Who defines and enforces property rights? If you are the average person, an undergraduate student, or even a mainstream economics professor, that answer is easy: the government. Look it up! Municipal and county governments determine the deeds to your property and various usage rights including wetland setbacks and easements. State governments create regulations that affect residential and commercial property and how businesses may go about their business. And the federal government controls patent and copyright protections, sets environmental policies, and enacts many other rules determining how one can use real estate and intangible assets. Sometimes property rights are not well defined, particularly when some new “thing” arises from technological innovation. The explosion of the internet in the 1990s posed a challenge to the ownership of information. Artificial intelligence is doing something similar today. But even when such novel situations arise that require defining ownership and usage, we still reflexively defer to government as the primary (if not sole) source for defining property rights. But what if I told you that there was a bigger and more amorphous entity that determines who owns and how we use all the stuff and junk in our daily lives? And what if I called that entity “civil society,” the spontaneous order of social norms, values, conventions, and rituals that coordinate human interaction without centralized direction? Would you want to know how that works? If yes, allow me a rather trivial example to illustrate the importance that civil society plays in defining property rights. Who Can Take the Shampoo? “Everyone knows” that hotel guests are allowed to take home the small bottles of shampoo and conditioner provided for individual use, not to mention lotion and mouthwash at fancier resorts. Admittedly, I love collecting them and possess several bins of diminutive aromatic toiletries. But recently, major hotel chains have moved away from individualized-use shampoo, substituting large dispensers attached to shower walls. This is ostensibly to minimize the waste and environmental damage that single-use bottles cause. But here is a question that I posed to several very smart political economists at a recent workshop I attended at Wabash College: Is it permissible for hotel guests to take the large dispenser bottles of shampoo and conditioner home? The immediate answer was “no!” But I prodded them, “Why not?” The initial answer was that the bottles were attached to the wall. I quickly volunteered to teach them how to dismantle these wall mounts; it isn’t hard. (Don’t ask how I know this.) The next answer from a prominent scholar proves my point above about our reflexive deference to government. “It is against the law to do that,” he claimed. I challenged him to show me the exact code stating “thou shalt not take thine hotel’s large bottles of shampoo.” While there are indeed laws against theft, there are no laws that specifically refer to hotel shampoo. No hotel that I know of calls the police on customers for taking the small bottles, which are as much the hotel’s initial property as the large bottles. So why is it a matter of just size? Taking small toiletries is fine, but snatching larger ones is felonious? Who says?!? What is and is not theft (i.e., what are the property rights) is what is under contention here. I pushed the matter further by asking if it was acceptable for me to bring small empty bottles on business trips and fill them up with shampoo from the wall dispensers. Here, I would only be taking the amount of soap that I would have taken if the hotel still provided the six-ounce tubes. The reaction of the intellectuals gathered was one of… well… bemused horror? What kind of ne’er-do-well brings empty bottles to pilfer hotel shampoo?! (I invoked the Fifth Amendment.) It didn’t stop there. I asked if anybody took home the half-used roll of toilet paper (a valuable commodity back in the pandemic spring of 2020). How about the towels? “Wait, you can’t take the towels because those can be washed and reused!” Fair point, but can’t small bottles of shampoo be washed out and refilled? “Gill, you’re being ridiculous.” While my questions over breakfast may have seemed silly, it so happens that those same examples became the empirical fodder of discussion for one of the papers being presented at the workshop. The trivial nature of toiletries became the focus of a broader intellectual debate. (For those interested in great debate, I encourage you to toss these questions to your friends and family to see their reactions.) Political Economic Explanations of Property Rights All the questions regarding hotel amenities above are about property rights. As I have yet to fully define the term, property rights are the socially agreed-upon rules about who owns a particular asset and how that asset can be used. Sometimes social agreement comes via government decree. Having paid off my mortgage, I legally own the title to my house and acreage, although my county government has specified that I cannot construct any building within 500 feet of the stream near the back of the property. My rights are not absolute, and I must conform my behavior to a government regulation. That’s the easy political economy explanation—I own and can use what the government tells me I can. But what about those hotel shampoo bottles? The scholar who suggested that one cannot take large bottles of shampoo because it is the illegal also noted that we cannot take the hotel mattresses home. Good point; I had never thought about doing that because most mattresses are hard to fit into a suitcase. Moreover, mattresses are expensive and time consuming to replace; a hotel would likely track the guest down and either force them pay for the mattress or call the authorities to report a dastardly bedding theft. “A claim on the use of an asset is only as good as one’s ability to monitor and enforce any misuse of that thing.” Here we have an economic explanation for defining property rights that conforms to the thinking of eminent scholars such as Harold Demsetz or Armen Alchian. Property rights are defined by the costs and benefits of communicating, monitoring, and enforcing rules. A claim on the use of an asset is only as good as one’s ability to monitor and enforce any misuse of that thing. As such, it is not just a matter of creating a formal rule, but of communicating that rule to others and somehow ensuring everybody obeys. To that end, the costs of creation, communication, monitoring, and enforcement all affect the actual nature of a property right. No hotel manager will find it cost effective to track down someone taking six ounces of hair conditioner. However, they will go after you if you take the mattress or television as those assets are costly to replace. Understanding the costs and benefits of enforcement, we can see why the property rights over small bottles of shampoo shift de facto to the hotel guest. Likewise, there is a regulation in my state that homeowners cannot capture and store the rainwater falling on their land (as it seeps into a underground watershed considered to be communally owned and managed by the government). However, I know that bureaucrats will not be policing my small 10-gallon rain barrel used to store water for my plants in the summer (and they openly acknowledge that). It is not worth the cost of policing such de minimus transgression, thus I de facto own ten gallons of rainwater each year despite the official policy against it. But what about that murky middle ground befuddling my academic colleagues? Will a hotel chase after you if you take the large shampoo dispensers? Or pump the shampoo into a half dozen smaller bottles? Or grab a half-roll of toilet paper for home use? Probably not. Some fancy hotels provide fluffy robes for room use but place a notice that they are not to be removed (or that they can be purchased upon departure). As the asset in question becomes more expensive to replace, the benefits of policing also increase shifting the de facto ownership clearly to the hotel. Clear communication about who owns what is important in this murky zone. (Note: There are websites informing travelers that they can take “complimentary” items provided in hotels, but they don’t define what “complimentary” is, which is a statement of a property right. It is best to ignore those pages and just refer to what you learn below.) A Civil Society Explanation While government regulation and the costs and benefits of enforcement over an asset help explain how property rights are inevitably defined, there is yet another explanation. And this gets to the issue of the toilet tissue. While I stumped my colleagues about whether it was acceptable to fill my own bottles with dispenser shampoo, there was a universal revulsion that anyone would think of taking the toilet paper home. They all thought I was weird for even suggesting it! And therein lies the other answer for who decides property rights—civil society. As it turns out, everybody (and nobody in particular) really decides how we allocate and use different pieces of property encountered in our daily lives. Despite our first reaction that governments define property rights, it would be impossible for any government to do so completely; there are just too many things used in so many different ways that formally codifying rules would be overwhelming. Moreover, how many officially promulgated by government property rules do you know? Not many, I’m guessing. Few people (including lawmakers) read the Federal Register where such rules are defined at the national level. States, counties, and municipalities have their own code books that are also duly ignored by the public. But without knowing the formal government-defined property rights, we all somehow manage to get by because we rely upon a set of social norms and conventions to guide our actions. Consider a city sidewalk. While technically “public property” owned by the government (or “the people”), citizens make private temporary claims on portions of the walkway all the time and in changing ways. When walking in large groups, we yield the right of way to anyone in a wheelchair who needs extra maneuvering space. Shopkeepers keep sidewalks clear to foster foot traffic and shoo away loiterers or buskers. Of course, there are formal regulations that may govern the use of sidewalks (e.g., laws against loitering or begging), but for the most part our use of this important asset is governed by common sense and an appeal to what is “normally” expected (emphasis on the “norm”). There are other examples I provide my students with. Choosing seats in a lecture hall on the first day of class is usually determined by the convention of first come, first served, the most common cultural rule for allocating open access (public) resources. Nonetheless, students will cede specific seats to left-handers or those with a disability needing a front row seat. These are the norms of civil society, and they define how important assets are used. Enter the Impartial Spectator The beauty about property rights being defined by civil society norms is how they are enforced. Sometimes, we resort to shaming individuals for violating common norms of property use. A side glance or a “tsk tsk” is sometimes all we need to get a group of people to walk single file in a crowded hallway or not take two chairs for themselves and their jacket in a crowded conference room. Continued violations may result in ostracism. Punishment isn’t necessarily pre-determined as in a formal legal code but is usually adjusted to meet the circumstances. Flexible justice prevails. But property rights are also self-enforced. As Adam Smith noted in The Theory of Moral Sentiments, humans want to be loved and be lovely; we want others to think well of us by conforming to reasonable social expectations. And when it becomes difficult to know who might own a particular piece of property or how it should be used, we often resort to what Smith calls the impartial spectator. Here, we look at the situation from the outside and ponder how other individuals would be perceived if they made various choices. Hopefully, after performing this assessment, an individual chooses the most socially-acceptable course of action, gaining the esteem of others. This works quite well. Knowing that my colleagues think it strange to take toilet paper from the hotel, I choose not to do so. Social norms dictate such action would bring disapproval upon myself. Notice how strongly this works. While it is unlikely that any colleague of mine would ever know that I put toilet paper in my suitcase, I nonetheless abstain from this action (de facto making the hotel the ultimate owner of the unused tissue, even though it is “complimentary”). If we perform a thorough accounting of our daily choices with respect to different things (i.e., property), it is astounding how much social norms, not formal law, guide our daily decisions. The other beautiful aspect of social norms is that we are all part of the process of contributing to and communicating those norms, as well as monitoring and enforcing them. It is anarchy in action;1 the good kind of anarchy and not the “burn down Portland” kind. The impartial spectator operates in this arena and sensitizes individuals to how their choices impact the broader society. To channel Ronald Coase, we voluntarily internalize our externalities by way of Adam Smith’s “man within the breast”2 and not via “the man of system.” For more on these topics, see “How Property Rights Solve Problems,” by David Henderson. Library of Economics and Liberty, April 2, 2012. “What Arnold Schwarzenegger Can Teach You About the Economics of Property Rights,” by Rosolino Candela. Library of Economics and Liberty, February 6, 2023. “Conscience and Moral Rules in Adam Smith,” by Edward J. Harpham. AdamSmithWorks, August 11, 2021. Anthony Gill’s EconTalk Archive. Norms do slowly change through an uncountable number of tiny negotiations (involving social approval and disapproval) of human action over time. (See Friedrich Hayek’s discussion of this in his epilogue to Law, Legislation, and Liberty.3) It is how we define and redefine “the common good,” even though all may not agree. But this is truly democratic (more so than voting) in that we all become involved in crafting, recrafting, promulgating, and enforcing the property rights that ensure free markets work and that society prospers. For those seeking to promote human flourishing, it is worthwhile to consider not only how to draft formal rules, but to think deeply about how our civic culture determines prosperity. That is something to think about next time you’re shampooing your hair at the Sheraton. Footnotes [1] Anarchy in action is the idea that a viable, stateless society is possible—not through impersonal markets or state enforcement—but through the cohesive, egalitarian bonds of small-scale community relations. This comes from Michael Taylor’s book, Community, Anarchy, and Liberty. (Cambridge University Press, 1982.) [2] Daniel B. Klein, Erik W. Matson, and Colin Doran, “The man within the breast, the supreme impartial spectator, and other impartial spectators in Adam Smith’s The Theory of Moral Sentiments.” History of European Ideas. Volume 44, 2018. [3] F.A. Hayek, Law, Legislation, and Liberty. University of Chicago Press, 2024. *Anthony Gill is Professor of Political Science  at the University of Washington, as well as a Distinguished Senior Fellow at Baylor University’s Institute for Studies of Religion. He is the author of Rendering unto Caesar: The Catholic Church and the State in Latin America and The Political Origins of Religious Liberty, the latter earning the American Sociological Association’s Distinguished Book Award. His research spans political economy, public choice, and the role of social norms. A recipient of UW’s Distinguished Teaching Award, Gill is also known for creating the Research on Religion podcast. (0 COMMENTS)

A central argument of this book is that episodes involving mass violence that contribute to an atmosphere of social unrest and political instability are likely to increase national elites’ willingness to invest in primary education in order to prevent future threats against the state… they lead elites to conclude that repression and redistributive concessions alone are insufficient to prevent social disorder. –Agustina S. Paglayan, Raised to Obey: The Rise and Spread of Mass Education.1 (page 108) In her book Raised to Obey, Agustina S. Paglayan presents the thesis that governments introduced mass education not to empower their citizens, but to control them by indoctrinating them as children. She argues that this thesis is supported by evidence concerning the timing of when states introduced mass education, the arguments that persuaded governments to provide mass education, and the training and direction that governments provided to teachers. By the 1800s, ruling elites were finding that conventional tools of social control, such as a national church, were not sufficient to quiet their populations. Revolutionary fervor emerged as a threat. Rulers became attracted to the theory that primary education could be used to train subjects to obey. Mass education is a relatively recent phenomenon. Paglayan writes, While in the 1850s only one in ten children were enrolled in primary schools worldwide, by 1940 a majority of children had access to schooling, and today, almost all countries provide universal or near-universal primary education. (page 12) She argues that in Europe the spread of primary education preceded industrialization and democracy. The leader was Prussia, which established comprehensive education regulations in 1763… while still maintaining an absolutist regime and an agrarian economy. By around 1850, a majority of children in Europe were already enrolled in primary school. (page 13) In the world as a whole, she summarizes data from more than one hundred countries: … governments began to systematically monitor primary schools on average sixty-five years before democratization. (page 48) Mass education also was not closely tied to industrialization. England was an industrialization leader and education laggard, whereas Prussia was the opposite…. In the early 1850s, many decades after England had begun to industrialize, less than 9 percent of English children were enrolled in primary school. (page 62) The United States was not a leader in primary education, either (although when enrollment began to rise, it did so rapidly). Teacher training was done by so-called Normal Schools. The first one to be established in the United States was in 1839. By that date, “there were already 264 Normal Schools throughout Europe.” (page 59) “Influential philosophers, including Thomas Hobbes, John Locke, and Jean-Jacques Rousseau, were confident that human behavior could be shaped by education.” Influential philosophers, including Thomas Hobbes, John Locke, and Jean-Jacques Rousseau, were confident that human behavior could be shaped by education. Hobbes and Rousseau, in particular, emphasized the need to train children to be obedient. Hobbes argues that education is what makes man fit for society and what ensures social order…. The “instruction of the people in the essential rights of sovereignty” by the sovereign is therefore “not only his duty, but his benefit also,” because this education provides “security against the danger that may arrive to himself in his natural person from rebellion.” (page 95) She quotes Rousseau in his Discourse on Political Economy, writing that “there should be laws for childhood that teach obedience to others” and that, “Public education under rules prescribed by the government, and under magistrates prescribed by the sovereign is, then, one of the fundamental maxims of popular or legitimate government.” Rousseau’s work illustrates the different types of education that Enlightenment philosophers envisioned for elites versus the rest…. Emile, however, is not a book about mass schooling; it focuses on the upbringing of a rich man’s son by his private tutor. The pedagogy… differs from the idea he advances in other works that the state should educate all children for the sake of cultivating obedience. (page 99) The Prussian model for schooling, which was admired and adopted elsewhere, was explicitly authoritarian. One of its primary theoreticians was Johann Felbiger. A school manual for teachers written by Felbiger in 1768 instructs teachers that every student must memorize the following answers: Q: Who is subject to the power of the ruler? A: Everyone… Q: From whence comes the power held by the ruler? A: This power comes from God. Q: Whom does God ordain? A: Everyone who holds authority. Because all who exercise authority are ordained by God, subjects must be submissive, loyal, and obedient, even to a ruler not of our religion… Q: What does it mean to resist authority? A: To resist authority is to rebel against the divine order. (page 104) Also in Prussia, … the king himself expressed the concern that if peasants learned too much, they might reject their place in society and migrate to the cities in search of better opportunities. The solution, according to his policy advisers, was to establish separate mandatory curriculums for rural and urban schools so that what children learned in rural schools would prove worthless in getting a city job—an approach that was adopted by other countries. (page 197) Paglayan carefully reviews the historical development of state-run mass education. She claims that, … the main goal driving the creation of national primary education systems was to shape the moral character of the lower classes to eradicate their “barbaric,” “violent,” “anarchic” predisposition and thus prevent future episodes of mass violence. (page 123) Because rulers saw education as a critical tool for maintaining order, they took a strong interest in how schooling should be undertaken. To successfully expand primary education in accordance with the state’s goals, states also needed a large number of teachers who had both the willingness and ability to implement the state’s educational agenda—an “army of teachers.” What was to be done to ensure that teachers would be loyal agents of the state inside the classroom? Here, central governments became directly involved in training aspiring teachers through state-controlled institutions often called Normal Schools, a name that alluded to their goal of normalizing or standardizing every aspect of teaching. In addition, most national laws of the nineteenth century established teacher certification requirements, including the requirement for aspiring teachers to show proof of their moral uprightness. (page 184) For me, Paglayan’s thesis raises a number of questions. • Did the state-sponsored primary schools achieve their intended goal of indoctrinating the masses? • If so, did they achieve this goal too well? Does this explain the otherwise puzzling fact that by 1914 the masses were enthusiastic supporters and willing participants in the brutality of the First World War? • To what extent do ruling elites continue to control primary schools today? • To what ends do today’s elites try to shape schooling? • How significant is it that schools of education in America (the contemporary equivalent of Normal Schools) are far to the left? • Is state control of schooling still necessary to ensure social order? • What would society look like without heavy state involvement in primary schooling? For more on these topics, see “Is State Education Justified? An Appreciation of E. G. West’s Education and the State,” by Kevin Currie-Knight. Library of Economics and Liberty, April 6, 2020. Diane Ravitch on Education. EconTalk. “Educational Despotism,” by Richard Gunderman. AdamSmithWorks, September 1, 2021. Her thesis is that government’s interest in primary schooling was to indoctrinate children to obey. Other histories of schooling tend to tell a much more benign story. If Paglayan is correct, then libertarians ought to be even more inclined to make the case for separation of school and state. Footnotes [1] Agustina Paglayan, Raised to Obey: The Rise and Spread of Mass Education. Princeton University Press, 2024. *Arnold Kling has a Ph.D. in economics from the Massachusetts Institute of Technology. He is the author of several books, including Crisis of Abundance: Rethinking How We Pay for Health Care; Invisible Wealth: The Hidden Story of How Markets Work; Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy; and Specialization and Trade: A Re-introduction to Economics. He contributed to EconLog from January 2003 through August 2012. Read more of what Arnold Kling’s been reading. For more book reviews and articles by Arnold Kling, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

One common criticism of capitalism is that it has sparked an epidemic of loneliness. This is often attributed to the individualistic nature of capitalism, and to the fact that markets have replaced a variety of more personal and communal connections with commercial activities. Karl Marx indeed expected that this trend will go as far as replacing even family relations and friendships with commercial interactions. How could that not make people more lonely? And yet, the reason why markets have been expanding into personal life is that markets provide a certain convenience. Instead of having to deal with a community, which will often have somewhat inconvenient (or downright oppressive) rules, you can now try to do things on your own, increasingly in virtual space, by finding willing partners who share your views and preferred terms of interaction. In the process, however, you as an individual may be losing something important, a sense of meaning that only genuine community can bring. The cost of choosing this market convenience is loneliness and losing a more profound sense of happiness that can only come from belonging. And because so many people get temped by this convenience, the argument goes, we are now experiencing an “epidemic of loneliness”. This sounds plausible, but I want to offer a different, simpler and, I think, better, explanation for this kind of phenomenon. The explanation that I have in mind is better equipped to understand how far reaching the issue is, and to explain the problem without abandoning the value of individualism, and without undermining our ability to be critical of the oppressiveness of many communities. This explanation is based on how improvements in our technologies for search lead to an over-optimistic increase in our standards of quality. Better search can, paradoxically, lead to the subjective perception that the search results are worse. How Do People Find Partners? Consider the problem of finding a partner in the 1950s. You would search for a partner within a very small group, your immediate geographical and cultural community. Undoubtedly, there would be many substantially better partners for you even in the slightly larger surrounding area, but your ability to search for them was severely limited. The technology of search, and by “technology” here I mean the entire social environment that facilitates the search, was just not very capable. The technology of search was limited to word of mouth and very short chains (1-2 people) of in-person interactions. Maybe your gregarious sister played matchmaker and found you a wife or husband, but surely there was a wider selection of partners out there that she just didn’t know about. Nonetheless, despite this bad search process, it would often work out just fine. You would choose a partner and have a family. You would be less likely to be lonely than you are today—or at least less likely to admit it in a survey. And yet, you would choose that partner because your field of selection and quality standards would be very low (by our contemporary standards). And often it wouldn’t work out so well at all. Many women in the 1950s would end up with bad husbands and yet not divorce them. Husbands who would get drunk and rape them, occasionally beating them and their children. Husbands who would not do much to help around the house or help raising the children. In the even earlier years of the 20th century the problem of drunken and deadbeat husbands was so widely recognized that factories like Ford adopted heavily paternalistic policies and established a “Sociological Department” which monitored workers’ alcohol consumption and required abstinence as a condition for receiving the famous $5-per-day wage (Snow 2017). This included unannounced visits to evaluate workers’ home conditions. adopted the practice of refusing to give the paychecks to the men working in the factory, and instead handed the money to their wives. When they were handing the money to the husbands, too many of them would immediately drink it away, with severe consequences for their families — and, even more importantly from Ford’s perspective, causing disruptions to the factory production. This is just one example of the paternalistic efforts of early capitalist enterprises. The factory sirenssignals (whistles and bells), calling the workers to show up to work, are a more famous example. The sirenfactory signals wereas needed because the men, previously used to working in agriculture, which did not have such strict time requirements, had to be taught the importance of showing up on time (Thompson 1967). As Thompson (1967) notes, the introduction of public clocks, designed to create a shared concept of exact time, as well as public schooling, operating under a strict schedule, were similarly designed to instill the importance of a precise schedule. By the mid-20th century such severe paternalism waned, as the capitalist enterprises had succeeded in domesticating the men to some extent. Today, most people find their partners online, using dating websites or apps. (See Figure 1.) In many regards, these tools have the exact opposite issues compared to dating in the 1950s. These apps show you a huge pool of potential partners, and, while very far from perfect, they do a better job at matching compared to picking up a random stranger in a bar. These apps are also substantially cheaper than a bar, both in terms of money and time. Going to a bar to pick up someone is not cheap. It takes up a lot of time and has low guarantees of a relevant match. By contrast, with an online dating app, you might spend an hour a day sending messages, which results in many more dates, with higher probability of relevance. In my own case, I found my wife in about one year, during which time I’ve had many more dates than without the app. Figure 1. How Couples Meet in the United States: 1950-2020Source: “How Couples Meet and Stay Together,” by M.J. Rosenfeld, Reuben J. Thomas, and Sonia Hausen. Analysis of original survey data cleaned to not double count couples who first met online. The opportunity cost of going to a bar is also much larger today than in the past—going to a bar means giving up on playing video games or enjoying a personalized service like Netflix. The only exception where the social environment of a bar is still (perhaps) better than private home entertaining is watching sports. The bottom line here is that modern search technology is far better than in the past (although far from perfect) and better adapted to the opportunity costs raised by modern home entertainment. Now, here is where the Marxist critique omits something important. One key consequence of this better search technology is that people’s quality standards go up. Few women today would take the kind of abuse that 1950s women regularly experienced. Why not? Because women have better search and better exit options. It’s not just a change in culture occurring due to persuasion and argument, due to feminism and liberalism. It’s also the result of better technology and of women starting working—in markets! Surely many people in the 1950s already understood that marital and child abuse were bad, but the ability to actually do something meaningful about it was lacking. It was the better search and better exit options that capitalism has brought that truly made a difference. The fact that women became more financially independent thanks to their more widespread participation in the labor market did more for women’s liberation than anything else. Husbands who would’ve been abusive in the past think twice today, because they know their wives have realistic exit options. “The ‘epidemic of loneliness’ can be understood as being caused by standards increasing faster than the actual capabilities of our search technologies.” And here is where my alternative explanation comes in. The “epidemic of loneliness” can be understood as being caused by standards increasing faster than the actual capabilities of our search technologies. The following is a common observation about the problems associated with dating apps: These apps give people, and especially women, the illusion that they have far more options than they actually have. These days, dating apps can feel like an avalanche of options and overtures, much of which is garbage, but people also receive a fair number of legitimate messages. All this can create the impression of an abundance of potential partners. This perceived, but partially illusory, abundance causes many partner seekers to raise their standards to unrealistic levels. This leads to a failure to actually find someone in a reasonable period of time, and to a disillusion with the existing search technologies themselves. When standards outpace search, the lost trust in the existing search technologies understandably leads to a sense of despair and the belief that loneliness is inescapable. Can Search and Standards Be Sync’d? This is a very far-reaching idea: Better search, and, consequently, better exit options, lead to higher standards, but what is the mechanism that makes sure that the standards increase perfectly in-sync with the actual capabilities of the improved search? If better search creates an illusion of abundance, standards will increase too much, and, hence, matching will actually often fail. Paradoxically, better search can lead to worse search results, because people who think the search result is never good enough will continue searching indefinitely, and never settle. The same logic applies to job searches. Online job postings create the illusion of a huge pool of potential workers. As a consequence, the standards have increased. As the joke goes, job ads today look like they want to hire an entire department, not just a single person. Similarly, seeing hundreds of opportunities on LinkedIn creates the illusion of an abundance of available jobs. The disillusion with the results of this search process leads some to drop off entirely off the job market or leads people to be highly dissatisfied with the jobs they have, because they (wrongly) imagine that much better opportunities exist right behind the corner, although they somehow never get them. This kind of divergence between expectations and reality can be very frustrating. It’s not surprising that many employees think they have meaningless jobs. Is Traditional Community Overrated Anyway? It is not an accident that when people are given the choice between individualism and market relations on one hand, and community, on the other hand, most people choose individualism and privacy. We should take revealed preferences seriously. The replacement of traditional communities with opportunistic, fleeting, and overlapping communities based on common interests is good. I don’t want my search options to be restricted to “my community.” I want them as broad as possible, and I want to be able to be part of many different groups at the same time, each group organized based on its own independent reasons. We tend to romanticize traditional communities. But maybe the sense of belonging they provided was a type of Stockholm syndrome, in which you were supposed to love the random community you happened to be born in, although no such community could possibly do a good job satisfying all individuals. Instead, these communities asked for and required their members to downplay and abandon their individual preferences in the name of stability and communal cohesion. This problem with traditional communities should not be downplayed. Furthermore, the fact that all attempts to design “intentional communities” have ended in dismal failures, often characterized by abuse and cult-like problems, is not an accident (Clay 2017). Individualism wins because it is genuinely better, and nostalgia for communitarianism should be viewed with suspicion. To summarize, the argument I’m making here is twofold: (1) The modern search technologies are in fact superior to past communal methods. The nostalgia for the past communities is misguided, and ignores the huge problems those past communities have always had, and the problems that new communities would have today. Whatever one thinks of the claim that capitalism has made people more lonely, the classic individualist critique of traditional communities still stands strong and needs to be grappled with. (2) Modern search technologies are so good that they create the illusion they are far better than they actually are. This illusion induces many people to increase their standards to unrealistic levels, for everything from romantic partners to jobs, which is the actual cause of the “loneliness epidemic” and of people’s discontent with “capitalism” and with otherwise fine jobs. The more readily available information about successful people showing off on social media, and not mentioning their failures, makes the problem worse, increasing the illusion that unusual success is readily available. What Is the Solution to This Problem? On one hand, people will eventually adjust to more realistic expectations. Illusion cannot last indefinitely, although it may last far longer than we would like. As the apocryphal quote from John Maynard Keynes goesput it, “markets can stay irrational longer than you can stay solvent” (Zweig 2011). Dating apps may improve slower than you will lower your expectations to more realistic levels. Moreover, even if error is corrected on average, the distribution of error will always be somewhat spread out, with some people being overly pessimistic (settling too early for too little) while others being overly optimistic (waiting too long to find the ideal partner and job). The nature of this distribution of errors is also unknown, and it need not be a bell curve. If the distribution of errors is a power law, with a long tail of people thinking search is better than it actually is, the social problem we’re facing is even more serious. On the other hand, the other type of solution is to actually make search better. If we’re putting our economists’ hats on, this is the main reason to be optimistic about the future: Economists are usually worried when no one can make money by solving a problem, but, in this case, there are enormous potential profits to be had by inventing better search-and-match algorithms. This means we should expect search to get even better. The profit incentive is actually in place here to mitigate rather than accentuate this problem. So, as people’s expectations temper somewhat, because of their experiences with the downsides of today’s search technologies (in areas like dating, job hunting, etc.), new search will improve. This should bring expectations and reality closer together, diminishing both the loneliness epidemic and the job dissatisfaction problems. Again, the time frame over which this will happen may be disappointingly long, but the trend is still here. For more on these topics, see Noreena Hertz on the Lonely Century. EconTalk. “Tolstoy, Smith, and the Perils of Loneliness,” by Richard Gunderman. AdamSmithWorks, October 20, 2021. “Capitalism and the Common Good,” by Erik Matson. Library of Economics and Liberty, December 7, 2020. We can see this far-reaching issue unfolding before our eyes. In my view, one of the reasons why AI companies have such high market valuations is that search problems are pervasive, and AI is expected to significantly improve search across many domains. People worry about the fake solutions AI might provide to the loneliness epidemic and the labor market issues, i.e., AI partners substituting real people and real relationships, and AI taking over all our jobs. The more optimistic alternative is that AI will greatly improve the available search algorithms, greatly improving both dating and job hunting. References Clay, Alexa. 2017. “Utopia Inc”, Aeon Magazine (Feb 28). https://aeon.co/essays/like-start-ups-most-intentional-communities-fail-why. Rosenfeld, Michael J., Reuben J. Thomas, and Maja Falcon. 2018. How Couples Meet and Stay Together, Waves 1, 2, and 3: Public version 3.04, plus wave 4 supplement version 1.02 and wave 5 supplement version 1.0 and wave 6 supplement ver 1.0 [Computer files]. Stanford, CA: Stanford University Libraries. Available online at: https://data.stanford.edu/hcmst  Snow, Richard. 2017. I Invented the Modern Age: The Rise of Henry Ford. Scribner. Thompson, E.P. “Time, Work-Discipline, and Industrial Capitalism.” Past & Present, No. 38 (Dec. 1967), pp. 56-97 Zweig, Jason. 2011. “Keynes: He Didn’t Say Half of What He Said. Or Did He?” Wall Street Journal (Feb 11, 2011.) *Vlad Tarko is Associate Professor of Political Economy at University of Arizona. This essay is based on the author’s forthcoming chapter in Polycentric Governance from a Philosophical and Political Perspective, edited by Pablo Paniagua and David Thunder (Rowman and Littlefield). For more articles by Vlad Tarko, see the Archive. This article was edited by Features Editor Ed Lopez. (0 COMMENTS)

Book Review of Poverty, By America, by Matthew Desmond.1 I had not planned to read this book. I found the author’s essay on the history of American capitalism for the New York Times Magazine‘s 1619 Project badly wanting, so I passed over Poverty, By America, until one of my students (a sociology major) asked me about it because he was reading it for his Sociology of Poverty course. Matthew Desmond is a passionate writer, but verve and fervor are poor substitutes for sound arguments backed by carefully interpreted data. Desmond’s conviction and moral certitude are clear on every page—a reviewer for The New Yorker writes, “Its moral force is a gut punch”—but his argument is ultimately unconvincing. He comes out swinging, beginning his prologue for Poverty, By America with “Why is there so much poverty in America? I wrote this book because I needed an answer to that question.” The word “By” in his title suggests that poverty isn’t just something in America. It’s in America because of America. But as John F. Early explained in his review for the Cato Institute’s Regulation,2 Desmond is never clear on what he means by “so much,” particularly given that the Organization for Economic Cooperation and Development’s reported poverty line changes by country. Its “poverty rate” is the fraction of the country’s population at or below half that country’s median income, which means comparing countries’ poverty rates using the OECD’s headline measure compares apples to oranges. If we measure every country by the same standard, either the U.S. Federal Poverty Line or half of the U.S. median income, the United States goes from having one of the highest poverty rates in the OECD to having one of the lowest. I doubt, however, that a book titled Poverty, By Scandinavia would have been one of the New York Times’ Notable Books of the Year. Nonetheless, I found myself nodding my head in agreement regularly. Desmond rightly draws attention to where we have earned blame. We pay far too little attention to policies and programs that redistribute income and wealth upward. We don’t think of economically and morally suspect tax breaks and credits (like the mortgage interest deduction) as government benefits, even though there might not be an economic difference between a tax break and a subsidy, despite the linguistic difference. And so, he points to a way Americans “spend” a lot on welfare for the well-off without it looking like we’re doing so. As scholars have pointed out, Americans run many of our social and redistributive policies through special provisions in the tax code. If, for example, you pay $50,000 in taxes and then get a check from the government for $10,000, you’re out $40,000. If you calculate a $50,000 tax bill and then get a $10,000 tax credit, you’re still out $40,000. The money is the same, but the language is different. I think we might be able to agree on welfare reform because the system we have right now is pathological in terms of the incentives it creates, and what’s more, it is more upwardly redistributive than we are inclined to think. Replacing the dog’s breakfast of sometimes self-contradictory welfare programs with an expanded Earned Income Tax Credit would win the hearty applause of most economists. Even if we couldn’t do that, there are plenty of places where we can remove clogs and chokepoints in a dysfunctional system. We part ways on the economic incidence of the Earned Income Tax Credit, which Desmond thinks is subsidizing employers and allowing them to pay lower wages. He’s right, to a point, but if this source is correct and the pass-through is at most 36% of each EITC dollar,3 then workers are still getting the lion’s share of the benefit. And besides, it’s a staple of introductory economics classes that the economic incidence of a tax or subsidy depends on the elasticities of the supply and demand curves, so it’s not clear we can subsidize work without at least some of it going into employers’ pockets. That brings us to the minimum wage, which Desmond thinks should be raised but is at best a very poorly targeted antipoverty program. In a 2015 paper, Thomas MaCurdy shows how higher minimum wages are, if anything, regressive insofar as they transfer income from low-income consumers to low-income workers.4 Desmond repeats the old trope that economists believed the minimum wage caused unemployment because the theory said so before David Card and Alan Krueger blew up the profession by looking at the data. However, empirical studies of minimum wage predate Card and Krueger by decades. Desmond seems to believe the minimum wage is a free lunch, at least for workers. While he cites work by David Neumark and William Wascher, he doesn’t give the criticisms of the minimum wage their due. I don’t expect him to get into the weeds of debates about identification strategies and the like. However, I’m still confident enough that labor demand curves slope downward. Labor supply curves slope upward, meaning higher minimum wages reduce employment and induce people to waste resources searching harder for jobs that are harder to come by. I don’t lose sleep over teaching this. Economists Jonathan Meer, Jeffrey Clemens, and many others have shown that, for example, higher minimum wages mean fewer non-wage benefits and more effort expended searching for work. Desmond rightly takes his fellow progressives to task for displaying Black Lives Matter flags and those “In this house, we believe…” signs while also fighting tooth and nail to maintain exclusionary zoning in the name of protecting the “character of the neighborhood.” Having written an earlier book called Evicted about the trials and travails of getting kicked out of an apartment for not paying your bills, it’s no surprise that Desmond finds housing policy so important. He should be able, I hope, to make common cause with libertarians like Bryan Caplan, who are working to identify and reduce the regulatory burden on new housing construction. Unfortunately, he endorses “inclusionary zoning,” which requires new projects to include a set-aside for “affordable housing”—a nebulous term, to say the least–that acts as a tax on any new construction and that requires builders to gravitate toward units that will generate enough revenue to pay for the below-market “affordable” units. Desmond is also correct about the folly of scapegoating immigrants for all that ails us. Growing empirical research shows that foreigners (whether over here or over there) aren’t taking our jobs. Foreigners over here aren’t bankrupting the welfare state or turning our cities into criminal wastelands. Indeed, the data suggest that even illegal immigrants have lower crime rates than natives. Blaming immigrants is a venerable American (indeed, human) tradition with ugly manifestations during the Progressive Era, where eugenicists and racists thought it necessary to control immigration lest the immigrants pollute the gene pool. “The familiar scapegoats are well-represented, as is the usual hero: government, but this time, a government that does the Will of the People.” Unfortunately, however, Desmond blames the usual list of suspects: corporations, speculators. Republicans, Ronald Reagan. The familiar scapegoats are well-represented, as is the usual hero: government, but this time, a government that does the Will of the People. First, Desmond asks why the richest country in the world has “so much poverty.” It’s a fair question, but it’s unclear exactly what would no longer be “so much poverty.” He doesn’t contextualize some of his numbers and slips back and forth between incommensurate definitions when he wants to make international comparisons. Domestically, he uses the federal poverty line and is aghast that there were some 38 million people in the United States who lived below the federal poverty line as of 2021. It’s a “country” larger than Venezuela and Australia (and, I would add, richer than Venezuela). Any decent person, I suspect, would say that’s 38 million too many, but it’s about 11% of the population–and over the long run, it’s headed in the right direction. Crucially, the story you can tell depends on which endpoints you pick. In Desmond’s book, Ronald Reagan gets a lot of blame, but what is Reagan’s record on poverty? When Reagan took office in 1981, 14% of the population lived in poverty. It had fallen to 12.8% by the time he left in 1989. Should Reagan get credit for this? It increased to 15.1% in 1993 (when Bill Clinton took office) before falling to 11.7% in 2001, when Clinton left office. It was 14.3% when George W. Bush left office in 2009 and then went back down to 12.3% after Obama left in 2017. By the end of Donald Trump’s first term, it was 11.6%. The fraction of the population in poverty has remained stubbornly stuck in the 11-15% range since the late 1960s. Desmond is eager to credit the Great Society with falling poverty; these lower poverty rates reflect the continuation of trends that started earlier. As Early explains, “Had poverty merely maintained its pre-1964 trend, it would have been 9.2 percent in 1974, not 11.2 percent.” Desmond reports many facts, but as Steven Landsburg has explained, nothing is less interesting than a fact unilluminated by a theory. And Desmond’s theory doesn’t go beyond “employers/corporations/landlords/Republicans are mean.” Maybe so. Mr. Potter in It’s A Wonderful Life and pre-conversion Ebenezer Scrooge in A Christmas Carol had rotten souls. But at the risk of sounding condescending, incentives matter much more than intentions, and too often, Desmond makes claims that, if true, imply that the profit-obsessed sociopaths he excoriates are systematically overlooking opportunities to make gobs of money by hiring armies of “underpaid” workers. It’s Schrodinger’s Corporation: simultaneously blinded by the profit motive and blind to the enormous profits they could enjoy by offering better pay and benefits to other firms’ “underpaid” workers and pocketing the still-enormous difference between this slightly higher pay and what the workers produce. We can say something similar about Desmond’s poverty victims suffering “exploitation,” a word he uses loosely. Desmond claims that housing is more expensive in low-income neighborhoods than in higher-income neighborhoods, which means landlords are exploiting the poor. But why don’t the poor who are overpaying for housing in the bad part of town lower their housing costs by moving to the nice part? Desmond’s explanations for why they don’t, which include poor credit histories and episodes of non-payment that mean they get turned down for apartments in the nice parts of town, suggest that what he has identified is a risk premium and not “exploitation.” As he explains, landlords take home profits for many years because bad things don’t happen every year, but all it takes is one large enough riot or natural disaster to turn years of profits into a single year of catastrophic losses. Desmond illustrates his argument with tragic and frustrating anecdotes that raise obvious but unanswered questions his “exploitation” argument can’t answer satisfactorily. He tells the story of Julio (not his real name, obviously), who worked two full-time jobs to support his family and collapsed from exhaustion in a grocery store. Later, he doesn’t have to work as hard due to the higher minimum wage in Julio’s California town. Good for Julio. What we don’t see, however, is the people who can’t supply the hours they want to supply (or get a job at all) because they aren’t productive enough to be employable at the minimum wage. Furthermore, Desmond explains that Julio wouldn’t have the problem of low wages and a porous social safety net if he lived in Denmark. So why doesn’t Julio move his family to Denmark, where he would have higher wages and greater security? The answer is that Denmark wouldn’t have him. Denmark is a lovely place where I’ve spent more time than I’ve spent in any other country save the United States, but it’s also a difficult place to move to legally. The Scandinavian welfare states “work” in part by keeping non-Scandinavians out and maintaining a homogeneous culture of “we’re all Danes (or Swedes, or Norwegians), and we don’t cheat our fellow Danes (or Swedes, or Norwegians).” The Danes are lovely people, Denmark is lovely, and I wear my FC København jersey proudly. However, if the entire world were a large American city, the Scandinavian countries would be the exclusive, highly regulated suburbs with rules written to keep the riffraff out. Some of Desmond’s anecdotes seem calculated for minimum sympathy. There’s the story of a father snorting speedballs at work that doesn’t lead to the obvious conclusion, “don’t snort speedballs at work.” He tells the tragic story of Crystal, who bounced around in the foster care system. It’s a tragic origin story, of course, but it seems like it was at least possible for her to have avoided homelessness and prostitution. She quit high school at 16. She “met a woman at a homeless shelter and secured another apartment with her new friend” (page 12). Great! But then we read the next sentence: “Then Crystal put that new friend’s friend through a window, and the landlord told Crystal to leave” (page 13). So, Crystal lost her apartment for throwing her roommate’s friend through a window. Unless it was a first-floor apartment, this seems like a pretty credible case for an attempted murder charge, not just eviction. Are we to be surprised that this isn’t the sort of tenant a landlord wants? But fortunately, Crystal had a network to fall back on as she “spent nights in shelters, with friends, and with members of her church” (page 13). Great! But a bit later, we learn that she “burned through the remaining ties she had from church and her foster families” (page 13). How, exactly? Poverty, By America is a short book for a general audience, but these seem like obvious questions a general audience would want answered. Desmond at least concedes (perhaps inadvertently) that Crystal isn’t wholly bereft of agency, noting that “Crystal had never been an early riser, but she learned that mornings were the best time to turn tricks, catching men on their way to work” (page 13). That raises another question about the economics and sociology of poverty: how many of her clients would suffer less if they weren’t in the habit of paying for sex en route to work? Desmond criticizes the “success sequence,” touted by conservative think tanks and which says that your probability of living in poverty is very low if you simply finish high school, work full time (at any job, not just a “good job,” as Desmond suggests), and don’t have children out of wedlock. Desmond says, “we might as well be asking that person to just get a different life” (page 40), but presumably, we study poverty and make policy to alleviate it because poor people want different lives. It’s not clear what to do about people like Crystal, who have, it seems, exacerbated poor choices by burning bridges, but it seems like a can’t-miss message for young people who still have time to make “success sequence” choices. And one has to wonder: would Crystal herself advise teenage girls to drop out of school at 16, get evicted for throwing someone through a window, and burn through the remaining ties they might have from church, family, and other relationships, no matter how tenuous? Would she look back and say, “This was inevitable? There is literally nothing I could have done to avoid this?” I doubt it. But here, Desmond’s message to the rock-ribbed and presumably hard-hearted conservative should resonate, at least slightly. If we’re all honest with ourselves, we can all look back at times when something random could have led to very different life outcomes. Think back to when you either made or barely avoided a poor choice. How different would things be had that gone the other way? A sober assessment of our lives should show us that things could be much better, but could also be much worse. But what do we do with that? I walk our dog in Birmingham’s Avondale Park every morning and most evenings. We live in a checkered-but-gentrifying neighborhood where many buildings are empty thanks to city rules and permitting processes making it hard to do anything with them (which helps explain Desmond’s invocation of Birmingham’s apartment vacancies on page 65). Several homeless people live in the park and on the streets surrounding it, and when I want to get annoyed, I just tell myself, “There but by the grace of God go I.” But what do I do about it? I don’t have a good answer. Service and outreach organizations (government and private sector) that provide health care, job training, food, and other services are within easy reach of Avondale Park. Why aren’t they using these services? I don’t know. At the beginning of the book, Desmond writes that “some lives are made small so that others may grow” (page 8). He’s correct, up to a point, and for most of history, the way to get rich was to steal, kill, and destroy. High real estate values are a product of exclusionary zoning and rules that make it difficult and costly to build new housing, but that doesn’t mean Jeff Bezos earns a lot because Amazon workers don’t. As Deirdre McCloskey and I argued in our 2020 book Leave Me Alone and I’ll Make You Rich, the best thing we can do for people is to get out of their way. Stop expecting them to ask permission to try new things, innovate, buy low, and sell high. Desmond wants to outlaw low wages, but while this might mean some people like Julio feel better off, he is silent on the people who will not be able to work if the jobs they can actually do are outlawed. He wants people to boycott companies that offer low wages and lousy working conditions, but would he suggest boycotting U.S. women’s soccer because the U.S. women’s team doesn’t earn what the U.S. men’s team earns? I doubt it. Should we have a more generous welfare state? Once you account for private and government welfare spending, U.S. and Nordic welfare institutions are comparable, and we didn’t get European-style welfare states not because of some sinister conspiracy but because mutual aid societies and industrial sickness funds worked well (Davie Beito’s book From Mutal Aid to the Welfare State and John Murray’s Origins of American Health Insurance make these points clear). He also wants to strengthen labor cartels, known as unions, but unions increase their incomes by shutting out competitors. Unions are great for insiders and not so great for outsiders. It’s not clear that the distributional consequences are desirable. Desmond is right that we would make things much better by eliminating exclusionary zoning and making it possible to build housing more densely, but he doesn’t devote a lot of attention to licensing laws that severely restrict the flexibility of the labor market. I would have been encouraged to see Desmond draw on economics’ work on housing markets, occupational licensing, and immigration to propose radical economic liberalization, but he doesn’t. For more on these topics, see Why Housing Is Artificially Expensive and What Can Be Done About It (with Bryan Caplan). EconTalk. Thomas Leonard on Race, Eugenics, and Illiberal Reformers. EconTalk. “Americans Are Still Thriving,” by Jeremy Horpedahl. Library of Economics and Liberty, October 2, 2023. Poverty, By America is an interesting but ultimately unnecessary and fundamentally flawed book. You can it skip safely if you want to understand poverty and prosperity. To borrow a cliche, what is original in the book is incorrect, and what is correct is not original. Poverty bothers Matthew Desmond to his core; this is commendable. However, anyone who picked up this book and used it as a manual for poverty abolition would be sorely disappointed. Footnotes [1] Matthew Desmond, Poverty, By America. Crown, 2024. [2] John F. Early, “Feeling Poverty But Not Understanding It.” Regulation. Winter, 2023-24. Available online at: https://www.cato.org/sites/cato.org/files/2024-01/regulation-v46n4-in-review.pdf  [3] Natalie Holmes and Adam Berube, “The Earned Income Tax Credit and Community Economic Stability.” Brookings, November 2015. Available online at: https://www.brookings.edu/articles/the-earned-income-tax-credit-and-community-economic-stability/ [4] Thomas MaCurdy, “How Effective is the Minimum Wage at Supporting the Poor?” Journal of Political Economy, Vol. 123, No. 2, April 2015. *Art Carden is Margaret Gage Bush Distinguished Professor of Economics and Medical Properties Trust Fellow at Samford University in Birmingham, AL and a Research Fellow with numerous organizations. I thank ChatGPT 4o and o3 as well as Google Gemini and Grammarly Pro for valuable research and editorial assistance. For more articles by Art Carden, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

Are humans the most intelligent species, or just the most arrogant? NYU primatologist Christine Webb, author of The Arrogant Ape, believes that human exceptionalism is a myth that does more harm than good. Listen as she speaks with EconTalk’s Russ Roberts about how research has skewed our understanding of animals’ capabilities, the surprising inner lives of animals, and how a shift from dominance toward connection with the larger living […] The post Humans Are Overrated (with Christine Webb) appeared first on Econlib.

(This post is part of a series that began with this post.) The overarching theme of Musa al-Gharbi’s book is examining the gap between the ideas most supported by those who are woke and the actions of those same people. While al-Gharbi isn’t overtly hostile to woke ideas as such, he is troubled by how people who are most aggressive advocates of those ideas don’t live in a way that reflects them. This is why his book is entitled We Have Never Been Woke, and not something like “Why Wokeness is Bad.” Given how al-Gharbi argues that wokeness has been used to justify policies that enrich and support members of the symbolic capitalist class, often at the expense of the poor and vulnerable populations the woke claim to want to help, it might be tempting to conclude that the woke simply use wokeness as a cynical ploy to cover up their own greedy desire to keep the plebs in their place. But, al-Gharbi says, this need not be the case. He does not think that the woke are generally insincere in their beliefs: Critically, none of this entails that symbolic capitalists are cynical or insincere in their professed commitments to social justice. We tend to be true believers. This sincerity makes it difficult for the woke to understand why various marginalized groups have increasingly been turning away from progressive politics and instead moving toward embracing the Republican Party: Growing numbers of poor, working-class, and nonwhite voters are growing alienated from the Democratic Party and have been migrating to the GOP. It is difficult for symbolic capitalists to understand these trends because, again, we believe that we represent the will and interests of the marginalized and disadvantaged, while our opponents serve elite interests (and are driven by racism, sexism, authoritarianism, and ignorance). This is not to say the woke elites haven’t noticed the fact that woke progressivism is largely the ideology supported by wealthy white elites while the Republican Party has become much more of a multiracial party of the working class. But this fact tends to be interpreted in a self-serving way – and one that reverses the logic that progressives used to employ when the relative makeup of the parties went in the other direction: As the partisan and ideological alignment of symbolic capitalists has shifted, so has the narrative about what the partisan diploma divide “means.” When professionals and highly educated Americans skewed Republican, Democrats held this up as proof that the GOP was controlled by elites while they were the party of “the people.” Now that the pendulum has swung the other direction, the narrative is that the Democratic Party appeals to the educated and professionals because their policies are simply more rational, informed, and effective. As Stephen Colbert put it, “Reality has a well-known liberal bias.” The GOP, meanwhile, is depicted as the party of ignorant and regressive zealots. Still, that puts the woke in the uncomfortable position of trying to explain why, increasingly, working-class nonwhites prefer the GOP, and have little regard for the policy preferences espoused by the (mostly white) woke elites: In principle, this state of affairs could be defended on the grounds that relatively well-off and highly educated liberal whites—precisely in virtue of their college education and higher rates of consumption of “woke” content in the media, online, and so on—perhaps understand the reality and dynamics of racism better than the average Black or Hispanic person. However, given that many of their preferred approaches to “antiracism” are not just demonstrably ineffective but outright counterproductive, I wouldn’t recommend that anyone try to take a stand on that hill. How do we square this circle? How can it be that the woke are both sincerely committed to bringing about social justice, while also advocating for policies that enrich themselves at the expense of the poor and vulnerable, and that are often contrary to the expressed views of those same people? According to Musa al-Gharbi, the fundamental problem is that woke progressives sincerely desire two different things that are fundamentally incompatible with each other: Members of the symbolic capitalist class want to bring about social justice and support egalitarianism, but they also want to be social elites. They want to hold positions of high prestige (high paying, high status), and they want to climb the ladder and to take steps to ensure their own children will be at least as successful as themselves. But al-Gharbi sees an incompatibility between wanting to bring about egalitarian outcomes and also wanting to be upwardly mobile: Symbolic capitalists simultaneously desire to be social climbers and egalitarians. We want to mitigate inequalities while also preserving or enhancing our elite position (and ensuring our children can reproduce or exceed our position). These drives are in fundamental tension. This tension has defined the symbolic professions from the outset. Both commitments are sincere. Here’s an example of a different form of this dynamic that many people will find relatable. John Q. Hypothetical has a sincere desire to lose thirty pounds. At the same time, he also has a sincere desire to eat lots of really tasty foods. In practice, these desires conflict with each other, but that doesn’t make either desire insincere. If Mr. Hypothetical ends up eating lots of tasty food rather than losing weight, this does not show that he doesn’t really want to lose weight or that his desire to trim down is insincere. But it shows that, if forced to make a choice between a smaller waistline and abandoning tasty food, he prefers tasty food more. In the same way, al-Gharbi argues that while the woke sincerely value both egalitarian ideas as well as being social climbers, that does not mean these ideas are equally important to the woke. To see which of these is more important, you have to observe how the woke behave when the incompatibility between them forces a choice of how to behave: Throughout this text I have insisted that symbolic capitalists are likely being sincere when they espouse social justice commitments. However, just because an expressed conviction is sincere doesn’t mean it’s particularly important. One advantage of drawing this distinction is that determining whether something is important (or a priority) for someone does not require scholars to take anyone’s word. One’s priorities are manifested through action…Put another way, you don’t observe what is important to someone by what they say but rather by what they do, and by how they structure their lives. If something is valuable to a person, truly central to their being, they make room for it. They make sacrifices for it. It reshapes one’s other (more peripheral) commitments, and one’s behaviors, relationships, and life plans. This is why the woke have never truly been woke, al-Gharbi says. When faced with a policy choice that would make things better for the poor and vulnerable but would be costly for the symbolic capitalist class, they are faced with a choice about whether to make a sacrifice to support egalitarianism or protect their elite status. More often than not — almost always, in fact — they end up choosing the option that preserves their elite status. To use a tangible example, al-Gharbi extensively documents how licensing and certification regulations were created with the explicit purpose of shutting out the “wrong” kind of people, and have had the effect of artificially boosting the wealth of the symbolic capitalist class. These barriers to entry are disproportionately harmful to racial minorities and serve as structural restrictions that make it far more difficult for members of those communities to improve their situation. However, given the choice between removing these restrictions (thus opening up their own livelihoods to increased competition) in the pursuit of egalitarian goals or preserving these barriers and protecting their own status, the woke consistently pick the latter over the former. Promoting egalitarianism is a sincerely held desire, but it is ultimately less important to the woke than their desire to preserve and enhance their social status. Rather than go through the painful experience of confronting the inconsistency between their behavior and their professed values, they instead reinterpret their behavior as though it reflected those values. There are four key methods al-Gharbi identifies that can be used to justify how one might behave in ways contrary to their moral commitments: “moral credentialing, moral licensing, moral cleansing, and moral disengagement.” Of the first, al-Gharbi says: Moral credentialing is a phenomenon where people become more likely to act in inegalitarian ways, and (critically) become convinced that their actions are nonbiased, after affirming their commitment to egalitarianism or engaging in behaviors they interpret as egalitarian. For instance, studies have shown that when white people publicly affirm their commitment to antiracism, they often become more likely to subsequently favor other whites in decision like hiring and promotion, even as they grow more confident that race played no role in their decision-making. When men identify with feminism, they regularly grow more likely to favor other men in their decision-making, but also grow more confident that their judgments were non-biased. Sometimes, however, people do things they recognize were wrong to do, but they use moral licensing to get around the problem: They can exempt themselves from the moral standards they apply to everyone else, confident that the good actions they have performed, or will perform (or other bad actions they have taken or will refrain from taking), will basically “even things out” ethically, result in a net positive, or at least fail to harm their reputation. If these two strategies don’t work, one can employ moral cleansing: In situations like these, where our self-image and reputation are compromised or at risk, we often engage in rituals of moral cleansing—behaviors that help restore the sense that we’re “on the side of the angels.” And it turns out that one of the most effective ways we can come to feel good about ourselves in the aftermath of a moral failing is to point out bad behaviors in others. Research shows that condemning and (especially) sanctioning others for wrongdoing can reduce one’s guilt over committing the same offense and helps assure oneself and others that they are different from “those people” being condemned (even if one is, in fact, engaged in similar or worse behaviors). When these three strategies fall short, the woke tend to pivot towards moral disengagement: However, should moral credentialing, licensing, and cleansing collectively fail at preserving our sense self-image and reputation, we often resort to moral disengagement instead: redefining situations in ways that neutralize their moral stakes. Sometimes we do this by downplaying the risks or costs imposed on others by our actions or by insisting that any negative eventualities were caused by circumstances beyond our own control, thereby minimizing our own perceived role in others’ misfortune. Other times, we tell ourselves that difficulties imposed on others serve some worthy goal or “greater good.”…For instance, this chapter highlighted how symbolic capitalists often define minorities who espouse inconvenient views as “compromised” in some way, allowing us to simply disregard their perspectives despite our expressed commitments to epistemic and moral deference toward people from historically marginalized and disadvantaged groups. This is moral disengagement in action. These strategies don’t only allow the woke to feel secure about the virtue of their own behavior. They also allow them to find ways to believe that those who are beneath them in social status are less deserving: In other cases, guilt over harm caused by people “like us” fuels moral outrage against third-party scapegoats; subsequent retributive actions against these scapegoats tends to cleanse our own guilt or shame. Or, all else failing, we find ways to collectively write off concern about those harmed by the pursuit of our own group interests. For instance, symbolic capitalists regularly portray the “losers” in the symbolic economy as unworthy of moral consideration because they’re racist, or sexist, or transphobic, or ignorant, or support “fascists” like Donald Trump. If “those people” are marginalized, good. They should be. If they’re suffering, who cares? All of these modes of behavior have the unfortunate effect of actually making the problems the woke want to eliminate even more pronounced within organizations that are controlled by the woke themselves. The more woke values are upheld and promoted, the more it creates the very behavior the woke oppose: That is, in environments where antiracism, feminism, and other egalitarian frameworks are widely and very publicly embraced, it can become easier for people to act in racist, sexist, or otherwise discriminatory ways while convinced that their behaviors are fair—and to have those actions actually perceived as fair by others who share the same ideological and political leanings, or who belong to the same social or institutional groups. Further, al-Gharbi points out that these forms of motivated rationalization are something woke symbolic capitalists are particularly prone to employ, compared to others: Critically, although moral credentialing, licensing, cleansing, and disengagement are general cognitive and behavioral tendencies, symbolic capitalists may be especially susceptible to these forms of self-serving moral reasoning. As discussed throughout this text, the kinds of people who become symbolic capitalists (those who are highly educated, cognitively sophisticated, etc.) tend to be particularly prone to, and effective at, motivated reasoning in general…Taken together, symbolic capitalists have especially powerful means, far more frequent opportunities, and a pronounced need to produce moral credentials and more licenses or engage in moral cleansing rituals or moral disengagement. On top of all of this, because the values espoused by woke progressives are generally antithetical, if not outright hostile, to the values held by most (nonelite) members of minority communities, woke culture itself becomes a sort of hostile environment for these vulnerable populations: Similar realities hold for other forms of social sanction for insufficiently “woke” views. In general, immigrants and racial and ethnic minorities tend to be more religious and more culturally and symbolically conservative than whites—as are people of more modest socioeconomic backgrounds compared to social elites. Consequently, inculcating an environment that is hostile to more “traditional” values and worldviews, although typically carried out in the name of diversity and inclusion, will often have the perverse effect of excluding, alienating, or creating a more precarious situation for those who are already underrepresented and marginalized in elite spaces. When we try to understand why it is that so many “people of color,” or people from low-income, immigrant backgrounds or otherwise “nontraditional” backgrounds, feel as though they don’t “belong” in symbolic capitalist spaces—whether we’re talking about elite K–12 schools, or colleges and universities, or professional settings—this is likely a big, and underexplored, part of the story. But after all this, there is one final question to be explored. As I pointed out at the start of this post, there is a reason al-Gharbi’s book is titled We Have Never Been Woke, and not something like Why Being Woke is Bad or Why We Shouldn’t Be Woke. If the problem is that we’ve never been woke, that leaves open that the solution is that we should be woke. Is there anything in the ideology of wokeness, properly understood, that ought to be preserved and practiced in a different way from how the woke currently behave? That question will be the subject of part 10 of this series.   As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

We’ve long been told that if there’s one issue economists agree on… it’s free trade. Maybe economists still agree, but protectionism is all the rage in the policy world today. What gives? In this episode of EconTalk, Russ Roberts brings back trade historian Douglas Irwin for a rich, illuminating discussion on tariffs, trade policy, and the ongoing temptation of economic nationalism. If you’re wondering why we keep having the same arguments about trade—over and over again—Irwin’s insights help explain both the history and the enduring politics behind it. (And if you’re not convinced after listening to this interview, you can also check out a similar conversation with Irwin on the Great Antidote Podcast with host Juliette Sellgren.) Irwin opens with the economic basics: tariffs are taxes on imports, and like most taxes, they distort behavior. They may benefit a small, concentrated group—domestic producers—but they do so at the expense of the larger, dispersed group of consumers. As Irwin notes, this isn’t just an abstract efficiency loss. Tariffs represent a real redistribution of wealth from the many to the few. The conversation moves fluidly between historical examples and modern parallels. Irwin revisits the Smoot-Hawley Tariff (a disastrous policy that helped deepen the Great Depression) and draws connections to more recent trade skirmishes. He underscores that the U.S., once a champion of liberal trade, is drifting toward a more nationalistic approach, one that’s increasingly skeptical of global interdependence. Irwin doesn’t shy away from the geopolitical context that challenges support for free trade—especially tensions with China—but he warns that trade wars often backfire. What lingers most from this conversation is a sense of frustration. We know tariffs are costly and often ineffective. And yet, the same bad ideas find new packaging—and new support. Irwin reminds us that economics doesn’t defeat politics on its own. It needs allies, storytellers, and persistence. Let’s hear your ideas! 1. Irwin points to the power of narrative to help explain the resurging popularity of tariffs. The appeal of protecting domestic jobs, restoring industry, or “bringing back” lost greatness often overwhelms quiet economic reasoning. Politicians love the symbolic clarity of “saving American jobs,” even if the policy in question raises prices and undermines broader prosperity. We know the economics of these explanations supporting protectionism are wrong. Can economists make a better case to the public for free trade? How would you correct these narratives? In other words, what might you say in response to these sorts of arguments? What new narrative might you offer that could be more compelling to the public at large? 2. Why aren’t trade deficits a big deal, according to Roberts and Irwin? The United States runs a trade deficit in goods with the rest of the world. That sure sounds bad. Why would the U.S. do such a thing, according to Irwin? And why are the deficits run by the United States with individual countries so varied? Irwin also notes that the US runs a surplus in services with the rest of the world, particularly with regard to investment opportunities. Roberts asks why the stock market seems to be doing so well if indeed US trade policy is so terrible. How does Irwin reply, and to what extent does he persuade you with his reasoning? 3. Saving American jobs is often invoked as a reason to support tariffs and other trade restrictions. Yet Roberts insists that trade doesn’t affect the number of jobs. What does he mean by this? Roberts also acknowledges that freer trade makes the nation better off, even as some individuals will be made worse off. How can both these things be true? Why do both Irwin and Roberts think it’s a good thing that the share of American jobs that are in manufacturing has shrunk so drastically? (And why do they argue we shouldn’t try to bring those manufacturing jobs “lost” overseas back?) How would you frame these arguments if you were making them to a person who lost their job as a result of foreign competition? 4. Roberts asks Irwin to respond to the claim that the decline in the Rust Belt is a result of policies that were advocated by economists and which have only benefited rich people. How does Irwin respond, and again, to what extent are you convinced? We’ll close with a question Irwin posed generally in response to the one above. How would you answer this question from Irwin, “How do we help individuals or communities—if we care about the community as well—in terms of overcoming some of these hurdles and the difficulties of economic dislocation, loss, and then the societal consequences of that?” (0 COMMENTS)

President Trump fired the Bureau of Labor Statistics commissioner, Erika McEntarfer, after July’s jobs report showed very little job growth over the past quarter.  Initially, the President accused her of “rigging” the numbers to make him look bad.  More recently, members of his administration have tried to reduce the criticism to just that of substantial revisions (one such representative case is Casey Mulligan’s tweet here). Let’s take the less inflammatory reason (unreliable jobs figures) as the true motivation here to ask a probing question: What would a successful change to the statistics program look like? It would not be the case that revisions would disappear.  With statistics, there will always be revisions.  Any statistical report is necessarily built on various assumptions.  Ultimately, you are collecting a sample that you use to, based on assumptions and stylized facts, make claims about the entire population.  Ideally, one would survey the entire population, but that is cost-prohibitive, both in terms of money and time.  So, one uses an (ideally) representative sample of the population.  If those assumptions and stylized facts change or are no longer useful, then the model must be revised. Revision will, in turn, change the results of the claims the sample can support.  In such a case, the presence of revised data is a sign of an improvement to the model.  Without revisions, the model will become less useful over time. What about the size of revisions?  That, of course, is a concern.  If the model’s revisions frequently swing by huge amounts, then the model is fundamentally flawed. But University of Central Arkansas economist Jeremy Horpedahl shows that the BLS’s data revisions have shrunk over time (see also this post by University of Louisiana economist Gary Wagner).  Not much room for improvement there. Size and frequency of revisions will depend on the sample, and most importantly, on the response rate of the sample.  A major problem with the BLS data in general is that response rates have been falling.  Falling response rates mean that larger and larger imputations have to be made with less data.  Not ideal.  Improving response rates could be a sign of better quality data. We could also see how the BLS data correspond to other sources.  ADP, the payroll company, puts out their own monthly survey of jobs.  It’s not quite identical to the BLS report (see their FAQ at the bottom for differences), but it is a useful comparison tool.  Indeed, the revisions to the BLS data (and ADP’s own revisions) tend to bring the two data sets closer together.  Over time, the BLS’s private employment numbers and ADP’s private employment numbers differ, with ADP Report on average 1,000 jobs lower than the BLS report.  Given we are talking job gains/losses in the tens, if not hundreds of thousands, each month, such a discrepancy is not bad at all.[1]  Lower discrepancy between the two data sets would be a sign of improvement. Improvements to economic data are a good thing.  But any improvement will be a difficult process.  One must be very, very careful about how one evaluates whether a change is an improvement.   — [1] Note: All data are using non-seasonally adjusted figures.  Since seasonal adjustment is a function of models chosen by each agency, NSA provide the best apples-to-apples comparison.  However, using seasonally-adjusted figures doesn’t alter this much.  The discrepancy rises to 5,000 employees per month. (0 COMMENTS)

“Fiscal dominance” refers to the state’s expenditures (fiscal policy) dominating monetary policy. Instead of the legislature (Congress in the US) controlling government expenditures while the central bank (the Fed) tries to control inflation, the latter helps finance expenditures and Congress obtains more leeway to run deficits. Fiscal dominance is the opposite of central bank independence. The idea is making a comeback (see Ian Smith, “Investors Warn of ‘New Era of Fiscal Dominance’ in Global Markets,” Financial Times, August 20, 2025; see also Greg Ip, “Get Ready for the End of Fed Independence,” Wall Street Journal, August 26, 2025). From a monetarist viewpoint, fiscal dominance would lead the Fed, under political pressure, to increase the money supply to stimulate the economy, if not to finance the government more directly. Other macroeconomic theories emphasize different means of intervention and causality chains. For example, the central bank may try to push down interest rates in order to reduce the government’s interest costs on its deficits and the rolling of its debt. As investors start to fear inflation, however, long-term interest rates, including on mortgages, will increase because a higher risk premium is required to incentivize the lenders. This probably explains the recent increase in the spread between long-term and short-term interest rates. (Co-blogger Jon Murphy made important related points earlier this week.) One way or another, sooner or later, fiscal dominance will lead to inflation, which is defined as a sustained increase in the price level. It is sustained in the sense that the central bank sustains it or “accommodates” it. Under fiscal dominance, the central bank cannot resist pressure from the ruling politicians. Many government expenditures, such as Social Security, are indexed to inflation, but some unprotected political clienteles will cry for assistance. Worsening budget deficits and further financing assistance from an obedient central bank can thus generate a self-perpetuating vicious circle. “Financial repression” is the use of financial and regulatory means by the government to divert resources away from the private economy to itself. Inflation is a major instrument of financial repression. For example, it played a large part in financing WWII as well as the growth of the welfare state in the 1970s. The political pressures for fiscal dominance suggest that financial repression through inflation will return. In this context, inflation is the result of the government bidding up prices and winning the bidding to get the resources to produce and do what it wants. The government can always win (in the virtual auctions that markets are) if the obedient central bank finances whatever its master needs to be among the highest bidders. Note that the government largely bids against its own citizens. Populist governments have been habitual practitioners of financial repression through inflation. In their study on the economics of populist regimes over more than a century, many of them South American and European, Cas Mudde (University of Georgia and University of Oslo) and Cristóbal Rovira Kaltwasser (Diego Portales University in Santiago de Chile) provide some econometric evidence to that effect (“Populist Leaders and the Economy,” American Economic Review, vol. 113, no. 12 [2023]). Inflation produces a stealth increase in real taxation (gaining control over real resources), which allows the government to bribe the clienteles whose support is most needed. Think of Nicolás Maduro or Recep Tayyip Erdoğan. The latter also believed that pushing down interest rates would reduce inflation, with the consequence that the annual increase in the country’s consumer price index reached 80% and is still half that rate (“Turkey’s Economic Woes Catch Up With Erdoğan,” Financial Times, June 27, 2025). After the speech of the Fed’s chairman in Jackson Hole, an editorial in the Wall Street Journal notes (“Powell Flips the Fed’s ‘Framework,’” August 22, 2025): The Fed Chair on Friday seemed to move toward the view that tariffs won’t lead to permanently higher inflation. “A reasonable base case is that the effects will be relatively short lived—a one-time shift in the price level,” Mr. Powell said. The editorialists could have been a bit more explicit on this point. A supply shock caused by a large increase in tariffs shifts the production possibility frontier downward and thus generates a one-time increase in the general price level. It may not cause inflation in the sense of a sustained increase in the price level, but only if the Fed doesn’t sustain it by increasing the money supply or helping finance the government deficit in some way (see my “Assessing Trump’s New Tariff Ideas,” Regulation, vol. 47, no. 3 [Fall 2024]). These rather basic observations do not imply that a more radical criticism of central banking is not warranted (see my post “A Bad Solution to Very Real Problems,” January 31, 2018). On the contrary, the Fed participates in the logic of self-sustaining government intervention. Government intervention begets government intervention. At a time when nationalization appears (again!) as the solution to all problems, radical critiques need to be emphasized.   ******************************   Financial repression, by ChatGPT (0 COMMENTS)

Soon before the election that made Javier Milei president, 108 economists around the world (including prominent names like Thomas Piketty, Gabriel Zucman, and Jose Ocampo) signed an open letter warning about the dangers of “non-traditional” economic thinking. Even at the time, the letter was cluttered with flawed thinking. The letter then bemoans that “the laissez-faire model assumes that markets work perfectly if the government does not intervene.” While there is some truth to the statement, the letter completely ignores the fact that most of Argentina’s problems over the past decades came about from government failure and over-intervention in the market. Later on they say that “Argentines are too familiar with the pain of laissez-faire economics”, as if Argentina has been this beacon of freedom beforehand. According to the Economic Freedom of the World index, Argentina has been in the bottom two quartiles of countries in its “laissez-faire economic polices” since 2005 and ranked 130th or lower every year since 2010.  So how has Argentina done with these “dangerous” policies of Milei? Pretty strikingly well, actually. Noah Smith, who is no free-market zealot, wrote what can essentially be called an apology to free-market supporters for Milei’s recent successes. The outcomes have been stunning, and even faster than I personally expected. Universidad Francisco Marroquin in Guatemala has a “Reform Watch” about Argentina and reveals some of the most impressive trends. Monthly inflation was 25.5%, now it is 1.5%, in part due to the massive austerity measures implemented. Also impressive is that the federal government is now in a budget surplus (pre-interest payments). The construction sector has skyrocketed, and rents have decreased, despite Milei removing rent controls, in large part because now rental housing supply has increased dramatically. Poverty rates have fallen sense his tenure, the country’s bond market has recovered. So why did these economists get it wrong? In part, because they do not appreciate the knowledge problem. Being experts in their field, they can fall trap into being overly optimistic about their role in perfectly tinkering with the economy, much like what we saw at the Federal Reserve during the Great Recession. But Hayek taught us that millions of individuals actors make up the market, not expert czars. Roger Koppl touched on this key point in his book “Expert Failure.” It’s a fundamental disbelief in the market process, and an overly optimistic ability to fine-tune the economy. Milei’s policies are allowing the millions in individuals that make up “the economy” and “the market” to act voluntarily and purposefully, in a way that is showing real steps to more prosperity for everyday Argentines.    Justin Callais is the Chief Economist with the Archbridge Institute and Co-Editor of Profectus Magazine. He has a Substack on economic prosperity called Debunking Degrowth. (0 COMMENTS)