Last year, I did a post discussing the US ability to attract global talent to our high tech industries. In April, I did a post discussing how immigration might have contributed to the US having a per capita GDP that is somewhat higher than in other developed economies.  Recently, I came across a few more articles that relate to the issue of US exceptionalism—in this case regarding stock market wealth. While US per capita GDP is modestly higher than in Europe, Canada and Japan, our stock market capitalization is far in excess of our population, or even our GDP.  Here is AI Overview: As of June 2024, the US stock market represented 61% of the world’s stock market capitalization, which is its highest level since the 1960s. This is a significant increase over the past decade and a half, and is especially notable considering that the US only accounts for about a quarter of the world’s GDP. The US stock market is also roughly 10 times larger than its closest competitor, Japan.  Not surprisingly, the same source suggests that high tech is the cause of this lopsided distribution of global stock market wealth: However, some say that this level of concentration can imply an unbalanced economy. For example, the concentration of the US stock market itself is also notable, with just three companies—Apple, Microsoft, and Nvidia—accounting for 10% of the market value of global stocks. When I was younger, I enjoyed reading Thomas Sowell’s books on the relationship between ethnicity and economic success.  Fans of his work might wish to check out two recent Substack posts by Razib Khan, who combines a deep understanding of genetics with extensive knowledge of global history. In the first post, he notes the unusual success of Indian-Americans, even when compared to other successful immigrant groups like the Chinese: Of the 18 Asian Americans in the House of Representatives, five are Indian American. A decade ago, only a single member of Congress was Indian American. The presumptive Democratic nominee for President of the US in 2024, Kamala Devi Harris, has an Indian mother, while the Republican Vice-Presidential candidate J. D. Vance is married to an Indian American, Usha (née Chilukuri) Vance. Last fall, two Indian Americans, Nimrata Nikki Haley (née Randhawa) and Vivek Ramaswamy, were both prominently vying for the Republican Presidential nomination . . . This is in contrast to other Asian American groups, like Chinese Americans, the most numerous subgroup in America (5.2 million vs 4.9 million Indian Americans). A difference in representation at the executive level has been noted in domains like the technology sector; considerably more people of Indian origin than Chinese rise above technical to high-level managerial positions. In the second post, Kahn points to the fact that Indian migrants come disproportionately from relatively successful groups within the Indian population: In India itself, 28% of Hindus are “General Category,” meaning they do not qualify for any affirmative action, unlike Dalits (“untouchables”), indigenous tribes or adivasis and “Other Backward Classes” (OBCs). A survey of Indian-American Hindus reports that here they are instead 83% General Category, 16% OBCs (vs. 35% of Indian Hindus) and 1% Dalits or of adivasi origin (vs. 35% of Indian Hindus). Private surveys have shown that 25% of Indian Americans are Brahmin, in contrast to 5%, at most, of Indians. But caste tells only a part of the story.  The most notable aspect of Indian migrants is the relatively high educational level, which correlates with (but does not fully explain) their unusually high incomes earned in the US: Nearly 80% of Indian immigrants in America over the age of 25 have a bachelor’s degree. This compares to 33% in the general American population. They contribute higher labor force participation than the overall population, 72% vs. 67%. More than 75% of Indian immigrants work in management, business and science (as opposed to 41% of the general population). No surprise either then, that Indian-immigrant median household income is considerably higher than that of Americans overall, ($132,000 vs. $66,000 in 2019). Note that $132,000 is above even the median income of college grads.  Here it might be useful to consider three ethnic groups, Chinese-Americans, Indian-Americans, and Jewish-Americans, each numbering roughly 5 or 6 million.   Both Chinese and Indian migrants come from a country with slightly over 1.4 billion people, and each group tends to have above average education.  That makes Jewish-Americans seem like the outlier.  But Kahn makes a persuasive case that at least in some respects (not all) Jewish-Americans are the closest comparison to the Indian migrant experience. For instance, India has a complex set of ethnicities, many of which have been genetically and/or culturally isolated for long periods.  Kahn points out that while intermarriage is now fairly common for both Jewish and Indian-Americans, these groups were more isolated during much of their previous history.   Of course, many populations have low rates of marriage outside their ethnic groups. But what makes Jewish people and high caste Indians different is that for centuries they largely avoided intermarriage despite living within other much larger societies.  Consider that the global Jewish population is roughly 15 million, whereas the entire Western world (broadly defined to include Europe, the Americas and Australia) has a population of 1.82 billion.  Similarly, the Brahmin comprise only about 5% of India’s 1.44 billion people.  In contrast, the China’s most successful group (the Han) comprise more than 90% of its population. Today, nearly 40% of the world’s Jewish people live in America.  The figure rises to roughly 50% if you consider only Ashkenazi Jews, the most successful portion of the Jewish population.  Based on the evidence provided in Kahn’s posts, you could argue that the huge 1980-2020 wave of Indian migration to the US has had an economic impact equivalent to doubling our Jewish population.  In other words, we’ve added millions of people that are among the most educated and productive individuals in their ancestral home country. Now let’s think about the fact that US corporations comprise 61% of global stock market wealth, a figure that has grown dramatically in recent decades.  Obviously there are many factors that led to this outcome.  But one important factor may have been the ability of the US to attract a disproportionate share of the global talent pool that is good at: 1.  Creating innovative new products. 2.  Having the financial and managerial skill to turn those products into successful businesses. The 1880-1920 wave of Jewish migrants showed an ability to achieve those two goals to a degree well beyond their 2% share of the US population.  The recent wave of Indian migrants is showing similar success.  This is not to suggest that these are the only two groups that matter for stock market wealth.  Nvidia founder is from Taiwan and Tesla’s founder is from South Africa.  Rather, I am suggesting that America’s ability to attract disproportionately large numbers of Jewish and high caste Indian migrants is emblematic of its broader appeal to talented people from all over the world.  To summarize: America’s modest advantage over other developed countries in GDP/person is a function of our modestly more productive workers, on average. America’s huge advantage over all other countries in market capitalization is a function of our vastly disproportionate number of extremely talented people, perhaps combined with the network effects of being able to work together. It’s difficult to see how the US could ever bring its level of wealth inequality down to European, Canadian or Japanese levels without expelling a big share of our most talented people. (0 COMMENTS)

There is nothing more banal than dying. Getting born is much trickier. Over the 200,000 years of mankind’s history, it is estimated that 109 billion individuals died, compared to 8 billion now alive. Thus, about 7% of the people who ever lived are now alive. But they will die too: c’est la vie. The chart below suggests that human population was stable until about 2000 BCE. From 2000 BCE, population grew slowly until around the 17th century, with some catastrophes along the way like the Black Death of the 14th century, which probably killed one-third of Europeans. Then, unexpectedly, the population exploded from the 18th and 19th centuries on (you can play with the graph on the website of Our World in Data). In 1820, life expectancy at birth was 36 years in Western Europe and Japan; it was still only 24 in the rest of the world, the level where it had been everywhere in year 1000. In the UK, it was 40 years in 1820, and had grown to 77 in 1999. The Industrial Revolution, which greatly increased incomes (GDP per capita), played a role in supporting and fuelling the population explosion. As Angus Madison noted, “there has been significant congruence over time and between regions, in the patterns of improvement in per capita income and life expectation [expectancy].” (See Angus Maddison, The World Economy, Organization for Economic Co-operation and Development, 2003, 2006.) We met Angus Maddison before when we looked at his estimates of GDP per capita since year 1 and the astonishing boost in its trend at the time of the Industrial Revolution. Increasing GDP per capita requires that total output (GDP) increase more than population. This growth phenomenon, which had never happened until it started in the Netherlands and the UK, requires institutions that don’t obstruct free markets and entrepreneurship. In the late 18th and early 19th century, ordinary people’s constant fear of starvation was abolished in countries that got on the bandwagon of the Industrial Revolution. Many countries that had feeble industrial revolutions were able to partly benefit from others’ through trade. Note that the Industrial Revolution was not only a matter of factories, even if mass production of common consumption goods for ordinary people, like clothes and everyday objects and tools, was an important step and a major achievement. But it was preceded and accompanied by a financial revolution, not to mention the preceding centuries of commerce (even if often restrained by political rulers). A whole industrial civilization was born and led to a large progress in agriculture and intangible services too. Today, in America, two-thirds of consumer expenditures go to services—such as education, health, housing, home deliveries, and such—instead of food and hard stuff. Consumers now want mainly services because food and manufactured gadgets cost so little. As my post “The Significance of Botched Industrial Revolutions” also indicated, some industrial revolutions started but failed, and some countries never had anything close. For us in Western countries (plus a few Asian countries), the future depends on our capacity to reinforce the institutions that allowed the Industrial Revolution to happen. Ortega y Gasset warned us that civilization—industrial civilization—is not guaranteed against political folly. Another lesson relates to the environmental scares of the 1960s and 1970s in the form of “the population bomb,” title of a book by Stanford University biologist Paul Ehrlich. Environmentaliats advocated massive state dirigisme to control population and save mankind. In 1965, the New Republic announced that the “world population has passed food supply,” that “the famine had started,” and that world hunger would be “the single most important fact in the final third of the 20th century.” In reality, the final third of the 20th century brought a historical decrease of poverty in the world. The “freedom to breed is intolerable,” ecologist and microbiologist Garrett Hardin pontificated. Economist Julian Simon argued against Ehrlich that man was “the ultimate resource,” title of his 1981 book: more individuals on our planet are not a problem but, on the contrary, bring more contributors in the solution of mankind’s problems—besides each individual being a life worth living. Simon made and won a famous bet with Ehrlich about the exhaustion of resources. The story is told in Paul Sabin’s The Bet: Paul Ehrlich, Julian Simon, and Our Gamble over Earth’s Future (2013); if you don’t have time to read the whole book, you may like my short review on Law and Liberty. We may rephrase the issue in terms of so-called “carrying capacity.” National Geographic defines it as a species’ average population size in a particular habitat. The species population size is limited by environmental factors like adequate food, shelter, water, and mates. If these needs are not met, the population will decrease until the resource rebounds. Applied to the Homo Sapiens, this Malthusian approach neglects the crucial fact that human individuals want more than “adequate food, shelter, water, and mates,” and are indeed capable, with the right institutions, to obtain much more. The Encyclopedia Britannica adds “social requirements” to the conditions of carrying capacity, although the term “requirements” seems to limit the scope of voluntary social cooperation: carrying capacity, the average population density or population size of a species below which its numbers tend to increase and above which its numbers tend to decrease because of shortages of resources. The carrying capacity is different for each species in a habitat because of that species’ particular food, shelter, and social requirements. Economics helps us understand how currently living humans have come to constitute 7% of those who lived in 200,000 years. It also enables us to look at the environmentalists’ scares and other social matters with a cool head.   (0 COMMENTS)

A soldier goes off to war. Damaged in combat, he returns home, forever changed. Master sculptor Sabin Howard captures this tragic and powerful journey in bronze, for the new World War I Memorial that will be unveiled in Washington, D.C. on September 13, 2024. Howard talks about his craft with EconTalk’s Russ Roberts as they discuss […] The post How Do You Capture the Tragedy of War? (with Sabin Howard) appeared first on Econlib.

The June 15 issue of The Economist had the following headline and subhead: America’s assassination attempt on Huawei is backfiring The company is growing stronger—and less vulnerable But if the allusion to Nietzsche was ill-timed, the story itself contains some important insights: America’s assault continues. In May, for instance, regulators revoked a special permit allowing Intel and Qualcomm, two American tech groups, to sell Huawei chips for laptops. Yet Huawei has not just survived; it is thriving once again. In the first quarter of this year net profits surged by 564% year on year to 19.7bn yuan ($2.7bn). It has re-entered the handset business. Its telecoms-equipment sales are rising again. And it has achieved this in large part by replacing foreign technology in its wares with home-grown parts and programmes, making it much less vulnerable to American hostility in future. Having failed to kill Huawei, Uncle Sam’s attacks have only made it stronger. Foreign Affairs also has an excellent piece on trade relations with China: A China that is increasingly cut off from Western markets will have less to lose in a potential confrontation with the West—and, therefore, less motivation to de-escalate. As long as China is tightly bound to the United States and Europe through the trade of high-value goods that are not easily substitutable, the West will be far more effective in deterring the country from taking destabilizing actions. China and the United States are strategic competitors, not enemies; nonetheless, when it comes to U.S.-Chinese trade relations, there is wisdom in the old saying “Keep your friends close and your enemies closer.” One advantage of globalization is that it makes countries much more interdependent.  If your well-being depends on interactions with countries all over the world, you might be less inclined to engage in hostile behavior that puts those supply chains at risk.  Once cut off from the rest of the world, there is little incentive to avoid reckless behavior, as we see in places such as North Korea.      (0 COMMENTS)

  California School Punishes First-Grader for a Drawing, Sparking Federal Lawsuit by Patrick McDonald, Reason, August 9, 2024. Excerpt: In March 2021, the elementary school student, referenced in legal filings as “B.B.,” drew a sketch depicting several individuals of different races, representing “three classmates and herself holding hands,” the family’s complaint states. Above the drawing, B.B. wrote “Black Lives Mater” [sic] with the words “any life” transcribed below the slogan. B.B. then gave the drawing to one of her classmates, who is black, in an attempt (as she later testified) to comfort her classmate. The words any life are, of course, similar to the phrase, “All Lives Matter,” which became a controversial retort to the Black Lives Matter movement in the wake of the 2020 killing of George Floyd. That similarity—whether the first-grader was aware of it or not—was soon to land B.B. in hot water. The same day she made the drawing, B.B. was told by the school’s principal, Jesus Becerra, that her drawing was “inappropriate” and, allegedly, “racist.” (The parties dispute whether Becerra told B.B. that the drawing was “racist.” The defense alleges that B.B.’s testimony on the subject is inconsistent.) DRH comment: Think of the emotional scars on this elementary school student who was punished for doing something nice. Also, notice that the first grader thought more clearly about human beings than Jesus Becerra, the principal did. Moral of the story: keep your kids out of government schools if it’s financially doable. Many of them are toxic.   Why Does Building Roads Cost So Much in the United States? by Timothy Taylor, Conversable Economist, August 9, 2024. Excerpt: One of my personal frustrations with how legislation is often discussed arises when there is a heavy focus on the total amount spent, which is easy to measure, and much less focus on what is received for what is spent, which is harder to measure. But the intention (level of spending) is not the outcome (actual results). The estimates in this paper   E.U. Regulations Made the CrowdStrike Fiasco Much Worse by J.D. Tuccille, Reason, August 9, 2024. Excerpt: “CrowdStrike’s bug was so devastating because its security software, called Falcon, runs at the most central level of Windows, the kernel, so when an update to Falcon caused it to crash, it also took out the brains of the operating system,” The Wall Street Journal‘s Tom Dotan and Robert McMillan reported July 21. “A Microsoft spokesman said it cannot legally wall off its operating system in the same way Apple does because of an understanding it reached with the European Commission following a complaint. In 2009, Microsoft agreed it would give makers of security software the same level of access to Windows that Microsoft gets.” “Mr. Bean” on free speech in UK. Don’t miss this one: it’s an impassioned case against Britain’s harsh restrictions on speech. HT2 Dan Klein. (0 COMMENTS)

  The list is long and so I’m doing this in two parts. The second part will be later today. Prostitution Surveillance Tower Goes Up in San Diego by Elizabeth Nolan Brown, Reason, August 5, 2024. Excerpt: The Ugly Truth’s website also states that there are “approximately 18,000 victims in the U.S.” If we take that at face value (and again, it’s dubious), that would mean that around 17 to 44 percent of all U.S. trafficking victims are in San Diego County. Why, it’s almost as if these numbers are completely made up… [italics in original] And: Local, national, and even international media have run with Bonta’s framing in their headlines. “14 Arrested at Comic-Con In Anti-Human Trafficking Sting,” NBC reported. “Fourteen arrests in undercover sex trafficking sting at San Diego Comic-Con convention,” Sky News said. If you read a few paragraphs down into Bonta’s press release, you’ll see that no sex trafficking or labor trafficking arrest resulted from this trafficking sting. The 14 people arrested were picked up for trying to pay another adult for sex. That other adult, however, turned out to be an undercover cop. [italics in original] ‘Too Much Law’ Gives Prosecutors Enormous Power To Ruin People’s Lives by Jacob Sullum, Reason, August 7, 2024. Excerpt: “Criminal laws have grown so exuberantly and come to cover so much previously innocent conduct that almost anyone can be arrested for something,” Supreme Court Justice Neil Gorsuch observed in 2019. Gorsuch elaborates on that theme in a new book, showing how the proliferation of criminal penalties has given prosecutors enormous power to ruin people’s lives, resulting in the nearly complete replacement of jury trials with plea bargains. “Some scholars peg the number of federal statutory crimes at more than 5,000,” Gorsuch and co-author Janie Nitze note in Over Ruled: The Human Toll of Too Much Law, while “estimates suggest that at least 300,000 federal agency regulations carry criminal sanctions.” The fact that neither figure is known with precision speaks volumes about the expansion of federal law. And: Since keeping up with all that law is a challenge even for experts, the rest of us cannot hope to know exactly which conduct is a crime, even though “fair notice” is a basic requirement of due process. The civil liberties lawyer Harvey Silverglate has suggested that “the average busy professional in this country” may unwittingly commit “several federal crimes” every day. DRH note: I read the referenced book, Three Felonies a Day, and I can’t find Silverglate coming close to making that case. He came up with a catchy title but I don’t think his book lives up to the title. Moreover, almost every time I see the book referenced, the person referencing it claims that Silverglate makes that claim. He doesn’t. I suspect that the number of felonies per day is substantially fewer than the book’s title says.   Poll: 63% of Americans Want to Increase Trade with Other Nations, 75% Worry Tariffs Are Raising Consumer Prices by Emily Ekins, Cato at Liberty, August 7, 2024. A newly released national survey from the Cato Institute of 2,000 Americans conducted by YouGov finds that two-thirds (66%) of Americans say global trade is good for the US economy, and 58% say it has helped raise their standard of living. This may help explain why 63% of the public favors the United States increasing trade with other nations. Three-fourths (75%) are concerned about tariffs raising the prices of products they buy at the store. Indeed, two-thirds (66%) of Americans would oppose paying even $10 more for a pair of blue jeans due to tariffs, even if they are intended to help US blue jean manufacturing. US Citizens Were 80.2 Percent of Crossers with Fentanyl at Ports of Entry from 2019 to 2024 by David J. Bier, Cato at Liberty, August 8, 2024. Many people wrongly believe that immigration is critical to the illicit supply of fentanyl in the United States. However, proponents of this view have offered little more than speculation to support it. New data obtained by the Cato Institute via a Freedom of Information Act (FOIA) request calls this belief into question. The new dataset shows that US citizens comprised 80 percent of individuals caught with fentanyl during border crossings at ports of entry from 2019 to 2024. The FOIA dataset contains individual records regarding each person encountered by officials at US ports of entry from whom fentanyl was seized. Figure 1 shows the citizenship of individuals arrested with fentanyl from fiscal year (FY) 2019 to 2024, as of June. Overall, the dataset reveals that out of 9,473 individuals associated with a fentanyl seizure, 7,598 were US citizens (80.2 percent).   (0 COMMENTS)

  When I taught a Masters course in macroeconomics at San Jose State University in the winter of 2009, one of my students was Drew Benson. He went on to found his own financial management firm. On June 18, he interviewed me about COVID, lockdowns, decentralized information, behavioral economics, and nudge units. Here’s the link. (0 COMMENTS)

 A new Federal Reserve study by Jason P. Brown, Elior D. Cohen, and Alison Felix looks at the effects of marijuana legalization.  Here is the abstract: We analyze the effects of legalizing marijuana for recreational use on state economic and social outcomes using difference-in-differences estimation robust to staggered timing and heterogeneity of treatment. We find moderate economic gains accompanied by some social costs. Post-legalization, average state income per capita grew by 3 percent, house prices by 6 percent, and population by 2 percent. However, substance use disorders, chronic homelessness, and arrests increased by 17, 35, and 13 percent, respectively. Early legalizing states experienced larger economic gains yet similar social costs, implying a potential first-mover advantage. Tyler Cowen discusses this study in Bloomberg: The researchers used appropriate statistical controls, but there is some question about causation vs. correlation. At the very least, it seems highly likely that state GDP went up: A state with legal marijuana can sell it, including to users in other states. Selling marijuana is a new business, and like any new business, it boosts the local economy. Due to the replication crisis in the sciences, it’s sensible to remain cautious about this sort of research.  But in this post, however, I’ll assume their findings are accurate. Let’s start with the fact that the estimated gains in income are huge.  To a non-economist, 3% may not sound very large, but it is.  The US defense budget is roughly 3% of GDP, and you rarely see people describe defense spending as small.  In contrast, the legal marijuana industry is tiny, well below 0.2% of GDP in California.  Therefore, this large a rise in income cannot plausibly be attributed to the direct effect of adding legal pot to a state’s GDP.  Instead, marijuana legalization seems to have produced some strong positive externalities—some combination of making workers more productive and adding to the number of workers.  If true, that’s a finding that we should be “shouting from the rooftops”. Tyler has mixed views on pot legalization, and in his Bloomberg piece he mostly emphasizes the negative: It would be hard to use this latest research paper to persuade people that additional drugs should be legalized as well. And I would not be surprised if some governments decided to end their experiments with marijuana legalization. Unless you are a responsible user, how exactly does it make you better off? Looking only at the practical issues, what is the case for legalization? Well, the study says it leads to higher incomes.  Yes, that seems unlikely.  But then why cite the study? The strongest argument for pot legalization is that it is cruel to send people to prison for selling or consuming pot.  After legalization in California, the number of people imprisoned for marijuana offenses fell dramatically.  On the other hand, the black market has not gone away, and thus the criminal justice benefits have been far less than they should have been.  That’s partly because pot remains illegal at the federal level, and this substantially increases the cost of doing business.  In addition, states have adopted legalization in such a way as to encourage the continuance of a black market.  There’s nothing special about marijuana that would make it more susceptible to a black market than are toasters or tee shirts.  The black market is almost entirely caused by burdensome regulation.  (Contrary to popular wisdom, taxes are not the main problem.)  The government may wish to restrict sales to people below a certain age and ban driving while under the influence.  Otherwise, it’s not obvious why there should be any regulation of pot production and distribution. So what would we expect from complete pot legalization?  Here are my guesstimates:  1. Some increase in a state’s population, but probably less than 2%. 2. No significant change in per capita productivity or income. 3. Some increase in both total usage and problem usage. 4. A substantial decrease in crime and punishment, much bigger than what we have observed thus far.  The black market would be almost completely ended, except for resale to underage teens.  (We’d have an even smaller black market than for cigarettes, which have higher taxes than pot.) (Note that for points #1 and #2 I am actually more pessimistic than the Fed study.  I believe they overstate the economic gains.) It is interesting to compare this list to the effects of alcohol legalization.  I suspect that alcohol has a much more negative impact on productivity than does pot.  It also seems likely that there is more problem usage of alcohol than pot, and that the health costs are greater. If society were serious about banning “bad things”, it might make more sense to start by banning alcohol.  Of course that experiment was tried, and the effects were roughly consistent with the pros and cons discussed above.  Banning alcohol reduced both consumption and problem consumption, and led to a big increase in crime and punishment.  The latter is a clear negative from prohibition, whereas the former is ambiguous.  Many people enjoy consuming alcohol, while heavier users suffer from some pretty severe consequences. I suspect that both the gains and losses from pot consumption are a bit lower than for alcohol. When I look at proposals to ban products such as alcohol, tobacco and pot, I see one massive negative consequence (more crime and punishment), and then some other effects that are hard to judge.  In 1933, the US public rejected alcohol prohibition, and is now beginning to develop the same view of pot prohibition—the policy has uncertain gains and huge losses. PS.  When I say “complete” pot legalization, I mean legalization at the federal level combined with state laws that are not more burdensome than the laws for selling beer.   (0 COMMENTS)

In April 1971, President Nixon was worried. Inflation had fallen from an annual rate of 6.2% in February 1970 to 4.2%, but unemployment, 3.5% in December 1969, hadn’t been below 5.9% since October 1970. Nixon’s ratings were tumbling; since the New Year, his approval rating had fallen from 56% to 49% and against his likely opponent in the 1972 presidential election, he had had flipped from leading 43-40 to trailing 47-39. He had to act. An avid sports fan, Nixon pulled an old favorite from his playbook. “Among the sharpest recalls of [Nixon’s] experience,” Theodore H. White wrote, was:  …the campaign against John F. Kennedy in 1960, and how the economy affected that campaign. As early as 1959, Nixon, then Vice-President, recognized the political danger as the second Eisenhower recession began. He had pleaded, early, in the Cabinet for an easy-money, pump-priming policy to get the economy moving before the election of 1960. His only ally had been economist Arthur Burns, but the Eisenhower administration had waited until late spring to loosen credit. By then it had been too late, for pump-priming requires long lead-time; and Nixon had been compelled to campaign against Kennedy with unemployment rising all across the country in the fall. He had lost. He did not want to repeat that experience in 1972. Now, time was running against him once more. ‘‘I’ve never seen anybody beaten on inflation in the United States”, Nixon said, “I’ve seen many people beaten on unemployment.’’ In one of Nixon’s famous secretly taped conversations, Arthur Burns, nominated by Nixon and now Federal Reserve chairman, told the president in February 1971: In my view the monetary authority…has laid the foundation for recovery…What is holding back the economy now not any shortage of money but a certain shortage of confidence. If we flooded the banks even more than we have I think you could have awful problems in 1972 and beyond.  But with unemployment stuck near 6%, Nixon continued pressuring Burns to ease monetary policy. “We’ve really got to think of goosing it…late summer and fall of this year and next year. As you know there’s a hell of a lag,” Nixon told Burns in March, but Burns replied that “To drive interest rates lower would run the risk of accelerating an international monetary crisis.” Changing tack, in July, Nixon discussed a possible vacancy on the Federal Reserve Board with Office of Management and Budget director George Shultz: I’ve told [Treasury Secretary John] Connally to find the easiest money man he can find in the country. And one that will do exactly what Connally wants and one that will speak up to Burns…and Connally is searching the god damn hills of Texas, California, Ohio. We’ll get a populist Senator [sic] on that Board one way or another…If you know of someone that’s that crazy let me know too…I want a man on that board that I can control. I really do. Basically that Connally can control. “To further pressure Burns,” Burton A. Abrams writes, “Nixon told his close advisors, John Ehrlichman and H. R. Haldeman, to leak a story through Charles Colson” – all key figures in the Watergate scandal – “about a recommendation to expand the Federal Reserve Board.” This “packing” would undermine Burns’ authority. Haldeman was also to leak that Nixon was considering legislation to curb the Federal Reserve’s independence.  On November 10, Burns folded, telling Nixon “Look, I just wanted you to know that we are reducing the discount rate today.” In December, Schultz told Nixon “[Burns] agrees that the money supply should now go up.” Later, Nixon urged Burns, “The whole point is, get [the money supply] up. You know, fair enough? Kick it!”  He did. Unemployment drifted down to 5.3% on election day. Nixon was reelected in a landslide, though this had as much to do with the Democrat’s missteps as anything else.  Wage and price controls announced in August 1971 muted inflation temporarily. But in September, Milton Friedman had warned Nixon that price controls “might be able to hold [inflation] down at least through the election…After this, you’ll have a great upsurge in inflation.” This soon materialized. The year-on-year inflation rate rose from 1.4% on election day to 4.9% when Watergate forced Nixon’s resignation in August 1974. One commodity after another surged against the dollar; soybeans, wheat, and finally oil, this latter, a consequence of inflation, being frequently mistaken as a cause even today. Unemployment was on its way up again, to a peak of 9.0% in May 1975. ‘Stagflation’ was here.  The American economy experienced the “awful problem” Burns and Friedman had warned about and the great inflation of the 1970s would not subside until the policies which caused it were reversed by Paul Volcker. Its origins lay not in the Arabian oilfields, but in Richard Nixon’s White House.           John Phelan is an Economist at Center of the American Experiment. (0 COMMENTS)

The arrest of a 19-year-old suspect who had allegedly planned a terrorist attack on a Taylor Swift concert in Vienna carries some lessons in view of what Auberon Herbert, a disciple of Herbert Spencer, wrote in 1894. The suspect, an Austrian citizen “with North Macedonian roots,” who is reported to have sworn allegiance to Islamic State, apparently intended to attack the crowd with knives and explosives. (See “Teenager Confesses to ‘Isis’ Attack Plot Against Taylor Swift Concerts,” Financial Times, August 8, 2024; and “Taylor Swift Terror Suspects Planned to Use Bomb-Filled Car at Concert, Authorities Say,” Wall Street Journal, August 8, 2024). Auberon Herbert was a British individualist-libertarian anarchist, although he called his philosophy “voluntaryism” and rejected the anarchist label. European anarchists of his time were mostly communists and often terrorists who blew up things to precipitate the revolution. In his Contemporary Review article, “The Ethics of Dynamite” (reproduced in The Right and Wrong of Compulsion by the State, Liberty Fund, 1978), Auberon Herbert argued that the “dynamiters” (the terrorists) were not really against government: Perhaps I ought at once, for the benefit of some of my friends who are inclined a little incautiously to glorify this word “governing” without thinking of all that is contained in it, to translate the term, which is so often on our lips, into what I hold to be its true meaning: forcing your own will and pleasure, whatever they may be, if you happen to be the stronger, on other persons. … Dynamite is not opposed to government; it is, on the contrary, government in its most intensified and concentrated form. … [Dynamite] is a purer essence of government, more concentrated and intensified, than has ever yet been employed. It is government in a nutshell, government stripped, as some of us aver, of all its dearly beloved fictions, ballot boxes, political parties, House of Commons oratory, and all the rest of it. How, indeed, is it possible to govern more effectively, or in more abbreviated form, than to say: “Do this—or don’t do this—unless you desire that a pound of dynamite should be placed tomorrow evening in your ground-floor study.” It is the perfection, the ne plus ultra, of government. Speaking of the terrorists, he harangued governments of his time: Here is your own child. This is what your doctrine of deified force, this is what your contempt of human rights, this is what your property in men and women leads to. This was at a time when Western governments were much less powerful than today’s. For sure, the latter are still far from beating at that game Isis and many other tyrants in the world. Still, we might reflect on a Senate hearing about another matter related to Taylor Swift but mainly about the government’s dirigiste crusade against so-called monopolies and market inefficiencies—a claim that, coming from the government, is hard to take seriously (“Senate Hearing on Ticketmaster’s Taylor Swift Meltdown: Five Takeaways,” Wall Street Journal, January 25, 2023): Live Nation Entertainment Inc. faced questions from lawmakers in Washington on Tuesday, in a Senate hearing stemming from Ticketmaster’s botched ticket sales last year for Taylor Swift’s coming tour. … Senators from both political sides of a divided Congress came together to criticize Ticketmaster, with Democrats and Republicans calling for a re-examination of Live Nation’s market power. Individual liberty and private property are required to prevent social strife or Leviathan. Let people who like Taylor Swift free to patronize her concerts, if she or others can finance them. Those who don’t like Taylor Swift or don’t like fun just have to abstain. And let people who want to go to Taylor Swift’s concerts buy their tickets from whoever organizes these concerts or acts as an agent of the organizers or has tickets to resell. (0 COMMENTS)