It would be hard to overstate the impact TV commercials have had on business and culture around the world. In the United States, television ads generate tens of billions of dollars every year and reach their pinnacle at the Super Bowl. As with every powerful force, though, there’s a humble origin story behind today’s polished spots. And it played out 75 years ago Friday. On July 1, 1941, the NBC-owned station WNBT in New York aired the first legal commercial in television history. Advertising was banned on TV until the Federal Communications Commission gave commercial licenses to 10 stations on May 2, 1941, to go into effect July 1. As Quartz points out, WNBT was the only one to air an ad on that day. The commercial played before a Brooklyn Dodgers–Philadelphia Phillies game at Ebbets Field. Ad Age reported in 1995 that it was a brief spot called the “Bulova Time Check,” which showed a watch face with the second hand ticking while a voice-over read the time. Bulova paid $4 for air fees plus $5 for station fees. At $147.08 in 2016 dollars, it was really a steal. Ad Age notes that there were about 4,000 televisions total in the New York area at that time. This is from Lily Hay Newman, “American’s First TV Ad Cost $9 for 9 Seconds,” Slate, July 1, 2016. That seems so typical of government agencies: when they don’t understand something or consider consequences, they ban it. (0 COMMENTS)

What sort of driving policy do you have?  Are you a fast driver or a slow driver?  And how should we evaluate a person’s driving policy? Suppose I’m driving my Ferrari up a long mountain road outside of Denver.  I overtake and fly by a slow moving 1968 VW minivan, which is chugging up the hill at 55 mph.   I say to my passenger, “What a slow driver!”  The passenger might respond by denying that I had passed a slow driver: “Drivers should be judged based on intentions, not outcomes. Perhaps the minivan driver had depressed the gas pedal 80% of the way to the floor, while in this Ferrari the pedal is only depressed 50% of the way to the floor.  In that case, the minivan driver had a faster speed policy, despite the slower outcome.” That seems an odd way to describe a speed policy.  But my passenger insists that the term “policy” implies actual intentions, not outcomes, and depressing the gas pedal by more or less is the specific action that causes the car to change speeds.  So speed policy should be judged based on the specific actions taken by the driver. I respond that depressing the gas pedal 80% of the way to the floor means something very different when going up a hill as compared to taking the same “concrete step” when going down a hill.  It makes no sense to describe someone choosing to go 55 mph on an expressway as having a “fast speed policy.” One potential compromise would be to define an equilibrium rate of pedal depression.  That’s the gas pedal setting that yields the appropriate speed—say 70 mph.  Using this criterion, depressing the gas pedal by more than equilibrium leads to a high speed policy, and depressing the gas pedal by less than equilibrium leads to a low speed policy. I guess that would work, but how do you know the equilibrium rate of pedal depression?  Don’t you have to look at the speedometer to determine whether the gas pedal has been depressed too much or too little?  I’m not saying this pedal approach is impossible—maybe a computer could be programmed to take everything in account and estimate the pedal depression required to reach 70 mph, but isn’t it just easier to look at the speedometer? In the comment section, please tell me if you would view a Ferrari and minivan as having the same speed policy if both drivers depressed the pedal by 50%, or would you regard these cars as having the same speed policy if both vehicles were going 70 mph? Also, do you see any similarities between the question of ascertaining the speed policy of a driver, and ascertaining the monetary policy of a central bank?  What is the analogy for pedal depression?  What is the analogy for speedometer reading?  What would the optimal speedometer look like if speed responds with a lag to pedal depression? PS.  Suppose a driver already going downhill depressed the gas pedal all the way to the floor.  The car ended up going so fast that an accident resulted.  Would it be a valid excuse to say, “The steep hill caused the accident”?  How does this analogy apply to fiscal and monetary policy during 2021? PPS.  My actual car is not a Ferrari, it’s a Nissan Maxima.  (Still faster than a minivan):   (0 COMMENTS)

For fairly obvious reasons, I’ve been thinking a lot about free speech on campuses, whether at government universities or private universities. The issues differ, of course, because private universities are not constrained by the First Amendment or state constitutional rules that require free speech. For now, I want to consider private universities. Like many people, probably most people who watched, I was appalled by presidents Claudine Gay of Harvard, Liz Magill of Penn, and Sally Kornbluth of MIT when Congresswoman Elise Stefanik asked them fairly straightforward questions and they answered as if they had “lawyered up,” which they actually had. But I had to think through why I was appalled. And I came to a conclusion very much at odds with my initial reaction. The Misreporting First, I’ll point out how badly some in the press–print and electronic–have misrepresented what happened. I’ll deal with that briefly before going on to the issue at hand. Exhibit A of the problem is Jennifer Rubin. In her December 9 Washington Post column, titled “University presidents flunk the humanity test,” she stated: “That was an unacceptable statement from the president of Penn,” [Pennsylvania governor Josh] Shapiro said in response to Magill not condemning calls for genocide. “Frankly, I thought her comments were absolutely shameful. It should not be hard to condemn genocide.” Granted that Rubin is quoting someone else but it’s clear from context that she agrees. Here’s the problem: Magill was never asked to condemn calls for genocide. I hope she would have condemned such calls if asked, and I hate to say this, but I’m not sure she would have. But that’s not what she was asked. She was asked the narrower question of whether such calls “violate Penn’s rules or code of conduct” or “constitute bullying or harassment.” And she did a decent job. Here’s part of the transcript: STEFANIK: Ms. Magill, at Penn, does calling for the genocide of Jews violate Penn’s rules or code of conduct? Yes or no? MAGILL: If the speech turns into conduct, it can be harassment. Yes. STEFANIK: I am asking, specifically calling for the genocide of Jews, does that constitute bullying or harassment? MAGILL: If it is directed and severe, pervasive, it is harassment. STEFANIK: So the answer is yes. MAGILL: It is a context-dependent decision, congresswoman. STEFANIK: So calling for the genocide of Jews is, depending upon the context, that is not bullying or harassment. This is the easiest question to answer. Yes, Ms. Magill. So is your testimony that you will not answer yes? Yes or no? MAGILL: If the speech becomes conduct. It can be harassment, yes. Freedom of Speech I won’t bother reporting the other parts of the interaction. The major excerpts are in Valerie Strauss, “How Harvard, Penn, MIT leaders answered–or skirted–questions on antisemitism,” Washington Post, December 6. Here’s the problem. While you might get the impression that these 3 presidents believe that anything goes in speech as long as it doesn’t escalate to action, that seems to be false. I don’t know the MIT or Penn stories as well, but I have been following Harvard for some time. The Foundation for Individual Rights and Expression (FIRE), which began as the Foundation for Individual Rights in Education, and to which I have donated annually for almost 20 years, tracks respect for freedom of speech on campus. In its latest rankings, Harvard is #248 out of 248 universities and colleges that FIRE ranks. Not good. I want to caution, though, that the FIRE site gives some bottom-line data without telling us enough to judge the data. For instance, one component of the ranking is whether students feel comfortable expressing unpopular views. That’s a bit of a squishy criterion. When I’m around some of my friends who are less concerned than I am about innocent people being killed in Gaza, I sometimes hold back. Part of it is that I don’t want to sound like a broken record; part of it is that, because of past reactions I’ve gotten, I don’t always feel “comfortable” expressing that view. But are my potential listeners hurting my freedom of speech? Hardly. What I would want to know is what happens if the students do express their views. Do people chant at them, follow them around campus, make threats? Even the chanting is simply freedom of speech unless it’s a mob chanting and chasing after the person being disagreed with. So I need to know more. But following them around campus and making threats is action and, depending on how far the stalking goes or the threats go, could be grounds for expulsion. If I had been Stefanik, I would asked questions about that. FIRE does give some objective data. If you go to their background on Harvard, you see the categories “Student Sanctions,” “Scholar Sanctions,” and “Speaker Disinvitations.” If you click on those items, you see the explanation that this datum is the number of times the particular thing happened in a 4-year period from 2019 to 2023. My prior had been that there were many such things. It turns out, though, that the number of student sanctions was 1.0, the number of scholar sanctions was 4.0, and the number of speaker invitations was 2.0. All of these are bad. How many such actions does it take for Harvard’s administration to communicate to students and faculty that certain views and certain speakers will not be tolerated? Probably not many. Still, what struck me was how few incidents FIRE found in each of those categories. I thought that I had heard of many such incidents, so I googled to find them. I didn’t find much. Of course, Harvard, with its deep pocket, can hire people to go on the web and make it hard to those incidents to show up. I did find one thing that’s close and one that seems like a clearcut retaliation against two faculty members. The one that’s close is a 2017 story by Hannah Natanson from the Harvard Crimson, the student newspaper, titled “Harvard Rescinds Acceptances for At Least Ten Students for Obscene Memes.” Natanson writes: Harvard College rescinded admissions offers to at least ten prospective members of the Class of 2021 after the students traded sexually explicit memes and messages that sometimes targeted minority groups in a private Facebook group chat. Judging whether that crosses the line into a restriction of freedom of speech is complicated. On the one hand, the Harvard administrators are communicating what they will tolerate, and their tolerance is low. On the other hand, the “students” were not yet Harvard students. I would want to see the contractual commitment that Harvard had made in initially accepting these students. My guess is that Harvard’s lawyers were smart enough to set it up so that Harvard did not breach a contract. The clearcut retaliation was in 2019, with Harvard’s announcement that it would not renew faculty members Ronald S. Sullivan Jr. and Stephanie Robinson as faculty deans of Winthrop House. That followed a number of student protests. The students objected to Ronald Sullivan’s decision to be one of the lawyers defending Harvey Weinstein. It seems clear from context that the Harvard administrators objected to his decision to exercise his freedom of speech in defending Weinstein. None of this is good. It’s just less bad than I had expected. Russ Roberts, Niall Ferguson, and Tom Palmer In his latest EconTalk episode, an interview with the Hoover Institution’s Niall Ferguson, Russ Roberts states: But, I want to see if you share this insight I heard from Tom Palmer of the Cato Institute and the Atlas Network, which I used to disagree with. This is where I’m a little less of a fundamentalist. He argued that when a group–a group, not an individual–when a group advocates for a movement that would eliminate free speech, that is the Communists. For a Soviet communist marching in the 1970s or 1980s, or a Nazi, say, marching in Skokie or trying to march in Skokie, a Jewish neighborhood, a highly Jewish neighborhood outside of Chicago. Tom argued that if this group does not believe in free speech for others, they should not be able to use the protection of free speech to advocate their agenda. And, I used to disagree with that. That’s where I’m a little more open to restrictions. I think that’s a very bad idea. How do you get discussion? It’s possible that some people in the group could be persuaded otherwise but, not having the protection of free speech, will shut up. That sounds similar to what FIRE reports about students at Harvard. There’s another more fundamental problem. I won’t put this on Russ because he seems to be considering the idea rather than advocating it. But I will pose it to Tom Palmer and others who agree with them. The problem is that they have just argued against their own freedom of speech. After all, they advocate eliminating free speech for some subset of people. If I understand their proposal correctly, they should not, therefore, have the protection of free speech. Are they sure they want to undercut their own free speech. I have known Tom Palmer since he was 17. He’s a smart, articulate, and passionate defender of freedom in all its dimensions. He makes his living speaking and writing. Would he want to advocate something, that if followed, would put that living at risk? (1 COMMENTS)

The biologist Leslie Orgel once said, “Evolution is cleverer than you are.” This statement is taken as having two implications. First, if you can’t conceive of how some biological system might have developed by means of evolution and natural selection, that doesn’t provide any reason to believe such a system could not have evolved – it only shows the limits of your understanding and imagination. Second, as this remembrance of Orgel put it, “evolution is a better ‘designer’ than any so-called ‘intelligent designer.’ The twists and turns of evolution are difficult to predict, let alone outwit.” This quip by Orgel also neatly summarizes the thinking behind the historical empiricism that Yoram Hazony associates with conservatism, and is also found in the thought of liberal thinkers like F. A. Hayek. In this line of thought, historical experience and social evolution are cleverer than you. Demonstrated experience is more reliable than abstract reason – and if the institutions developed through experience don’t seem to make sense by your use of reason, that most likely only shows the limits of your understanding – it doesn’t provide a reason to think those institutions are without value. Arnold Kling points out that this can be applied to even something as universally disliked as bureaucracy:  Bureaucracy was not imposed on humanity just to perpetrate evil. It solves some problems, particularly in capital-intensive firms. In government and non-profits, it can be a tool to hold individuals accountable; otherwise, because there is no profit-and-loss system, there would be no accountability at all. This is not to deny the problems with bureaucracy. It is not to suggest that it is the best solution for preventing major errors. But there is a Chesterton’s Fence argument for not simply abolishing bureaucracy. Getting rid of bureaucracy is not a shortcut to utopia. But if a defense of bureaucracy isn’t to your liking, perhaps a defense of gift-giving might be more welcome? Tis the season, after all.  You might be wondering why something like Christmas presents needs defending – who could possibly be against it? Well, the economist Joel Waldfogel, in his book Scroogenomics, makes a case against gifts. Very briefly, gift-giving is bad because we are bad at understanding what other people value and how much they value it. When buying for myself, I won’t spend $100 on anything that I don’t value at $100 or more. But I might spend $100 buying a gift the recipient only values at $20 – or that the recipient might actively dislike, and negatively value. When I buy myself a widget for $100 that I would have been willing to pay upwards of $150 to acquire, I’ve become $50 wealthier. If I buy someone else that same widget, but they only value it at $20, that represents $80 in lost wealth. If I had just given them $100, they might have purchased their own preferred brand of widget that they valued at $150. By giving the recipient cash, $50 in new wealth might have been created, but by giving them a gift, $80 in existing wealth is lost. Waldfogel argues that gift-giving leads to tens of billions of dollars of wealth lost every year for just this reason. It makes no rational sense, and we’d be better off without it.  That line of thinking represents the rationalist approach. Waldfogel assumes gifting, in order to be justified, must be deliberately aimed at achieving a specified end. Then, applying his reason, he shows that using a reasonable model with various plausible assumptions, gifting fails to achieve the particular end he specifies for it. Therefore, we’d be better off without it, QED. A rebuttal, motivated by a more evolutionarily-informed approach, was published in the Journal of Institutional Economics by Anthony Gill and Michael D. Thomas. [Editor’s note: Gill also recorded this charming poetic version of the paper. See also below.] The authors of this article approach the question in a mindset more informed by the cultural equivalent of Orgel’s Second Law – social evolution is cleverer than you. As they put it, if “gifting is a major source of social inefficiency, economists face two puzzles: first, why has the practice endured for so long? Second, why has it been common across widely disparate cultures? Gifting is a near-universal institution…If gifting was inefficient as Waldfogel claims, why would this cultural institution exist so ubiquitously and resist replacement?” Gill and Thomas take the fact that gifting has developed across so many cultures and existed for so long to be a good indicator that gifting serves a valuable purpose. If your reason tells you that the tradition of gifting is without value, the most likely explanation is that you’ve overlooked something, and not that you, personally, are smarter than the centuries of accumulated experience that produced the tradition.  Gill and Thomas see gifting not as a static series of individual acts, but as part of a more dynamic cultural process with larger implications and importance. Even if individual gifts are inefficient in the way Waldfogel says, gifting as a practice allows for the development of crucial social norms regarding trust and reciprocity, upon which a great deal of depends. And in a way, the fact that gifting often produces less value for the recipient than it costs the giver is itself part of the value of gifting as an institution – the authors make an analogy with burnt sacrifices. A burnt sacrifice destroys the value of the thing sacrificed, but that very fact also conveys the seriousness of the person offering the sacrifice in a way that a costless act would fail to demonstrate, making it a more socially valuable signal. This is true of gifting as well: When we see many others merrily purchasing, wrapping, and exchanging gifts during the holidays (or other gifting events), and doing so on a regular basis, we can assume that most others in society are acculturated into the norm of sacrificing resources for the sake of others and graciously accepting those sacrifices when offered to them. Gifting rituals represent a manifestation of the folk theorem played extensively throughout societies. Although the laboratory experiments on iterated cooperative play often involve the same (sometimes quasi-anonymous) players, publicly visible gift-giving implicitly signals individuals are choosing to cooperate in a game in which they expend resources and potentially create static deadweight loss. Gifting, in other words, is the folk theorem lived daily; we learn to be trustful in commercial interactions by playing out a seemingly wasteful game. Again, it is the iterated process of gifting that is more valuable than the actual gifts themselves. In all, the gifting process generates or reinforces four key values over and above the values of the individual gifts as such. They represent a willingness to sacrifice for others in a way that inspires gratitude, so that even “if the received gift is below the price the recipient would have paid, the grateful recipient understands that the giver sacrificed resources and appreciates the effort to signal a desire for an ongoing relationship.” Gifting rituals also provide repeated opportunities to demonstrate reciprocity, and confidence in reciprocity “initiates, replicates, and extends the trust relationship. It precedes the generalized trust that explains the extended order.” Gifting is also a publicly visible social tradition. The visible and widely known tradition of gifting for holidays, birthdays, weddings, other socially significant events can “provide the visible smoke for our burnt offerings. They bring us closer to those we don’t know well by connecting us with a common cultural practice. When people know that others are involved in sacrificial giving, trust develops, networks expand, and markets flourish.” Gifting is also ritualistic, and “highly visible [rituals]…extend the iterated game to the world of quasi-anonymous strangers. Year after year, at Christmas and birthday parties, we play tit-for-tat with one another and observe others involved in the same game even if we don’t play with them directly. The shared social traditions observed in various giving rituals remind us we are part of a larger network of people – most of whom we don’t know – that share a common heritage of generously giving and graciously receiving. Trust, necessary for extended markets, grows from this.”  So, it seems that gifting is a worthwhile practice after all. Gill and Thomas argue that Waldfogel is narrowly focused on whether individual gifts are statically efficient. But because Gill and Thomas wisely understand that an institution is unlikely to be so widespread and long lasting if it’s truly without value, they are able to see the bigger picture, and describe how the institution of gifting can be dynamically efficient.  All of this brings to mind an idea summed up wisely by Russ Roberts in his book (and wonderful potential Christmas present!) Wild Problems, when he said:  It’s also not a bad idea to keep tradition in mind. I think most of us in modern times disdain tradition as the equivalent of superstition. It’s not a bad idea to think of it instead as what has survived the test of time…Sometimes old-fashioned beats cutting edge. So, this holiday season, be of good cheer and bask in the traditions of gifting and gratitude. And don’t let Scrooge tell you otherwise.  (0 COMMENTS)

If Hamas ruler Yahya Sinwar had learned methodological individualism, things would be different. He might have been tempted by a broader individualist philosophy and might have treated “his” people in Gaza better, including by not using them as human shields and not spending public money on tunnels. But even if he had only known methodological individualism, his life might not be on the line right now. That’s what we can deduce from a Wall Street Journal story that reports on Sinwar’s thinking (“Hamas leader Yahya Sinwar Who Studied Israel’s Psyche—and Is Betting His Life on What He Learned,” December 10, 2023). Not quoting him directly alas, the report says: Now … the Hamas leader is betting he can force the release of thousands of Palestinian prisoners and establish a permanent cease-fire. He’s relying on his judgment of Israeli society after two decades studying it in jail, learning Hebrew, watching the local news and getting inside the Israeli psyche. There is no such thing as the “Israeli psyche,” so Sinwar must have read the wrong books or have read no books at all. Or perhaps it is the WSJ reporter who read the wrong books and put his words in Sinwar’s mouth—or, should I say, in Sinwar’s collective mouth. Israel is not a living organism with a brain of its own. Organicist and anthropomorphist beliefs about society have led to errors, tyranny, and tragedies (see a few examples in my “The Impossibility of Populism,” The Independent Review, Summer 2021). Methodological individualism, the opposite of methodological holism, is a social-epistemological claim that society can only be understood by starting from the thoughts and actions of the individuals who compose it. Individuals and their interrelations make up the whole of society. A simple proof is that if all individuals of a society died, there would be nothing left of that society–except history, including the history of ideas but these were the ideas of individual minds. On the contrary, if a society disappears—imagine that all Israelis leave Israel and join the Jewish diaspora around the world—its individuals will continue to exist. They might be or become members of some other “society” or community, including virtual ones, but their previous territorial society would no longer exist nor would any “collective mind” that could have been imagined in it. Another way to express this idea: a whole—including a social whole—is not greater than its parts if we include in it the relations between the parts. Any social science worth its salt and any successful attempt at rational understanding of society have been grounded in methodological individualism, at least since Thomas Hobbes in the 17th century. Friedrich Hayek discusses methodological individualism in The Counter-Revolution of Science: Studies in the Abuse of Reason (1952), notably the first part. In his 1946 article “Individualism: True and False,” reproduced in his book Individualism and Economic Order (1948), he argues that methodological individualism does not necessarily imply an individualist political philosophy. At any event, the whole of economics and liberal political economy in Adam Smith’s tradition is grounded in methodological individualism. One can of course make errors while studying society under the lense of methodological individualism. Hobbes provides an example, as he believed that rational individuals would want to grant illimited power to the state. Methodological individualism is a necessary but not sufficient condition for understanding society (“society” including the economy and politics). Methodological individualism is useful not only for understanding whole societies but also any social subgroup such as, say, a social class. The borders of societies and groups are somewhat arbitrary anyway. Karl Marx was so bad at understanding social classes and predicting the future of “the proletariat” precisely because he was a holist thinker and did not try to comprehend a social class from the bottom up, by starting from the subjective preferences and incentives of the individuals who compose this collective abstraction. Influences play a role, but they are influences from some individuals over others. Even to understand military tactic, methodological individualism is necessary. In their article “An Economic Theory of Military Tactic: Methodological Individualism at War,” (Journal of Economic Behavior and Organization, Vol. 3 [1982], pp. 225-242), Geoffrey Brennan and Gordon Tullock notably wrote: Armies must be analyzed as collections of independent individuals who are, in some sense, as much at war with one another and their own leaders as they are with enemy forces. … The basic point here is that there may exist means of deploying forces, using terrain and so on–all standard parts or military strategy as connventionally conceived–that serve not so much to increase physical strength vis-à-vis one’s enemy as they do to circumvent the ‘free rider’ incentives within one’s own forces. … It is an understanding that springs naturally from an individualistic approach to military science. And in our view, that individualistic approach is, here as elsewhere, the uniquely appropriate one for the study of human conduct. It is a good article to familiarize oneself with the economic way of thinking, which is grounded in methodological individualism. (0 COMMENTS)

A few years ago, I criticized the view that rising long-term interest rates represented a tightening of monetary policy.  This was in response to Fed claims that even though they had not yet begun to raise their short-term policy rate, rising bond yields effectively tightened policy.  I think we now know that the Fed’s theory was wrong, as inflation and NGDP rose very sharply in 2022.  Policy was highly expansionary at that time and yields rose due to rapid NGDP growth. At today’s Fed press conference, Nick Timiraos asked a very good question: Q: Nick Timiraos of The Wall Street Journal. Chair Powell, you’ve argued over the last year that policy tightening started before you actually lifted off because the market anticipated your moves and tightened on your behalf. The market is now easing policy on your behalf by anticipating a funds rate by next September that’s a full point below the current level, with cuts beginning around March. Is this something that you are broadly comfortable with?MR. POWELL: So this last year has been remarkable for the sort of seesaw thing back and forth we’ve had over the course of the year of markets moving away and moving back and that kind of thing. So—and what I would just say is that we focus on what we have to do and how we need to use our tools to achieve our goals, and that’s what we really focus on. And people are going to have different forecasts about the economy, and they’re going to—those are going to show up in market conditions or they won’t. You know, but in any case, we have to do what we think is right.And, you know, in the long run—it’s important that financial conditions become aligned or are aligned with what we’re trying to accomplish. And in the long run they will be, of course, because we will do what it takes to get to our goals. And ultimately that will mean that financial conditions will come along. But in the meantime, there can be back and forth. And, you know, I’m just focused on what’s the right thing for us to do. And my colleagues are focused on that too. In general, Jay Powell gave very cogent answers at today’s press conference.  He seemed fairly confident that the Fed was well on its way to bringing inflation back to 2% without a major recession.  But the answer to Timiraos’s question is obviously pretty weak.  If the rising market rates of late 2021 really did indicate policy tightening, then the sharply falling rates of the past 6 weeks would indicate substantial easing.  But elsewhere Powell insists that it’s too soon to ease policy, as we need clearer evidence that inflation is on track to fall back to 2%.  You can’t have it both ways. In fact, Powell was wrong to be reassured by rising bond yields back in late 2021, and he’s right not to be concerned by sharply falling bond yields in recent weeks.  I hope the Fed never again relies on the faulty theory that movements in long-term rates are evidence of a change in monetary policy—they often reflect changes in expectations about the future path of NGDP growth. (0 COMMENTS)

Our environment is filled with externalities.  Not only do environmental problems refuse to conform to standard problems of conflicts between rights-holders, they often don’t even conform with our basic mental models of externalities. Sparks flying off a railway to start a fire in a field are imagined to affect the owner of that field more than everyone who breathes the air. (At least, they weren’t imagined to before wildfire smoke became such a prominent issue.) When it comes to environmental damage, the solution to the problem isn’t the only thing that needs to be discovered. Often, even the appropriate scope of the problem is in play. Who contributed to a problem, who was affected, and who can provide a remedy, are not necessarily obvious. And often there’s not a single solution, but a solution with many contributing parts.  This is where public choice and polycentricity, discussed by Jordan Lofthouse and Bobbi Herzberg on a recent Hayek Program Podcast, come into play. “Polycentricity” is a technical term used to describe in which rules and plans for different groups of people exist at different levels that are overlapping, nested, and interacting. Polycentricity, says Herzberg, is not how people normally think of the world working. In the podcast she says, “We tend to think in terms that are simpler and more regulated or more regular—usually either central authority, top-heavy hierarchical relationships where power from the top is delegated down, or in decentralized arenas or confederation arenas where the power resides in the smaller or more localized levels and is aggregated up.” But even though polycentricity is not how people think of the world working, it is how the world tends to actually work. The concept of polycentricity is an important one because it helps us to see order in otherwise chaotic-looking systems. What can look like a mass of undifferentiated activity in a neighbourhood might really be people operating under contracts, through community associations, running sports teams, on school councils, town councils, and for and through the municipal government—not to mention higher levels of governments. All of these relationships interact with, depend on, and adjust to each other.  This is why in reality, most collective attempts to solve problems are neither top-heavy hierarchical relationships nor decentralized arenas, but also, they’re both. Different efforts operate parallel to one another or overlap and different initiatives collaborate. Some fail, but others succeed. In the process, the people involved can learn from their own experiences and from one another.  People are people, people are political. Herzberg and Lofthouse do not talk about to public choice explicitly until nearly the end of their conversation when they talk about behavioural symmetry. Behavioural symmetry means that people acting through government are just as likely to operate according to their interests as people acting in markets: people are people, wherever they’re operating in a market or a legislature. But public choice is baked into the study of polycentricity because of another of the key concepts of public choice: politics as exchange.  Addressing the meta-problems mentioned above of deciding who is responsible, who is harmed, who can help, and what can be done to help before actually aiming for a solution to a social problem is the context in which politics as exchange takes place. It is through political exchange and negotiation that the answers to these questions are tested and discovered.  People come together to tackle political problems because it is mutually beneficial for them to do so. Remembering that “people are people” and always motivated by self-interest puts some brackets on what we can expect from political action, but it doesn’t tell us political action isn’t worthwhile.  Politics as exchange also explains one of the most important benefits of polycentricity: buy-in from participants. It is because governance is happening at a level at which people can effectively agree to a set of rules. Because those rules are generally agreed upon they are not only generally followed, but the people who have bought-in may monitor one another’s behaviour and even confront those who break the rules, making monitoring and enforcement cheaper and more effective than if it had to be accomplished through force.  Adaptation, learning, and buy-in. This is why polycentric approaches to addressing climate change matter. Lofthouse elaborates in the podcast:  Climate change is not just one problem, it’s a multitude of problems that are overlapping and nested within one another. There are many causes of climate change. Burning fossil fuels…Well, that’s transportation and energy production, but it’s transportation in a whole bunch of different ways and energy production in a whole bunch of different ways…And the effects of climate change are also complex, overlapping, and nested. So sea level rise is a huge issue. Sea level acidification has different properties. Some places are going to be drier, some places are going to receive more rainfall. There are so many things going on at once when we talk about climate change. It’s this huge, complex social problem. Climate change as an overarching, global problem is one that politics has struggled to solve. Different levels of wealth and technology, different levels of commitment to change, and different political motivations frustrate global, coordinated attempts to address the problem.  But even if humanity could agree, it’s almost inconceivable that anyone could think it would produce a complete and effective action plan. No one seriously believes that cultural context, local knowledge, and economic realities aren’t relevant to how climate action is executed on the ground.  And while there is disagreement about whether technology can “save us”, technology is certainly relevant. Complex, overlapping, and nested approaches to the problem of climate change allow different technologies to be tested, new technologies to be introduced, successful approaches to be adopted, and failed approaches to be discarded. This is in contrast to large-scale projects that buy into a single, existing technology that may not be especially effective, or may be overtaken during the lifetime of the project, but is harder to abandon because of the scale of the undertaking.  Again, the advantages of polycentricity isn’t enough to rule out large, centralized approaches on its own. Global-scale approaches like the Montreal Protocol to combat global problems (in that case, fighting degradation of the ozone layer) can be useful.  They just can’t be, and never will be, all there is.     ——— Quotations from the podcast are edited for clarity and flow.    Read more:  Elinor Ostrom: 1933–2012 at Econlib. Adam Smith in the Anthropocene by Paul Crider at Adam Smith Works. EconTalk: Peter Boettke on Elinor Ostrom, Vincent Ostrom, and the Bloomington School James Buchanan Intellectual Portrait Series Part 1 and Part 2 at the Online Library of Liberty Elinor Ostrom | Prize Lecture, Beyond Markets and States: Polycentric Governance of Complex Economic Systems.   (1 COMMENTS)

Dan Moller’s Governing Least: A New England Libertarianism is one of my favorite books on libertarian philosophy. In it, he discusses one idea that I think is underrated, and deserves to be highlighted. The idea is what he calls residual obligations.  First, Moller’s approach to libertarianism is not based on a hardline approach like many associate with Rand or Rothbard. Moller does not think in terms of exceptionless rules, or rights that are inviolable in all circumstances. He acknowledges that sometimes, rights violations can be justified. Suppose I find myself in the following scenario:  I am hiking on a mountain pass and have become trapped in a massive snowstorm. My life is in peril if I cannot find shelter and food. Luckily, I stumble across an unoccupied hunting cabin. The cabin is clearly marked with “Keep Out” and “Private Property” signs. However, I can easily break into the cabin and take shelter against the storm until it has passed, saving my life at the cost of causing some property damage to someone else. People with an absolutist view of rights might argue that I’m morally obligated to stay outside and freeze to death. Common sense morality, however, says this is a case where it’s permissible to violate someone’s property rights. However, Moller points out what’s often overlooked is that a rights violation being justified isn’t the end of the moral analysis. Too many people speak as if overriding a right necessarily means the same things as erasing the right altogether. But this is a mistake. As Moller puts it, an overridden right is not a deactivated right. A justified rights violation is still a rights violation. The reasons that exist to avoid harming someone, though overridden, have not ceased to exist, and harm was still caused to someone who did not deserve it.  As a result, Moller says, “the overridden reason to avoid harming you” still being in effect produces “residual obligations for me.” If you see that I’ve broken your cabin window and taken some of the supplies you kept stored in there, would be wrong of me to merely shrug and say “well, the emergency situation I was in overruled your property rights, so unfortunately for you, this is all your problem.” Instead, I now have some residual obligations to you. Moller suggests these obligations include restitution – if I caused $300 worth of damage to your cabin in order to break in, I should repay you for the damage. There is a further obligation of compensation to the extent that you are otherwise harmed by my actions, and I should take efforts to compensate you for those harms. I should express sympathy – even though my action may have been justified, it was still regrettable, and it still caused harm to you, and for me to treat that as a matter of indifference would be wrong. And there is an obligation of responsibility which is “not just backward looking, but forward-looking.”  The forward-looking nature of responsibility is of particular interest. For example, if the mountain pass in the above thought experiment was widely known to be a hazardous place to hike, and I also knew that there was a major snowstorm coming in, and could have easily anticipated that taking a hike that day could place me in a situation where I might need to break into someone else’s cabin in order to survive, that gives me a strong obligation to avoid putting myself in that scenario in the first place. As Moller puts it, “If I can reasonably foresee that some action of mine will put me in the position of facing an emergency that will then render it permissible to harm you, I must take responsibility to avoid such actions of possible. I should not think that I have less reason to take responsibility because I can avoid harms by transferring them to you instead. And failing to take responsibility weakens my claim to impose costs on others when the time comes.” I think this is basically right. If I had been the hypothetical hiker above and was later trying to take moral inventory of my life, I wouldn’t find myself thinking “If only I had been a better, more moral person, I’d actually be dead already. I’d have had the decency to do the morally correct thing, and I’d have frozen to death outside that cabin years ago.” But if I failed to live up to my residual obligations, and never attempted to make things up to the cabin owner, I would feel like I had done something wrong to that extent. As I’ve written before, I don’t want to be the kind of person who feels comfortable with making others bear the costs of my choices, or of my misfortunes. As Moller phrased it, “the core impulse isn’t outrage about being asked to give, it is in the first instance a bewilderment at the suggestion that we are entitled to demand.” And Moller goes on to argue, persuasively in my view, that “if we recognize even modest strictures on making others worse off to improve our lot” then “we quickly run into a form of libertarianism.”  A simple question we should all ask ourselves about any belief we hold is “If I was wrong about this, how would I know it? What would it actually take to convince me that I’m mistaken?” If you can’t answer that question, that should be a big red flag. This is hardly an original observation on my part, of course. Eliezer Yudkowsky, for example has written that “a belief is only really worthwhile if you could, in principle, be persuaded to believe otherwise. If your retina ended up in the same state regardless of what light entered it, you would be blind.” Similarly, if your mind ends up in the same state regardless of the evidence or arguments you encounter, then intellectually you have been “blinded as effectively as by poking out your eyeballs.” To illustrate the point, Yudkowsky goes on to say this holds true even for things as basic as 2+2 = 4, and that he finds “it quite easy to imagine a situation which would convince me that 2 + 2 = 3.” So, what would it take to convince me I was wrong about the moral argument for libertarianism? Well, as mentioned, I don’t think it’s right of me to demand and compel other people to carry the costs of my actions or my misfortunes. If someone could provide me with a convincing argument that I would become a better, more moral person if I did adopt such a belief and began to act in accordance with it, that would in turn convince me I was wrong about the moral argument for libertarianism. What about you, EconLog readers? What’s a core belief you hold, and what would it take to convince you that you were mistaken about it?    (0 COMMENTS)

The title above is in quotation marks because I see athletes and fans use the term to mean something different from the apparent meaning. Of course, the players should decide the game, but they should decide the game based on rules. It would make no sense to say “let the players decide the game” if it meant that an ineligible receiver (in football) could receive a pass, that a tackle could use his helmet as a spear into the chest of an opposing player, or any number of other rules violations. Yet players and fans often use the term to mean that small violations should be allowed. This issue came up in the Kansas City Chiefs’ loss to the Buffalo Bills on Sunday. With just over a minute left, KC quarterback Patrick Mahomes threw the football to Travis Kelce, who caught it and ran down the field. As he was about to be tackled, Kelce threw the ball backwards to Kadarius Toney, who ran into the end zone and scored a touchdown. Or so we thought. But the play was nullified because a line judge had thrown the flag right at the start of the play when Toney was lined up offside. Here’s the video. Mahomes and others argued that Toney’s lining up offside didn’t give the Chiefs any advantage. That’s true. But here’s the problem. Line judges, unless they miss it, are pretty much always going to call offsides. And notice in the video that the flag was thrown right away before the play evolved. So, for Patrick Mahomes to get his way, he would have to contend one of two things: (1) the line judge should wait until the play is over before throwing the flag on an offside call, something I have never seen happen in years of watching football, or (2) the line judge or another referee, after the play had ended, should have recognized what a great play it was and gone over and picked up the flag, making it a no-call. With either of those options, the refs, not the players, would be deciding the game, and not in a good way. The reality is that one player, Kadarius Toney, did decide the game. The pic above is of Mahomes yelling at the ref.   (0 COMMENTS)

Just weeks before Hamas launched the deadly Oct. 7 attacks on Israel, the head of Mossad arrived in Doha, Qatar, for a meeting with Qatari officials. For years, the Qatari government had been sending millions of dollars a month into the Gaza Strip — money that helped prop up the Hamas government there. Prime Minister Benjamin Netanyahu of Israel not only tolerated those payments, he had encouraged them. This is from Mark Mazzetti and Ronan Bergman, “‘Buying Quiet’: Inside the Israeli Plan That Propped Up Hamas,” New York Times, December 10, 2023. Later: The money from Qatar had humanitarian goals like paying government salaries in Gaza and buying fuel to keep a power plant running. But Israeli intelligence officials now believe that the money had a role in the success of the Oct. 7 attacks, if only because the donations allowed Hamas to divert some of its own budget toward military operations. Separately, Israeli intelligence has long assessed that Qatar uses other channels to secretly fund Hamas’ military wing, an accusation that Qatar’s government has denied. Thus, the title of my post. Later in the NYT article, a former CIA official notes what I noted: “Money is fungible,” said Chip Usher, a senior Middle East analyst at the C.I.A. until his retirement this year. “Anything that Hamas didn’t have to use out of its own budget freed up money for other things.” Interestingly also, Netenyahu appeared to want to support Hamas in order to deflect a two-state solution. Two key paragraphs: As far back as December 2012, Mr. Netanyahu told the prominent Israeli journalist Dan Margalit that it was important to keep Hamas strong, as a counterweight to the Palestinian Authority in the West Bank. Mr. Margalit, in an interview, said that Mr. Netanyahu told him that having two strong rivals, including Hamas, would lessen pressure on him to negotiate toward a Palestinian state. The official in the prime minister’s office said Mr. Netanyahu never made this statement. But the prime minister would articulate this idea to others over the years. I don’t say this often, but the whole NYT piece is worth reading. (0 COMMENTS)