Free to Choose: A Debate between Milton Friedman, Jamie Galbraith, and David Brooks

Jamie Galbraith debates Milton Friedman and David Brooks. Arnold Schwarzenegger also makes an appearance at the beginning. The debate begins about halfway through the video (from 1990):

Comments

[dissent]

So this is the Milton Friedman that so many economists love. He's a bit creepy, to me anyway. The whole video seems like an incantation of a perverse ideology in honeyed tones. I can see that the fall of the Soviet Union gave these folks spasms of joyous self-justification. Yuck.

[John V]

For those interested:

click here to see other episodes.

[Erik]

Dissent: Do you have any substantial criticism or are you just here to fling poo on people you find "creepy"?

[Brenda Rosser]

Just to state the obvious, when it is so easily missed:

Try asking these propagandists to define the word 'freedom'. Ask them if 'freedom' means being exposed to aerial-sprayed poisons, being contaminated by toxins in the food you buy, investing in banks who hide most of their financial liabilities from you, and so forth.

Because all of these disasters are created by granting complete freedom for people to do precisely what they want to do.

[Lafayette]

Damn few

BR: Because all of these disasters are created by granting complete freedom for people to do precisely what they want to do.

Well put.

The dichotomy in our society today is the tug between freedom of the individual (to do what they damn well please) and the rights of the collective (to know well the risks that each are undertaking).

It is clear (to me) that in order, in effect, to protect the freedom of the individual, then Individual Initiative must be supervised and, where necessary, even constrained. Not all such initiative, we have seen, is beneficial to the Collective Community. The sub-prime mess in only the latest example, and BR has noted others equally as serious/harmful.

An extreme example: The American gun lobby's petulant assertion that "guns don't kill people, people kill people" simply does not hold water in most of Western Society. Gun control is practically Draconian in most European countries, which is why -- for instance -- the spate of young adults murdering one another at schools/universities aghasts Europeans.

A les extreme example: To have dismissed callously in 2001 an International Treaty (Kyoto) that could have started America on the road to more ecological use of its carbon-molecule resources.

I would dearly like to see a serious piece of work that describes precisely where extending unlimitedly personal freedoms (that promote the gain of select interests) enters upon the territory commonly known as personal selfishness or greed.

Where is the moral balance point between the initiative to better one's economic circumstance (that is native to us all) and the consequence of doing harm to others in the process.

This is the principle challenge of all societies today. Damn few, in my view, are getting it right.

[ken melvin]

for those who missed, Bruce Webb's:
http://economistsview.typepad.com/economistsview/2008/02/nafta-isnt-the.html#c105095112

[macquechoux]

God, I hope freedom means protection from people like you, Brenda. People that want to manage, regulate, and dictate every aspect of my life; because you know what is best for me. Right?

Lafayette, to offer an extreme example, one could argue that the state could/should regulate births to one per couple, like China. We know that more people increase the carbon food print and use up limited resources therefore to save the planet you are hereby ordered to have only one child. In the name of Global Warming and the environment I cannot think of anything that could not be regulated. Can you? I think there is a serious piece of work, it is called the Constitution. You ought to check it out.

[hari]

Sorry! China just decided to recind the one child policy. They argue society is getting older and children are needed to support older generation and whatnot.

However, after listening to Friedman and Co on freedom of choice and personal decision-making, I came to the conclusion that times have changed, including economic circumstances. Society needs to care for those who're left behind - for whatever reason. Laissez faire economics won't do in this competitive age...

[Economic layman]

One of Friedman’s main points was that greedy people using the market place aren't as dangerous as greedy people using the government. He had a realistic view of humanity and the firm belief that no human should command other humans. He never was a conservative or an authoritarian but a real friend of liberty.

For Friedman the only goal of government should be freedom. Protecting the rights of individuals and helping them to live free. Friedman’s proposals for welfare reform were far more radical then anything from the left. He was for government funded education + free choice (school vouchers), he was for redistribution without any work condition (negative income tax) and even expressed sympathy for an unconditional basic income, he praised land value tax and recommended the redistribution of natural resources (for example he proposed giving Iraqi oil to the Iraqi people in form of a citizens dividend. He opposed the war, of course.) He fought against rent seeking (criticized state licenses, opposed copyright exploitation like the Sonny Bono Copyright Term Extension Act), promoted drug legalisation, free immigration, coined the term “helicopter money” (not a conservative monetary policy, me think)... And he never said that capitalism is a sufficient condition for freedom or that we don't need any government at all.

Please, what is not to like about Milton Friedman?
(I'm for universal health care, he was not. But that's the only point I can come up with.)

[reason]

Economic Layman ... Your contribution is an intelligent one. There was indeed a lot to like about what Friedman said, in fact more so than a lot of people who claim to follow him. Worrying about the how, and not just the what is something we should all do more of.
But surely this is a bit naive

For Friedman the only goal of government should be freedom. Protecting the rights of individuals and helping them to live free.

(I'm not sure whether it is naive of you or of Friedman.) What exactly do you mean by free? It should be clear to anybody who really thinks about it that private property itself is a restriction of freedom enforced (for perfectly good reasons) by government. He means a specially defined sort of freedom. And of course to ignore the importance of negative and positive externalies is an attempt to make simple something that really is complicated. Unless we live on our own private planet, all of us are inevitably as free as insects caught in a spiders web. The world is full of subtle positive feedback loops that often result in locally perverse incentives (the simplest to understand is of course, traffic jams - everybody seeking extra personal mobility reduces mobility for everyone.) How to maximise "effective" freedom, and not just "legal" freedom is a very difficult exercise. I hope we are all part of that process. Ultimately, doctrinaire answers of all kinds are too simple minded.

[sglover]

Try asking these propagandists to define the word 'freedom'. Ask them if 'freedom' means being exposed to aerial-sprayed poisons, being contaminated by toxins in the food you buy, investing in banks who hide most of their financial liabilities from you, and so forth.

As far as I can tell, "freedom" for these people means nothing more than increasing the number of choices, C, for, well, anything. It's got all the subtlety of a Stalinist production quota, but it can be quantified, and in the idiot savant world of economists, that makes it "real".

[reason]

Brenda Rosser

Because all of these disasters are created by granting complete freedom for people to do precisely what they want to do.

macquechoux

I hope freedom means protection from people like you, Brenda. People that want to manage, regulate, and dictate every aspect of my life; because you know what is best for me.

I don't know about you, but I think there is a lot of room for compromise between "complete freedom for people to do precisely what(ever) they want to do" and "manage, regulate and dictate every aspect of my life".

Not all != nothing

[sglover]

Try asking these propagandists to define the word 'freedom'. Ask them if 'freedom' means being exposed to aerial-sprayed poisons, being contaminated by toxins in the food you buy, investing in banks who hide most of their financial liabilities from you, and so forth.

As far as I can tell, "freedom" for these people means nothing more than increasing the number of choices, C, for, well, anything. It's got all the subtlety of a Stalinist production quota, but it can be quantified, and in the idiot savant world of economists, that makes it "real".

[dissent]

"For Friedman the only goal of government should be freedom. Protecting the rights of individuals and helping them to live free."

This is the ideology that justifies the deaths 17K Americans every year due entirely to lack of health insurance. The deaths related to lack of preventitive care are not included in that number, and so the total related to lack of health insurance is far higher.

It needs to be said: this is a callous, even murderous, ideology. Those who push for it share the blame for the consequences.

says...

Hari, the last I read was the Chinese were THINKING about doing away with the law. It is still the law as far as I know. I think you need to reread the news. Try Googling, "China + one child" in Yahoo news.

Reason, I am an old man and as far as I can see the Brendas' of the world are more than winning the battle between freedom and state control of just about every aspect of your and my life. I also don't think the Constitution ever declared a right to "complete freedom for people to do precisely what(ever) they want to do." I don't find the Brendas' of the world are very interested in compromising. Good luck on that one.

[macquechoux]

Hari, the last I read was the Chinese were THINKING about doing away with the law. It is still the law as far as I know. I think you need to reread the news. Try Googling, "China + one child" in Yahoo news.

Reason, I am an old man and as far as I can see the Brendas' of the world are more than winning the battle between freedom and state control of just about every aspect of your and my life. I also don't think the Constitution ever declared a right to "complete freedom for people to do precisely what(ever) they want to do." I don't find the Brendas' of the world are very interested in compromising. Good luck on that one.

[Patricia Shannon]

As usual, both extremes are ridiculous, but I don't think anybody wants the extremes on the side of control, unless they are the ones doing the controlling.

I like freedom, but I wouldn't want someone to build a pig farm in the lot right next to where I live. And I don't think most people want me to be free to spit on them, even though it would be perfectly harmless. And I don't want people to be free to torture people and animals.

[hari]

@Patricia -

I've sympathy for you! Living in Georgia ...Gone With The Winds! You must have the most wonderful weather to allow the pigs to enjoy life. I'd rather make schwinebraten a la Byrieshe-art!

@Machquechoux -

Stop Googling and/or Yahoooo and read People's Daily in English - it's official. Get the truth from the horses mouth! I'm an old China-hand and don't trust your sources.
If you think you're an oldman, may I remind you I will be 70 in a few weeks! Age is NOT a problem, if you're simply interested in getting the truth...from the source.

I like your sentiment on the Constitution...you're right.

[hari]

I think as a commentary on the rise and growth of American capitalism, Friedman is speaking the truth and reflecting on economic history. Hong Kong is an excellent example of how the capitalist system eliminates inefficiency and so on.

However, to think that Friedman's views have any substantive contribution to make to current credit crunch and whatnots...if a bit far fetched. Philosophy is fine. But bread and butter counts!

[calmo]

Geeze, I made it only 15 sec into Terminated's fireside little chat chummy dissertation on the Perils of Socialism before taking action myself, being the somewhat ancient (so popular on this thread!) action hero myself (go you little digits go!)...but today lacking that certain mettle to stick withit..no matter how deep, how mucky, how mentally retarded...unlike my youthful colleagues who sound as if they made it all the way to the 1 minute mark...maybe mo.
My wheaties are no longer doing it for me: bring on the porridge. (In a command economy, you listen to what I eat and what I cannot stomach...just like AS.) [You figure Action Hero has the larger captive audience (of muscle builders)...wait till I debut on Youtube! (and the mental builders there!)]
Could we have a caricature of the Governor of California as Philosopher of Not Only Muscles?
no

[Keith]

I think a lot of people are talking past each other, here. That tems from a mistaken dichotomy.

Individual freedom is great, yep. But how do we reconcile that with situations where a lot of small individual actions can have a large cumulative effect that nobody likes?

Leaded gas is cheaper for each of us, but when we all buy leaded gas, we're all worse off on net, given the cumulative effects of lead in the air.

So then what?

I think we first have to spec out the "ideal" solution, because that solution articulates exactly what we want. Then we get into the realistic solution. But we first have to state the ideal solution, so we don't confuse the details of the realistic solution with the ideal.

Ideally, all consumers would costlessly negotiate and enforce a massive contract on car and gas purchases and would work out an agreement that would universally coordinate away from leaded gas, becuse the total benefits of doing so in terms of air quality and health outweighed the savings.

In the absence of any contracting costs, then there isn't any conflict between individual and collective needs. We work problems out by contracting with each other as individuals. That's the ideal.

But of course we have massive contracting costs, so we can't contract this stuff individually. So instead the government, in the form of regulation, hammers out a contract that is supposed to come as close as possible to the contract we'd agree to if we were all individuals contracting in a zero-cost contracting world.

This also shows why governments should use cost-benefit analysis, since that's what we'd do to, in our zero-cost contracting with each other. That also illustrates why the existence of a complex world does not justify endless government regulation and control.

We also recognize that government has many weaknesses. Rational voter ignorance, combined with ambitious politicians and bureaucrats, means that government often won't give us the results we want. This means we should not look to government regulation, even if the optimal government regulation would work, if that regulation relies on fine tuning and expertise. (There might be an exception if some horrible disaster means that we create a technocratic bureaucracy with very smart, well-trained, and motivated bureacrats, who are allowed to do what they need to do without it being mucked up by lame politicians playing to the prejudices of rationally ignorant voters.)

In addition, as communication technology lowers contracting costs in many areas, the argument for regulation in those areas will get weaker.

So basically, libertarianism is the baseline, and deviations from that are only justified by the existence of insurmountable contracting costs, and a regulatory scheme that is simple enough to be free from manipulation, or a case where there is universal agreement on the need for unencumbered technocrats.

[John V]

Keith,

But how do we reconcile that with situations where a lot of small individual actions can have a large cumulative effect that nobody likes?

Like those of government?

:)

hehehe

[macquechoux]

Hari, thanks for the tip on the People's Daily in English! Wow, like China it is a big site. I have this theory on age: Anybody younger than me is still a youngster and anybody older than me is a REALLY old person. Have a good day young man.

[Paul G. Brown]

Having sat through this and the works of several other commentators who espouse the supremacy of 'individual liberty' over all other virtues, I'm struck by how often their arguments rely on strawmen.

Prof. Friedman here (and Hajek before, von Mises etc) all point to how terrible life is under authoritarian socialist regimes. Completely true. But then they use this as an argument against even the relatively mild regulations that characterize a modern mixed economy in a social democracy. Perhaps a visit to countries with minimal government other than Hong Kong (Nauru, Saudi Arabia) would give viewers a richer view of the alternatives. And as 'the past is another country' a quick review of the (as Galbraith points out) the failure of their iconic 'free market' historically would also be useful.

Then when you confront them on the specifics of the program you find their arguments boil down to a preference for certain kinds of regulation over others. "Governments are needed to define and enforce 'property rights'" is a back door through which ANY kind of regulation can be introduced so long as the regulation is expressed in terms of 'property rights'.

Milton's a fine economist and a first rate mind. But I'm sorry; I ain't buying his soap regarding how best to organize a society. I'm too much of a Burkean conservative to accept his reactionary ways.

[Economic layman]

Friedman was no cynic, not in favour of greed. He just thought that the greatest gift is freedom. Freedom in the banal sense of controlling what is yours. What is yours is your own body and everything you get without using force. In a free exchange everybody wins. Natural resources (like land or oil) should be taxed and cashed out in form of citizen’s dividend. Friedman was no friend of rent seeking. He was in favour of private property when he thought this would create competition, he was against private property if he thought it created monopoles. I really think one should read Friedman not as a crazy free market fanatic, but as an enemy of any kind of monopole.

Sure, there are externalities, public goods, but even then he always tried to conceive interventions which empower the individual. School vouchers or a negative income tax try to do that. Who else proposed giving money to the people without controlling them? Friedman trusted the individual to care for himself. He mistrusted the government.

Friedman hated paternalism. He thought that on the average people know what's good for them. Government -even if it is really democratic- means majority vote. The minority gets forced. That's why collective decision making should be minimized. Majorities should not rule over minorities. And the ultimate minority is the individual. What is so bad about that?

[Paul G. Brown]

"
Friedman hated paternalism. He thought that on the average people know what's good for them. Government -even if it is really democratic- means majority vote. The minority gets forced. That's why collective decision making should be minimized. Majorities should not rule over minorities. And the ultimate minority is the individual. What is so bad about that?
"

Nothing, Economic layman. Nothing at all.

Except that your list of principles doesn't distinguish Friedman's ideology from any other (except perhaps radical collectivists) And, once the rubber hits the road and discussion turns to specific policy questions Friedman find himself (with alarming regularity) aligned with the economically powerful in opposing (collectivist) policies designed to help the rest of us.

That, and if the evidence from behavioral economics is any guide, the proposition that "on the average people know what's good for them." is ... apparently a nonsense. Collectively we can tell what's good for "us". We can agree on a set of measures and how to achieve them. But we mess things up all to often as individuals.

[NLS]

Milton Freidman (at about 40:25): "As David says, a major enemy of a free market is a business interest. The business community is a major enemy and the problem of society is to have the public at large understand the importance of free markets so as to protect themselves against the depredation of the business community with their tariffs, their quotas, their special provisions and so on."

So that means to deregulate deregulate deregulate then try to explain to people that they are being protected? And I'm supposed to believe that the conglomeration of market power to a few firms is "good?"

[NLS]

It kind of sounds like "Hey, are you cold? Well, here's some small pox blankets. You're welcome."

[Patricia Shannon]

I love freedom, but anybody who thinks that freedom is the highest thing that people value has led a privileged life. Study Maslow's hierarchy of needs.

As a case in point, many women stay in marriages where they are abused and are not free, for the sake of freedom from starvation, homelessness, and/or the possibility of even worse abuse.

[Patricia Shannon]

https://www.agronomy.org/press/releases/2008/0225/001/

American Society of Agronomy
Is Your Drinking Water Safe?

MADISON, WI, February 25, 2008-Lake Bloomington is a major source of drinking water for residents of Bloomington, IL, and has a history of nitrate concentrations that exceed safe levels. Because Lake Bloomington has a record of elevated nitrate levels, local residents are concerned over their drinking water quality.

Kenneth Smiciklas, Associate Professor of Agronomy, Illinois State University, along with a team of colleagues, present an article about the nitrate levels in Central Illinois in the 2008 Journal of Natural Resources and Life Sciences Education.

According to Smiciklas, "Drinking water contaminated with nitrate concentrations exceeding the maximum contaminant level established by the USEPA can cause health effects in humans and animals."

Nitrate-nitrogen is a form of nitrogen that is naturally occurring in most soils. Nitrogen fertilizers added to the soil for crop production can also add to the soil nitrate concentration. If these amounts become extreme, drinking water quality can be affected.

More than 90% of the area in the Lake Bloomington watershed is used for agriculture. The application of nitrate fertilizers (both synthetic and organic) in the growing food crops can result in relatively high levels of nitrate in the surrounding waters. Non-agricultural sources of nitrate can include natural mineralization occurring primarily in the spring due to organic matter breakdown and also from septic emissions.

The freedom of farmers to use certain fertilizers reduces the freedom of others to have access to safe water.

http://pmep.cce.cornell.edu/facts-slides-self/facts/nit-heef-grw85.html
NATURAL RESOURCES
CORNELL COOPERATIVE EXTENSION
Nitrate: Health Effects in Drinking Water

by

Margaret McCasland, Nancy M. Trautmann, and Keith S. Porter
Center for Environmental Research
and
Robert J. Wagenet
Dept. of Agronomy
Cornell University

Nitrate is one of the most common groundwater contaminants in rural areas. It is regulated in drinking water primarily because excess levels can cause methemoglobinemia, or "blue baby" disease.
...
Once diagnosed, methemoglobinemia can be readily reversed, although with anoxia permanent damage may have occurred.

Anoxia is lack of sufficient oxygen. One of the kinds of damage it causes is permanent brain damage.

[Brenda Rosser]

"I don't find the Brendas' of the world are very interested in compromising."

Such strong words by a person who uses a pseudonym!

I don't know any other 'Brenda's' so I can't really comment about that particular subset of the human population.

This 'Brenda' though lives with the history (and ongoing high likelihood) of our rainwater being seriously contaminated by at least one residual and very toxic pesticide. I live year-by-year with an illness strongly linked to the very chemical found in our rainwater tank.

Where I live, the Tasmania Government are hiding the results of water testing carried out statewide and the Australian Federal Government is refusing to make public the results of epidemiological studies done in Australia.
See: http://www.abc.net.au/news/stories/2008/02/28/2175332.htm
and
Medical researchers angered by Govt suppression
By PM's David Mark
http://www.abc.net.au/news/stories/2008/03/01/2177010.htm?section=justin

Hey! I'm no fan of Government. But neither am I in love with the large multinational corporations that these bastards are protecting.

You won't complain though, will you, if I am allowed (i.e. 'free') to take a shotgun seek retribution for this ongoing assault on my person?

[Lafayette]

mcq: People that want to manage, regulate, and dictate every aspect of my life; because you know what is best for me. Right?

Lafayette, to offer an extreme example, one could argue that the state could/should regulate births to one per couple

Bollocks, you've gone off the deep end. Your argument is typical exaggeration of the genuflecting Right, positing conditions that can only exist in a dictatorship. We are talking about communal rights and responsibilities within a democracy. So, your remark is off-subject. (You want to debate about autocracies? OK, but its another thread.)

Nobody knows better what is best for me than me. But, I (at least) realize that extending my choice unlimitedly, to do whatever the hell pleases me, automatically influences the choice (and therefore rights) of others.

Societies have everywhere and always set up rules that its people live by in order to preserve law and order. Within that order are found the principles of social harmony and fairness.

If you want unlimited freedom, go live on an island. Then whatever you do has no consequence whatsoever on anyone else but you. You will be living in a one-person autocracy.

But you are not going to do that, are you? No, you want the modern comforts of a societal living, the warmth of family and friendships, the protection that collective grouping provides as well as the benefits produced by the Division of Labor.

But of course, absolutely, you exact ALSO your Individual Right to accumulate as much as those benefits as you can.

In other words, you want your cake AND eat it along with the cherry on top. That's selfishness or greed. Look up the words in a dictionary.

[Lafayette]

The Individual vis-a-vis the Collective

EL: Friedman was no cynic, not in favour of greed. He just thought that the greatest gift is freedom.

It is. The history of the 20th century has shown how very dear freedom can be to the individual and a nation.

Let's not confuse the word's usage, however. The freedom of an individual in not the freedom of a collective. (A collective is the aggregate or whole such as the community, town, city, state, nation). Collective freedom is to accept constraints on personal liberties for the sake and benefit of the whole. By which we are all better off individually.

This question of the Individual vis-a-vis the Collective always arises when the balance of power/esteem of one or the other is thrown out of kilter. Income Inequality is just such a circumstance as it privileges the Individual over the Collective.

There has been far, far too much aggregation of financial power/benefit in a tiny percentage of the population. It is unwise, unfair and inevitably worrisome -- as it can rot the very foundation of democracy.

Absolute power corrupts absolutely. Our forefathers understood that, having learned at the hand of King George V. It is this very reason that they devised the balance of power that has served so well the United States these past 228 years.

Liberty, yes. Fairness, yes also. And our forefathers, landed gentry (amongst the richest in Colonial America), would not have begrudged taxation in order to achieve fairness. After having risked one's life to a cause, what is giving-up money comparatively?

To want otherwise, unfairness, is simply greed.

[Brenda Rosser]

Well put Lafayette.

It's interesting to observe that the abusive, negative form of freedom we are collectively victim to is Government granted and protected. Where would the Rockefeller and Ford foundation be, for instance, without the myriad laws enacted to ensure their chemicalised agribusiness ventures continue to pollute and degrade the global environment?

How would they fare without the incessant media deceit? Without the ubiquitous propaganda? The taxpayer funded subsidies and grants? And Government-granted monopoly privileges?

'We (the transnational corporations) are now in the driver’s seat of the global economic engine. We are setting government policies instead of watching from the sidelines.' (quoted in CCPA Monitor, 1996). David Rockefeller, 1996

'A government which robs Peter to pay Paul can always depend on the support of Paul.' --George Bernard Shaw

'Oil is much too important a commodity to be left in the hands of the Arabs.' --Henry Kissinger

'We have always known that heedless self-interest was bad morals; we know now that it is bad economics.' -FDR

The ’seven blunders’

Wealth without work

Pleasure without conscience

Knowledge without character

Commerce without morality

Science without humanity

Worship without sacrifice

Politics without principles

Ghandi

[Brenda Rosser]

Arnold Schwarzenegger's version of 'free to choose'. He's approved a government program to aerial spray pesticide over 700 kilometres of California, including the city of San Francisco. Why is his Government so active in intervening on behalf of agribusiness, given his open support for a 'free' market? Who is Schwarzenegger actually giving choice to? [Who is he really serving?]

Governor Schwarzenegger Backed Immoral Sex Pheromone Spraying Continues
http://rinf.com/alt-news/contributions/general/schwarzenegger-backed-immoral-spraying/2405/

"..The California Department of Food and Agriculture’s own doctor acknowledges, in court documents, that the aerial application of this chemical has not been tested. Let me repeat this so you understand, chemicals are being sprayed on young children, nursing mother’s, people with asthma, lung problems, heart problems, the elderly, the disabled, the homeless and the chemically sensitive - and this chemical formulation has NEVER been tested on even a piece of dirt, let alone, humans. .."

+
Chemical pesticides have reduced crop losses in many situations, but even with a very substantial increase in pesticide use, the overall proportion of crop losses and the absolute value of these losses from pests appear to have increased over time. Despite this perverse relationship, an increase in pesticide use still appears to be profitable. Increased monoculture, reduced crop diversity and rotation, reduced tillage, and use of herbicides have all boosted yields, but have increased vulnerability to pests as well. Pests tend to develop resistance to pesticides, requiring higher use to sustain production (Oerke et al. 1994).

Inappropriate and excessive pesticide use have led to increased and unnecessary pest outbreaks and additional pest losses because of the inadvertent destruction of natural enemies of the pests, pest resistance, pest resurgence, and secondary pests. Ultimately, overuse of pesticides can reduce food production.

http://www.apsnet.org/education/feature/FoodSecurity/

http://www.geocities.com/rosserbj/Pesticide_Abuse_In_Tasmania.html

[Lafayette]

BR, have you ever heard the joke about God who, with his hands, raised the US by the East Coast. And all the loose marbles rolled into California.

It's no joke. Too much sun on the skull ... does it every time.

[Lafayette]

What's next for California, not that dotcommery is sooooo passé? Silicon Valley Venture Capitalists are going to save mankind .... and make Megabucks.

Such profit-motivated munificence can only in California ...

Read all about it:

Business and the environment

From geeks to greens
(Feb 28th 2008; From The Economist print edition)

Executives are switching in droves from the computer industry to clean-technology firms. Do they have what it takes to succeed?

WHEN Shai Agassi, long the heir apparent at SAP, was told in March 2007 that he would not become chief executive for at least another two years, he quit. And when the German software giant then tried to change his mind by offering to make him boss right away, he realised he was “much more excited” about the new chance that his unexpected freedom would grant him. In January Mr Agassi's new start-up, Better Place, announced its first deal, in partnership with Renault, a carmaker, and the government of Israel: to “get an entire country off its addiction to gasoline” by switching to electric cars.

Though Mr Agassi is the most senior executive so far to quit a mainstream information-technology firm for clean tech, he is far from alone. Mr Agassi (pictured right, above) joins Elon Musk (pictured left), a co-founder of PayPal who is now chairman of Tesla Motors, an electric-car start-up, and Vinod Khosla (pictured centre), a legendary venture capitalist who has switched his focus from dotcommery to greenery, among many others. “There is an unbelievable migration of talent from traditional technology to clean technology,” says Adam Grosser, a partner at Foundation Capital, a big Silicon Valley venture firm. “They have had their social conscience energised, and they believe there is a lot of money to be made. So you get to exercise your capitalist desires while feeling self-righteous at the same time.”

Many of these techies are being recruited by the same Silicon Valley venture firms that were behind successive generations of tech companies, from PC-makers to software companies to two waves of internet firms. Along with Foundation Capital, several of the leading venture firms, including Kleiner Perkins and Khosla Ventures, are now betting big on green.

The multi-billion-dollar question is whether the skills that make somebody a successful executive, entrepreneur or investor in digital technology also work with green technology. What does a software guru bring to biofuels? Can you build an electric car in a garage? The answers may have huge implications for the planet.

Mr Khosla, who made his fortune as a co-founder of Sun Microsystems, a computer-maker, has no doubt that the Silicon Valley model can succeed in this new field. Partly, that is because he believes that dramatic change can best be achieved by entrepreneurial start-ups, which are not lumbered with the incremental outlook of what, in the early days of the internet, were called “big dumb companies”.

With market risk declining fast, as even the American government mandates big increases in renewable energy and energy efficiency, much of the job is coming down to backing the right technology. Mr Khosla believes that venture capitalists are good at understanding and managing technology risks, in whatever industry they are in. Traditional energy companies understand and take on exploration risk, say, but do not feel comfortable investing in a new fuel technology with a similar level of risk, he says. “People in venture and IT are used to operating in a context when you don't know if a technology will work, and we start building before the design is finalised and fix it as we go along,” he says. They are also used to a high failure rate, which they balance against the prospect of rich rewards when things go well.

“What really differentiates the Silicon Valley community is its ability to work with entrepreneurs in all sectors and shape early-stage businesses,” says Bill Ford of General Atlantic, a private-equity firm that is investing heavily in greenery. “Over my career in Silicon Valley, I have learnt how to create and grow technology-based companies,” says David Cope, chief executive of Purfresh, a company that focuses on purifying water and food without using nasty chemicals. He previously worked for a string of tech companies, from IBM to BizGenics, a software firm.

The Internet is so passé
Mr Agassi says that what he brings from SAP is an ability to think systematically about solving problems. “I learnt how to understand a big problem, break it into small pieces, solve every one of these pieces and to reintegrate them back into a system,” he says, noting that previous attempts to introduce electric cars have failed because of a lack of systemic thinking. His solution brings together four pieces: Renault, which will build the cars; Better Place, which will provide the infrastructure that allows consumers to recharge the cars easily; investors to finance the infrastructure; and a government ready to offer a large tax break to anyone ready to buy a zero-emissions car—Israel has guaranteed its tax break until 2019.

In some cases, the leap from computing to greenery may not be all that big. Most geeks already have a science background (though Mr Musk abandoned his physics doctorate after two days). Building solar panels has much in common with building microchips. “It is all about miniaturisation and the use of silicon,” says Mr Ford. If he is right to expect a “Moore's Law for solar”, the effectiveness of the technology will increase at a predictable rate. One of the early successes in the green boom is SunPower, a solar-energy firm spun out of Cypress Semiconductor, which now has a stockmarket value of nearly $6 billion.

Similarly, energy firms operate huge distribution networks—another area in which geeks feel at home. “When I joined from Perot Systems in 2004, the last-mile technology for energy utilities had not been invented, and I saw a huge opportunity to help utilities connect more efficiently with their customers,” says Scott Lang, the chief executive of Silver Spring Networks. His firm applies internet technology to utilities' networks to improve energy efficiency and manage demand. “This is classic IT,” he says. He reckons that nearly half of the demand for new generation capacity around the world over the next 15 years could be met instead through greater efficiency.

One danger for tech executives who go green is that “they may expect things to happen too quickly,” says Mr Lang. “They are used to overnight change, but this is going to take time.” Another, at least for some green start-ups, is the amount of capital that has to be laid out at an early stage.

“The amounts of money on the line are radically different from traditional technology start-ups,” says Mitch Mandich, a 25-year veteran of Silicon Valley technology firms, including Apple, who runs Range Fuels, which is building America's first cellulosic-ethanol plant in Georgia. (The idea is that turning plant material such as switchgrass, wood or agricultural waste into biofuel will overcome the drawbacks of corn-based ethanol, which is inefficient and drives up food prices.) He has had to learn to raise money from New York investment banks and hedge funds, as well as from his venture-capital backers. Clean-tech start-ups very quickly leave the $5m-10m range, he says, and go to $50m and $100m fundraising rounds. “The stakes get very high much earlier.”

For this reason, Foundation Capital is focusing on firms that improve energy use. Attempts to design clean fuels are “not capital efficient”, says Mr Grosser, noting that “building plants costs hundreds of millions, and the margins may be low.” Mr Khosla, an investor in Range Fuels and other clean-fuel firms, disagrees. He thinks the huge market opportunity in “replacing coal and oil” justifies the huge risks.

Then there is the need to focus on government policy. When it comes to green investing, public-policy risk may matter at least as much as technology risk. Even though the three main remaining candidates for the White House all say they will introduce a mandatory federal cap-and-trade scheme to limit America's carbon-dioxide emissions, the details have yet to be agreed on and the votes cast. “Managing public-policy risk is not something traditional technology executives have had to do, so there will be a steep learning curve,” says Diana Glassman, an environmental-business banker at Credit Suisse.

Still, they are off to a promising start. Mr Khosla is fast building a reputation as a wily Washington wheeler-dealer. Range Fuels has won a $76m grant for its Georgia plant from the Department of Energy. And having bonded successfully with Shimon Peres and Ehud Olmert in Israel, Mr Agassi confidently predicts another deal between Better Place and a national government “within 100 days”.

[reason]

Economic Layman...

Friedman was no friend of rent seeking. He was in favour of private property when he thought this would create competition, he was against private property if he thought it created monopoles.

Including a monopoly on a particular piece of land?

Keith
Your Coasian analysis ignores income effects. That somebody could pay someone to stop polluting their neighbourhood is well and good, but the perpetrator is taking income from the victim. It is a sort of protection racket.

[hari]

@ Lafayette -

This is an interesting and valuable insight into renewable resources energy and fuel development potential....

I might just mention in passing that I've personally tried to involve Khosla,s VC firm in developing a pilot project on sugarcane based anhydrous ethanol. Bill Clinton's Foundation had him directly involved in his renewable energy projects.

The VC bring something valuable - how we manage risk in technology transfer and development given all the pitfalls in the new production system. It's a very exciting area of technology transfer today.

[Lafayette]

hari: It's a very exciting area of technology transfer today.

I quite agree. I would prefer having VCs leading this effort than some bureaucrat in Washington.

I find amusing, however, what the Economist says of this effort, namely:

“There is an unbelievable migration of talent from traditional technology to clean technology,” says Adam Grosser, a partner at Foundation Capital, a big Silicon Valley venture firm. “They have had their social conscience energised, and they believe there is a lot of money to be made. So you get to exercise your capitalist desires while feeling self-righteous at the same time. ”

Making a bundle of money is now, abracadabra, legitimate. Which means they had qualms before discovering Ecology? Ok, Ok ... so I'm nitpicking.

Frankly, I think Nikola Tesla would turn over in his grave if he knew there was a car named after him ... HIS idea and and THEY get the profits!

(Ain't life unjust ... ? He remarked as he went of stumbling and mumbling.)

[Lafayette]

hari: It's a very exciting area of technology transfer today.

I quite agree. I would prefer having VCs leading this effort than some bureaucrat in Washington.

I find amusing, however, what the Economist says of this effort, namely:

“There is an unbelievable migration of talent from traditional technology to clean technology,” says Adam Grosser, a partner at Foundation Capital, a big Silicon Valley venture firm. “They have had their social conscience energised, and they believe there is a lot of money to be made. So you get to exercise your capitalist desires while feeling self-righteous at the same time. ”

Making a bundle of money is now, abracadabra, legitimate. Which means they had qualms before discovering Ecology? Ok, Ok ... so I'm nitpicking.

Frankly, I think Nikola Tesla would turn over in his grave if he knew there was a car named after him ... HIS idea and and THEY get the profits!

(Ain't life unjust ... ? He remarked as he went of stumbling and mumbling.)

[Economic layman]

"Including a monopoly on a particular piece of land?"

Friedman once wrote that he favours a tax on land value.

[hari]

@ Lafayette -

VCs are good JV partners simply because their approach to feasibility study and a bankable document is quite different, I found out. As a rule, project implementation comes on after a lot of separate/inter-sectoral valuations and they usually break-up a feasibility study into its operational and non-operational components - and then repeat the exercise - in order to find (random) factor analysis in terms of not only final product development but product differentiation, as well.

These guys are genius at identifying (insignificant) factors which we normally wouldn't bother. They're mostly coming from engineering background; their mind is not fixed on economic variables. And the ball game, for them, is not short-term but really looking for that long term breakout scenario.

My original concept was to make a pilot project on an (unidentified) island and secure all the industrial incentives before embarking on the renewable energy project.

In short, the project is now going ahead but using cassava or tapioca (carbohydrate - cellulosic waste).

[Lafayette]

The lowly spud

hari: ... the project is now going ahead but using cassava or tapioca (carbohydrate - cellulosic waste).

You could do it with potatoes. Lotsa carbohydrate, cheap to produce in Europe and plentiful.

The potato has had such a huge effect on the development of mankind that the lowly spud has earned recognition as Year of the Potato by the UN.

Will wonders never cease ...

[reason]

Economic Layman,
If that was his opinion (and he kept it low key) then he has a lot in common with left-wing Libertarians and somewhat less in common with the propertarians who claim his mantel. I don't necessarily agree with that point of view (because I reguard the pervasiveness of externalities argues against methodological individualism) but I am more sympathetic to it. I particularly like LVT and GMI but worry that they would be hard to introduce.

[reason]

For those of you who may object that "methodological individualism" has nothing to do with "pervasive externalities" my reply is "do you think the way to understand the human body is by studying the cells"?

[reason]

(Of course I know that ONE answer is yes.) But the chances of missing something important are high. Eventually both the disaggregated and the aggregated view must come to the same conclusion and we won't have a full understanding until they do.