Category Archives: Economics

Keep China busy- buy an iPhone.

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Thanks to Bill in Michigan for the link on how the US lost out on manufacturing the iPhone. The article is well worth the read. A few of us have been beating this drum for a while. Economics is not a theory of physics. It is entirely about choices people make. But to some, economics has become a mathematical and philosophical validation of greed and a metric of mortal value.

Interestingly, Robert Reich has a parallel and broader editorial on the same general topic.  Reich points out that US corporations are becoming increasingly globalized with “less and less stake in America.”

Reich quotes an Apple executive –

‘An Apple executive says “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.” He might have added “and showing a big enough profits to continually increase our share price.”’

Reich goes on to say that US business investment in R&D is in general decline but…

“… According to the NSF, American firms nearly doubled their R&D investment in Asia over these years, to over $7.5 billion.

GE recently announced a $500 million expansion of its R&D facilities in China. The firm has already invested $2 billion.”

If you read history and understand something of how the industrial revolution has been the deus ex machina of social revolution since the invention of smelting, then unavoidably you must ask what happens if we change the sign of the revolution?  Does the sign of social revolution become negative as well in a nation of negative- or de-industrialization? What happens in a nation when a minority of shareholders absorb value from the stakeholders via tranplantation of the economic engine to another nation? What happens to society when the population grows but the per capita availability of jobs is in decline?  A trip to the Congo or to Gaza might give some useful hints.

Deindustrialization is not nearly the sole culprit. Automation is much to blame for the obsolescence of job descriptions. Automation actually facilitates the export of jobs because the key expertise may be in the design of automated equipment, not its operation.

What made America “great” was not simply its freedom. There was a substantial contribution from a vast continent pregnant with animal, vegetable and mineral resources for the taking. The early allotment of land and mineral resources by the government to settlers, railroads, and mine operators kick started the American economic engine in the mid 19th century.

I am uncomfortable with this strident American exceptionalism viewpoint. Maybe it is the midwesterner in me, but I would prefer to see Americans roll up their sleeves and get busy making things again. Leave the boastful and prideful stuff for the comics. A little more humility and thoughtfulness will get us further and in better condition.

Devon Energy Sells Stakes to SINOPEC in Shale Gas Plays

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Devon Energy has raised $900 million in cash from Sinopec Group for a stake in Devon shale gas plays. These gas projects include the Utica, Niobrara, and Tuscaloosa formations. 

What is interesting is not so much that China has bought its way into the extraction of a resource that the USA has in some abundance. What is more troubling is that China has bought its way up the learning curve in horizontal drilling and fracturing. 

According to the article in Bloomburg Businessweek-

China National Petroleum Corp., Sinopec Group and Cnooc Ltd. are seeking to gain technology through partnerships in order to develop China’s shale reserves, estimated to be larger than those in the U.S.

“In these joint ventures, the partner does typically get some education on drilling,” Scott Hanold, a Minneapolis-based analyst for RBC Capital Markets, said today in an interview.

So, the business wizards at Devon in OKC have arranged to sell their drilling magic to the Sinopec for a short term gain on drilling activity. Way to go folks. Gas in the ground is money in the bank. These geniuses have arranged to suck non-renewable energy out of the ground as fast as possible.  Once again US technology (IP, which is national treasure) is piped across the Pacific to people who will eventually use it to beat us in the market.  Score another triumph for our business leaders!!

The market is like a stomach. It has no brain. It only knows that it wants MORE.    Th’ Gaussling.

 It’s a banner day for American Business.

Locust Capitalism- The Frass Machine.

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Here is a great catch phrase- Locust Capitalism. The article by David Waldman, describing the past business practices of one of our corporate persons, Bain Capital, uses this catchy phrase to characterize said corporate person. Of course, the irony of it all is plastered on the face of biological person Willard “Mitt” Romney who makes a show of being a job creator.

There is something that locusts do create- it is called frass.

I do not doubt Romney’s sincerity when he speaks. Like other candidates, he seems to live in the “eternal now” much like a dog. He wags his tail at the public hoping to curry favor for the treat of being president. If wagging his tail doesn’t work, he rolls over and puts up a paw hoping to win over the public. It is in the nature of these creatures to do this and while we cannot hold them blameless for their transgressions, we can at least understand them.

People who are able to think about business in an abstract way, that is, unencumbered by sloppy sentimentality for the fate of individuals, are well suited to become the captains and oligarchs of business. Romney seems to have been a captain. If the practices described by Waldman did in fact happen, then the locust analogy is very suitable and it says a lot about the character of the persons involved.

Waldman writes that Romney and cohorts bought companies holding ample commercial credit, charged them substantial management fees, and tapped out the credit lines while pocketing operating cash, driving the company into bankruptcy. They walk away from the remaining husk of what was a functioning organization with their neatly stacked pile of lucre.

If a real person did this, he/she might be described as a kind of sociopath. But somehow in the context of business there is no descriptor for such antisocial behavior.

Since we are now in the habit of referring to corporate personhood, perhaps we need to be a bit more analytical about it and characterize pathological behavior such as this.

Mr. Thiel Speaks

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When you look for science news at news aggegation sites like Google News or popular publications like, well, any given magazine or newspaper, or (yawn) any given non-fiction television program, what you are likely to find are fluff pieces on topics related to medicine, automobiles, and telecommunications. To people in the news business, scientific progress means new kinds of medicines, better cars, and the latest (n+1)G cell phone or iPad.

It is possible for even successful people to apply pop-culture metrics to economic theory. For instance, the founder of PayPal, Peter Thiel, has written an essay for The National Review in which he questions the motives of scientists as well as their ability to maintain the growth of scientific progress.

The state of true science is the key to knowing whether something is truly rotten in the United States. But any such assessment encounters an immediate and almost insuperable challenge. Who can speak about the true health of the ever-expanding universe of human knowledge, given how complex, esoteric, and specialized the many scientific and technological fields have become? When any given field takes half a lifetime of study to master, who can compare and contrast and properly weight the rate of progress in nanotechnology and cryptography and superstring theory and 610 other disciplines? Indeed, how do we even know whether the so-called scientists are not just lawmakers and politicians in disguise (italics mine), as some conservatives suspect in fields as disparate as climate change, evolutionary biology, and embryonic-stem-cell research, and as I have come to suspect in almost all fields?

The article goes on to paint a picture of failure on the part of the scientific community for not coming up with a Moore’s law style of continuous bounty for the consumer.

Here is where I greatly disagree with Thiel. He cites the stagnation of wages as an indicator of economic progress which, in turn, is an indicator of tepid technological progress.

Let us now try to tackle this very thorny measurement problem from a very different angle. If meaningful scientific and technological progress occurs, then we reasonably would expect greater economic prosperity (though this may be offset by other factors). And also in reverse: If economic gains, as measured by certain key indicators, have been limited or nonexistent, then perhaps so has scientific and technological progress. Therefore, to the extent that economic growth is easier to quantify than scientific or technological progress, economic numbers will contain indirect but important clues to our larger investigation.

… Taken at face value, the economic numbers suggest that the notion of breathtaking and across-the-board progress is far from the mark. If one believes the economic data, then one must reject the optimism of the scientific establishment (italics mine).  Peter Thiel, National Review.

This is where Thiel drives into the weeds. He conflates stagnant wages in the post Viet Nam era with a failure of science and technology to produce the kinds of advances he would recognize as worthy.

What is lost on Thiel is the fact that stagnant wages are a kind of benefit to employers and investors as the result of technology. Over this so-called period of stagnation in wages is a complementary increase in productivity. If anything the improvements in technology unseen by Thiel and his ilk have been applied to render human labor obsolete, thereby sustaining profits. China hasn’t gotten all American jobs. Machines have taken over much ot it.

The fact that Thiel scans the horizon from his perch and fails to see this is indicative of a kind of blindness of prosperity. In his world, technology is the internet. Apparently, people like Thiel only register scientific progress as a stream of shiny new consumer electronics, supersonic transport, or brain transplants. The advances in science and technology from the last 20 years are everywhere, not necessarily just in internet technology, cell phones, and Viagra.

Semiconductor technology is now well below the micron scale and heading to the tens of nanometers.  Bits of data are heading toward tens to hundreds of electrons per bit.  Lithographic fabrication at this scale allows for rules of thumb like Moore’s Law.  Growth in component density can multiply parabolically or more as greater  acreage of chip surface is consumed in 3 dimensions. Many doublings are possible in this domain.

But parabolic growth in aircraft or land vehicle speed is limited by other physics. A dynamic range of only a few factors of ten in vehicle speed are economically feasible.  Fossil fuels are fantastically well suited for use in transportation owing to their high energy density, low cost per kiloJoule, and ability to flow through pipes. Fundamentally new forms of energy storage are hard to find and are expensive.  All energy usage is consumption.  Science can only go so far in facilitating better forms of consumption for the profligate.  Doing work against gravity also consumes lots of energy, so the world of George Jetson never became feasible.

Ordinary automobiles that comprise a part of the stagnancy that Thiel bemoans are coated in highly advanced polymer coatings made from specialty monomers, catalysts, and initiators. The polymeric mechanical assemblies are highly engineered as well as is the robotic assembly of the vehicle. The implementation of automation in the manufacture of plain old cars is just a part of the overall issue of low job growth. In this case, technological advancement => stagnant growth in wages and employment.

iChallenge

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Here is an iChallenge for the iPeople who are developing the telecommunications wonders we have today. You designers of the Kindle, Nook, iPhone, iPad, iWidget, and all of the variants spreading away from the core technology. I know you are clever and hard working people. There is no doubt.

What about developing or just relocating manufacturing processes that can be run in the USA? Shouldn’t the fabrication technology be lined out and automated to the point where it can be operated nearly anywhere? One of the things that the advance of technology brings is reduced headcount per unit of production.  How do we justify off-shoring manufacturing that is highly automated? What is the advantage if inexpensive labor is not needed? It must be something else.

If taxes are the issue, then let’s look at the numbers. Quit the handwaving. We need a company like Apple to pony up some actual numbers. Make your case like you did in B-school. Manufacturing doesn’t have to start up in the expensive SF Bay area. Plants can be built anywhere the public infrastructure already supplies utilities and transportation.  Could it be that many of the arguments for off-shore manufacturing are related to a deficit in imagination rather than rigorous calculation?

And to the iConsumers out there. By demanding these wonderphones, you are only making the trade deficit worse.  Public corporations are people, or so the thinking goes. What is with these people? Do they not have any sense of loyalty? Are they even trying to manufacture in the USA anymore?

 

The 21st Century. The Century of China or Malthus?

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I’m trying hard not to be gloomy, but I’ve just been over at the The Oil Drum reading a post written by Jeremy Grantham, Chief Investment Officer at GMO Capital. This essay is notable in that it is written by someone in Grantham’s position. What I find so gloomy is the sense that our modern world is like a runaway train in terms of resource consumption.

People have been talking about peak oil and the importance of petroleum in nearly every material aspect of our lives since the Arab oil embaro of the 1970’s.  What free market enthusiasts and libertarians fail to emphasize is that the market is a social phenomenon; it is not physics. It is a phenomenon that is driven by desire.

The market is like a stomach- it has no brain. It only knows that it wants more.

The idea that you remove all elected government oversight and allow this stomach to reign free across the world is just another type of politics. Inevitably and always, money aggregates into the hands of a few percent of the human population and into the wire-transfer hands of synthetic people called corporations.

In a world of increasing scarcity the prospect of reduced consumption confounds political and business practices devoted to growth, since growth typically means increased consumption.

The key psychological barrier is this- How do we feel like we’re improving as we’re making do with less?

As the cost of manufacturing increases due to increased raw material costs, unit prices will rise. The invisible hand of price elasticity of demand will inevitably partition out the elastic from the inelastic goods on the market.  Whole industries relying on discretionary income will feel exposed. 

The challenge for our leaders is to maintain a vibrant economy even though natural resources are becoming ever more scarce. Power is manifested in the allocation of resources. China has pointedly focused on Africa as a source of raw materials for its growing economy.  The act of power is the fact of power. By throwing a lot of money around, and by controlling the flow of resources, China is exercising power. You don’t need to march an army around to demonstrate your power.

China is executing  industrial policy by forging alliances and allocating resources to global sourcing action. The USA dithers with self-destructive party politics, foreign military adventures, and a narcissistic indulgence in “greatness”.  Instead of wearing our hearts on our sleeves, we should roll them up and get to work building a robust and healthy culture.

Startup Failures

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Having been a part of several startups that failed, I think I can speak credibly about aspects of the startup phenomenon.  My friend Bill who lives in a state shaped like an oven mit sent a link to a blog written by a venture capitalist (VC). The long and short of it is that, according to this VC, too many discoveries reported in the biotech literature are based on very slender threads of experimental evidence and often have been performed by a limited number of people.  He ges on to lament that the nature of grant funding may contribute to an R&D style that focuses on reporting only the best looking data that supports the hypothesis forming the basis of the grant.  The basis of his commentary is his experience funding biotechstartups.

Based on my life experiences I have no doubt that his comments are reasonable.

The unspoken rule is that at least 50% of the studies published even in top tier academic journals – Science, Nature, Cell, PNAS, etc… – can’t be repeated with the same conclusions by an industrial lab. In particular, key animal models often don’t reproduce.  This 50% failure rate isn’t a data free assertion: it’s backed up by dozens of experienced R&D professionals who’ve participated in the (re)testing of academic findings. This is a huge problem for translational research and one that won’t go away until we address it head on.     –Bruce Booth, Life Sci VC.

The thing is, this phenomenon doesn’t have to be based on dishonesty, though sometimes it is.  It is in the nature of entrepreneurs to be extremely (or rabidly) optimistic about the value of their ideas.  Entrepeneurs who are specialists with some kind of standing in their field, ie., minimally having tenure or a tenure track slot at a reputable institution, can produce very convincing PowerPoint presentations and handwaving arguments to support their assertions. Especially in front of viewers and investors who are desperate to find the “next big thing”.  Finding investors is a numbers game. You simply have to go out in the big, big world and talk to a great many people. Eventually you will find people who want to invest in a startup.  It is a form of enchantment. And charismatic entrepreneurs learn early on that they can do this.

If you thought that this is limited to biotech or to academic entrepreneurs, you’d be wrong.  I’ve seen this kind of thing up close in other areas of technology. I can say that the prospect of riches just over the horizon can move otherwise sober individuals to commit significant resources to the startup wagon train. 

Especially dangerous is the entrepreneur with a patent or even a portfolio of them.  Having a patent amounts to an endorsement by the US government, or so it would appear to the unwary.  I’ve witnessed entrepreneurs collect and spend millions of dollars of investors money on nothing more than a patent based on handwaving. Remember, patent examiners do not require that you trot out a working model and run it for a while.  Before you invest, I would recommend that you demand to be shown a working model or some other hard evidence of proof of concept.

There are several ways to set up shop in the world economy. One is to steal market share. This is the better mousetrap world of “market pull”.  You develop a product or service that is superior in some way and compels customers to abandon their loyalties. You depend on taking someone else’s share of the pie.

The other way to set up shop is a bit harder. And riskier.  It is the “technology push” domain and consists of introducing new capability through goods and services.  It is more than taking a share of the pie- it is baking a new kind of pie.  This is the realm of the paradigm shift. Examples are the introduction of petroleum, electricity, vacuum tube electronics, synthetic chemistry, semiconductors, and the internet to name some of the really big ones. 

But not all technology push history is so grand. Most technology push is incremental.  Marketing products that create new capability requires early  investors and early adopters. And not everyone wants to be an early to the show.  The trick for purveyors of technology push is to get the cash flow going by selling to early adopters.

I would offer this to those who want to be involved in a startup.  Demand results from a marketing study and examine them as closely as you might the technology. If the entrepreneurs are hazy on how the sales part will look, then watch out.  If they have not included money people and marketing people early in their adventure, then the investor or employee should beware. It’s not all about the technology in the startup.  The entrepreneurs should be as focused on sales and marketing as the tech package. This is where academic entrepreneurs can be extremely weak.

Andy Grove on Scaleup

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Andrew Grove is the former CEO of Intel who was responsible for its transition from memory chip producer to microprocessor producer. According to Wikipedia, Grove is responsible for an increase of 4500 % in Intel’s market capitalization. In his youth he and his family escaped from Budapest, Hungary during the Soviet invasion of 1956. Groves holds a PhD in chemical engineering from UC Berkeley. Grove is now retired and is a senior advisor to Intel.

Grove recently wrote an article for Bloomberg that is quite insightful in its analysis of certain aspects of American corporate culture. In particular, Grove notes the disconnect between US technology startups and the subsequent expansion of business activity leading to job growth. He also notes that startups are failing to scaleup their business activity in the USA. The Silicon Valley job creation machine is powering down.

Grove makes an interesting point here,

A new industry needs an effective ecosystem in which technology knowhow accumulates, experience builds on experience, and close relationships develop between supplier and customer. The U.S. lost its lead in batteries 30 years ago when it stopped making consumer-electronics devices. Whoever made batteries then gained the exposure and relationships needed to learn to supply batteries for the more demanding laptop PC market, and after that, for the even more demanding automobile market. U.S. companies didn’t participate in the first phase and consequently weren’t in the running for all that followed. I doubt they will ever catch up.  Andrew Groves, 2010, Bloomberg.

To build on what Grove is saying, I’ll embellish a bit and add that an industry is actually a network of manufacturers, suppliers, job shops, labor pools, insurers, bankers, and distributors. When deindustrialization occurs, the network of resources collapses. The middle class takes a big hit when a commodity network moves offshore. In the end, the intended market for commodity goods and services- ie., the middle class- is weakened by the very move that was supposed to keep prices down and profits up.

Grove is most concerned with the matter of scaleup. This is the business growth phase that occurs after the entrepreneurship proves its worth in the marketplace. Investors pour money ino large scale operations and staff to get product onto the market. Grove suggests that investment in domestic startups who do not follow on with domestic scaleup are not participating in keeping the magic alive.

Offshore scaleup negatively counteracts the benefit of domestic innovation. In a sense, it is an abdication of the trust given to the entrepreneurs by the citizens who provided the infrastructure to make the innovation possible.

Grove makes a good point in his editorial and I think that the rest of us need to take an active stance to question the facile analysis so often uttered by business leaders when it comes to relocation of business units offshore.  Citizens paid for the infrastructure and a large part of the education that makes our innovative technology possible. There needs to be more public pushback on business leaders and government officials about this topic.

Viewpoints on American Business

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Over at the Robert Reich blog there is a recent commentary on Chinese currency policy. Reich makes some interesting comments on the Chinese approach to industrialization.

But most fundamentally, China is oriented to production, not consumption. It wants to become the world’s preeminent producer nation. While keeping the yuan artificially low is costly to China — it pushes up the prices of everything China imports — China is willing to bear these costs because its currency policy is really an industrial policy.

We think the basic purpose of an economy is to consume, not to produce. So we only grudgingly support industrial policy. We think of government efforts to rebuild our infrastructure as a “stimulus.” We approve of government investments in basic research and development mainly to make America more secure through advanced military technologies. And we give American companies tax credits for R&D wherever they do it around the world.

Don’t be fooled into thinking that US companies will continue to make big profits from sales in China. China allows big U.S. and foreign companies to sell in China on condition that production takes place in China – often in joint ventures with Chinese companies. It wasn’t American know-how, so it can eventually replace the US firms with China firms.  [Italics by Gaussling]

It seems to me that American policy leaders have no clue whatsoever on how to coexist or compete with China economically. Because of the authoritarianism in contemoporary Chinese culture, they are able to focus their resources on long term goals while we in the USA rely on a kind of economic Darwinism. It seems that we are waiting for the rational forces of the marketplace to take us forward in the economic struggle with China.  In reality, American businesses have no nationality. Their obligation is only to achieve maximum shareholder value, irrespective of parochial concepts of national interest.

Americans like to put on a show of maintaining an orthodox capitalistic stance against a nation state like China. One with a centrally controlled economy.  Unfair currency policy is a foreign policy that China is using to leverage the flow of export dollars their way.  Somehow we are content to play cards with an opponent who has stacked the deck.

It is worth remembering that much of the technology that economically emergent states use to energize their manfacuring sectors was paid for by US citizens over the last 100 years. Electronics , metallurgy, chemistry, aerospace, transportation, automation. The US has made substantial contributions to technologies that are now ubiquitous.

These emergent states have not funded generations of successive invention and improvement to achieve their semiconductor FAB or petrochemical complex. Corporate investors dropped it out of the sky.  This technology that we have been busy exporting has been dearly paid for by generations of hard working citizens here. Yet, through the exercise of advanced business philosophies, this magic of ours has been transplanted off shore to the benefit of a few.

I think there is an assumption that our American democracy is somehow a uniquely robust form of democracy. It is hard to make that argument anymore. A culture that equates money with speech and validates it in the Supreme Court is a culture that accepts the notion that the congress is part of the marketplace of goods and services.

In the face of a shift in the global economic center of gravity, Americans are busy in an orgy of fratricidal disassembly of its institutions. Journalism and independent media come to mind.  The former watchdogs of democracy are now quasi-analytical entertainment divisions of a few major comglomerates.

The market is like a stomach. It has no brain. It only knows that it wants more. I think nations like China know this about us and take full advantage of the fact that we like to wear the badge of orthodox capitalist on our sleeves. In a way we are just country bumpkins who have never traveled out of the county. We’ll be true to our doctrine as we run aground.

I think that, in the end, publically owned corporations will be the death of our economic vitality. Blind reverence for CEO’s who maneuver a dividend no matter what the economic climate force this species of organization to abdicate any sense of national affiliation. It’s been happening for many years. Legions of B-school students study the strategy of Jack Welch and similar ethically agnostic characters who serve the greater good of the corporation.

Instead, legions of B-school students should be trying to figure out how to sustain American manufacturing rather than how to outsource it. These people should not confuse M&A with progress. Making things and offering services that people want is how progress happens. If taxes are too high to sustain business within these borders, then an open effort to bring corporate taxes into line based on mathematically defensable arguments should be made. To work for progress is to be progressive. We need more progressive business people, not more financial wizards. The grownups of America need to step up.

Rand, Ron, and Ludwig

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Disclaimer: I’m neither an expert on or an enthusiast of orthodox libertarianism. I think it is yet one more narrow utopian social philosophy that a band of economic puritans want to impose on society. To their credit, it is a scholarly economic theory. But it seeks to validate and legitimize the most selfish and materialistic impulses of our primate sensibilities.

I have a comment on the recent public flare up on comments by candidate Rand Paul of Kentucky.

Randal Paul, son of Ron Paul, seems to be very much influenced in his thinking by his father and by Ludwig von Mises. I would characterize father and son as ultra-orthodox libertarians (if only by virtue of their scholarship) along the lines of the Austrian school but lacking the John Birch Society fascist and theocratic elements. I sincerely acknowledge their understanding of economics and history. However, I must differ in regard to their understanding of the non-mathematical aspects of civilization. 

Rand Paul’s recent expression of his views on the civil rights act comes straight from the Austrian view on statism. It is right out of the textbook. The man is not a racist. He just does not approve of the intervention of the state into the affairs of a property owner. I think he would prefer to see market forces solve the problem in the domain of private property.

The problem is that market forces have a substantial element of greed. And greed is what greed does. Social justice is orthogonal to greed forces. American slavery did not end because the market found a way out of it. The slave states were deeply dependent on the economic advantages in labor overhead that slavery provided. The nonmarket forces- government- that are inevitable in civilization intervened and put an end to it.

The impulse to accumulate power is expressed in the market and in government. Power is the ability to allocate resources. The domains of both government and business need to be watched closely because both are subject to the corruption of greed. Both socialism and libertarianism are utopian in their conception. Both tend to fail because adherents must rely on the adoption of their tenets by diverse groups. Both require a kind of homogeneity in thinking that is inherently unstable over large populations. Neither seems willing to accomodate a bell curve of views and behaviors. 

Just read history. You can’t even get large populations to agree on how to enable or even what is meant by the meaning of life, liberty, and the pursuit of happiness.

I fail to understand how people who do not trust big government can somehow trust a business system which can fund methods to override the checks and balances of a natural market. The notion that consumers actually have power through the allocation of their dispersed resources is perhaps partially valid in a village market. It fails in contemporary society because businesses are focused and populations tend to be defocused. 

Advertising works. Consumers are subject to suggestion by advertising influence. Consumers are not perfect, rational economic units. In some ways, we are fish in a barrel.  Businesses can obtain patents or assemble local monopoly and dominate a market in a way that consumers are powerless to respond. Look at how big box stores can move into a local market and dominate. They do provide lower prices, but they also offer a channel for foreign suppliers to cross the border and invade a market for the profit of corporate owners who live elsewhere. They apply instant globalization to local markets that are ill equipped to compete. Economic purists would say that local businesses are unfit in this circumstance.

The proclivity to trend into big-brother influence seems just as certain with business as with government. The purpose of civilization is to buffer the Darwinian forces of nature and make life less brutal and short. Government provides a way to accumulate resources and focus effort on large scale infrastructure and allow access to all. Access to infrastructure facilitates innovation and economic growth and diversity. If you don’t like infrastructure, move to Haiti or Somalia where you’ll be blissfully free of it.

Government can grow to the detriment of all. And, arguably, it is in such a position now. But to abandon this important element of our culture in favor of a more Darwinian approach to everything is a utopian dream that will not come to pass. Libertarians need to develop some pragmatism.