Early detection of cancer seems like a very good idea. But it’s a lot more complicated than it seems. Oncologist and epidemiologist Vinay Prasad of the University of California, San Francisco talks to EconTalk’s Russ Roberts about why many tests to detect cancer do little or nothing to extend lifespan. The post Vinay Prasad on Cancer Screening appeared first on Econlib.

There is something absurd in anti-discrimination laws. One illustration can be found in a recent Wall Street Journal report on corporations sued by conservative activists for discriminating in the name of non-discrimination (“The Legal Assault on Corporate Diversity Efforts Has Begun,” Wall Street Journal, August 8, 2023): The Wisconsin Institute for Law and Liberty, in suing Comcast in April 2022, cited the 1866 Civil Rights Act. One provision often referred to as Section 1981 says all Americans should have the same rights to sue and enforce contracts “as is enjoyed by white citizens.” … Title VII of the Civil Rights Act of 1964 bans workplace discrimination. The recent [Supreme Court] affirmative-action decision didn’t address employment practices directly. But Supreme Court Justice Neil Gorsuch in a concurring opinion noted “materially identical language” on discrimination in the laws governing higher education and employment. … The pressure leaves employers vulnerable to litigation for either going too far or not far enough in addressing barriers to equity and inclusion, lawyers say. Consider the broad lines of the history of discrimination in America. Before the Civil War, some states mandated racial discrimination either legally or by letting mobs impose it. After the Civil War, racial discrimination was forbidden, even if the prohibition was not seriously enforced until the Civil Rights Act of 1964. This law came to be interpreted as mandating discrimination in the name of non-discrimination, an enterprise called “affirmative action.” Now, some people want to forbid discrimination again. (Note how the word “liberty” seems to be used against liberty in the name of the Wisconsin Institute for Law and Liberty, except if they refer to “collective liberty” instead of individual liberty.) Here is a revolutionary idea: Why not let individuals and their voluntary associations (including private corporate bodies) be free to discriminate or not? At least if some actions or attitudes are bigoted (with the cost of discrimination largely supported by the bigots), the outcomes will remain diversified at the level of private choices. What should be forbidden, of course, is for governments and government institutions to discriminate. (0 COMMENTS)

Yesterday my friend Danny Shapiro recommended a 2018 EconTalk episode in which Russ Roberts interviewed A. J. Jacobs on his book Thanks a Thousand: A Gratitude Journey. I loved the episode. Various parts of it immediately caused me to think of my own experiences, including my own expressions of gratitude to people. Here are a few. Thanking the barista for the coffee Jacobs says: And, I said, ‘I know this sounds strange, but I just want to thank you for keeping the bugs out of my coffee.’ And she said, ‘Well, that is strange; but I really appreciate it. I don’t get a lot of gratitude.’ That reminded me of when I was on a flight from Newark to San Francisco and started a conversation with the guy beside me. One of the things I find most interesting about people is what work they do. So I asked him. He answered that he worked for a pharmaceutical company and named the company. I asked him what drugs they produced and what diseases they were aimed at. He told me a few. Then I said, “Thank you.” “What?” he asked. “Thank you. I appreciate your role in getting these drugs out to the public and helping them.” “I’ve been in this business for over 20 years,” he said, “and you’re the first person who has ever thanked me.” By the way, I wrote an op/ed 23 years ago titled “Make Money off My Sickness, Please.” In it I expressed gratitude to the local hospital (Community Hospital of the Monterey Peninsula, which we locals call CHOMP) for saving my life for $2,000 in 1995 dollars. Gratitude for a Doctor Russ tells this story about people expressing thanks to a doctor dying of cancer. People gathered to thank him for the treatments he had given them. This doesn’t directly relate, but somehow it reminded me of the memorial service for my friend Harry Watson last month. I was wandering around their New Hampshire compound (there are 7 buildings on it) an hour or so before the service when I saw someone show up in a nice Porsche. He rolled down his window to ask where he should park and I introduced myself. He then introduced himself. He was Dr. Hunt of the University of Pennsylvania medical center. He had been Harry’s hero because his destruction of various malignant tumors in Harry’s body probably bought Harry 3 or 4 more years of life while he had stage 4 colorectal cancer. Dr. Hunt flew from Philly to Boston and then rented a car to drive 2 hours to New Hampshire. Now that’s dedication. Gratitude for a Parent Russ states: You mention your parents. That’s an obvious example where, for me, when I first had, when I was blessed with a child, one of the things that it does to–it does a lot of things to you–but one of the things it does to you is it makes you realize what your parents did for you. Because–tragically or not, realistically, you don’t spend a lot of time thinking about it. And when you have your own child, you realize, ‘Oh my gosh.’ And you should be overwhelmed by gratitude. And I think how often you tell you tell your parents how grateful you are for what they did for you. My mother died when I was 19 and so it never occurred to me to express gratitude to her. My father died when I was 46 and fortunately I knew it was coming (I had visited him for that reason less than 2 weeks earlier) and when I found out from the nursing home that he was near the end, I faxed him a very brief appreciation that they told me they had read to him. I did get a glimpse of the fact that he had thought about his kids when I went through his papers and found a carbon copy (remember those?) of an application he had written for a job as a school principal when he was wanting to resign as a school principal where he was. He mentioned that he had 3 kids and his youngest (me) was 9 and then something I forget. But still it was neat to see him even mentioning me when I had had the working assumption that he took me for granted. Gratitude Replacing Annoyance Jacobs states: I think my default mode, like many people’s, is to be annoyed: Find the three or four things wrong with everything and focus on them. I think of it almost like a battle between my inner ‘Larry David’ and my inner ‘Mr. Rogers.’ And I think my Larry David is very strong. So, this was partly an attempt to strengthen my Mr. Rogers. And I do think it was successful. I mean, I still get annoyed a huge amount. But, just doing a practice of focusing on the hundreds of things that feel right in every part of our lives, it really is a radical shift in perspective. I have worked on this a lot over the last 5 decades and I’m now at the point where my “Mr. Rogers” is dominant. Two stories from the last 2 weeks. Two weeks ago my wife and I rented an expensive house for 5 nights in Novato, California. We had to pay a lot to get a private swimming pool. All kinds of things went wrong. First, there was no set of directions. So we had to contact the owner to get the WiFi password. Second, I had bought ice cream the day we arrived and by that evening, it had turned to soup. The freezer didn’t work. Third, it took us 2 days to find where the towels were hidden. I could mention a couple of other upsets, but I think you get the picture. We contacted the owner about the freezer and he told us he had ordered a new one and it would arrive the day before we left. So it wouldn’t help us much. I don’t know if this was a response to our complaint about the ice cream or if he had already ordered it and it was due to arrive. He asked us if we could be there to accept delivery. My immediate response was anger, but by this point my anger quickly turned to laughter. This really seemed like a comedy. We said we could be there if they specified the time, and the guys who delivered it were only a little later. The owner also showed up and he was a really nice guy. The power had gone out that morning and when we had told him that, he said we should go out for breakfast and he would pay. My sister in law and her boyfriend were visiting and so we took them out and treated. I had no intention of charging him for them, just for us. So when I told him that the bill was $107, but that he should give us half of that, he pulled out 6 $20s and said that that should compensate us for breakfast, the ice cream, and another dish that had spoiled in the fridge. When the fridge arrived and the guys pulled out the old one, of course there was all kinds of dirt on the floor. Although the owner was 10 years younger than me, he wasn’t in as good shape and it was difficult for him to clean the floor. He tried to do it with wet paper towels and using his foot to sweep them back and forth. It just wasn’t working. I like to be helpful and I also felt gratitude for his being so accountable. So I got some wet paper towels, got on my hands and knees, and cleaned the floor. The other story is about something that happened this morning. My wife is having a knee replacement early next month and a friend who had had it recommended that we get a big piece of plywood and put it under the cushions on our couch. That way, she could get off the couch more easily. So I went to Home Depot this morning to buy a piece of plywood. It turns out that Home Depot has a great deal where you can rent a truck for 75 minutes and pay only $20 plus gas. So I did that. The guy who checked me out told me to make sure I returned it full, because the gas gauge said “F” for full. I also noticed that it said 394 miles until empty. After I dropped the plywood off at home, I went to gas station. I had driven only 9 miles but I pumped 1.9 gallons and it hadn’t quit. So I stopped. There was no way I had got just over 4 miles per gallon. When I returned the truck, I pointed out that the gas gauge now said 414 miles until empty. I wasn’t upset. I think I just wanted to tell them and maybe I wanted to get a little credit for being a responsible customer. A different guy was there and he said something that disarmed me and got me laughing: “Welcome to the Home Depot business model.” I never had any anger. But this one line brought out my Mr. Rogers big time. Thanking People in Your Life Around the 22 or 23-minute point, Russ talks about thanking people who have done nice things for you and he tells a nice story about a family friend who was generous to him. It made me think of someone who arguably saved my life. When I was 24 and about to go to the University of Rochester as an assistant professor, I was visiting friends in Winnipeg. I wasn’t sure that the Immigration “Service” would okay the extension of my F-1 student visa for “Practical Training,” I was way further behind on my dissertation than I had expected to be, and I was afraid of moving into a new job where I was around people, at least some of whom I had already figured were smarter and more productive than me. Everything hit at the same time one evening. I had borrowed the car of my friend I was staying with and I told Edwin, “I want to go out in your car and get it up to 80 and crash it into a tree, and I want you to talk me out of it.” My brother had committed suicide 5 years earlier and that had, unfortunately, made suicide quite plausible to me. Edwin could have said, “No way are you going to wreck my car.” He didn’t. He gave me what I needed. He talked me down, having me look at each problem in turn and convincing me that I could deal with each problem. That is the only time in my life when I seriously thought about committing suicide. For that response, I feel a lot of gratitude to Edwin. (0 COMMENTS)

With the rise of social media (especially Twitter), it has becomes easier to observe changes in the zeitgeist. Over the past few years, I’ve seen the following trends:1. Claims that increases in the minimum wage do not have negative side effects.2. Claims that we don’t have to worry about big budget deficits when the interest rate is low.3. Claims that changes in the money supply don’t impact inflation.4. Claims that neoliberalism no longer works, and that we need an industrial policy. In each case, trendy pundits rejected long established economic principles. And now the chickens are coming home to roost.  1. In a recent post, Kevin Corcoran discussed a study by Seth Hill, which found that minimum wage increases led to more homelessness.  Can we be certain that this study is correct?  Clearly not; social science has a replication crisis.  But that’s equally true of studies claiming that the minimum wage did not reduce employment.  Other studies by highly respected researchers found that the minimum wage does reduce employment.  In my view, all of these studies miss an important point.  The worst effect of wage, price and rent controls is that they make society more cruel.  With rent control, landlords have an incentive to be mean to tenants.  With minimum wage laws, bosses have an incentive to become jerks.  Anyone who ever visited a communist country quickly discovers that “customer service” abysmal.  (I was married in a communist country.)  I have enough problems; please don’t make our society even more annoying. 2. I have some sympathy for those who suggested that we didn’t need to worry about budget deficits when interest rates were low.  At the time, I argued against this view on the basis that interest rates might rise in the future.  But even I did not expect rates to rise as sharply as they have over the past few years.  Now we are discovering that debts incurred at a very low interest cost in the late 2010s and early 2020s must be rolled over at a much higher rate.  Yes, it is true that we never actually pay off the national debt.  But we do pay off individual Treasury securities, and refinance this debt at current market rates. The other reason I have some sympathy for those who discounted the danger of budget deficits is that there had been so much “crying wolf” over previous decades.  Throughout almost my entire life, I’ve heard the budget deficit called a ticking time bomb.  And yet for the most part the national debt remained relatively low as a share of GDP.  Something changed in the late 2010s, when the US went from being a responsible nation to something akin to a banana republic.  There were no more “grownups in the room” to scold Congress when reckless fiscal policies were adopted.  The budget deficit doubled during an economic boom, a period where it would normally be falling as a share of GDP. These policies (spend more and tax less) proved popular with the general public and were maintained (and even extended) when a new administration took power in 2021.  And now the wolf is here, we really do have a debt problem.  Unlike during the Reagan years, this really is unsustainable: Future generations will face some very unpleasant choices due to the irresponsible behavior of the Federal government over the past 6 years.  I would not wish to be elected president in 2024. 3.  The money supply is not an ideal indicator of the stance of monetary policy.  Velocity can change over time.  But many pundits drew the wrong inference from those facts, completely discounting the importance of monetary policy.  Now we are seeing the high inflation from the reckless decisions made by the Federal Reserve back in 2021 and 2022, which led to a surge in the money supply.  And don’t be fooled by the recent drop in the headline inflation rate—the problem is far from over. It would not surprise me to see headline inflation begin moving higher again. Inflation and excessive borrowing share one common feature—the longer we wait to address the problem, the more painful the cure. 4.  After the 2008 financial crisis, neoliberalism seemed to go out of style.  Perhaps people just got bored with it.  “You say it was the biggest ever reduction in world poverty seen, by far?  Yawn, what have you done for me lately?”  The US, Europe and China all began moving in a more statist direction.  Pundits assured us that we needed to copy China’s industrial policy, least we fall behind that nation of 1.4 billion people.  (Left unsaid is why the US should copy a nation that has a per capita GDP roughly equal to that of Mexico.) Now we are being told that China’s economic model is sputtering.  And the recent so-called Inflation Reduction Act is creating a set of grotesque distortions and inefficiencies.  Even worse, the massive subsidies will also boost the national debt, forcing future tax increases that will further slow economic growth.  Statist policies are like a time bomb; the most pronounced negative effects occur down the road. But what about global warming?  Didn’t something need to be done?  Here it’s worth noting that the approach most favored by economists (a carbon tax) would have actually reduced our budget deficit. That would have been the logical approach. Instead we went with a set of open ended subsidies that boosted the budget deficit. Even worse, we favored local producers over imports, even if imported goods could address global warming more effectively.  We were told that global warming was such a big problem that we could no longer rely on a free market economy, but then implemented mercantilist policies that prioritized subsidizing domestic special interest groups over addressing global warming.  Apparently global warming was merely a pretext for industrial policies that were being implemented for other reasons.  The same is true of industrial polices aimed at competition with China.  If we were serious about this issue, we’d bring thousands of Taiwanese and Chinese engineers to America to help us rebuild our chip industry.  Instead, these projects are floundering due to a lack of skilled labor.  Trump and Biden have an instinctual preference for mercantilism—China and global warming are handy excuses to exercise those preferences. To summarize, stay away from trendy economic fads.  The eternal verities never change: 1. Price controls are bad (whether on wages, prices rents or interest rates.) 2. Large budget deficits are bad, even if interest rates are low at the time.  3. Persistent inflation is always and everywhere a monetary phenomenon. 4.  Free market economies do better than statist economies.  Emulate Denmark, not Argentina. PS.  Veronique de Rugy discusses the Foxconn fiasco in Wisconsin, a previous attempt at industrial policy that occurred during the Trump administration.  Hope springs eternal. (0 COMMENTS)

The invention of the concept of rent-seeking has made a powerful impact on economic science. Comparative economics, especially the study of economic transitions, has been particularly affected as rent-seeking nicely explains the behavior and institutions involved in the processes and unintended consequences of transitioning to different economic systems. For this reason, the case of Cuba is perfect to be explained in terms of rent-seeking and the search for privileges. The idea of rent-seeking – as described expertly by David R. Henderson – is that entrepreneurs obtain certain benefits and privileges via the political arena. Rent-seeking behavior can include everything from tariffs or subsidies protecting a specific interest group, to patents and licenses.  The choice to engage in rent-seeking is rational when the expected costs of wealth transfers via political pursuits are lower than those of engaging in the market process. In modern economics, rent-seeking is categorized as a zero-sum game or wasteful behavior. Rent-seekers do not create value through production; they instead capture wealth from other entrepreneurs, possibly wasting resources and destroying wealth in the process. In contrast, market entrepreneurs make their wealth by producing the best quality goods at the lowest and most affordable prices. And, in the eye of comparative advantage and specialization from trade, they secure this wealth through mutually beneficial trade with the consumers and other sellers. In other words, gains from trade.  It is here where entrepreneurs and rent-seekers diverge, while they are both entrepreneurs in the pursuit of profit, only market entrepreneurs profit by making society better off. However, their addition to the wealth stock is different.  Despite being a net drain on society, rent-seeking never ceases to exist, though it differs from country to country. Such variations result from differences in institutional arrangements which determine how profitable rent-seeking activity is and, therefore, how much occurs. As the American economist William Baumol put it, “Changes in the rules and other attendant circumstances can, of course, modify the composition of the class of entrepreneurs and can also alter its size.” When the rule of law is absent, and the law is unpredictable, not applicable to everyone, and unequal, rent-seeking reigns freely. Once rent-seeking has been connected to the concept of institutions, we may propose a case study to explain the phenomena of economic transitions. With the recent approval of a law that legalizes small and midsize enterprises, many commentators have claimed that capitalism might be returning to Cuba. Although this claim must not be outright discredited, clarifying the true state of affairs is still necessary.  In the political economy of Cuba, the rule of law is absent, property rights are not protected, and legal exchanges often cannot take place – these factors conspire to make a free market impossible. Moreover, allocating property rights via political means could never be considered capitalism, as it substitutes political competition for competition in the market sphere market. Put differently, Cubans are not competing in the market but for the right to enter it. Moreover, the 18th article of the Cuban constitution states that:  The Republic of Cuba is governed by a socialist economic system based on ownership by all people of the fundamental means of production as the primary form of property as well as the planned direction of the economy, which considers, regulates, and monitors the economy according to the interests of the society. While the Cuban government might have changed the players, the rules of the game, that is, the institutions, have stayed the same. Even Gil Fernandez, Cuba’s Economic minister, has stated that Cuba is still a centrally planned economy despite the recent market-oriented laws. This phenomenon is similar to the Perestroika period in the Soviet Union, as Peter Boettke pointed out in his book Calculation and Coordination: Thus, despite the rhetoric promising enterprise autonomy, the Law on State Enterprises – the centerpiece of perestroika – was never intended to substantially change the basis of state central planning (see Ericson, 1988, 1989). More recent “reform” decrees and laws have similarly claimed to accomplish much but in reality made little substantial difference. Putting aside the fact that these enterprises will play a secondary role in the economy, the legal, financial, and economic regulations they face impose substantial expected costs on entrepreneurs on the island. The Decree Law 46/2021 introduces a myriad of regulations seemingly aimed at regulating the emerging private sector, but which, in practice, often result in undue restrictions on private initiatives. These restrictions extend to the number of employees and partners an enterprise can have and the sectors they are allowed to operate in. Nonresident individuals and legal entities, including potential investors, grapple with stringent limitations when initiating a business venture. Such limitations prioritize natural-born citizens and residents, thus narrowing the field of potential participants.  An overarching concern emerges with the incorporation of small and midsize companies, as the process is subject to the Ministry of Economy and Planning approval. This requirement inadvertently fosters an environment conducive to rent-seeking, wherein political connections become a means to secure approval rather than the strength of the business proposition. This phenomenon further increases the expected costs of engaging in the market. Moreover, the tax regulations, which are intended to provide a revenue stream for the government, are not tailored to facilitate a straightforward path for entrepreneurs to achieve profitability. Consequently, this intricate tax system adds to the already onerous burden of entrepreneurship, exacerbating the gap between the costs of engaging in legitimate market activities and those of seeking political favor. Another critical confusion is the assumption that the liberalization of some limited and regulated markets indicates a free market—in fact, nothing is further from reality. The presence of some consumer markets does not indicate capitalism if the state lacks the very institutions needed to be capitalist. Another question to ask, considering this law of small and midsize enterprises, is if everyone can even open one of these newly legal companies in the first place? It is hard to believe that Cuba would allow any of its 1037 political prisoners or their family members to open an enterprise. Not even Cuba’s financial press can be trusted to provide an accurate account of what’s happening, as they, too, have experienced political pressure, as evidenced by the many constraints placed upon elToque, who has been reporting the exchange rates between the Cuban peso and the U.S. dollar. The official statistics are hard to acquire and even harder to believe; in many instances, the time series that the Cuban government publishes are either non-accessible or nonexistent. This makes it more challenging to prove that Cuba is transitioning to a market or market-friendly economy. So far, the expectations for the Cuban economy are an economic transition a la Russia. In fact, Cuba has been seeking the advice of Russian officials and economists to provide the structural changes the economy needs to be more productive or at least more connected to rational economic calculation. The concept of rent-seeking has proven to be a valuable lens for understanding economic transitions, exemplified in the Cuban case. The distinction between rent-seekers and market entrepreneurs highlights the contrasting paths to wealth creation and societal impact. The analysis of Cuba’s economic situation reveals the persistent challenges of institutional constraints and central planning. As the country embarks on potential changes, careful evaluation of rent-seeking behaviors and their consequences remains essential to gauge Cuba’s economic future trajectory.   Carlos Martinez is a Cuban American undergraduate student attending Rockford University. He is pursuing a BS in financial economics. Currently, he holds an Associate of Arts degree in economics and data analysis. (0 COMMENTS)

The worldwide recession induced by COVID-19 pandemic has caused enormous misery across the world. It was the worst recession the world has seen since World War 2 and caused a 3.4% drop in global GDP just in 2020. A surface level analysis implies that the COVID recession was caused only because of the drastic measures, such as the lockdowns, taken to stop the spread of the disease. The reality is that there are deeper underlying factors behind this. If gone unchecked, these factors can continue to cause worldwide economic downturns in the future. Comparing the interest rates, money supply, and inflation rates of the US, UK and EU over the past 20 years makes it obvious that these economies follow the US. When the US increases its money supply, other countries often feel justified to increase their own since it generates more money for them to spend. This coordinated expansion of money supplies is a contributing factor to global economic crises.  (Correlation Coefficients of the money supplies, inflation rates, and interest rates of the US, UK and EU from 2002-2022)                                    The pandemic recession is the latest in a long line of economic disasters which have arisen from this monetary alignment. COVID stimulus packages are an example of how countries coordinate their money supply expansion with the US. The US announced its first package on March 6, 2020, followed shortly by the UK on March 11 and the EU on May 27. Though well intentioned, issued in response to the loss of jobs and economic activity due to lockdowns, these ended up being one of the major contributors to present day inflation.  One can argue that the current recession, which affected one third of the planet, was induced by the COVID-19 pandemic’s impact on the health and productivity of people, and not necessarily due to the coordinated monetary policies. But previous recessions that started with local economic mismanagement have also ended up becoming global economic crises. For instance, the Great Recession of 2007-09 started out as an American problem, where the US banks and lending corporations took on too much bad debt. Once the bad debts came to fruition, it resulted in a market crash that eventually spread to other countries. The coordinated monetary policies of countries were a significant contributing factor in spreading local economic malaise internationally. The timelines of the recessions in the UK and the EU corroborate this. The American recession officially began in December of 2007, while the European recession began in the first quarter of 2008 and finally the British one in the second quarter of 2008. One may ask why expanding the money supply by the governments for public spending is such a bad idea. Expanding the money supply, in simple terms, means printing more money. Printing money out of thin air leads to inflation and hence increases cost of living. To control the rising inflation, governments raise interest rates. This decreases economic activity and often leads to recessions. How to Tackle Coordinated Global Recessions? Decoupling American monetary policy from the monetary policies of other central banks in the West could alleviate coordinated global recessions. Countries can then conduct monetary policy as per the prevailing conditions in their local economies and not driven by a desire to align with the dollar. Here are three potential solutions: Keynes’ bancor system, a modified version of Hayek’s competing private currencies system, and cryptocurrencies.  The first method is from the economist John Maynard Keynes. He, along with his colleague E. F. Schumacher, proposed a new system of international trade. In this system, Bancor, a supranational currency would function as a unit of trade. Exports would credit Bancors to a country’s account while imports would add to its Bancor debt. This is an evolution of Schumacher’s proposed multilateral clearing system. The Bancor system is designed to disconnect international trade from the dollar and American monetary policy. However, it would be a herculean task to establish political buy-in for such a system. Countries across the world would disagree over its adoption and who would control it. While the system allows countries to delink from US monetary policy, practical implementation would be fraught with problems and is unfeasible. The second method comes from F. A. Hayek. In his book, The Denationalisation of Money, the Austrian economist proposed the abolition of government fiat currency and switching to a system of privately operated currencies, treating money like any other commodity. In Hayek’s model, the money with the most stability, reliability and purchasing power would win in the competitive market and be widely adopted. However, the lack of government control over money is impractical in today’s environment. No government would voluntarily give up control of their nation’s currency, citing instability of private currencies and fragmentation of the payment settlement system.  Hayek’s system can be modified for international trade, however, instead of competing private currencies, we would have competing national currencies. Exchange would not be conducted solely in dollars, rather, it would be conducted in whichever currency countries wish to trade in. This would diversify foreign exchange and alleviate a dollar dependency. An example of this system would be the direct rupee-rouble trade between India and Russia after Russia was sanctioned by the West for perpetrating the Ukraine war. The issue, though, with this system comes in the case of a trade imbalance. If country A holds a balance of payments surplus with country B, it is left with currency it can’t use anywhere else except with country B. In fact, in the previously mentioned example of direct rupee-ruble trade, the Russians have now stopped accepting rupees for this very reason. Cryptocurrency is the third potential solution. It is the closest we have come to a unified medium of international trade settlement since gold. It can be used for international trade, wherein the trade takes place through cryptocurrency, which can be converted back to the local currency afterwards. Cryptocurrency has certain unique advantages that make it more usable than the dollar for international trade. Countries can buy cryptocurrencies like bitcoin, rather than it being distributed by a supranational authority, like in the Bancor system. Also, cryptocurrencies can be purchased with any national currency, thereby solving one of the problems with direct trading. A country can use their hold of surplus currency to buy cryptocurrency, which can then be used to trade with any other country, since they are not independent of the influence of any one government. However, this also comes with certain practical problems. One, the excessive volatility of cryptocurrencies could discourage countries from conducting their trade through them. The current situation of cryptocurrency in the US has been quite chaotic though, post the collapse of one of the largest exchanges, FTX. This results in a catch-22 that we often see: cryptocurrencies only become stable if they attain widespread adoption, but unless they are stable, people are not willing to adopt them. Also, countries like China dislike cryptocurrencies as it compromises their sovereign right over money supply. In such cases, countries like China can use cryptocurrency for international trade, while continuing to enforce the ban on retail usage. Only the Chinese central bank would have access to cryptocurrency and all trade would flow directly through their central bank. Yet, the concept still stands as a good one if crypto manages to achieve sufficient stability as it matures and derivative markets emerge. Countries across the world are realising the disadvantages that come with trading in dollars. As more and more economies de-dollarise over the next few decades, we could see significant transformations in how international trade is conducted. In the long run, private market players and global governments would have to use a combination of all the above approaches to decouple themselves from the dollar and attain true financial independence. As cryptocurrencies mature and associated derivative instruments bring stability, these digital currencies could become the future of international trade.     Saaketha Nalamotu is associated with the Fellowship for Freedom in India.  (0 COMMENTS)

What is the state (“government”)? The current prosecutions of a former statocrat-in-chief* offer multiple opportunities to raise the question. A declaration by a lawyer about how Donald Trump’s co-defendants could challenge the use of Georgia’s RICO law is especially interesting. The Wall Street Journal reports (“How Donald Trump Could Attack Georgia RICO Prosecution,” August 25, 2023): “They’d say that there may have been a similar goal—that Trump remain president—but there was no coordination,” said Jack Cunha, a lawyer in Boston who has defended racketeering cases. “They’re going to say this isn’t the mafia or a street gang. They’ll say this is just hardball politics.” Lysander Spooner, a 19th-century political philosopher and activist, would probably reply that hardball politics is indistinguishable from a mafia. For Spooner, the state is the ultimate criminal conspiracy. In this light, there is a certain irony in its creation and use of RICO. In his fiery 1870 article “The Constitution of No Authority,” Spooner wrote: Not knowing who the particular individuals are, who call themselves “the government,” the tax payer does not know whom he pays his taxes to. All he knows is that a man comes to him, representing himself to be the agent of “the government”—that is, the agent of a secret band of robbers and murderers, who have taken to themselves the title of “the government,” and have determined to kill every body who refuses to give them whatever money they demand. … The secret ballot makes a secret government; and a secret government is a secret band of robbers and murderers. … Thus it is obvious that the only visible, tangible government we have is made up of these professed agents or representatives of a secret band of robbers and murderers, who, to cover up, or gloss over, their robberies and murders, have taken to themselves the title of “the people of the United States,” and who, on the pretence of being “the people of the United States,” assert their right to subject to their dominion, and to control and dispose of at their pleasure, all property and persons found in the United States. An economist or a political economist will look at the state in a very different way. The question is not the ontological one of what is the state but, in a scientific-nominalist way, how the state works (and how, comparatively, would anarchy work). Incidentally, this focus on how things work reminds us that any collective action or conspiracy must be incentive-compatible. Most of what is called “conspiracy theories” is not. Incentive-compatible means that each individual co-conspirator thinks that his own action will increase his own expected net benefit more than his own expected cost. This is why there are few large, complex, and risky conspiracies. When there is one, it is discovered because each conspirator has an incentive to rat on his fellow conspirators (it’s the “prisoner’s dilemma”). Going back to how the state works, consider Anthony de Jasay who was, I believe, one of the great (and most neglected) economists of the 20th century. He described himself as a liberal and an anarchist. Perhaps one could say that he was a conservative anarchist. How the state works is the question he asked in his masterpiece The State. He answers that the state (even if run by an altruistic political philosopher like, say, Trump or Giuliani) does not behave like a great and glorious embodiment of “the people.” Instead, the state is in the business of governing, that is, of handicapping some of its subjects or “citizens” in order to grant privileges to those whose support it needs to retain power. The state may not be more dignified in de Jasay than it was in Spooner, but the methodology and implications of the analysis, as well as its (possible) normative corollaries, are very different. One may disagree with de Jasay’s analysis, and have good reasons to, but not before reading the book. ———————————————————– * “Statocrats” comes from an old French word (statocrate) recycled by Bertrand de Jouvenel and meaning “a man who derives his authority only from the position he holds and the office he performs in the service of the state” (On Power: The Natural History of Its Growth, 1945 for the original French edition). (0 COMMENTS)

Gwern has an excellent essay on how everything is correlated, and very rarely does the correlation imply causation.  I was reminded of that essay when I read this tweet: In addition to male and female happiness since the Sexual Revolution, those graph also show male and female happiness . . . 1. over 50 years of economic growth 2.  since Nixon’s War on Drugs was initiated 3.  since abortion was legalized 4.  since divorce laws were liberalized 5.  during a period of increasing civil rights for women, blacks and gays 6.  during a period where computers increasingly dominated our lives 7.  during a period where families became smaller 8.  since the creation of the EPA and OSHA 9.  during a period where our politics became increasingly polarized So why does Ross Douthat single out the Sexual Revolution?  Is it because he doesn’t like the Sexual Revolution, for reasons essentially unrelated to this happiness survey? I don’t happen to believe the reported happiness data tells us much of anything about the actual happiness experienced by humans.  If asked how happy I was, I wouldn’t even know how to answer the question.  Compared to what?  I have no idea how happy other people are, and hence have no “baseline” to give a zero to 10 rating for myself.  Perhaps modern media outlets present an increasingly dazzling image of the good life experienced by the rich and famous, making people who are just as happy as in 1970 rate their well being lower than they would have 50 years ago.  Almost anything is possible. For the sake of argument, lets assume that reported happiness does tell us something meaningful.  Most of those nine listed factors obviously had little impact on reported happiness.  Is there a “story” where the Sexual Revolution could explain these changes?  Sure, there are lots of stories.  Some have argued that the Sexual Revolution helped attractive men at the expense of women, which might explain the bigger decline in reported female happiness.  But two points are worth noting.  First, male happiness also declined.  Second, male happiness now equals female happiness.  Is that a good thing?  Again, I don’t trust the data. But if it is to be taken seriously, has the Sexual Revolution given us gender equality? It might seem bizarre to claim that economic growth made us less happy.  Don’t people enjoy having more goods and services?   Yes, but couldn’t the same be said about sex?  The argument that the Sexual Revolution reduced happiness obviously needs some nuance, some indirect effects. While there are plausible stories about how the Sexual Revolution might have made us less happy, I could just as easily invent stories where economic growth made us less happy.  Much of our recent economic growth has been driven by the computer revolution.  Perhaps we used to socialize in bowling leagues, and now we sit at home all alone and use social media to obsess over how other people have more friends and better vacations than we do.  Note that the Sexual Revolution was at its peak around 1980, whereas male and female happiness took a big drop after the early 2000s, just as social media was ramping up Would Tyler Cowen have retweeted a tweet indicating that happiness was declining as computer use increased? Do I believe that economic growth makes us less happy?  Not really, or at least I’m agnostic on the issue.  Just as I don’t believe any other explanation for why we are less happy.  Indeed, I don’t even believe that we are less happy.  Ironically, I often play the contrarian in the opposite direction, claiming that economic growth has not boosted happiness and justifying that belief by pointing to the fact that people don’t seem any happier than when I was young.  But they also don’t seem less happy than before.  When it comes to happiness, agnosticism seems like the most sensible attitude. PS.  Elsewhere I’ve argued that classical liberalism is the system that maximizes human happiness.  Since 1970, we’ve liberalized in some directions (gay rights, marijuana) and gone backward in others (the TSA, tobacco).   Net change?  Hard to say.  Are we happier?  Hard to say.  Are we less happy?  Hard to say. (1 COMMENTS)

Money In 1973, Pink Floyd released The Dark Side of the Moon which included the single ‘Money,’ on which Roger Waters snarled:  Money Get back I’m alright, Jack, keep your hands off of my stack ‘Money,’ according to one critic, “deals with crass materialism.” But by the time Pink Floyd recorded The Wall in 1979, they did so in France and the United States because remaining in Britain would have incurred a massive tax bill.  British income taxes post-1945 Hiked to 99.25% during World War Two, Britain’s top rate of income tax did not return to its pre-war level when the war ended, hovering around 90% through the 1950s and 60s. These rates were a bane of Britain’s entertainment industry. In ‘Taxman,’ released in 1966, The Beatles sang: Let me tell you how it will be There’s one for you, nineteen for me ‘Cause I’m the taxman Yeah, I’m the taxman   “‘Taxman’ was when I first realized that even though we had started earning money, we were actually giving most of it away in taxes,” George Harrison wrote in 1980. “It was and is still typical.” The 1970s: The Age of the ‘Tax Exile’  In 1971, a Conservative government cut the top rate of tax on ‘earned’ income to 75% but a 15% surcharge on ‘unearned’ investment income kept the top rate at 90%.  The Rolling Stones had had enough and went to France to record Exile on Main Street. “[I]n those days, in England, the high tax rate was 90 percent,” Mick Jagger explained: You made 100 pounds, they took 90. So it was very difficult to pay any debts back. So when we left the country, we would get more than the 10 pounds out of 100. You know, we might get 50 or something. In 1974, a Labour government hiked the top rate on ‘earned’ income to 83% for a top rate of 98%, the highest permanent rate since the war.  Rod Stewart fumed: The Government thinks it’ll tax us bastards right up to the hilt because we won’t leave, but that’s wrong because I will if I want to…with a 90 percent tax ceiling, it’s just not worth living in England any more.   He left for California in 1975 – his first subsequent LP was titled Atlantic Crossing – infuriating Elton John. “Round at his place one evening,” Stewart wrote in his autobiography:  I told him I was thinking of quitting Britain, and he called me a traitor and put on Elgar’s “Pomp and Circumstance Marches” at a volume so high that we couldn’t talk over it. The Stones and Stewart became known as ‘Tax Exiles.’ They were joined by others. Jethro Tull went to France, Marc Bolan to Switzerland, Tom Jones and Bad Company to California – lead singer Mick Ralphs citing “ridiculously high tax in England” – Ringo Starr to Monte Carlo, and Cat Stevens to Brazil. In 1978’s ‘Dead End Job,’ Sting sang “I don’t wanna be no tax exile.” He moved to Ireland in 1980 where musician’s royalty earnings were exempted from income tax. If, in many cases, exile marked a vertiginous decline in the quality of the exile’s music, this wasn’t so in every case. David Bowie went to Switzerland where, according to his wife, Angie, he got “an almost ludicrously low tax rate of about 10 percent.” “The Swiss take their residency requirements seriously,” she wrote: …and demand that their resident foreigners spend significant amounts of time at ‘home.’ Therefore you ‘stay’ or ‘work’ or ‘holiday’ in your London flat, Berlin garret, or wherever, and return to Switzerland when you have to. This led Bowie to Berlin where he recorded his classic trilogy of albums – Low, Heroes and Lodger – between 1977 and 1979.  The 1980s: The end of the Tax Exiles In 1980, Margaret Thatcher’s Conservatives cut the top rate of income tax to 60% and reduced it to 40% in 1988. The investment surcharge was abolished in 1985 and the era of the Tax Exile ended.  A recent paper by economists Henrik Kleven, Camille Landais, Mathilde Muñoz, and Stefanie Stantcheva that: “review[s] a growing empirical literature on the effects of personal taxation on the geographic mobility of people and discuss[es] its policy implications” found that: There is growing evidence that taxes can affect the geographic location of people both within and across countries. This migration channel creates another efficiency cost of taxation with which policymakers need to contend when setting tax policy. More specifically: This body of work has shown that certain segments of the labor market, especially high-income workers and professions with little location-specific human capital, may be quite responsive to taxes in their location decisions. The era of the Tax Exiles illustrates that perfectly. “We left England because we’d be paying 98 cents on the dollar,” Rolling Stone Keith Richards explained, “We left, and they lost out. No taxes at all.”     John Phelan is an Economist at Center of the American Experiment. (0 COMMENTS)

In their recent book, We’ve Got You Covered, two health economists make their case for ditching the current system of health insurance in favor of a government-financed, zero-premium insurance for basic coverage. They would allow people to buy supplementary insurance to expand their coverage. The two economists, Stanford’s Liran Einav and MIT’s Amy Finkelstein, are well-known contributors to the literature on health insurance. With their breezy and humorous writing style, Einav and Finkelstein make what seems at first like a compelling case. They may sway many readers, especially those who don’t know the literature on health economics. But a careful look at their case for ditching our current health insurance and starting over with a centrally planned system uncovers serious omissions and some tensions between their own views. Two omissions are: any mention at all of health savings accounts, and any mention, with a one-sentence exception, of possible reforms of the supply side that would increase supply and reduce the price of health care. One major tension is on their view of the importance of co-payments and deductibles; moreover, they seem to misunderstand the way to measure the impact of co-payments. These are the opening two paragraphs of David R. Henderson, “A Flawed Case for Centrally Planned Health Insurance,” Defining Ideas, August 24, 2023. Another excerpt: You might be surprised to learn that the authors’ fundamental argument for a government-financed basic coverage for all is not that in our current system some people go uninsured. They write, “One in ten Americans lack formal health insurance coverage. But they are not uninsured.” How can that be? People without health insurance, they note, “receive a substantial amount of medical care and don’t pay for most of it.” They buttress their claim with strong evidence taken from the Oregon health insurance experiment, which Finkelstein was deeply involved in studying. In 2008, the Oregon government, constrained by its revenue, had decided to run a lottery to choose who would be added to Medicaid rolls and who would not. This is the kind of experiment that causes economists to rub their hands in glee. The reason: we get a large random sample of people who get the coverage and people who don’t, and we can track both their use of the medical system and their health. Read the whole thing. (0 COMMENTS)