Monday, February 12, 2018

Why I Am Shorting the Market for Lincoln and Darwin - by Gary North

Two hundred and nine years ago today, the sun rose over the English village of Shrewsbury. Susannah Darwin was about to give birth to her fifth child, Charles. Her husband Robert was a financier. Her father was a Wedgewood, of pottery fame. Times were not tough in the Darwin household.
The sun moved over the Atlantic, heading for Hardin County, Kentucky. Later in the day -- the Darwins' day, anyway -- it passed over the log cabin of Thomas and Nancy Lincoln, whose son Abraham had just been born. Times were always tough in the Lincoln household.
All in all, it was a memorable day, if not for the sun, then for the rest of us.

Forty-nine years later, in 1858, Darwin was an amateur naturalist, unemployed but content as a man of leisure. He had achieved some degree of fame with his 1839 book, Journal and Remarks, 1832-1835, known today as The Voyage of the Beagle, but he had not made any major contribution to science.
He had been working for over a quarter century on a manuscript about evolution. He could not bring himself to finish it. That year, he received a letter from Alfred Russel Wallace, a naturalist living in the Malay Peninsula. Wallace in his autobiography said he had been afflicted by a fever. While in bed, he had come up with a theory of evolution through natural selection. He sent the outline of his theory to Darwin.
Darwin was stunned. The theory was almost identical with his own, even with the same section categories. If Wallace got into print first, he would be the winner, though it was not clear what exactly he would be winner of. Darwin told some of his friends, who persuaded him to offer Wallace joint authorship of a paper on natural selection. Wallace agreed. The paper was published in The Journal of the Linnean Society in 1858. It attracted no interest. Darwin was still unknown to the world.

In that same year, 1858, Abraham Lincoln lost the race for United States Senate to Stephen A. Douglas. In 1839, the same year that Darwin's book appeared, Mary Todd was courted by Douglas, but she decided to end the relationship in favor of Lincoln. It could be said that Douglas had defeated Lincoln twice. In 1858, they were both successful lawyers for the Illinois Central Railroad, but Douglas was the more successful of the two.

In late 1859, Charles Darwin's book appeared: On the Origin of Species by Means of Natural Selection, or the Preservation of the Favoured Races in the Struggle for Life. The entire edition of 1250 copies sold out the first day. Well, 1170 copies; the others had been sent out as review copies. This was not a best-seller.

That same year, on the other side of the Atlantic, Lincoln delivered a speech to the Wisconsin Agricultural Society on the importance of state fairs. He began with these words: "Agricultural Fairs are becoming an institution of the country; they are useful in more ways than one; they bring us together, and thereby make us better acquainted, and better friends than we otherwise would be." Not a spellbinding beginning. The ending was not much better. Lincoln seemed to be on a slow track to oblivion.
Then came 1860. Lincoln was invited to give a speech at Cooper Union in New York City. That led to his nomination for President by the Republicans. In November, he won the Presidency.

By the end of 1860, Darwin's book was becoming famous, due initially to the efforts of his friend Thomas Huxley, who wrote four glowing reviews, including one in the influential Times of London in December of 1859.
At the time of Darwin's death in 1882, Darwin's book, along with his follow-up book, The Descent of Man (1871), had conquered the intellectual world. His theory of evolution through natural selection was re-shaping legal theory. One piece of evidence is Oliver Wendell Holmes, Jr.'s, book, The Common Law (1881).
Deeply affected by 1885 was the new academic discipline of sociology. Social Darwinism had become a major intellectual movement. There were two camps. A laissez-faire camp was led by Herbert Spencer, who coined a phrase that Darwin adopted in later editions of Origin: "the survival of the fittest." Opposed to him was Lester Frank Ward, who believed that Darwinian science gives a scientific and educational elite the ability and therefore the legal right to plan society. Both men appealed to Darwin's theory as justification.
Lincoln's wartime policies re-shaped the politics of the United States. This transformation was reflected in a change of grammar. In 1860, men said "the United States are." After 1865, they said "the United States is."
Had anyone on February 12, 1859 looked at the careers of these two fifty-year-old men, he would have concluded that they had made minor contributions to their respective fields, but that if they had both died that evening, neither of them would have made it into a history textbook. Two years later, they had begun to re-shape the modern world. Lincoln had not yet been inaugurated, but Southern secession was in full swing.
This should remind us that the affairs of men are essentially unpredictable. In the conclusion to his June 1968 Commentary essay, "The Year 2000 and All That," Robert Nisbet assessed futurology.
It is very different with studies of change in human society. Here the Random Event, the Maniac, the Prophet, and the Genius have to be reckoned with. We have absolutely no way of escaping them. The future- predictors don't suggest that we can avoid or escape them -- or ever be able to predict or forecast them. What the future-predictors, the change-analysts, and trend-tenders say in effect is that with the aid of institute resources, computers, linear programming, etc. they will deal with the kinds of change that are not the consequence of the Random Event, the Genius, the Maniac, and the Prophet. To which I can only say: there really aren't any; not any worth looking at anyhow.
Ludwig von Mises challenged all central economic planning because he knew that no one, and no committee, has the ability to see accurately the effects of government directives. Men cannot derive viable plans in terms of supposed historical stages. In Chapter 18 of Socialism (1922), he wrote this.

For sociological study the stage theories are useless. They mislead us in regard to one of the most important problems of history -- that of deciding how far historical evolution is continuous. The solution of this problem usually takes the form either of an assumption, that social evolution -- which it should be remembered is the development of the division of labor -- has moved in an uninterrupted line, or by the assumption that each nation has progressed step-by-step over the same ground. Both assumptions are beside the point. It is absurd to say that evolution is uninterrupted when we can clearly discern periods of decay in history, periods when the division of labor has retrogressed. On the other hand, the progress achieved by individual nations by reaching a higher stage of the division of labor is never completely lost. It spreads to other nations and hastens their evolution.
Men are not omniscient. They are bounded by uncertainty. The free market offers a way to deal with this uncertainty: entrepreneurship. Men of necessity must face the future. They do their best to see what is coming. They delegate to specialists in forecasting the responsibility of allocating resources for future production. Then consumers bid against each other for these goods and services. By their bids, they bless certain entrepreneurs with profits, but thereby curse others with losses. Through the incessant process of resource allocation and bidding, individuals shape the world in which they live.
There was no way in 1859 to go long in Darwin or Lincoln futures. There would have been too few longs to make a market.
I would have preferred to go short. The market would have made hash of my plans.
Still, I maintain a short position on both Lincoln and Darwin.
Shorting Lincoln's legacy takes faith in the ability of the free market to bring negative sanctions against the modern State. But I think that Jacques Barzun and Martin van Creveld are correct. The nation-state is a viable short: the end of a 500-year bull market.
Shorting Darwin means shorting the university system and the public schools. My view is this: when the nation-State goes belly-up, tax subsidies to education will end. In a competitive market, Darwinism will lose. It already has. Even today, it is accepted by under 20% of Americans. That percentage will fall if the subsidies to education end.
I love the way the Darwinists in the media stack the deck. It doesn't work. The Gallup organization surveys Americans' belief in Darwinism every year. The figures don't change much, year to year. In 2017, those who favored six-day creationism constituted 38% of those polled. Those favoring intelligent design -- God's guidance of evolution -- constituted 38%. This view has been anathema to Darwinists ever since Darwin. He paid no attention to creationists. His enemy was the idea of intelligent design. He was trying to refute Robert Chambers' Vestiges of the Natural History of Creation (1844), not Genesis 1. Only 19% accepted Darwinism in 2017. So, what was Gallup's headline? This: In U.S., Belief in 
Nice try, guys. But you are still losing, despite 100% control over tax-funded education. Wait until Washington's checks bounce.
I just hope the futures market survives the regulators in the interim.