We seem to be in the midst of a backlash against much of the woke, DEI induced madness that has become so prevalent at American universities. While it’s heartening to see people becoming more and more willing to point out the emperor’s state of undress, one must also be on guard to make sure the backlash doesn’t take on excesses of its own. One such overreaction, in my judgment, comes from Yoram Hazony, who argues the idea “of the university as a ‘neutral’ forum is too far removed from reality to be feasible. Instead, anti-Marxist liberals and conservatives should be defending a theory of the university as an educational institution that has no choice but to uphold at least minimal standards of substantive decency.”  While I share Hazony’s horror at the cases of anti-Semitism seen on universities and I also recoil at the woke orthodoxy that has entrenched itself at so many institutions, I find his analysis fundamentally flawed. I don’t think the issues we see are a result of universities practicing some kind of excessive, over the top commitment to free speech. For good reasons, Harvard University has been considered an emblematic example of how things have gone wrong. But it’s worth pointing out that Harvard, also for good reasons, has for years been near the bottom of and currently sits dead last on free speech ratings by the civil rights organization FIRE. The fact that the university that most embodies the problems that concern Hazony also happens to be the university that performs the worst at upholding free speech certainly seems noteworthy. Whatever the source of the problems at Harvard that concern Hazony might be, an absolutist commitment to free speech just isn’t it – and as a committed empiricist, Hazony hasn’t done enough to grapple with that point in my opinion.  But another critical appraisal of Hazony’s take comes from his fellow conservative Robert P. George. There are many aspects to George’s argument, and I won’t unpack them all here. But one thing George does that really nails the issue is to ask the right question: Imagine if university administrators were called upon to determine which views are simply unacceptable and should therefore make the student or faculty member who expressed them subject to suspension or termination. Yoram laments, as do I, that a certain ideology (it happens to be left-wing “woke” ideology) is dominant on most university campuses. For years now, we’ve been hearing from partisans of this ideology the allegation that there is a “trans genocide” in this country. Do we want to empower university administrators—presidents, deans, and diversity, equity and inclusion officers—to decide which viewpoints on gender and sexuality constitute “hate speech” or the advocacy of genocide, triggering revocation of faculty tenure or the expulsion of students? That is a question that, it seems to me, answers itself. … If we were to adopt Yoram’s call for censorship in areas where I am calling for freedom of speech, I invite him—and you, gentle reader—to consider the following question: Would the result be anything other than the further entrenchment of current campus orthodoxies, and the further weakening of protection for dissent and dissenters?  Hazony’s solution falls into the body snatcher problem I’ve discussed before. If you think alien body snatchers have taken over the CIA as part of a plot to conquer the world, it would be self-defeating to try to solve the problem by putting more power and resources into the hands of the alien-controlled CIA. If you think corporations control the government, it’s self-defeating to try to solve that problem by increasing the power of the corporation-controlled government. And if you think the administration of universities have been taken over by woke ideology, it’s self-defeating to try to solve that problem by putting still more power into the hands of the woke-controlled university administrators.  I wrote previously that “Government shouldn’t have the level of power that would best enable good work to be done by wise and trustworthy public servants – government should only have as much power as you would be comfortable being held by someone who is your worst political nightmare. Because, one day, someone that nightmarish will actually get elected, and they will gladly pick up any of the tools made available to them.” In the same way, and for the same reasons, university administrators should only have as much power as you’d be comfortable being held by someone who is your worst ideological nightmare. Right now, many university administrators uphold an ideology that Hazony, George, and I all find repugnant – but I agree with Robert George that the solution to this is to lessen, rather than strengthen, the power of administrators to control speech. (0 COMMENTS)

The world of today would seem alien to someone living 30 years ago: people seduced by their screens in private and public and now AI blurring the lines between humans and the machine. Author and technologist Azeem Azhar chronicles the pace of change and asks whether the human experience can cope with that pace while […] The post Living with Exponential Change (with Azeem Azhar) appeared first on Econlib.

In a recent post, I pointed out that how we define words doesn’t matter when considering substantive issues. Thus whether addition is defined as a mental illness should have no bearing on how we treat addiction.An old Noah Smith Bloomberg column reminds me of how definitions can lead us astray. Smith points out that (in 2018) Bitcoin prices had recently crashed, after previously soaring to a peak of $19,000. He acknowledges that Bitcoin prices might boom again in the future, but nonetheless defines this as a “bubble”: But for ordinary investors, who don’t tend to get in early on potentially revolutionary new technologies or to have the savvy or luck to time the market, the Bitcoin bubble should serve as a learning experience. The most important lesson is: Financial bubbles are real, and they will make your life’s savings vanish if you aren’t careful.Formally, an asset bubble is just a rapid rise and abrupt crash in prices. I don’t have a big problem with Smith’s claim, but it seems odd to view this as a “lesson”.  We didn’t need Bitcoin to know that asset prices often rise sharply and then fall.   This is not the definition of bubble that I prefer, but it’s pointless to argue about definitions.  I’d rather debate substantive issues.  So let’s consider this remark: Bubbles are extremely hard to spot — if it was easy, they wouldn’t exist in the first place. I’m confused.  Why is it hard to spot a sharp rise and fall in price?  I could imagine that it’s hard to predict a big rise and fall in price, but why would it be hard to spot a bubble? A generous reading of Smith’s comment is that I’m interpreting “spot” too literally.  He presumably means something like the following (from the same column): Instead, it seems overwhelmingly likely that Bitcoin’s spectacular rise and fall was due not to rational optimism followed by sensible pessimism, but to some kind of aggregate market irrationality — a combination of herd behavior, cynical speculation and the entry into the market of a large number of new, poorly informed investors. When Smith says bubbles are hard to spot, it seems like he is saying something like the following: “It’s hard to spot situations where as asset is clearly overpriced relative to any sort of rational appraisal of fundamentals.”  (My language, not his) And that’s a perfectly fine definition of “bubble”; indeed it’s the definition that I would prefer.  A bubble is a situation where an asset price is clearly overvalued, and likely at some point to fall back toward a more rational valuation.  If that’s what Smith meant, then his comment: Bubbles are extremely hard to spot — if it was easy, they wouldn’t exist in the first place. would make perfect sense.   But if he’s defining bubbles as merely a sharp rise and then fall in price, then it makes no sense to say that bubbles are hard to spot.  If the price has risen, but not yet fallen, then it is (by Smith’s first definition) not a bubble at all.  To be a bubble you need sharp rise and fall in price. Some readers might think I’m getting too cute—“Surely I know what Smith meant”.  Yes, I think I know exactly what Smith meant.  And that’s why I suspect his claim that a bubble is just a rise and fall in price is incomplete.  He seems to have something more in mind.   I believe that Smith (like me and most other people) implicitly defines a bubble as a situation where an asset is clearly overvalued relative to fundamentals.  That’s why they are hard to spot—they haven’t crashed yet. Why does any of this matter?  Consider this sarcastic comment (the price of Bitcoin had fallen below $4000 at the time Smith wrote his column): Now it suddenly makes a big difference how one defines “bubble”.  Using Smith’s definition (a bubble is simply a big rise and fall in price), McAfee’s comment seems ridiculous.  But if we use the more common definition that I prefer, and which McAfee probably prefers, and which Smith seems to implicitly have in mind in other portions of his column, then McAfee’s comment seem eminently defensible.  I don’t know if Bitcoin was overvalued at $16,600 in 2018.  But given its current price, McAfee’s 2018 claim certainly doesn’t look ridiculous.  I interpret McAfee as saying Bitcoin prices are highly volatile, but we cannot predict where they will move over the long run.  And that’s true!  In contrast, an asset in the midst of a speculative bubble is a poor long-term investment, more likely to fall in the long run. [To be clear, while I agree with McAfee that bubbles don’t exist, I find his explanation to be flawed.  They are not “mathematically impossible in the new paradigm”; rather they don’t exist for Efficient Market Hypothesis reasons.] Of course, if you define “bubble” as merely a sharp rise and fall in price, then bubbles do exist.  But I doubt that McAfee would deny that assets rise and fall in price.  PS.  When I do a post arguing that bubbles don’t exist, I sometimes get commenters telling me they disagree with me because a bubble is nothing more than a sharp rise and fall in price.  But then exactly what are they disagreeing with? PPS.  Smith spends a good portion of his column discussing why he doesn’t believe the big swings in the price of Bitcoin are justified by changing fundamentals.  I can’t comment, because I don’t really understand Bitcoin fundamentals.  But his claim has no bearing on the point I’m trying to make in this post—that it’s important not to let definitions distort a debate over substantive issues. PPPS.  Commenters almost always ask me how I would test for the existence of bubble.  I’d look for evidence that, in the long run, the class of mutual funds that invest using “bubble theory principles” outperform index funds.  I define bubble theory principles as the buying of assets that the market currently prices at irrationally low levels and shorting assets that the market prices at irrationally high levels.  You say that’s hard to do?  I agree!! (0 COMMENTS)

Last week was very busy for me, with doing taxes and substantially rewriting our wills. So this is biweekly rather than weekly. We Are Still Measuring Inflation All Wrong by Alan Reynolds, Cato at Liberty, February 26, 2024. Excerpt: If the U.S. measured consumer prices in the same “harmonized” way other countries do —by simply excluding dubious guesstimates of Owners’ Equivalent Rent— the average rate of inflation was 2.3 percent over the past twelve months, 1.1 percent over the past six, and zero over the past three.   New technologies, new totalitarians by Noah Smith, Noahpinon, February 27, 2024. Excerpt: The internet’s inventors thought it would be a force for human freedom, enabling regular people to speak up from a position of relative privacy without getting government permission or paying large fixed costs. And for a while, in the 1990s and 2000s, that’s more or less how it turned out. Then two things happened. First, internet users migrated from the Web (where attempts at tracking can be detected and blocked) to apps, which watch and record pretty much everything you do in the app. Second, internet use switched from PCs to smartphones, which are far easier to track in physical space, and far easier to link to a user. Together, these changes turned the internet into a technology for universal surveillance. A sufficiently powerful government can use your phone, and the apps on your phone, to track where you are and what you’re doing at all times. Interestingly, though, Smith goes on to point out how narrow the Chinese government’s aims are vis-a-vis the United States. Biden’s Inaccurate and Inadequate Lip Service to Marijuana Reform Ignores Today’s Central Cannabis Issue by Jacob Sullum, Reason, March 8, 2024. Excerpt: Contrary to what Biden said, his pardons for people convicted of simple possession under federal law do not entail expungement of criminal records because there is no way to accomplish that without new legislation. The distinction matters because Biden has emphasized that “criminal records for marijuana possession” create “needless barriers to employment, housing, and educational opportunities.” His pardons do not remove those barriers. The certificates that pardon recipients can obtain might carry weight with landlords or employers, but there is no guarantee of that.   GMU economist reported to DEI office for criticizing plan to mandate DEI courses by Jennifer Kabbany, The College Fix, February 27, 2024. Excerpt: An economics professor at George Mason University was recently reported to its Diversity, Equity and Inclusion office after he publicly criticized an effort underway to add two diversity-heavy courses to graduation requirements. Economist Bryan Caplan posted on X his strong objection to the proposal — which is on the cusp of being implemented even as several states across the nation have enacted laws that curb diversity, equity and inclusion initiatives and offices in higher education. “George Mason University is a public university, funded by Virginians with a wide range of political views about the nature of justice. The Just Societies Initiative is a thinly-veiled effort to teach far-left (or ‘woke’) views of justice as the One True Position,” Caplan posted Feb. 20. “Even people who agree with such views should ponder the justice of creating an official state-sanctioned orthodoxy and requiring all students to spend multiple classes feigning agreement with it.”     (0 COMMENTS)

Star Trek is often seen as utopian science fiction, but a close look shows that the world of the Federation is not as peaceful and inclusive as it first appears. Following Gene Roddenberry’s dream of a future society lacking prejudice and focused on inclusion, social and legal equality, and egalitarian post-scarcity economics, Trek is well-known for its strong moral compass and its progressive, even leftist values. It is a world I appreciate and admire, as a die-hard Trekkie who holds many similar commitments. And yet the United Federation of Planets doesn’t truly resolve deep differences and divergent interests among different beings. Rather, it obscures them with cultural uniformity, propounding a quasi secular humanist, even anti-religious philosophy, coupled with a near-complete transcendence of material constraints. This allows the Federation to sidestep the kind of conflicts that real differences, both in beliefs and in material endowments, create. By contrast, the staunchly economic perspective of the Ferengi makes them better able  to cope with hard tradeoffs and ensure genuine respect for diversity, despite their many ethical and social deficiencies. Yet the discussion cannot end there; in the final analysis, we need a synthesis that incorporates the moral ideals of the Federation together with the Ferengi’s pragmatism to find a balance of the wisdom embodied in the Star Trek universe.   Beating Phasers Into Plowshares? It is striking how often the Federation’s supposed embrace of difference is contradicted and challenged by its interactions with alien species. Starfleet’s mission is to “seek out new life and new civilizations”. They believe in the power of dialogue and diplomacy and in the possibility of common understanding. But they find it surprising and challenging when other species don’t want to have anything to do with them or are overtly hostile, despite their best efforts. In part, this is because the Federation’s social model doesn’t seem genuinely conducive to cooperation within truly radical diversity. Rather, it is about discovering that “we’re really all the same”. In some ways, the Federation isn’t so different from their dreaded enemies, the Borg Collective. Despite an appreciation for the Vulcan credo of “Infinite Diversity in Infinite Combinations,” Federation success seems to heavily rely on people thinking in the same syrupy-sweet, group-oriented way. In the words of Quark, the Federation is the cultural equivalent of a root beer.   Or, as renegade Starfleet officer Michael Eddington puts it to Captain Sisko: …we’ve left the Federation, and that’s the one thing you can’t accept. Nobody leaves paradise. Everyone should want to be in the Federation. Hell, you even want the Cardassians to join. You’re only sending them replicators because one day they can take their ‘rightful place’ on the Federation Council. You know, in some ways, you’re even worse than the Borg. At least they tell you about their plans for assimilation. You’re more insidious. You assimilate people and they don’t even know it. This lack of real diversity is embedded in a world that imagines there is no self-interest, no competing goals and values. Though religion’s portrayal throughout Trek is complicated, the Federation appears to be an essentially secular humanist society (in keeping with Gene Roddenberry’s own beliefs). Trek does not portray most ordinary Federation citizens as having faith traditions, and Starfleet officers are generally skeptical of the various super-beings and powerful entities that claim God-like status, from Trelane and Apollo to Landru and Q. While there are a few episodes where powerful metaphysical beings are seen as being above humanity in their wisdom and having much to share, such as the Organians, the Metrons, and the Cytherians, most of these creatures — whether Q, Trelane, Ardra, or others — are understood as fraudulent and psychologically primitive. This limits the potential for the Federation to have genuine humility about their own knowledge and priorities, or learn how to balance competing visions of the good.  Notably, Starfleet is especially unhappy when its officers get involved in the religious beliefs of other cultures, such as Captain Sisko’s eventual embrace of his status as Bajor’s “Emissary of the Prophets”. Irrespective of whether Sisko has firmly held beliefs or the Bajorans have something to teach the Federation, Starfleet’s only concern is that Sisko’s embrace of Bajoran culture will threaten its publicly reasonable neutrally liberal utopia. Their secularism and cultural commonality greatly diminish any potential conflicts within the Federation between individuals or groups with different beliefs. The Federation also tends to adopt a highly paternalistic, superior attitude to non-Federation cultures’ beliefs or religions. They may be tolerant, but they are far from respectful, if their treatment of the Bajoran culture is anything to go on, or their uprooting of colonists with spiritual beliefs and deep ties to nature, including in a dark twist of irony, Native Americans. It is unsurprising then, that we rarely see disagreements within the Federation, and Trek rarely depicts protracted animosity or competing interests between Federation members.  Rather, Trek hand-waves away problems as easily resolved through democratic deliberation and collective decision-making. In cases where political disagreement is intractable and members wish secession or separatism (such as with the Maquis or the Sevrinites), the Federation often turns authoritarian and hostile. As Captain Kirk’s initial interaction with the Gorn showed, rarely does Starfleet question its own “enterprise” as a quasi-colonizer, (the Prime Directive notwithstanding) and not simply an engine of exploration and cultural interchange.  The absence of trade is one reason why the Federation has difficulty dealing with competing powers such as the Klingons and Romulans. Having —apparently—nothing of value to offer each other, there is little room for a meeting of minds. Insisting that others recognize Federation justice does little to make them do so, and often provokes enmity. When people are divided by resource competition or culture, the answer is not simply to preach inclusivity more loudly, but to incentivize emergent economic and social integration — precisely what markets and liberal individualism provide.  As the economist Ludwig von Mises wrote in Socialism:  The greater productivity of work under the division of labor is a unifying influence. It leads men to regard each other as comrades in a joint struggle for welfare, rather than as competitors in a struggle for existence. It makes friends out of enemies, peace out of war, society out of individuals. However, in a world of quasi-communist post-scarcity, the institutions of private property and attendant division of labour and trade either no longer exist or are severely restricted. Thus, the incentives that would encourage integration and cooperation are missing. Worse still, the Federation tends to view markets and trade with suspicion, identifying them as domains of selfishness, exploitation, and avarice, making the possibility for even limited exchange less likely. Because there is no exchange that is at risk from conflict, for the Federation, the costs of conflict are arguably too cheap rather than too expensive. Because replicators create something close to (but not identical with) post-scarcity for most of the Federation, they are able to persist without depending much on trade. Their technology allows the Federation (and other major competitors) to be largely autarkic. Unfortunately, relative self-sufficiency also diminishes their need to become materially intertwined with other cultures. There is little in Trek’s economics that incentivizes peaceful cooperation through exchange. Rather, everyone seems to get what they want and cooperates because they have nothing to fight over. Alternatively, cooperation is simply advantageous or even a necessity, as it was for the Klingons at the Khitomer Accords.  When their preferences aren’t satisfied, the spectre of war quickly returns, and ancient cultures of honor which encourage conflict do not have the problem of material necessity to restrain them. Federation ideals of peace and cooperation are challenged when they have nothing to trade or lack things that would interest other species and political entities despite their differences. This is demonstrated by their failures to make peace with the Sheliac, the Dominion, and others. Crucially, Federation replicators have not eliminated the scarcity of space itself (both regions of the galaxy and specific planets). Conflict over territory is often worsened by ideology, ranging from the Cardassians’ and Romulans’ militaristic nationalism to the Founders’ xenophobic imperialism. In a subsequent post, I will further explore the role markets play in the Trek universe.   Akiva Malamet is a Contributing Editor at The UnPopulist. He has been published at The UnPopulist, Libertarianism.org, Liberal Currents, Catalyst, and other outlets. (0 COMMENTS)

Banking crises seem to occur more and more frequently. And the federal government keeps broadening its insurance of bank depositors. I suspect that these two trends are related.Bloomberg reports that the Fed is backing off from a plan to require higher levels of bank capital, which was formulated in the wake of the March 2023 banking crisis. Instead, the government plans to address the fundamental problem in American banking by doing . . . nothing: Wall Street banks are on the cusp of a sweeping regulatory victory after Federal Reserve Chair Jerome Powell signaled officials would scale back plans to make them hold more capital. The world’s most powerful central banker flatly told lawmakers Wednesday that the government’s plan was in for “broad and material changes,” and that a complete do-over was very possible. Powell’s comments appeared to catch even seasoned industry lobbyists off-guard and immediately threw into doubt a signature Biden-era regulatory effort. Would a future President Trump revive the effort?  Don’t count on it: The political stakes are also high with November’s elections looming. A consolidation of power by Republicans, who have been generally receptive to the industry’s arguments, would further hamstring the effort. As usual, the industry lobbyists have won.  America’s banking system will continue to become increasingly dysfunctional, with more and more frequent banking crises. PS.  You might wonder why a libertarian like me favors higher capital requirements.  Actually, I favor complete laissez-faire in banking, with no deposit insurance and no “too big to fail”.  But if we do have government backstops for bank depositors, then banks will have an incentive to hold too little capital.  When they collapse, taxpayers will be forced to bail out the depositors of failed banks. (0 COMMENTS)

Referring to my post “Only One Way to Be “President of All Syldavians,” I gave ChatGPT 4 the following instruction: “To illustrate the article at https://www.econlib.org/only-one-way-to-be-president-of-all-syldavians/, generate an image showing two individuals fighting:  one wants to force the other to drink only beer as himself; the other wants to force the first one to drink only wine as himself.” The bot came up with interesting drawings, illustrating the hidden face of democratic politics as we know it, that is, as a method for imposing to all the choices of some—at best, of the majority of the electorate. One of the bot’s images appears on the featured images of this post, and is reproduced below. Our friendly chatbot did not do badly. How to democratically choose between beer and wine   (0 COMMENTS)

The 30-day period since publication of Charley Hooper’s and my article has passed. Here’s the whole thing:   Be Thankful for High Drug Prices If Americans weren’t overcharged, we wouldn’t have innovative treatments. By David R. Henderson  and Charles L. Hooper Feb. 4, 2024 at 4:16 pm ET Who wants to pay for expensive drugs? No one, including Joe Biden, Donald Trump, Ron DeSantis and Bernie Sanders, wants Americans to pay for costly drugs. Mr. Trump has advocated policies to lower drug prices. Gov. DeSantis wants Floridians to be able to buy drugs from Canada. Sen. Sanders wants to subpoena the CEOs of drugmakers that have challenged the Inflation Reduction Act’s price “negotiations.” President Biden signed the act. Who wants drugs that will save lives? Everyone we know. For Americans, paying for the discovery and development of new drugs rests on our shoulders. If we pay, we get new lifesaving medicines. If we don’t, we don’t. Almost all new drugs are developed for the U.S. market, no matter where the company’s headquarters are. Why? America is a large, rich country with an advanced medical system. America’s gross domestic product per capita is 65% higher than Britain’s, 57% higher than Germany’s and 87% higher than France’s. There are four Americans for every German and nine Americans for every Canadian. We have many wealthy people. The Food and Drug Administration, which moves slowly, is still often faster at approving new drugs than regulatory bodies in other countries. While far from a free market, our medical system is freer than in many other nations. Countries with single-payer systems often take one to two years to negotiate the price of a new drug. If a patent is granted for 20 years but the first 13 years are dedicated to development and approval, then only seven years of patent-protected sales remain. If two years are added to that timeline for reimbursement negotiations, the interval drops to five years. If new drugs can make it in America, they are developed. If they can’t, they aren’t. Other countries are considered secondarily. They are the cherry on top; we’re the sundae. While only 4% of the world’s population, the U.S. often accounts for half or more of worldwide revenue for a new drug. The cancer-fighting drug Keytruda was Merck’s top-selling product in 2022, generating sales revenue of approximately $20.9 billion. Around 60% of Keytruda sales were in the U.S. In the U.S., we pay for drug research and development while other countries free-ride on our investments. Why do other advanced countries get their drugs more cheaply? They have monopsonistic government agencies that negotiate drug prices with the attitude that if they can’t get it cheaply, their citizens will do without. Pharmaceutical companies go along with this because drugs have high upfront costs and relatively low incremental costs. After those upfront costs are paid by someone, drug companies decide that the extra revenue, perhaps from Canada, covers incremental costs and is better than nothing. Drug companies would prefer that everyone pay the high price, but they have little control over the situation. If the price is too low in Canada, the company won’t launch there. Sometimes, a drug company must accept Canada’s low price or grant a compulsory license to a producer of a generic version, even though the patent is still in force. Americans should be free to purchase drugs from any willing pharmacist, even those in Canada. But don’t expect that to move the needle. Canada’s government is likely to restrict exports so that American buyers don’t scarf up all the drugs. In 2020 Canadian Minister of Health Patricia Hajdu ordered companies not to export any drugs if those sales would create or worsen shortages in Canada. Capitalized drug development and approval costs have increased at 7.5% a year in real terms since the mid-1970s, when the cost to develop a new drug and secure FDA approval was estimated at $179 million. It has now certainly surpassed $6 billion. Most drugs are less expensive to develop, but the $6 billion figure accounts for the “dry holes” (about 82% of drugs that pass preclinical testing still fail in clinical trials) and the time value of the money spent many years ago. This amount doesn’t account for post-approval clinical trials that the FDA often requires. Longevity is highly correlated with drug R&D. Columbia University economist Frank Lichtenberg has found that modern drugs were associated with 73% of the increase in life expectancy that we’ve enjoyed in the last few decades. Some people claim that the American medical system isn’t very good because American life expectancy isn’t top tier. But as we know, Americans aren’t always models of health, moderation and safety. No one in this country is happy that Americans pay for drug R&D while the rest of the world free-rides off our investment. But we don’t run the world. If we try to free-ride too, there won’t be a ride. When we look at our situation as it is, not how we wish it were, we can see what a good investment drug R&D is and how cheap-drug schemes such as importing drugs from Canada and “negotiating” Medicare drug prices generally won’t work. If they do, we’ll wish they hadn’t. Mr. Henderson is a research fellow with Stanford University’s Hoover Institution. Mr. Hooper is president of the life-science consultancy Objective Insights and author of “Should the FDA Reject Itself?”   (0 COMMENTS)

The following two quotes show a bridge between old-time classical liberals, represented by Adam Smith, the famous and 18th-century liberal economist, and Anthony the Jasay, the more radical liberal anarchist of our time. The first quote comes from the manuscript of a lecture delivered by Smith (quoted after his death but later lost): Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things. The second quote is from Anthony de Jasay’s book Social Contract, Free Ride, which I review in the forthcoming issue of Regulation on the 35th anniversary of its publication. De Jasay defines (classical) liberalism as a broad presumption of deciding individually any matter whose structure lends itself, with roughly comparable convenience, to both individual and collective choice. This bridge points to a common denominator between more moderate classical liberals and more radical libertarians: the ideal of a humble state. It is true that the correspondence is not perfect. Anthony de Jasay was more radical than his definition suggests. And other classical liberals—for example, Friedrich Hayek and James Buchanan—accepted a potentially larger role for the state than the two quotations above imply. Buy I think that de Jasay put his finger on a necessary (and perhaps sufficient) condition for liberalism or libertarianism: a general primacy of individual and private choices over collective and political choices. ********************************* To illustrate this post, I instructed ChatGPT 4 to “generate an image symbolizing the primacy of individual and private choices as opposed to collective and political choices, as it is viewed by classical liberals and libertarians.” The robot labored on that (although “he” seemed to have an idea of what classical liberalism and libertarianism are). I had to give other instructions, notably by evoking two individuals trading oranges and apples. Recall how James Buchanan used that image as a symbol of mutually beneficial exchange. The chatbot’s best or most striking image, which I use as this post’s featured image, is reproduced below. (1 COMMENTS)

Back in February 2023, I did a chat with GPT to determine its understanding of supply and demand. I discovered that it did not understand the concept, but I didn’t blame the AI. Instead, I argued that it reflected a flawed understanding of S&D in the documents that GPT was trained on.Claude 3 was just released, and I decided to investigate whether AI had progressed in its understanding of S&D. As we will see, it has not. I suspect this is because AI is limited by the quality of the material that it trains on, at least for the moment. Perhaps in the future it will be able to “think for itself”. I had hoped that Claude 3 would recognize that the impact of a price change on consumption depends on whether the price change was caused by a shift in supply or a shift in demand.  It failed: As I did in February 2023, I specified that I was looking for an equilibrium outcome, to make the question less “tricky”.  As in 2023, this led to some bizarre confusion in the reply: The decrease in supply in step 5 is perfectly fine, but the way Claude reasons between steps #3 and #5 is cringeworthy. I worried that the phrase “in equilibrium” might have confused Claude, leading it to assume I only meant starting in equilibrium.  So I repeated the question with language making it clear I meant “remains in equilibrium”: This is a bit better, although it still misses the basic point that you cannot reason from a price change.  Claude had no basis for assuming the price increase was due to a decline in supply. Interestingly, at some level Claude does “understand” the fallacy of reasoning from a price change . But here the term “understand” is used in roughly the way a B student at a decent university understands concepts.  They can memorize them and provide answers on tests, but often are unable to apply the concept in a novel situation. I also repeated a question about the impact of an expansionary monetary policy on interest rates.  Once again, it assumed that interest rates would fall, which is a mistake made by many economists.  More worrisome is its claim that inflation expectations would also fall: (0 COMMENTS)