Russell Roberts's Blog, page 133
June 14, 2022
Pittsburgh Tribune-Review: “‘Riding’ Social Security off a cliff”
In my column for the December 7th, 2012, edition of the Pittsburgh Tribune-Review I wrote about the dangerous (il)logic – the fiscal recklessness – of Social Security. You can read my column in full beneath the fold.
Quotation of the Day…
… is from page 41 of Richard Epstein’s magisterial 2014 book, The Classical Liberal Constitution:
If the common-law lawyers were right to worry about the dominant position of a common carrier, modern scholars, both within and beyond the legal profession, should not be indifferent to the still greater power that lies in the hands of state regulators in the modern administrative state.
DBx: Yes. And, indeed, even if the common-law lawyers were not right to worry about the dominant position of a common carrier – not right, that is, when that common carrier is privately owned and there are no government-erected barriers to entry into that carrier’s market – modern scholars, and citizens too, should nevertheless still fear the immense power “that lies in the hands of state regulators in the modern administrative state.”
June 13, 2022
Bonus Quotation of the Day…
… is from pages 69-70 of the 1990 Transaction Publishers reprint of W.H. Hutt’s superb 1936 volume, Economists and the Public:
The warping of judgment may be observed in forms which vary from the deliberate propaganda of bodies like the Federation of British Industries of the Trades Union Congress, to the self-deception of the individual who convinces himself that what suits him must contribute to the general good…. We see it also in the enthusiasm of the debtor classes for inflationary measures which they are emphatic will stimulate the prosperity of all; in the universal concern of town-dwelling populations for the welfare of the rural dwellers who, they aver, will suffer moral and physical corruption if they are allowed to follow their inclinations and drift townwards; and in the general persuasion of social classes or races with superior status that the best interests of politically inferior classes and races are served by the maintenance of the existing regime.
DBx: The late economist W.H. Hutt is now among those persons who Nancy MacLean and her cadre of historically uninformed – and if one didn’t know better, also illiterate – co-authors and supporters insist was a white supremacist. Phil Magness and Art Carden masterfully expose the baselessness of this assertion by MacLean, et al. To supply yet a bit more evidence against the idiotic charges leveled by MacLean, et al., I offer the above quotation from what is my favorite of all of Hutt’s many superb books.
Some Links
Phil Magness and Art Carden expose the many errors – several of which are jaw-dropping – committed by Sandy Darity, M’Balou Camara, and Nancy MacLean in their unintentionally comical attempt to portray W.H. Hutt and my late Nobel-laureate colleague Jim Buchanan as white supremacists. Here are two slices from their conclusion:
The pattern of mishandled quotes, citation mistakes, superficial engagement with the sources they do cite, and clear factual errors convinces us that “Setting the Record Straight on the Libertarian South African Economist W.H. Hutt and James M. Buchanan” hasn’t set the record straight on anything. Their purported sequence of events establishing Hutt’s white supremacy doesn’t match the actual timeline and falls apart once we correct a citation mistake (see section IIa above). It’s hard to believe they are serious in suggesting that Leon Dure’s italicization was rubbing off on Hutt (discussed in section VII). Darity, Camara, and MacLean have not persuaded us that Buchanan and Hutt were white supremacists concocting “stealth plans” for America, South Africa, or anywhere. Does this make us guilty of “dogma-driven denialism”? We will let the reader decide.
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We don’t expect to change their minds. We expect the goalposts to move and maybe to be accused again of “dogma-driven denialism” if not conspiratorial obligations to nefarious “Dark Money” interests. That saddens us, but we think the issues at stake are very important because they affect real, flesh-and-blood human beings, and we think the Great Conversation that is the academic project is too important to be contaminated by well-poisoning, name-calling, and ad hominem. In any event, we’ve read student evaluations for years. We know which comments we need to take seriously and which ones to ignore. If the collection of inaccurate citations, selective presentation of sources, and strained interpretations is what Darity, Camara and MacLean believe to be an “irrefutable” argument, then we infer that there is little to nothing to be gained from engaging with their claims about on Hutt, Buchanan, Friedman any further. In this light, we wish them well, and we consider the discussion closed.
George Selgin busts another myth about private currencies – a myth recently promoted by Paul Krugman. Three slices:
Although I’ve devoted many essays here to exploding myths about historical private currencies, there’s one I’ve yet to directly challenge. That’s the belief that such currencies only thrive in the absence of official alternatives. Otherwise, the argument goes, people would drop private currencies like so many hot rocks. Since this opinion assumes that private currencies are inevitably inferior to official ones, I hereby christen it the “ersatz” theory of private currency. Note that “currency” means circulating or (in today’s digital context) peer-to-peer exchange media: nobody denies that other sorts of private money, such as commercial bank deposits and traveler’s checks, can coexist with official alternatives.
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Paul Krugman explicitly appeals to the ersatz theory in observing, in a recent New York Times column, that although “private currencies did indeed circulate and function as mediums of exchange” during the United States “free banking” era, this was so “because there were no better alternatives: greenbacks—dollar notes issued by the U.S. Treasury—didn’t yet exist.” Krugman goes on to say that, because “greenbacks and government-insured bank deposits do exist” today, “stablecoins play almost no role in ordinary business transactions.”
Like [Yves] Mersch and most others who subscribe to the ersatz theory of private currency, either explicitly or implicitly, Krugman doesn’t seem to consider another possibility, to wit: that private currencies seldom survive, not because the public prefers centrally-supplied, official currencies, but because governments routinely slant currency playing fields in official currencies’ favor, often by banning private alternatives outright. Let’s call this the “coercive” theory of official currencies. If the ersatz theory is correct, the historical record should show that private currencies died out on their own once official alternatives were available. If, instead, the coercive theory is correct, governments would have had to take further steps to seal private currencies’ fate.
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I’ve singled out the story of U.S. “national” currency because Krugman refers to it. But it is only one historical instance of many that I might offer contradicting the ersatz theory of private currency, while affirming the coercive alternative. In fact, so far as I’m aware, private paper currencies, including notes issued by ordinary commercial banks without the benefit of official guarantees, have never been driven to extinction by the mere presence of official alternatives. Instead, they’ve always been forced out of existence, by prohibitive taxes, impossibly onerous regulations, or (most often) outright prohibition. This was so in England and Wales. It was so in France and in Italy. It was so in Sweden and Switzerland and Canada and…but it would be tedious to list all the cases I’m aware of. Instead, I challenge my readers to inform me of an exception, that is, a case where some official currency out-competed private rivals, fair and square.
Juliette Sellgren talks with my Mercatus Center colleague Thomas Hoenig about inflation and the Fed.
Colorado is more progressive than its neighboring Western states. But Democratic Gov. Jared Polis last week said no to becoming California by vetoing a bill that would have required parking lots of new buildings to be wired for electric-vehicle chargers.
Covid is now endemic, yet the Biden administration keeps extending the public-health emergency. Its goal is to preserve the expansion of the welfare state through Medicaid, even though large and growing numbers of enrollees are ineligible for the benefit.
Medicaid, the federal-state entitlement that provides health insurance to nearly 1 in 4 Americans, ballooned during the pandemic. Enrollments had declined in 2018 and 2019, but jumped by 15.9 million—about 25%—between February 2020 and February 2022. According to the Centers for Medicare and Medicaid Services, the increase was “due, in large part, to the continuous enrollment condition” in Congress’s March 2020 Covid relief package, which encouraged enrollments by temporarily increasing the federal government’s share of total Medicaid costs by 6.2% while prohibiting states that accepted Washington’s help from redetermining Medicaid eligibility and removing ineligible people from the rolls until the emergency ended.
In other words, so long as the emergency persists, so too does the expansion of the welfare state. More than two years later, the Biden administration is intent on making permanent what were meant to be emergency measures.
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Extending the public-health emergency is a Trojan horse for further government takeover of the healthcare system through a massive expansion of Medicaid to cover those who aren’t even eligible. Washington should end the emergency so states can ensure Medicaid is reserved for those who are actually eligible.
Anthony LaMesa tweets: (HT Jay Bhattacharya)
Shutting down large parts of the global economy for nearly two years was a major mistake.
Joakim Book shares some of the lessons found in Mattias Desmet’s new book, The Psychology of Totalitarianism. Here are three slices from Joakim’s essay:
In his new book The Psychology of Totalitarianism, which comes out in an English translation this month, Belgian psychologist Mattias Desmet calls this phenomenon “mass formation.” He writes that he first began sketching on a comprehensive account of totalitarianism in 2017: woke culture and the intolerant anxiety that came with its rise to power was a symptom – as was the surveillance state and the hysteria in recent decades surrounding terrorism and climate change.
It’s not the topics themselves or the merits of their respective case that interests Desmet, but the way populations process them, get wrapped up in them, and psychologically attach themselves to their ideas.
Ultimately, it was the reactions to the coronavirus events in 2020 that was Desmet’s ultimate catalyst. It shone a bright light on many things that, beyond a doubt, had gone wrong with modern society. Here was mass formation, on full display; totalitarian behavior, suddenly lived and experienced by all of us.
In essence, mass formation is a sort of group-level hypnosis “that destroys individuals’ ethical self-awareness and robs them of their ability to think critically.” Labor camps and mass extermination, so unknown and so unfathomable to our delicate present, don’t come out of nowhere but “are merely the final, bewildering stage of a long process.”
The coronavirus crisis didn’t come out of the blue, either; we made it. (We probably made the virus too, but that’s not the object of Desmet’s investigation.) “Totalitarianism is not a historical coincidence,” he writes, “In the final analysis, it is the logical consequence of mechanistic thinking and the delusional belief in the omnipotence of human rationality.”
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Desmet’s take, following Hannah Arendt (a hero for political theorists, particularly on the left), shows that opposition to coronavirus measures isn’t merely the mad ramblings of a right-wing fringe. Opposing the public measures taken in 2020 and 2021 crossed political lines, and the components of his argument are, if anything, more traditionally associated with values and worries on the left: loneliness, social isolation, atomized individuals, unseen collateral damage, bullshit jobs and rejection of the technocratic Enlightenment view of top-down rational control and scientific improvement.
The stunning question looms: how do we make sense of all of this? We overhauled society, on a whim and with very little to go on, for what seemed – both at the time and in hindsight – a rather minor threat. How did we all lose our minds at the same time? How could we all feel such incredible buy-in in the months and years that followed?
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The covid pandemonium was a reminder that even rich, sensible, well-mannered, and well-educated societies can descend into the pits of hell faster than you can cry “emergency.” Society always balances on the edge of an unspeakably horrific abyss.
For those of us scratching our heads in disbelief at what happened in 2020 and 2021, Desmet’s book comes up short. It’s not as comprehensive and conclusive as we might have liked, and it definitely won’t be the final word on this strange episode. Still, it offers us a plausible story, nested in the ways that the human mind can collectively go astray.
Quotation of the Day…
… is from page 37 of Matthew Hennessey’s excellent 2022 book, Visible Hand:
Life is not determined by what you want. Life is determined by the choices you make.
June 12, 2022
Some Links
George Mason University Econ alum Dominic Pino, writing at National Review, describes Friday’s inflation report as “the final nail in the coffin of ‘greedflation.'” Here’s his conclusion:
The idea that inflation was the result of monopolization and insufficient antitrust enforcement was always nonsense, as I have mentioned many times before. Now, there’s not even circumstantial evidence to back up the demagoguery.
The Jan. 6 committee will forfeit the public’s limited trust in it — and the public’s limited interest in it — if members pursue preexisting progressive agendas, such as abolition of the electoral college or other changes to election law. Furthermore, Congress has neither a constitutional power nor an institutional aptitude for building a criminal case against Donald Trump. If the committee attempts this, it will sink into the quicksand of fascinating but legally problematic definitions of “conspiracy,” and of speech that becomes illegal by “inciting” illegality.
Juliette Sellgren talks with Arnold Kling about the three languages of politics.
Arnold Kling offers evidence of the intellectual decline of the economics profession.
Economists who claimed inflation was transitory and driven by increases in select categories such as used cars are belatedly admitting they were wrong. What else can they do? Prices for some goods have moderated in recent months, but inflation is broadening. That’s why the so-called core inflation index that excludes energy and food is up 6% over the past 12 months and 0.6% from April.
Here’s Reason’s Nick Gillespie on Colorado governor Jared Polis.
Still another argument against liberalism is that it will lead to “unacceptable” inequality. The rich will get way too rich, which government must prevent. The authors respond that material equality is not an ethically relevant goal, writing, “What matters is absolute material standards of living, not anger that someone else might be doing better.” Statism thrives on envy, but, say the authors, we must not let it get in the way of progress.
Not only do we not need big government to “save us” from liberalism and enrichment, we need to steer clear of the traps it sets for us. Even “mild socialism,” they write, “puts people under pressure to commit the sins of state-enforced envy or class hatred or environmental imprudence.”
The New York Post‘s Editorial Board calls for a permanent end to all mask mandates.
But even these measures would not solve the problem. After all, countries with high vaccination rates still can’t guarantee zero-Covid – and China’s leaders are sticking to the official line that the virus must be entirely eliminated. As the country’s health chief, Ma Xiaowei, recently declared: ‘We’re a long way off being able to relax.’
Quotation of the Day…
… is from page 134 of the original edition of Robert Higgs’s remarkable 1987 book, Crisis and Leviathan:
No resource taken by the government in its war mobilization was more precious, and no one else was so poorly compensated for his sacrifices as the draftee.
DBx: Yes. Such is one of the many vile consequences of conscription – a consequence that, in turn, unjustly concentrates the cost of the government’s effort on a subset of the population and, also, masks this cost’s full size.
A similar consequence occurred during covid. Lockdowners concentrated disproportionately heavy costs on a subset of the population – such as, for example, workers prevented from earning incomes and keeping their job skills sharp, and small-business owners who lost their enterprises and incomes. Being off-budget, these costs aren’t reckoned into the final, formal cost of the covid response.
June 11, 2022
Bonus Quotation of the Day…
… is from page 4 of the June 2022 typescript of Deirdre McCloskey’s paper, forthcoming in the Erasmus Journal, “Most Policy is Impossible”
State power, unlike the non-power power of rivalrous companies, consists of physical coercion or its threat. Shoe companies offer you a deal. States offer to jail and execute you. Such power tends to corrupt.
More on the Folly of Price Controls
In today’s Wall Street Journal are two excellent letters-to-the-editor on the folly of price controls. Each is written by a treasured friend of mine. (Note that the author of the second letter is not the David Henderson who blogs at EconLog.) I share these letters here.
Jason Zweig gives price controls too much credence when he writes that “they have often been surprisingly effective as temporary measures in urgent crises” (“Back in Business: Fighting Inflation the WWII Way,” Exchange, June 4). Price controls generally are designed to conform monetary prices today with those that prevailed in the past; because that is how inflation is measured, they can be “effective” in that narrow sense.
But price controls substitute actual privation, and waiting in queues, for high monetary prices. They induce corruption, as buyers and sellers negotiate with bureaucrats rather than each other. As time goes by, they increasingly misdirect resources and encourage wasteful evasive measures. If there are historical examples of successful price controls, it is only because the price data supply an incomplete record of all that transpired.
Brian F. Mannix
Gainesville, Va.
*****
In the 1950s, my parents’ inventory of dishes contained a large, garish serving plate. Not realizing an economic lesson was to come, this lad asked why we had such an atrocious platter. A brief explanation followed. While World War II price controls were still in place, my parents needed a refrigerator. With much searching, they finally found one for sale, and the law-abiding seller asked the price mandated by the state. The offer was contingent, however, on the additional purchase of a large, expensive, non-price-controlled platter.
Dave Hendersen
Salem, Ore.
DBx: This truth cannot be too often repeated: There is never any good reason for government to control, with mandated ceilings or floors, the money prices or wages that arise when people make exchanges in markets. Never.
Economists whose cleverness swamps their judgment sometimes construct theoretical models in which god-like politicians can impose wage floors or price ceilings in a manner that improves overall economic efficiency and consumer welfare. Indeed, any half-competent undergraduate majoring in economics should be able to churn out such silliness. Even I – no singular talent as an economic theorist – could do so as a matter of routine by the time I turned 20. But as the letters above by Brian and Dave show, the margins of adjustment in reality are so numerous – and the self-interest-serving motives of sellers and buyers so unrelenting – that any such model peddled as a demonstration of the potential real-world benefits of wage or price controls is nonsense, and should always be greeted as such.
Some Links
Price controls can’t stipulate every aspect of an exchange. Usually, the only contractual term they alter is price. Market participants are free to change other margins of the exchange, and the disequilibrium created by a (binding) minimum wage gives them an incentive to do so.
Gordon Tullock offered the following famous example. Imagine factory workers on a hot summer day. The plant manager gets the bright idea of cutting costs by shutting off the AC. Before long, the workers begin complaining. If the owner wishes to retain these workers, he’ll likely respond by flipping the AC back on—he doesn’t want to lose these laborers to the employer across town who offers better working conditions.
So how does the minimum wage alter this calculus? If it’s binding, it transforms a situation of market-clearing, the process of moving towards an equilibrium of quantity supplied and quantity demanded, into one of surplus. And a labor market surplus shifts power from sellers (laborers) to buyers (employers). A surplus of labor means a buyer’s market. Employers can pick and choose, and their offer on margins other than wage needn’t be as attractive as it had been.
Now when the plant shuts off the AC and the workers begin complaining, the owner metaphorically responds: “You don’t like it here? Feel free to leave. There are a hundred other workers who will take your place tomorrow.” The labor supply curve is at work to the employer’s advantage. More workers are entering this labor market due to the minimum wage (what economists refer to as the “extensive margin”). Notice something else: It will be harder for workers to find alternative employment precisely because a labor surplus prevails. As a result, the workers are less likely to leave and seek another job.
It’s, therefore, possible that a.) the total number of laborers employed remains unchanged and b.) employers restore profitability by cutting their electricity bill. Again, enabled by the “power” the minimum wage affords these employers.
(DBx: I believe that my first publication in The Freeman is this one: “The Minimum Wage: An Unfair Advantage for Employers.”)
Wall Street Journal columnist Holman Jenkins understands climate-change ideology and politics. A slice:
Mr. Muffley is a perfect example of something I’ve been telling readers about for a decade. Every politician has a picture of Alvin Muffley in his head by now: Alvin is “passionate” on the subject of climate change to the point of name-calling but doesn’t actually know anything about it. He votes for politicians who give him a tax rebate for his Tesla and pretends that’s doing something. He’s sanctimonious around the house but AWOL when the hurly-burly begins. For 30 years, every economist of note has explained why a carbon tax is the efficient way to moderate emissions, but politicians know Alvin Muffley isn’t there for the compromises and horse trading. Alvin’s investment in the issue is superficial. Result: Michael Moore and Donald Trump can both be right about something—climate politics devolves into a corporate welfare scam.
(DBx: Anticipating reactions from some Cafe patrons: I do not single out the above paragraph because of the kind word Jenkins says about a carbon tax. Although such a tax is indeed likely the best means of reducing carbon emissions if further reductions in carbon emissions are desired, it’s not at all clear to me that the current level of taxation imposed on petroleum production and consumption isn’t already ‘optimal’ or even excessive. The complexity and dynamism of the global economy combine with both the inability to predict future innovations and the inevitable role of politics in the setting of taxes to make the case for a government-engineered reduction in carbon emissions, regardless of the chosen means, wholly speculative. There can be nothing truly scientific about any such case.)
An authoritarian muscle exercised vigorously during covid is now being used to threaten freedom of expression about climate matters. (HT Iain Murray) A slice:
Gina McCarthy, President Biden’s top domestic climate adviser, said tech companies should do more to prevent the spread of inaccurate information about climate change and clean energy.
Excellent news! “U.S. to Scrap Covid-Test Requirement for Travelers Flying into Country.” (HT Dan Klein)
Having failed at all other pandemic measures, what does China have left? Something that comes naturally to a regime that also runs vast prison complexes and concentration camps: locking people up. It’s the Law of the Instrument: When all you have is a hammer, everything looks like it needs to be pounded down.
The essence of China’s “Zero COVID” policy has been to lock down whole neighborhoods and even whole cities upon detection of the first case. This strategy had a certain blunt effectiveness in the early stages of the pandemic. But the highly contagious omicron variant spreads too easily and rapidly and has made it necessary to impose larger and longer lockdowns, with ever more devastating effects. The result is the massive effort over the past two months to put most of the population of Shanghai, a city of 26 million, under house arrest.
Shutting down all activity in one of China’s economic powerhouses is likely to cause an economic contraction for the whole country, just at the point when most of the world’s other economies have come roaring back from the pandemic. But the economic impact is just part of a massive human toll. The stories coming out of Shanghai indicate a lockdown so draconian that people were trapped in their homes without food or medicine.
Jeffrey Tucker decries the covidocracy’s betrayal of the public trust.
Raymond March reviews Scott Atlas’s A Plague Upon Our House. A slice:
Although unintentional, Atlas’s book also illustrates fundamental public choice economics insights into political decision-making during the pandemic. While Dr. Atlas frequently expresses bewilderment that few seem interested in his advice or improving guidelines – these actions are easily explained. Even during a crisis, bureaucratic decision-making is sluggish because it lacks incentives to adapt. Public agencies succeed by acquiring more resources and influence. Dr. Atlas advises measures that would give them less of each. Developing effective guidelines to address COVID is essential, but less important than reelection. These realizations are unfortunate, but obvious from reading his frustrating interactions.
Sanjeev Sabhlok tweets: (HT Jay Bhattacharya)
Gigi Foster makes a point in an Epoch Times interview that GOVERNMENTS IN AUSTRALIA HAVE KILLED THOUSANDS MORE with cancers, diabetes, etc. in order to “save” COVID deaths.
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