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The Social Benefits of Iconoclasts

Years ago, my father offered me some advice. (Many such instances, but I have a specific case in mind.) When in class, he told me, never be afraid to raise your hand and ask questions or seek clarification on some point you don’t understand. People are often reluctant to do this, he said, because they’re afraid of seeming like they’re slower than their classmates. When a teacher pauses and asks “Are there any questions?” and nobody else around you has any, it’s easy to feel like everyone else is up to speed and you’ll stick out as falling behind. But, if everyone else in class also feels that way, then there can both be lots of people with lots of questions, but nobody raising their hand. Plus, there was an extra benefit, he told me. He asked, “Have you ever been in class and been confused by something, but someone else asked about it and you were glad that they did?” The answer, of course, was yes. And that was an extra reason to ask questions. Doing so would give me the chance to be that guy — by asking a question, I might also be helping other people who needed clarification but were too nervous to ask get the help they needed too. On that last point, my dad was speaking like an economist, albeit without the jargon. In economic jargon, asking questions in had the chance to create positive externalities. I might gain additional understanding for myself, but other people could benefit in the same way. Because of this, individually people might undervalue asking questions, leading to too few questions in class being asked. Pointing this out was a way to try to encourage me to internalize the externality — to consider that if I’m feeling confused on some point, it’s likely that at least a few others are as well, and that should increase my willingness to ask questions. The other point ties back to my earlier posting on preference falsification. The hesitance to ask questions in a classroom setting for fear of seeming like you’re not keeping up with everyone is another case where people might falsify their preferences. Publicly, students will express that they are up to speed and need no additional information, while privately desiring extra clarification. If each individual thinks they are the only one who is feeling confused, and is worried about seeming foolish compared to everyone else, then we can end up in a scenario where everyone privately wants extra explanation but publicly expresses a desire to keep moving ahead. An iconoclast is someone who loudly and boldly takes stances far outside of conventional (expressed) public opinion. Iconoclasts can attract a lot of criticism. On the other hand, in situations where there is widespread preference falsification, the only way to break out of that is for at least some people to be willing to noticeably make their private beliefs publicly known. Each person who does so makes it just a little bit easier for the next person to do so as well. The first people to do so may face heavy criticism — even attempts at cancelation — but iconoclasts often revel in the controversy rather than being deterred by it. There are upsides and downsides to this. In the worst case, we have trolls — people who say outrageous things simply for the purpose of causing outrage, and who revel in doing so. On the other hand, in at least some cases, people who are genuinely iconoclastic can start the process that breaks the spell of preference falsification. I have no doubt that trolls outnumber iconoclasts. But despite this, the value of open and free expression is not diminished. Even though most new ideas are terrible, some will be real breakthroughs. We don’t have a way of identifying in advance which will be which — because doing so would require us to know in advance what future experience will show. As Yogi Berra once said, prediction is hard, especially about the future. A parallel can be made with the work done by venture capitalists. They know that most of the ventures they support will turn out to be flops and will fail — but just a few here and there will turn out to be giant successes. There’s no way to know in advance which will be which — if they knew that, then they’d only invest their money in those rare few and not bother with all the rest. But because they don’t — and can’t — know which is which, they invest very broadly to make sure those few good ideas can be found and brought out. The same is true in the marketplace of ideas. Of all the ideas put forth that are drastically outside the (apparent) social consensus, most will probably just be duds and the people who advocate them likely trolls who just want to get a rise out of people. But some few will be different — and have the potential to make a commonly held but commonly hidden belief more freely expressed. We don’t know which ideas will be which, and most will probably be the former, but there only way to find the latter is to let all ideas out into the open. (0 COMMENTS)

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Steven Pinker on Common Knowledge

Why are Super Bowl ads so good for launching certain kinds of new products? Why do we all drive on the same side of the road? And why, despite laughing and crying together, do we often misread what others think? According to bestselling author and Harvard psychologist Steven Pinker, it all comes down to common knowledge, or the phenomenon that happens when everyone knows that everyone else knows […] The post Steven Pinker on Common Knowledge appeared first on Econlib.

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Evaluating We Have Never Been Woke Part 2: Bootleggers and Baptists

After spending ten posts (beginning here) outlining Musa al-Gharbi’s arguments in his book We Have Never Been Woke, it’s time to move on to my evaluation of those arguments. In my first post discussing this, I covered al-Gharbi’s claim that elite overproduction is an important cause of “Awokenings.” Today I want to explore how thinking about incentives and political coalitions might help us evaluate al-Gharbi’s explanations. Bootleggers and Baptists Another point in al-Gharbi’s argument is that, in the guise of social justice activism, woke activists promote policies that benefit themselves, but are harmful to the poor and vulnerable, as a means of protecting their own status. He shows that when many of the policies associated with progressivism (or wokeism) today were first introduced during the first Great Awokening. These included welfare and social aid programs, education requirements, increased and more rigorously enforced regulations, licensing and certification laws, zoning and development regulations, and technocratic economic management. As al-Gharbi notes, the early progressive movement originally pursued these policies as a means of ensuring high-status social positions would be kept out of reach of the “wrong” kind of people (women and racial and religious minorities in particular) and as a means of bringing about eugenicist goals. This creates an interesting situation. The goals and motivations of modern progressives are very different from the explicitly racist, classist, and eugenicist goals of the early 20th-century progressive movement. Yet in pursuit of outcomes that are the opposite of those intended by early progressives, modern progressives tend to advocate…basically the same set of policies. There are a few ways we might square this circle. The most uncharitable is to suggest that the goals of progressives never changed, and the movement is still intent on keeping the “deplorables” in their place. In other words, that modern progressives are deliberately dishonest about their goals. Another possible explanation is the bootleggers and Baptists approach: Some progressives are Baptists, and genuinely believe that, say, occupational licensing laws are beneficial on net and their absence would bring about all manner of terrible outcomes. Others, however, cynically use licensing laws to protect incumbents and shut people out of upward mobility, as in the case of Sandy Meadows, described here by George Will: Meadows was a Baton Rouge widow who had little education and no resources but was skillful at creating flower arrangements, which a grocery store hired her to do. Then Louisiana’s Horticulture Commission pounced. It threatened to close the store as punishment for hiring an unlicensed flower arranger. Meadows failed to get a license, which required a written test and the making of four flower arrangements in four hours, arrangements judged by licensed florists functioning as gatekeepers to their own profession, restricting the entry of competitors. Meadows, denied reentry into the profession from which the government had expelled her, died in poverty, but Louisianans were protected by their government from the menace of unlicensed flower arrangers. But Musa al-Gharbi’s explanation is that the proverbial bootlegger and Baptist are one and the same. The woke want to be upwardly socially mobile and protect their status — their inner bootlegger. But they also want to bring about egalitarian goals — their inner Baptist. When there’s a conflict between their inner bootlegger and Baptist, the woke behave like bootleggers and speak like Baptists – and construct narratives to convince others, but mostly themselves, that their behavior is also Baptist in its motivation as well. I think there some truth to this analysis. But, how much of the variance does it explain? I’m still skeptical that it explains much about why modern progressives support the policies of they do. Consider one particular policy that was originally, and for a long time, advocated for specifically on the grounds that it would serve as a barrier to entry to keep “undesirables” such as racial minorities and women unemployed: the minimum wage. As Thomas Leonard documented in his book Illiberal Reformers: Race, Eugenics, and American Economics in the Progressive Era, what many economists now cite as one of the most damaging results of the minimum wage – how it disproportionally drives the most vulnerable people out of work – was originally considered to be the minimum wage’s primary benefit by progressives. Progressives today continue to be particularly aggressive in their support for increasing the minimum wage – but it’s far from clear to me that their modern support for that policy is ultimately rooted in the initial justification. Though al-Gharbi isn’t quite explicit on this point, there are a handful of passages in the book that lead me to believe he’s in favor of increasing the minimum wage. Certainly, however, al-Gharbi does not desire to ensure the most vulnerable people be shut out of upward mobility. Supposing I’m right about al-Gharbi’s support for an increased minimum wage, it naturally raises the question – if al-Gharbi can support this particular policy today for reasons contrary to the initial gatekeeping purposes it was meant to serve, can’t the same be true today of progressive who favor, say, licensing, certification, and educational requirements? And even if I’m wrong about al-Gharbi’s support for minimum wage increases, surly it’s not hard to imagine why progressives today might support that policy even while opposing the goals for which it was originally instated. Indeed, I suspect the vast majority of progressive simply have no idea that displacing the poor and vulnerable was the original goal of so many of the policies they support. I can’t help but wonder if there is a potentially much simpler explanation underneath it. But first, a digression into a different Scott Alexander post. In the post I have in mind, Scott Alexander describes (without necessarily endorsing) “the theory that the fear of disease is the root of all conservativism.” This elaborate theory, he points out, actually has a lot of fancy research supporting it: There has been a lot of really good evolutionary psychology done on the extent to which pathogen stress influences political opinions. Some of this is done on the societal level, and finds that societies with higher germ loads are more authoritarian and conservative. This research can be followed arbitrarily far – like, isn’t it interesting that the most liberal societies in the world are the Scandinavian countries in the very far north where disease burden is low, and the most traditionalist-authoritarian ones usually in Africa or somewhere where disease burden is high? One even sees a similar effect within countries, with northern US states being very liberal and southern states being very conservative. Other studies have instead focused on differences between individuals within society – we know that religious conservatives are people with stronger disgust reactions and priming disgust reactions can increase self-reported conservative political beliefs – with most people agreeing disgust reactions are a measure of the “behavioral immune system” triggered by fear of germ contamination. He also proposes the idea of another “Grand Narrative” underlying conservative thinking on social policy: The Narrative is something like “We Americans are right-thinking folks with a perfectly nice culture. But there are also scary foreigners who hate our freedom and wish us ill. Unfortunately, there are also traitors in our ranks – in the form of the Blue Tribe – who in order to signal sophistication support foreigners over Americans and want to undermine our culture. They do this by supporting immigration, accusing anyone who is too pro-American and insufficiently pro-foreigner of “racism”, and demanding everyone conform to “multiculturalism” and “diversity”, as well as lionizing any group within America that tries to subvert the values of the dominant culture. Our goal is to minimize the subversive power of the Blue Tribe at home, then maintain isolation from foreigners abroad, enforced by a strong military if they refuse to stay isolated.” Both of these grand and complex theories Alexander was proposing were meant to explain a particular question – specifically, the difference between Republicans and Democrats on the issue of how to handle the possibility of an Ebola outbreak in 2014. At that time, the position among Republicans was that the disease should be contained through travel restrictions and strict quarantines of those who might have been potentially exposed. And the position among Democrats was that even suggesting the use of even very limited quarantines or lockdowns to contain the spread of disease was an unconscionable violation of civil liberties, was harmful to the poor and vulnerable, and was intrinsically racist. As Alexander put it, What’s more, everyone supporting the quarantine has been on the right, and everyone opposing on the left. Weird that so many people suddenly develop strong feelings about a complicated epidemiological issue, which can be exactly predicted by their feelings about everything else. What’s interesting is this was written in 2014, which, dear reader, means it was written about a half-decade BC (Before Covid). And when Covid came around, suddenly the partisan divide flipped, with Democrats being overwhelmingly likely to embrace even widespread lockdowns and quarantines, and Republicans taking the opposite view. (Libertarians, by contrast, were consistently on the “oppose quarantines” side for both occasions.) This is pretty difficult to square with either of Alexander’s Grand Theories. However, in the same post, he does suggest there might be a simpler explanation: Is it just random? A couple of Republicans were coincidentally the first people to support a quarantine, so other Republicans felt they had to stand by them, and then Democrats felt they had to oppose it, and then that spread to wider and wider circles? And if by chance a Democrat had proposed quarantines before a Republican, the situation would have reversed itself? Could be. I think this is ultimately a much stronger explanation than the fancy theories. And to put a bit more flesh on this – while there was a lot of screaming and yelling among the Extremely Online Crowd during 2014, the whole episode was fairly short-lived and had little impact on most people’s lives. (I suspect many people reading this post today forgot that there was ever an Ebola controversy in 2014.) As a result, neither position really “took” as being the “official position” for either party. However, Covid had an overwhelming social impact and left nobody’s life untouched. As a result, when that event occurred, many issues that were never politically valanced before became durably coded as the “conservative” or “progressive” view. In the same way, it seems to me that a simpler explanation is that progressives initially recommended a variety of social and economic policies for particular reasons at the time. But over time, those policy positions themselves became durably coded as “progressive.” And, over decades, people who thought of themselves as progressive would simply adopt whatever policies were coded with the proper political valance. They weren’t progressive because they supported those policies – they supported those policies because they considered themselves to be progressive. As Arnold Kling would say, we choose what to believe based on who we believe. I think in most cases people support the policies that are coded as favorable to their political ideology, rather than supporting an ideology because they deeply understand the history and impact of various policies associated with that ideology, or even an understanding of how the policy would impact them personally. To be clear, this is not to say I think al-Gharbi’s explanation is completely wrong. But I think it does explain at least some of the variance, and it represents a genuine contribution to understanding how the world works. I’m just not sure I’m convinced that the desire to protect one’s social class is a dominating factor compared to a desire to defend policies favorably coded by one’s political ideology. In my next post, I’ll be examining on some of al-Gharbi’s commentary on economics, and economic policy.   As an Amazon Associate, Econlib earns from qualifying purchases. (1 COMMENTS)

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AI Won’t Kill Work – It Will Reinvent It

It’s easy to doomscroll these days. AI, it appears, is coming for our jobs. Even occupations that were previously considered an easy path to a middle-class lifestyle, like lawyer and radiologist, may be subject to the AI chopping block. Yet these stories, despite their flashy headlines, are missing nuance. They examine the seen (and likely) consequences of the AI revolution, but are missing the unseen “what comes next” part of the story. Every historical episode of creative destruction involves both creativity and destruction. Yet current news stories are focusing only on the destruction.  We might not know how AI will revolutionize the American workforce, but past episodes of similar technological upheaval suggest that the future will be brighter than we can imagine.  Recent headlines are, indeed, scary. Consider the following:  May 12, 2025: “For Silicon Valley, AI isn’t just about replacing some jobs. It’s about replacing all of them” – The Guardian June 18, 2025: “AI Will Replace Amazon Jobs. CEO Andy Jassy Confirms Workers’ Worst Fears.” – Barrons July 3, 2025: “Ford’s CEO is the latest exec to warn that AI will wipe out half of white-collar jobs” – Business Insider  July 19, 2025: “AI will take your job in the next 18 months. Here’s your survival guide.” – Market Watch   These headlines aren’t from some alarmist blogger, sheltering in a tin-hat corner of the internet. These are from reputable news sources with large readerships. And they’re causing an artificial panic. Consider the Amazon headline. Amazon has been an industry leader in automation, yet employment at the company has continued to grow unabated. Currently, Amazon employs more than 1.5 million people. That’s up from 17,000 in 2007, and nearly double its 2019 employment figure. This employment growth has happened despite the fact that the company currently has more than a million robots in its workplaces. The jobs those robots have replaced are primarily those involving menial work or repetitive tasks, freeing up labor for more valuable pursuits. While CEO Andy Jassy recently announced that AI will likely lead to future job cuts at the company, similar claims were made in 2012 when Amazon acquired robotics company Kiva Systems. Employment grew unabated after this acquisition.  These headlines also sound suspiciously like those circulating during a previous public conversation in which technology threatened to take all the jobs away. In the mid-1990s, the internet began to move from the plaything of tech hobbyists to a central part of work and education. Jobs that had previously been done by human processors were increasingly outsourced to data processors.   In 1995, Jeremy Rifkin published his book The End of Work, which argued that the dawn of the information technology age would create a massive and structural decline in jobs. He suggested that as many as two-thirds of all existing jobs could eventually be eliminated by machines. Jobs in manufacturing, agriculture, and clerical work were particularly vulnerable to this type of technology-based outsourcing.  To be fair, machines did take over many of those jobs. But we didn’t have massive, enduring, structural unemployment as a result. Instead, new jobs emerged.  Because I’m writing a piece on how AI won’t replace all our jobs, I asked ChatGPT to help me figure out how to identify some jobs that didn’t exist in 1990 and now have a significant number of employees. It very helpfully pointed me to the Bureau of Labor Statistics’ Occupational Employment and Wage Statistics. Here are a handful of new job categories and their current employment figures from that database: Software and Web Developers, Programmers, and Testers: 2,154,370 employees Database and Network Administrators and Architects: 633,540 employees Computer and Information Analysts: 677,230 employees Indeed, the full set of “Computer and Mathematical Occupations” has exploded since internet adoption began accelerating in the late 1990s. The entire category of “Computer Occupations” currently has an employment figure of 4,786,660.  These broad categories include a range of fulfilling jobs and occupations, including app developer, social media manager, cloud architect, cybersecurity analyst, and influencer. In past eras, many of the individuals pursuing these opportunities would have been good candidates for once-stable jobs in law, accounting, or manufacturing.  In 1897, Mark Twain heard a rumor that he’d died. He sent a letter to the New York Journal to clear up the matter, stating that “the report of my death was an exaggeration.” Not only are the reports of AI’s employment “death toll” an exaggeration, but they’re missing information about the critical second act of the play. After the destruction comes the creativity, and the story of the internet can give us clues about the future of work in this technological episode as well.    As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

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The Virtue of Dissent and Conversation

I have written a lot on dissent and how it serves in the truth-finding process (for selections, see my blog posts here and here, and some of my academic articles like the award-winning “Cascading Expert Failure” and “Expert Failure and Pandemics: On Adapting to Life with Pandemics,” coauthored with Abigail Deveraux of Wichita State University, Nathan Goodman of the Mercatus Center, and Roger Koppl of Syracuse University).  Indeed, I believe dissent is so important, I teach it in my classes.  I actively encourage my students to find information and challenge me.  Being able to question is vital to revealing more information and for both the expert and nonexpert to achieve their goals. Of course, dissent forces each party to shore up their arguments and reveal more information.  But dissent is also vital because it reveals the knowledge each party has.  Nelson and Winter discuss this effect in their 1982 book An Evolutionary Theory of Change.  Parties must make assumptions and those assumptions may not even be known to them. For example, a forecast of commodity prices requires assumptions about the major factors affecting supply and demand, expected weather conditions, the likelihood of major tail events, and so on. Additionally, since models are generalizations of observed phenomena, even the choice of models entails assumptions about conditions, margins the actors can adjust along, and the like. Dissent and the conversation it spurs help reveal these assumptions, as well as any potential biases the experts may have; we are all human, after all. Additionally, questions from the nonexpert can reveal what information the nonexpert values, which in turn helps shape the expert advice. Given much information is tacit, the dialogue between expert and nonexpert can reveal additional information to both parties as well as shape the interpretative frameworks of both expert and nonexpert. Democracy, at least in any reasonable sense of the term, is built on the idea of dissent and conversation: citizens discuss and dissent with each other.  Conversations and debate happen.  The expert in a democracy, therefore, must serve a similar role: as dissenter to and converser with the nonexpert (and to each other).  The expert’s ethical duty is to serve this role, not be a Yes-Man who simply acts at the behest of the nonexpert.  Dissenting may cause the nonexpert to reevaluate their desires, hopefully in a direction that is actually toward the nonexpert’s true goals. To that end, I propose a broader version of the Hippocratic Oath geared toward experts in general: the expert shall help, or at least do no harm.  That will often involve telling the nonexpert what they don’t want to hear.  But that conversation may ultimately lead to better outcomes.   As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

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Changing Opinions on America

I have a memory of reading, sometime in the 1980s, a story in a French magazine about the American border patrol along the Mexican border. They don’t use police dogs, the reporter explained approvingly, “because of a certain idea of the rights of man.” I have tried to trace this story, but alas, to no avail. Whether the details of my memory are exact or not, I believe that, in general, and for a long time, many of those in the world who were critical of the American ideals and way of life, or even thought of themselves as anti-American, still had much respect and even admiration for the country and its traditions. Many secretly regretted not being American. How this has changed! Just consider the experience of the South Korean personnel who were the victims of a police raid at an LG-Hyundai plant in Georgia. They were arrested, shackled, and jailed for one week until they were released and allowed to return to their country. The Wall Street Journal reports on the wife of an engineer arrested there (“Confusion, Anger, Relief: Korean Engineer Tells of Week in U.S. ICE Detention,” September 12, 2025): Lee said she was heartbroken to hear her husband, an LG Energy employee, was in shackles. “Treating him like a felon—it made me so angry,” she said. The husband was among the 330 workers who, last Friday, landed near Seoul on a flight chartered by the South Korean government. His wife, who waited for him at the airport, emotionally declared: I don’t want him to go back there. “There” is America. A report by the Financial Times is even more damning (“South Korea Denounces ‘Shocking’ US Treatment of Detained Workers,” September 12, 2025): The workers’ flight was delayed on Wednesday after President Donald Trump made them a last-minute offer to remain in the US. But only one elected to stay, with many who returned to Korea vowing never to return to America. … Business groups and South Korean officials have admitted that Korean companies often used unsuitable visas for workers sent to the US to build multibillion-dollar advanced plants. But they insist Washington left them in an “impossible position” by refusing to facilitate short-term working visas that would allow projects to be completed on time. Another returning worker said that “we should have followed the rules properly”. Seoul should negotiate the visa issue with Washington, the worker said, but added that “I don’t want to go back to the US”. Just a few days ago, I found, on the website of a foreign university in a Western country, a list of countries with high cybersecurity risks, requiring faculty traveling there to borrow a specially configured device from the university. The countries listed (in this order): United States China Russia Iran India North Korea I suspect that, lurking under this list, there is still some anti-américanisme primaire (“crude anti-Americanism”) as we (well, some of us) used to say in French.* Perhaps many would now have some reason not to laugh at the list. American border agents have the power to inspect electronic devices at ports of entry. America is going through dangerous times. Those who love her most should be the most worried.   —— * In 1984, Georges Suffert, Deputy Editor-in-Chief of the magazine Le Point in Paris, published his book Les nouveaux cow-boys. Essai sur l’anti-américanisme primaire (The New Cowboys: Essay on Crude Anti-Americanism). At Le Point, he was a colleague of Maurice Roy, another Deputy Editor-in-Chief and also economics editor, who had published Vive le Capitalisme! (Long Live Capitalism!) a few years earlier. I was honored to count Roy among my friends. In France as in America, we seem to be living in another geological epoch. (0 COMMENTS)

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The Problem with Government-Run Grocery Stores

In 1989, Russian President Boris Yeltsin took a famous trip to a grocery store in Texas. The event lives on in popular history because of this famous photograph. Yeltsin was amazed by the food availability in the US, in contrast with the breadlines of the Soviet Union. Markets successfully catered to customers, whereas government central planning performed miserably by comparison. Despite this recent example, politicians in the US have begun to wonder whether centrally planned grocery stores are superior. New York City mayoral hopeful Zohran Mamdani has recently proposed a municipal grocery store. Previously, I wrote a story about Chicago’s plans to create a municipal grocery store. Luckily for residents of Chicago, the plan was scrapped, and the city has decided to focus on enabling private food vendors. Let’s examine why municipal grocery stores are a bad idea and consider the potential impact if Mamdami implements the system. The Power of Profit The major difference between a municipal grocery store and private grocery stores can be summarized in one word: profit. To make a profit, businesses must do two things: maximize revenue and minimize costs. Higher business revenue indicates customers are willing to spend more at the business. In other words, more revenue means more value provided. In order to minimize cost, businesses must cut back on the number of scarce resources used, and this frees up the resources to be used elsewhere in the economy. Profit represents the value a business creates for customers. If businesses make losses, the resources being used are worth more than the value being created. In other words, the business is destroying the value of resources. Thankfully, if a business makes losses for long enough, it must shut down, preventing further destruction. Government-run grocery stores, on the other hand, have no legal owner. That means no individual or group collects profits. If a state-run store has revenues greater than the costs, those revenues must be spent on something. Why does this matter? Profit is a means to evaluate decisions. For example, should a grocery store buy a new software system for more efficiently managing inventory and deliveries, or should it invest in a physical warehouse? Without profit and loss calculation, there is no rational way to make the decision. A for-profit store can calculate profits and losses and evaluate if the chosen option creates more value than cost. Without profit, there is no way of telling ex-post if the decision was value-creating. This insight was pioneered by economist Ludwig von Mises and has been dubbed “the calculation problem.” This is the major problem with Mamdami’s proposal. What Will Happen? You might think that this would mean an NYC municipal grocery store would go out of business, but the result would be worse. In state-run enterprises, value can still be lost. If the costs of a grocery store are higher than its revenues, value has been destroyed, but the money to make up for the loss must come from somewhere. Private businesses can run out of money, but governments can tax their way out. In the Soviet Union, where the economy was centralized, there wasn’t enough wealth sitting around to tax its way to success. In New York City, most businesses are private. That means there is plenty of money for the government to seize via taxation to keep inefficient operations afloat. It gets worse. Since politicians and bureaucrats are not personally responsible for the losses created by their policies, they have no incentive to ensure stores operate at reasonable prices.  If all food at grocery stores were given away for free, there would be an obvious problem. The shelves would clear out, and there’d be no incentive to restock them. Charging money is necessary to incentivize the people associated with producing food. Politicians and bureaucrats, contrarily, will have an incentive to manipulate prices to suit their political ends. If political desires drive prices too low, this could mean actual value-producing grocery stores will be unable to compete. I can already hear people ask, “Well, wouldn’t it be good if prices were being lowered?” No! Prices serve an important function. They compensate for work, they incentivize consumers to be conservative with consumption, and they communicate knowledge about the value of goods. Disturbing prices by government fiat ruins these functions and ultimately would require the city to increase taxes to make up for the losses. It’s possible to create a municipal grocery store that leeches off the healthy economy, but it comes at a cost to taxpayers. The larger the state-run program becomes, the smaller the value-producing economy becomes. You ultimately run into Margaret Thatcher’s final constraint on socialism: “The problem with socialism is that you eventually run out of other people’s money.”   Peter Jacobsen is an Assistant Professor of Economics at Ottawa University and the Gwartney Professor of Economic Education and Research at the Gwartney Institute. His research is at the intersection of political economy, development economics, and population economics.  (0 COMMENTS)

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Preference Falsification, Marginal Cost, and Cancel Culture

In my earlier post on preference falsification, I argued that a culture of free speech and open debate is a necessary factor for the benefits of free speech to be fully realized. This post expands on that, examining a common fable involving preference falsification, how the dynamics of preference falsification are different in reality than the fable, and how what is commonly called “cancel culture” is a factor that undermines free speech culture and keeps preference falsification in place. The fable, as you might have already guessed, is The Emperor’s New Clothes. In that fable, people privately hold the belief that the Emperor is naked, but publicly they express the belief that the Emperor is adorned in splendid garments, because they worry that expressing their private belief will make them appear like fools. However, a child eventually breaks this spell by loudly declaring the Emperor is naked. As soon as he does, the rest of the townspeople join in, and everyone realizes the Emperor is in fact truly naked. In reality, however, a single person accurately declaring their private belief publicly is not sufficient to break the spell of preference falsification. People feel compelled to falsify their beliefs when they think the views they express are widespread — not universal. Take any proposition you care to imagine — call it p. Suppose 90% of people privately don’t accept p. However, people also think that 90% of people do accept p. To the extent that p has been moralized or politicized, there is a strong reason for those who reject p privately to affirm p publicly. A single person here and there who openly rejects p will simply seem like someone in the (assumed) 10% that rejects p. This is where marginal cost comes in. In the fable, the first person who accurately declares his public belief faces no sanction of any kind — and everyone immediately becomes willing to publicly admit that they, too, believe the Emperor is naked. In a more realistic scenario, as soon as someone says “the Emperor has no clothes!”, the rest of the crowd would still be strongly inclined to openly shun and mock the person who said it. After all, according to what everyone believed, only the foolish would be unable to see the Emperor’s new clothes — and certainly some foolish people exist. So obviously some people would see the Emperor as naked. A single person declaring the Emperor has no clothes may be nothing more than a fool exposing his own foolishness. Do you immediately join him and risk making yourself look like another fool in the crowd? What if, as soon as that first person declares the Emperor is naked, the crowd immediately mocks them as an unenlightened rube who can’t see the obviously splendid garb adorning the Emperor? Most people, I suspect, would feel the urge to pretend they could see the Emperor’s clothes an join in on the mockery. The marginal cost of being the first person to declare the Emperor naked would be very high. One of the arguments Musa al-Gharbi makes in his book We Have Never Been Woke is that each “Awokening” is strikingly parallel to the Awokenings that came before. Cancel culture, he points out, was a common feature of the second Great Awokening, although at the time it was described as “trashing.” He quotes from a magazine published in the 1970s describing the practice: Trashing has reached epidemic proportions…What is “trashing,” this colloquial term that expresses so much, yet explains so little?…It is not done to expose disagreements or resolve disputes. It is done to disparage and destroy. The means vary…Whatever methods are used, trashing involves a violation of one’s integrity, a declaration of one’s worthlessness, and an impugning of one’s motives. In effect, what is attacked is not one’s ideas, but one’s self. This attack is accomplished by making you feel that your very existence is inimical to the Movement and that nothing can change this short of ceasing to exist. These feelings are reinforced when you are isolated from your friends as they become convinced that their association with you is similarly inimical to the Movement and to themselves. Any support of you will taint them. Eventually all your colleagues join in a chorus of condemnation which cannot be silenced, and you are reduced to a mere parody of yourself. Whether it’s being mocked by the crowd watching the Emperor’s parade, or being trashed, or being canceled, the cost of accurately revealing one’s private beliefs can be very high, even when that private belief is actually widely held. In my previous post, I mentioned how nearly 90% of students feel pressured to present themselves are more left-wing than they actually are because they believe their social and academic success depends on it. But while costly, this is also a diminishing marginal cost. As the person most willing to defy the crowd makes their private beliefs publicly known, they make others slightly more willing to do so themselves, because those others feel slightly less alone in their beliefs. This can make someone who was slightly less willing to defy the crowd now willing to do so as well — and so on. Eventually, there is some tipping point where what was hidden private knowledge can all come cascading out as public knowledge, and everyone in the crowed becomes willing to admit that they, too, see the Emperor as naked. In the absence of a free speech culture, however, this tipping point may never be reached. Suppose there were 1,000 people in the crowd, and the tipping point would come at the 150th person. Once the 150th person says they, too, see the Emperor is naked, suddenly everyone’s true opinion comes out as well. If cancel culture, or trashing, or whatever you prefer to call it, keeps the cost of revealing one’s private preference so high that it remains above the marginal cost that 150th person is willing to pay, the Emperor will remain naked and the majority of the crowd will still continue to falsify their beliefs.   As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

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The Measurement is Not the Thing

Measure what is measurable, and make measurable what is not so. -Galileo Galilei Any science contends with a difficult problem: there are things we want to understand, but we cannot easily measure those things.  Any tool for measurement will be inherently have technical limitations (that is, limited by the technology of the time) and be subject to arbitrary choices by those doing the measuring.  Sometimes we may not even be able to directly measure the thing, instead we have to rely on proxies, or on a lack of information, to track what we’re interested in.  Consequently, the measurement one uses is not the same as the thing itself. It is merely a representation of the thing. Unfortunately, those untrained in scientific thinking will often mistake the measurement for the thing.  This is very common in economics.  Take, for example, the Consumer Price Index (CPI).  CPI is a measurement of inflation using a basket of consumer goods.  The basic idea is that if prices are moving independently of one another, there should be limited movement in the Index.  However, if the Index is consistently changing in a certain direction, there is likely inflation (the Index is rising) or deflation (the Index is falling).  However, the Index can rise for reasons other than inflation.  If even one price changes and all else is held equal, the Index would change simply because of how the Index is calculated.  It is a weighted average of all prices in the basket.  One change therefore moves the whole Index. To make my point more concrete, let’s say that the price of gasoline were to rise considerably and no other price were to change.  The CPI would naturally rise given gasoline is a component of the Index.  No economist would say there is inflation; inflation is a general rise in prices and this is just a single price rising.  But those who think that CPI is inflation would misunderstand and consequently misdiagnose the situation.  They confuse the measurement for the thing itself. We see the same thing for Gross Domestic Product (GDP).  GDP is a measure of economic growth, but it is not economic growth in and of itself (nor is it a theory of economic growth).  GDP, like the CPI above, is an accounting identity that attempts to act as a proxy for economic growth.  But, like with CPI, those who confuse the measurement for the thing erroneously conclude that an increase in GDP necessarily means an increase in economic growth.  GDP is defined as New Consumption + New Investment + New Government Spending + New Net Exports.  If any of those variables change, GDP will necessarily rise.  That is true.  But it does not follow that the rise in GDP necessarily means economic growth is occurring.  America in World War 2 and the USSR showed that conclusively.  US GDP rose significantly in World War 2 because of the huge increase in government spending.  But, by many measures, people were worse off than during the Great Depression: consumer goods were hard to find because so many materials were needed for the war effort, people had to grow their own food—it was not an economy that supports a good life.  In the USSR, GDP was rapidly approaching the US.  Indeed, some were even predicting the USSR would overtake the US.  But once the USSR collapsed and we saw behind the veil, the standard of living for Soviet citizens had barely changed since the fall of the Tsars.  GDP was propped up by government spending, and thus became an unreliable indicator of economic growth. The confusion between the measurement and thing I have discussed here is a perpetual problem for any sort of central planning or industrial policy.  The central planners must establish some goal, which in turn requires some measurement.  But then the project becomes all about hitting the measurement rather than promoting the goal.  Ultimately, this leads to the plan to fail in its goal even if it hits the measurements. (0 COMMENTS)

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The Anthropic Settlement: A $1.5 Billion Precedent for AI and Copyright

Last week, Anthropic, the AI company behind the Claude chatbot, settled a landmark class-action lawsuit for $1.5 billion. The amount is very large in the context of copyright legal cases, yet it represents just a fraction of Anthropic’s estimated $183 billion valuation. Authors and publishers, led by figures like Andrea Bartz and Charles Graeber, accused Anthropic of illegally downloading millions of pirated books from shadow libraries like Library Genesis to train Claude, violating copyright law. The settlement will compensate roughly 500,000 authors and publishers at about $3,000 per affected work. While Anthropic didn’t admit liability, it agreed to destroy the illicit files and pay authors, avoiding a trial. The Authors Guild hailed the outcome as a precedent for licensing content in AI development. This case raises questions about property rights in the age of Large Language Models (LLMs). Courts have ruled that recombining existing texts into new outputs qualifies as fair use, but the Anthropic lawsuit hinged on the piracy itself, not the training process. What should the law say about compensating authors whose works indirectly fuel AI innovation? The answer could shape not just fairness but the future quality of AI. The term “AI slop” increasingly describes low-quality, machine-generated text produced with minimal human oversight. If human writing ceases to be a viable career due to inadequate compensation, will LLMs lose access to fresh, high-quality training data? Could this create a feedback loop where AI models, trained on degraded outputs, stagnate? This dilemma mirrors the classic “access versus incentives” debate in intellectual property law: Access to a rich corpus of human-written text today enables entrepreneurs to build powerful, affordable LLMs. But without incentives for human authors to keep producing, the well of quality training data could run dry. This case also blurs the traditional divide between copyright and patents. Copyrighted material, once seen as static, now drives “follow-on” innovation derived from the original work. That is, the copyright protection in this case affects AI-content influenced by the copyrighted material in a way that previously applied to new technology that built on patented technical inventions. Thus, “access versus incentives” theory applies to copyright as much as it used to apply to patents. The Anthropic settlement signals that intellectual property law, lagging behind AI’s rapid evolution, must adapt. Authors might need compensation, but halting AI progress to resolve legal disputes risks stifling innovation. At $1.5 billion, the settlement’s size sends a clear message: bypassing legal channels could be costly. This could deter smaller AI firms from entering the market, especially as similar lawsuits loom against other companies. The precedent may push developers toward licensing deals or public domain data, raising costs and potentially concentrating the AI industry among deep-pocketed players like Anthropic, backed by billions in funding. Smaller startups, unable to afford licensing or litigation, may struggle. This would become a case of regulatory barriers favoring incumbents. Could Anthropic’s willingness to pay such a hefty sum reflect a strategic move to fortify a moat around well-capitalized AI firms, discouraging upstarts? In a 2024 post, I speculated that AI companies, flush with cash, might strategically hire writers to replenish the commons of high-quality text. In that post, I wrote:  “AI companies have money. Could we be headed toward a world where OpenAI has some paid writers on staff? Replenishing the commons is relatively cheap if done strategically, in relation to the money being raised for AI companies.” The Anthropic settlement partly validates this idea. For an AI arms race in which Mark Zuckerberg spends millions luring engineers from OpenAI, $1.5 billion seems like a modest price for a chance of establishing AI dominance. For now, the Anthropic case marks a pivotal moment. It underscores the need for a balanced approach and sets the stage for how AI and intellectual property law will coexist in an era of unprecedented technological change. Although, at a certain point, the LLMs might reach a take-off point where they are so intelligent and agentic that they do not need new input from humans anymore. That is a horizon beyond which I cannot see.   Joy Buchanan is an Associate Professor of economics at Samford University. She blogs at Economist Writing Every Day.  (0 COMMENTS)

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