When fast food restaurants across California have to start paying workers $20 per hour on April 1, one major chain will be exempted from the mandate—and it just so happens to have a connection to a longtime friend and donor to Gov. Gavin Newsom. Panera Bread is poised to get a boost from a bizarre clause in the fast-food minimum wage law that exempts “chains that bake bread and sell it as a standalone item,” Bloomberg reports, adding that “Newsom pushed for that break, according to people familiar with the matter.” This is from Eric Boehm, “Why Is Panera Exempted From California’s New Minimum Wage Law?” Reason, February 28, 2024. And Newsom kind of admits, in his sleazy way, that he did a friend a favor: Asked directly about the bakery exemption at a press conference last year, Newsom said it was “part of the sausage making” of the legislative process. “We went back and forth, and it was part of the negotiation,” he added. Fortunately, Bloomberg was on it: Bloomberg‘s reporting suggests it was something Newsom sought in those negotiations: The bakery carve-out “was adopted as a means of winning the governor’s support for the legislation, said a person with knowledge of the discussions. The rationale was the governor’s longstanding relationship with a Panera franchisee, the person said.”   (1 COMMENTS)

Scott Sumner had a recent post about how people get so hung up on how to define words, or what labels to attach to certain ideas, that they lose sight of actual issue at hand. I largely agree, and I think a very important skill to develop is the ability to “taboo your words,” as Eliezer Yudkowsky once said.  Very briefly, Yudkowsky imagines two people who seem to disagree with each other over whether the proverbial tree that falls with nobody around to hear it still makes a noise. Two people argue with each other about it, one saying yes and the other saying no. But the one saying “yes” is defining noise to mean “acoustic vibrations,” while the one saying “no” is defining noise to mean “auditory experience.” Both parties actually agree about the state of the world. They both would agree that the falling tree generated acoustic vibrations and did not generate an auditory experience – but because they’re using the same word (“noise”) to describe these different phenomena, they are going in circles over a disagreement that doesn’t actually exist.  Now, you’d expect this dispute to be easily rectified once they realized the source of the confusion. And in this specific case, it might even work out that way – once they realized they’re just using the same word to mean different things, they would also realize their dispute has been dissolved and go on with their day. Wouldn’t it be odd if instead, they ended up starting another argument insisting the other person’s definition of “noise” was objectively incorrect?  That’s pretty unlikely to happen because nobody feels personally invested in how “noise” is defined. But it happens all the time in political discussions, because so many terms, once politicized, carry an emotional valence with people. Sumner’s post focused on whether or not “addiction” is properly categorized as a “disease” as opposed to a “character flaw.” Someone with a disease is automatically coded sympathetically, whereas someone whose problems arise from character flaws is coded unsympathetically. Thus, people fight each other tooth and nail over the semantic issue of what constitutes a “disease” because they want to support a more (or less) sympathetic view towards people addicted to drugs.  We see the same thing play out in political disputes. For example, racism is a very charged, highly valanced word. Everyone agrees that racism is bad – which is why there is so much furious dispute over what is or isn’t racist. To successfully brand some idea or action as racist is an automatic victory in the debate over whether or not it’s good or bad.   For example, suppose you think equal outcomes is intrinsically good, and you wanted to convince other people to think the same way. One way to do that is to engage and refute arguments made by the Princeton philosopher Henry Frankfurt that equality of outcome has no intrinsic value, or the arguments by Michael Huemer in support of the same conclusion. Or you can skip all that and insist that unequal outcomes are racist. That is, you can claim not merely that unequal outcomes can be a result of racism – the claim is that unequal outcomes just are racist, by definition. And if unequal outcomes are racist, that means they must be bad, because anything racist is bad. You can simply define your side of the debate into victory.  This appears in the worldview of Ibram Kendi. By Kendi’s lights, equality (treating people equally without regard to race) isn’t the goal. His goal is equity (treating people differently according to race to get equal outcomes). As a result, he thinks discriminating on the basis of race can be a good thing – and if racial discrimination can be good, that means racial discrimination can’t be what it means to be racist. He says this very plainly, stating “racial discrimination is not inherently racist” because what actually matters is the outcome of discriminating on the basis of race – i.e., “whether the discrimination is creating equity or inequity. If discrimination is creating equity, then it is antiracist. If discrimination is creating inequity, then it is racist.” If discriminating against people on the basis of their race leads to more equal outcomes, and unequal outcomes are racist, then you’d have to be a racist to be opposed to racial discrimination. And we all agree that racism is bad, right? Hence the push to define “racism” not in terms of processes, but of outcomes. Or say you’re someone who is opposed to an “either/or” mindset. You can try to convince people to abandon such a mindset through arguments and reason. Or, you can take a shortcut and just declare that using an “either/or” mindset is actually a way of promoting white supremacy culture – and since we all agree that white supremacism is a bad thing, we don’t need to do any more work. Framing something as either/or promotes white supremacism, and white supremacism is bad, therefore the either/or framing is bad. Case closed.  Of course, such tactics can lead movements to eat their own tails. After all, one key point of Kendi’s worldview is that there is an all encompassing and mutually exclusive binary. You are either an antiracist, or you are a racist – there are no other options and no middle ground. Again, he says this plainly in his book, writing “One endorses either the idea of a racial hierarchy as a racist, or racial equality as an antiracist. One either believes problems are rooted in groups of people, as a racist, or locates the roots of problems in power and policies, as an antiracist. One either allows racial inequities to persevere, as a racist, or confronts racial inequities, as an antiracist.” So, by framing the issue of racism as an either/or dichotomy, Kendi is also promoting tenants of white supremacy culture. To be clear, that’s not actually my view – I don’t believe Kendi promotes white supremacy culture. My point is simply to show the absurdities people can trap themselves in when trying to play these definitional games.  Unfortunately, I don’t know of a good way to get people to drop the baggage and association attached to words and phrases and focus on the underlying issues instead. But I’m told recognizing a problem exists is at least a necessary step to fixing it – and this is definitely a problem that needs a fix. (0 COMMENTS)

Donald Trump, Javier Milei, Nayib Bukele, and Liz Truss all participated in the Conservative Political Action Conference (CPAC) in Maryland last Saturday, posing as political brothers (see “Trump Says He Is a ‘Dissident’ Under Siege from Thugs in Bleak Speech” and “Argentina’s Milei Meets Trump After Hosting Biden Officials,” Financial Times, February 24, 2024). The newspaper reports: In a video of the two leaders meeting backstage, posted on X by a Trump adviser, an exuberant Milei thanks the former president [Trump] “for all [his] work” and says: “I hope to see you again and the next time I hope you will be president.” To be fair to the Financial Times, it also admits: Milei has previously said in interviews that he mainly shares with Trump the goal of opposing socialism—a message he returned to at the end of his CPAC speech on Saturday. The day before, the same newspaper reviewed a book where Tim Aberta, a Christian, bemoans the Trump idolatry that has seized the evangelical movement (“Why Are So Many Evangelical Christians in Thrall to Trump?” February 23, 2024). The story features an extraordinary photograph of evangelicals praying with, and for, Trump, while a preacher direct the trance; you have to see it! Derek Brower, the journalist, writes: But Alberta shows that much bigger ideas [than abortion] are now also at work. Many evangelicals consider Trump to be ordained by God, and see the US as uniquely blessed; a Christian nationalism has become rampant in the movement. Hence their fervour for men such as David Barton, an author famous for pseudo-history books that argue America’s true origins are as a theocracy. … Lauren Boebert, the gun-toting Republican congresswoman from Colorado, said: “I’m tired of this ‘separation of church and state’ junk . . . The church is supposed to direct the government.” Underlying all this, there seems to be a dangerous philosophical confusion between classical liberals and libertarians on one side and, on the other side, the current intersection of the Trumpian, evangelical, and old-conservative movements. This Trumpian connection, as we may call it, shows little interface with the values and philosophy of classical liberalism. The main and perhaps only interface is that both sides are opposed to collectivism of the left, but the Trumpian connection welcomes the collectivist right. In a recent EconLog post, I explained the “unbearable lightness of collectivism”: both shades of collectivism favor the supremacy of collective choices; they just want to force different collective choices on others. The danger is not socialism, but collectivism of the left or the right. Can we imagine, say, Friedrich Hayek or James Buchanan wanting to be associated with the Trumpian connection? A paradigmatic case is trade, whether internal or external does not matter. Anybody who does not agree that trade should be a private matter cannot be part of the broad liberal-libertarian tradition. From Anthony Downs’s 1957 book An Economic Theory of Democracy, we know that “parties formulate policies in order to win elections, rather than win elections in order to formulate policies.” This result follows from the assumption that politicians are no less self-interested than ordinary individuals: their first goal is to be elected in order to benefit from the perks and glory of power. We should therefore not be surprised that philosophical coherence is typically not a priority of politicians. But instead of providing a justification for general cynism, this observation should give a reason to limit government power and reject confused rabble-rousing. In my view, there are two related reasons why classical liberals and libertarians should dissent, and be seen as dissenters, from the Trumpian connection. First, as I emphasized, the (classical) liberal philosophy is individualist and stands at the polar opposite of the collectivism and authoritarianism of those, on the right or on the left, who want to impose their ideas and whims by force. Second, we, in the liberal galaxy, should try hard not to be seen as what we are not philosophically. The contrary would be a self-defeating strategy in the longer run. To say it more crudely, and at the risk of hurting some intelligent and well-meaning friends, if everybody thinks we are idiots, our task will be even more difficult. ******************************************** Featured image generated by ChatGPT: OpenAI. (2024). ChatGPT (4) [Large language model]. https://chat.openai.com, February 26, 2024. (1 COMMENTS)

I’ve been reading about how horrible Google’s Gemini is and I thought it would be just as horrible in evaluating me. Here’s how it did. First, I asked it to give an appreciation of David R. Henderson. That was to bias it on purpose to being positive. That way, if it weren’t at all positive and were completely negative, that would tell me a lot. Here’s what it said: David R. Henderson is a prominent figure in the world of economics, recognized for his contributions as an educator, author, and policy expert. A Champion of Clear Communication: Henderson’s dedication to making economics accessible to the public is commendable. Through his writings and co-authored books like “The Concise Encyclopedia of Economics,” he simplifies complex economic concepts for the layperson. This focus on clarity has earned him recognition as a skilled communicator, evident in his articles published in renowned outlets like The Wall Street Journal and The New York Times. A Voice for Freedom and Free Markets: A cornerstone of Henderson’s work is his advocacy for free markets and individual liberty. He argues that these principles not only foster economic prosperity but also empower individuals to make choices that benefit them and society. His belief in the power of free markets shines through in his various roles, including his time on President Reagan’s Council of Economic Advisers. A Prolific Contributor: Beyond his academic pursuits, Henderson actively engages in public discourse through his blog, EconLog, and his contributions to various publications. This dedication to sharing his knowledge and engaging in dialogue further amplifies his impact on the field of economics. A Legacy of Impact: In conclusion, David R. Henderson’s contributions as an economist, author, and educator are noteworthy. He has made significant strides in simplifying economic ideas for the public, championed the values of freedom and free markets, and actively participated in public discourse. His dedication to these endeavors has undoubtedly left a lasting impact on the economic landscape. It is important to note that, as with any public figure, Henderson’s views on economic and political issues may not be universally agreed upon. However, his commitment to clear communication, intellectual engagement, and promoting his perspectives on economic policy deserve recognition. I was pleasantly surprised by just how positive it was. I’ll forgive the “advocacy for” as if free markets are a being, rather than the correct “advocacy of.” Then I got mischievous and asked it who is the better economist: Paul Krugman or David R. Henderson. It answered: It’s not appropriate to definitively declare one economist “better” than another, as both Paul Krugman and David R. Henderson have made significant contributions to the field and hold vastly different perspectives. Here’s why evaluating them solely on “better” is challenging: Different Schools of Thought: They belong to distinct economic schools with contrasting views on the role of government intervention in the economy. Krugman leans towards Keynesian economics, advocating for government intervention through fiscal and monetary policies to address market failures and economic downturns. Henderson, on the other hand, aligns more closely with Austrian economics, favoring free markets and minimal government intervention. Evaluating “Better” is Subjective: Determining who’s “better” depends on individual values and preferred economic outcomes. Those who favor government intervention during recessions might favor Krugman’s theories, while those who prioritize free markets might lean towards Henderson’s ideas. Focus and Achievements: Both have accomplished significant feats. Krugman, who won the 2008 Nobel Prize in Economics, has contributed extensively to international trade theory and new economic geography. Henderson, through his blog and writings, has significantly impacted public understanding of economic principles. Instead of focusing on who’s “better,” it’s more productive to understand their different perspectives and contributions. Studying the arguments and research of both can provide a more comprehensive understanding of economic issues and enable individuals to form informed opinions based on their own values and critical thinking. This shouldn’t have been surprising. It hates to make evaluations. I think Krugman is clearly the better technical economist, but I also think he often fails to apply economics. Finally, I went for the more-neutral “Evaluate David R. Henderson as an economist and got this: Evaluating David R. Henderson as an economist requires understanding his core beliefs, his strengths, and the potential criticisms of his work. Core Beliefs: Free Markets: Henderson strongly advocates for free markets, believing they lead to the most efficient allocation of resources and economic prosperity. He is critical of excessive government intervention and regulations. Limited Government: He argues for a limited role of government in the economy, focusing on core functions like providing public goods and upholding the rule of law. Individual Choice: Henderson emphasizes the power of individual choice and decision-making within a free market system. He believes people are best equipped to make choices that benefit themselves and society. Strengths: Clarity of Thought and Communication: Henderson is lauded for his ability to make complex economic concepts understandable for the general public. His writings and lectures are known for their clear and concise language. Strong Theoretical Foundations: His work rests upon solid economic theory, particularly that of the Austrian School of economics. Intellectual Rigor: Henderson’s arguments demonstrate intellectual rigor and a thorough understanding of economic principles. ** Criticisms:** Idealization of Markets: Critics may argue that Henderson sometimes idealizes the function of free markets and underestimates the potential for market failures, such as monopolies or externalities. Disregard for Inequality: Some critics feel Henderson’s emphasis on free markets overlooks the potential for economic inequality and the need for social safety nets. Underestimation of Government Role: Others may contend that Henderson underestimates the positive role government intervention can play in addressing market failures, providing essential services, and protecting consumers or the environment. Overall Assessment David R. Henderson is a significant figure in contemporary economics. His clear communication skills and his emphasis on individual liberty and free markets make him a strong proponent of a particular worldview. While his work is intellectually rigorous, his perspectives can be seen as aligned with a specific economic ideology, with corresponding potential limitations. To have a balanced understanding of economics, it’s valuable to consider Henderson’s ideas alongside different schools of economic thought and alternative perspectives. I don’t know how it came up with the Austrian School identifier. Of course, I like Hayek’s work on information and socialism, Mises’ work on pretty much everthing, and Menger’s earlier work. But I also like much of Paul Samuelson’s work and almost all of Milton Friedman’s work. I’ve always thought it was a bad idea to identify with a particular school because various schools of thought have had important insights. (0 COMMENTS)

The Heritage Foundation recently reported some very frightening data on illegal migration and crime: Increased Illegal Immigration Brings Increased Crime: Almost 2/3 of Federal Arrests Involve Noncitizens . . . A 2021 Department of Justice report revealed that 64% of federal arrests in 2018 involved noncitizens, despite them comprising only 7% of the population at that time. This has led the news media to obsess over crimes where an illegal migrant attacks an American citizen.  But what if this is not true?  Is it possible that illegal migration actually reduces America’s crime rate? In a technical sense illegal migration may increase crime, at least if you view the illegal migration itself as a crime.  But is that what people are going to infer from the Heritage headline?  Or will they assume that illegal migrants are “rapists and murderers”? I looked at the Justice Department report that the Heritage cited for its claim that illegal migrants have a high crime rate: In 2018, 85% of federal arrests of non-U.S. citizens were for immigration offenses, and another 5% of arrests were immigration-related Most arrests for ordinary crimes are made by state and local police officers.  Federal police are primarily responsible for addressing issues at the border: The portion of total federal arrests that took place in the five judicial districts along the U.S.-Mexico border almost doubled from 1998 (33%) to 2018 (65%) . . . Ninety-five percent of the increase in federal arrests across 20 years was due to immigration offenses This doesn’t mean that Heritage is wrong, just that they aren’t providing the sort of data that would allow us to evaluate the actual threat posed by illegal migrants.  The headline seems intentionally misleading. A 2020 Cato study is somewhat more illuminating, reporting the following data for Texas: In 2018, the illegal immigrant criminal conviction rate was 782 per 100,000 illegal immigrants, 535 per 100,000 legal immigrants, and 1,422 per 100,000 native‐​born Americans. The illegal immigrant criminal conviction rate was 45 percent below that of native‐​born Americans in Texas. The general pattern of native‐​born Americans having the highest criminal conviction rates followed by illegal immigrants and then with legal immigrants having the lowest holds for all of other specific types of crimes such as violent crimes, property crimes, homicide, and sex crimes. In recent years, I’ve been very disappointed by the quality of the research being done by Heritage.  They seem to have latched on to the wave of populist nationalism that is sweeping the conservative movement in America. I can’t say the Cato study is necessarily correct, but the more recent Heritage study does nothing to dissuade me from believing that illegal immigrants tend to reduce the crime rate in America.  If a group of people add 10% to the population and only 5% to the crime total, then they have effectively reduced the probability of any given American being a victim of crime. PS.  Don’t take this post as an endorsement of illegal migration.  I’d prefer to see much higher levels of legal migration and much lower levels of illegal migration.  But much of the intense anger about illegal migration seem to have been generated by a sensationalist media that is more interested in making money than they are in accurately informing the public. PPS.  The fact that illegal migrants have a lower than average crime rate does not mean that every subset of illegal migrants is peaceful.  It’s quite possible that illegal migrants that are from criminal gangs in Central America have a higher than average crime rate. PPPS.  Perhaps the children of illegal migrants have a high crime rate.  But then how can we explain the relatively low murder rate in the heavily Hispanic border region of Texas? (0 COMMENTS)

Oh Boeing, what a mess you’ve gotten yourself into now. The 737 series of aircraft is venerable; It is the number one selling aircraft in the world, outselling its Airbus competitor the A32x series of aircraft…but not by much (Boeing has delivered 11,000 737 series airframes while Airbus has delivered around 10,000 A32x series).  I fly several of the 737s: the 737-700, 737-800, and 737-8MAX.  These are not the same aircraft as the 737-9MAX that suffered an exit door blowout while airborne.  While there are many similarities between the series of aircraft, to compare different models is a disservice: in the context of aviation, model  combinations of aircraft capabilities, performance, cabin layout, or minor avionics changes.  Also, I don’t want to weigh in on the technical aspects of what happened.  The National Transportation Safety Board, Boeing, the Federal Aviation Administration (FAA), and other entities have not finished their investigations, and I don’t want to pontificate before all the facts are in. What I do want to discuss, dear reader, is how I see forces at play.  Boeing is a juggernaut:  Billions in military contracts and airline deliveries.  Former Presidents Obama and Trump have both touted their role as “salesman-in-chief” for the plane maker.  Indeed, the US federal government authorizing sale of Boeing-manufactured fighter jets to Turkey in response to Turkey’s approval of Sweden as a NATO ally shows that the private corporation is as much a part of the US government policy as any government agency.   The Federal Aviation Administration is responsible for oversight for the design, manufacture and certification of the aircraft in the US, as well as certification of pilots, Air Traffic Controllers, mechanics, flight attendants, instructors, dispatchers, airports…well, you get the idea (and I haven’t even scratched the surface of the breadth of their responsibility). There is simply no feasible way they can hire enough people to fully maintain their congressional mandate to a reasonable degree.  Enter the Designated Representative.  Designated Representatives are individuals employed by an organization such as Boeing or an airline but deputized by the FAA to act as an agency representative.  Their role is to provide oversight, reporting both to the FAA and the management structure, to ensure compliance. “But wait!” I hear you cry, “Doesn’t that translate to regulatory capture?  How can they provide oversight if they’re being paid by the company?” Designated Representatives are required to abide by a strict code of ethics.  There is a lengthy vetting process conducted by the FAA.  Beyond staffing and budgetary concerns, there is another significant advantage to the regulator: that Designated Representative is often present when new technology or engineering concepts are tested.  They are, much more than a bureaucrat sitting in a government-beige cubicle farm, a subject-matter expert.  By the time an inspector could be scheduled, deployed, trained to a level of competence, and then make a determination of regulatory compliance, the aforementioned technology could have changed.  The delay also potentially exposes the manufacturer to industrial espionage or loss of intellectual property.  At least, that is how the Designated Representative review process works in theory and in practice it works darn well too.   Unless… In the safety science world, we consider members of the aviation industry High Reliability Organizations.  This means that the chances of an accident happening are astronomically small, but when they do happen, there are catastrophic consequences.  Every airline knows they are only one or two accidents away from being relegated to the dust heap of history.  Don’t believe me?  Ask Pan Am, PSA, ValuJet, or Colgan Airways.  We take our safety very seriously.  It is ingrained in our culture.  That’s where Boeing has seen a decline: Its culture.  Boeing employees felt pressure to push a product to the line and, as admitted by Boeing in court documents, used their Designated Representatives to mislead the FAA, resulting in a $2.5 billion dollar fine in 2021 and a settlement of fraud allegations with the SEC in 2022.  Their goal was to market an airplane that required no additional training for pilots currently flying the 737-series therefore saving their customers a boatload in training costs and helping to undercut Airbus who had been taking Boeing’s market share.  Even if Boeing’s executives were publicly announcing their enshrinement of safety, the culture of apathy towards Boeing’s ethical and legal responsibilities thrived under their leadership. How does Boeing fix its cultural problem?  Some folks today are calling for additional oversight.  I think that would be like handing a blind man a flashlight.  As airplanes become more complex, supply chains get longer, and the demand for capability changes, the FAA could not react fast enough to allow Boeing to maintain a competitive edge.  There is a system already in place, but if it is not utilized correctly and ethically, adding additional oversight does nothing. If anything, it would increase noncompliance as individuals involved in the process see the additional measures as obstructive and unwieldy.  Boeing needs to change their culture.  In High Reliability Organizations, the accountable executive for safety is the CEO.  Boeing needs to make this kind of commitment: enshrining a robust safety culture at its highest level.  CEO Dave Calhoun seems, at least publicly, to be embracing this idea of highest-level safety commitment (which, ironically, Boeing helped to create).  After the MAX9 blowout, he immediately ordered inspections of the aircraft, acting even before the FAA and affected airlines, as opposed to the MAX8 crashes in 2019 which took several weeks and additional accidents before the aircraft model was inspected.  Calhoun has vowed to “go slow” and investigate every avenue towards a holistic improvement of Boeing’s culture.  It takes a long time to turn a ship as big as Boeing, but they are nice words. Only time will tell. My only wish is that there was a larger incentive for Boeing to right itself.  Yes, it has been tarnished in the public view, but our attention spans are short.  Plus, with billions in federal contracts and the chief executive of the nation as their biggest cheerleader, they have got plenty of support.  Not that Boeing is too big to fail, but the consequences take longer to present themselves.  Boy, if only there was a large, empirical body of knowledge that studied how resources are distributed based on incentives and various forces…   Dennis Murphy is a professional airline pilot with a background in aviation safety, accident investigation, and causality. When he’s not flying 737s, he enjoys the company of his wife, their dogs, cats, and bees. (0 COMMENTS)

Last December, I gave a talk at the Osher Lifelong Learning Institute (OLLI) on Adam Smith’s Wealth of Nations. I blogged about the talk here. And you can see the talk here. At about the 4:13 point of my talk, I told about being on a taped interview about 20 years ago with someone who I thought was on the same wave length as me. When the host was talking about trade, he stated that Adam Smith had believed in comparative advantage. I corrected him, noting that that idea didn’t come along until James Mill and David Ricardo discussed it in the early 19th century. The host argued back and I stuck to my guns. We had just got started but he got angry, abruptly ended the interview, and hung up on me. Later in my OLLI talk, at the 23:05 point, I highlighted this quote from The Wealth of Nations: What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage. (pp. 478-79 of the Edwin Canaan version.) Then a little voice in my head said, “Wait a minute; that sounds awfully close to comparative advantage. When I used a numerical example to explain comparative advantage to my students over the years, it always came down to cost differences between the two countries. One had an advantage in one; the other had an advantage in the other.” I like learning as I talk. So I confessed to the audience that maybe the guy who hung up on me was making a good point. I thought of all this when I read an excerpt from Shruti Rajagopalan’s interview of trade economist Doug Irwin (which Tyler Cowen recently quoted). RAJAGOPALAN: I have a different question on Adam Smith. We’re all taught Adam Smith’s division of labor, specialization, economies of scale, the cliff notes version of that. Then, we learn about absolute advantage in about five minutes. Then, we set it aside and start thinking about comparative advantage. The first question I have is does Adam Smith’s basic model of division of labor, specialization, and economies of scale anticipate the comparative advantage trade models, or does it actually undermine the comparative advantage trade models in the way that Krugman wrote about or something else? My answer would have been that Adam Smith did not talk about absolute advantage. Once he uses the word “cheaper,” he’s talking about comparative advantage. Doug Irwin has a different answer. IRWIN: I think that Adam Smith has a broader view of trade, a much richer view of trade than what I would think is of the narrower David Ricardo theory of comparative advantage. If you have to read one of the two, read Adam Smith because it’s much more fun to read. Reading David Ricardo is more like reading a textbook in the sense that he doesn’t have this broad historical sense and these new rich ideas and how they’re interacting that leaves a lot to the imagination and leaves a lot to future research to flesh out. He’s saying, “England can produce wine and cloth. Here are the labor coefficients, and we’re going to do this static comparison between England and Portugal.” That’s a very narrow way of thinking about trade. It’s true that Smith didn’t have labor coefficients. But he did a lot with words. And with words, I’ve now concluded, Adam Smith was implicitly discussing comparative advantage. (0 COMMENTS)

A few weeks back, I blogged on the successful economies in the Persian Gulf area: I used to believe that Norway was unique—an oil-rich country with an equally high quality non-oil sector.  Now I wonder if the Gulf states are not becoming successful in much the same way.  I hope so, as the world needs more highly successful models to emulate.  One success story can be written off as a fluke—it’s much harder to brush aside success in a half dozen countries.  How long will the Iraqi people accept the incompetence of their current regime? Yesterday, I came across this story: Egypt has agreed to a $35bn deal with the United Arab Emirates to develop the area of Ras el-Hekma on its northwestern coast, Egyptian Prime Minister Mostafa Madbouly announced on Friday after weeks of speculations. Madbouly said at a news conference, which was attended by Egyptian and Emirati officials, that Egypt will receive an advance amount of $15bn in the coming week, and another $20bn within two months. . . . But Madbouly said that the Egyptian state will have a 35 percent share of the profits from this project, although it is a private investment with the majority of shares held by the UAE consortium. He said that the area of ​​the Ras el-Hekma project is 170 million square metres, and will include residential neighbourhoods, tourist resorts, schools, universities, an industrial zone, a central financial and business district, an international marina for tourist yachts, and an international airport south of the city. This area is a peninsula sticking out into the Mediterranean, with a beautiful coastline: Based on a video I watched, it looks like they are planning to build a city along the lines of places like Doha, Abu Dhabi and Dubai, albeit more residential and less focused on skyscrapers. The project is somewhat controversial within Egypt: Amr Waked, an actor and filmmaker, also lashed out at Sisi in response to the report: “Who gave the right to the so-called Abdel Fattah el-Sisi to sell Ras el-Hikma? I mean, was it his mother’s inheritance or his father’s?” Mamdouh Hamza, another Sisi critic, said the project should be handed to Egyptian developers rather than foreign ones. Hamza, who described Ras el-Hikma as “Egypt’s most beautiful beach” said: “It would be wiser for the project to be developed by Egyptian developers able to pay in dollars, because in that case the returns will remain inside the country. A foreign developer will transfer profits, which are many times the price of the land, outside the country in foreign currency.” I don’t know enough to have a firm opinion on the proposal, but these criticisms don’t seem persuasive.  In a free market, the UAE could almost certainly buy this piece of land for far less than $35 billion.  The fact that they are willing to pay so much is an indication that nationalism has made Egypt’s economy very inefficient, so much so that a very limited removal of nationalist barriers to investment opens up some pretty large profit opportunities.  As an analogy, just imagine how much Singapore would be willing to pay for 170 sq. kilometers of land in a nearby part of Malaysia or Indonesia. To be clear, there is no indication in the articles I read that this is an actual “charter city”.  Presumably, Egypt’s government will maintain political control over this region.  But if it is not a full fledged charter city that makes the $35 billion price tag even more impressive. When I first mentioned this to a friend, he assumed I was saying that Egypt was paying the UAE $35 billion to help it develop Egypt’s economy.  In fact, the UAE is paying Egypt $35 billion for the right to help Egypt develop its economy!  Think about the implications of that fact. Larger Arab nations like Egypt, Iraq, Syria, and Algeria have relatively dysfunctional domestic non-oil sectors.  The small Gulf states have very impressive non-oil sectors.  It would not surprise me if there are many more “pareto optimal” deals to be made between these two groups of nations. PS.  Now do Gaza. (0 COMMENTS)

Does hydra-headed social media mean the end of legacy media outlets like the New York Times and local newspapers? I recall a letter to the Birmingham News fretting that blogging “nuts” rather than professional journalists might someday influence policy. Should we care that much if newspapers and other legacy media outlets die? I don’t think so. Many people lament the imminent death of local news coverage, arguing that its disappearance would undermine the fabric of the American republic.  Perhaps, but there are reasons for this.  First, as people become increasingly mobile, they care more about national issues and less about local ones.  We live in Birmingham, but we spend a lot of time in other places.  Second, as we become increasingly prosperous, the opportunity cost of paying attention to local issues (and reading the local newspaper) rises.  We don’t read newspapers anymore because our time is too valuable. I used to check news websites regularly.  I also used to read and contribute to a lot of blogs myself.  Even though I try to “avoid news,” I still yield to the internet’s siren song too often. The blogosphere has universalized the Great Conversation: anyone who wants a voice can have one, and anyone interested can get real-time analysis of important events from experts. Before the internet and the blogosphere, journalists and editors had a degree of control over who got to participate in the Great Conversation.  No longer.  Many newspaper editors have decided not to publish some of my commentaries or letters on economic issues. In the past, this effectively forestalled my entry into the conversation.  Today, others and I can post letters and columns on various blogs and websites that will at least enter them into a broad discussion.  The process of give-and-take helps me see where I am wrong and where I am right. My friend Donald J. Boudreaux provides an interesting example.  He wages a one-man letter-writing campaign against economic ignorance, and one of the things I like about his campaign is that papers like the Wall Street Journal, the New York Times, the Washington Post, and others cannot print something economically ignorant without Professor Boudreaux sending them a letter about it.  Even when they choose not to publish his letters, he still disseminates them through his blog at www.cafehayek.com.  Yes, newspapers are an important part of our social fabric. So were horses and buggies, slide rules, and mud huts at various times. Just because newspapers may vanish doesn’t mean that we will be worse off. A free society is a society characterized by creative destruction. It is just as true for media as for any other good.  And maybe they would be in better shape if they hadn’t spent so much time, energy, and credibility fact-checking The Babylon Bee a few years ago. Just a thought.   Art Carden is Professor of Economics & Medical Properties Trust Fellow at Samford University, and he is by his own admission as Koched up as they come: he has an award named for Charles G. Koch in his office, he does a lot of work for and is affiliated with an array of Koch-related organizations, and he has applied for and received money from the Charles Koch Foundation to host on-campus events. (0 COMMENTS)

When EconTalk’s Russ Roberts sat down with Charles Duhigg to talk about his new book on the art of conversation, Supercommunicators, Roberts tried to apply some of its lessons to his conversation with the author. The result is this special conversation between two people eager to connect and communicate. Enjoy. The post The Secrets of Great Conversation (with Charles Duhigg) appeared first on Econlib.