The recent Supreme Court ruling condemning Harvard and UNC’s race-based admissions policies has re-ignited the conversation about how to improve opportunities for bright minority students. In this week’s episode, economist Roland Fryer has a proposal to improve the pipeline of minority applicants, but he doesn’t think the Ivy League universities will go for it. He also explains how to tell if a racial disparity is discrimination, and describes how he advises companies that are trying to address racial disparities. We’d like to hear your thoughts on this episode. What most surprised you? What changed your mind? Use the prompts below and share your thoughts in the comments, or drop us a line anytime at econlib@liberytfund.org.     1 – Fryer begins the episode by describing three explanations for racial disparities. Becker‘s theory of tastes, Arrow‘s theory of stereotypes, and sociologists’ theory of structural-based discrimination. Which of those (or what combination) seem(s) like the most plausible explanation of racial disparities to you?   2 – Why would seeing the same piece of evidence cause two people with opposite views to both become more confident of their polarized perspective? Can you think of a circumstance when you have observed this effect?   3 – Is the presence of statistical disparities between members of different racial groups evidence of discrimination? What methods does Fryer recommend for identifying the difference, and how compelling does that seem to you?   4 – Companies that Fryer has advised seem clueless about aligning their hiring criteria with the characteristics that make employees successful in their roles. Is this true, in your experience? If so, why is this a problem that companies are ignoring?   5 – Fryer heavily emphasizes paths or pipelines as contributors to racial disparities, meaning that the path that leads to a particular job or admission to university might not have as many minority individuals on it leading to a disparity. Fryer suggests elite universities start feeder middle and high schools to improve college-readiness for promising underprivileged students. Pick a career or opportunity and explain how the pipeline problem could be addressed in that situation. Katie Flavin was the “original intern” at Liberty Fund in 2012, and has since been on the EconTalk team for almost a decade. She is excited to be the new Community Coordinator at Liberty Fund. (1 COMMENTS)

I was at a Labor Day  barbecue last Monday at a friend’s house. There was an interesting mix of people. My best conversation was with a woman who had immigrated from the Philippines as a teenager in 1976 and had grown up in poverty. She, like me, had a real appreciation of her adopted country. She had immediately noticed the higher standard of living here. How could she not? But she was surprised to learn that when I immigrated to the United States from Canada on a student visa in 1972, I immediately noticed the higher standard of living also; I estimated it as being 15 to 20 percent higher. Later, she and I were in a discussion with a woman (I’ll call her L since I don’t have her permission to quote her) who gets much of her news from MSNBC and likes both Robert Reich and Jared Bernstein, who is the chairman of President Biden’s Council of Economic Advisers. The discussion was quite amicable. (L seemed impressed by the fact that I had debated both Reich and Bernstein, the former on KQED-FM and the latter at a Mercatus event in Annapolis in the 1990s.) L commented matter of factly that the vast majority of Americans couldn’t save money. Both J (the woman from the Philippines) and I disagreed strongly. I think it was for the same reason. We both had come from places that were poorer than the United States, extremely poorer in J’s case, and it was easy to see how people could save if they cut back on their luxuries that they have come to regard as necessities. For example, my wife and I often order take out food on Saturday for lunch and the bill is usually over $40. But we could make sandwiches at home for a cost of a a few bucks and do it in less time than it takes me to go pick up the food. Or we could get takeout from Carl’s Jr. for a total of about $15. One of the best parts of Dwight Lee’s and Richard McKenzie’s book Getting Rich in American: 8 Simple Rules for Building a Fortune and a Satisfying Life is the chapter on resisting temptation. I have found that easy to do in my life. I think a big part of the reason was that I got an allowance of 10 cents a week when I was in single digits, 25 cents a week when I was a tweener, and one dollar a week when I was a teenager in the mid-1960s. To do things that cost money, I needed to figure out ways to make money. Because I had to work hard for that money, I learned not to waste it. Most people I run into have more trouble than I had in saving money. It’s not easy for many of them. But that doesn’t mean they can’t do it. Relatedly, I was watching Laura Ingraham earlier this week and she quoted, the way people on the right, left, and middle often do, a study that said that most people who had an unexpected expense of $400 couldn’t pay it. The study didn’t say that at all, as I discussed here. That then led to her saying that most people live paycheck to paycheck. That last one may be true, but what it leaves out is that they are making choices and could make different choices. Easy? Not necessarily. But doable? Absolutely.   (1 COMMENTS)

Should the Supreme Court have term limits as opposed to lifetime appointments? A version of this idea has been floating around lately, so I decided to give it a look. Let me say upfront that I don’t actually have a very strong opinion on whether set terms for Supreme Court Justices would be better than a lifetime appointment, mostly because I haven’t thought about it for very long. But for now, I’ll try to review the idea positively.  From what I understand, the main reason for Supreme Court Justices to have a lifetime appointment is to make them less subject to political influence. The President can remove members of his cabinet at any time for any reason, which gives the President a great deal of influence over them. Other important federal positions can be removed by Congress, or at the very least maintaining a position depends on continued re-confirmation by Congress. If Supreme Court Justices could be removed from office by either the President or Congress, this could have the effect of putting members of the Supreme Court under the thumb of the President or Congress. This could inhibit their ability to issue rulings that are correct but unpopular, as well as undercut the ability of the Supreme Court to serve as a check on the other two branches.  But if this was the case, insulating Supreme Court Justices from influence from the other two branches would only require that those branches not be able to fire a Justice for voting the “wrong” way – and that doesn’t require a lifetime appointment. With the term limit system under proposal, a Justice would serve for 18 years – and during that time they would be just as protected from removal for unpopular rulings as they are currently. Once their term has completed, according to this proposal, they would be designated as “senior Justices” and continue to receive their full salary for the remainder of their life and could serve in an assisting capacity to the active justices on the Supreme Court. In instances where a sitting Justice recuses themselves from a case, one of these “senior Justices” can return to the bench to rule in their place, ensuring the case is still argued before nine justices. The same could be done in the case of an early retirement or if a sitting Justice dies – their spot could be temporarily filled by one of these senior Justices until a proper replacement is appointed. Justice terms would be timed so that each presidential administration appoints two Justices, one in the first year of the administration and the other in the third year.  A move like this wouldn’t be without some precedent, of course. The legislative branch of government has already imposed term limits on the executive branch. On the topic of executive term limits, Thomas Jefferson once said: If some termination to the services of the chief magistrate be not fixed by the Constitution, or supplied by practice, his office, nominally for years, will in fact, become for life; and history shows how easily that degenerates into an inheritance. In the beginning, limitations on Presidential terms were, in Jefferson’s phrasing, “supplied by practice” with most Presidents deferring to the so-called “two-term precedent” established by George Washington and Jefferson himself. Of course, this was simply a tradition, not a legal restriction, and it depended on Presidents willingly engaging in obedience to the unenforceable. After this precedent was broken by FDR, Congress moved from having this limitation “supplied by practice” and made it “fixed by the Constitution” with the 22nd Amendment.  I don’t think the odds of the Supreme Court term limit proposal actually passing are very good, but it does raise an interesting question. Let’s just imagine for a moment that it did pass. It would mean that we’d be in a situation where the legislative branch of government had imposed term limits on both the executive and judicial branches of government. This raises an obvious question – if term limits are good for the executive and judicial branches of government, might term limits also be good for the legislative branch? Such limits could only be created by the legislative branch itself. If the legislative branch put term limits on the other two branches of government, would they apply similar limitations to themselves, or ensure they continue to face no such limitations? And what are the implications of that?  Discuss!   (0 COMMENTS)

I won’t confess everything but I will admit that I was once a great fan of Murray Rothbard (1926-1995), the economist who was nicknamed “Mr. Libertarian.” I was reminded of that when I saw him mentioned in a Financial Times column a few days ago: Jonathan Derbyshire, “Libertarianism Is Having a Moment With Argentina’s Milei,” August 31, 2023. The column focuses on Javier Milei, who is the favorite to win the upcoming presidential election in Argentina (see also “Argentina Could Get Its First Libertarian President,” The Economist, January 14, 2023). Milei, who defines himself as an anarcho-capitalist à la Rothbard, is a fan of the latter and named one of his dogs after him. The fact that Milei is apparently also a fan of Donald Trump does not bode well for the future. The Financial Times columnist does get Trump’s anti-libertarianism right, albeit not to all its extent. But he is wrong in suggesting that Republican primaries candidate Vivek Ramaswamy could (or, at any rate, should) be embraced by the libertarian movement. Anti-libertarians have been elected before Trump, but this is not an excuse for libertarians to compete down to the bottom of the barrel.  If we are to believe The Economist, many of Mr. Milei’s political allies are not exactly paragons of libertarianism either. I do think that libertarianism and classical liberalism should be a big tent, but there is a limit somewhere. Rothbard’s system had an apparent advantage, which was also its big defect: it had an obvious, definitive, nearly religious answer to any and all questions. I was bothered by some of his claims, like the right of a child to run away from home whenever he wants to because he is thereby asserting his right of self-ownership (The Ethics of Liberty, p. 102). I also had doubts about his economics, although it took me some time to recognize their significance. He had a deep distaste for, or fear of, anything that looked like mathematics. He did not realize that, as J. Williard Gibbs said, mathematics is a language. He did not see the relationship between mathematics and logic. For instance, he could not understand that “marginal utility” cannot be ordinal (that is, just a ranking as opposed to a cardinal measure) if total utility is ordinal, for it is mathematically impossible to cut an ordinal value into identifiable marginal pieces. What Rothbard was missing had been recognized by John Hicks (a future Nobel economics laureate) and Roy Allen in two famous 1934 Economica articles, “A Reconsideration of the Theory of Value.” Hicks and Allen formalized an ordinal theory of utility, which Irving Fisher, Vilfredo Pareto, and perhaps other economists had already postulated but not exactly specified. Lionel Robbins, who represented a mix of the Austrian and neoclassical schools of economics, mentioned the Hicks and Allen formalization in the 1935 edition of his An Essay on the Nature of Significance of Economic Science. Changing one’s opinion for good reasons is not a cardinal sin. Sometime around the turn of the millennium, I asked Anthony de Jasay, who described himself as a liberal and an anarchist, why he did not use the anarcho-capitalist label. He answered, “I do not wish to be counted as one of that company,” or perhaps simply “I don’t like the company.” (Although I quoted the first sentence elsewhere, the latter also hangs in my memory. I should have written it down at the time.) I think Tony’s statement was meant as a criticism of the Rothbardian sort of anarcho-capitalism. Let’s hope Mr. Milei wins the election in October and does not oblige libertarians all over the world to walk back their support or, worse, to Trumpianize the libertarian movement. (0 COMMENTS)

Bloomberg recently discussed a new working paper out of the SF Fed, co-authored by Òscar Jordà, Sanjay R. Singh, and Alan M. Taylor (JST). They argued that monetary policy has long lasting effects on productivity and output.  The following graph is from the SF Fed letter that summarizes a longer JST research paper, which examines data from 1900 to 2015, excluding the two World Wars: Here’s the abstract: Monetary policy is often regarded as having only temporary effects on the economy, moderating the expansions and contractions that make up the business cycle. However, it is possible for monetary policy to affect an economy’s long-run trajectory. Analyzing cross-country data for a set of large national economies since 1900 suggests that tight monetary policy can reduce potential output even after a decade. By contrast, loose monetary policy does not appear to raise long-run potential. Such effects may be important for assessing the preferred stance of monetary policy. Unfortunately, JST use interest rates as an indicator of the stance of monetary policy.  Long-time readers know that I view interest rates as being among the worst of all possible policy indicators.  Even JST recognize the problem: A key challenge for analyzing data on the macroeconomy is isolating the relationships between economic variables that represent causation rather than correlation. If interest rates are raised when the economy is buoyant and inflation is rising, a simple correlation analysis could mistakenly suggest that high interest rates cause high inflation. In reality, interest rates are typically high because the central bank is trying to bring inflation down. Accounting for such reverse causality in macroeconomic data is crucial for understanding business cycle dynamics and the influence of monetary policy. It’s actually much worse than that.  Rates are not high during periods of high inflation “because the central bank is trying to bring inflation down”, they are high because inflation discourages saving and encourages investment for any given nominal interest rate.  High inflation would cause high interest rates even in an economy with no central bank, and thus no monetary policy.  I’m glad JST recognize the problem with using interest rates, but it’s even worse than they assume.  Here’s how they address the problem: The approach we use to separate causation from correlation is based on a simple idea from international economics. Over the past century or more, smaller economies have sometimes pegged their exchange rate to the currency of a bigger economy, usually referred to as the base. In that scenario, the returns on assets with similar risk characteristics will move at a similar pace between the pegging and the base economies. . . .  Thus, when the base economy changes interest rates in response to domestic economic conditions, interest rates in the pegging economy will move in tandem, even if that economy’s domestic conditions do not require such an adjustment to interest rates. We use these externally driven interest rate movements as a source of random variation in monetary policy for the pegging economy. Because the change in financial conditions is independent of economic conditions in the pegging country, the resulting impacts are more likely to reflect causation rather than correlation. That’s a nice idea, but does it really solve the problem?  Suppose that the Canadian dollar is pegged to the US dollar (as in the 1920s.)  Is the claim that the fed funds rate is not a useful indicator of the impact of monetary policy on Seattle’s economy, but is a useful indicator of the impact of monetary policy on Vancouver’s economy?  I suppose you could argue that Seattle’s interest rate is in some sense endogenous—linked to the performance of the US economy—and Vancouver’s interest interest rate movements are independent of the US economy, and thus reflect “monetary policy”.  But in practice the global business cycle is fairly strongly correlated, especially when there are major slumps such as 1921, 1930, 1974 and 2009. The first part of the study examines monetary shocks under the classical gold standard (1900-14).  At that time, the US had no central bank, so it would seem that we had no “monetary policy”.  But in their longer paper, Great Britain is assumed to be the global monetary policymaker during this period—setting interest rates for all countries on the gold standard.  That’s actually a fairly widely held view (Keynes called the BoE the conductor of the international orchestra), but I think it’s wrong.   Under a gold standard regime, the world price level (and NGDP) is determined by the global supply and demand for gold.  The BoE had no direct impact on global gold supply and very little impact on global gold demand.  I suspect it was like the little boy that ran out in front of the parade, and then took credit for the parade’s path through the city.  Britain had little impact on global interest rates; rather the BoE (mostly) moved their policy rate in tandem with changes in the global natural interest rate.  (Here the “natural rate” refers to the rate that stabilizes nominal gold prices, not the rate that stabilizes the global price level for goods and services.) Even during the interwar years, the gold standard continued to exert an effect on global monetary conditions.  There were two tight money policies that brought the price level back close to the pre-war level.  The first (in late 1920) led to a severe recession in 1921, followed by the roaring 20s.  The second (in late 1929) led to a depressed economy throughout the 1930s.  In the latter case, however, other policies such as the NIRA played a major role in lengthening the Depression.  Even so, one can plausibly argue that the monetary policy mistakes of 1929-33 led to the bad supply side policies of 1930-39. Another period of high interest rates occurred in the late 1960s.  This was followed by slower growth in real GDP and productivity during the 1970s and early 1980s.  This slowdown was not caused by the tight money policy of the late 1960s, however, because monetary policy was not in fact contractionary according to any reasonable definition.  During the 1960s and 1970s, money growth, inflation and NGDP growth all accelerated sharply.  This is about as perfect an example of the Fisher effect as one could find.  High interest rates reflected easy money.  And this pattern was not limited to the US, similar outcomes occurred in a wide range of countries. In recent decades, trend RGDP growth has been slowing.  The high interest rates of 2000 were followed by somewhat slower growth in the early 2000s, and the rising rates of 2005-06 were followed by slower growth over the following decade.  I doubt whether monetary policy had any significant impact on slowing growth during 2000-2007, but it probably played a role in slower growth during 2008-15.  In the longer paper JST try to control for real factors that impact long run productivity growth trends, but that’s not easy to do.  And equilibrium interest rates are certainly linked to the factors driving changes in long run growth. To summarize, I have some sympathy for the claim that monetary contraction can have surprisingly long-lived effects, although the 12-year impact seems a bit implausible.  Even the Great Depression doesn’t seem to have permanently impacted US real output or productivity.  Indeed productivity rose at an unusually rapid rate during the 1930s, a period dominated by the most contractionary monetary shock in US history.    More importantly, I’d like to see economists move away from using interest rates as an indicator of monetary shocks. In a now classic paper, Barsky and Summers found that higher interest rates had an inflationary effect under the classical gold stand.  Higher rates led to a higher opportunity cost of holding (zero interest) gold, and this reduced gold demand.  Under the gold standard, lower gold demand is inflationary, as it reduces the purchasing power of the medium of account.  This explains the so-called “Gibson Paradox”, the positive correlation between interest rates and the global price level under the classical gold standard.  And in this case the explanation is not “long and variable lags”; the relationship between interest rates and prices is causal—higher rates cause higher prices for goods and services.  Their paper only makes sense if one assumes that the BoE did not control global monetary conditions.   (1 COMMENTS)

Luca Dellanna is a management advisor, author, and researcher. Luca has published nine books and is currently operating a consulting practice in Italy and Singapore. On this episode of EconTalk, host Russ Roberts and Dellanna engage with Luca’s book: Ergodicity: How irreversible outcomes affect long-term performance in work, investing, relationships, sport, and beyond. Roberts and Dellanna trade examples of maximizing chances for success by staying in the game- managing risks and accounting for the variation of outcomes. Dellanna offers the example of his cousin, a talented professional skier, who unfortunately had his career cut short by serious injury. Dellanna stresses the importance of managing risks to stay in the game, and that success is not a short-term endeavor. How do you manage the risks in your life to both avoid ruin and maximize your chances at success? How do time horizons relating to a goal and its sustainability influence decision-making? Share your thoughts and experience with us today. As Russ always says, we love to hear from you.   Roberts and Dellanna agree that a process that can have an irreversible outcome should be treated with extreme caution. Roberts’ suggests that trying to meet the average is inferior to continuing to play the game. Risks should be handled with a hope that one can continue a process instead of exposing oneself to too much risk and falling to ruin. How can a long-term approach assist in protecting yourself from ruin? What causes some to ignore care for the future, incurring great risks for short-tern success? How might Dellanna’s approach change the mindset of such a person? Roberts talks about his role as president of Shalem College. He is under a short-term contract and can only serve up to 12 years as president of the school. He presents the principal-agent problem his position illustrates- the school board, or principal, and him, the agent. Russ takes the approach of acting as if he would have a lifetime contract, looking out for the school’s best interest beyond his time there. But is that a feature of the contract, or a feature of Russ? What is an example of a situation where short-term, individual benefits severely outweigh the aggregate good that goes beyond one’s own time horizon? To what extent do you think Roberts’ situation encourages a Dellanna-style approach to decision-making? How might you use Dellanna’s approach to design a better contract?   A recurring theme of the episode is weighing the average versus the variance of a given event. Dellanna gives the example of a pandemic occurring; the probability is low, but over a lifetime, that probability accumulates and the chances of a pandemic are high. Russ makes the point that low-risk activities measured in the sense of probability versus outcome can be very dangerous when you come out on the reward side of a risk any number of times, “…it lulls you into thinking..eh, I’m safe!” (Roberts, 24:15). What is a behavior that you have noticed or that you have yourself have engaged in that could fit into this category (pandemic-related or otherwise)? Why else is it so hard to be a rule-follower, knowing that even though a process is low-risk in probability, its outcome can be ruinous?   Dellanna and Roberts discuss near-misses and the attention that should be given to them so people create and remember safer habits and regulations, versus retreating from the initial shock of a near-miss and not subsequently addressing a potentially ruinous behavior. Dellanna provides the example of each participant in a meeting at DuPont sharing a near-miss they are aware of before they begin discussing other subjects. How can subsidiarity with regard to safety benefit a company no matter the hierarchy of roles? Russ talks about near-misses in sports, where they are rarely punished. Should near-misses be punished more formally in sports, or are the informal relations between players enough to address the consequences for those enacting risky behavior?   Dellanna and Roberts discuss ergodic versus non-ergodic processes. How does he describe the difference between the two? Some non-ergodic processes can be good; Dellanna uses the obvious example of learning, where one invests over time so that knowledge can be built from failures. What is a habit or a strength that requires a non-ergodic approach to instill its outcome–taking the time to build yourself up toward success (reaching the probability of reward)? How have you employed such an approach in your own life? To what extent has this conversation changed the way you think about building habits or strengths? Brennan Beausir is a student at Wabash College studying Philosophy, Politics, and Economics and is a 2023 Summer Scholar at Liberty Fund. (0 COMMENTS)

“If someone disagrees with me, he must have bad or venal motives.” The quote above could be the subtitle of Matt Stoller’s 2019 book, Goliath: The 100-Year War Between Monopoly Power and Democracy. I’ve been working on my next article for the Hoover Institution’s Defining Ideas site and when I mentioned it to a friend that it’s on antitrust, he recommended that I read Stoller’s book. I read parts and paged through the rest. What struck me is that Stoller has a tendency to attribute disagreements with him to bad motives on the part of those who disagree. Related to that, he has a tendency to not actually examine their arguments carefully but, instead, to dismiss them. He also seems to think that when people want to keep certain decisions out of the hands of government, they are attacking democracy. I called him out on some  of this a few years ago when Stoller wrote a nasty attack on Aaron Director. The site that published him, misleadingly labeled Pro-Market, did have the decency to repost my blog post on its site, along with his response. So I won’t rehash that: take a look, if you’re interested. Instead I’ll hit two highlights from Goliath. On James Buchanan and Gordon Tullock: Behind the rhetoric of science was an attack on democracy. Considerations of equity, democracy, and social stability became, as Bork put it, “vague, squishy, and dangerous,” a “reckless and primitive egalitarianism.” In 1947, at Mont Pelerin, James Buchanan founder of public choice theory and one of the Chicago School’s later Nobel Prize winners, referred to the need to ensure that wealthier citizens must not be forced to shoulder a disproportionate tax burden. Freedom, particularly economic, required “the removal of certain decisions from majority-vote determination.” He and Gordon Tullock used a scientific veneer in The Calculus of Consent to argue a one-person, one-vote system was inefficient. Where to start? Let’s leave out the fact that at age 27, Jim Buchanan was not invited to the 1947 Mont Pelerin meeting. And let’s also leave out the fact that Buchanan, to his death as far as I know, advocated a 100 percent marginal tax rate on all estates above a fairly moderate value. (I don’t defend this; I simply point it out.) I bet he advocated heavier death duties than Stoller does. It’s certainly true that Buchanan wanted governments not to use the tax system to discriminate against wealthy people who were alive. Is that an attack on democracy? I don’t know Stoller’s views on the legality of abortion, but the Supreme Court’s Roe v. Wade decision of 1973 was certainly “the removal of certain decisions from majority-vote determination.” Would Stoller cast similar aspersions on the seven judges who voted for the decision in Roe v. Wade? Also, while it has been many decades since I worked though The Calculus of Consent, I certainly didn’t notice a “scientific veneer.” It is scientific, but it’s deep-down scientific. On Robert Bork: A seminar at the University of Rochester for executives offered Bork a lucrative speaking opportunity on mergers. Notice the undercutting word “lucrative,” as if the money might have motivated Robert Bork to say things he didn’t believe. I bet that a transcript of the talk, if there was one, would have shown that Bork said the same things he had earlier said when he wasn’t paid much. I’ve had about five or six lucrative speaking opportunities in my life, if you define lucrative to mean “paying $5,000.” It has been wonderful to be paid to say things that I think are true and important and that I’m passionate about. I’m guessing Bork felt the same way.   (0 COMMENTS)

In their book We’ve Got You Covered, which I reviewed here, Liran Einav and Amy Finkelstein have a short section in which they discuss a 1975 article by James Buchanan titled “The Samaritan’s Dilemma.” They summarize it briefly. It has been almost 50 years since I’ve read Buchanan’s piece but I think they get it basically right. Buchanan argued that when people are bailed out from their risky decisions that go wrong, they are likely to take fewer precautions. Thus the dilemma: do we help them, which will signal them and others not to take precautions, or do we not help them, recognizing that some people who didn’t take precautions will be in bad shape? (I guess I’ve answered that for myself. I have friends who have not made nearly as good provision for their old age as I have and I sometimes help them.) Then they write: The issue with the Good Samaritan, in other words, is one of unintended consequences, a perennially popular theme of economists’ lunchtime chatter and PhD dissertations alike. This summing up of Buchanan’s point surprised me. I would have thought that the authors would identify this theme of “chatter” and dissertations for what it is: moral hazard. Finkelstein has written extensively on moral hazard, making their failure to use the term even more puzzling. Then they write: How then to protect ourselves against our own well-intentioned but ultimately misguided charitable instincts? True to his libertarian roots, Buchanan offered no public policy solution. “Modern man has ‘gone soft,'” Buchanan lamented, as he exhorted the reader–in the spirit of Lady Macbeth urging her husband to murder the king–to try to restrain our natural impulses, to “screw [our] courage to the sticking place.” I know a little about libertarianism, having been one for over 50 years. I’ve never seen someone who understands it say that being true to my libertarian roots means I can offer “no public policy solution.” I probably don’t go a day without offering some kind of public policy solution that is rooted in my libertarian views, whether it be to cut government spending, end rent control, end tariffs, end certificate of need laws, liberalize immigration. or many others. And specifically, since the discussion is about people not buying health insurance, I have often argued for allowing bare-bones health insurance that many people could afford rather than throwing people off those policies the way the Biden administration is attempting to do. Whatever their intent, Einav and Finkelstein come off as people who want their readers not to take libertarians seriously. More important, they do it by distorting.         (0 COMMENTS)

This tweet caught my eye: Use of the term “unprecedented” is becoming disturbingly common.  Let’s review the past 5 years: Unprecedented situation #1:  In 2018 and 2019, I warned that the doubling of the budget deficit over four years was unprecedented (and reckless), for a period of peace and prosperity.  Lots of pundits ignored these warnings, pointing to low interest rates. Unprecedented situation #2:  In 2020 and 2021, I warned that the huge size of the budget deficit was unprecedented (and reckless) for a period when we were not at war.  Pundits pointed to the low interest rates and basically said, “don’t worry”.  (Some spending was justified by Covid, but much of it was not.) Unprecedented situation #3:  And now we have another unprecedented situation, the deficit doubling in just one year (to a very high level) during a period of peace and prosperity. But this time I’m seeing a flurry of article in the mainstream press, concerned that our debt situation is unsustainable.  They are correct, but where were they in 2019? PS.  I suspect our candidates will ignore the budget deficit in the upcoming presidential campaign.  But (with apologies to Leon Trotsky), politicians may not be interested in budget deficits, but budget deficits are interested in politicians. (0 COMMENTS)

Dawn Addis, the Democratic member of the California legislative assembly for the 30th district, sent me an email in recognition of Labor Day. In it, she wrote: This Labor Day holiday, let’s remember it is because of hard-fought wins that we have a five-day work week, a minimum wage and even weekends. I think she’s only one third right. It is true that labor unions pushed for those three policies. The only one, though, for which unions can take credit is the minimum wage. More on that anon. What was the main factor behind the five-day work week and weekends free from work? Rising standards of living. Leisure is a normal good and so as real income rises, we demand more of it. The effect of rising income, to the extent it’s due to rising wages and salaries (which it largely is), is actually ambiguous. On the one hand, as noted, there’s an income effect: we want more leisure. On the other hand, the price of leisure, which is the foregone after-tax wage, rises and so we want less leisure. It’s pretty clear, though, that the income effect has dominated. So with or without labor union pressure, we almost certainly would still have the five-day work week. The difference is that without the law, there would be more flexibility so that the (I assume) relatively small percent of workers who wanted to work for six days without time and a half for overtime would be able to work for employers who wanted them to. So the effect of unions, to the extent they were responsible for the legislated 40-hour work week, was to foreclose options. They were responsible for the legislated 40-hour work week but not for the de facto 40-hour work week. On the minimum wage, she’s right. But she shouldn’t be bragging. The minimum wage at the federal level came about in 1938 in part because labor unions in the industrial north, especially the New England states, noticed that employers were moving to the southeast to take advantage of lower wage rates, often paid to black people. They wanted to reduce the south’s competitive advantage so that employers would be less likely to move. Back then, and even into the 1950s, politicians could be more blunt about their motives. So in discussion of the minimum wage at a committee hearing in Washington in 1957, one U.S. Senator from a New England state stated the following: Of course, having on the market a rather large source of cheap labor depresses wages outside of that group, too—the wages of the white worker who has to compete. And when an employer can substitute a colored worker at a lower wage—and there are, as you pointed out, these hundreds of thousands looking for decent work—it affects the whole wage structure of an area, doesn’t it?[1] [1] From U.S. Senate, Labor and Public Welfare Committee, Proposals to Extend Coverage of Minimum Wage Protection, Hearings before the Subcommittee on Labor, 85th Congress, 1st session, March 20, 1957, p 856. That senator was John F. Kennedy. It has been well known for decades that one of the effects of the minimum wage has been to price lower-skilled workers out of jobs. Back then, that category had a disproportionately high number of black people and still has a disproportionately high number of black youth.             (0 COMMENTS)