Russell Roberts's Blog, page 13
June 2, 2023
A Speculative Thought
The late Newton Minow’s daughter, Nell Minow, tweeted that an idea expressed recently by David Henderson and me in the Wall Street Journal is “idiotic.” I learned of Ms. Minow’s low opinion of my and David’s piece from David’s posting of our piece at EconLog.
My point here isn’t to defend my and David’s argument. You can read our piece in full – either here or here (or here) – to judge for yourself our argument’s merit or demerit.
I instead write here to make an observation about Ms. Minow’s suggestion that David and I expressed our “idiotic” idea because we allegedly are paid to do such things by Koch. (In the comments section at David’s EconLog post, Ms. Minow denies that she made any such accusation. But as you’ll see if you read her comment and then David’s response to it, her denial falls flat. Her suggestion is very real that David and I wrote what we wrote because we allegedly are Koch pawns, or are angling to be so.)
Accusations that those of us who today publicly support free markets do so only because we’re paid shills of rich oligarchs are commonplace. I’ve been targeted with this factually baseless accusation too many times to count, and I’m confident that the same is true for David. Nevertheless, these accusations have long been, for me, mystifying.
I understand that dismissing an argument by using ad hominem ‘reasoning’ is cheap and easy and perhaps also emotionally gratifying: “Oh, I think that Mr. A or Ms. B is paid by Charles Koch, so I don’t have to engage the substance of Mr. A’s or Ms. B’s arguments; I can confidently dismiss these arguments simply because of who (I think) Mr. A and Ms. B are.” What had long mystified me is not that lazy or uninformed people resort to making this particular ad hominem argument. What had long mystified me is that such a fallacious line of argument seems to work. Why, I wondered, do many people who encounter such an argument seem to nod their heads in agreement. Such an argument just seems on its face, to me, to be pathetically – indeed, almost comically – inadequate.
But in pondering Ms. Minow’s accusation that David and I are Koch shills, I think that I’ve uncovered at least a powerful clue as to why this ad hominem argument works as well as it does in many circles. I hypothesize that such an accusation has special resonance for those persons who believe that intentions are results. If you believe that there is a tight connection between intentions and results, then intentions loom in your mind very large. Individuals who you judge to have poor intentions are dangerous to society, while individuals whose actions have any hope of benefitting humanity are individuals whose intentions are pure, noble, and other-regarding.
Therefore, if Mr. C’s motives are believed to consist entirely of reaping for himself ever-greater riches at the expense of humankind, then anyone who is convinced that there’s a tight connection between intentions and results naturally, upon becoming convinced that Mr. A and Ms. B are paid shills for Mr. C., dismisses any arguments offered by Mr. A or Ms. B. Because Mr. A’s, B’s, and C’s intentions are (believed to be) bad, any arguments offered by these people must also be bad. There’s no need to evaluate these arguments’ coherence, logical structures, or conformity with available empirical evidence. We know that these argument are bad simply because we know that the intentions of the persons offering these arguments are bad.
To discredit the argument, all that must be done is to expose the arguer’s unsavory intentions – and such an exposure is achieved merely by alleging that the arguer is a spokesperson for an ill-intentioned individual or group.
Let me state my point a bit differently. For those of us who understand that intentions are not results – for those of us who understand that economic and social outcomes are largely the unintended results of unfathomably complex human interactions – the intentions (real or merely suspected) of someone loom far less significantly than intentions loom in the minds of those who believe that intentions are results.
Compared to people who believe that intentions are results, those of us who understand that intentions are not results are far less impressed with the motives – be these real or imagined – of someone making an argument. Badly intentioned people can make sound arguments, and well-intentioned people can make unsound arguments.
It’s no surprise that Ms. Minow advocates ESG investing, for ESG investing is premised on the notion that in order for corporations to better serve society, corporations must intend to better serve society. In the minds of ESG advocates, if corporations intend only to maximize shareholder value, then corporations either do not serve the larger public good at all, or serve the larger public good far less effectively than corporations would if they had as part of their intentions the furtherance of the larger public good.
That this premise of ESG investing is not only economically naïve, but unintentionally (!) harmful to the larger public good, is a reality that most readers of this blog will readily understand. Most readers of this blog, after all, understand that intentions are not results.
Some Links
Here’s the abstract of a recent paper by Ann Krispenz and Alex Bertrams (emphasis added): (HT Phil Magness)
In two pre-registered studies, we investigated the relationship of left-wing authoritarianism with the ego-focused trait of narcissism. Based on existing research, we expected individuals with higher levels of left-wing authoritarianism to also report higher levels of narcissism. Further, as individuals with leftist political attitudes can be assumed to be striving for social equality, we expected left-wing authoritarianism to also be positively related to prosocial traits, but narcissism to remain a significant predictor of left-wing authoritarianism above and beyond those prosocial dispositions. We investigated our hypotheses in two studies using cross-sectional correlational designs. Two nearly representative US samples (Study 1: N = 391; Study 2: N = 377) completed online measures of left-wing authoritarianism, the Dark Triad personality traits, and two variables with a prosocial focus (i.e., altruism and social justice commitment). In addition, we assessed relevant covariates (i.e., age, gender, socially desirable responding, and virtue signaling). The results of multiple regression analyses showed that a strong ideological view, according to which a violent revolution against existing societal structures is legitimate (i.e., anti-hierarchical aggression), was associated with antagonistic narcissism (Study 1) and psychopathy (Study 2). However, neither dispositional altruism nor social justice commitment was related to left-wing anti-hierarchical aggression. Considering these results, we assume that some leftist political activists do not actually strive for social justice and equality but rather use political activism to endorse or exercise violence against others to satisfy their own ego-focused needs. We discuss these results in relation to the dark-ego-vehicle principle.
Here’s Arnold Kling on Kevin Corcoran on Randy Holcombe’s new book, Following Their Leaders. A slice from Kling:
Perhaps the idea that democratic governments are accountable to the people is a Noble Lie. If people did not believe it, they would be inclined to be rebellious and disobedient, and this could get out of hand, meaning anarchy and violence. On the other hand, the Noble Lie seems to have gotten out of hand, in that government seems to me to be too powerful.
For me, the virtue of democracy is that it allows for peaceful transfers of power. In an ideal country, the stakes in elections would be low, because of constitutional limits on government. Elites would be able to negotiate and settle differences, unperturbed by engaged, polarized masses who use primaries to punish compromisers. The public will have modest demands and expectations for government, but they will vote out of power a party that governs poorly. Their voting will be fluid, based on satisfaction or dissatisfaction with those in power; not fixed, based on strong party allegiance.
Walter Olson applauds the U.S. Supreme Court ruling in Glacier Northwest, Inc., v. Teamsters. A slice:
In Glacier Northwest, Inc., v. Teamsters, decided today, the Supreme Court showed a good measure of consensus and civility in settling a potentially contentious issue in labor law: whether a company is entitled to sue a union that has so arranged its strike so as to put the company’s equipment, as well as its perishable inventory, at risk of destruction. Eight Justices led by Justice Amy Coney Barrett said the company was entitled to sue, while Justice Ketanji Brown Jackson, the only dissenter, said the dispute should properly be heard by the National Labor Relations Board. Along the way, the Justices brushed up against two kinds of issues seen in many higher‐profile cases: when federal law should pre‐empt that of the states, and the degree to which courts should show deference to the expertise of federal agencies.
Christian Britschgi reports on yet another reason to ignore the World Health Organization.
Max Gulker reviews Matthew Desmond’s Poverty, by America.
George Will is not a fan of Biden’s schemes to increase Americans’ purchases of electric vehicles. A slice:
Because multiple subsidies seem insufficient to lure multitudes into buying electric vehicles, President Biden is resorting to a labyrinthine industrial policy to supply what people are not demanding. A purchaser of an EV is eligible for tax credits of up to $7,500, if:
If final assembly of the vehicle occurred in North America. And if a minimum of 40 percent (80 percent by 2027) of the minerals in the battery, and 50 percent (100 percent by 2029) percent of the vehicle’s components come from the United States or a country with which it has a “free trade agreement.”
There are no such agreements with some nations that are important sources of EV materials, so the Biden administration has issued a semantic fiat: In the context of the pertinent legislation, the Inflation Reduction Act (IRA), the phrase “free trade agreement” shall mean any deal that encourages environmentally and labor-friendly trade — and such agreements do not need congressional approval. The Constitution says: “Congress shall have power … to regulate commerce with foreign nations.” But desperate times require desperate measures, and nowadays times are always too desperate to treat the Constitution as other than a tissue of suggestions.
Alex Gutentag is no longer a supporter of ‘teachers’ unions. (HT Jay Bhattacharya)
Quotation of the Day…
… is from page 43 of University of Connecticut economist Richard Langlois’s monumental forthcoming (2023) study, The Corporation and the Twentieth Century:
Here we begin to glimpse the great irony of American antitrust policy at the turn of the twentieth century: legislation pushed in part by small independent businesses to ward off the threat of the giant corporation actually harmed the small firms, which relied on coordination through contract, and reduced the relative cost of coordination within boundaries of large enterprises.
DBx: Government restrictions on contractual agreements across different firms often artificially increased the attractiveness to those firms of merging with each other.
Real-world economic activity is unfathomably complex – or, rather, it must be so if the results of this activity are to sustain our modern standard of living. The lowest-cost means of accomplishing some tasks is for producer A to sell inputs in arms’-length exchange to producer B. The lowest-cost means of accomplishing some other tasks – tasks W and X – is for producer B to perform both of these tasks in-house. The lowest-cost means of accomplishing yet other tasks – tasks Y and Z – is for producer B to enter into long-term ‘relational’ contracts with producer C, contracts in which B and C commit to interact with each other in particular ways that are hoped will minimize the total cost of performing tasks Y and Z.
Absent the actual trial-and-error of market processes, no one can possibly know what are the best means of arranging for the performance of different economic tasks. These ‘best’ means vary from place to place, from output to output, and from time to time. For an economics professor, a law student, a bureaucrat, a media pundit, or a politician to proclaim that this particular commercial arrangement is wasteful and that that specific commercial arrangement is wonderful is the height of hubris.
Government can certainly raise the costs of using particular methods of contracting and of otherwise arranging in particular ways production and exchange activities. Government can thus change the ‘industrial organization.’ But unless and until government officials gain access to the knowledge available to a being closer to omniscience than are ordinary humans, the results over time of penalizing this particular contractual arrangement and subsidizing that other particular contractual arrangement will be to reduce the economy’s overall productivity – and often to do so in ways that generate results quite the opposite of what even rent-seekers believe will materialize.
June 1, 2023
Some Links
George Will applauds the U.S. Supreme Court ruling in Sackett v. EPA. Two slices:
The nation will be better governed because Michael and Chantell Sackett began resisting the Environmental Protection Agency 16 years ago.
In 2004, planning to build a house, they bought, in an established subdivision, a parcel of land 300 feet — think of a football field — from Priest Lake in Idaho, with a row of houses between their land and the lake. Preparing for construction in 2007, they added gravel and sand to the land. The EPA, citing a subsurface flow of moisture and a nearby ditch that drains into a stream that flows into the lake, ordered them to stop and restore the land to its original condition. The EPA was wielding the Clean Water Act, which regulates “navigable waters.”
In 2012, the Supreme Court ruled unanimously for the Sacketts and against the EPA’s contention that its compliance orders are not subject to judicial review. Last week, the court ended the Sacketts’ saga, holding that the EPA could not regulate their land as navigable water.
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Last year, the New York Times warned that inhibiting the EPA’s sovereignty over electric power generation would reduce “the federal government’s authority” to regulate harmful emissions. Wrong. Congress is (this fact frequently distresses progressives) part of the government, and can explicitly authorize the EPA to do what the Clean Air Act does not clearly do.
After last week’s Sackett decision, the Wall Street Journal’s headline said: “Supreme Court Further Erodes EPA’s Power,” and the Post headline said, “Supreme Court weakens EPA power to enforce Clean Water Act.” More precisely, the court curtailed the EPA’s illegitimate exercise of a major power that Congress never explicitly conferred.
Progressives, who abhorred last June’s and last week’s decisions, currently denigrate the “imperial” Supreme Court. This is peculiar. In three decisions since the end of last June, the court has receded from making abortion policy and has notified the legislature that it must write laws with “exceedingly clear language” to relieve the court from making environmental policy by divining congressional intent that inexplicit congressional language leaves obscure.
Scott Lincicome isn’t swallowing the nonsense that is the theory of ‘greedflation.’ Two slices:
For starters, there’s nothing really novel about corporations raising prices after a recession and thereby enjoying a temporary boost in profits. As just documented by the Kansas City Federal Reserve, for example, companies during and after a recession routinely engage in “anticipatory price-setting, in which firms expect higher costs of production in the near future and thus raise prices on the goods they produce today.” Because costs incurred during a recession are “temporarily depressed,” higher prices produce a temporary surge of profits, which then start to decline as an economic recovery takes hold and input costs rise. The report finds this pattern of profits in every U.S. recession going back to 1948 and finds it again in the pandemic recession, with a similar magnitude.
In fact, as shown in figure 3 below, corporate greed—erm, profit— was actually a little lower during the 2021-2022 pandemic recovery than in previous recoveries….
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This historical perspective is useful, but it avoids more important and fundamental points about higher prices and corporate profits during and after the pandemic: Profit-maximizing firms could only raise prices (and earn higher profits) because consumers let them; consumers let them because they were flush with cash; and consumers were flush with cash mainly because of government policy.
The role that consumers play in companies’ pricing decisions isn’t exactly groundbreaking stuff; it’s a standard part of mainstream microeconomics and frequently mentioned in economic analyses and business reporting—even for essentials like food. For example, a Kansas City Fed report from late last year found that consumer spending and behavior (eating more at home, and then shifting back)—not corporate profiteering—were the primary drivers of higher U.S. food prices during the post-pandemic recovery.
On average today for commercial aircraft, one gallon of fuel carries each passenger about 67.1 miles. The typical French automobile sold in 2019 gets about 42.8 miles per gallon. These facts means that if someone in France chooses to drive alone in one of these cars—say, from Paris to Nantes—rather than traveling by train, he will burn 57 percent more fuel than he would have while flying. And even if there are two people on this car trip, the amount of fossil fuel burned per person will be only about 22 percent less than if these two travelers had instead flown.
This math may still lead many readers to jump to the conclusion that at the very least, piling three or more people into a car for that same trip will be desirable. But peering one more step beyond that which is seen counsels against this. Here we finally see the most frightening “unseen” consequence of the short-haul flight ban: the likelihood of more roadway deaths.
A recent study out of Harvard University found that, for people traveling within the United States, Europe, and Australia, the chances of being killed while flying are 1 in 11 million, while the chances of being killed while driving are 1 in 5,000. Put differently, you’re 2,200 times more likely to be killed when traveling by car as opposed to by airplane. By diverting some travelers from the air to the roadways, the French government will almost certainly cause more travelers to die.
Political theater, it turns out, can be deadly.
This pattern established by the American Founders has continued to the present day, when one will often hear progressives summoning Smith’s words to battle for the causes of antitrust, publicly funded schooling, labor unions, taxing the rich, and more. Economist David Friedman vets the legitimacy of these claims and finds them mostly wanting in “Adam Smith Wasn’t a Progressive” (page 22).
Neocons such as John Bolton and David Frum, at the height of their powers in the early 21st century, frequently invoked (and often misquoted) Smith’s line that “defence…is of much more importance than opulence”—ripped from its proper context, which was an extended defense of free trade.
John Stossel warns of the “ticking time bombs” that are Social Security and Medicare.
Michael Shellenberger tweets: (HT Jay Bhattacharya)
The picture we used to have of journalists was of crusaders for truth against power. But today, journalists are crusading for the rights of the powerful to censor their competitors.
The Wall Street Journal‘s Editorial Board reports on “the Trump-Cuomo Covid Bromance.” A slice:
The 2024 presidential race is already wild, and the strangest moment so far may be the mutual Covid admiration society of Donald Trump and former New York Gov. Andrew Cuomo. In 2020 they were mortal political enemies, but now they’re uniting to praise their performance in order to trash the far better Covid judgment and governance of Ron DeSantis in Florida.
Mr. Trump will say anything to hurt the Sunshine State Governor now running against him for President. Last week he said in a video posted on Truth Social: “How about the fact that he had the third most deaths of any state having to do with the China virus or Covid? Even Cuomo did better, he was number four.”
Mr. Cuomo returned the compliment on Tuesday from his political exile, tweeting that “Donald Trump tells the truth, finally. New York got hit first and worst but New Yorkers acted responsibly. Florida’s policy of denial allowed Covid to spread and that’s why they had a very large second wave.”
Where to begin? The media feted Mr. Cuomo for his handling of Covid in 2020, but his harsh lockdowns continue to have baleful effects on the state’s economy as its recovery lags. We also know Mr. Cuomo made a literally fatal March 2020 decision to admit Covid patients to nursing homes. His administration then tried to fudge the number of nursing-home deaths from Covid.
In sharp contrast, Mr. DeSantis demonstrated true leadership. To the extent Florida had a second Covid “wave” during the summer of 2020, it was because it never had a big first wave in the spring.
Despite having a higher proportion of elderly citizens who were more vulnerable, Mr. DeSantis resisted Anthony Fauciand the media to keep his state’s schools and economy going. He lifted the lockdown in May 2020 and removed all restrictions on business capacity in September. That autumn he fought the teachers union in court to reopen schools far earlier than most states did.
Mr. Trump’s claim about Florida’s relative Covid deaths is a distortion. Florida had more total deaths than New York, but Florida’s population is older and thus more vulnerable to Covid. The Centers for Disease Control and Prevention reports that age-adjusted deaths were 245 per 100,000 residents for Florida against 311.5 for New York.
Quotation of the Day…
… is from page 319 of Thomas Sowell’s 2002 collection, Controversial Essays:
“Entitlement” is not only the opposite of achievement, it undermines incentives to do all the hard work that leads to achievement.
May 31, 2023
Continuing to Get Straight the Facts About the American Economy
But don’t America’s poor pay an unfairly high percentage of their income in taxes while America’s rich pay an unfairly low percentage? Such, after all, is what is claimed to be found by economists Emmanuel Saez and Gabriel Zucman, each of whom received the American Economic Association’s prestigious John Bates Clark Medal.
No. Saez’s and Zucman’s claims about the burden of taxation across income earners is wildly inaccurate. As GEE [Gramm, Ekelund, and Early] note about the research of Saez and Zucman,
[t]hey count only earned income. They completely ignore transfer payments that make up more than 90 percent of the income of the bottom quintile and 50 percent of the income of the second quintile. By not counting transfer payments as income to the recipient households, they grossly understate income in the bottom two-fifths of the population. So, when they then divide the actual taxes paid by an income amount that is between two and nine times smaller than the real amount, the result tax rates are unbelievably too high….
For the lower part of the income distribution, they choose not to count the largest part of the actual income individuals actually received – namely, transfer payments. At the higher end of the distribution, Saez and Zucman decide to count fictional amounts that the households never received as income. They estimate how much assets by individuals might have appreciated. These assets may include stock, mutual funds, retirement accounts, art collections, or homes. Then they count that amount as if it were income, although the asset owners cannot use it for consumption, savings, or paying taxes because they never received it.
After adjusting household-income figures to include government transfers, but not to include unrealized (and often only estimated) appreciations in capital values, GEE find that income-tax filers in the bottom half of income earners pay, as federal income and payroll levies, on average about nine percent of their incomes. In contrast, income-tax filers in the top ten percent of income earners pay in these taxes on average about 21 percent of their incomes. The average tax-payment figure for income-tax filers in the top one percent is about 28 percent of their incomes. (These figures are all pre-COVID.)
The data simply contradict the popular claim that high-income Americans, compared to lower-income Americans, do not pay substantially higher portions of their incomes as taxes to the federal government.
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The picture painted from rich sources of data by Gramm, Ekelund, and Early reveals an American economy that over the past several decades steadily and surely raised the real incomes of Americans across the income distribution. This picture is encouraging. But a word of caution is in order. Most of GEE’s data end in 2017. Although that’s only six years ago, those six years were unusually bad ones for economic prosperity. Starting in early 2018 Americans have been subjected to recurring waves of protectionism – waves started by Donald Trump and continued by Joe Biden. Because no small part of our growing prosperity up through 2017 was caused by our greater integration into the global economy, today’s fever for protectionism – a fever prevalent now across the political spectrum – will surely dim, and perhaps severely darken the economy’s prospects going forward. Also worrisome is the current craze of politicians of all stripes with active antitrust enforcement. By penalizing innovative experimentation with different business models, the recent rise of antitrust activity will join protectionism in stymying economic growth.
Far worse, however, is the terrible precedent set by America’s, and most other governments’, authoritarian posture during COVID. Although COVID restrictions are now largely things of the past, no one can know just how much entrepreneurial energy is still being sapped away by uncertainty about what will happen when another contagious pathogen emerges – as one will. Having learned how easy it is to frighten people into sheepish obedience to diktats that shut down large swathes of the economy indefinitely, governments are very likely to pull such a stunt again. Even just the prospect of enduring yet another fear-fueled authoritarian lockdown might very well be draining would-be entrepreneurs of much of the optimism they need to energize their productive endeavors.
Bonus Quotation of the Day…
… is from page 187 of 1982 economics Nobel-laureate George Stigler‘s 1971 essay “Can Regulatory Agencies Protect the Consumer?” – which is reprinted as Chapter 11 of Stigler’s 1975 collection, The Citizen and the State: Essays on Regulation:
The individual consumer has no real defense, given the nature of our political process, which allows compact groups with substantial per capita interests to win out over diffused masses of consumers, no one of whom can effectively combat special interest legislation.
DBx: Yes.
Giving government discretionary power to protect consumers is akin to giving wolves discretionary power to protect sheep.
Minimum-Wage Legislation Came From a Bad Place
Here’s a letter to the New York Post:
Editor:
John Thorpe’s case for repealing the Davis-Bacon Act is persuasive (“Ditch this Jim Crow-era mandate that hurts minorities most,” May 31). But he errs when he writes that “unlike minimum-wage laws, prevailing-wage mandates didn’t even come from good intentions.”
In fact, minimum-wage statutes were just as ill-intentioned as was Davis-Bacon’s prevailing-wage mandate. As Princeton economist Thomas Leonard reports about early 20th-century progressives who lobbied for minimum wages,
By pushing the cost of unskilled labor above its value, a minimum wage worked on two eugenic fronts. It deterred immigrants and other inferiors from entering the labor force, and it idled inferior workers already employed. The minimum wage detected the inferior employee, whether immigrant, female or disabled so that he or she could be scientifically dealt with.*
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
* Thomas Leonard, Illiberal Reformers (Princeton: Princeton University Press, 2016), page 151.
Some Links
State Farm General Insurance Co. last week became the latest insurer to retreat from California’s homeowners market. The culprit isn’t climate change, as the media claims in parroting Sacramento talking points. The cause is the Golden State’s hostile insurance environment.
The nation’s top property and casualty insurer on Friday said it won’t accept new applications for homeowners insurance, citing “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.”
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Insurers aren’t prioritizing short-term profits. They are protecting their customers, investors and creditors. Mr. [Ricardo] Lara isn’t helping Californians by driving away insurers, which will reduce competition and force more customers into a state-established insurer of last resort (backed by insurers) that provides skimpier and more expensive coverage.
Florida last year passed legal reforms to help keep property and casualty insurers in the state. If Democrats in Sacramento believe their climate-change hype, they’ll strengthen the state’s insurance market rather than tilt at windmills.
Prompted by the enthusiasm for socialism among today’s young people, Mike Munger makes an excellent point about the translation-into-English of Ludwig von Mises’s pioneering 1920 paper “Die Wirtschaftsrechnung im sozialistischen Gemeinwesen.” Two slices from Munger:
With a prescient recognition of the core of the problem, Ludwig von Mises wrote an article entitled “Economic Calculation in the Socialist Commonwealth.” The challenge of the paper was to require advocates of socialism to apply their critiques of capitalism—including concentrations of power, lack of information, and scarcity to a planned economy, and to show specifically how planning might do better.
Mises expanded and refined his argument in his 1922 book, Socialism. Before Mises’ contributions, the primary debate had been over the “J.S. Mill question”: are people “good enough” for socialism? Since citizens will need to be motivated by serving the public good rather than pursuing their individual self-interest, “we” will need to create a “new man” to people this brave new world. But Mises redirected the debate in a more technical direction: Is it possible for a non-market system to perform all the necessary “calculations” to be able to achieve results as good as those provided by a market system that generates prices as measures of opportunity costs?
It turns out that the way Mises was translated was, and is, unfortunate. The original title of his 1920 article was “Die Wirtschaftsrechnung im sozialistischen Gemeinwesen.” The word “Wirtschaftsrechnung” can be translated literally as “the economic arithmetic,” so “calculation” is not unfair. But even a cursory reading of Mises, and later expositors such as F.A. Hayek, reveal that the problem is not “calculating” the solution to set of equations where the data are given; the whole point of market processes is that exchange in a system of enforceable property rights generates the data that the system can then use to coordinate the conflicting plans and purposes of millions of people, in widely geographically separated locations.
This apparently minor word choice—I wish Mises had used a form of “Generieren,” or “to generate,” instead—has created grave difficulties ever since. After all, if the data are given, but dispersed, what is necessary is computing power. And, unsurprisingly, that is exactly how Mises’ opponents interpreted his argument.
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This mistaken interpretation of the Misesian “calculation” problem persists to today, and it’s getting worse. MIT economist Daron Acemoglu recently tweeted the question that is on many minds about knowledge and computational power.
What Acemoglu calls “Hayek’s argument” is actually Mises’ argument, reinterpreted through the Hayekian explanation of the role of prices conveying information about relative scarcity. Note: If the problem is “calculation,” then Acemoglu’s question is perfectly fair. Socialism is not impossible, it is just limited by the ability of society to replicate the function of the price system, gathering dispersed data and performing and updating calculations very rapidly. But that means that the function of markets is essentially mechanical, and there is nothing in principle that would prevent economic experts from solving this problem, with sufficient computing power.
But…wait, stop, don’t! The problem is not calculation of given data, but the generation of the data that would be required, but does not yet exist. An example will make it clear why this is true.
Jacob Sullum is correct: “Ron DeSantis dangerously blurs the line between state and private action.” A slice:
DeSantis’ insistence on overriding those private decisions belies his description of Florida as “an oasis of freedom” with a “business-friendly environment.” When it comes to vaccination and masks, he recently told John Stossel, Florida has “consistently sided with the individual,” which is accurate only if you ignore individuals whose business policies DeSantis does not like.
The same is true of the Individual Freedom Act, the Orwellian name of a Florida law also known as the Stop WOKE Act. Among other things, it purported to dictate private employers’ training practices, a provision that a federal judge blocked last year because it violated freedom of speech.
The Goldwater Institute’s John Thorpe calls for the Davis-Bacon Act to be ditched.
“Maritime protectionism continues to plague offshore wind development,” so reports Colin Grabow.
Vinay Prasad tweets: (HT Jay Bhattacharya)
The data linking gas stoves to asthma is weak science. The links in article are trash science.
Quotation of the Day…
… is from page 91 of Ronald Bailey’s insightful 2015 book, The End of Doom:
The modern combination of liberal trial-and-error institutions – limited democracy, free markets, and liberal science – emerged in Western Europe and North America and have been spreading around the globe. Wherever the institutions of liberalism have been embraced, prosperity has followed in their wake.
DBx: Indeed.
Yet the same human imagination that is indispensable to modern prosperity – the imagination that innovates – has (as most things do) a downside. This imagination allows individuals to conjure in their heads beautiful worlds that are far superior to any reality, actual or possible. Unsatisfied with reality even when and where it is off-the-charts superior to any other reality ever experienced by humans, individuals obsessed with their imagined utopias insist that reality is hell that can be transformed into heaven if only enough coercion is used to bring the imagined heaven into earthly existence.
Social engineers – whether they be leftist progressives, rightist “national conservatives,” or something else altogether – are, at the end of the day, mystics. Most of these mystics today speak the language of science; many even use mathematics to describe their utopias; and nearly all are sincere. They are true believers in their mysticisms. But they are all detached from reality. They know too little history. Their thinking is illogical. They believe in miracles. They are mystics peddling the equivalent of poisonous snake oil.
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Pictured above is Free Trade Hall in Manchester, England. This building – which is now a Radisson hotel – is a monument to what Bailey calls “liberal trial-and-error institutions.”
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