Ahmed Fouad Alkhatib spent much of his childhood in Gaza before becoming an American citizen. He has lost dozens of family members and both his childhood homes in Israel’s war in Gaza. But he hasn’t lost hope for peace and the future of the Palestinian people. Listen as he describes the reality of life in Gaza […] The post Voices from Gaza (with Ahmed Alkhatib) appeared first on Econlib.

At first glance the answer seems obvious—no.  But not everyone sees things that way. Here’s Bloomberg: Biden will also ask lawmakers — as he did in last year’s budget request — to impose the 21% minimum on multinational corporations, which the White House says would result in substantial new taxes on pharmaceutical companies. He also wants to quadruple the tax companies must pay when they buy back their own stock to 4% from 1%. Democrats have proposed buyback taxes as a way to encourage companies to invest in workforces and equipment over share repurchases. Corporations have several different ways of rewarding investors.  One method is dividends.  Another approach is to use a stock buyback, which leads to capital gains.  Many investors prefer to receive capital gains, which are generally treated more favorably than dividends in the federal tax code (partly because the gains are not taxed until the stock is sold.)  By taxing stock buybacks, the government would be raising the effective tax rate on capital formation. These taxes do not encourage investment—just the opposite.  Instead, they tend to push investment into less productive areas.  Thus suppose company A can earn a 5% rate of return on capital and company B can earn a 10% rate of return.  Ideally, profits earned by company A would be paid out to owners, who would redirect funds to investments made by company B.  This tax provision seems motivated by the desire to make each company more self sufficient, relying on its own internal funds for capital investment.  But an economy where each organization is self-sufficient is much less efficient than an economy structured around specialization and trade. Perhaps there is some other motivation for this proposed tax change.  If so, I cannot imagine what it is. (0 COMMENTS)

First, Happy St. Patrick’s Day. Now to the news. DEI killed the CHIPS Act by Matt Cole and Chris Nicholson, The Hill, March 7, 2024. Excerpt: The Biden administration recently promised it will finally loosen the purse strings on $39 billion of CHIPS Act grants to encourage semiconductor fabrication in the U.S. But less than a week later, Intel announced that it’s putting the brakes on its Columbus factory. The Taiwan Semiconductor Manufacturing Company (TSMC) has pushed back production at its second Arizona foundry. The remaining major chipmaker, Samsung, just delayed its first Texas fab. Later excerpt that gives the reason: The law contains 19 sections aimed at helping minority groups, including one creating a Chief Diversity Officer at the National Science Foundation, and several prioritizing scientific cooperation with what it calls “minority-serving institutions.” A section called “Opportunity and Inclusion” instructs the Department of Commerce to work with minority-owned businesses and make sure chipmakers “increase the participation of economically disadvantaged individuals in the semiconductor workforce.” HT2 commenter Ahmed Fares, who linked to this later article.   Steven D. Levitt (Freakonomics co-author and University of Chicago Economics Professor) on His Career And Decision To Retire From Academic Economics Jon Hartley interview of Levitt, The Capitalism and Freedom in the 21st Century Podcast, March 7, 2024. Note: I read the transcript because I can read at about 6 to 8 times the speed at which I can listen. But the transcript is “scratchy.” For example, “U of C,” which is obviously the University of Chicago, comes across as UFC. Excerpt: Because when you’re on the job market, when you’re young academic, you have to convince the faculty who are hiring you, that you have, somehow the idea is that technique, knowing how to do hard things, technical skills is really valuable. Or that you have, you know the formula for writing some difficult kind of paper. My comment I had no concept of this when I went on the job market. I had just turned 24 and interviewed at the AEA meetings in San Francisco in December 1974. UCLA, where I was working on my dissertation, was pretty hot then and so I got interviews with a lot of top schools, including Northwestern. I remember Northwestern specifically. I had got interested in energy economics and that led me to a number of popular publications. One was about all the small mines that had closed down after the 1969 coal mine safety law had passed. Could there be a connection? There sure as hell was, and showing that was a big part of my dissertation. Part of my interest also, I confess, was due to the fact that I had worked in an underground nickel mine in northern Manitoba during the summer of 1969. In short, I chose my topic because it interested me, it seemed important, and I thought I could do it. I literally didn’t think, “What would top economists find interesting?” I didn’t care. And I’m glad I didn’t care. I marched to the beat of my own drummer from an early age. Cue Mama Cass singing one of my favorite songs, “Make Your Own Kind of Music.” In those days, you interviewed in a hotel suite with 3 or 4 of the college’s faculty. One or two of the Northwestern faculty seemed interested and I could tell by Dale Mortensen‘s look and body language that he wanted me to get the hell out of there. He wasn’t rude. He just had zero interest. (By the way, Mortensen shared the 2010 Nobel Prize in economics.) One other thing I’ll add: If you decide to work on things that other people are interested in and you’re not, you know what will happen if you succeed? You’ll get more opportunities to work on things that you’re not interested in. When I accepted my job at the Council of Economic Advisers under Murray Weidenbaum and got there 2 weeks before Murray left and Marty Feldstein showed up, I looked around at who was there and who would show up under Marty (I correctly predicted Larry Summers and Paul Krugman), I realized that there was no one to cover health policy. Health economics had always fascinated me and so on Marty’s first day on the job, when we went around the room saying our names and where we came from, I departed from form and said, “David Henderson, Labor Department, and I want to be the health economist.” Krugman and Summers, sitting at Marty’s end of the room, looked at each other; one said something to the other–I can’t remember which one–and the other one giggled. I had the last laugh. Two hours later Marty invited me to his office and handed me the job. There’s so much good material in Jon’s interview that I recommend listening to, or reading, the whole thing.   The Chris Cuomo Interview Tucker Carlson, The Interview, March 11, 2024. Tucker was pretty nasty to Chris Cuomo when each had a show, Carlson on Fox News and Cuomo on CNN. But after Tucker was fired, Cuomo called up to offer moral support. That, in itself, I found impressive. There are so many good comments in this almost 2-hour long interview, with the approximate time stamps. 15:30. Cuomo: Presidents take the power to make war and Congress doesn’t fight back. The result: we get in bad wars. 54:00. Cuomo doesn’t make a gender distinction about whom should be shot. 1:01:00. Cuomo: The January 6, 2021 event was a riot, not an insurrection. You don’t do an insurrection without guns. 1:21:46. Cuomo: Negativity is the proxy for insight. 1:35:20. Cuomo cites Marcus Aurelius. There are so many more good parts. My opinion of Carlson rose a little because he had the decency to invite Cuomo and also to admit that he (Carlson) had acted like a jerk. My opinion fell later when he said two things: (1) it’s never justified to hit or shoot a woman and (2) one should always take the side of a family member regardless of the truth. My opinion of Cuomo had been low because he had lied about staying in his basement after getting Covid. But it rose when I saw him making clear distinctions that, in my view and surprisingly, showed him to be Tucker Carlson’s intellectual superior. (0 COMMENTS)

I posted recently about how some people try to use definitions to shortcut discussion about various issues. This is closely related to an idea Steven Pinker calls the “euphemism treadmill.” In short, this describes how people attempt to relabel ideas or concepts to improve their appeal. The process was once explained in the following way by the (very family-unfriendly) standup comedian Doug Stanhope, describing how doctors would refer to people of limited cognitive ability: Doctors would use the term “imbecile” or “moron” …Moron and imbecile were the correct terms for a while. And what happened is we co-opted those words to call our friend when he does something incredibly stupid, to the point where it became an insult. So out of sensitivity, they changed the word to “retarded.” And what happened is we co-opted that word to call our friend when he does something incredibly stupid. So, you can keep changing the word, and if you make a new one stick, that’s what I’m going to call my friend. Certain concepts have bad associations attached to them – and some people think that if a new label is used, the new label will remove the negative associations with the concept. But often, all that happens is the negative association attached to the concept just gets transferred to the new label, leading to a repeat of the process. This is why what was once considered polite and forward-looking terminology at one time might be considered an offensive slur some years down the road.  What I described in my previous post were attempts to use the idea behind the euphemism treadmill in the reverse direction – attempts to use labels to transfer negative associations onto rather than away from certain concepts or ideas. Hence, if you can simply define unequal outcomes as racist, then the negative associations with racism will be transferred onto unequal outcomes. But one should be very cautious about attempting this tactic – it’s a very double-edged sword.  Attempting this move runs the risk that the transfer won’t work the way you want – instead of the negative valence of the word being transferred to the concept, it might work out that positive associations with the concept remove the negative valence from the word. In my earlier post, I referenced a program that argues “either/or” thinking is a tenant of white supremacy culture. This is just one of a number of programs that try to label a variety of concepts as intrinsically part of white supremacy – including concepts like punctuality, being objective, the scientific method, belief in hard work, and rational thinking. These aren’t exactly things most people will find off-putting, and if you managed to convince people that “rational thinking” is somehow inherently in support of white supremacy, you run the risk they’ll conclude “well, maybe this means white supremacy isn’t such a bad thing after all.”  I think a version of this has already happened as it relates to the term “socialism.” Many people with classical liberal sympathies have been dismayed at recent polls showing increasing support for socialism, especially among the young. However, digging a little deeper, you find that a significant portion of people who are advocating for socialism say they want policies reflective of Scandinavia, not Venezuela. This, in turn, leads more market friendly people to point out that the Scandinavian countries are not socialist countries – they are unambiguously free-market capitalist countries. Fareed Zakaria, for example, points out that making the US more like Sweden would mean having more billionaires per capita (who can pass on all their wealth because there are no inheritance or estate taxes), having a tax system where the wealthy have a much lower tax burden while the middle class and poor have a much higher tax burden, removing barriers to free trade, having much less economic regulation and fewer price controls, no minimum wage laws, school choice and vouchers, and high out-of-pocket costs for medical care.  Of course, what the Nordic countries also have is a high level of spending on social safety nets, with a very strong welfare state (again, funded by a much less progressive tax system that places a much lower total tax burden on the wealthy). People who are saying they want socialism often mean they want this kind of social safety net. They aren’t advocating for state ownership of the means of production. Originally, socialism referred to a system where the means of production were owned and operated by the state. In the United States in particular, communism and socialism were very negatively valanced words. This in turn made it an attractive tactic to try to shortcut arguments against policies by labeling them as “socialist,” in order to try to transfer the negative valence of that term onto the policies. Thus, even though welfare-state programs don’t involve state ownership of the means of production, one could try to attack welfare programs by attaching the socialist label to them. But this tactic has backfired. Welfare and social safety net programs are really popular among American citizens, and the repeated use of “socialism” to describe them hasn’t transferred a negative valence to the idea of social safety nets. It’s simply removed the negative valence from the term “socialism”, leading many people to say to themselves, “Well, if that’s what socialism is, then socialism doesn’t sound so bad to me.” And there’s a risk that rationally ignorant voters, seeking to support Nordic-style capitalism, might end up empowering Venezuela-style socialism. (0 COMMENTS)

In my previous post, I discussed why Star Trek’s Federation, despite its calls for peaceful diversity, fell just a bit short of their aim. In this post, I switch gears from culture and ideology to economics. In the Federation, most goods and services are produced via replication. The need for production and trade via the division of labour is greatly diminished (though there is demand for luxury artisanal, non-replicated goods, as shown by culinary enterprises like Chateau Picard and Sisko’s Creole Kitchen, as well as physical books and other objects). Thus, the Federation seems to have overcome much of the knowledge problem around satisfying dynamic, subjective preferences and efficiently allocating scarce resources with competing uses. It is an economy of abundance beyond even the dreams of most economists or sci-fi writers. This is coupled with egalitarian values and the self-important assurance that the Federation is populated by virtual saints only interested in self-actualization and universal brotherhood. By contrast however, outside (and sometimes within!) the Federation’s utopian core of planets, people often fight over insufficient replicators, scarce machinery, food, medicine, and other resources. Supply ships are vital for bringing scarce items to distant worlds, and for transporting goods that can’t be replicated, such as dilithium and rare medicines. Mining seems to be an important industry across the galaxy.  As Benjamin Sisko bitterly admits: On Earth, there is no poverty, no crime, no war. You look out the window of Starfleet Headquarters and you see paradise. Well, it’s easy to be a saint in paradise, but the Maquis do not live in paradise. Out there in the Demilitarized Zone, all the problems haven’t been solved yet. Out there, there are no saints — just people. Angry, scared, determined people who are going to do whatever it takes to survive, whether it meets with Federation approval or not! Notably, while replicators can recreate almost anything, it appears that replicators themselves cannot be easily reproduced. Trek never tells us if creating replicators is costly. Yet it is apparent that replicators cannot be provided easily for all. Contrary to Jean-Luc Picard’s assertion that “…the acquisition of wealth is no longer the driving force in our lives” the Federation has not overcome self-interest, greed, or other constraints of human nature. It has simply changed the transaction costs of conflict by exploiting technology that severely reduces scarcity. When scarcity returns, so does conflict over resources. Job allocation adds further support to the view that the Federation relies on advanced technology more than it does a sci-fi version of the New Soviet Man or Rawlsian ideal theory. It is unclear how the Federation incentivizes people to take on jobs that are less desirable or whose social importance is less well-understood; given that job choice is meant to be driven by whatever an individual perceives to be public-spirited, as well as whatever they think will help them self-actualize (two goals potentially in tension) without adjudication by the price mechanism.  And it is never explained how people (especially non-Starfleet civilians) are incentivized to choose menial, relatively unfulfilling work that is also socially necessary, like cleaning. But it also remains a mystery why such an advanced technological and egalitarian society needs professions such as bartenders or janitors in the first place. Notably, Starfleet employees’ devotion to duty does not prevent them from looking for ways to limit their workload or evade unpleasant tasks, whether through trading duties or by creating buffer time.    A (Qualified) Defense of the Ferengi Here the Ferengi have advantages that the Federation rarely acknowledges. The Ferengi are routinely portrayed as a venal, selfish species and are a comic-book caricature of capitalists (as well as being genuinely virulent misogynists). However, their single-minded pursuit of profit and appreciation for the economic way of thinking opens them up to possibilities that are otherwise closed to the Federation and Starfleet. Consider Quark’s resolving of conflict between the Maquis rebels and the Cardassians with some simple game theory, offering a solution that was opaque to his “rational” Vulcan interlocutor. His attentiveness to profit and loss allows him to recognize that a successful end to any conflict is about the relative price of peace over war: Quark: You want to acquire peace. Fine, peace is good. But how much are you willing to pay for it? Sakonna: Whatever it costs. Quark: That’s the kind of irresponsible spending that causes so many business ventures to fail. You’re forgetting the Third Rule! Right now, peace could be bought at a bargain price, and you don’t even realize it. Sakonna: …I find this very confusing. Quark: [sighs]  Then I’ll make it so simple that even a Vulcan can understand: the Central Command has been caught red-handed smuggling weapons to their settlers. So every ship that approaches the demilitarized zone will be searched. Without the support of the Central Command, the Cardassian settlers won’t be so eager to fight. Sakonna: You forget the weapons they already have. Quark: They have weapons, you have weapons, everyone has weapons; but right now, no one has a clear advantage. So the price of peace is at an all-time low. This is the perfect time to sit down and hammer out an agreement. Don’t you get it? Attacking the Cardassians now will only escalate the conflict and make peace more expensive in the long run! Now, I ask you: is that logical? For Federation citizens, thinking about the opportunity costs of their choices is not a regular exercise. Pampered by material abundance and an idyllic form of deliberative democracy, they further restrict themselves from thinking about tradeoffs by adhering to simple and inflexible rules such as the Prime Directive. When they do choose to violate an ordinance like the Directive, rarely do they follow up with the society in which they had involved themselves, leaving whatever massive social changes they have wrought for the natives to deal with (this is particularly evident in series like TOS, but also in TNG). The Directive’s non-interventionism may in many instances reflect a kind of implicit Hayekian or Austrian school wisdom, but rarely are different kinds of involvement given a thorough comparison by the Federation. There is a big difference between trade and cultural engagement and the disestablishment and reconstruction of native institutions by elites from above. The Federation is also not well-equipped to recognize costs and tradeoffs in those areas where scarcity has not been eliminated, particularly of one’s time. This is where the Ferengi save the day. When Chief O’Brien is unable to get the stabilizer he needs, Nog manages to acquire it for him by creating a complex system of barter across Starfleet. Similarly, Nog leads Jake in a series of trades that allow them to acquire an antique baseball card for Captain Sisko. In doing so, they take over the disliked duties of (supposedly work-happy, purely altruistic) Starfleet employees, improving everyone’s lot in the process. Unlike the Federation, the Ferengi are entrepreneurially alert to meeting people’s preferences and making efficient use of resources. The Ferengi dedication to profit even pushes them to ditch their sexism, in the true spirit of Gary Becker. As the Grand Nagus points out, discrimination is bad for business and wastes valuable human capital.  The Ferengi were also well-placed to help Bajorans during the Cardassian occupation. Ferengi served as arms dealers to the Bajoran rebels and offered Bajoran workers employment opportunities comparatively better than what they were forced into by the Cardassians. Though driven by profit, the Ferengi’s status as neutral merchants allowed them to engage in entrepreneurship that improved the Bajoran situation, at least on the margin. By contrast, as enemies of the Cardassians, the Federation was unable to do much and took time to even recognize Bajor’s plight, despite the valiant efforts of Ensign Ro and others.    Between the Federation Constitution and Ferengi Rules of Acquisition The Ferengi arguably exemplify humanity’s long-standing cultural antipathy to merchants, businessmen, and economic middlemen, positions often held by the despised minorities the Ferengi seem to resemble. How we think about the Ferengi reflects how well we understand the challenges of cooperation, especially with outsiders, and the costs and tradeoffs inherent in all parts of life. Of course, the Ferengi have many deficits, ranging from their sheer love of greed a la Gordon Gekko to their ugly sexism and speciesism. Yet they often provide a useful corrective to the Federation’s excessive idealism and failures to coordinate. The Federation may dislike the Ferengi, but the Ferengi have many useful lessons to impart.  However, the Ferengi also have something to learn from the Federation. The missing core of Ferengi values is the Federation’s respect for the equal freedom and dignity of people as sentient beings. While the Ferengi are good at recognizing the costs and benefits of their actions, a mercantile culture without a larger philosophy of how people should be treated is, in Deirdre McCloskey’s words, “soul-destroying.” As McCloskey points out, a worldview focused only on self-interest and costs and benefits has a very real danger of reducing people to crude calculating agents, perpetually seeking to exploit and cheat one another, both in theory and in practice. We are not, and should not be, simple profit-seekers in our relationships with others, the character McCloskey calls “Max U” or “Mr. Maximum Utility.”  In this respect, Trek may teach us something important about the inherent limitations of different worldviews. The Ferengi’s chief fault is that they are selfish utility maximizers even to the point of gross immorality, while the Federation has not fully reckoned with an imperfect world full of self-interest, scarcity, knowledge problems, and tradeoffs. Ferengi relativism results in Quark’s dilemma about whether there really is anything wrong with being a weapons merchant (thankfully his conscience wins the day). Federation absolutism results in Starfleet failing to save billions of lives because nothing can sanction breaking the Prime Directive, (thankfully certain officers’ conscience sometimes overrides their obedience). In a world of deep complexity and competing values, we need both the Ferengi Alliance and the United Federation of Planets. A messy mixture to be sure, but one better in tune with the universe we actually inhabit, even in fiction.    Akiva Malamet is an M.A candidate in Philosophy at Queen’s University (Canada). He has been published at Libertarianism.org, Liberal Currents, Catalyst, and other outlets. (0 COMMENTS)

The Biden administration claims to have many priorities:1. Addressing global warming2. Strengthening our alliances in the China region3. Mercantilist policies aimed at domestic job creationIn fact, not everything can be a priority. Based on their actions, it appears the administration has one overriding priority—domestic jobs. The Inflation Reduction Act has been much less effective in addressing global warming than had been hoped, partly due to protectionist provisions that have sharply raised the cost of clean energy.Now we see evidence that building an alliance of democratic East Asian nations is less important than protecting jobs in Pennsylvania. Here’s the FT: Nippon Steel announced the controversial acquisition in December, leading Biden to pick a side between a powerful union and its voters, and a critical American ally. The president has invested heavily in shoring up alliances, particularly with Japan.The White House asked US ambassador to Japan Rahm Emanuel to make the problem go away, putting him in a tough position after he had publicly welcomed the deal as “historic”. Emanuel did not respond to a request for comment.One person familiar with the deliberations said it was “embarrassing” for an administration that talks about the importance of allies and particularly the US-Japan alliance to “send a signal of distrust regarding Japanese ownership of US companies” as Kishida prepares to visit.“The president knows all this, but sadly it looks like election year politics will win out,” the person said. I certainly understand the politics of the situation.  But I also believe that these examples demonstrate the internal contradictions of nationalism.  The Biden administration seems to wish to embrace both nationalism and globalism (i.e. international cooperation.)  That’s not possible—you cannot prioritize everything.   PS.  I suspect that a future Trump administration would drop the globalism, and go all in for nationalism. PPS.  Below is a picture of the US Steel plant in Gary, taken in 1959.  We drove through Gary in 1959, on the way to visit my grandparents.  Its population was 178,000 (similar to Austin or Nashville).  Today, it’s 69,000.  I still recall the smell from the air pollution. (0 COMMENTS)

In macroeconomics, the “circular flow of income” refers to the continuous flow of money between producers and consumers in the economy. Producers provide goods and services to consumers, who in turn pay for them. Producers then use this revenue to pay employees and suppliers, who become consumers themselves when they spend their incomes, and so on in a virtuous cycle. Within this circular flow, some economists see savings as problematic, since saving effectively takes money out of the circular flow. However, saving is also important to provide funds for investment, which will spur future consumer spending at a later date. It is primarily hoarding of cash that is problematic and removes funds from the cycle. But there is another kind of “leakage” from the circular flow system that often goes overlooked: this is the leakage of unpriced benefits that consumers receive from market transactions. While money spent to make a consumer experience more delightful will have a corresponding receipt as it forms income for another individual, it may also entail an efficiency loss in that aggregate income would have been higher had the spending gone toward some other purpose.  Consider the example of an auto mechanic that spends money on free coffee for customers while they wait for their cars to be repaired. Although the activity does provide income for the coffee company, the payment also results in an efficiency loss in that resources devoted to coffee could have been invested in more productive business activities that reduce costs, generate revenue, or increase output for the firm. This lost efficiency applies to unpriced consumer surplus more broadly. Consumer surplus refers to the difference between the price a consumer pays for something and the maximum they would have been willing to pay. For instance, if one spends $300 at an auto mechanic, but would have paid up to $400 due to the trustworthiness of the mechanic, that person has received $100 of consumer surplus.  Imagine a bank goes above and beyond for clients by placing ATMs in convenient locations. Even if this maximizes profits by attracting customers, it can still be economically inefficient compared to a world where either those resources were used to expand bank loans or where consumers ultimately didn’t value such extravagances and were willing to walk a few more blocks to withdraw cash. Imagine an enterprising firm could capture some of this surplus. For example, landlords could install a small toll at the location of convenient ATMs. Some might argue this just redistributes surplus from consumers to producers unnecessarily. Some consumer surplus constitutes financial savings that can otherwise be redirected toward other parts of the economy. While this may be true at the microeconomic level, at the aggregate level some surplus still escapes the system in the form of unpriced consumer benefits. These “savings” can’t be spent as there is no more income left to pay for them. They are similar, in some but not all respects, to the hoarded funds that “leak” out of the circular flow system. Looking at the situation holistically demonstrates there are aggregate social benefits from converting some surplus from unpriced into priced form. An example may make the point clearer. When companies like Walmart keep prices steady rather than raise them during natural disasters, they are essentially providing a free benefit to consumers in the form of “fairness.” But this benefit has a downside from the standpoint of efficiency–output of essentials could have been higher with surge pricing, benefiting society overall. Extending goodwill to customers by holding prices steady may win their loyalty and may even be profit-maximizing for Walmart, whose customers might otherwise shop elsewhere if they perceive unfair treatment. But maintaining artificially low prices is still inefficient compared to a world with more toilet paper, bottled water, and other necessities. The example reveals a kind of market failure. Effort exerted by competing to provide unpriced benefits to consumers (like exceptional service or “fair” no-surge pricing) comes at the expense of greater market output and investment. Higher output generates higher incomes, and in the long run more consumer benefits.  The problem may be obvious during disasters, but a more general form of the issue occurs at nearly all times. Imagine if companies added fees for parking, restrooms, or other conveniences. Or imposed surge pricing or “peak load pricing.” These nickels and dimes would add up and would ultimately also create consumer satisfaction when they are redirected back toward additional production, boosting incomes and growth. Utility, by contrast, can’t be invested in any account.  Business practices that extract consumer surplus through price discrimination, reduced quality, hidden fees, and nickel-and-diming pricing strategies can ultimately benefit society by funneling money into production instead of wasteful perks. Although these practices may anger consumers, their anger is misplaced because these practices serve the greater good. In fact, it would be better if consumers didn’t have such preferences. The lower-quality goods and fewer free benefits consumers receive are outweighed by the higher real incomes earned over time economy-wide. This lesson has practical policy implications. President Biden has an ongoing campaign to eliminate “junk fees.” A new law also recently passed in California that targets “drip pricing” that occurs when paid prices deviate from advertised prices. These policies will probably only serve to exacerbate existing inefficiencies. Besides being difficult to eradicate because companies find ways around restrictions, junk fees like hotel resort charges or airline fees are often just creative price discrimination methods that efficiently transfer some consumer surplus back to businesses. Although voters and consumers may find these fees frustrating, their frustration is due to a lack of economic understanding. Don’t be surprised when opportunistic politicians seek to take advantage of this ignorance for their own personal gain.  Of course, excessive fees or miserly service can certainly go too far and be counterproductive. If safety is undermined excessively, lives could be lost that would contribute productively to the economy. Moreover, penny-pinching on the part of consumers can also be socially beneficial. And if convenience is sacrificed too much, consumers might undertake additional costs to avoid hassles. But consumers generally gain more over time from rising real incomes than from temporary perks and freebies. Thus, businesses should feel emboldened to modestly cut corners and charge incremental fees when doing so maximizes their returns—even when it comes at the expense of some consumer welfare. Furthermore, consumers should learn to tolerate such minor inconveniences, recognizing these practices ultimately fuel growth, which benefits everyone in the long run.   James Broughel is a Senior Fellow at the Competitive Enterprise Institute with a focus on innovation and dynamism.  (0 COMMENTS)

After having moved from Canada to the United States, partly to be wealthier and partly to be freer (those two are connected, by the way), I was shocked, in March 2020, when President Trump and most US governors imposed heavy restrictions on people’s freedom. The purpose, said Trump and his COVID-19 advisers, was to “flatten the curve”: shut down people’s mobility for two weeks so that hospitals could catch up with the expected demand from COVID patients. In her book Silent Invasion, Dr. Deborah Birx, the coordinator of the White House Coronavirus Task Force, admitted that she was scrambling during those two weeks to come up with a reason to extend the lockdowns for much longer. As she put it, “I didn’t have the numbers in front of me yet to make the case for extending it longer, but I had two weeks to get them.” In short, she chose the goal and then tried to find the data to justify the goal. This, by the way, was from someone who, along with her task force colleague Dr. Anthony Fauci, kept talking about the importance of the scientific method. By the end of April 2020, the term “flatten the curve” had all but disappeared from public discussion. Now that we are four years past that awful time, it makes sense to look back and see whether those heavy restrictions on the lives of people of all ages made sense. I’ll save you the suspense. They didn’t. The damage to the economy was huge. Remember that “the economy” is not a term used to describe a big machine; it’s a shorthand for the trillions of interactions among hundreds of millions of people. The lockdowns and the subsequent federal spending ballooned the budget deficit and consequent federal debt. The effect on children’s learning, not just in school but outside of school, was huge. These effects will be with us for a long time. It’s not as if there wasn’t another way to go. The people who came up with the idea of lockdowns did so on the basis of abstract models that had not been tested. They ignored a model of human behavior, which I’ll call Hayekian, that is tested every day. These are the opening two paragraphs of my latest Defining Ideas article, “Looking Back at COVID’s Authoritarian Regimes,” Defining Ideas, March 14, 2024. Another excerpt: That wasn’t the only uncertainty. My daughter Karen lived in San Francisco and made her living teaching Pilates. San Francisco mayor London Breed shut down all the gyms, and so there went my daughter’s business. (The good news was that she quickly got online and shifted many of her clients to virtual Pilates. But that’s another story.) We tried to see her every six weeks or so, whether that meant our driving up to San Fran or her driving down to Monterey. But were we allowed to drive to see her? In that first month and a half, we simply didn’t know. Read the whole thing, which is longer than usual. (0 COMMENTS)

You say Mises, I say Mices. I’m sitting across the table from a long time member and leader of the Libertarian Party, and for the third time in about an hour he has mispronounced the word “Mises”.  He’s not an academic nor is he someone I’d expect to be reading deeply in Austrian economics, so I politely say to him, “You know it’s pronounced “Mises,” and he chuckles, smiles, nods and says, “Oh Pat I know; I just like getting under the skin of those folks.” “Those folks” are the new leadership team of the national Libertarian Party, the so-called “Mises Caucus.”  In a raucous 2022 national party meeting the caucus took over the party and has since fractured it.  The Mises Caucus chose its name to honor the famous economist, but also to identify with the Mises Institute in Auburn, Alabama.  The institute was founded after another falling out within the LP in the 1980’s between the Murray Rothbard/Ron Paul wing of the party and the David Koch/Ed Crane wing.  And much like today’s conflict, this one occurred after an election in which the LP had two wings at odds over whether it should pursue electoral success at the expense of ideological purity. In the 1980 election Ed Clark and David Koch garnered a little over 1% of the national vote, a record to be later broken in 2016 by Johnson and Weld.  But in both instances the more radical elements in the party derailed the potential for momentum.  Candidates like Bill Weld ruffled feathers, particularly at the end of the 2016 campaign when he called on voters to support Hillary Clinton over President Trump.  Members of the Mises Caucus were frustrated by what they saw as watering down core libertarian principles for the sake of short term political opportunism.   My lunch companion and I are starting with some spring rolls and iced tea.  In between bites of the crunchy, hot starters my friend explains how he thinks about the differences in the flavors of libertarianism espoused by the two groups.  Of course he’s more sympathetic to his own position; he believes that while he is a “live and let live” libertarian who can broaden his message to a larger audience, the Mises Caucus represents a younger and more ideologically inflexible “don’t tread on me” group.  In his view, this group has become unnecessarily antagonistic towards any concessions to make the party politically palatable beyond a small group of hard core believers. The Mises Caucus is led by Michael Heise, and other notable public figures include the lightning rod Angela McArdle as well as the prominent comedian Dave Smith, who has an extensive social media presence.  They cite longtime LP influences Ron Paul, Murray Rothbard, and historian Tom Woods among their supporters and role models.  In a nod to the Austrian economist who is their namesake, the caucus’ web page asks individuals to “Take Human Action” in promoting liberty through the LP. This wing of the party is not some Johnny-come-lately group that never was part of the LP.  In fact, the party has never been unified or particularly consistent in the views it espoused or issues it promoted.  But the party has been consistently successful in the institutional strategies of keeping the diverse interests together and keeping the party on the ballot in all 50 states for national elections. The LP is really a bunch of different groups, not merely one party.  Each state has its own state level party.  And the state organizations are now more or less aligned on one side or another of this divide.  So while New Hampshire is now run by staunch supporters of the Mises Caucus, Louisiana is still controlled by the Old Guard.  You can tell the differences by looking at the social media accounts for both groups that seem like they are from different planets from time to time, let alone the same philosophical traditions.  During Nikki Haley’s recent misstep about the cause of the Civil War, the old guard wings of the party chided her and agreed that slavery was the root cause.  The Mises Caucus social media outlets cited controversial studies by historians who blame Lincoln for a war of national government consolidation.  Academic debates in libertarian circles are never dull. What prompted the Mises folks to launch their hostile takeover and storm the Bastille?  In order to understand I reached out to Steven Nekhaila, who has supported the caucus during the past several years.  He’s been on the LP national board since 2016 and before that was part of the board of the Florida state party, so he has seen the LP at the national and local level change and evolve.  In his view, the Mises caucus was initially motivated by a more wonkish group of activists trying to improve the party.  He sees new energy and youth in the group of leaders and is excited by the influence of social media personalities like Dave Smith, who has more than 400,000 followers on Twitter/X. Nekhaila believes that the LP has always had a broad appeal because individuals on the left and right find a home in it.  In his view, the current emphasis of the Mises Caucus is on war and economics, which he believes has attracted a younger group of followers to both the party and the writings of people like Rothbard, Paul, and Mises.  He sees these new, younger activists as energized and enthusiastic, but in need of assimilation to the world of politics. In the wake of the Mises Caucus ascension, I asked him how the party could mend fences and move forward?  He notes that as Florida state chair he saw a lot of new folks come in and earn the respect of party veterans.  The Florida state LP board is mixed with both Old Guard and Mises folks, but they have managed to get the personalities to mesh.  He acknowledges that things were tense at the start, but he believes the party has to set those differences aside and work together.  Nekhaila would like to see a memorandum of understanding on process between the two groups to help align goals and objectives.  Coming from a business background he says bluntly, “We don’t have to love each other to get things done.”  Considering the relative level of tension nationally, that is certainly a laudable goal. And a quick visit to the Florida LP Twitter/X account confirms that.  It’s a mix of mainstream libertarian positions, such as a retweet from a recent Reason article supporting immigration along with more radical tweets about Jan 6th and attacks on Bill Clinton’s links to Jeffrey Epstein. Nekhaila believes that ultimately all libertarians, even the Mises caucus, get tired of losing, which leads to the temptation to support pro-liberty Republicans to scratch that itch. But he rejects that approach by maintaining a more “orthodox” libertarianism and supporting some ideological boundaries.  He’s not worried about anyone in the LNC or the Mises Caucus, but is concerned about Colorado, where they are working with Republicans. I ask him if it’s the party’s job to run candidates to change policy or promote the philosophy of the party. He says they have to do both – explain the underlying philosophy and build the infrastructure.  He argues both are necessary because in his business and political experience he sees an increase in self-identification libertarianism among younger employees, but little understanding of the philosophical underpinnings.  How exactly the party will manage to accomplish that is another matter. And he believes that the Old Guard lost sight of that philosophy, particularly the writings of Ron Paul who he believes provided “a wider vision and energy”.  According to Nekhaila, the influx of Mises supporters is a positive development overall and a needed one.  But the challenge now is to create a social movement that attracts voters.  He argues neither the Democrats or Republicans are doing that now and it’s a gap that the LP can fill with its new converts.  He is a business person who employs a lot of younger workers, and he sees a growing popularity of those ideas among that generation.  That’s part of the reason he supports a more orthodox approach to political work. Is Nekhaila’s optimism and professional experience capable of rebuilding bridges with the Old Guard?  We turn to that question in the next installment.   G. Patrick Lynch is a Senior Fellow at Liberty Fund. (0 COMMENTS)

This is the title of my anniversary review of Anthony de Jasay’s Social Contract, Free Ride, just out in the Spring issue of Regulation, under the “From the Past” rubric. The highlights of the book, as quoted from my review: De Jasay argued that the main justification for the state—that it produces or finances so‐​called “public goods” (e.g., parks, streets, public security)—is economically flawed. Even if we assume that all individuals are self‐​interested and even selfish, some of them want some public goods enough that they would be willing to pay something to obtain them, notwithstanding that others would free ride on their contributions. Hence, de Jasay claimed, there is no need for an overall social contract to enforce private contracts and property. … Once the state can create public goods, everybody’s dominant strategy is to ask for more of those he likes—that is, whose benefits are higher than his diluted tax contribution. Instead of free riding on others’ voluntary contributions, free riders in a society governed by the state exploit coerced taxpayers by obtaining “free” stuff for themselves. … The state replaces contract and justice by command and arbitrary “fairness.” … De Jasay espoused classical liberalism together with what he believed to be its natural anarchist extension. Even if you don’t agree—especially if you don’t agree—it is worth studying de Jasay’s ideas. I offer some criticisms myself. For the layman, Social Contract, Free Ride is not an easy book, but it is important, radical, and scholarly. An easier one with a wider scope is Against Politics: On Government, Anarchy, and Order (Routledge, 1997), a collection of scholarly articles by de Jasay. My review of this other book is forthcoming on Econlib’s “Liberty Classics.” First published by Oxford University Press in 1989 (35 years ago), Social Contract, Free Ride was reissued by Liberty Fund in 2008, including in html format. My Regulation review is available in the paper version of the magazine as well as in html format and a pdf format (pp. 60-62). ************************************ The featured image of this post, provided by ChatGPT 4 and reproduced below, is rather banal and not as interesting as the chatbot’s description of it. My instructions to ChatGPT were: Generate an image illustrating Anthony de Jasay’s argument against the mainstream economic concept of “public goods” in his book *Social Contract, Free Ride*, keeping in mind that de Jasay was both a classical liberal and an anarchist. The chatty bot replied: Creating a visual representation of Anthony de Jasay’s critique requires a thoughtful approach, balancing the essence of his arguments with the philosophical underpinnings of his views. Jasay, known for his classical liberal and anarchist perspective, critiqued the conventional economic concept of “public goods” by challenging the assumption that certain goods must be provided by the state due to their non-excludable and non-rivalrous nature. He argued that the state’s role in providing these goods often leads to inefficiencies, coercive taxation, and the infringement of individual freedoms. For the image, we will depict a scene that contrasts the inefficiency and coercion associated with state-provided public goods with the potential for voluntary cooperation and market solutions. The image will feature a central motif of a bustling marketplace symbolizing voluntary exchange and cooperation, juxtaposed with a distant, inefficient, and imposing government facility, representing the coercion and inefficiencies of state intervention. This marketplace will be vibrant, with individuals freely exchanging goods and services, showcasing the potential for public goods to be provided through voluntary means. Meanwhile, the government facility will have a cold, bureaucratic feel, with long lines and unhappy citizens, illustrating the drawbacks of state provision. The contrast aims to encapsulate de Jasay’s critique of the mainstream economic concept of public goods, highlighting his belief in the superiority of free-market solutions and the importance of individual liberty. Let’s create this image. After showing the image (created by his artist friend, OpenAI’s bot DALL-E), ChatGPT further explained (epistemological, “explain” should probably be in scare quotes): The image illustrates Anthony de Jasay’s argument against the mainstream economic concept of “public goods,” contrasting a vibrant marketplace representing voluntary cooperation and market solutions with a distant, inefficient government facility symbolizing state coercion and inefficiency. This visual embodies de Jasay’s critique from his classical liberal and anarchist perspective, highlighting the potential for individual freedom and market efficiency. Exercise for students: What, if anything, did DALL-E get wrong on the image? Discuss from the viewpoints of both de Jasay and mainstream economic theory. Rendition by ChatGPT (DALL-E) of Anthony de Jasay’s critique of “public goods” (0 COMMENTS)