In a recent blog post, Vasant Dhar had some interesting remarks about the possible role of AI in Fed policy: Might AI help us better understand the data and design better economic policy interventions?Last week I had lunch with some central bankers who wanted to talk to me about AI. They were interested in discussing how they should think about the risks and opportunities associated with the increasing presence of AI in financial markets. I asked them the same question I had asked Paul: could AI do the work of the central bank? Over the course of the meal, they realized that an AI would indeed have a lot to offer in terms of connecting the dots better than humans can. The dots would include historic data on all past central bank monetary policy decisions, past communication and forecasts, all past and contemporary data available at the time, and all literature published about the subject over time. In principle, we felt that the AI might do a better job of modeling the economy. At the very least, its models should be compared to the ones currently in use.But we’d still need humans to blame, they concluded. After all, you can’t get mad at an AI if it’s wrong. I can certainly see the attraction of using AI in the formulation of monetary policy.  But on balance, I’d still prefer to rely on a market approach to policy. Would an AI be able to forecast better than an NGDP futures market?  That’s hard to say.  An AI forecast might incorporate market forecasts, and also other factors missed by market participants.  In that case, you could think of AI forecasts as man/machine hybrids.  In the early days of computer chess, play that combined the insights of both grandmasters and computer programs was better than either man or machine working in isolation. But if AIs are truly superior to the market in certain respects, then we can expect market participants to use AI when engaged in the trading of financial assets.   If so, then the insights of various AIs will become incorporated into market prices. From this perspective, the addition of AI is not a qualitative change in markets or forecasting.  Rather the AI revolution will add lots of really smart “entities” to the market, making it even more efficient than before.  This may be important, but it’s still more of a quantitative than qualitative change.  Even if some AIs are smarter than any individual, including Jay Powell, no individual AI will be smarter than a market that includes lots of smart humans and lots more even smarter AIs.  The wisdom of crowds still holds. A potentially more promising use of AIs would be to come up with the appropriate target of Fed policy (say inflation vs. NGDP growth, or levels vs. growth rates.)  Those questions cannot be answered by market forecasts, as there is no point at which future data clearly resolves the question of who was right or wrong.  Of course this is true of a wide range of public policy questions.  Thus we could envision asking AIs whether the death penalty increases or reduces the aggregate utility of society.  If this thought makes you queasy, you can take some comfort in the fact that AIs are currently very far from being able to answer that sort of question, and it’s not clear they will ever be able to do so. PS.  David Beckworth asked an AI what it though about using AIs in monetary policy. (0 COMMENTS)

This is the third in my series on the social costs of drug prohibition. You can read part one here (prison-industrial complex) and part two (police militarization) here.   In the 1914 decision US v Regan, the Supreme Court held that the “rule of evidence requiring proof beyond a reasonable doubt is generally applicable only in strictly criminal proceedings.” This decision is relevant because it has subsequently allowed for civil actions in rem (against a thing, such as property) to be taken against those who have not been criminally charged in persoram. (against a person). Specifically, Section 881 of Nixon’s Comprehensive Drug Abuse Prevention and Control Act of 1970 declared subject to forfeiture all controlled substances, as well as equipment used in the manufacture and distribution of such substances (Stahl, 1992). With §881, the practice of civil asset forfeiture, the extrajudicial seizing of property suspected of being used in (or being the benefit of) was born. The addition of § 881(a)(6) in 1978 allowed for the seizure of both profits derived from the drug trade and anything purchased with those profits, while the 1984 addendum of § 881(a)(7) permits the forfeiture of any real property used to violate drug laws. Because the law enforcement agency responsible for the seizing of assets is allowed to keep the property – or any proceeds from the sale thereof – asset forfeiture has become an important source of revenue for these agencies. This has created a situation where a conflict between genuine enforcement of prohibition and revenue raising is all too often decided in favor of the latter (Boudreaux & Pritchard, 1996). This is made possible because of the differing standards between criminal and civil procedures; while criminal suspects must be found guilty beyond a reasonable doubt, victims of asset forfeiture only need be “reasonably suspected” of having committed a crime.   Of course, reasonable suspicion is a highly subjective standard of proof, and extant laws provide little objectivity. This is hardly surprising, as asset forfeiture sits at the nexus between criminal and civil law. Depending on the case in question, the Court has declared in rem forfeitures as criminal in some instances, and as civil in others. In truth, the hazy distinction serves a purpose, as it allows law enforcement to civilly punish individuals for suspected criminal activity without the heightened burden of proof required for criminal prosecution. It then becomes the duty of the individual who has had his property seized to prove his innocence after the fact, an often-costly procedure that is a clear violation of due process protections. Unfortunately for these individuals, judicial precedent has trended towards viewing this protection as a matter for criminal prosecution, not civil. Police department budgets are subject to the same laws of scarcity as everything else, and every enforcement priority comes with opportunity costs. Money and manpower dedicated to, for instance, investigating auto thefts, cannot be used to investigate homicides. Indeed, research has shown that shifting resources towards drug enforcement has lowered the opportunity costs of property crime, leading to an increase thereof (Benson, Rasmussen, & Sollars, 1995).Asset forfeiture allows the drug enforcement apparatus of police departments to supplement their revenue at little cost to the taxpayer outside of the costs of seizure. Moreover, individuals who have their assets seized are often permanently bereft of their property even if they are never found guilty of any crime. Incentives to maintain this system in place go far beyond local departments; while they keep the lion’s share of proceeds – especially cash seizures – the funds are often spread around. Williams (2002)observes that some departments share a small portion of proceeds with local schools, health departments, and favored nonprofits, while Blumenson and Nilsen (1998) note that courts also receive a share of these funds, providing little incentive for judicial independence in protecting the property rights of forfeiture victims. All of this contributes to a paradigm wherein seizures are used in place of criminal convictions in violation of the Fourth Amendment’s exclusionary rule regarding evidence, and the focus of law enforcement in the area of drugs has shifted from fighting crime to chasing assets (Jensen & Gerber, 1996). Not only has this shift in focus not decreased crime, as we shall explore next, there is also evidence that it has helped increase crime.   Tarnell Brown is an Atlanta based economist and public policy analyst. (0 COMMENTS)

During the period following the 2020 Covid pandemic, many countries experienced relatively high inflation. This reflects two factors:1. All countries were hit by shocks such as Covid-related supply chain disruptions and the Ukraine war.2. Most countries enacted very extensive stimulus programs, which had similar effects in each case. It was appropriate to allow some increase in inflation in response to negative supply shocks.  That’s the whole idea behind “flexible” average inflation targeting.  But the actual rate of inflation also reflected excessive aggregate demand growth, and thus was inappropriately high in many countries, including the US.  I worry when people seem to suggest that there wasn’t much the Fed could have done about the inflation surge because it also occurred in many other nations.  In fact, not all countries experienced extremely high inflation.  Notice that China (red line) and Switzerland (blue line) experienced some increase in inflation, but much less than in the US (green line): In a podcast with David Beckworth, former Fed vice-chair Richard Clarida suggests that the similar pattern experienced by most countries suggests that differences in monetary policy regime were not crucial in this particular case: The most important thing to remember about the lessons learned from the inflation surge post-pandemic is that it was very similar across countries, across implementation, and across policy strategies. So, single mandate inflation targeters, like the Bank of England, inflation was too high. Single mandate inflation targeters, for the Eurozone, inflation was too high. Inflation was too high in Switzerland. It was too high in Australia. It was too high in Canada. Moreover, with the exception of the SNB and the Norwegian Central Bank, all of the other advanced economy inflation targeters also chose to fall behind the curve, in that they did not begin to hike rates until core inflation in their country had moved well above target. So, it was something about initial conditions— inflation had been too low for a decade— about the magnitude and complexity of the shocks, because they impacted both supply and demand, that led central banks to do very similar things and to have very similar liftoffs, very similar inflation history, and now very similar disinflation. So, I think and I predict that, with the passage of time, scholars will look back on this period and they will not think that it revealed very much about inflation targeting versus flexible average inflation targeting versus single mandate versus dual mandate. They think it will reveal something about the initial conditions and the magnitude and the complexity of the shocks.  I would argue that the cross country pattern we see suggests that some policy regime differences are more important than others.  For instance, consider the case of China, which has seen its inflation rate fall to levels below even those of Japan, indeed to slightly below zero. Why might this have occurred? It’s worth noting that Japan’s currency has recently depreciated very sharply against the US dollar, whereas China’s currency has depreciated only very modestly.  Some pundits have suggested that China is reluctant to allow a sharp currency depreciation for fear that it would trigger a protectionist response in the US.  Whatever the reason, China seems to have fallen into an excessively tight monetary policy because it is reluctant to allow a dramatic fall in the foreign exchange value of its currency. This is one more example of where the price of money approach to policy can be much more powerful than the interest rate approach, a point I emphasized in my recent book.  Once China decided not to allow a sharp fall in its nominal exchange rate, it could only achieve an equilibrium real exchange rate by allowing price level deflation.  A similar pattern occurred in Argentina in the late 1990s, when a fixed exchange rate combined with a strong US dollar led to price deflation. PS.  Nothing in the Clarida interview made me optimistic about the upcoming review of the Fed’s policy regime.  It seems clear to me that, at a minimum, the average inflation targeting regime needs to be made symmetrical, but I don’t see Fed officials advocating that sort of change.  I hope I’m wrong, but I expect more of the same—a policy “rule” that allows far too much discretion. (0 COMMENTS)

The contrast often presented between America and China is one where Beijing is a highly competent, well-oiled autocracy while the United States is a political circus held back by partisan drama. On the surface, and especially with recent news headlines, this may seem true. One might recall Senate Republican leader Mitch McConnell staring blankly into space in the middle of a press conference, President Joe Biden making frequent gaffs while his opposition chants “Let’s Go Brandon”, or any number of inelegant moments from former President Donald Trump. Indeed, with election season underway, both sides are showing just what a circus they can put on. Meanwhile, the story goes that the Chinese are orchestrating a series of well-organized and nefarious plans such as winning the quiet war of global governance. All the while Xi Jinping is also seemingly able to launch one sweeping policy campaign after another. Although these headlines and comparisons look true on the surface, a deeper analysis of the situation shows that China is facing real and substantial problems in its quest to centrally plan all of Chinese life. These problems may not get as many media hits as the decline of the dollar and the mishaps of the U.S. politicians, but they are issues that leave the Chinese Communist Party (CCP) in a far less secure position than it appears. Government Structure The Chinese government cultivates an image of an efficient and focused regime with its technocratic leadership that when compared to the complicated partisan gridlock that often is the reality of the U.S. government appears far better than it is. During the outbreak of the Covid-19 pandemic, stories highlighted the swiftness with which the Chinese government was able to build hospitals and take decisive action. Meanwhile, the United States was mired in partisan arguments, and constitutional checks and balances left decision makers without the unilateral authority they wanted. What those with a working knowledge of China, and what is even more apparent today, is that China’s authoritarian system produced its own structural failures. From the very outset, local officials were incentivized to minimize information about the outbreak as promotions and their jobs were contingent on producing good news about the crisis. Officials in Wuhan feared that sharing information that suggested anything other than that they were effectively managing every aspect of the outbreak would be punished. Indeed, the whistleblower doctor who helped break the news about the virus was silenced by local authorities for “spreading rumors” and only remembered as a hero after large-scale public outcry.1 Although China’s response was swift and aggressive, it would ultimately suffer from the undermining of civil liberties, checks and balances, and political freedom that typifies the Chinese system. The most emblematic blunder was the ordeal of Beijing’s “Zero Covid” strategy. This attempt to contain the highly contagious, but less fatal, Omicron variant, employed a draconian lockdown strategy at the same time the rest of the world had begun a return to normalcy, fueled by vaccine deployment and natural immunity rates. This led to China being effectively cut off economically from the trade vital to powering its economy. The CCP’s doubling down on a lockdown doctrine while also eschewing Western vaccines to promote its own less effective domestic versions, led to disastrous results. Entire cities, such as the bustling metropolis of Shanghai, were shut down to the point citizens ran low on food reserves and many were trapped in their homes for extended periods. Meanwhile, pride and adherence to the supremacy of the CCP’s policy prevented the deployment of advanced Western vaccines produced by Moderna and Pfizer. At the same time, the CCP pushed e of its domestic Sino-Vac line which top officials admitted were not nearly as effective.2 Criticism of the Zero-Covid strategy was highly discouraged and censored because it was the signature policy of Xi Jinping and a symbol of Beijing’s competence and efficiency, even as the economy stalled. Indeed, Zero-Covid only ends after Xi’s reappointment to rule for a third term as leader and a declaration of the full success of the policy. Virtually overnight, lockdowns were suddenly lifted, unleashing the contagious Omicron variant upon a population that had low rates of natural immunity or vaccination, leading to massive spikes in infections and a significant number of deaths. Meanwhile, economic growth rebounded briefly but then stalled once again as businesses and capital rich citizens began to hedge the political risk created by the CCP’s power maximizing behavior by moving investments to neighboring markets like Singapore and Thailand.3 Rewarding Politics Over Results For aspiring bureaucrats who fell in line with Xi’s mandate, promotion to national leadership positions in the Politburo, the CCP’s leadership organ, followed. Indeed, despite the public outcry surrounding Xi’s Zero-Covid response, his grip on power increased following the 20th Party Congress in 2022 when he replaced all his political opponents on the Politburo Standing Committee, the country’s highest governing body, with his allies. In particular, Li Qiang and Cai Qi, the mayors of Shanghai and Beijing who oversaw the widely condemned covid responses in Shanghai and Beijing, were elevated to Standing Committee positions for their loyalty, and willingness to follow the leader despite disastrous consequences.4 These political realities have significantly harmed business confidence in China and Chinese nationals have increasingly hedged their assets by purchasing property in foreign countries and positioning their wealth for mobility. Taken as a whole, these blemishes strongly suggest an overall narrative of a hyper competent and efficient autocratic regime is inaccurate. “In virtually every area of Chinese political and economic life the disruptions of autocratic technocracy are only thinly veneered by the perception of decisive and efficient leadership.” The central planning failures extend beyond the pandemic blunders. Zero-Covid and the economic slowdown in its wake is one of many policy miscalculations and excesses enabled by China’s authoritarian system. In virtually every area of Chinese political and economic life the disruptions of autocratic technocracy are only thinly veneered by the perception of decisive and efficient leadership. Examples of this reality can be found throughout China. Electric car graveyard in China For example, in August of 2023, Bloomberg reported on a growing problem in China of massive collections of unused electric cars, which are not only a waste of resources but cause negative environmental impacts.5 These electric car ‘graveyards’ came from the government’s subsidization of the EV market for both economic and geopolitical goals. Beijing saw the development of EVs as a key emerging technology and the CCP believed that EV sales would be key in spreading Chinese influence globally. Beijing poured subsidies into the electric auto market creating an explosion of output and even the creation of new ride hailing services to absorb excess vehicle production. Once the government began slashing state aid because of the excess vehicles ending the artificially sustained market, what had been a 500 firm industry shrunk to just 100 by 2023. Many of the cars produced by government mandate and subsidy featured dismal range, less than 100 miles per charge, a reality that was particularly problematic because Chinese infrastructure lacked and still lacks the charging stations to sustain a substantial EV driving populace. China’s already strained traffic and parking capacity only made the situation worse as car owners found it more advantageous to abandon their vehicles rather than attempt to sell them. Despite Xi’s speeches about the importance of a vibrant and productive private sector, the CCP as central planner of private enterprise is the norm and has increased under Xi leading to near disastrous results. In an attempt to control the economic sector “The Opinion on Strengthening the United Front Work of the Private Economy in the New Era” was released in 2020.6 It signaled the reassertion of Party power in both private and state owned entities, with the CCP maintaining a direct involvement in corporate HR departments and corporate governance. Despite its sweeping grant of authority, the directive was only the beginning of Xi’s assertion of Party authority. In 2021, Xi announced the Common Prosperity, an unprecedented regulatory and income redistribution campaign focused on China’s largest companies. The campaign consisted of highly aggressive, ad hoc regulatory crackdowns involving vague citations to anti-monopoly laws, data privacy, and other black letter rules. Another key component was state encouraged philanthropy that saw China’s elite transfer over $10 billion to various approved social causes.7 Although ultimately a failure in achieving its lofty goals of fixing China’s structural ills, Common Prosperity clearly shows how the political priorities of the CCP are enabled by an authoritarian system with little checks and balances. In response to criticism, the CCP would say that the aggressive, ad hoc antitrust actions taken against large firms like the e-commerce giant Alibaba and ride hailing service Didi corrected years of lax enforcement and forwarded the interests of a Chinese public weary of corporate power. Again, the power play took priority. The crackdown reminded private firms that the CCP was ultimately in charge of all aspects of China.8 China’s sudden and unrestrained crackdowns on its tech companies has been viewed by some as a bold step for antitrust law, unburdened by Western style checks and balances. The results, however, discredit the idea and show that such attempts do not lead to a new era of “10,000 little giants” with multiple Amazon and Google type companies competing against one another, but instead the assault on its most lucrative companies led to a sharp increase in youth unemployment and economic uncertainty. Xi’s Political Dilemma The maximization of political influence with almost no institutional checks and balances has characterized Chinese politics since the earliest days of the Communist regime. Xi Jinping’s version of this power-maximizing regime has served him well, but today’s Chinese leaders who lack Xi’s political savviness have become losers in the system. Although in the United States we may lament the entrenched nature of partisan interest groups and career politicians and wonder how seemingly unpopular political parties stay in power, China has its own far worse systemic problems. Although the CCP is one political party, it is filled with different factions, including the hardline communists, economic reformers, personal patronage groups, the military industrial complex, and regional interest groups. Rising to the top in the mold of Xi Jinping is not as simple as unifying the country under a competent and clear vision. Xi, like most authoritarian leaders, rose to the top through complicated and entangled alliances, making promises to interest groups, plus purging and imprisoning his enemies. For this reason, especially following his numerous anticorruption purges that targeted both genuinely corrupt individuals and political enemies, many speculate that Xi cannot leave power without facing retribution.9 As a result, his leadership going forward will be increasingly colored by this dilemma and potentially undermine his ability to make prudent decisions. United States Competition with China Many look toward the confusion and disagreement present in the United States on foreign policy with its passionate debates over nationalism and internationalism, and free trade over protectionism and arrive at a fatalistic belief of the inevitability of a loss to China. Although China does not have the same fervent debates, it does suffer from the opposite problem, as there are too few voices to challenge unproductive ideas and temper runaway nationalism and state. The common narrative has been that the CCP engages in 100-year plans, slowly biding its time and expanding its influence across the world in ingenious ways. Although Beijing has had some success in living up to that narrative, recent events have proven to be a rude awakening. The CCP’s relationships with major trade centers like the European Union and neighboring powers like India and Japan have become complicated and increasingly adversarial. Chinese leader Deng Xiaoping articulated a hide and bide strategy. This doctrine would see China continue to grow its industrial, military, and diplomatic capabilities while prioritizing friendly relationships with all nations and never taking a leadership role. The strategy was practiced for decades gaining Beijing substantial influence in the global economy. Indeed, foreign policy attempts such as “derisking,” and creating economic solidarity to resist Chinese sanctions were initially ignored and seen as American unilateralism. Today, countries are far more open to the prospect of jeopardizing economic relations with China in favor of security and tempering the balance of power in the Indo-Pacific than they were even just a few years ago. This dynamic is due to both natural balancing tendencies that follow Beijing’s accumulation of power as well as its own actions that have exacerbated tensions with the West and its neighbors. Conclusion The United States, with its seemingly chaotic politics, a free press, and partisan debate, often plagued with gridlock and identity politics, is easy to look at as an example of dysfunctional governance. Meanwhile, the Chinese have become a global superpower and have moved a huge population out of poverty within a single lifetime. These accomplishments are largely attributable to structural factors, such as having a massive population and removing decades of self-inflicted restraints that unleashed massive productive energy. In short, China’s growth story occurred despite the government’s interventions not because of some technocratic plan. Indeed, today the headlines are filled with articles highlighting China’s stagnation and the idea of “peak China” as the government imposes new restrictions.10 For more on these topics, see “Touching the Elephant,” by Kwok Ping Tsang. Library of Economics and Liberty, Apr. 3, 2023. “How the Collapse of Communism Has Undermined Faith in American Capitalism,” by Richard B. McKenzie. Library of Economics and Liberty, Sep. 7, 2020. Branko Milanovic on Capitalism, Alone. EconTalk. The reality is that China is not a singularly competent, well-oiled autocracy that will inevitably succeed. Instead, the CCP faces the real problems inherent to their authoritarian rule, such as formidable interest groups bent on preserving unproductive state enterprises, misallocation of capital from decades of industry policy, and loss of business confidence from recent attempts to insert the Party in daily life. The actions of the CCP in navigating the political complexities of staying in power have led to policy decisions and repression that ultimately harm long term economic growth and quality of life. Despite the problems inherent to America’s system of governance, China faces formidable problems of its own that are increasingly devastating. The United States should not lose hope in its liberal democratic form of government and free market system that has largely delivered both freedom and prosperity. Footnotes [1] “Doctor who blew whistle over coronavirus has died, hospital says,” by Emma Graham-Harrison, Tom Phillips, and Justin McCurry. BBC, February 6, 2020. [2] “China’s Xi unwilling to accept western vaccines, U.S. official says,” by Michael Martina and David Brunnstrom. Reuters, December 4, 2022. [3] “Wealthy Chinese ramp up efforts to shift fortunes overseas,” by Pak Yiu and Echo Wong. Nikkei Asia, February 12, 2023. [4] “Around the Halls: The outcomes of China’s 20th Party Congress,” by Richard C. Bush, Diana Fu, Ryan Hass, Patricia M. Kim, and Cheng Li. Brookings Institute, October 25, 2022. [5] “China’s Abandoned, Obsolete Electric Cars Are Piling Up in Cities.” Bloomberg News, August 17, 2023. [6] “The Chinese Communist Party Targets the Private Sector,” by Scott Livingston. Center for Strategic and International Studies, October 8, 2020. [7] “Tech titans hew to China’s ‘common prosperity’ call, as 49 richest tycoons donate a record US$10 billion of their wealth,” by Martin Choi. South China Morning Post, November 16, 2022. [8] “Why China crushed its tech giants,” by Lavender Au. Wired, September 27, 2023. [9] “Unsafe at the top: China’s anti-graft drive targets billionaires and bankers,” by Amy Hawkins. The Guardian, April 18, 2023. [10] “Is Chinese power about to peak?” The Economist, May 11, 2023. * Dr. Ryan M. Yonk is Senior Research Faculty at the American Institute for Economic Research, and Co-Author of The China Dilemma: Rethinking US-China Relations Through Public Choice Theory. His research explores how the intersection of public choice and public policy and how policy can be better crafted to achieve greater individual autonomy and prosperity. Ethan Yang is an adjunct research fellow at the American Institute for Economic Research, Co-Author of The China Dilemma: Rethinking US-China Relations Through Public Choice Theory. His research focuses include Chinese political economy, international affairs, tech policy, and law and economics. This article was edited by Features Editor Ed Lopez. (0 COMMENTS)

On April 1 of this year, California fast-food restaurant chains with sixty or more national locations (for example, McDonalds and Chipotle, but not Bill’s Burgers or Dick Church’s Diner or other off-brand restaurants in the state without national locations) were required to raise their minimum wage for all workers from $16 to $20 per hour, a 25 percent increase in one fell swoop—supposedly intended to make covered low-wage workers better off. The governor and the legislative backers of the wage hike might have reasoned that the limited mandate would force other, higher-level restaurants (fast casual and casual dining, like Applebee’s, Islands, and Panera’s) and even stores with low-wage workers (such as Dollar General) to match the mandated fast-food minimum. Why? Because if they didn’t match the new minimum, their workers making less than $20 an hour could be enticed to move to covered fast-food restaurants for higher pay. But the backers would be wrong. Prior Measured Effects of Minimum-Wage Increases As a multitude of academic studies have shown,1 a minimum wage increase for fast food (especially as high as this one with unprecedented narrow market coverage) will far more likely cause covered restaurants to cut their workforces, either by laying off workers or reducing their hours. This means that even workers who keep their low-wage jobs but get fewer hours could be induced to move to non-covered jobs with more hours in higher-level restaurants. (A wage of $16 an hour on a forty-hour workweek would generate $640 in gross pay; a $20 hourly rate with only 25 hours a week would yield a weekly pay of $500, a 22 percent reduction.) Of course, fast-food restaurants would cherry-pick among their workers, laying off a disproportionate number of their lower-skilled/low-productivity workers. However, note that any reduction in fast-food employment could transmute into an increase in worker supply for uncovered, higher-level restaurants, with the supply increase putting downward pressure on their workers’ wages and benefits—a market effect that wage-hike backers likely haven’t considered. Again, those restaurants will also cherry-pick among new applicants, choosing a disproportionate count of the relatively lower-skilled/low-productivity workers they interview. This means that the lowest of the low-skill/low-productivity workers will suffer most in terms of ending up on the unemployment lines, perhaps not exactly what backers expected. Lost Fringes and Geater Work Demands The political supporters, who surely know the findings of the minimum-wage studies, might object vociferously: “Most past statistical studies on minimum-wage hikes have found meager percentage reductions in employment in covered worker groups (generally, lower than 3 percent of covered workers) and hours worked.” They would be right, for the literature they’ve reviewed. Yet they overlook how employers are not fools, unable to recognize and use other ways of legally responding to government mandates, with the intent of offsetting partially, if not totally, the labor-cost increases from money wage-rate hikes. Employers know very well that the mandated money-wage increase is hardly the only way workers are compensated, and may not even be the most important form of compensation (on the margin) for some, or even a few, covered workers (especially those with children who need flexible schedules). Employers also face competitive market pressures to control their labor costs and advance their profits in financial markets. Employers who don’t respond to minimum-wage mandates by cutting their labor costs (perhaps because they want to be “nice” to their workers) can be left behind with relatively higher production costs, and with higher prices and lower sales than those who do make the cuts. The extant competition can force all competitors to respond even when they would prefer not to do so. Faced with an above-market minimum wage, employers will be pressed to offset the money-wage hike with savings in labor costs that can come with replacement of covered workers by uncovered “non-human workers”—kiosk order takers and “burger bots.” These “tech workers” have an enviable market-wage advantage over their human competitors: Their legal California minimum wage is hard to beat: $0.00! Employers can also reduce or eliminate whatever (minimal) fringe benefits they offer their workers, such as flexible scheduling, hours off for taking college classes, and even limited health benefits. Employers who have no fringes to trim can always increase work demands. Employers can do that because of work opportunities reduced by the minimum-wage hikes. Indeed, when fast-food restaurants cut their workforces, many will be pressed to transfer some or all of the lost workers’ tasks to the remaining workers. And many of the lost benefits will never be recognized by government minimum-wage monitors. Why Job Losses to Minimum-Wage Hikes Have Been “Small” The lost worker benefits unseen by minimum-wage backers is one reason reformers perennially claim that fast-food workers are poorly compensated and why minimum-wage hikes seem to be an ineffective policy for raising covered workers out of “poverty,” as one of my UC-Irvine economist colleagues David Neumark has argued in the Wall Street Journal.2 Another unheralded reason is that a wage hike for poor workers who are on several welfare programs can mean a loss of more in welfare benefits than they can gain from a higher minimum wage. Why? For a simple, but obscure reason. Most welfare program benefits are reduced as covered workers’ earnings rise, as economist Craig Richardson and I have shown,3 leaving covered minimum-wage workers facing higher marginal tax rates that are higher than the marginal income tax rates paid by the rich—even higher than 100 percent (which means that some covered minimum-wage California workers on welfare will lose more in benefits than the money they gain from the $4 increase in their minimum wage), an unseen consequence that hardly their incentives to continue working. Why Past Minimum-Wage Hikes Have Been So “Small” Apparently, hike backers also haven’t realized that the reported “small” employment effects of past wage hikes have been largely attributable to how small the hikes have been (10 percent or so, sometimes spread over years) and how easy it has been for employers to offset their low increase in wage costs with reductions in fringes and increases in work demands—as well as with price increases and replacement of unskilled workers with more skilled (productive) workers. “California could be conducting a social experiment in poverty relief that could very well spark backer-remorse and reduce backers in other states enthusiasm for minimum-wage hikes.” Because California’s minimum-wage hike is so large this time (and has not been gradually increased), employers could quickly run out of ways to develop offsets for the $4 wage increase, which means that the 25 percent minimum-wage increase can be expected to disproportionately magnify its employment effect (far beyond the “small” percentage effects reported in almost all previous statistical studies). California could be conducting a social experiment in poverty relief that could very well spark backer-remorse and reduce backers in other states enthusiasm for minimum-wage hikes. Why Covered Workers Who Keep their Jobs Can Be Made Worse Off Than the Workers Who Leave Typically, economists’ arguments for and against minimum-wage hikes lead to an often-touted conclusion, that workers who keep their jobs are made better off by hikes, while those who are let go are made worse off, because they must accept unemployment or lower-paying jobs uncovered by the hikes. That facile deduction, adamantly supported for decades, is also likely wrongheaded. My explanation is straightforward: When employers offer workers fringe benefits, they likely expect their costs to be covered either by an increase in worker productivity and/or lower wages (brought on by an increase in the number of potential workers). This means that when benefits are reduced because of wage hikes, the value of workers’ lost fringes (say, $5, only as an illustration) will tend to be worth more than their minimum-wage increase ($4 an hour, in the California case). It also means that firm profits will be higher than without the non-wage benefit adjustments. Doubt that covered workers will suffer non-money-wage effects, often in unseen ways? A bartender at a local casual dining restaurant recently reported his restaurant just hired two employees whose hours were cut at a Chipotle (after Apri1) in the same shopping center, giving his restaurant a chance to expand business in the tight Orange County labor market without having to increase its starting wage. A manager at a local Chick-fil-A has reported that her company has matched the mandated $4 wage increase, keeping its starting wage $1 above the state’s required $20 minimum, but has changed its standards for annual raises; instead of basing raises on both tenure and responsibilities, it now offers higher wages only for increased responsibilities. The result is that a forced minimum-wage hike will negate many mutually beneficial market trades, making many workers worse off on net: The workers may receive a higher money wage, but will tend to lose benefits and must meet greater work demands. The very workers this legislation was supposed to help will, with time, tend to be net losers. Concluding Comments Members of Congress seem to have gotten economists’ message. The federal minimum-wage of $7.25 has not been raised since 2009. The federal real minimum has, as a consequence, deteriorated by 40 percent since 2009. Yet that real-wage reality doesn’t mean that workers covered only by the federal minimum are worse off today. The market minimum wage in most states has continued to rise. Even if California had no state minimum today, no firm in the state could get by with paying the federal minimum, as evident by the fact that many firms, including fast-food restaurants, were paying above the state’s $16 minimum before April 1, and some restaurants were even paying more than $20 an hour, and with more worker benefits than years ago. For more on these topics, see Minimum Wages, by Linda Gorman. Concise Encyclopedia of Economics. “Progressives’ Desires to Help the Poor Will End Up Hurting Them Instead,” by Craig J. Richardson and Richard B. McKenzie. Library of Economics and Liberty, Sep. 6, 2021. Jacob Vigdor on the Seattle Minimum Wage. EconTalk. “Large Increases in the Minimum Wage Are Likely to Destroy Jobs,” by Robert P. Murphy. Library of Economics and Liberty, Oct. 5, 2015. Nevertheless, many state politicians continue to favor minimum-wage increases. The reasons are not as clear as may be thought: “Politicians want to help poor workers” or “They have simply not appreciated the economics of the minimum wage in competitive markets.” These are not inconsequential points, but they seem too obvious and facile for my academic proclivities. I am inclined to believe that both proponents and opponents of minimum-wage hikes find the political forces behind minimum-wage hikes more powerful than the economic forces. But that is hardly a comfortable admission. Footnotes [1] See for example “On the Minimum Wage, Both Sides Have Their Economics Wrong,” by Richard B. McKenzie in Regulation. Summer, 2021. [2] David Neumark, “California’s Crazy ‘Fast Food’ Minimum Wage Takes Effect,” Wall Street Journal, March 31, 2024. Paywalled. [3] Craig J. Richardson and Richard B. McKenzie, “Progressives’ Desire to Help the Poor Will End Up Hurting Them Instead.” Library of Economics and Liberty, September 6, 2021. *Richard McKenzie is a professor of economics emeritus in the Merage Business School at the University of California, Irvine. He is also author most recently of Reality Is Tricky: Contrarian Arguments on Contested Economic Issue and a soon-to-be-released book (June 2024) on Rationality Evolved! Why We Have No Choice Over Having Choices. For more articles by Richard B. McKenzie, see the Archive. (0 COMMENTS)

A Liberty Classics Book Review of Studies on the Abuse and Decline of Reason: Text and Documents, by F.A. Hayek (edited by Bruce Caldwell). 1 According to F.A. Hayek, what are the theoretical and historical reasons for the tragedies of socialism that emerged in the 20th century? Hayek attempted to answer this question in what was an unfinished project that he had been writing in the late 1930s through the 1950s. Hayek expressed his enthusiasm for a new book that would not only investigate the “history of the influence of scientific and technological development on social thought and policy (to be called The Abuse and Decline of Reason)” (quoted from Hayek 2010, p. 312), but also “the fundamental principles of the social development of the last hundred years (from Saint-Simon to Hitler)” (quoted in Caldwell 2010 [2018], p. 1). Though this greater project was never realized as Hayek had intended, readers are now fortunate to have a reconstruction of what Hayek had completed reassembled as Studies on the Abuse and Decline of Reason: Text and Documents, edited by Bruce Caldwell as part of The Collected Works of F.A. Hayek (Volume 13). Special credit must be given to Caldwell not only for his masterful introduction to this volume, but also the archival material provided in the appendix and the supplementary footnotes that provide further context to the text. With the aid of Caldwell’s editorship, I will first briefly summarize Hayek’s argument before, secondly, situating the argument not only in the immediate historical context within which Hayek was writing, but also (and lastly) turning to the broader, and more fundamental, intellectual basis of Hayek’s argument. Hayek’s Argument “Hayek’s fundamental motivation behind The Abuse and Decline of Reason project was to explain how human reason used in the natural sciences, as evidenced by the amazing scientific and technological advances of the 18th and 19th century, would later become the basis for hubris among social scientists.” Hayek’s fundamental motivation behind The Abuse and Decline of Reason project was to explain how human reason used in the natural sciences, as evidenced by the amazing scientific and technological advances of the 18th and 19th century, would later become the basis for hubris among social scientists. Such hubris rested on the belief that human beings could deliberately or consciously create economic, political, or social changes as a direct outcome of their own reasoning. The “the fatal conceit,” as Hayek would later put it, of this intellectual attitude is based on an “intellectual somersault” (Hayek 2018, p. 148) among social scientists that Hayek refers to as scientism, the misconceived application by social scientists of the methods of the natural sciences to understanding the nature and causes of social order. According to Hayek, scientism is characterized by the “blind transfer of the striving for quantitative measurements to a field in which the specific conditions are not present which give it its basic importance in the natural sciences” without taking into account the plans or purposes attached to human action (2018, p. 114). In order to understand what Hayek means by scientism, we must first understand the nature of social science in the first place. Any social science, including economic theory, attempts to explain the existence of a particular phenomenon through generalizable and systematic chains of cause and effect that is compositive of, but not directly reducible to, its ultimate source: the universal tendency of individuals to utilize the most effective means to achieve their ends. For example, money emerges as a generally accepted means of exchange for the purpose of avoiding a double coincidence of wants. But the source of that knowledge, according to Hayek, requires humility, not conceit. The explanation of social phenomena requires the social scientist to be concerned with explaining human action based on the appropriate “facts” of the social sciences: what people believe and think. As Hayek states, “it is probably no exaggeration to say that every important advance in economic theory during the last hundred years was a further step in the consistent application of subjectivism. That the objects of economic activity cannot be defined in objective terms but only with reference to a human purpose goes without saying. Neither a ‘commodity’ or an ‘economic good,’ nor ‘food’ or ‘money,’ can be defined in physical terms but only in terms of views people hold about things” (Hayek 2018, p. 94). Hayek’s emphasis on methodological subjectivism, however, is not synonymous with methodological behaviorism, or the notion that social science can be directly reduced to quantifiable, physical explanations of cause and effect. “It is a mistake,” Hayek writes, “to which careless expressions by social scientists often give countenance, to believe that their aim is to explain conscious action. This, if it can be done at all, is a different task, the task of psychology. It is only insofar as some sort of order arises as a result of individual action but without being designed by any individual that a problem is raised which demands a theoretical explanation” (emphasis in original; Hayek 2018, p. 103). Though the purpose of all social sciences is to explain spontaneous order in terms of systematic chains of cause and effect, the source of such explanation in the social sciences is human reason, or the purposes and plans of human beings. However, by replacing the method of the social sciences with that of the natural sciences, the irony of scientism is that it dismisses human reason as an “unscientific” source for explaining the spontaneous order of society, while embracing human reason as the scientific basis for the deliberate organization of society. To purge such subjective and qualitative knowledge as unscientific not only purges economic science of its “data,” but also purges scientists of the very theoretical knowledge upon which social order is understood. This leaves us with a notion of science that explains social outcomes only in terms of direct relationships of cause and effect that can be either quantified, deliberately determined by human reason, or otherwise explained by historical laws of nature. The intellectual origins of socialism can thus be traced back to the narrowing of what the term science meant and how the practice of science came to be understood. However, the tragedy of socialism that emerged in the 20th century cannot be explained by scientism alone nor by malevolent ends. “As Hayek always emphasized,” Caldwell writes, “both he and his opponents typically see similar ends and differ principally on the means that they think are best to achieve them” (Caldwell 2010 [2018], p. 40). Moreover, Hayek’s critique is not directed against the scientist “in the special field in which he is competent, but against the application of his mental habits in fields where he is not competent” (Hayek 2018, p. 166). Rather, the tragic results of totalitarianism emerged from the application of central planning as a means to achieve a more prosperous and just society among the poorest and least advantaged. But, central planning, as “fully recognized by its advocates” from “Saint-Simon to Marx to Lenin” (Hayek 2018, p. 161, fn. 8), was “nothing but such an application of engineering principles to the whole of society based on the assumption that such a complete concentration of all relevant knowledge is possible” (Hayek 2018, p. 161). Thus, the tragedy of socialism in the 20th century was defined by the unity of both statism and scientism, the use of state power in an effort to deliberately organize society as if it were an engineering problem (i.e., the allocation of given resources to achieve a single end) rather than a coordination problem (i.e., the discovery of the most appropriate means among an infinite set of unknown ends). Historical Context The immediate historical context of Hayek’s project, and why it was never completed as intended, can be understood by comparing Hayek’s originally intended organization of the project with the chronological order in which pieces of the project were published. Both the manner in which Caldwell has organized this volume and the correspondence between Hayek and Fritz Machlup, provided in the appendix, explain what Hayek had in mind. As clearly stated in his correspondence with Machlup, dated October 19, 1941, Hayek’s project was motivated by the immediate threats to Western civilization: “If one cannot fight the Nazis one ought at least to fight the ideas which produce Naziism” (quoted in Hayek 2018, p. 319). In particular, Hayek wanted to disabuse individuals of the idea, popular at the time among British intellectuals, that Naziism is a reactionary, capitalist movement. This immediate motivation was intended to be the tail end of this broader project on The Abuse and Decline of Reason, but ended up being the initial pieces published, first as a pamphlet, Freedom and the Economic System (1939)—and later with greater exposition as The Road to Serfdom (1944). Yet even after revelation of the horrors that had transpired in Nazi Germany and Stalinist Russia, intellectuals were not disabused of the hopes that central planning promised. Why not? As historian Tony Judt states in Postwar: A History of Europe Since 1945, there “was a great faith in the ability (and not just the duty) of government to solve large-scale problems by mobilizing and directing people and resources to collectively useful ends” (Judt 2005, p. 68). However, the fact that intellectuals across the political spectrum of his time could agree on the primacy of central planning was Hayek’s entire point (Caldwell 2010 [2018], p. 29), the fundamental intellectual origins of which Hayek wished to uncover in The Abuse and Decline of Reason project. Intellectual Basis The scientific justification for both the positivism and the socialism of Hayek’s time are descended from a common intellectual origin going back to Henri de Saint-Simon. This intellectual origin can be understood as the attempt to purge the social sciences of its explanandum, namely how the subjective knowledge that resides in the minds of individuals gives rise to the spontaneous formation and evolution of institutions as an indirect outcome of their own reasoning. Although the word socialism had been used in Italian by Giacomo Giuliani as early as 1803 (Hayek 2018, p. 229, fn. 57), according to Hayek, the positivistic and statist components of “scientific socialism” can be traced back to Saint-Simon’s Introducion aux travaux scientifiques du dix-neuvième siècle (2 vols, 1807-1808), which “combines, for the first time, nearly all the characteristics of the modern scientistic organizer. The enthusiasm for physicism (it is now called physicalism) and of ‘physical language,’ the attempt to ‘unify science’ and to make it the basis of morals, the contempt for all ‘theological,’ that is anthropomorphic, reasoning, the desire to organize the work of others, particularly by editing a great encyclopedia, and the wish to plan life in general on scientific lines are all present. One could sometimes believe that one is reading a contemporary work of an H. G. Wells, a Lewis Mumford, or an Otto Neurath. Nor is the complaint missing about the intellectual crisis, the moral chaos, which must be overcome by the imposition of a new scientific creed” (Hayek 2018, p. 195). As Hayek further explains, Saint-Simon’s work “is the beginning of both modern positivism and modern socialism, which, thus, both began as definitely reactionary and authoritarian movements” (2018, p. 195). Thus, we can trace the intellectual trajectory of Karl Marx back to Comte and Hegel and ultimately to Saint-Simon. Although Hayek’s project was ultimately historical in nature, it cannot be understood without acknowledging that the ultimate source of modern socialism can be traced back to its very first casualty: the intellectual humility taught by the “compositive method” of economic science. For more on these topics, see Studies on the Abuse and Decline of Reason, by F.A. Hayek. Bruce Caldwell, ed. Liberty Fund, Inc. “Hayek, Mises, and the Methodology of the Social Sciences,” by Adam Martin. Library of Economics and Liberty, Apr. 1, 2019. Bruce Caldwell on Hayek. EconTalk. Angus Burgin on Hayek, Friedman, and the Great Persuasion. EconTalk. Nobel Peace Prize Laureate Christian Lange is quoted as saying that technology is a useful servant, but a dangerous master. If Hayek’s Studies on the Abuse and Decline of Reason can teach us anything, human reason is no different: it can be used to understand its own limitations, from which the rules that govern a free civilization can emerge to allow individuals to cope with such ignorance in pursuit of their own ends. In this sense, human reason can be a useful servant. Without such humility, however, “the individual whose reason is not sufficient to teach him those limitations of the powers of conscious reason, and who despises all the institutions and customs which have not been consciously designed, would thus become the destroyer of the civilization built upon them” (Hayek 2018, p. 154). In this regard, the conscious use of reason can become a dangerous master. References Caldwell, Bruce. 2010 [2018]. “Introduction.” In The Collected Works of F.A. Hayek, Volume 13: Studies on the Abuse and Decline of Reason, edited by Bruce Caldwell (pp. 1–45). Carmel: Liberty Fund. Judt, Tony. 2005. Postwar: A History of Europe Since 1945. New York: The Penguin Press. Hayek, F.A. 1939. Freedom and the Economic System (Public Policy Pamphlet, No. 29). Chicago: University of Chicago Press. Hayek, F.A. 1944. The Road to Serfdom. Chicago: University of Chicago Press. Hayek, F.A. 2018. The Collected Works of F.A. Hayek, Volume 13: Studies on the Abuse and Decline of Reason, edited by Bruce Caldwell. Indianapolis: Liberty Fund. Footnotes [1] Studies on the Abuse and Decline of Reason: Text and Documents, by Friedrich A. Hayek. Edited by Bruce Caldwell. This 2018 Liberty Fund paperback edition is Volume 13 of The Collected Works of F.A. Hayek, published by arrangement with The University of Chicago Press. * Rosolino Candela is a Senior Fellow in the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics, and Program Director of Academic and Student Programs at the Mercatus Center at George Mason University. For more articles by Rosolino Candela, see the Archive. 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… digital media not only enhance information exchange and render offline life obsolete—they also reverse literacy and retrieve orality. … This book is about orality, which once was obsolesced by writing, and about literacy, which is now becoming obsolesced by digital media. —Andrey Mir, Digital Future in the Rearview Mirror: Jaspers’ Axial Age and Logan’s Alphabet Effect,1 (p. 10) The year 1969 saw the premier of Sesame Street on public television. In the years that immediately followed, adults extolled the virtues of the program. They proclaimed that it was teaching children to read. I would say to myself, and sometimes aloud, “No. It’s teaching children to watch television.” In high school, there was an avant garde English teacher who introduced us to Marshall McLuhan, known for his catch-phrase “the medium is the message.” My cynicism about Sesame Street was based on McLuhan’s insistence that the nature of the medium would have a stronger effect than its content. Andrey Mir refers to McLuhan and his fellow travelers as media ecologists. In addition to McLuhan, he cites Eric Havelock, Harold Innis, Jack Goody, Walter Ong, Neil Postman, and others. Mir argues that media ecology explains many of the cultural changes that we are experiencing. Many of us would say that we are suffering through these cultural changes, as Enlightenment values of free speech, objective inquiry, and dignity of the individual seem to be slipping away. Mir writes, Why do people on social media become so polarized and deaf to logic and reason? Why do people read less and demand more? How do social media change minds and society? What comes next? The answer is digital orality. (p. 14) Mir sees the invention of alphabetic writing as a useful “rearview mirror” for grounding his analysis. Following Robert Logan, Mir sees alphabetic writing as wiring minds for intense concentration and for abstraction. Mir argues that alphabetic writing therefore created the conditions for the cultural changes that Karl Jaspers termed the “Axial Age.” The Axial Age, around 500 BC, is when humans began to see themselves in relation to history and to an all-powerful deity. Our notions of scholarship, argumentation, empirical observation, and logic all appeared during the Axial age. Consider the changes that took place as humans went from having only face-to-face oral communication to having the ability to read and write. Writing gives us a powerful form of social memory, reducing our need to rely on individual memory. Preliterate man lives in a multi-sensory present. For literate people, a more introverted existence becomes possible. As we read, we tune out the world in order to focus on input from our visual sense. We can detach from the present to dwell in the past and the future. Instead of relying on our instant reactions, we stop to reflect and think about what we read. We relate to descriptions of people and events that are outside of our personal experience. Reading requires us to think abstractly. This is particularly true of alphabetic writing. The meaning of the symbols on a page is not self-explanatory. We have to interpret and calculate meaning. When only oral communication is available, collective memory must be in the form of received wisdom. We value the person who can repeat with high fidelity the sacred stories. With writing, there is room for thinking. We can value the person who asks questions or who criticizes. Writing allowed for the codification of laws, eventually leading to impersonal concepts of justice. Printing, which came after Gutenberg, allowed wide reproduction of thought, which in turn made possible the scientific method of testing for reproducibility of results. “How does the spread of electronic media, especially in the 21st century, affect our brains and our society?” How does the spread of electronic media, especially in the 21st century, affect our brains and our society? Mir says that the new media put a premium on rapid reaction, not reflection. They tempt us away from contemplative reading with addictive distractions. With the advent of cable news, Television stopped being news-centered and started being viewercentered. This move reversed the print-induced control over emotions and retrieved the agonistic mentality both on the air and in the viewers, starting the process of cultural and political polarization (which skyrocketed 15 years later with the advance of social media). (p. 244) Mir claims that modern media are behind the rise of identity politics. Digital orality recreates an environment in which collective indoctrination is encouraged while personal inquiries are suppressed. (p. 217) Truth is a referendum by likes. (p. 228) It is becoming harder to withstand the “peer pressure” of the tribe when objective truth does not align with the truths of the tribe. (p. 235) So where are we now? Mir remarks, … blog posts were the last texts of the Gutenberg era. (p. 317) This leads me to wonder what are the demographics of the readers of Substack essays, which are reminiscent of blog posts. I worry that this readership skews over the age of 50. Digital speech possesses the characteristics of both oral and written communication. Similar to oral speech, it enables the instantaneous exchange of replies; akin to writing, it leaves a record behind and can be transmitted across time and space. These features imply that people’s spontaneous and mostly emotive efforts to establish their social statuses in conversation are no longer evanescent. The interactions of millions of people are accumulated, disseminated, and displayed for everyone else to react to. This new type of conversation has its benefits. It allows socialization at an unprecedented pace and scale. But the ease of exchanging digital speech has shifted the focus of communication from reflections to reflexes, from substance to attitude. Social media demand that everyone relate to others, to their ideas, to their troubles and achievements, to their very existence. The Viral Editor of the blogosphere has evolved into the Viral Inquisitor of social media. [On the Internet] authors do not share physical space and type their replies in isolation. Besides, such conversation often has more than two interlocutors, and the exchange becomes chaotic. The oral thema-rhematic reliance of replies on preceding utterances is often broken, and the written syntax does not apply either. All this makes digital conversation a weird hybrid in which interlocutors often simply do not “hear” each other. Their dialogue is not coherent; it is fragmented, causing emotional frustration, which is so typical for digital conversations. Moreover, since digital speech is recorded, it is not just a mere exchange; it is an exchange displayed to others who can judge and contribute. Therefore, it is an exchange aimed to affect others. The agonistic mentality of orality flourishes in digital orality and amplifies frustration and polarization even more. (p. 318-319) Mir goes on to say that “like” buttons, emojis, and other forms of digital communication are even more primitive than speech. They are more like grunts and gestures. He writes, … digital orality trains the brain to experience tiny and repetitive hormonal gratification for minuscule efforts of participation or even for simple presence. (p. 319) And where are we headed? In only a brief section, Mir suggests that we humans are close to leaving the real world behind in order to live completely in the virtual world. I found this prognosis, and indeed the entire book, to be intriguing, but speculative. It seems plausible that human brains and culture were affected by literacy in general and alphabetic literacy in particular in the ways that the media ecologists argue. And it is plausible that the apparent decline in support for Enlightenment modes of thought can be traced to the shift in digital media. But the media ecologists do not subject their hypotheses to rigorous empirical tests. They do not look for natural experiments that might demonstrate that their proposed causal mechanisms are at work. For more on these topics, see Russ Roberts on the Information Revolution, Politics, Yeats, and Yelling. EconTalk. David Weinberger on Everything is Miscellaneous and the Wonderful World of Digital Information. EconTalk. Robin Hanson on the Technological Singularity. EconTalk. “Tribal Psychology and Political Behavior,” by Arnold Kling. Library of Economics and Liberty, Aug. 6, 2018. Many observers have noted and lamented the shift away from objectivity in academia and journalism. Some attribute this to an ideological takeover by postmodernists and leftists—the so-called Gramscian march through the institutions. Other assign some blame to the feminization of institutions, with women bringing their social tools of enforcing conformity into campuses and newsrooms. Even theorists such as Jonathan Haidt, who see social media as the root of much evil, point to the specific strategies and tactics employed by the leading corporations as the problem. Just as the fans of Sesame Street saw hope that television could be reformed for social good, Haidt would seem to hope that with better norms and guidelines, the harms of social media can be contained. A devotee of McLuhan would be skeptical. Footnotes [1] Andrey Mir, Digital Future in the Rearview Mirror: Jaspers’ Axial Age and Logan’s Alphabet Effect. Human as Media, 2023. *Arnold Kling has a Ph.D. in economics from the Massachusetts Institute of Technology. He is the author of several books, including Crisis of Abundance: Rethinking How We Pay for Health Care; Invisible Wealth: The Hidden Story of How Markets Work; Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy; and Specialization and Trade: A Re-introduction to Economics. He contributed to EconLog from January 2003 through August 2012. Read more of what Arnold Kling’s been reading. For more book reviews and articles by Arnold Kling, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

What does it mean to live Constitutionally in the year 2024? For a start, it means getting off social media. It also means swapping a quill pen for your keyboard, and candlelight for electricity. And don’t forget the tricorn hat and musket–though maybe skip the boiled mutton. Join author A.J. Jacobs as he deep-dives with […] The post Living with the Constitution (with A.J. Jacobs) appeared first on Econlib.

First, Happy Cinco de Mayo. Now to the content. Backpage: A Blueprint for Squelching Speech by Elizabeth Nolan Brown, Reason, April 29, 2024. Excerpt: From the beginning, this prosecution has been premised on a bogus rationale (authorities yammer on about sex trafficking though none of the defendants are charged with sex trafficking), overreaching in its scope (attempting to hold a web platform accountable for user-generated speech, in contradiction to Section 230), offensive to the First Amendment, and relentless in its attempts to handicap the defense. So it’s a treat to see a judge slap prosecutors down a notch, even if it comes very late in the game (after two trials and after one defendant taking his own life) and even though it may not make much of a practical difference for Lacey, Brunst, and Spear (who face imprisonment for the rest of their lives even with the acquittals). And: In this case, Backpage banned explicit offers of sex for money (which is illegal in most of the U.S.) but allowed adults ads more generally, since plenty of forms of sex work are legal. Providing a platform for protected speech should itself be protected, of course. But in a truly Orwellian fashion, the government argues that the very act of forbidding explicit prostitution ads was a way of encouraging prostitution ads, thereby facilitating prostitution in violation of the federal Travel Act.   Biden Administration Again Delays Decision on Banning Menthol Tobacco by Jeffrey A. Singer, Cato at Liberty, April 29, 2024. Excerpt: Aside from criminal justice concerns, singling out menthol tobacco for a ban lacks a basis in scientific evidence. A 2022 research paper in the Journal of the National Cancer Institute found menthol smokers had no greater difficulty quitting smoking than non‐​menthol smokers. Furthermore, according to FDA research reported in the Journal of Nicotine and Tobacco Research, there is “evidence of lower lung cancer mortality risk among menthol smokers compared with non‐​menthol smokers among smokers at ages 50 and over in the U.S. population.” Perhaps that’s because menthol smokers tend to smoke fewer cigarettes per day, according to a Vanderbilt University study that also found “menthol cigarettes are no more, and perhaps less harmful than non‐​menthol cigarettes.” A disproportionately high percent of black smokers smoke menthols. My guess is that Biden is getting increasingly nervous about losing a significant portion of the black vote. I posted about this in November 2022. Income Inequality Matters by Roger Koppl, ThinkMarkets, March 26, 2013. Excerpt: Income inequality matters. Let me say that again so you know I meant it: Income inequality matters. This statement may be surprising coming from a self-described “Austrian” economist and a “liberal” in the good old-fashioned pro-market sense. It shouldn’t be. It should be one of our issues. The surprise should be that we pro-market types have not spoken up more on this central issue, thereby letting it become associated almost exclusively with more or less “progressive” opinion. This indifference to income distribution is all the more mysterious because pro-market thinkers generally support a theory of politics that tells us to watch out for ways the state can be used to create unjust privileges for some at the expense of others. We should expect the distribution of income to be skewed toward the politically powerful and away from the poor and politically weak. In a representative democracy “special interests” engage in “rent seeking” to get special favors. Those special favors enrich some at the expense of others. That’s what they are meant to do! Roger makes a good point but overstates. The excerpt above makes it sound as if he thinks most of the inequality in the United States is due to government. I think that’s unlikely, although much of it is: think about the middle-class homeowners in California who are millionaires because the severe government restrictions on building housing have made their houses worth ore than $1 million. But also a huge amount of inequality is due to people having very good ideas and cashing in on them. Think Jeff Bezos and Amazon, for example. That inequality matters too, but not in the way that Roger focuses on. Now, if Roger were discussing world inequality, he would be absolutely right. The biggest source of worldwide inequality is restrictions on immigration. Marx and the Continuing Influence of Socialism Speech by Ben Powell, Hillsdale College, November 6, 2023. In the next few days, I’ll post about this speech on my Substack, “I Blog to Differ,” along with some highlights. It’s very good. (0 COMMENTS)

For many people, a world without zoning sounds like a dystopia.  Uninformed people often assume that zoning laws protect homeowners from the risk of ugly industrial plants being built right next door. In fact, there were rules against that sort of “public nuisance” even before the first zoning laws were enacted. The actual purpose of residential zoning laws is to restrict the supply of new housing.For those who are under the illusion that zoning is about protecting residential areas against industrial plants, check out the following tweet: That’s how much they hate new housing.  PS.  A few weeks ago California voters narrowly approved a $12 billion initiative to “help the homeless”.  Good luck with that. (0 COMMENTS)