Chicago’s population is down about 25% from its peak back in 1950. That statement might conjure up images of empty blocks of homes, as you see in Detroit. In fact, Chicago remains quite crowded. I cannot find the article, but I recall reading that Chicago now has more households than ever before. Average household size has shrunk dramatically since 1950, due to factors such as fewer children and more independent living for young adults and the elderly.The OC Register reports some seemingly odd data for California. Its housing stock has grown since 2020, its population has shrunk, and yet home prices have soared. This has led to dark conspiracy theories that there are lots of empty houses in California held by speculators, and that this is boosting prices. Not so. If California’s population is well off its peak, and developers keep on building housing, why does the cost of living in the Golden State remain lofty? . . . Start with the basics: California had 38.2 million residents living in households last year – that’s down 375,800 since 2020, or a 0.9% loss. In the same timeframe, California’s housing stock grew to 14.8 million residences – a 432,700 improvement since 2020, or 3% growth. The puzzle can be resolved if we consider the nearly 4% decline in average household size: The average number of Californians living in an occupied housing unit was 2.75 last year – that’s down from 2.86 in 2020. That’s not an insignificant change across 39 million residents. Why did it occur? There’s the pandemic effect of people wanting larger living quarters, often shunning roommates. Others got historically cheap mortgages in 2021-22 and won’t move, no matter how oversized their residence is for their needs. Some of this trend may be adult children leaving the parents’ home – with destinations both in and out of state. Young families frequently exited for other states, too. Or it’s older residents losing a spouse. No matter the cause, smaller households gobble up housing supply. In addition, birthrates are declining. I believe that Kevin Erdmann was the first to document the fact that a booming economy in a housing constrained market (such as LA) leads to population loss, as working class families move to cheaper states and are replaced by younger childless professionals.  Selfish empty nesters like me live in houses that are far too big for our needs.  (I recall back in the 1990s driving a Chinese visitor around one of the nicer neighborhoods in Newton, Massachusetts.  The awestruck lady asked how many families lived in each house. I gave my wife the “Who’s going to tell her” look.)   PS.  Although Chicago remains relatively “full” despite a 25% population decline; there are rust belt cities that are much worse off.  Detroit, Cleveland and St. Louis have seen population declines of 60% to 70%, and thus do have vast areas that are emptying out. (0 COMMENTS)

Charging extra for specific preferences, such as a seat selection on a flight, enables lower basic prices, increasing access to no-frills options for lower-income customers, while allowing businesses to customize their services to individual customers’ preferences. Airlines unbundle in-flight food and checked bags, for example, leading to more profit opportunities and lower base fares. Yes, “price discrimination”—charging various customers different amounts for the same product—can sometimes be harmful to customers on net. But banning such unbundling when consumers put wildly different values on certain services can price out poorer consumers and compel others to pay for services they neither want nor need. Likewise, overdraft fees from banks help disincentivize costly behavior. Banks incur costs and face heightened risks when customers overdraw their accounts. Overdraft charges help deter this behavior in a well-targeted way, by imposing charges on those customers whose accounts become overdrawn. Capping or constraining overdraft fees doesn’t eliminate these costs and risks; it just means someone else must be charged for them in a different way. Banning overdraft charges thus means higher prices for some other subset of a bank’s customers. This is from Ryan Bourne, “Abolishing ‘Junk’ Fees Would Be Junk Policy,” in Ryan A. Bourne, The War on Prices: How Popular Misconceptions About Inflation, Value, and Prices Create Bad Policy, which was released this week. There’s actually some other content between these two paragraphs. As I said in the blurb on the book this is one of my favorite chapters. Specifically, I wrote, “Particularly good are the chapters on rent controls, price controls on oil and natural gas, and so-called junk fees, which are really fees to solve problems that would exist without them.” Bourne quotes President Biden’s attack on “junk fees.” I get the impression, given Joe Biden’s low or close to zero understanding of economics, that Biden thinks that eliminating junk fees won’t cause any prices to rise. (0 COMMENTS)

Click-a-ty-clack, click-a-ty-clack . . ., click-a-ty-clack.    Those were the sounds that regularly echoed down the second-floor hallway of Clemson University’s Sirrine Hall in the 1980s and before. Those sounds of metal-on-metal could be expected by the economists on the floor at 10:00 in the morning, carrying a clear message: “Time for coffee!”  The sounds came unmistakably from Professor Hugh Macaulay’s steel leg brace that he had worn since he suffered a bullet wound in France in World War II. He had proudly volunteered for service.  The “clickities,” combined with Hugh’s knocks on office doors, would roust eight or more economists in the department for the treat of the day, a lively policy debate at the campus coffee shop over the latest market-control pronouncement coming out of Washington. Our debates would usually begin as we left Sirrine to make the three-hundred-yard hike to the “Canteen,” so named when the University’s students were all male and all cadets. The life of Professor Hugh H. Macaulay, Clemson University Alumni Professor of Economics would have celebrated his Centennial today. Those of us who were his colleagues and friends celebrate his life as an economist and moral force in the lives of us all, as well as the lives of his students. Hugh remains one of    the most “unforgettable characters we’ve ever met,” to paraphrase one of Reader’s Digest’s most popular series. He is also remembered as one of the profession’s staunchest defenders of markets, always ready to find fault with proposals to constrain the market process..  Professor Macaulay died on October 5, 2005 at the age of 81 from kidney cancer.  *     *     *    *     * Hugh always wore a bowtie… Always! And they were made by his wife Frances—or, rather, “Pinky” to all who knew the Macaulay’s. She was the love of Hugh’s life, his partner, colleague, and soul mate. She made the bowties from old neckties. In the Macaulay household, nothing was wasted.  Hugh had his own dress code. A while back it might have been called “Sunday-go-to-meeting” attire. His hair was cut close. His face, lively. His dark eyes danced as he talked and laughed with others. If one did not know the meaning of Victorian manners of speech and conduct before, they would after spending time with Hugh.  The style of the day meant nothing to him. Presenting a proper model to his students meant everything. In 35 years of observing him up close, including occasions that might have tested the patience of Job, I can tell you that Hugh never uttered a word that would not have passed muster for My Weekly Reader.  *     *     *     *     * Hugh Macaulay knew well and followed the words of Adam Smith found in his Theory of Moral Sentiments: “One should think much of others and little of oneself.” He told me early in my career when I still hadn’t gotten over having a PhD., “Bruce,” he said, “everyone you will ever meet, even the janitor, will know things you do not know. We must treat them all with great respect.”  Hugh had a keen intellect, a never satisfied hunger for knowledge and for opportunities to engage in conversation about ideas. But there was one set of ideas that mattered above all others: Economics. On this, Hugh had, in the words of J. M. Clark, “an irrational passion for dispassionate rationality.”  Hugh was an economist to the core. Economics was in his DNA. And Hugh’s economics was not just any old economics, either. It was the Adam Smith economics of markets, price theory, trade, and monetary policy. It was what we in the business call the Old Time Religion. Hugh was an unabashed lover of market competition and individual freedom. No, more than a lover, he was an evangelist.  And was he ever good. Any time I had trouble with an international finance problem, which was fairly often, I would go to Hugh. He would start laying out principles, then go to application, and before you knew, the answer would be clearly revealed, sprinkled with the well-known Macaulay wit. Going for coffee with Hugh was great fun and could be hilarious—but the coffee discussions were serious business. Always, always, Hugh brought pen and pad with him. If no one else jumped in with a question, Hugh would pose his own, followed by drawing supply and demand curves. Our discussions could be boisterous but were always good-natured, and peppered with laughter. We all learned from the master and tried to emulate him. Those who enjoyed Hugh’s company in our book club discussions knew what to expect if anyone even suggested that a government solution to an economic problem would be more effective that markets. Hugh would ask with a disappointed tone, “Haven’t you been listening?” And to make sure we remembered, he would hold forth, often citing his favorite authorities, beginning with Adam Smith, moving on to Milton Friedman, then to Ronald Coase, and finally ending with Will and Arial Durant—incorporating their works into a fully integrated classical liberal thought.  *     *     *    *     * Hugh was an economist, but not just an economist. At heart, Hugh was a teacher. A teacher of research. A teacher of life. He was born to be in the classroom… and he knew that.  His students? They were the joy of his life. His door was always open…, as was his home. The number of times Hugh and Pinky had students in their home was legion, and even though he was a demanding grader, he left his students enthralled with his lectures and his thoughtfulness on allowing them to come to understand why and how he thought as he did. Understandably, any number of his students left his classes to say with conviction, “I would rather take another Macaulay course and make a D than a course from someone else and get an A.”  For many, Hugh was the one who set them on a new path, writing personal and detailed letters nominating them for graduate school or a job, and who, later, dropped notes of congratulations when they were honored in their work. Long after Hugh’s retirement in 1980, his Clemson colleagues would often be asked, “And how is Professor Macaulay”? In the words of one of Hugh’s former students, “You know, it really isn’t necessary now to say good things about Professor Hugh Macaulay to those who walked in his footsteps and were aided by the time he gave to them and to their papers. His goodness was self-evident in the way he conducted his life and in the way he treated others with respect and courtesy.” At the same time, those of us who knew him feel compelled to announce with force on this celebratory day that every economics department needs a Hugh Macaulay, someone who is committed with words and deeds to the essential wisdom that Adam Smith laid out in both of his interdependent masterpieces, The Wealth of Nations, and The Theory of Moral Sentiments.  *     *     *    *     * I dropped by to see Hugh when in the hospital and in his final days, if not hours. Still sedated from the surgery, Hugh did not seem to be fully awake. Even so, Pinky insisted that I come in and speak to him.  “Hugh,” I said, “I’ve come to tell you that markets work.” This roused him fully. “Thank you for telling me, Bruce,” he responded. “I thought that might be so. Now that I know for certain I can just go ahead and die in peace.” With that, he burst out with that famous Macaulay laugh. Pinky and I laughed, too.  Hugh Macaulay was one wonderful human being.   Bruce Yandle is  Co-Founder of the Clemson Institute for the Study of Capitalism and Distinguished Professor Emeritus, Department of Economics and distinguished Mercatus Center adjunct professor of economics at George Mason University. He specializes in public choice, regulation and free-market environmentalism.  (0 COMMENTS)

As with any tale, it is useful to begin at the beginning.  And in my instance, all my beginnings related to Austrian economics are found at Grove City College.  How I ended up at Grove City is an extremely unlikely journey with zigs and zags, the probability of which defies all calculation.  I was not a focused student in high school or even as I began my college career.  My interests were focused elsewhere and my dreams were directed at a life far removed from anything associated with the “life of the mind”. Once I got the bug to study economics, my professor Dr. Hans Sennholz guided my path of study with his entertaining and enduring lectures (I can still hear his voice 40 years later) and the books he encouraged me to read, which included Frederic Bastiat’s Economic Sophisms, Henry Hazlitt’s Economics in One Lesson and Milton Friedman’s Free to Choose, but also Carl Menger’s Principles of Economics, Eugen Bohm-Bawerk’s Capital and Interest, and Ludwig von Mises’s Theory of Money and Credit, Socialism, and Human Action.  Before I graduated I had read Adam Smith’s The Wealth of Nations, Jean-Baptists Say’s Treatise, David Ricardo’s Principles, John Stuart Mill’s Principles, F.A. Hayek’s The Road to Serfdom, Israel Kirzner’s The Economic Point of View and Murray Rothbard’s Man, Economy and State. Sennholz also made sure we read Marx, Keynes, Veblen, and Galbraith.  I should also acknowledge besides these classic works, I read everything Sennholz himself had published (in particular The Age of Inflation) as well as became a regular reader of The Freeman, and other writings from the staff at the Foundation for Economic Education.   My Philosophical Vision and the Critique of Scientism in the Study of Man My religion and philosophy teacher Dr. Reed Davis introduced me to the work of Michael Polanyi, and in particular the issue of presuppositions in scientific inquiry. I was able to see wider applications and a link between what I was learning about how to do economics and the philosophical discourse that Polanyi directs us to in thinking about the study of man.  In Sennholz’s presentation, economics was a human science and was corrupted by the unwarranted intrusion of the methods of the physical sciences into its domain.  Mises (and Hayek) had good reasons for this position, but Polanyi gave me additional reasons as I read him and learned from him. My appreciation of Polanyi would only increase over the subsequent years as I was assigned to be Don Lavoie’s research assistant. Lavoie was busy working on finishing two books – Rivalry and Central Planning and National Economic Planning: What is Left – both would be published in 1985.  Lavoie was blending Austrian economics with the growth of knowledge literature in the philosophy of science, including Polanyi. So my early exposure to Polanyi now turned out to be an advantage in my work with Lavoie. The great strength was that Polanyi not only told us how to study, but what to study – the growth and utilization of knowledge in society.  This, of course, feeds directly into Hayek’s research program.  It turns out that Polanyi was also a critic of the socialist planned economy and the Soviet system in particular, just like Mises and Hayek. So many points of confluence emerged during that first year of graduate studies with what I had been prepared to learn from my time at Grove City. Economics at the graduate level is a technical discipline, similar in many ways to engineering or a form of social physics. But economics as practiced in the Austrian School of Economics is a philosophical science and is more akin to the humanities than to science.  I had to learn to live academically in two worlds at once.  My education at Grove City College and the mentoring I received at George Mason prepared me to do precisely that.  And hopefully, others can see that example in my writings and teaching in the subsequent decades.   Analytical Puzzles and Economic Science As much as I was drawn to economics as a philosophical science, the puzzles of economics as understood by my peers in the discipline also intrigued me. The most fundamental puzzle was understanding how markets work. The textbook presentation didn’t seem to explain how the market economy came to be, just what the optimal result would be if the market did all its work.  There was no real theory in the textbook of the working of economic forces, only a presentation of the consequences that follow from economic forces having worked.  This was very unsatisfactory to me and became an obsession to fix in my mind and in the minds of others. Sennolz turned me on to the discipline in my youth, and I have never become bored thinking, talking, or writing about economic science and its history, method, and application. I am a fan of economics and economists, just as I am a life-long fan of the New York Yankees.  In fact, I think of the Austrian School of Economics as the New York Yankees of economic science.  The Austrians have arguably won more major debates than any other school of thought- the methodenstreit; the socialist calculation debate; the monetary theory and policy debates; the methodological disputes on excessive formalism, naïve empiricism, and problems of aggregation; and the benefits of trade, migration, and development for the improvement of the least advantaged and most vulnerable populations on earth.  Unlike the Yankees, however, many fail to recognize the championship pennants of Austrian economics. This fueled my curiosity to understand how such a disjoint between perception and reality could persist among economic scientists. So the sociology of the profession has been as much a subject of my attention as the substantive contribution to economic science of what I have called mainline economics.  Mainstream economics reflects the current fads and fashion in the science, whereas mainline economics reflects the enduring substantive principles that the science teaches us about how the world works.  Austrian economists explain how the world works, mainstream economists explain how the economics profession works – those are different things.  Learning that was a long and difficult awakening process. My philosophical interests, analytical interests, and sociological interests are all interconnected. And again I found my roots at Grove City College, in this instance the reading of Walter Miller’s A Canticle for Leibowitz, which taught me that knowledge does not just get recycled, but instead moves in fits and starts, with periods of progress stopped by periods of retrogression.  Knowledge processes move through time in a sort of corkscrew shape – progress is made, but sometimes we cycle back only to move forward.  Knowledge can be lost and must be found again before we can progress.  Economics is particularly prone to this problem because, as Hazlitt taught in Economics in One Lesson, sound economics is built up through long chains of reasoning that many cannot or will not follow, and in the gaps vested interest groups will exploit the situation to push through their preferred narrative in the hope of pursuing their agenda.  This was indeed the case during the period from 1920-1980 as we debated the merits of socialist economic planning – despite the evidence of economic deprivation and political tyranny.  In the 1980s, the evidence against the socialist experiment mounted to such an extent even the most stubborn minds had to concede the points raised by Mises and Hayek.  My early work as an economist was precisely on this topic, and my first three books detail the history, operation, collapse and transition from the socialist economy in East and Central Europe and the former Soviet Union. How did economists get such a big experiment wrong?   The Academic Life How does one pursue a career in the life of the mind? It is tied to an aspiration to allow curiosity to guide you and to adopt an unquenchable thirst for learning throughout your life.  You must be free to ask questions that might not have answers, let alone easy answers. It is the recognition that knowledge in society grows (remember the corkscrew), and that the more you know the more you know you don’t know. Teaching enables us to interact with young, curious, and compassionate minds eager to understand the world and to work to repair a broken world.  Our job as teachers is to tap into that curiosity, to demonstrate to each generation how the tools of economic reasoning can be indispensable aids in unleashing their curiosity, and disciplining their thought so that they can pursue effectively the compassion they have and desire to do good in the world.   Conclusion My life as an Austrian Economist has been great, and I hope to keep learning and working for decades to come.  Austrian economics properly understood is a growth industry. We are constantly building for a better future and the promise of more and more scientific victories in the years to come.  Being part of that heritage is a privilege.   [Editor’s note: You can read like Boettke- and with Boettke- in our No Due Date subscription book club.] (0 COMMENTS)

When you think of statistics, do you think of a helpful tool for real-world analysis, or does the phrase, “Lies, damn lies, and statistics” come to mind? Regardless of your answer to that question, Jeremy Weber wrote his new book, Statistics for Public Policy, for YOU. In this episode, host Russ Roberts welcomes Weber to talk about it. Weber argues that no statistics textbooks include integration of context and purpose and audience with statistical analysis. That’s a problem. Roberts congratulates Weber for his use of illustrations rather than equations, and describes how he thinks of statistics in university as being more like a cooking class. Weber thinks of them more like vocational education; both are excellent analogies! Which one works best for you? Of course, I have lots more questions I could ask… As always, we’ll limit it to a few, and we hope you’ll take a moment to share your thoughts. As Russ says, we love to hear from you!   1- How is learning statistics in school like a cooking class or learning how to use a chainsaw? What’s wrong with these ways of thinking about statistics? What does Weber mean when he compares concepts that are concept-dependent versus contextless? (Think of statistics versus physics, perhaps.)   2- Is statistical analysis more often used as a weapon or for truth-seeking in the political process? How do you think would politicians would perceive Weber’s book, and why?   3- Roberts asks to what extent you can look at data without considering theory. How does Weber describe the proper relationship between data and theory? How does the increased computing power and quantity of data today make analysis harder? How might analysis today be more shallow at the same time as it has more data behind it?   4- The (in)famous distinction between correlation and causation is raised toward the end of the conversation. Roberts says one of the things he loved about Weber’s book is that he makes a point much deeper than that. What is that point? How ought we to consider the magnitude of causation, and how do analysts use statistical significance as a crutch?   5- Thus far the focus has been on what’s wrong with statistics and the way it’s taught. What did you take from this conversation about how it should be improved? Is a good understanding of statistics a requisite part of civic education? Why or why not?   (0 COMMENTS)

Some people on the right worry that immigration will cause America’s white population to be largely replaced by non-whites.  This hypothesis is sometimes referred to as “The Great Replacement”.  There is a great replacement occurring, but these worriers have things exactly backwards.  (As an aside, this post will not examine the pros and cons of a changing ethnic mix.  Rather, I’ll argue that the feared change is not occurring.) To understand why the Great Replacement theory is wrong, it’s helpful to begin with a bit of American history.  A century ago, people tended to think about the white race in a more narrow fashion.  The original settlers in the 1600s and 1700s tended to be white Anglo-Saxon protestants (WASPs) from northern Europe.  This was followed by a new wave of settlers from places like Ireland, Italy and Eastern Europe.  Although today we regard these more recent immigrants as white, they were initially viewed as being members of a very different ethnic group—what we would call “minorities”.  Over time, they became more successful and assimilated with the majority WASP population.  Here’s a screenshot of some books that discussed how these groups became “white” in a cultural sense.  (Again, I am using race here as a social construct, not a biological category.) Today, the vast majority of immigrants come from Latin America and East Asia.  They are gradually assimilating with the majority white population, often via intermarriage.  In 100 years, the descendants of Asians and Hispanics will be viewed as being just as white as Italian-Americans, Jewish-Americans and Irish-American people are viewed today. My daughter is a good example.  People who meet her for the first time almost universally regard her as “white”.  And yet my daughter’s mother is from China.  Thus in a sense my East Asian wife is being “replaced” by a white daughter.  That’s the actual “Great Replacement”. It is true that there is somewhat less intermarriage between whites and blacks, but that fact doesn’t change the basic picture.  Since 1990, blacks have constituted between 12% and 13% of the US population, about the same as in 1870.  The Great Replacement theory is mostly about the effects of Asian and Hispanic immigration, and that’s where assimilation is occurring at a rapid pace. You will occasionally see predictions of whites becoming a minority at some point in the future.  Don’t believe them.  I’ve seen this sort of prediction off and on for my entire life, and yet in a cultural sense whites are just as dominant as ever.  What changes over time is our concept of what it means to be white.  This category will be continually redefined in such a way as to keep whites in the majority.  I suppose some on the left might view that process with suspicion, but I believe that assimilation is a very positive development.  The greatest ethnic strife tends to occur in countries that do not experience assimilation. (0 COMMENTS)

This is the fourth in my series on the social costs of drug prohibition. You can read part one here (prison-industrial complex), part two (police militarization) here, and part three (civil asset forfeiture).   Prohibition policies are often sold to a willing public on the grounds of crime reduction. This is especially true regarding the rhetoric on violent crime, as public policy has long assumed a causal relationship between drug use and an increase in violent crime. An example of this assumed relationship is the laws banning firearm ownership by those found to be addicted to or unlawful users of controlled substances (McGinty, Choksy, & Wintemute, 2016). The underlying belief is that violence is inherently a psychopharmacological side-effect of drug use. This belief among policymakers persists despite the abundance of research that shows that the majority of drug-related violence is systemic – the result of the exigencies of operating within a black market – rather than psychopharmacological (Goldstein, Brownstein, & Ryan, 1992). Simply put, it is the prohibition that causes the violence at a greater rate than the use of the prohibited substances. The reasons for this should be as obvious to policymakers as they are to economists, sociologists, political scientists and criminologists, yet the paradigm continues. Because law enforcement efforts such as interdiction lessen supply, while demand remains relatively inelastic even with the arrest of drug users, prices increase. This makes the control and protection of both trafficking routes and sales territories more valuable, increasing tensions between rival organizations and gangs. While these competing organizations sometimes enter into agreements, the illegal nature of their activities renders them unable to utilize legal conflict resolution avenues such as courts to mediate disagreements and enforce accords (Castillo & Kronick, 2020). As such, the lure of higher profits makes violence an attractive alternative to honoring low-stake territorial agreements. Antidrug policy, by its nature, creates a tradeoff between lowered supply and increased violence. This would be a policy failure if increased violence were the only negative externality associated with the current drug policy, and as we shall discuss later, a large portion of the violence caused by these policies occurs outside of our domestic borders. We began this series by detailing how the paradigms created by Prohibition informed current drug laws and enforcement mechanisms and looking at the similarities between the two. However, there is one major difference that must be accounted for. Alcohol production occurred domestically, which concentrated the attendant violence to local American cities. This led to a public backlash against the Eighteenth Amendment, resulting in its repeal. Much of the production of illegal substances such as cocaine or heroin happens in other countries, who then traffic the wares into the United States. The result of this is much of the violence caused by domestic prohibition laws is offshored to nations such as Mexico and Afghanistan, thus hiding the human costs that domestic politicians must answer for.  Violent crimes are not the only area impacted by drug policy, however, and the relationship between this set of tradeoffs often goes unnoticed by the public. As noted earlier, there are opportunity costs associated with efforts to interdict the flow of controlled substances, as well as to maximize the incarceration of sellers and users. Grossi observes that the inflow of inmates convicted of drug-related crimes has a crowding out effect, lessening the space available to incarcerate those who have committed other types of crimes. Additionally, when conducting a pooled analysis of 51 separate state-level (including D.C.) regressions utilizing the FBI’s  seven  Index  Crimes as a baseline measure, Defina and Arvanites (2002)  find a positive correlation between drug arrests and an increase in five of the seven Index Crimes in a majority of states. While this is not uniform across states – i.e. some states see a reduction in crime across the board as a result of drug arrests – in aggregate, the more vigorous the policy of drug enforcement, the more crime there is in other areas such as property crimes and theft. In 2020, the Centers for Disease Control and Prevention (CDC) reported 92,700 fatal overdoses in the U.S.; an increase of 29% over 2019. This rate of roughly 28 per 100,000 people is almost double the rate of 14.7 per 100,000 people in 2014. Much of this explosion on overdoses has been fueled by the opioid crisis. Recall from the discussion in my previous post the concept of the Iron Law of Prohibition, the economic principle which holds that artificially imposed barriers to entry and supply exert pressure to simultaneously minimize volume and maximize profit. Whereas drugs such as cocaine, heroin and methamphetamines impose transaction costs related to illegal trafficking, legal opioids were a readily available, and initially legal, substitute for illegal opioids such as heroin. Conversely, efforts to criminalize the nonmedical use of legal opioids such as oxycodone has increased the trafficking and usage of readily obtained synthetic opioids such as fentanyl. Gottschalk (2023) provides a fascinating retrospective on how the opioid crisis evolved. She traces its beginnings to the 1980s moral panic regarding crack, a cheaply produced derivative of cocaine that provided a convenient justification for politicians to engage in “tough on crime” rhetoric. Despite a lack of hard, valid evidence, this rock upon which to build a political religion of expanded prohibition claimed that this new scourge was instantly, inevitably addictive, invariably caused violent, antisocial behavior in users, and would birth a new generation of addicted, disabled babies that would need costly medical care for the entirety of their lives. While separable from the later opioid crisis itself, this provided the backdrop against which illegal synthetic opioids could both flourish and provide a new enemy for policymakers to rally against. Meanwhile, pharmaceutical firm Purdue Pharma, which marketed itself as a leader in cutting-edge pain management, led the charge in convincing regulators to greenlight the sales of its synthetic opioid OxyContin in 1995. OxyContin, and other variants of oxycodone, proved to be highly addictive, which the manufacturers of these synthetics knew beforehand. In conjunction with coconspirators such as Walmart, Walgreens and CVS, these pills were heavily marketed, especially in rural communities, where doctors readily prescribed them to neatly anyone complaining of pain. Soon enough, regulators and policymakers recognized that an epidemic was on hand and sprang into action. Predictably, instead of treating the rising tide of addiction and overdoses as a public health crisis, they responded by seeking to limit the supply of these drugs, restricting the number of pills doctors could prescribe, to whom they could prescribe them, and creating a prescription monitoring program which criminally prosecutes physicians who exceed prescription limits. Supply always eventually follows demand, and in the absence of the preferred product, substitutes will fill the gap. In this case, users addicted to oxycodone and similar synthetic derivatives turned to extant opioids available on the street, namely heroin. While, of course, interdiction efforts limit the available supply of heroin to a degree, it is possible to increase the potency of the supply at hand. Enter fentanyl, a synthetic opiate that is both accessible with a legitimate prescription domestically, and relatively easy to smuggle across borders. Fentanyl can be up to fifty times more potent than heroin, which naturally increases the potency of drugs laced with fentanyl. The result has been a marked increase in the occurrence of overdoses, both fatal and nonfatal, as well as communicable diseases spread by the sharing of needles (Meyer, et al., 2023), (Leyton & Krausz, 2024). The tragedy lies in the fact that none of this is necessary.   Tarnell Brown is an Atlanta based economist and public policy analyst. (0 COMMENTS)

Because the price control system was incomplete in that it didn’t cover every part of the U.S. oil market, the price controls were rarely binding. When they were, in the winter of 1972–1973, winter of 1973–1974, and early 1979, shortages occurred. During the rest of the 10 years, the price controls and entitlements program mainly acted like a tax and transfer system. Economist Joseph Kalt found that from 1974 to 1980, federal oil price controls (primarily through the old oil entitlements program) transferred $43–$153 billion annually (in 2023 dollars) from domestic crude producers to refiners. Because this lowered the marginal cost of production of refined products, some of the transfer reduced product prices and benefited consumers. Kalt estimated that 60 percent of the transfer stayed with refiners and 40 percent was passed through to customers. The price controls and the incentive to import created by the entitlements program reduced domestic production by 0.3–1.4 million barrels per day. And the wealth losses of crude oil producers exceeded the gains obtained by refineries and crude oil consumers. The difference between the two figures is the economic value that price controls destroy—what economists call “deadweight loss”—which Kalt estimated to be between $3 billion and$15 billion annually (in 2023 dollars) from 1975 to 1980. Kalt’s analysis assumed that world oil prices were unaffected by U.S. controls. But economist Rodney T. Smith calculated that EPCA price controls increased world crude oil prices by 13.35 percent. And economist Robert Rogers, who incorporated Smith’s findings into an econometric model, found that the EPCA increased domestic oil prices. This is an excerpt from one of my favorite articles in Ryan A. Bourne, The War on Prices: How Popular Misconceptions About Inflation, Prices, and Value Create Bad Policy. It’s Peter Van Doren, “Oil and Natural Gas Price Controls in the 1970s: Shortages and Redistribution.” I remember trying to figure out in December 1974 and early 1975 how the “entitlement” program would affect prices. I was sharing thoughts with Richard Sweeney and Tom Willett at the U.S. Treasury. I had got to know them both in the summer of 1973, when I was a summer intern at the Council of Economic Advisers. The person who ultimately figured it out was my fellow UCLA graduate student Joe Kalt. I’ve titled this post “Some of the Awful Effects of Price Controls on Oil” because the worst effects were long-term: CAFE mandates on fuel economy for cars and trucks being the main one.     (0 COMMENTS)

I live in Alabama, where college football is the major religion. The two major denominations are the University of Alabama Crimson Tide and the Auburn University Tigers. They have fought a storied and ludicrously overwrought rivalry since 1893, except for the four-decade gap between 1907 and 1948 when they didn’t play one another because the two schools hated each other so much. Suffice it so say Alabama fans (like me) don’t go out of their way to shop for Auburn merchandise and vice versa. Unless, of course, there is money to be made.  In his classic study The Economics of Discrimination, the Nobel Prize-winning economist Gary Becker introduced the term “taste for discrimination” to describe someone’s preference for avoiding people based on arbitrary characteristics like race and gender. I’d like to explore the concept in a less morally and emotionally charged setting: eBay. Since around mid-February, I’ve been selling things on eBay for fun, (accounting) profit, and inspiration. Markets push me to overcome my morally innocuous prejudices, and this is a case study of how markets push us to overcome our morally serious prejudices. The pursuit of fun, profit, and a few economics lessons curbs my “taste for discrimination” against people who don’t like the things and teams I like. I notice things I otherwise wouldn’t, and I help people I might not otherwise consider. Until a few weeks ago, I had bought exactly one Auburn shirt in my life, when I visited to present some research in 2008. I have several Auburn shirts, jerseys, and hats in my garage now awaiting the right buyer. My taste for discrimination against the Auburn faithful–or at least my indifference to their wants–is curbed by my even stronger taste for a few extra dollars and some classroom examples. But what does the morally trivial discrimination of something trivial like college sports fandom have to do with morally serious discrimination like racism? Morally, I don’t think they’re comparable. Sports rivalries are all in good fun, most of the time. Racism is wicked. Logically, however, the economics of discrimination against people with the wrong diplomas on their wall resemble the economics of discrimination on the basis of skin color, and just as I don’t discriminate against Auburn fans as much when it is costly, racists don’t discriminate as much when it is costly. Will the profit motive change racists’ hearts? Not directly, though it encourages a kind of “exposure therapy” that likely erodes it. Does it excuse or justify racist discrimination? No, but efforts to change hearts and minds by passing laws and pointing guns have ended poorly. Maybe profit-seeking is a base and vulgar motive, and making a few dollars won’t restore a corrupted soul. Profit-seeking free enterprise, however, mutes the darker angels of our nature by making it more costly to act on prejudice.   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)

Another day, another labor market intervention!  Recently, the Biden administration has announced new rules regarding overtime pay and salaried employees. Generally, salaried employees are paid a flat rate, not paid by the hour, and as such don’t get traditional overtime pay. But legislators have decided that lower-paid salaried workers should also get overtime pay. This itself isn’t new – what is new is that the Biden administration is increasing the salary cap for this rule to apply. According to the Labor Department, starting July 1st, salaried employees making less than $43,888 per year will now get overtime pay, and by 2025 that will increase to $58,656.  There are a number of concerns one might raise. This rule will make less experienced workers more expensive to hire than they were before. Someone you might have been willing to hire in an entry level position for a $40,000 per year salary may suddenly become a less attractive prospect – leading you to favor hiring someone with a more established work history and better skill set. Anecdotally, I frequently hear people complain about how hard it is to find even entry-level jobs, and it’s not helpful to such people to pass laws that make it even more expensive to hire someone for an entry-level position. But perhaps this will be offset by including fewer benefits and perks, instead of hiring fewer entry-level workers. There are multiple margins that could be adjusted.  But what struck me about the Labor Department’s announcement was the following line: “This rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time,” said Acting Secretary Julie Su. I found this very confusing. I have worked salaried positions that were below the minimum caps currently in place. There were definitely times I worked more than 40 hours per week as well. Yet I didn’t demand, or expect, overtime pay, because I had already agreed to a set salary as part of the process of negotiating for the job. If someone then said to me “Oh no! You put in more than 40 hours a week but didn’t get additional overtime pay for it! A promise has been violated!” I would have just stared at them and wondered what on earth they were talking about. I was being paid the wages I was promised – there was never any agreement between me and my employer that workweeks extending beyond 40 hours would yield extra pay. So what promise was being violated? Who made that promise?  Secretary Su is talking about restoring a promise that was never made by anyone actually involved. If I had started receiving payment below my negotiated salary, that would have been a violation of a promise. And that’s a role government can usefully serve – if my employer had promised me a particular salary in the employment agreement, but didn’t follow through, the government could appropriately take steps to restore the broken promise. But this new rule isn’t anything like that. This isn’t the government enforcing an existing promise (or contract) that had been made between two consenting parties. This is the government stepping in to a promise that’s being upheld as agreed, and forcefully breaking the promise after the fact. Secretary Su’s actions are better characterized by the words of Darth Vader in The Empire Strikes Back: “I am altering the deal. Pray I don’t alter it any further.”  (0 COMMENTS)