Edward Conard

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  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences
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Saturday, September 19, 2020

The Systemic Racism Dodge

AI Summary. The argument holds that framing racism as systemic denies black citizens agency by leaving protest as their only recourse and dismissing past measures against white supremacy as tools of white power. It further contends that remedies such as affirmative action and subsidies may do more harm than good.

Harvey Mansfield Wall Street Journal
Date Posted:
September 19, 2020
Is Database:
Database

Harvey Mansfield argues systemic racism undermines black agency, implying past efforts against white supremacy were futile. This perspective questions the effectiveness of historical measures like the Constitution & Rights of Man. @HarveyMansfield @WSJ.

Harvey Mansfield argues systemic racism undermines black agency, implying past efforts against white supremacy were futile....

Does framing racism as systemic deny black citizens agency?

Core argument: Mansfield argues that the concept of systemic racism undermines the agency of black citizens by casting protest as their only recourse and implying that past white efforts against white supremacy have been futile.

Mansfield argues that systemic racism undermines the agency of black citizens, suggesting that their only recourse is protest, while implying that past efforts by whites against white supremacy have been futile. This perspective questions the effectiveness of historical measures like the Constitution and the Rights of Man, which were perceived as tools of white power. The economic implications are significant, as policies such as affirmative action and subsidies are critiqued for potentially causing more harm than good. This raises concerns about the allocation of resources and the effectiveness of current economic policies aimed at addressing racial disparities. The lack of clarity on alternative solutions suggests a need for innovative policy approaches that genuinely address systemic issues without perpetuating dependency or ineffectiveness.

Takeaways by Macro Roundup® AI

  1. Mansfield argues that the concept of systemic racism undermines the agency of black citizens by casting protest as their only recourse and implying that past white efforts against white supremacy have been futile.
  2. Mansfield questions whether historical measures such as the Constitution and the Rights of Man can serve as remedies if they are perceived as instruments of white power.
  3. Mansfield critiques policies including affirmative action and subsidies as potentially causing more harm than good, without specifying alternatives that avoid perpetuating dependency or ineffectiveness.

Harvey Mansfield, "The ‘Systemic Racism’ Dodge,"Wall Street Journal, September 18, 2020, https://www.wsj.com/articles/the-systemic-racism-dodge-11600454532

“…Systemic racism ignores the agency of black citizens, leaving them nothing to do except to protest in the streets or cheer from the sidelines. Meanwhile whites are told by the same idea that all their past efforts against white supremacy have been in vain. Nothing they have done has worked or could have worked. All along our history, the Constitution and the Rights of Man we thought we practiced and defended were nothing but the power of white men. All the heroes of both races and their sacrifices were defeated by systemic racism and went for naught. What we might do now differently from what we have done in the past is left totally unclear. More affirmative action and more subsidies—what can they do that will now help instead of hurt?..”

Ed Comment:Wow! Harvey, it's brilliant. Congratulations and thank you for your contribution--the time you spent puzzling through these critical issues when you could have been doing something more selfish, and the courage to say it. I've read it twice but that's not nearly enough. There is so much there. Here are the first things that came to mind (at 4:30 AM, now 5:30 soon to be 6): Let's say I don't believe there are different between the races. I see that difference have nevertheless manifested themselves. But I don't care enough to make fixing them my priority (other than to believe it isn't fair). Is that racism, systemic racism, or something else? It seems to me that we are always debating priorities. Should my daughter and her school devote more time to learn math and science, or spend even more time learning to cure whatever it is that causes unequal outcomes despite equality between races? You say "All the heroes of both races and their sacrifices were defeated by systemic racism and went for naught. What might we do now differently?" If their efforts did not come to naught but made some improvements to the greater equality of African-Americans, as surely they did, what did those efforts change it we were not racists, systemic or otherwise? What if there are difference between the races? Are we racists if we believe the truth? What if we believe all people, regardless of their capabilities should be treated with equal rights, respect, gratitude, and a minimal but justly living standard regardless of their race?...that the unevenly distributed talents of mankind belong to mankind and not the luckily recipients. And so come with moral obligations to give much of the value to others--to pay a high tax on our intelligence for example. But that once paid, we are free to do as we please, especially since our example and the rewards for success motivate others with talent to go above and beyond their mere obligations. We fulfill our moral responsibilities but there are still differences between the races even though there are no inherent differences. Are we nevertheless responsible? Are we infinitely responsible for everything? Is there no price at which a person, a talented person, can buy their freedom?...”

The ‘Systemic Racism’ Dodge

Systemic racism, also known as institutional or structural racism, is a new phrase for a new situation. We live in a society where racism is not, and cannot be, openly professed. To do so not only is frowned upon but will get you into serious trouble, if not yet jail, in America. Yet even though this is impossible to miss and known to all, “systemic racism” supposedly persists. The phrase describes a society that is so little racist that no one can respectably advocate racism, yet so much racist that every part of it is soaked with racism. We live with the paradox of a racist society without racists.

Systemic racism is unavowed and mostly unconscious, racist despite itself. Those who use the phrase, mostly whites, are consciously accusing their unconscious selves. To get a sense of what they mean, think of African-Americans as they are, freed of slavery and segregation but still somehow consigned to an inferior social position. Everywhere they look, they see black faces on show but white faces in charge. This is true even where they generally excel and surpass whites, as in sports and entertainment, and still more in business and academia, where they are fewer. White supremacy seems to be true in effect if not in intent. Look around and you will see it.

It is strange to describe an unconscious effect as racism, for an ism is an opinion, a doctrine, not a mere condition. A doctrine has adherents who articulate it; it cannot be held unconsciously as can a prejudice. Racist doctrine says that blacks are a naturally and inherently inferior race. To criticize the character or behavior of blacks, individually or even on average, is not racism. Criticism implies that blacks are not living up to their potential, hence that they are capable of behaving well. Criticism implies an essential equality between critics and whomever they criticize. This is contrary to racism.

Racist doctrine is not really blame of an inferior race but implies a sort of excuse. If you are innately inferior, there’s nothing you can do about it—so no blame is reasonable. Nor, from the standpoint of racism, is it reasonable for the inferior race to resent being treated as inferior; that’s all it is entitled to. It’s better to resign oneself to one’s fate, whether one is superior or inferior. That is racism, and it is contrary to the American principle that all human beings are created equal.

The idea of systemic racism proclaims that racism is unjust but exists nonetheless despite ourselves. How could this happen? It is the bad result of the behavior we regard as good. The good behavior of conscientiously striving to better oneself is joined to the bad behavior of always preferring oneself. Thus any privilege one earns and deserves is tied to undeserved privilege: A successful life if you are white comes out as white supremacy. Despite your verbal rejection of that result, the system behind your intentions brings it about.

The notion of systemic racism is designed to make you feel guilty about this if you are white. But why should you? The system did it, not you. You can’t change the system; that’s what “systemic” means. All your good intentions have existed since America began, but they are always tainted by bad consequences. The movement against systemic racism must fail. How could it succeed where Abraham Lincoln and Martin Luther King Jr. couldn’t? Systemic racism exists despite our intentions; so it can’t be cured by changing our intentions—as by protesting.

If, on the other hand, we are all responsible, then we should all behave better. If that is possible, then we don’t live in the thrall of a system. We somehow control our lives but don’t do a good job of it. We should turn a bad job into a good job. To behave responsibly, it doesn’t help to assume a systemic racism that acts against our intentions.

Yet “systemic racism” is used as an accusation, not as mere description. As accusation, though, it is no longer a system in the required sense of being beneath our awareness. It is joined to the demand for antiracism. If antiracism is possible, then all of us, whites as well as blacks, are no longer mere victims of a system.

In fact, all of us are aware of the racial question, even those who are not woke. Both sides of this matter are awake, but we differ. Our compassionate intentions run up against our fear of running other peoples’ lives, together with legitimate concern for our own well-being and our children’s, and we resolve the conflict differently, usually by partisan choice. Instead of submitting to fate, we argue our differences over justice. This is what we do and what we should be aware of doing.

Systemic racism has disadvantages as a way of thinking that outweigh the specious advantage of not having to argue about justice. It tells blacks that they are quite OK, and that it is entirely up to whites to change their thinking and their behavior. This means that blacks must allow whites to hold their future for them.

We recently mourned the passing of John Lewis, an activist for civil rights. Civil rights come from America, and to demand them is to imply that America would be OK if only it would assure for blacks what it gives to whites. But if America is tainted by systemic racism even to the principles of its founding, blacks will have to depend on the goodwill of whites and can’t call on our common patriotism. That is the implication of the slogan “Black Lives Matter.” The civil-rights movement was led by blacks, and its accomplishments were theirs, in cooperation with the governing white majority.

Systemic racism ignores the agency of black citizens, leaving them nothing to do except to protest in the streets or cheer from the sidelines. Meanwhile whites are told by the same idea that all their past efforts against white supremacy have been in vain. Nothing they have done has worked or could have worked. All along our history, the Constitution and the Rights of Man we thought we practiced and defended were nothing but the power of white men. All the heroes of both races and their sacrifices were defeated by systemic racism and went for naught. What we might do now differently from what we have done in the past is left totally unclear. More affirmative action and more subsidies—what can they do that will now help instead of hurt? Call them “reparations”—will that do any good?

Another disadvantage of the idea of systemic racism is to deny the value of prudence in politics. A democracy can react quickly if attacked, but for a transformation out of white supremacy, you have to have the support of a majority; you have to go by stages. First, assert the goal to be achieved, the principle of human equality, as was done in the Declaration of Independence. Then make a constitution so that a free country can govern itself effectively. To ratify the Constitution, it was necessary to gain the assent of the slave states.

The American founding couldn’t be perfect from the start; it had to progress toward its goal. Prudence is the faculty that deals with imperfection in order to form, as the Preamble put it, a “more perfect union.” To make progress effectively and democratically, prudence seeks and finds necessary accommodations in compromise. Not all compromises are successful, but the successful ones deserve to be accepted, and those who had the prudence to make them should be honored—not merely tolerated, let alone dishonored or canceled.

The cancel culture is a malignant growth from the idea of systemic racism. Those who cancel stop accusing themselves; they step outside of the system they denounce. After asserting the guilt of all whites, these whites give themselves a pass.

“Systemic racism” is a bogus description that issues in an accusation made in doubtful faith that contradicts itself. But it is held by many fellow Americans, so let’s not dismiss it. It’s better to treat it respectfully as a disputable opinion.

Mr. Mansfield is a professor of government at Harvard.

  • Politics
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    • Race

Monday, September 21, 2020

Do Stocks Outperform Treasury Bills?

AI Summary. Five firms—Exxon Mobil, Apple, Microsoft, General Electric, and IBM—accounted for 10% of total US stock market wealth creation from 1926 to 2016, and just 4% of firms generated all net stock market gains. Most listed firms had lifetime buy-and-hold returns below those of one-month Treasury bills.

Hendrik Bessembinder Journal of Financial Economics
Date Posted:
September 21, 2020
Is Database:
Database
Is Important:
Important

According to @HendrikBessembinder, 5 firms account for 10% of wealth creation btw 1926-2016, while 4% of firms account for all net stock market gains over the period.

Do most stocks outperform Treasury bills?

Core argument: Only 4% of listed firms accounted for all net stock market gains from 1926 to 2016, while most listed firms delivered lifetime buy-and-hold returns below those of one-month Treasury bills.

The analysis reveals a striking concentration of wealth creation in the stock market, with just five firms—Exxon Mobil, Apple, Microsoft, General Electric, and IBM—accounting for 10% of total wealth creation from 1926 to 2016. Furthermore, only 4% of firms were responsible for all net stock market gains during this period, highlighting a significant skewness in returns. This suggests that while stocks can outperform Treasury bills, the majority of listed firms have lifetime buy-and-hold returns that are less than one-month Treasuries. The data underscores the importance of selecting the right stocks for substantial returns, as a small fraction of firms drive the majority of market gains.

Takeaways by Macro Roundup® AI

  1. Only 4% of listed firms accounted for all net stock market gains from 1926 to 2016, while most listed firms delivered lifetime buy-and-hold returns below those of one-month Treasury bills.
  2. Five firms—Exxon Mobil, Apple, Microsoft, General Electric, and IBM—accounted for 10% of total stock market wealth creation from 1926 to 2016.

Hendrik Bessembinder,"Do Stocks Outperform Treasury Bills?" June 3, 2018, Journal of Financial Economics, https://papers.ssrn.com/sol3/papers.cfm

The paper finds the majority of listed firms have lifetime buy and hold returns of less than one-month Treasuries:

Great new paper finds a shocking high degree of skewness in returns. As of December 2016 5 individual firms accounted for 10% of wealth creation btw 1926-2016, Apple and Microsoft were two of them and another two Exxon and GE seem like they are in death rolls now: “…However, just five firms (Exxon Mobile, Apple, Microsoft, General Electric, and International Business Machines) account for 10% of the total wealth creation…”

Steve Comment: See table“Panel A of Table 2A reports summary statistics for the pooled distribution of 3,575,216 monthly common stock returns contained in theCRSP database from July 1926 to December 2016, as well as matched Treasury bill returns. The data confirm that the mean excess return is positive, as the average monthly return is 1.13%, compared toan average one-month Treasury bill return during the same month of 0.37%..”

Ed Comment::Speaking loosely 1:25 account for all the gain (since the one-month treasury is effectively inflation please zero return. What is the 1-month treasury return bench march he is using over the period?) 1:300 account for all the excess profits. And these are the companies that made it public!!! For every one of those, there are probably many that failed long before.

"....Themajority of common stocks that have appeared in the Center for Research in Security Prices (CRSP) database since 1926 have lifetime buy-and-hold returns less than one-month Treasuries. When stated in terms of lifetime dollar wealth creation, the best-performing 4% of listed companies explain the net gain for the entire US stock market since 1926,as other stocks collectively matched Treasury bills.....Of all monthly common stock returns contained in the CRSP database from 1926 to 2016, only 47.8% are larger than the one-month Treasury rate in the same month. In fact, less than half of monthly CRSP common stock returns are positive. When focusing on stocks’ full lifetimes (from the beginning of the sample in 1926, or first appearance in CRSP, through the 2016 end of the sample, or delisting from CRSP), just 42.6% of common stocks, slightly less than three out of seven, have a buy-and-hold return (inclusive of reinvested dividends) that exceeds the return to holding one-month Treasury bills over the matched horizon. More than half of CRSP common stocks deliver negative lifetime returns. The single most frequent outcome (when returns are rounded to the nearest 5%) observed for individual common stocks over their full lifetimes is a loss of 100%.....Rates of underperformance are highest for small capitalization stocks and, as would be anticipated based on the evidence in Fama and French (2004), for stocks that have entered the database in recent decades.... approximately 25,300 companies that issued stocks appearing in the CRSP common stock database since 1926 are collectively responsible for lifetime shareholder wealth creation of nearly $35 trillion, measured as of December 2016. However, just five firms (Exxon Mobile, Apple, Microsoft, General Electric, and International Business Machines) account for 10% of the total wealth creation. The 90 topperforming companies, slightly more than one-third of 1% of the companies that have listed common stock, collectively account for over half of the wealth creation. The 1,092 topperforming companies, slightly more than 4% of the total, account for all of the net wealth creation. That is, the remaining 96% of companies whose common stock has appeared in the CRSP data collectively generate lifetime dollar gains that matched gains on one-month Treasury bills.... When stated in terms of lifetime dollar wealth creation to shareholders in aggregate, approximately one-third of 1% of the firms that issued common stocks contained in the CRSP database account for half of the net stock market gains, and slightly more than 4% of the firms account for all of the net stock market gains...."

  • Financial Markets
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    • Historical


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