Here are some highlights of my weekly reading for the week just passed. Providing Labor Market Context for Debt-Related Driver’s License Suspensions in Ohio by Kyle D. Fee and Brian A. Mikelbank, Federal Reserve Bank of Cleveland, Community Development Reports, February 23, 2o24. Excerpt: Based on our analysis, over 830,000 Ohioans could be at risk of leaving the labor force if only half of drivers with a DRS abided by its terms. That equates to 14.4 percent of the labor force. Metropolitan labor markets would be hit the hardest by the labor force exodus, along with nonmetropolitan areas in southern Ohio. Compared to the nation, Ohio’s new jobs more often require a driver’s license, and the requirement is increasing. It is becoming more common, across almost all sectors, for a driver’s license to be required as a condition of employment. This is particularly so in suburban, exurban, and rural economies, reflecting the mobility challenges present in areas that are not well served by public transit. Furthermore, employer driver’s license requirements tend to be highest in middle- and lower-wage occupations, indicating the importance of a driver’s license to this segment of the workforce while highlighting how a lack of driver’s license can be a barrier to economic mobility for those most at risk of receiving a DRS. Our analysis suggests that these suspensions, especially when combined with increasing driver’s license requirements, make finding and maintaining employment more difficult for a sizable portion of Ohioans, but that instability also affects the broader economy. Fewer people in the labor force means fewer people to hire and fewer people to produce and consume goods and services. Note: I posted about this issue back in November 2013. I quoted one of my students who said, “No one benefits from making it more difficult for an individual who owes money to make money.”   What Senator Rubio Gets Wrong about Manufacturing and Industrial Policy by Colin Grabow, Cato at Liberty, April 10, 2024. Myth 1. U.S. manufacturing has crumbled. Rubio’s call for more muscular government intervention to rebuild domestic manufacturing implies the sector is in dire straits. Rubio twice references the “collapse of American manufacturing,” necessitating what he describes as a “serious effort to rebuild American industry.” But his entire premise is wrong. Domestic manufacturing is doing pretty well. Whether measured in terms of value‐​added or output, US manufacturing is at or not far off from record highs. The United States accounts for a greater share of global manufacturing output than any country save China, with more output than Germany, India, Japan, and South Korea combined. US manufactured goods exports in 2022 totaled nearly $1.6 trillion, including tens of billions worth each of autos, medical instruments, integrated circuits, and aerospace. In 2021, the United States was the world’s fourth‐​largest steel producer, second‐​largest automaker, and largest aerospace exporter. It Shouldn’t Take Long to Rebuild Baltimore’s Key Bridge by Edward McSpedon, Wall Street Journal, April 5, 2024 (gated) Excerpt: An objective look at the required engineering feat reveals many reasons for optimism. The approach structures—the elevated roadways on each side of the main ship channel, which carry traffic over water to the center span of the bridge—appear to have suffered little damage. Even the column that the ship struck directly might be able to be rebuilt using some or all of its existing foundation. The part of the bridge that was most severely affected was the 1,200-foot-long main-span superstructure. This is the structural-steel “truss” carrying the roadway high above the water in the center of the ship channel. This “clear span” eliminates the need for underlying support columns that would interfere with navigation. The component parts of the damaged steel truss can be quickly replicated using the design information that is already available from the current bridge. These subcomponents can then be prefabricated into large subassembly units off site, on land or in a dry dock. Notice that the title the Journal gave it says that it shouldn’t take long, not that it won’t take long. The pic above is of Marco Rubio. (0 COMMENTS)

Economics can help understand two conflicting aspects of religion: its potential usefulness in a free society and the incentives of some believers for extreme intolerance. The social usefulness of religion has been noticed by many thinkers, including Friedrich Hayek (see Chapter 9 of The Fatal Conceit). Religion or at least some religions can provide the proper incentives for the moral behavior that is necessary for the maintenance of an autoregulated order. In their seminal The Calculus of Consent, James Buchanan and Gordon Tullock went in the same direction, but with a caveat (pp. 300-301): A widespread adoption of Judeo-Christian morality may be a necessary condition to the operation of any genuinely free society of individuals. … Christian idealism, to be effective in leading to a more harmonious social order, must be tempered by an acceptance of the moral imperative of individualism, the rule of equal freedom. The acceptance of the right of the individual to do as he desires so long as his action does not infringe on the freedom of other individuals to do likewise must be a characteristic trait in any “good” society. The precept “Love thy neighbor, but also let him alone when he desires to be let alone” may, in one sense, be said to be the overriding ethical principle for Western liberal society. As much as religion can generate useful incentives for life in society, it can also lead believers to behavior more conducive to intolerance, social strife, and violence. An extraordinary example of this was provided by Ismail Haniyeh, who ran the Quatar-based political bureau of Hamas. Three adults among his thirteen children, who were reportedly also involved in Hamas terrorism, were targeted and killed in Gaza by an air strike attributed to the Israeli government. Four of his grandchildren also died in the strike. Haniyeh declared (“Israeli Airstrike Kills Three Sons of Hamas Political Leader,” Wall Street Journal, April 10, 2024): I thank God for this honor that he bestowed upon us with the martyrdom of my three sons and some grandchildren. It is difficult to counter the incentives of individuals who believe that their savagery and the sacrifice of their children (and “some grandchildren”) will be rewarded with blissful eternal life. A blissful eternal life has, by definition, an infinite value. The greedy incentive to get there has led to wars of religion, and alas still does. St. Bartholomew’s Day massacre (1572), by François Dubois. Wikipedia Commons https://en.wikipedia.org/wiki/File:La_masacre_de_San_Bartolom%C3%A9,_por_Fran%C3%A7ois_Dubois.jpg (0 COMMENTS)

Public Goods differ from private goods in that they are non-rivalrous in consumption and nonexcludable. If I watch a fireworks show, it doesn’t reduce the amount of “fireworks show” my neighbor can enjoy. If I’m going to put on a fireworks show, I can’t prevent non-payers from watching my bombs bursting in air.  Since public goods are non-rivalrous and non-excludable, we won’t get enough of them if we rely exclusively on the free market. Subsidies and government provision are the textbook correctives. Of course, entrepreneurs and innovators have come up with all sorts of ingenious methods for providing public goods privately, like radio and TV broadcasts sponsored by advertising. Edward Stringham’s Private Governance compiles examples of free people coming up with ways to do the things the textbooks say will be done inefficiently without subsidies or government provision. There’s another way we need to advance this discussion, however. We need to take the possibility that we are subsidizing public bads very seriously. A lot of the brute-force responses to the Covid pandemic originated in seminar rooms and government-funded labs on the assumption that a great mind could figure out what we should all do. The National Endowment for the Humanities sponsored Nancy MacLean’s conspiracy screed Democracy in Chains (I discussed this for EconLog here and here). I found another amusing example in some historical documents recently. In the 1904 Yearbook of the United States Department of Agriculture, we can read an article by Archibald D. Shamel describing “The Improvement of Tobacco By Breeding and Selection.” On the list of things the government should be subsidizing, breeding better versions of a crop that has wreaked cancerous havoc on the world is pretty low on the list. “But that was 120 years ago.” True, and it’s easy to look back and chuckle–but we haven’t learned our lesson. Governments around the world subsidize tobacco; while that might be the price we pay to get subsidies for good things, it should at least curb our enthusiasm for subsidies and government provision of alleged public goods. Good ideas have a well-known free-rider problem. Instead of doing the hard work of research and development, many people join Homer Simpson in asking, “Can’t Someone Else Do It?” Subsidized research has a less-frequently discussed forced rider problem. Reports like these aren’t catalogs from which people can choose where and how to contribute. They’re reports about what the government is doing with money they “contributed” at gunpoint. The space program is cool and all, and it’s very personal to me: one of my grandfathers worked for NASA. It’s still not clear it was the best use of the resources that went into it. I think the entire issue illustrates an important difference between economists on the right who are skeptical of government intervention even in textbook situations and economists who are more enthusiastic about it. The skeptics think governments are more likely to subsidize things like tobacco. The sanguine think governments are more likely to subsidize in ways that fix plausible market failures.   Art Carden is Professor of Economics & Medical Properties Trust Fellow at Samford University, and he is by his own admission as Koched up as they come: he has an award named for Charles G. Koch in his office, he does a lot of work for and is affiliated with an array of Koch-related organizations, and he has applied for and received money from the Charles Koch Foundation to host on-campus events. (0 COMMENTS)

Today, residential zoning, drug prohibition, and restrictions on legal immigration are three of America’s most consequential public policies. As we will see, all three began in California, and all three were explicitly motivated by extreme anti-Chinese bigotry.  All three policies were intended to exclude “undesirables”. To be clear, I am not suggesting that modern proponents of those policies have a similar motivation, although I will argue that bigotry continues to play a role in at least some of these policies. Until recently, I had assumed that these three policy regimes began during the early 1900s, as part of the so-called “progressive era” of activist government.  In fact, they began in the late 1800s, mostly in California.  A recent Jacob Sullum article in Reason magazine examined this period: ‘Smoking Opium is Not Our Vice’ America’s First Drug War Was Driven by Xenophobia Against Chinese Migrants Despite the title, the article is about much more than the war on drugs; it exposes how deeply held racial prejudices affected a wide range of public policies.  Much of the article does focus on San Francisco’s notorious opium dens, which led to the first American laws prohibiting drug use: These “infamous resorts” were “an unmitigated evil,” demanding “immediate and rigid legislation.” . . . That “rigid legislation” was the nation’s first anti-drug law, if you don’t count the short-lived alcohol bans that 13 states enacted in the mid-19th century. Of course this war on drugs was not successful: Wasn’t San Francisco’s ban supposed to put an end to that? Despite the 1875 ordinance, Rogers reported in 1876, “the practice, deeply rooted, still continues.” And “in enforcing the law with regard to this matter,” police “have found white women and Chinamen side by side under the effects of this drug—a humiliating sight to any one who has anything left of manhood.” That comment reflected anxieties about opium-fostered race mixing, including the fear that Chinese men were using the drug to seduce or sexually enslave white women. By the way, anxiety about race mixing remains a common theme in the war on drugs, illustrated in the 2000 Soderbergh film entitled Traffic. [Full disclosure:  My wife is Chinese, so perhaps I have “nothing left of manhood”.] The ultimate goal was to get Chinese residents to leave the country: As politicians like Lewis saw it, the opium problem was inextricably intertwined with the Chinese problem. If the government could not forcibly remove these “filthy” foreigners, as Lewis seemed to prefer, it could at least make life as difficult as possible for them. As former congressman James Budd put it at an 1885 anti-Chinese meeting in Stockton, California, it was local authorities’ “duty” to make conditions so “devilishly uncomfortable” that the Chinese would be “glad to leave.” Legislators certainly tried. San Francisco’s ban on opium dens, which cities like Stockton imitated, was just one facet of a broad, long running legal campaign aimed at subjugating or driving away Chinese immigrants. In addition to attempts at outright bans on Chinese immigration into California, that campaign included special taxes, discriminatory regulations, and restrictions on the right to hunt, fish, own land, vote, and testify in court. Judges often allowed these sorts of laws, despite their obvious discriminatory intent: “Smoking opium is not our vice,” U.S. District Judge Matthew Deady wrote, “and therefore it may be that this legislation proceeds more from a desire to vex and annoy the ‘Heathen Chinee’ in this respect, than to protect the people from the evil habit. But the motives of legislators cannot be the subject of judicial investigation for the purpose of affecting the validity of their acts.” In other cases, the laws were viewed as too intrusive and blocked by judges holding views that in 2024 seem almost quaintly old fashioned: “To prohibit vice is not ordinarily considered within the police power of the state,” [Justice Jackson] Temple wrote. “A crime is a trespass upon some right, public or private. The object of the police power is to protect rights from the assaults of others, not to banish sin from the world or to make men moral….Such legislation is very rare in this country. There seems to be an instinctive and universal feeling that this is a dangerous province to enter upon, and that through such laws individual liberty might be very much abridged.” Concurring Justice A. Van R. Paterson likewise argued that “every man has the right to eat, drink, and smoke what he pleases in his own house without police interference.” Today, American politicians continue to blame the Chinese for corrupting our youth.  China is supposedly to blame for America’s fentanyl epidemic–as if we have no agency.  Not because China exports fentanyl to America, nor because they export fentanyl to Mexico that is re-exported to America.  Rather they are blamed for exporting chemicals that can be used elsewhere to create fentanyl.  As viewers of Breaking Bad are well aware, Americans are quite capable to creating illegal drugs without any help from the Chinese. And prison sentences have generally been longer for drugs preferred by African-Americans (crack cocaine) as compared to drugs preferred by white Americans (powder cocaine).  Racial bias has always been a factor in the war on drugs. In 1909, the Smoking Opium Exclusion Act banned the importation of opium (other than for medicinal purposes.)  But even in the early 1900s, some politicians saw the folly of assuming that an import ban on opium would solve the problem: Although “Chinamen desire opium prepared for smoking in their own country,” Rep. Sereno E. Payne (R–N.Y.) said, smokable opium “can be manufactured in this country from medicinal opium.” And “rather than not have it at all,” he added, “they would take that prepared in this country, undoubtedly.” Given that prospect, Payne was skeptical that the law would have a substantial impact on opium smoking. Anti-Chinese sentiment also led to the very first laws aimed at restricting immigration based on national origin: The “moral crusade” championed by the Chronicle soon inspired the Chinese Exclusion Act of 1882, the first federal law to ban immigration based on national origin. The law, which applied to “skilled and unskilled laborers,” notionally made exceptions for certain categories of visitors, but permission was difficult to obtain. Congress also made Chinese immigrants already living in the United States ineligible for citizenship and required them to obtain reentry permits when they traveled abroad. Such policies were applauded by the “Anti-Chinese Leagues” that began to proliferate across the West in the late 19th century. Even today, some of our leading politicians rail against allowing (legal) immigrants from “s***h*** countries”, regardless of how talented they may be.  Immigrants from poor countries like India and Nigeria have actually done quite well in America. New York City’s 1916 residential zoning laws are generally regarded as the first example of using regulation to prevent “undesirables” from moving into certain neighborhoods.  In fact, an even earlier example occurred in California, again motivated by anti-Chinese sentiment: Other anti-Chinese measures of this era were neutral on their face but clearly aimed at a specific ethnic group. San Francisco, for example, set a minimum space requirement of 500 cubic feet per resident for private dwellings (thereby forbidding common living conditions in Chinatown), prohibited theater performances between midnight and 6 a.m. (targeting Chinese opera), and required licenses for laundries in wooden buildings—licenses that Chinese laundry owners somehow were never able to obtain. That last ordinance passed muster with the California Supreme Court, which saw it as a valid exercise of the city’s police power. But the U.S. Supreme Court later unanimously ruled that the law’s discriminatory enforcement violated the 14th Amendment’s guarantee of equal protection. Today, San Francisco continues to restrict the construction of low cost housing.  As a result, its already rather small African-American population is being priced out of the area, even as numerous “Black Lives Matter” signs populate San Francisco front yards.  Africans-Americans comprised about 13.4% of San Francisco’s population in 1970; today the share has fallen to roughly 5%.  If “progressive” NIMBYs get their way, even that 5% will soon be gone. To be clear, there are many people who favor drug, housing and immigration regulations for reasons other than ethnic bias.  Nonetheless, it’s important to recognize that these rules were originally put in place to exclude people viewed as undesirable, and many modern Americans continue to be motivated by anti-Chinese bias.  Recently, several states have put in place restrictions on Chinese college students attending their state colleges, and also prohibited Chinese people from buying real estate.  Unlike with Huawei and TikTok, there is no plausible national security argument for these policies. PS.  There is much more of interest in the Sullum article—I encourage people to read the whole thing.  It’s also worth thinking about how perceptions change over time: Testifying before the California Senate’s Special Committee on Chinese Immigration the year after Douglass’ raid, another San Francisco police officer, George W. Duffield, averred that “ninety-nine Chinamen out of one hundred smoke opium” and that “every house” had an opium den. Even then, that was a gross exaggeration.  Today, drug use among Asian-Americans is considerably lower than for any other ethnic group. PS.  A recent article in The Economist begins as follows: One of the most chilling moments in America’s post-war relationship with Japan occurred in Detroit in 1982. Two American car workers clubbed a Chinese-American man to death, mistaking him for a Japanese citizen they accused of stealing American jobs. A sympathetic judge fined them $3,000, with no jail time. This outrageously lenient verdict reflected a mood that later extended to the highest level of government. Fearful of being overtaken by Japan as the world’s economic superpower, America wielded the crowbar. It imposed trade restrictions, sought to pry open Japan’s domestic markets and led international efforts to reduce the value of the dollar against the yen. Only after Japan’s asset-price bubble burst in the 1990s did America leave it alone. Sound familiar? (0 COMMENTS)

I attended the Association for Private Enterprise Education annual conference in Las Vegas earlier this week. One of the sessions I attended was titled “Improving Women’s Welfare: Economic Freedom, Gender Ideologies, and Entrepreneurship.” One of the presenters showed a slide about the federal government’s 1978 Pregnancy Discrimination Act (PDA) and said that this had expanded economic freedom for women. I wrote her a note saying that, au contraire, it reduced economic freedom for women and employers. When I ran into her in the hallway later, I pointed out that, in addition, one Harvard economist’s study found that it was paid for by married women of child-bearing age. Here’s an elaboration of my points. Economic Freedom Whenever the government interferes with contracts between employers and employees, it reduces the freedom of both sides. Take the PDA. One can certainly imagine a married women who would want the freedom to contract with an employer who doesn’t offer a pregnancy benefit. Why? The most obvious reason is that she might not want to get pregnant. The benefit, then, would appear to be of no value to her. But it’s worse than that. Although the benefit is of no value, there is a cost. There’s no such thing as a free lunch, and employers, if forced to offer this benefit, will figure out ways to reduce pay (either in dollars or in other benefits) for women, especially married women, of child-bearing age. Which brings us to the economic issue: who pays? Who Pays for the Pregnancy Discrimination Act? In June 1994, the American Economic Review published “The Incidence of Mandated Maternity Benefits” by Jonathan Gruber, at the time an assistant professor of economics at Harvard University. What he was able to do was compare the growth of pay in states that already had mandated pregnancy benefits with the growth in states that didn’t have mandates. He hypothesized that in states without mandates, pay for married women of child-bearing age would grow more slowly once the PDA came into force than in states that already had the mandates. And that’s what he found. He wrote: The findings consistently suggest shifting of the costs of the mandates on the order of 100 percent, with little effect on net labor input. In short, the women who are supposed to benefit from the mandate are the ones who pay. BTW, both Gruber and I drew on his research when we testified before Senator Ted Kennedy’s Senate Labor and Human Resources Committee, when “Hillarycare” was being considered and was on its last legs before its defeat. Jonathan was invited by the Democratic majority; I was invited by the Republican minority, whose ranking member was Senator Nancy Kassebaum of Kansas. She was, incidentally, the daughter of 1936 Republican presidential candidate Alf Landon. The pic above is of me testifying before Kennedy and Kassebaum. (0 COMMENTS)

Jessamine Chan’s 2022 novel The School for Good Mothers (New York: Simon & Schuster) constructs a bureaucratic dystopia in which unfit parents—mostly mothers, but not all—are ordered by family courts into a re-education camp run by Child Protective Services. Perhaps the most chilling part of the narrative is how easy it is to imagine a path towards such a future. After the successful television adaptation of The Handmaid’s Tale debuted in 2017, Margaret Atwood reflected, “There’s a precedent in real life for everything in the book,” she says. “I decided not to put anything in that somebody somewhere hadn’t already done.”  The same can be said of Chan’s School. Forcefully held opinions about the right and wrong way to parent abound in both Chan’s world and ours. So do the technologies capable to monitoring any and all interactions between parent and child. Even scanners and AI technologies capable of perceiving and tracking moment to moment moods and micro-reactions do not seem so much the domain of speculative science fiction as products that could show up in a Google commercial any day.  And, of course, we do already have a legal apparatus for removing children from unfit parents—and for good reason. Child abuse is all too common and can be incredibly difficult to detect. However, Family Courts and Child Protective Service workers, even when well intentioned, do not always have the ability to know whether they are doing harm or good by removing a child from their parent’s supervision. This is most apparent in the sad cases of children who are unnecessarily removed or subjected to abuse and neglect after being placed in the foster care system. This situation is unfortunately understudied, with child welfare agencies often expected to use scarce resources to police themselves. The main protagonist in Chan’s novel is an overworked, sleep-deprived, recently-divorced woman who loses her 18-month-old daughter because she left her home alone in an ExerSaucer for 2.5 hours so she could get a coffee and retrieve some files from her office. Ideal? Certainly not. Perhaps not even particularly sympathetic. But it is far from obvious that this one-time situation is so dangerous that it justifies the trauma of forced removal. It is a situation reminiscent of the Salon piece written by the woman who left her children in a car with the windows cracked on a cool day for 5 minutes and wound up facing criminal charges it took years to fight. That particular incident happened to a woman with the skills to professionally write about it and the resources to fight the charges. A report from Human Rights Watch and the ACLU found that children are being removed from homes due to circumstances associated with poverty rather than abuse or neglect, such as the family whose eight-year-old son was removed because they were using bottled rather than running water while temporarily living in a camper until they found a rental. In part due to the higher rates of economic hardship among Black and Indigenous families, they are more likely to be investigated and to have children placed in foster care.  And although I hope I am right in seeing forced re-education as something the public would not currently support, it is certainly not without precedent in the United States. The most extreme example is the hundreds of thousands of Indigenous children who were kidnapped and forced into “Indian Boarding Schools” between the 1860s and 1960s under the presumption that the state knew what was best for them. The United States does already provide resources for in-home training for people whose children might otherwise be taken away. I have no specific argument to make with respect to these programs—I don’t know enough of the particulars and it is an empirical question whether or not their current incarnations are helpful anyway. But the existence of such a practice does suggest that it is no great stretch to imagine current policymakers responding favorably to the idea of putting a parenting “expert” in charge of determining whether or not another parent is doing their job well enough. When contemplating the turn to experts it’s always worth revisiting Thomas Leonard’s Illiberal Reformers, an incisive history of Progressive Era social reform efforts that compiles example after example of discriminatory and oppressive policies implemented in the name of experts using their supposedly superior knowledge to ‘correct’ other’s choices. Chan’s novel illustrates poignantly the potential harms of turning down such a road. Without spoiling the plot, parents threatened with the loss of their children are often willing to go to great lengths to prevent that from happening, and as such are vulnerable to abuse and manipulation. The exercise of trying to fit human relationships into the current scientific understanding of what behavior is ‘best’ results in frustrating absurdities. Ultimately, putting discretion over the best way to be human in the hands of bureaucratic authorities deprives relationships of their authenticity. In the quest to perfect humanity, we become less humane.   Jayme Lemke is a Senior Research Fellow and Associate Director of Academic and Student Programs at the Mercatus Center at George Mason University and a Senior Fellow in the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics. (0 COMMENTS)

In July 2013, I wrote a post on EconLog titled “The Economics of Self-Imposed Price Ceilings.” The case in point was the Costco hot dog. I pointed out that by keeping the price of a hot dog and a soda with free refills at $1.50, Costco over time, to reduce losses, reduced the quality of the product. I might have been wrong in saying that the new hot dog is inferior to the old Hebrew National brand. The brand that Costco shifted to is still quite good. But I was not wrong in saying that Costco quit letting the customer turn a crank that yielded sauerkraut and instead put sauerkraut behind the counter. Two further changes have happened, one that I noticed in the last year or two and one that I noticed today. At some point in the last year or two, Costco discontinued the behind-the-counter sauerkraut. Today, I noticed another change. Costco has discontinued the onions that you used to get by turning the crank. So now all you get is mustard, ketchup, and relish. In case you’re wondering, of course I’m not advocating that a government agency regulate Costco’s choices about hot dogs. I’m simply pointing out predictable consequences of price freezes in a time of inflation even when the freezes are self-imposed. (1 COMMENTS)

What do we desire from our lives and our work? In October of 2023, I participated in a debate at my college, Western Carolina University, regarding whether gender affirming care for minors should be banned. When it was my turn, I mostly stuck to the facts. I cited medical organizations, doctors, and meta-analyses. Though we were arguing for the same conclusion, my professor, Dr. Sean Mulholland, took a different approach. The first words out of his mouth were, fittingly for an economist, from Adam Smith. But, perhaps surprising to some, from Smith’s The Theory of Moral Sentiments, a work on moral philosophy, “Man naturally desires, not only to be loved, but to be lovely.” One aspect of Smith that I find praiseworthy is how his thought applies to an infinite number of situations. Dr. Mulholland emphasized self-expression and individualism through affirming one’s gender identity as a Smithian idea. While listening to Brent Orrell on The Great Antidote podcast with Juliette Sellgren, I noticed a similar idea applied to work. Orrell and Sellgren discuss the importance of finding intrinsic worth and value in one’s work, and how to do so in a moving and shaking economy rife with demographic and technological change. Orrell emphasizes that young people’s ambitions should not be pushed aside just for financial benefit. Orrell wants to help young people answer what he calls “the drunk uncle question.” This is the question that you get around the Thanksgiving table when your uncle asks you what you’re studying. If it’s not a technical field like computer science, his follow-up question is going to be, “Well, what are you going to do with that?” As if that were some sort of a knockdown question, like if you can’t connect your interests directly to an economic outcome, somehow, they aren’t worthwhile. Orrell sees this attitude damaging the prospects of the younger generation of Americans. He wants them to find work that’s fulfilling and beneficial to society. In a Speaking of Smith post titled, Vocation: A Cure for Burnout Orrell and David Veldran make the point that we should welcome creative destruction through technological advancement, precisely because this transitions work to be more vocational, and less monotonous. The key to a productive distribution of labor is allowing workers to find jobs that excite their creativity, “[These jobs] tend to be more fulfilling, energizing, and more compatible with our desire for dignity in work.” Paychecks and purpose go hand in hand to Orrell. This may seem like an inconsequential concern, but Orrell points out how refusing to fulfill the innate human need to be understood undermines one’s individuality and sends the message that they are not worthy of understanding in the first place. This may cause individuals to choose work that is not optimal for them and harms the division of labor through incorrect specialization. The economy is deprived of highly productive English literature professors or anthropologists, for the trade-off of subpar computer scientists.  In another Speaking of Smith post, Beyond Being Lovely, Shal Marriot phrases Smith’s quote as, “the desire to be understood and to be worthy of that understanding.” To me, Orrell’s issue with “the drunk uncle question,” and the pervasive view of work as separate from self-actualization reflects this.  Disrespecting human dignity is harmful to all except a very small number of successful rent seekers. Orrell understands this and knows that there is nothing efficient about dismissing human dignity. Orrell sees a world where the core value of work is acknowledging humanity. Orrell’s advice and prescriptions for the future of work are valuable and pertinent to a changing and progressing American economy. But it’s more difficult to apply these ideas to those without a suitable level of socioeconomic privilege. Yes, America is the most economically prosperous nation in the world, and incentivizing those who have the means to pursue what they love is beneficial to us all. But poverty is still real and limiting. So is systemic discrimination towards marginalized people, particularly towards non-white and LGBTQIA+ people. We should take care that the luxury of pursuing personal ambitions isn’t only for the white and the rich.  This is not permanent. The great enrichment includes hundreds of millions of people striving for self-actualization instead of merely scrapping for survival. As Orrell states in his article, “The Common Ground of Human Dignity,” “The American story in particular has been one of a gradual expansion of principles and laws that protect the dignity and rights of the person.” This expansion upon the principles of individuality, mutual respect, and the will to understand is crucial not only to economic growth throughout an innovative and changing economy, but also are necessary elements of social progress and fulfilling the American vision.   Kevin Lavery is a student at Western Carolina University studying economic analysis and political science and was a 2023 Summer Scholar at Liberty Fund. (0 COMMENTS)

JP Morgan is one of America’s most important investment banks. So what should we make of the following claim? The Federal Reserve raised rates the most in decades to bring down inflation. High borrowing costs are supposed to put the brakes on the economy to keep consumer prices from rising too quickly.But Jack Manley at JPMorgan Chase argues that the Fed’s current rate range of 5.25% to 5.5% are actually inflationary at this point, and that prices won’t stabilize more until the central bank starts cutting. . . . Manley’s idea is a provocative one. It also shows how little agreement there is on how to understand the economic cycle we’re in.  The same Bloomberg piece suggests that most conventional economists have a very different view: This is pretty radical thinking, and flies in the face of a lot of economic thought. (When asked her take on this issue more broadly, Nationwide Mutual Insurance’s Kathy Bostjancic flatly disagreed with the thesis.) I find all of this to be quite depressing.  Macroeconomists are still stumbling around, engaging in elementary economic errors—in this case, reasoning from a price change.  Is it actually possible that in 2024 we are still debating whether higher interest rates are inflationary or deflationary (or don’t matter either way)? Here’s the case for making fun of JP Morgan’s analyst:  It makes no sense to speak of the effect of interest rates on inflation.  Interest rates change for many reasons.  Some of those reasons lead to higher inflation, and some of those reasons lead to lower inflation. Here’s the case for not making fun of the JP Morgan analyst:  Conventional economists often make the exact same error (reasoning from a price change), but in the opposite direction.  They assume that higher rates are tight money, and will lead to lower inflation.  Again, it depends on why interest rates increased.  Thus the sharp rise in interest rates during 2022 mostly reflected the Fisher and income effects, not the liquidity effect resulting from tighter money. Today’s disappointing inflation report is another reminder that we have not yet achieved a soft landing, despite all the premature “mission accomplished” statements we’ve seen over the past year in the financial press.  High interest rates did not cause the recent bout of high inflation, but they also did not solve the problem. Inflation depends on monetary policy, not interest rates. (1 COMMENTS)

I recently stumbled across a news story that highlights something about capitalism and the profit motive that is underappreciated by the very people who most loudly clamor for it – the conservation of resources. Capitalism doesn’t merely incentivize maximizing output – it also incentivizes minimizing the use of inputs as well. If you want to conserve resources, capitalism and the profit motive are your best friends.  The story in question describes how the publishing company HarperCollins reduced the amount of paper they use to publish their books, as a result of making numerous “subtle, imperceptible tweaks” to the font and layout of the pages. The efforts first began in their Christian publishing division, where making these adjustments resulted in 350 fewer pages being needed per Bible, which in 2017 alone resulted in over 100 million fewer pages needed – four times the height of the Empire State Building, according to the story.  HarperCollins sought to use these innovations across all of their publishing lines and put quite a lot of effort into it. There were a number of factors that had to be considered and counterbalanced against each other: The team got to work. They tested their theories with a large book in their catalog—more than 600 pages—by creating 50 versions of it using different fonts. HarperCollins uses a wide range of off-the-shelf fonts in its books, rather than custom ones. As the team ran the experiments, they observed that some fonts were more compact, resulting in fewer total pages, while remaining easy to read. …In the end, the designers found that clever font selection, coupled with a thoughtful layout design that reduced white space, resulted in more words per page…And when you place them side by side, the differences are imperceptible. And what’s been the payoff for all this effort? The report tells us that “these subtle, imperceptible tweaks have saved 245.6 million pages, equivalent to 5,618 trees.” The other payoff, of course, is that these changes have “cut HarperCollins’s printing costs.”  One might want to dismiss this as no big deal. While 5,600 trees might seem like an impressive number, how big is it really? After all, there are more trees on Earth than there are stars in the entire galaxy! In light of that, isn’t 5,600 trees kind of small potatoes? Yes, but at the same time, that actually strengthens the point I want to make! The market provides strong incentives to find and implement every feasible option to reduce and minimize the resources needed in production. If there is some means available to reduce resource usage by even a tiny amount, someone out there is looking for it, and will find and implement it. By contrast, can you imagine any government agency putting teams to work engaging in similarly intensive efforts to ensure they are using only the minimum amount of resources necessary?  The difference is that capitalism and market discipline provide a very different institutional structure and set of incentives – incentives that are absent from government agencies. And because of this difference in incentives, market actors will take much greater care to conserve and reduce resource usage than state actors. So if your goal is the conservation of resources, be glad that markets exist – and cheer for them to expand.  (0 COMMENTS)