And they’re not just for students. Georgetown philosophy professor Jason Brennan, a friend on Facebook and an actual friend, posted recently on Facebook a set of 20 exercises to give students to help them learn. Jason is a strong proponent of the view that you learn best, not by being lectured to (he might say “at”), but by doing. He gave me permission to use these. He got the idea from Jessica Flanagan, a philosophy professor at the University of Richmond’s Jepson School. Some of the ideas below are his and some of these are Jessica’s. According to Jason, Jessica’s students do one exercise each week as a “Purpose Project” assignment in one of her classes. Jason told his students to choose 10 of the 20 options below. 1. The Singer Project Make your phone background one of the pictures of a GiveDirectly recipient. As you spend money throughout the week, write a short note to that person explaining why you need to make that purchase instead of giving them money. At the end of the week, write a reflection paper about your moral reasons for spending or giving throughout the week. 2. The Hedonism Project Think about the things that make you happiest while they are happening and the things that you want for your life. This assignment is designed to make you appreciate the paradox of hedonism and the potential appeal of utilitarianism. On one day, whenever you have the choice, choose whatever will make you happy at that moment (within reason, folks). On the next day, try to live in a way that contributes to the happiness of the people around you whenever you can. What are some examples of the differences between these days? What did you learn by reflecting on what would make you happy in the moment? How did you feel on the day you devoted to the happiness of others? Write a response paper where you evaluate how satisfying each day was and what you learned about the moral significance of happiness. Which kinds of days would you want more of in your life? 3. The Honesty Project* For a 12-hour period, in which you are awake and interacting with others, try to be completely honest. You needn’t answer every question someone asks, but you must avoid engaging in strategic speech, deception, obfuscation, exaggeration, signaling, understatement, and the like. [DRH note: this reminds me of two movies: the hilarious 1997 movie “Liar, Liar” with Jim Carrey and the more interesting 2009 movie “The Invention of Lying” with Ricky Gervais.] Was this difficult or easy? How did it make you feel? How did people react to you? 4. The Paternalism Project* Choose a trusted friend or family member who cares about your wellbeing. Tell them your goals for yourself and identify the ways that you are falling short. Ask them to plan a day for you that they think will help you make progress on some of your goals. Follow their plan for the day and write a reflection about whether it actually did bring you closer to your goals. If so, why was your friend helpful here? If not, what information did they lack or why did they fall short? 5. The Political Disagreement Project* Talk to someone you disagree with about politics for 20-30 minutes about a political topic. Ask them to explain why they think their view is correct. Record the conversation and write 700 or words explaining and defending their argument for their position. Show them the summary and have them email me telling me whether they think your summary is fair, charitable, and accurate. 6. The Obligation Project* Part 1: I’m not saying you should break the law when you judge that the law is stupid, useless, and unjust, solely for the purpose of developing your anarchist spirit. But it’s at least worth thinking about the many laws you could break in this spirit! Make a list of at least 5 laws or rules that you think are totally permissible to break, and explain why it’s fine (or good?) to break these laws. Part 2: You’re probably a free rider. This week, spend at least 2 hours contributing to public goods in your home, community, or workplace (e.g. tidying common spaces, picking up trash, playing pleasant music for others, lending a helping hand at the gym, etc.). How did it feel to contribute to public goods when most other people were free riding? How did others respond to your contributions? Do you think you will continue to contribute going forward? 7. The Democracy Project* Think of a decision that you need to make in the next week. Gather at least 7 people to vote on the decision. (You can use social media to do this with a poll.) The more people voting the better! Let the crowd choose for you and follow the wisdom of the crowd. 8. The Equality Project On Day 1, try to live as a distributive egalitarian by leveling yourself down in order to equalize. (For example, you might spend time that you’d ordinarily devote to your own studying helping a struggling student or you could buy lunch for someone who has fewer resources than you) On Day 2, try to relate to everyone as an equal. Pay attention to status hierarchies and work to combat inequalities of status and esteem in your life. 9. The Drugs and Vices Project Talk to someone you know who uses a lot of recreational drugs, cigarettes, alcohol, study drugs, or the like. Ask them how they got started using the drugs. How do they circumvent rules trying to stop them from using the drugs? Do they like using the drugs and plan to continue? How much more would they be willing to pay for the drugs than they currently pay? Do they regret starting using them and wish they didn’t use them now? Alternative: Do the same for some other activity commonly seen as a vice. 10. The Tradition Project* Think of something that is considered a tradition in your community which you have not done. Try doing it. How did it make you feel to do it? Why do you think this tradition exists? What’s the best case for it? What might be lost of value if the tradition goes away? Alternatively, think of a long-standing norm or tradition in any society which at first glance seems unjustifiable to you. Make the best case you can for it. What possible purpose or value might it serve? Are there legitimate reasons why this norm or tradition exists? What might be lost of value if the tradition goes away? 11. The Laborer Project Find a person who works at what you consider a “blue collar” or “sweaty” job. Interview them about their work. Do they like it? Do they think they are paid well? Are they proud of their work? What sorts of skills do they use and how did they get into the work? What do they think of the people who manage them, if there are any such people? Do they think those managers add value? Do they want to become managers themselves? If the laborer works for themselves, ask them what value they think their self-management activities (scheduling, advertising, accounting, etc.) adds compared to the actual labor. 12. The Envy Project Think of someone who has something you do not, someone you are envious or at least jealous of. Make the best case you can for why they might deserve it or be entitled to what they have. Make the best case you can for why they don’t deserve it or aren’t entitled to it. Explain as best you can how things seem from their perspective. (You can feel free to ask them.) How would your life be better if you weren’t jealous or envious? 13. The Immigration Project Pick two countries where you are not a citizen, one rich and one poor, where you do not speak the most common language. Research what would it take for you (yourself, not a hypothetical person) to get the legal right to live and work there long term, if you could get such a right at all. What kind of jobs do you think you could get and what kind of lifestyle would you lead? What would your quality of life be? Tip: You might find people from those countries and ask how they think you would fare. Alternative: Find two immigrants to your own country, one from a rich country and one from a poorer country. Ask them why they moved. How are they doing? What did it take to enter? How long may they stay? Do they want to stay or plan to return? 14. The Reputation Project* Write down a short summary of what you believe your reputation is among some group of people you care about or whom you at least need to work with. (Examples: Teammates, family, people in your dorm, people in this class.) Now, find some reliable way to check if your view of your reputation is correct or not. For instance, ask a trusted friend to show people the summary and to take notes about whether people agree. Or set up an anonymous poll. 15. The Economic Growth Project Try to find a country or place from before 1850 AD where the typical person is leading a lifestyle and has a qualify of life that you think would be as good or better than your own. Explain why their life is better than yours. If you cannot find such a country or place, explain why not. In that case, pick a place and explain why yours is better. 16. The Moral Exemplar Project Talk to someone who you view as a moral exemplar, in some aspect of how they live their life. Do they view themselves in this way? What sets them apart, in your view, as a moral exemplar. Are they especially morally motivated or do they have other reasons for their actions? 17. The Perverse Incentive Project* Identify a persistent problem or flaw in an organization which you are involved in (such as a team, club, Georgetown University, etc.), a problem which is caused by perverse incentives. Explain how one might feasibly change the incentives to produce better outcomes. What are the potential downsides to your idea? Why hasn’t the organization already adopted the proposed change? Bonus if you get them to actually change. 18. The Taboo Market Project Pay someone to do something taboo or accept money to do something taboo. (Don’t do anything illegal.) For example, pay someone to wear clothes of your choosing or to put a temporary tattoo on their head. Write up a short report about how the spender and buyer felt, whether they regret it, and whether they would do it again. 19. The Socialism Project Take some property of yours (which you value but can afford to lose, if it comes to that) and announce to everyone in your dorm (or some other suitably large group where people know you but not that well) that for one week you consider this property a common bounty for all. Tell them they may use it at will and do what it takes to let them borrow it/ use it. How did they treat it? How did people respond to this? Did it get destroyed or overused? 20. The Trading Project* Select an item worth [DRH note: I’m pretty sure that Jason means “priced at”] approximately $1 USD, such as a candy bar. Over the course of a week, try to sell or trade that object for items of higher value. Trade each new object in turn and try to end up with the highest value object or most amount of money you can, just from trading. Note: You cannot add something to the objects to increase their value. For instance, don’t offer to tutor someone in calculus II if they buy your candy bar. Don’t tell them you are raising money for charity. The monetary value must be something we can easily establish from retail websites and the like; you cannot, for instance, just say you personally value some ten-cent item at $1 million. (0 COMMENTS)

I talked about education and positive externalities in a recent post. In that post, I took for granted that education has positive externalities, and that subsidizing education is an appropriate role of government, according to standard economic theory. However, as is often the case, there’s more to the story. Things that have positive externalities can simultaneously have negative externalities as well. It’s not a foregone conclusion what the net effect will be, even in the case of education. However, there’s also a subtle fallacy of equivocation we should avoid falling into. The fallacy of equivocation happens when we use the same word, but that word refers to different things at different stages in the argument. For this discussion, it’s important to distinguish between education, by which I mean the general process of gaining knowledge and skills, and the education system, by which I mean the system of schools, accreditation, degrees, and so forth. The education system is often referred to as just education, but they’re not the same thing. For example, Bryan Caplan’s book on the topic would probably have a more accurate (if less provocative) title if it had been called The Case Against the Education System, rather than The Case Against Education. Education has positive externalities – my neighbors being smart and well-informed benefits me as well in addition to the benefits it provides them. But the fact that education has positive externalities doesn’t entail that the existing education system ought to be subsidized. These are different things, and arguments about one can’t simply be copy-pasted onto another. A negative externality that exists with the education system comes from the idea of what economists call positional goods. A positional good is when somethings value for you to possess depends on the fact that it’s not possessed by others. As that good becomes more widely possessed, it becomes less valuable to you. For example, a sandwich is clearly not a positional good – the value of your lunch doesn’t go down just because other people also have a sandwich to eat at lunchtime. But the education system produces positional goods – the value of the degree you gain becomes lower as more people also acquire the same degree. How many times have you heard some variation of this lament? It’s getting harder and harder for people to keep up these days. Not too long ago, it was possible for someone to go straight out of high school into a career that would let them buy a house and support a family, and graduating college was a surefire ticket to the upper class. But now, you need a college degree just to have a chance to be middle class, and people who never graduate college have almost no hope at all of building a decent middle-class life. Part of this is due to the positional goods nature of degrees. Rates of both college and high school graduation only a few decades ago used to be much lower than today – and because of that, having a high school degree or a college degree used to be worth much, much more. Sometimes people suggest that the apparent necessity of getting a college degree to secure a good job means we should more heavily subsidize the education system so more people can get college degrees, but this is a self-defeating approach. If by waving a magic wand we could make bachelor’s degrees as common among people now as high school degrees currently are, the result wouldn’t be to secure the financial future of everyone who magically gained a new bachelor’s degree. It would be to basically wipe out the market value of everyone’s bachelor’s degree, and going forward it would take a master’s or PhD just to get the same benefit on the job market as is currently gained by an undergraduate degree. It’s important to not confuse the signal with the underlying reality the signal is meant to reflect – and to recognize you can’t change the underlying reality by simply changing the signal. In the beginning of the Great Depression, after worldwide tariffs were employed, food prices in America collapsed as export markets were restricted. A program was put into place prevent new food from being grown, or destroy currently existing food, to try to drive the price back up again. The thinking seemed to be “When the economy was strong food prices were high, so if we can make food prices high then the economy will be strong again.” But that approach got things all wrong – it mistook the signal for the reality. In the same way, many people have argued that since people with college degrees make more money than people without college degrees, if we can just make it so more people have a college degree by subsidizing the education system, then everyone will make more money. But that, too, is wrong. It’s also mistaking a signal for the reality – and it overlooks the positional goods aspect of the education system. Increasing the number of college graduates doesn’t necessarily give the current benefits of college to more and more people. It may instead only dilute the value of a college degree to those who have it, and further block the upward mobility of those who lack a degree.   (1 COMMENTS)

Economist Anita Summers died on Sunday, October 22. She was the mother of Larry Summers, Kenneth Arrow’s sister, and Paul Samuelson’s sister-in-law. I had a brief but pleasant phone conversation with her in, I think, the late 1980s. I had heard that Larry was very sick. He and I had been colleagues at the Council of Economic Advisers and we always got along. So I called her to see if he was alright and to express my concern. James Poterba and Claudia Goldin did a recent interview of her to learn about her early experiences as a researcher with the National Bureau of Economic Research. It’s fascinating throughout. HT2 Tyler Cowen. She was clearly a very careful numbers person and the first 8 minutes or so are about that. Later she worked for Standard Oil of New Jersey and was given an important question on Friday to answer by Monday. That part starts at about the 28:00 point. She spent virtually the whole weekend researching it and had her answer. It was about whether Standard Oil, if it invested in a refinery in South Africa, would be able to take the dollars out later. Here’s the transcript of the conversation, cleaned up for the “uhs” etc. I got all the examples of other things that were were gotten and looked for the evidence of where dollar shortages were eased and so on and made a conclusion that the answer was yes, they would be able to get their dollars out by then and so I had the report by the end of Monday. Then my immediate boss looked at it and then the head of the department looked at it and it went to–what’s his name–Emilio Collado, who had been head of the IMF [DRH: actually, the World Bank], you know, before he came there.  He was Chief Financial Officer of Standard Oil of New Jersey. He was the person. So the next day, Tuesday, it was to be discussed with him, and my immediate boss said to me when I came in at nine o’clock in the morning, “I’m sorry, Anita, that he won’t have a woman in his office except as secretary, so I’m going down. So stay next to your phone.” All morning every 10 minutes the phone would ring. I would answer the question. The phone would ring and I began to really feel angry. But the interesting thing is that I was angry that I had done all the work and he was the one transmitting it. That was idiotic. I was less focused on because it was a female. It was the idiocy of it. So at lunchtime when he came back and it was still to continue, I said, “I just want you to know that of course I’m going to see this through appropriately, but I will never do this again. You can decide to fire me or you can decide to see that I never do a job for him again but the one thing I will never do is this again.” So then he and the head of the department decided they would both take me down in the afternoon unannounced in advance. We walked in the office and he said, “Who is she?” and they answered and he started by asking them the answer [question] but within five minutes, I was answering and that was the end of the problem. From then on it was not a problem but I really felt the notion that I had worked and, particularly, I think because I’d worked 20 hours a day, you know, and doing all this and the idiocy of that arrangement was so offensive. But that was the end of the problem. He was courteous.   (0 COMMENTS)

…and never were. It has become conventional wisdom among economists that demographics are Japan’s underlying problem. Demographics are blamed for everything from slow growth to zero interest rates to deflation. But demographics are not and never were Japan’s problem.  Japan may represent “the future”, but are we drawing the right lessons?The demographics hypothesis does have a sort of superficial plausibility. Japan’s population grew 12.5% between 1974 and 1991, and then only 3.0% from 1991 to 2012. Japan’s total employment grew 23.6 % between December 1974 and December 1991, and then actually fell by 2.4% over the following 21 years. Thus as population growth slowed, employment growth slowed even more dramatically. At the time, people assumed that an aging population was the culprit.But when the Abe administration took office at the beginning of 2013, everything changed. Employment soared by 8.1% between December 2012 and November 2019, and yet the demographics actually got far worse. Population is now actually falling, and at an accelerating rate. In addition to a falling population, Japan also has an aging population.  But that “problem” actually got worse after 2012, so it doesn’t explain the dramatic employment shifts.  I use scare quotes, as I’m not convinced that an aging population is actually a problem, at least by conventional metrics.  If adults work on average during 75% of their expected adult lifespan, it really shouldn’t matter whether the life expectancy is 80, 180, or 580 years.Many people (including me a few years ago) assumed that as Japan got older the Japanese would continue to stop working at the same age.  But that doesn’t seem to have been the case, and thus the number of available bodies in Japan has risen much more than expected.  That reflects both better health and less strenuous jobs.(In the US, the employment/population ratio for age 55-64 and has hit all time high, while the ratio for over-65 group peaked in late 2019.) It’s now clear that demographics never were Japan’s problem.  Once monetary policy became a bit more expansionary, prices began rising and employment rose much faster than expected.  Demographics may partly explain the low real interest rate in Japan, but the nominal rate is mostly determined by the trend rate of inflation, i.e. monetary policy.In the future, demographics may be a problem for specific countries such as Italy, but only if they choose to make it a problem.  There’s no reason to keep the retirement age at 62 as life expectancy rises sharply and jobs get softer.  We may choose (in public pension plans) to allow the elderly to enjoy some extra years of retirement as we get richer, but there’s no reason for years spent in retirement to rise one for one with life expectancy.  Japan is showing that there’s another way. (0 COMMENTS)

Your mother’s socio-economic status at the time of your birth. Whether your ancestors raised crops or led camels through the desert. The smell of the room you’re in when you’re making a decision–all of these things, says neuroscientist Robert Sapolsky, combine to affect your behavior, as well as everything in between. And if you’re wondering […] The post Robert Sapolsky on Determinism, Free Will, and Responsibility appeared first on Econlib.

We saw a good illustration of the paradigmatic Prisoner’s Dilemma (widely used in economics and other sciences) when Sidney Powell, one of Trump’s lawyers after his 2020 defeat, agreed on October 19 to a plea deal and recognized her guilt for some misdemeanors. She also had to promise to testify at the trials of her alleged accomplices. (“Sidney Powell Accepts Plea Deal in Trump’s Georgia Case,” Wall Street Journal, October 19, 2023.) Remember that to demonstrate massive election fraud against Trump, Powell promised to “release the Kraken.” The Kraken never came, but the incentives imbedded in the Prisoner’s Dilemma eventually did. The prisoner’s dilemma is a game-theoretic model in which each player’s optimal decision is to defect, that is, not cooperate with the other player(s), whatever the latter does—even if, for each of them individually, the best would be that they all cooperate. Defecting is said to be the “dominant strategy” of each player. Consider a non-technical description of such a game. Two prisoners or criminal defendants are charged with a crime they committed together. If none of them plea-bargains and confesses, less evidence will be available to the prosecutor and they will be convicted of less serious offenses. But given the structure of a Prisoner’s Dilemma game, whether or not the other one plea-bargains, my best decision (for me Powell), is to defect. If, on the one hand, the other does not plea-bargain (he cooperates with me) but I confess our crime, I can dramatically reduce my own punishment and perhaps even be granted immunity for my testimony. If, on the other hand, the other one does plea-bargain first (he defects), I will be the sucker and get a worse sentence than in any of the other possibilities. I know that the other defendant makes the same reasoning from his point of view, which further motivates me to plea-bargain before he yields to the same temptation. I prefer being the rat to the risk of being the sucker. The day after Powell’s plea deal, lawyer Kenneth Chesebro, another one of the 19 defendants (including Donald Trump) charged with conspiring to subvert the 2020 presidential election in Georgia, rushed to confess a felony in return for a reduced sentence, again with the promise to testify (“Kenneth Chesebro Accepts Plea Deal in Trump Georgia Case,” Wall Street Journal, October 20, 2023). Preceding Powell, Scott Hall, a minor figure, plea-bargained and admitted his guilt to misdemeanors. The Prisoner’s Dilemma model explains why the dominos are falling. The ones against whom they fall are the principals in the alleged crimes like Rudolf Giuliani and ultimately Trump himself. This analysis would be valid even if none of the defendants is actually guilty. In 16th-century France, an accused witch would often denounce other witches with the (usually vain) hope of escaping punishment. This suggests that the combination of plea bargaining and liberticidal laws like the supposedly anti-mafia RICO sort of law is an extremely dangerous power to grant to Leviathan. But this does not change the general fact that strong incentives push any individual involved in an illegal conspiracy to spill the beans. It also explains (as I wrote before) why vast conspiracies involving a large number of individuals who take great risks are unlikely. (0 COMMENTS)

In the old days, cities became denser as they grew larger, especially in the central area close to the downtown. Many of our newer cities, however, have remained fairly low density even as they’ve grown to be quite large.  San Jose and San Diego are good examples.Houston is an exception to this rule. Over the past few decades, it’s grown into one of our largest cities, with a metropolitan area population of over 7 million. Unlike other Sunbelt cities, it has relatively little regulation of home building. As a result, close in neighborhoods have become much more dense, even as Houston’s suburbs remain dominated by single-family homes. Houston provides low cost housing for people with a wide variety of preferences.Some housing experts at NewGeography are opposed to this approach, favoring zoning regulations that short circuit market forces.  Yet if people have their own aspirations, those who designate themselves as knowing best—notably urban planners, large financial institutions, tech companies, and academics—prefer another scenario for ordinary people. Rather than allow the market to reveal what people want, there has been a mounting effort, here and in most of the developed world, to shoehorn people into dense development and, in some cases, ban zoning entirely for single-family homes. Notice what they’ve done here.  They’ve dressed up support for anti-free market policies that restrict people’s ability to build housing as somehow reflecting “the market”.  Terms like “market” and “ban” are used in an almost Orwellian sense.  It is zoning that “bans” people from using their property as they’d like to.  It is zoning that prevents market forces from delivering the sort of housing that the public wants.  It would be like saying free trade policies ban people from buying American.  Or the First Amendment bans people from cancelling unpopular speakers. Opponents of zoning don’t wish to “shoehorn” people into dense areas, they wish to allow people to choose the sort of housing that best suits their needs.  For some people that will be high-rise condos in the central city.  For others, it will be single-family homes in the suburbs.  The free market is the best way of determining what sort of housing density is appropriate.  In general, the free market will deliver more density in central areas and less density in outlying areas. Zoning has only been around for about a century.  Thank God it did not exist when our country was first developed, otherwise we never would have built those wonderful high-rise neighborhoods in places like Manhattan and lakefront Chicago.  Indeed, today even the dense townhouse neighborhoods in central Boston cannot be built in most cities—including metro Boston.  Ironically, Houston is one of the few places in America where it is legal to build a neighborhood like Boston’s Beacon Hill or Back Bay.  (1 COMMENTS)

The headline practically screamed: “30 New Orleans area restaurants fail health inspection, some for bugs or dirty kitchens.” Undoubtedly, many people in the Crescent City as a result reduced their take outs from these eateries, several of them world famous, and also decreased eating out in them. If so, they did so in favor of grocery stores, which now seemed relatively more reliable, health-wise. This might be somewhat of an exaggeration, since the story allowed that “… more than 16 … don’t have food safety certificates to ensure their kitchens meet health standards.” As far as we know, they were perfectly clean, but merely lacked proper government certification thereof. Should the local citizenry be worried? The more discerning of us have to be forgiven for asking: Who do you trust more: the restaurants themselves, or the government health inspectors? The former can lose money from dirtiness, the latter cannot, at least not, personally, for failing to make accurate assessments. What is the solution to this conundrum? The course of action emanating from this present quarter is to substitute private certification agencies for the ones perpetrated by government. Is this the ravings of a radical free market advocate such as myself? Is this a mirage, something just plain crazy that can never be implemented?  Yes and no. As to the former, this appellation certainly fits me. I hold an endowed chair in free enterprise economics at a local university. As to the latter, it is no concoction in my fevered brain. Rather, capitalist certification agencies are to be found all throughout the modern economy. Let us count some of the ways. But, before I do, let me explain the difference between licensing and certification. In both cases, a test must be passed. But with the former, if you do not pass the exam, you may not legally engage in the industry. For example, if you fail the bar exam, you cannot work as a lawyer. If you do not pass the medical examination, and worked in the capacity of a physician anyway, you are a criminal and can be incarcerated. In sharp contrast, if you do not score high enough in the exam for Certified Public Accountant, you can still keep financial books for your clients; it would only be illegal to pass yourself off as a CPA. Where else besides accounting is certification, not licensing, in operation? One aspect is brand names. McDonalds, Walmart, Microsoft, Toyota, and thousands of other companies large and small, stand by their wares and offerings. They are in effect insuring their customers that what they purchase from them is of a certain quality. Another example is testing laboratories. They are not at all well known to the general public, but are widely used in such industries as acoustics and vibration, biological, electrical, forensic services, geotechnical and mechanical testing. The most famous of these is Underwriters Laboratories. Others include Tuv Sud, Enviropass, Intertek, MetLabs, Curtis-Straus, F2Labs, Dayton T. Brown, NCEE Labs and Applied Technical Services. Industrial chemists, engineers, technicians, etc., are fully aware of these and the many more that comprise this industry. A third subset is far more well known: Consumer Reports, the Better Business Bureau, and more recently, Yelp warn buyers of inferior products. For finance and investments the big three are Moody’s, Fitch and Standard and Poor. The U.S. News and World Report, a private entity, rates, that is, certifies, universities. (There has been of late a bit of a rebellion against this organization; evidently campus leaders do not much appreciate being assessed by a private corporation; they would rather leave the matter to organizations such as the Association to Advance Collegiate Schools of Business). Milton Friedman, in the brilliant chapter nine of his book Capitalism and Freedom advocated that certification replace licensing all throughout the economy. Courageously, he took on even the sacred cow often bruited about in favor of this form of quality assurance, medicine. The American Medical Association insists that their licensing exams be given in English. All too many doctors who functioned ably abroad are not able to pass, even though their skills would pass muster if tested in their native languages. The AMA reckons in the absence of unconscious patients, those who speak the same foreign language as the doctor, and the possibility of translation. What they are really up to, of course, is restricting entry, reducing competition, and keeping their compensation elevated. The next time you hear that a private restaurant has not passed the review of a government agency, do not blithely assume there is something wrong with the former. It may well be due to the failure of the latter. Walter E. Block is Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics at Loyola University New Orleans and is co-author of the 2015 book Water Capitalism: The Case for Privatizing Oceans, Rivers, Lakes, and Aquifers. New York City, N.Y.: Lexington Books, Rowman and Littlefield (with Peter Lothian Nelson ). (1 COMMENTS)

In his recent post, “The True Story of the Oil Crisis of 1973-1974,” October 19, 2023, John Phelan gets the facts right but the economic interpretation wrong. John argues, as the late Wall Street Journal editor Robert Bartley had argued, that OPEC quadrupled the price of oil in order to keep the price constant in terms of gold. John writes: “In the first half of 1974,” Bartley wrote, “after “the shock,” a barrel of oil was worth almost 1/12 of an ounce of gold,” just as it was in 1969. But he also quotes the September 1973 OPEC resolution’s statement that OPEC’s members would adopt “ways and means to offset any adverse effects on the per barrel real income of Member Countries resulting from the international monetary developments as of 15th August 1971.” Why do I say “But?” Because real income is measured in terms of what it will buy. OPEC members didn’t sell their oil so they could buy only gold. They sold their oil so that they could buy goods and services. By how much did the overall prices for goods and services rise? Between 1969 and 1974, by which time almost all the price controls and been ended, the CPI rose by 35%. So OPEC’s attempt to keep their per barrel income constant in real terms would explain at most a 35% increase in the price of oil between 1969 and 1974, not a 300% increase. Why would OPEC refer to “the international monetary developments as of 15th August 1971?” The most likely reason is that doing so was good PR for a move that OPEC knew would be unpopular, namely a quadrupling of the price of oil over a few months. There could be another reason that somewhat fits OPEC’s idea of bringing gold into the discussion. When any cartel sets prices, it needs to set them with reference to something. But what? Possibly the OPEC members thought they could hold the cartel’s price together for a few years by setting it in terms of gold. But that’s different from OPEC’s claim that it was simply trying to maintain the Member Countries’ per barrel real income. What about the effect of the oil price increase on inflation? It was not large. In 1973, we imported approximately 6.3 million barrels per day (mbd) of oil. So when the price of oil quadrupled, from $2.75 per barrel in early 1973 to $11 per barrel in early 1974, the annual income transfer to foreign producers due to that price increase was $8.25 per barrel times 6.3 mbd times 365 days, which is $19 billion. U.S. GDP in 1973 was $1.326 trillion. $19 billion is 1.4% of $1.326 trillion. Using the equation of exchange, MV = Py, where M is the money supply, V is the velocity of money, P is the price level, and y is real GDP, we can calculate the part of inflation due to the oil price increase. The effect of y falling by 1.4% is a 1.4% one-time increase in the price level. So the increased price of oil was a substantial contributor, but not the most important contributor, to the inflation from early 1973 to early 1974, and only a small contributor to the inflation from 1969 to 1974. You might wonder why I consider only the price increase on imports. Didn’t the price of domestic oil increase also? Yes. But two things. First, Nixon’s price controls didn’t allow the domestic price of oil to rise to equal the world price. That didn’t happen until January 1981, when Ronald Reagan, in his first month in office used the discretion he had been given in 1980 legislation to end the price controls on oil and gasoline. But second, and more important, even if the price of domestic oil had been allowed to rise to the world price, that would have represented a transfer of income from domestic consumers to domestic producers but not a loss of real income to the U.S. as a whole.   (0 COMMENTS)

A year after the Supreme Court struck down President Biden’s student loan forgiveness plan, he presented a new scheme to the Department of Education on Tuesday. While it is less aggressive than the prior plan, this proposal would cost hundreds of billions of taxpayer dollars, doing more harm than good.  As the legendary economist Milton Friedman noted, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”  Higher education in America is costly, and this “forgiveness” would make it worse.  Signing up for potentially life-long student loans at a young age is too normalized. At the same time, not enough borrowers can secure jobs that offer adequate financial support to pay off these massive loans upon graduation or leaving college. These issues demand serious attention. But “erasing” student loans, as well-intentioned as it may be, is not the panacea Americans have been led to believe. Upon closer examination, the President’s forgiveness plan creates winners and losers, ultimately benefiting higher-income earners the most. In reality, this plan amounts to wealth redistribution. To quote another top economist, Thomas Sowell described this clearly: “There are no solutions, only trade-offs.”  Forgiving student loans is not the end of the road but the beginning of a trade-off for a rising federal fiscal crisis and soaring college tuition.  When the federal government uses taxpayer funds to give student loans, it charges an interest rate to account for the cost of the loan. To say that all borrowers no longer have to pay would mean taxpayers lose along with those who pay for it and those who have been paying or have paid off their student loans. According to the Committee for a Responsible Federal Budget, student debt forgiveness could cost at least $360 billion.  Let’s consider that there will be 168 million tax returns filed this year. A simple calculation suggests that student loan forgiveness could add around $2,000 yearly in taxes per taxpayer, based on the CRFB’s central estimate.  Clearly, nothing is free, and the burden of student loan forgiveness will be shifted to taxpayers. One notable feature of this plan is that forgiveness is unavailable to individuals earning over $125,000 annually. In practice, this means that six-figure earners could have their debts partially paid off by lower-income tax filers who might not have even pursued higher education. This skewed allocation of resources is a sharp departure from progressive policy. Data show that half of Americans are already frustrated with “Bidenomics.”  Inflation remains high, affordable housing is a distant dream, and wages fail to keep up with soaring inflation. Introducing the potential of an additional $2,000 annual tax burden at least for those already struggling, mainly to subsidize high-income earners, adds insult to injury. Furthermore, it’s vital to recognize that the burden of unpaid student loans should not fall on low-income earners or Americans who did not attend college. Incentives play a crucial role in influencing markets.  By removing the incentive for student loan borrowers to repay their debts, we may encourage more individuals to pursue higher education and accumulate debt without the intention of paying it back. After all, why would they when it can be written off through higher taxes for everyone? The ripple effect of this plan could be far-reaching.  It may make college more accessible for some, opening the floodgates for students and the need for universities to expand and hire more staff, leading to even higher college tuition. This perverse incentive will set a precedent that will create a cycle of soaring tuition, which would counteract the original goal of making higher education more affordable. While the intention behind President Biden’s student loan forgiveness may appear noble (in likelihood, it is a rent-seeking move), the results may prove detrimental to our nation’s economic stability and fairness. And if the debt is monetized, more inflation will result. Forgiving student loans will exacerbate existing problems, with the brunt of the burden falling on lower-income Americans. Instead of improving the situation, it will likely create an intricate web of financial consequences, indirectly affecting the very people it aims to help. But that is the result of most government programs with good intentions.     Vance Ginn, Ph.D., is president of Ginn Economic Consulting, chief economist or senior fellow at multiple state thinks across the country, host of the Let People Prosper Show, and previously the associate director for economic policy of the White House’s Office of Management and Budget, 2019-20. Follow him on X.com @VanceGinn. (0 COMMENTS)