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China’s Real Problem is Nominal

There have been numerous news reports suggesting that China’s economy is in the doldrums. Strong exports have allowed China to maintain a solid overall growth rate, but that growth engine may not be sustainable, especially given the likelihood of increasingly protectionist headwinds. Domestic sectors such as housing and retail sales have been fairly weak. Here is the Financial Times: China’s economy grew 4.7 per cent year on year in the second quarter, official data showed on Monday, missing forecasts and marking a slower rate of expansion compared with the previous three months. . . . The data release came as the Chinese Communist party’s Central Committee on Monday launched its third plenum, a four-day meeting in which the country’s leadership is expected to set the direction of economic policy. The last such event was held in 2018.Eswar Prasad, professor of economics at Cornell University, said the latest data release would “add force to the rising clamour for stimulus measures, such as fiscal support for households, as well as broader reforms to foster a more favourable business environment for private enterprises”. “The reliance on exports to power growth will inevitably result in rising trade tensions with China’s major trading partners,” he said. While Western economists continue to recommend more fiscal stimulus, it is increasingly clear that China’s actual problem is an overly restrictive monetary policy: In nominal terms, GDP grew by 3.97% in the first quarter, and 4.01% in the first half of the year, according to data accessed via Wind Information. Before considering the implications of this data, I’d like to clear up a few misconceptions: 1. The fact that China’s nominal growth is slower than its real growth is not in and of itself a problem.  This might be viewed as “good deflation”, if driven by productivity growth. 2. I have recommended 4% NGDP growth for the US, and so I don’t see that figure as being a major problem. So what exactly is the problem in China?  In my view, the biggest problem in China today is not the fact that NGDP is growing at 4%; rather it is that China’s monetary policy has slowed the rate of NGDP growth too rapidly.  For more than four decades, China experienced much higher rates of NGDP growth.  An abrupt deceleration to roughly 4% has caused economic sluggishness.  If 4% NGDP growth is the ultimate objective, it would have been better to slow the nominal growth rate more gradually. If the Chinese government decides that they wish to maintain somewhat faster NGDP growth for a few more years—say closer to 5%—then they should ignore Western calls for fiscal stimulus and focus on using monetary policy to boost NGDP growth.  China already has substantial debt problems, the last thing they need to do is copy mistakes made in Western countries, where the public debt is now on an unsustainable path.   I worry that China may be making the same mistakes as Japan made during the 1990s and 2000s.  The Japanese government was unwilling to do sufficient monetary stimulus, probably out of concerns that it would lead to excessive currency depreciation.  Instead, they relied on massive fiscal stimulus, which turned out to be completely ineffective.  Japan got no NGDP growth and instead ran up an enormous public debt.  Ironically, there are now signs that Japan is finally escaping that long period of zero NGDP growth, perhaps partly because the government is finally willing to allow the necessary currency depreciation. Abenomics was announced in late 2012: (0 COMMENTS)

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Lessons from Lincoln, Then and Now (with Diana Schaub)

What lessons can we take from the speeches of Abraham Lincoln for today’s turbulent times? How did those speeches move the nation in Lincoln’s day? Listen as political scientist Diana Schaub of Loyola University, Maryland talks with EconTalk’s Russ Roberts about three of Lincoln’s most important speeches and what they can tell us about the […] The post Lessons from Lincoln, Then and Now (with Diana Schaub) appeared first on Econlib.

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Can We Meaningfully Speak of Bubble Gum “Inflation”?

The Wall Street Journal’s report on the reduced increase of the Consumer Price Index is confused. Or so would think an economist who understands the difference between changes in relative prices and a change in the general price level, of all prices together. (See “Milder Inflation Opens Door Wider to September Rate Cut,” July 11, 2024.) Reading the story, the proverbial Martian landing on Earth would think that, on this strange planet, all prices are the product of inflation (or deflation), that there is no difference between inflation (or deflation) and changes in relative prices, and that the increase in the CPI is inflation. Quoting from the story cited above: Housing inflation, which measures the cost of renting and accounts for about one-third of the CPI, has kept overall prices high. If there is such a thing as “housing inflation,” we have a puzzle. What happened to other “product X inflation” in the other two-thirds of goods and services—including, say, bubble gum inflation?  Did that part also keep overall prices high? Or did the rest of the CPI show “product deflation” (the opposite of inflation, as we see during economic depressions)? Does the economy witness a continuous struggle between two evils, inflation in some prices and deflation in others? Or could it be that some prices increased or decreased relatively to each other whatever happens to inflation (or deflation)? But then, a contrarian economist would ask—as economists started asking a couple of centuries ago—what causes all prices to rise together besides changes in relative prices? What does it mean then to speak of housing inflation or gasoline deflation? One easy way to think about relative prices is as follows. Assume that only one price changes in the economy, all other prices remaining constant. (This would of course implies the absence of inflation.) The price that changed has changed relative to all other prices (although in a different proportion of different prices). Arithmetically, if one relative price changes, all other prices also change relatively to that one. All prices are relative prices compared to other prices. Relative prices change all the time, whether there is inflation, deflation, or none of either. The two phenomena obviously need to be distinguished, inflation or deflation on one side, and specific relative price changes on the other. Ryan Bourne’s recent book The War on Prices (Cato Institute, 2024) contains many discussions of prices besides your humble blogger’s chapter, “A Rising Product Price Doesn’t Cause Inflation”). Over the history of economic analysis, there is much theory and much evidence supporting the hypothesis that inflation—an increase in all prices together, as opposed to relative changes among them—is due to an increase in the money supply over and above what economic agents demand for their transactions. The price of any good or service as observed and included in the CPI is composed of a change in its relative price and, when there is inflation (or deflation), a change in the general level of prices. Reproduced below is a chart published in one of Ryan’s contributions to the book. The correlation between changes in the money supply and estimated inflation supports the hypothesis that inflation is a monetary phenomenon. We should not be too hard on journalists and the WSJ is not alone in error. Most journalists are just echoing the noises they are hearing, including from many economists. Perhaps some economists are trying so hard to dumb down what they know for journalists and pundits that the latter end up thinking in dumbed-down economics: “inflation is the sum of all price increases,” they seem to think (while inflation, when present, constitutes only part of a price change). Other economists seem happy to forget the economic way of thinking when they leave graduate school and become accountants with large databases and sophisticated statistical software. Still other economists mainly have political points to make, which generally amount to saying that the government has got things under control and is taking good care of its “citizens.” It is as if, in today’s economic Newspeak, the words to conceive of relative prices were being obliterated. Then, nothing is thinkable but housing inflation, grocery inflation, and bubble gum inflation, which, all added up, produce (total) inflation.   ****************************** A Martian puzzled by Earthlings’ theories of bubble gum inflation (0 COMMENTS)

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Highlights of My Weekly Reading for July 14, 2024

  First, Happy Bastille Day. Now to some highlights. Reliable Sources: How Wikipedia Admin David Gerard Launders His Grudges Into the Public Record Tracing Woodgrains, July 10, 2024. Excerpt: Unsurprisingly, Gerard’s slash-and-burn, no-questions-asked policy has led to more than a few conflicts on Wikipedia. Editors who object to his indiscriminate removals have raised the issue multiple times to Wikipedia administrators, on talk pages, and elsewhere around the site. Each time, Gerard defends the approach of indiscriminately removing everything from Unreliable Sources, generally carrying on with removals as the disputes carry on. Each time, the arguments peter out with nothing in particular changing. In one case, another Wikipedia administrator, Sandstein, pushed to ban a user for repeatedly criticizing Gerard’s judgment on the matter. In other words, whatever Wikipedia’s written policy, the practical day-to-day reality is that Gerard will remove Unreliable Sources en masse with terse explanations and with little consideration for actual content, digging in with elaborate justification when pressed. Given that, it’s worth examining the reliability battles Gerard picks. The article is very long, very detailed, and  very persuasive. Childcare Regulations May Be Stifling Fertility, New Paper Finds by Peter Jacobsen, Foundation for Economic Education, July 12, 2024. Excerpt: In other words, states with more childcare regulations tend to have larger fertility gaps—women are less able to have as many children as they’d like. The fascinating implication, of course, is that reducing or eliminating childcare regulations could help facilitate higher birth rates. One of the persistent drawbacks associated with pronatal policies is that they tend to be high-cost. But the implication of this new paper is that they need not be. By allowing parents to regulate childcare with their purchasing decisions, rather than relying on politician-assigned standards, it seems possible to lower the cost of childcare and, as a result, support parents in having larger families.   A Foreign-Born Terrorist Could Cross the Southwest Border by Alex Nowrasteh, Alex Nowrasteh’s Deep Dives, July 9, 2024. Excerpt: Since 2016, my research on foreign-born terrorism has shown that the threat is relatively minor. During the 1975-2023 period, foreign-born terrorists murdered 3,046 people on U.S. soil in attacks committed by a total of 230 terrorists, which includes attackers, those who planned attacks, or who were convicted of terrorism offenses where they plotted an attack. The annual chance of being murdered in an attack carried out by a foreign-born terrorist during that time is about 1 in 4.5 million a year. By comparison, the annual chance of being murdered by a common criminal in the United States was about 1 in 13,767. In other words, the annual chance of being murdered in an ordinary homicide was about 323 times as great as dying in an attack committed by a foreign-born terrorist on U.S. soil. Alex, as usual, brings some nice numeracy to the discussion. (0 COMMENTS)

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Alan Reynolds on “Shelter Prices” and Inflation

Alan Reynolds writes: Consumer Price Index (CPI) inflation has been zero for two months. Over the past 12 months, prices of food at home are up 1.1 percent, and energy prices are up 1 percent. Yet headlines keep focusing on the 12-month averages of 3 percent for the total CPI and 3.3 percent for “core inflation” (less food and energy). But there is a big problem: Those 3–3.3 percent figures do not reflect a broadly defined measure of inflation since they are largely dominated by shelter costs. Widely criticized Bureau of Labor Statistics (BLS) estimates of rent and owners’ equivalent rent (a price nobody pays) account for a third of the total CPI and over 40 percent of the core CPI. Reynolds points out that extreme estimates of shelter prices are also problematic for another reason: they lag reality by 12 to 18 months. Of c0urse, since there is a lag, we don’t know what’s happening to shelter prices in recent months. But without shelter prices, inflation has been low. Reynolds writes: Here is the unreported good news: Aside from shelter, CPI Inflation and core inflation rose only 1.8 percent over the past 12 months and were either flat or falling over the last two. (bold in original) What he means, of course is not that CPI inflation and core inflation rose only 1.8 percent over the past 12 months; he means that CPI inflation and core inflation were only 1.8 percent over the past 12 months.   (0 COMMENTS)

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Trendy Tables

A report in the New Yorker (and discussed in an NPR Marketplace segment) discusses restaurant table reservations, showing how third-party sellers are earning money by reserving tables at trending restaurants and reselling them to eager diners. These “hustlers” and “mercenaries” as they have been named (and self-named) might be seen, even by themselves, as jacking up the price for something that would be cheaper otherwise.  However, these are alert entrepreneurs who provide an interesting example of how markets can emerge to solve complex coordination problems. Only restaurants in very high-demand locations like New York City have actually experienced a significant amount of such trading activity. As the New Yorker article quotes about one particularly popular Italian spot, “New Yorkers are risking their lives, begging, bribing, and pleading to get a table at the Italian eatery.” These restaurant tables are scarce commodities. When price is not used, “begging, bribing, and pleading” are ways that the competition for them will take place. The same is true when prices are controlled for other goods.  Traders buy and sell reservations by monitoring reservation sites, booking tables, and placing them up for sale on sites like Appointment Trader. By doing this, they increase the likelihood that the tables at these restaurants are allocated to their most valued uses, i.e. to the diners that value them the most. In other words, they likely are enhancing efficiency.  Most restaurant seating is not allocated by the price mechanism, but on a first-come first-served basis. Even when restaurants take reservations, those are also typically first-come first-served. A diner may not know about or decide to try a trendy new restaurant until the evening prior. In this scenario, without third-party sellers, they might find a months-long wait to get a table reservation.  With third-party sellers, there will be a seat available for them – for a price. In turn, the restaurant seats parties most eager to be there and are likely to spend more on average. Third-party sellers are better off as well as long as the money they earn is greater than the cost of the time they use to troll sites for reservation bookings.  There are likely to be people who are worse off. Pareto improvements are difficult to come by. Perhaps passers-by no longer have much of a chance to grab a table that just happens to be empty at the right moment. If tables listed by third-party sellers don’t sell, restaurants may miss opportunities to seat needed customers. Indeed, some restaurants opt not to list reservations with platforms online and use their own system instead. Overall, it is likely the case that total welfare improves from the existence of third-party sellers where reservations are consistently listed on online platforms.  An interesting question is why restaurants don’t raise the price of tables and reap the extra surplus themselves. In the restaurant industry, products are hugely differentiated from one business to the next. Owners of popular restaurants might be said to have a degree of monopoly power; they have high demand for their product, but they are able to restrict output because they are the sole purveyor of it. There is only one place to get a meal at Tatiana in New York. The monopoly power comes from the fact that that no restaurant can perfectly copy what they have. If the wait for a table is months long, that implies that menu prices could be higher, or that the restaurant could use table-pricing to reap more of the monopoly rents that is available to it.  Most restaurants that are successful and popular enough to have predictably full dining rooms every night likely raise menu prices to some degree to accommodate the higher demand, but it would seem not enough to clear the long wait lists. Third-party sellers arise as a result of this fact. The restaurant has left monopoly rents on the table, so to speak, by not putting a price on reservations. This is either because it is not cost-feasible or because there are countervailing reasons for not doing so. Perhaps the notoriety that comes with long waiting lists and high prices for tables on third-party apps is a more valuable reputational asset for restaurants. Or perhaps having the certainty of a full dining room months in advance is more valuable to restaurant owners. Lastly, two diners who happen to get a table at the same time through first-come first-served seating are likely to place two different values on getting that table. If the restaurant could give each of them a different surcharge for the privilege of getting a table, it could gain the extra surplus. This leaves third-party sellers to fill the role of such price-discrimination by allowing diners to compete in bidding up the price for the table. The restaurant industry is incredibly vibrant, and it is interesting to explore why markets are emerging to address novel issues within it.   Giorgio Castiglia is the Program Manager for the Project on Competition at the Mercatus Center, and a PhD student in economics at George Mason University. (0 COMMENTS)

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Dreams and nightmares

Imagine if you were born overseas but grew up in America. After graduating from college, you start looking for a job. There’s just one problem; you do not have legal residency. As a result, the US government sends you back to your home country, a place you might not even remember. To many people, this would seem like a nightmare scenario.Reason magazine has a recent article discussing this issue: In 2008, Taroll arrived in the U.S. as a 10-year-old with his father, younger brother, and Preth, his mother, who had secured a job in the States at a tech company on an H-1B visa. He subsequently became a “Documented Dreamer”: the same moniker given to DACA recipients, except with a twist. Core to being a “Dreamer” under DACA’s purview is that they are undocumented, so Taroll didn’t qualify for the protection provided by the program—not in spite of coming to the U.S. legally, but because of it. To benefit from the “Dreamer” program it is essential that your parents arrived in the US without permission.  The children of legal immigrants do not qualify.  Some are eventually able to obtain green cards, but the line is so long that many “age out” before they are able to achieve legal residency.  At that point they must leave the country: So last month, Taroll was forced to self-deport to Taiwan, where his employer was able to secure him a spot. He does not know the language nor does he have any family ties to the country. “I grew up in my hometown of Boston as just a regular kid, never imagining that my status would define my decisions later in life,” he tells me. “And like many Documented Dreamers, we only truly understood the ramifications once we get closer to aging out and have to start planning for ways to remain in the only country that we know as home.” Immigration is a contentious political issue in America.  And yet it seems implausible that many politicians on either side of the debate would knowingly support giving Dreamer status to only those children whose parents arrived in America illegally.  One way to ascertain the views of policymakers is to look at what happened when this quirk in the law was brought to the attention of legislators.  Is this what they intended? Here’s Reason:  Some lawmakers on both sides of the aisle have tried to answer that question. In 2021, Rep. Deborah Ross (D–N.C.) introduced a bill in the House to effectively close the Documented Dreamer loophole and pave a pathway for citizenship. . . . A version of that bill passed the House as an amendment in the National Defense Authorization Act (NDAA). And then it was laid to rest in the Senate’s legislative graveyard after Sen. Charles Grassley (R–Iowa) rebuffed the proposal.    (0 COMMENTS)

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Activism and Institutional Gresham’s Law

I recently posted about two broad lenses one could use to analyze political activism. One form is what I called “activism as production,” which occurs when activists are motivated by a desire to help produce some form of public good – better environmental health, an improved justice system, and so on. The other form is what I called “activism as consumption,” which occurs when activists are motivated by the satisfaction they gain from activism itself – a feeling of community, social status, pride in “being part of the solution” or being “on the right side of history,” and so on. As I mentioned in that post, these are not the only two lenses by which we can view activism, nor are they mutually exclusive. Any given individual or organization can be motivated by either, or by both in varying degrees. But over the long term, we should expect to see a trend in which of these is more prominent.  This is because activism is subject to what Anthony de Jasay has called “Institutional Gresham’s Law,” which I’ve described before. In economics, Gresham’s Law describes the tendency of bad money to drive good money out of circulation, when there is a fixed exchange rate between the two that prevents the situation from moving towards an equilibrium. If exchange rates are allowed to adjust freely on the market, the effects of Gresham’s Law are prevented. Anthony de Jasay described Institutional Gresham’s Law as the tendency for bad institutions to drive out good ones over time. Institutions that prioritize their own growth and survival over being socially beneficial will drive out institutions that prioritize being socially beneficial over their own growth and survival. Unlike with money, there is nothing that serves as an exchange rate that can keep this process in check. As de Jasay phrases it, institutions are selected “for the characteristics favorable to their own survival.” The selection pressure for institutions, then, is not survival of the most socially beneficial. It is what de Jasay called the “survival-of-the-fittest-to-survive” – which means survival of institutions that prioritize their own growth and expansion over other factors like what is most socially beneficial. As this process goes on,  …the surviving [institutions] might not well be the ones most conducive to making the host civilization prosper and grow…For a variety of reasons, we should expect survival-of-the-fittest-to-survive to produce a population of institutions with many monsters and with no bias towards the benign and the instrumentally efficient. When competing for survival, the latter may well be driven out by the former. It is well in line with this expectation that there is no marked tendency in history for societies equipped with benign institutions to “prevail.”…Institutional Darwinism would work in the benign fashion ascribed to it, and “nice” civilizations would spread, if the subject being selected by the environment for its characteristics that best help it to survive were the whole symbiotic set of host society with its complementary institutions. For this to be the case, single parasitic institutions in the set should have to lose more by weakening the host society than they gain by feeding on it. Gresham’s Law would then cease to operate, for “non-nice” institutions would either not survive the adverse feedback they suffer from their own parasitic actions which weakens their host society, or they would change their spots by a process of mutation-cum-selection. There is no evidence whatever to bear out supposition of this sort. The same thing can happen over time with activism. Suppose there are two activist organizations dedicated to helping alleviate the same social problem. One is a “good” institution, as defined above, while the other is a “bad” one. Let’s say over time, the social problem both institutions are meant to address becomes substantially alleviated, and is perhaps on the verge of disappearing altogether. A “good” activist organization will acknowledge the progress, recognize there is less need for what they are doing, and reduce the scope and scale of their activism. A “bad” activist organization would deny that any progress has been made, insist that things are worse than ever, and seek to continually increase the scope and scale of their activism. Over time, the second organization would completely drown out the former – not because the second one is better, but precisely because it is worse. The bad institution would have a lot to gain by convincing people that the problem it formed to address is large and growing, even if it is actually small and shrinking. This also holds true at the individual level. As mentioned in my initial post on this topic, being motivated by “activism as consumption” is a matter of degree, not a either/or dichotomy. But for reasons of Institutional Gresham’s Law, we should expect over time to see a greater proportion of “activism as consumption” crowd out “activism as production.” In the extreme, those who are motivated by “activism as consumption” are the kind of people who find “being involved” as a great source of meaning, purpose, and satisfaction in their lives. I’ve certainly met no shortage of people who describe themselves in this way. As a social problem improves over time, we should expect to see those who see “being involved” as a means to an end being driven out by those who see “being involved” as something to be pursued for its own sake. But how plausible is it that some people engage in “activism as consumption”? Two researchers (themselves quite sympathetic to activism) looked at this very question. They start off by recounting Aristotle’s notion of “humans as political animals by nature. One implication of this idea is that when people engage in political activity, they are expressing a basic motive fundamental to being human. If this is true, then Aristotle’s logic would further suggest that the extent to which people engage in political activism might be positively associated with their well-being.” That is, political engagement is a deeply felt need that people can feel motivated to pursue for its own sake.  They sought to measure the extent to which activism provides personal psychological benefits, and in what circumstances. What they found shouldn’t be surprising – engaging in activism, in and of itself, provides people with significant personal psychological benefits. As they put it, “well-being was higher to the extent people self-identified as an activist, expressed commitment to the activist role, and reported engaging or intending to engage in activist behaviors. Results were similar across measures of hedonic well-being (e.g., life satisfaction and positive affect), eudaimonic well-being (e.g., personal growth, purpose in life, vitality), and social well-being (e.g., social integration). The results of both studies also suggest that activists are more likely to experience the satisfaction of basic psychological needs, an indicator of more frequent experiences of intrinsic motivation.” Thus, activism-as-consumption has a very fertile ground out of which to grow.  The strength of this effect depends on numerous other factors, such as how strongly people agreed with the statement “Being an activist is central to who I am” – the kind of person I had in mind when I described the more extreme case of those seeking “activism as consumption.” But even if only a tiny number of potential activists fall into that category, because of Institutional Gresham’s Law, we should expect there to be selection pressure over time for that group to dominate activist engagement. And if something like Institutional Gresham’s Law applies to political activism, it could provide an explanation for what Eric Hoffer observed about mass movements – that in time, each mass movement “ends up as a racket, a cult, or a corporation.” (0 COMMENTS)

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Nepotism and global politics

I imagine that most readers don’t spend a great deal of time thinking about the practice of nepotism. In this post, I won’t try to convince you that nepotism is good or bad, rather I’ll try to show that nepotism provides a useful entry point to thinking about contemporary trends in the politics of many countries. Conservatives often speak of the importance of family, faith, and the flag.  But just how much weight should we place on family, religion and the nation?  Consider the following sliding scales of intensity: 1. No religion   moderate religion   intense religion 2. Cosmopolitanism moderate nationalism intense nationalism 3. Pure egalitarianism Nordic family values strong familial favoritism People often describe intense religion as “religious fanaticism”, a phrase with a negative connotation.  Although I am not religious, it’s not obvious to me why intense adherence to a set of beliefs viewed as both good and important is a bad thing.  In this post I’ll try to steer clear of value judgements. Here I am most interested in the second and third issues, attitudes toward families and nations.  A cosmopolitan might call him or herself a “citizen of the world”, and claim no favoritism toward the country of their birth.  A person with moderate nationalism might be strongly opposed to the sort of intense nationalism seen in places like Russia, and yet to some extent favor social programs aiding domestic residents over those of foreign countries. In much of the world, it is considered unethical not to exhibit a strong favoritism toward those with a blood relationship.  In contrast, family bonds are weaker in places such as Northern Europe, where nepotism in hiring is widely viewed as unethical.  Not very many people exhibit absolutely no familial favoritism, but you can imagine a person who grumbles that they get to choose their friends but not their family, and has friendly relationships with those with similar interests, not those who are close relatives.  I grew up in a culture that gravitated toward the “moderate” position on all three sliding scales, and I have no interest in supporting or criticizing that position.  Instead, I’m interested in thinking about logic behind each position, particularly on the final two sliding scales (attitudes toward one’s nation and family).  Why is it so hard to determine which attitude is appropriate?  Is the “golden mean” approach I grew up with just lazy thinking?  Recall Thomas De Quincey’s famous jest: A golden mean is certainly what every man should aim at. But it is easier talking than doing; and, my infirmity being notoriously too much milkiness of heart, I find it difficult to maintain that steady equatorial line between the two poles of too much murder on the one hand and too little on the other. Why do the cases above seem different from those where one of the extremes is obviously preferable?  Here it will be useful to think about two terms that have very different connotations: bias and solidarity. In America, bias is considered so unethical that there are all sorts of laws against showing favoritism toward one group as opposed to another.  In contrast, solidarity has a positive connotation, obviously linked to patriotism and family values, but also to labor union solidarity and even loyalty to a sports team. But bias and solidarity are two sides of the same coin. I would be hard pressed to give you any “rational” reason for my support of the Milwaukee Bucks basketball team.  I haven’t lived in Wisconsin for more than 40 years, and even when I did it was not in Milwaukee.  On the other hand, it’s pretty easy to explain why I am a Bucks fan.  That was the local team on TV when I began following the NBA in 1968, and once hooked I stayed with them.   Similarly, people usually (but not always) favor the religion, nation and family of their youth. Nepotism is a strong form of family values, or familial favoritism.  It may seem obvious to you that nepotism is unethical.  But many (most?) people around the world do not feel that way.  Indeed they might find your refusal to engage in nepotism to be deeply unethical.  Sociologists use the acronym WEIRD to describe our culture (Western, Educated, Industrialized, Rich, and Democratic.)  In my view, the tension between solidarity and bias is increasingly driving recent trends in politics.  Authoritarian nationalism tends to lean toward the center and right side of those three sliding scales, with some important exceptions.  Liberalism leans more toward the center and left side of the three scales, again with important exceptions. The concept of tradition probably plays a bigger role on the right than on the left.  In places like Russia, liberals are criticized (perhaps unfairly) for abandoning religion, family values and patriotism.  A liberal might respond that supporting the concept of gay marriage is actually consistent with family values.  When conservatives criticize things like gay rights, trans rights and abortion, I think they implicitly have in mind the idea that once you start down that road, you end up with a sort of radical individualism, which erodes the solidarity underpinning family and nation.  If there is no logical reason not to allow people to follow any particular lifestyle, then (some might argue) there’s no logical reason for me not to switch from the Bucks to the Celtics, or not to switch from rooting for the US winter olympics team to the Norwegian winter olympics team. In some cases, there is tension even within a given ideological framework.  My favorite example is the Dutch right-wing politician Pim Fortuyn, who opposed Muslim immigration because he feared that it threatened the Netherland’s “traditional values” of liberalism in areas such as gay rights.  French conservatives have complained when women from different cultures did not wear bikinis on the beach.  So there are important exceptions, cases where people don’t line up the same way on all three scales. [Recall the famous paradox: Should liberals tolerate the intolerant?] Some pundits have noted that blue collar workers are switching from the left to the right in many countries.  This can be understood as a reaction to the collapse of communism.  As the working class’s socialist dream seemed increasingly unrealistic, politics shifted to a focus on issues of identity.  Left wing labor union activism and right wing nationalism can both be seen as putting more emphasis on solidarity than bias.  From that perspective, the working class’s core ideology has not shifted, rather the issues have changed. In contrast, liberals tend to worry a lot about bias, and place less emphasis on family or national solidarity. Proposals to address global warming suffer from an “externality problem.”  Thus it’s no surprise that the very same voters that showed labor union solidarity when voting socialist in the 20th century now show national solidarity when voting for right wing parties that oppose carbon taxes. Most of the gains from carbon taxes go to foreigners, while most of the costs are borne at home. To summarize, the politics in the 20th century tended to split along the lines of socialism vs. capitalism.  In the 21st century, the fault line seems to be attitudes toward the relative importance of bias and solidarity. PS.  Elsewhere, I’ve argued that nationalism and patriotism are two very different things.  Here I’ve steered clear of that thorny topic. (0 COMMENTS)

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The Problem of Collective Action: An Illustration in Education

As formalized by Mancur Olson in his seminal 1971 book The Logic of Collective Action, smaller social groups are easier to organize than larger ones. Consequently and other things equal, a small group will be more effective at lobbying governments, even if the total benefits of its members are smaller than what all the members of the large group lose. One illustration can be found in primary and secondary education, where teachers’ unions impose working conditions that are in their members’ interests but reduce the value of the product the pupils and their parents get. (See “School in Rich Countries Are Making Poor Progress,” The Economist, July 7, 2024.) Two parties to an exchange benefit from it (as judged by each party for himself), otherwise one would decline. But this basic economic principle only applies to a free exchange; it does not apply if one party coercively imposes its conditions, or if one side includes involuntary members. Since 2000, the OECD’s Programme for International Student Assessment (PISA) evaluates 15-year-old students in maths, reading, and science. The average scores showed no improvement until the early or mid 2010s, and then declined until 2022 (latest year available). Other indicators largely confirm the trend, which precedes the Covid-19 epidemic. The magazine notes: Around a quarter of 15-year-olds in OECD-member countries do not meet basic proficiency in maths, reading and science, according to standards set by PISA. That means 16m teenagers struggle with tasks involving numeracy or find it more difficult than they should to draw meaning from basic texts. One reason why the more numerous consumers (the parents of the pupils) cannot change the situation follows from Olson’s theory of collective action: Pupils and their families are rarely organised; this makes it easier for teachers’ unions to resist changes to, say, teacher training and evaluation. Some 70% of schoolteachers belong to a union, an unusually high proportion although it also includes less controlling employees’ associations. Parents whose children attend small schools may be able to organize themselves locally at low cost (in a decentralized system like that of the US). Yet, they often face state-level or national-level teachers’ unions. Trade unions benefit from special legal privileges and powers, such as the employer’s obligation to negotiate, strike disruptions or threats thereof, or the obligation of workers to be union members or to pay union dues. Depending on state law, teachers’s unions can exercise some of these powers, which facilitate their collective actions and translate into restrictive collective “agreements.” I am not arguing that this problem is the only one plaguing public schools. Other imperfections of political processes including politicians’ short-termism prevent elected officials from correcting the weaknesses of the public education system, as The Economist recognizes: Meanwhile leaders are asked to spend political capital on changes that might not bear fruit for years.   ****************************** The unionized schoolteacher, by DALL-E (under the influence of your humble blogger)   (0 COMMENTS)

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