Author and consultant Luca Dellanna talks with EconTalk host Russ Roberts about the importance of avoiding ruin when facing risk. Along the way Dellanna makes understandable the arcane concept of ergodicity and shows the importance of avoiding ruin in every day life. The post Luca Dellanna on Risk, Ruin, and Ergodicity appeared first on Econlib.

Competition is a buzzword. Everyone loves it, but there are vastly different interpretations of this precious concept. These different interpretations lead to strongly conflicting policy recommendations. Imagine you and your super wealthy friend bet on who will win the 100 metres at the Olympics. Your friend wins the bet. But then you find out that the race was rigged. Your friend had bought off seven of the eight contestants. “That’s unfair! Then it wasn’t a real contest” you cry out. Now, imagine your friend shrugging his shoulders and responding, “It was a competition. See, there were so many runners.” That response would strike us all as ridiculous. The sheer number of racers is not relevant. What would have been necessary for it to be true competition and a true race is for all the runners to give their best to win. But that wasn’t the case. And thus, it wasn’t competition; it wasn’t a race. This story demonstrates a precious insight into economic theory. To see that, consider one of the dominant models in economics, that of perfect competition. Roughly, this suggests that for a market to be perfectly competitive, goods must be homogenous, there must be an infinite number of sellers, no transaction costs, and perfect information. Let’s focus solely on the infinite number of sellers. In reality, there’ll never be an infinite number, but imagine that we have an industry with many sellers such that we would be content that this condition for perfect competition holds for our practical considerations. Remember the race example I mentioned earlier. There were eight runners. Would this number be “enough” to have competition? Initially, one would think yes, in general this is so. When we have many runners (as these are the companies in the market), we should expect there to be competition. But not so fast. Recall that in our example, seven of the eight runners had been bought off. They had not given their best; they lost on purpose. There had been no competition – it was all a sham. Unrealistic as this example may be, it demonstrates an important lesson: we want a certain kind of behaviour when we want competition. We want racers to give their best to win the gold medal, we want athletes to train as hard as possible, and we want entrepreneurs, managers, and workers to work relentlessly to improve their products, make them cheaper, and align them better to what the consumers want. What we want is not this or that number of runners or sellers. What we want is a certain attitude. Two lessons follow from this. Firstly, a monopolist, in the sense of a company that is the sole seller in some market, can mean absolute competition. For it is enough that the company has the right mindset, i.e., acts competitively by relentlessly striving to improve their product etc. So, what is needed is this competitive mindset. And for its emergence it is necessary that potential competitors have “freedom of entry”. The threat of competitors potentially entering the market keeps the incumbent company on its toes. Then, we may have only one seller – but this seller is competing. Secondly, a market that has many companies does not necessarily have to be competitive. Imagine we had an economic system akin to the guild systems of past centuries. In such a scenario, there could be hundreds of smiths in the country, but all of them with their specified area that they, and only they, supply. There may well be no competitive mindset here, as the smiths need not worry about customers choosing a rival – as rivals are not allowed to enter the market. Capitalism as an economic system is intended to lead entrepreneurs to produce what consumers want. To ensure that consumer wants are satisfied, competition is imperative. But this is about a mindset, an attitude. It is irrelevant whether there is one spectacular entrepreneur in a market that outcompetes others such that his company is the only seller. Instead, it is about how entrepreneurs act: are they vigilant, striving, restless, endlessly looking for improvements? If yes, then we consumers have the competition we want. If not, then we consumers must protest. And then we consumers must recall that for sellers to have this competitive mindset, we need “the complete absence of institutional restrictions upon entry”. This freedom for entry (and for exit) is what makes for competitive markets. Not an arbitrarily defined number of sellers.   Max Molden is a PhD student at the University of Hamburg. He has worked with European Students for Liberty and Prometheus – Das Freiheitsinstitut. He regularly publishes at Der Freydenker. (0 COMMENTS)

Libel is in the news. The high-profile case, of course, is the result in the defamation lawsuit in which Fox News settled with Dominion for $787.5 million. But the chess world is not too far behind, with a slander case brought by Grandmaster Hans Niemann demanding $100 in damages from world champion Magnus Carlsen who had accused him of cheating. What is going on here? Of what is the perpetrator of libel (a statement in writing) and slander (one spoken orally) being accused? It is that the author of defamatory material has ruined the reputation of the victim, and the latter has suffered grievous financial and other harm. This must be a false claim, not merely a matter of opinion, or a truth, since a sharply negative book or movie review can ruin reputations, but as long as there is nothing untrue in such writing or speaking, libel law would not apply. Libel law is thus akin to protecting private property rights. If I car jack your automobile, I am a thief; I should be made to return your vehicle to you, plus visit the pokey for a period of time. If I falsely accuse you of something, I have robbed you of something quite possibly far more valuable to you than your four wheels. The analogy is not a perfect one, since neither Dominion nor Niemann was even asking for incarceration for Fox or Carlsen, only to be made “whole” again, at least financially. What is the libertarian take on all of this? In the analysis emanating from this quarter, there should be no such thing as libel law. Yes, slander ruins the reputation of the victim, but, paradoxically, he simply does not own his own reputation. He works hard to improve it; he benefits from it; sometimes, the good will of a company is worth more in a sale than the attached capital equipment. But, still, his reputation consists, solely, of the thoughts of others in the community and he simply cannot own their thoughts. I now engage in some libel: Joe Biden takes candy from babies. Donald Trump takes a bath with a rubber duckie. If anyone takes these silly lies of mine seriously, these two presidents of the US will have their reputations diminished. But did I in effect steal anything from either of them? Of course not. I only denigrated the reputations of both of them, which they do not own in the first place. Another paradox: reputations might well be safer, not in greater danger, without these laws. Right now, people are likely to think: “where there’s smoke, there’s fire. There must be some truth to these false allegations.” With no libel laws on the books, the accusations would come so thick and fast, none of them would any longer have as much power to ruin reputations. Proof, evidence, would have to be offered before people believe them. There is one more problem with present legislation: it makes an invidious distinction between those who are public figures, and those who are not. Plaintiffs in the former category have a harder row to hoe: they must prove actual malice on the part of the defendant. Waitasec: When Senator Rand Paul, a public figure if ever there was one, was physically attacked by his neighbor, who is not a public figure, one set of laws applies, and if the assault and battery was in the other direction, a different one would apply? There is a word for that hypothetical: unjust. Ditto for libel law. 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 ). (0 COMMENTS)

Friday night football is a tradition in the state of Texas, with high school games often attracting very large crowds. Today, I came across a couple of news stories that suggest this cultural tradition indirectly impacts public policy.Bloomberg has a story about Governor Abbott’s attempt to expand school choice in Texas. He is running into predictable opposition from the Democratic Party, which tends to support teachers unions. But Democrats are in the minority in Texas, and Abbott must also contend with opposition from rural Republicans: The efforts have been met with stiff opposition not only from Democrats – traditional allies of public education – but also rural Republicans who fear that more parents pulling their kids out of the local schools will decimate funding for institutions that serve as community hubs and a source of regional pride. An additional factor for many GOP lawmakers outside cities is that their sparsely populated districts often don’t have any private schools, limiting the usefulness of the [education saving] accounts for those who don’t want to homeschool their children. Perhaps government monopolies seem less oppressive in smaller towns where citizens have more influence over public policy. For example, I suspect that rural Texas school boards are less likely to impose “woke” approaches to teaching.  If the local football team is a “source of regional pride”, then school choice seems less appealing than in a bigger city such as Dallas or Houston.  A post written by Matt Yglesias looked at a very different industry, but reached a similar conclusion: There’s a very widespread misperception that the biggest companies have the most clout in politics, when actually highly fragmented industries like auto dealers have more clout as a collective. Just a small example is that when congress was putting the Dodd-Frank financial regulation overhaul together, Elizabeth Warren rolled the entire financial services industry and got her Consumer Financial Protection Bureau created. But to round up the votes in congress, she had to swallow an exemption from CFPB oversight for auto loans because the car dealerships had the clout to demand that. The key to dealership strength is that there’s a dealership owner (or several) in every district, and they are rooted in the local community — often involved in sponsoring sports teams, visible on local television news, and generally playing a major role as a local influencer. People feel sentimental about local businesses. Republicans like free markets but they love businessmen, so if businessmen want to back an anti-market policy, Republicans are inclined to agree. Democrats are more skeptical of businessmen but less enthusiastic about markets, so it lands in the same place. In California, the Democratic Party is far more powerful than in Texas, and hence the prospects for education reform are much bleaker.  Indeed, Abbott may succeed in the end despite rural opposition.  But California is more market friendly in terms of auto retailing, with new manufacturers such as Tesla able to sell directly to consumers.  (This does not apply to manufacturers with existing dealer franchises.) Many people on both the left and the right assume that the US is a free market economy, although they may differ on whether that state of affairs is desirable.  In fact, the auto retailing industry is fairly typical; there are hundreds of similar examples.  Most US industries are heavily regulated and the regulations generally favor producers at the expense of consumers.  We have a large pro-business political party and a large pro-bureaucrat political party.  We do not have a significant pro-market political party.   (0 COMMENTS)

If you think you’ve never heard of Leigh Steinberg, you may want to rethink. Steinberg is an accomplished sports agent, who is loosely depicted by Tom Cruise in the film, Jerry Maguire. In his 41-year career, Steinberg gas represented over three hundred professional athletes. In this 2013 episode, EconTalk host Russ Roberts and Steinberg dive into his unique approach as an agent, presenting his model for both acquiring athletes and helping them achieve what they value most. Steinberg covers topics like crisis management and cohesively growing the game of football with each party involved in contract negotiations in this fascinating discussion with Roberts.     1- Steinberg found success in creating a unique model for the athletes he wanted to attract. In recruiting clients, he favored athletes who wanted to be role models and who hoped to springboard their own personal brand while having athletic success as well. Steinberg also realized the marketability and capital forming quality of the quarterback, as well as the advantage of regionality in controlling costs and revenue. What other profit maximizing strategies would serve agents well in looking to start a successful business today? What other qualities of athletes today (besides being a quarterback!) can provide a breeding ground for an agent’s expansion?   2- Steinberg’s approach in maximizing an athlete’s own agency is interesting—he wants to push the athlete to become the captain of their own ship by providing them with a model for post-athletic success as well as mentoring them. Steinberg encourages both financial planning and a structure of tracing back roots to create a meaningful impact on the athlete’s community. How much value should athletes place on setting themselves up for a potential career after sports? Should sports agents be as involved in athletes’ lives as Steinberg has? How else can athletes maximize their individual potential while developing an ideal living environment after sports?   3- Steinberg and all sports agents must be able to effectively manage crises. When his clients make a public mistake, Steinberg has a step-by-step strategy for controlling brand blowback. Steinberg believes that the athlete should take responsibility as someone with a big platform, and that they should also apologize and offer their steps to prevent the action from happening again. How often do we see athletes today following this process, and to what extent does it feel genuine? Have personal brands and the earning potential of athletes taken a greater hit in the last few years due to the prevalence of cancel culture?   4- Steinberg asserts that the NFL is competing with all other forms of entertainment which people spend money on, and that agents should cooperate with owners in growing the game and building a pie big enough for everyone to share. According to Steinberg, contract negotiations are a closed system with owners, GM’s, and players all being involved continually. He thinks that negotiations should be less about labor versus management and instead, each party should provide creative ways to increase the revenue pot. As an agent, Steinberg focuses on building a revenue flow for the athlete with creative business ventures. How have we seen athletes extend their brand to become cultural phenoms? What areas of business are untapped which could provide great earning potential for athletes and agents?   5- Steinberg believed that contract negotiations following the NFL draft are an “artificial construct” because players would automatically be earning more than they would if they were to stay in college an extra year. How do NIL opportunities change the role of agents and general managers when athletes are considering a return to college athletics instead of entering the draft?   6- Steinberg believes that a sports agent should understand his or her client’s valuation of specific features of a contract because it is not always about receiving the highest salary. Roberts and Steinberg discussed Tom Brady’s new contract at the time, which may have offered the Patriots more spending flexibility. Often, fans see this as a sacrifice by a player to help their team win, but other parts of the contract, like guaranteed money, weigh more on the player’s decision than any other incentive. Are there as many situations as it seems where players are really taking a pay cut for the betterment of their team? Given that athletes are already making tons of money, which parts of their contract should they value most?   Brennan Beausir is a student at Wabash College studying Philosophy, Politics, and Economics and is a 2023 Summer Scholar at Liberty Fund. (0 COMMENTS)

Montesquieu: “Peace is the natural effect of trade.” KYIV, Ukraine — Despite a brutal Russian invasion that has killed tens of thousands of Ukrainian soldiers and civilians and laid waste to swaths of the country, Ukraine continues to allow Russian oil and gas to cross its territory to serve its European neighbors — generating revenue for Kyiv and Moscow and illustrating how hard it is for the bitter enemies to cut ties. Senior Ukrainian officials have demanded that their Western partners impose tougher sanctions and cut virtually all economic ties to Russia, saying “more must be done” to cripple Moscow’s war machine. But as surreal as it might seem, Ukraine insists that it has virtually no choice but to maintain its own commercial deals and has lobbied to preserve them, arguing that they provide some leverage over the Kremlin and help constrain where the Russian military carries out airstrikes. This is from David L. Stern, “Despite War, Ukraine and Russia are still connected to pipelines,” Washington Post, May 24, 2023. There is little doubt that a huge percent of Ukrainians, not least among them President Volodymyr Zelenskyy, hate Russian President Vladimir Putin. So love cannot account for the fact that Zelenskyy allows the Russian oil and gas to cross its territory. What can account for it? Economic incentives. Both sides gain. Obviously, this doesn’t create peace in an overall sense, but notice the last part of the quote above: “arguing that they provide some leverage over the Kremlin and help constrain where the Russian military carries out airstrikes.” So both sides gain and a little bit of territory is somewhat safer. The whole Stern news story is well worth reading.   (0 COMMENTS)

David Beckworth directed me to an interesting debate at a recent Brookings panel. Olivier Blanchard and Ben Bernanke presented a paper that evaluated various factors in the recent inflation surge, highlighting the role of supply issues related to food, energy, shortages, etc.  To be clear, they noted that some of the supply bottlenecks occurred due to previous over-stimulus of demand.  They also argued (correctly in my view) that inflation moves from transitory to permanent when it becomes embedded excessive wage growth.  The initial inflation surge was high prices relative to wages; the current problem is excessive wage growth.In his discussion, Jason Furman presented a slide showing his interpretation of their framework for aggregate demand shocks: He contrasted that with his preferred framework for the analysis: Long time readers will recognize that this is also my preferred way of thinking about demand shocks.  By itself, real GDP tells us almost nothing about demand.  In contrast, NGDP is a reasonable proxy for aggregate demand.  (That doesn’t stop pundits from occasionally citing real output and/or real consumption data as “demand”, even though that’s an EC101-level error.) In the subsequent discussion, Bernanke objected that the implications of rising NGDP were ambiguous, as one could imagine a scenario where both the AS and AD curve shifted upward (less AS, more AD, no change in output.)  Thus stable RGDP and rising NGDP does not necessarily imply that the problem is primarily excess demand.  He may have been reacting to this slide from Furman: In an accounting sense, it looks like the inflation problem is 100% nominal, with real GDP roughly on trend.  If I’m not mistaken, Bernanke’s argument is that in a counterfactual where NGDP rose less strongly, it is possible that output would have been lower (due to Covid/Ukraine, etc.) and we still would have experienced some excess inflation (albeit presumably less than what we actually experienced.) Here’s why I prefer Furman’s approach.  Prior to Covid, unemployment was roughly 3.5%, and hence the economy was probably close to equilibrium.  In that case, we should not have been aiming for fast NGDP growth to reduce unemployment below 2019 levels.  Rather, we should have aimed for NGDP growth of roughly 2% plus the Fed’s estimate of trend RGDP growth after 2019.  In fact, we got a couple trillion dollars in excess NGDP growth, roughly 8% above trend.  It would be shocking if that sort of rapid growth in nominal spending had not created high inflation, given that we were already near full employment in early 2020. That doesn’t mean that Bernanke’s theoretical observation is incorrect.  Rather I am suggesting that his point is probably of limited relevance for this particular episode.  Perhaps Covid reduced aggregate supply by 1% or 2% between early 2020 and today, and the powerful demand stimulus boosted output by a roughly equal amount, leaving RGDP close to trend.  If NGDP had grown at trend, perhaps output would be 1% or 2% lower than current levels.   What seems implausible is that the change in aggregate supply over the past three years is anything close to the 8% overshoot of demand.  That sort of rapid growth in nominal spending is not a necessary condition for inflation (supply shocks can also boost the CPI), but it seems to me that it’s pretty close to a sufficient condition for high inflation in the absence of some sort of truly extraordinary boost in aggregate supply.   So while Bernanke is right that fast rising NGDP doesn’t definitively prove that excess demand is the cause of the recent inflation overshoot, given plausible estimates of shifts in the AS curve, it seems highly likely that the 8% NGDP overshoot is by far the most important cause of high inflation. Furman also made some very good observations about the difficulties involved in separating supply and demand shocks.  For instance, congestion at the ports seems like a “supply problem”.  But most of this congestion was not caused by a physical problem at the ports.  According to Furman, import volumes at US ports were far higher in 2021 than in 2019.  Instead, it was the extraordinarily large demand for goods during 2021 (partly driven by stimulus checks) that was causing congestion at the ports.  So in a sense even the “bottleneck” problems were partly excess demand, even though they looked like a supply problem.  (Again, Blanchard and Bernanke acknowledged this problem in their paper.) In EC101, we are taught that P and Y, considered in isolation, tell us nothing about supply and demand shocks.  NGDP is different.  It measures prices times output, or total nominal expenditure.  Thus NGDP is a fairly direct read on aggregate demand.  Instead of looking at all sorts of sectors (food, energy, services, labor, investment, durables, exports, etc.), NGDP provides a simple and elegant way of thinking about total demand in the economy.  Yes, the Fed doesn’t directly target NGDP.  But there is no plausible interpretation of the Fed’s dual mandate where—if starting from equilibrium—it is appropriate to have NGDP growth either far above 4% or far below 4%.  In 2008-09, we went roughly 8% below trend (which was then 5%), and in the past three years we’ve gone roughly 8% above.  When the deviations in NGDP are that large, it’s reasonable to say that the problem is primarily demand. PS.  Of course I favor NGDP targeting, which is another reason to prefer Furman’s framing of the issue.  But I’d prefer his approach even if the Fed sticks to its current “dual mandate” approach.  As St. Louis Fed President Jim Bullard once observed, the implications of FAIT (if symmetrical) are pretty similar to NGDP level targeting. (0 COMMENTS)

Randall Holcombe’s Following Their Leaders: Political Preferences and Public Policy makes the case that contrary to the usual description of democracy, where voters call the shots with their votes and political leaders craft policies as the voters direct, political leaders control and craft policy, and voters follow their leaders, adopting their political preferences according to the platforms created by the elites. So how well does his case hold up? I’ll give my thoughts on what I see as the main claims of his case – the idea that votes reflect expressive preferences rather than instrumental preferences, the idea of anchor and derivative preferences, and the idea that policies are made by elites with voters following their leaders, rather than elites making policies according to voter preference. The claim that votes are expressive rather than instrumental is where I see the most grounds for skepticism. The idea is theoretically sound – what people express when nothing is at stake often differs from what they actually choose when they directly create an outcome. And it’s factually correct to say that in all but the smallest elections, the act of casting a vote has essentially zero chance of creating an outcome. But I think the case may be overstated here. It takes for granted that voters are aware that their votes have essentially zero instrumental value – an assumption that was forcefully criticized by Jeffrey Friedman in another book I’ve covered in depth, Power Without Knowledge: A Critique of Technocracy. Friedman argues this claim is simply asserted far more than analyzed, and Friedman also contends that the mathematical work showing votes have essentially zero instrumental value is actually an esoteric bit of knowledge that can’t simply be assumed as universally known. Additionally, when one openly declares “I don’t vote, because it’s not worth the time and effort since my one vote won’t make a difference”, the typical response from most people is bewilderment, because they consider that claim to be obviously wrong. Many – perhaps most – people will insist that of course your vote can make a difference, because most people genuinely have no idea of the mathematics implied by that claim. Successfully convincing people their vote has zero instrumental value takes a great deal of time and effort. Another reason I see for skepticism is something that should be familiar to anyone with inclinations towards so-called “third parties” in the United States. I wasn’t quite old enough to have voted in the 2000 presidential election, but I was at least politically aware at that time. And I well remember a major point of contention was the candidacy of Ralph Nader and the concern that he would be a spoiler candidate for Al Gore. There was a fierce debate going on at the time among Nader supporters about whether they should cast their vote for Nader, which would effectively tilt the odds of what was being projected as a very close election towards George W. Bush, or if they should withhold their vote from Nader and vote in favor of Gore, whom the typical Nader supporter considered the lesser evil. Many voters went to the polls in that election preferring Nader as a candidate, but still cast their vote for Al Gore, because they knew that the outcome would realistically be either Bush or Gore, and Gore was the outcome they preferred between those two. This kind of behavior seems far more like voters who see themselves as using their vote to choose an outcome rather than express a preference. This is not to say I think the distinction between expressive and instrumental preferences is without value, or that it never applies in voting. As I’ve commented before on this blog, I tend to interpret ideas like rational irrationality, or expressive vs instrumental preferences, as being more of a sliding scale than a binary switch. And if we take Holcombe’s strong claim (voters cast their votes expressively rather than instrumentally) and modify it to a weaker claim (many voters cast their votes more expressively than instrumentally), his point that voting aggregation methods can’t be used to validly infer instrumental social choices still holds. The concept of anchor and derivative preferences seems solid to me. When looking at how people form their political preferences, the statement “I like the red tribe’s policies, so I’ll be on their team” seems to be much less reflective of reality than “I’m a member of the red tribe, so I’ll support their policies.” There is no official account of how many political issues there are, but when we begin to list off issues impacted by political policies, the list quickly becomes extensive. Gun control, abortion, trade and tariff policy, police policy, taxes and spending, military spending and foreign policy are all obvious examples, and each of them breaks off into multiple lines of inquiry. For example, “taxes” as a category contains all sorts of separate issues, such as what should be taxed (income, wealth, imports, externalities, etc.), how those taxes should be structured (flat rate, progressive rate, regressive rate, fixed payment), how those taxes interact with other taxes (deductions or credits), among other questions. Nobody has enough information or knowledge to have a well-formed opinion about all of these topics and subtopics simultaneously. And yet, the vast majority of voters do hold strong opinions on all of these topics, with high levels of certainty, and these beliefs are highly correlated with each other even when they have no direct connection. Holcombe’s contention that most voter beliefs are adopted derivatively, based on the elites, parties, or movements to which they anchor, both fits the facts and provides a highly plausible account for those facts. I also find Holcombe’s contention that policies are formed by elites and voters follow the lead of the elites, rather than elites forming policies based upon voter input, to be sound and persuasive. Indeed, I have a hard time understanding how anyone who observes how politics actually works could possibly believe that elites base policy on voter input, or that policies are formed based on voters compromising among themselves as equals. If anything, I think Holcombe may be too generous in his description of how elites interact with voters. For example, Holcombe makes the following observation: Recognizing that the demand for accurate and detailed information on the part of citizens is low, parties and candidates provide very little information of this type. Platforms are deliberately vague to broaden their appeal. Citizens will find little to disagree with in a vague platform. But politicians don’t merely keep their policy intentions vague. They frequently engage in false advertising, knowing that most voters are inattentive enough that it will go unnoticed. To use just one example, in the 2008 presidential campaign, then Senator Barack Obama advertised himself as fiercely opposed to NAFTA and loudly proclaimed his intentions to undo this policy. Meanwhile, his main economic advisor, Austin Goolsbee, was quietly reassuring the Canadian government that this was all just political blustering and there were no real implications for policy. And upon winning the election, President Obama took none of the actions on NAFTA he had campaigned on. Overall, I found Following Their Leaders to be a solid and important work. And as I mentioned in the first post of this series, my summary is no substitute for reading the book itself. However, I suspect the validity of the Holcombe’s argument also suggests why the argument will not find much traction. A key point Holcombe makes throughout the book is that, to a huge degree, people do not adopt parties based on policy, but instead adopt policy based on parties. Democracy is treated as sacrosanct, and its justness is taken for granted. I suspect that most people don’t come to support democracy because they are persuaded that democratic governments are accountable to the people – instead, they accept uncritically the idea that democratic governments are accountable to the people because it supports their pre-existing belief in the justness of democracy. Refuting the idea that democratic governments are accountable to the people will therefore have little effect. I wish I could end on a less dour note, and I sincerely hope to be proven wrong! But regardless of the impact it will have, Holcombe has written a well-reasoned and important book that deserves to be widely read, and one I can easily recommend. (0 COMMENTS)

When I wrote the op/ed on Robert E. Lucas in the Wall Street Journal last week, I was unaware of an article he wrote in 2004 for the Federal Reserve Bank of Minneapolis. It’s Robert E. Lucas, Jr., “The Industrial Revolution: Past and Future,” May 1, 2004. It’s quite good. (HT2 Art Carden.) And here is the last paragraph. Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution. In this very minute, a child is being born to an American family and another child, equally valued by God, is being born to a family in India. The resources of all kinds that will be at the disposal of this new American will be on the order of 15 times the resources available to his Indian brother. This seems to us a terrible wrong, justifying direct corrective action, and perhaps some actions of this kind can and should be taken. But of the vast increase in the well-being of hundreds of millions of people that has occurred in the 200-year course of the industrial revolution to date, virtually none of it can be attributed to the direct redistribution of resources from rich to poor. The potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production. The article as a whole, which surveys economic growth over long periods, reminds me of my favorite study by University of California, Berkeley economist Brad DeLong. It’s titled “Cornucopia: The Pace of Economic Growth in the Twentieth Century,” NBER Working Paper 7602, March 2000. DeLong quotes a famous passage from Karl Marx and Friedrich Engels, The Communist Manifesto, in which Marx and Engels waxed rhapsodic about the incredible accomplishments of capitalism in the 19th century. The bourgeosie, wrote Marx and Engels, was: the first to show what man’s activity can bring about. It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals; it has conducted expeditions that put in the shade all former Exoduses of nations and crusades…. 
[It has], during its rule of scarce one hundred years…created more massive and more colossal productive forces than have all preceding generations together. The subjection of nature’s forces to man, machinery, the application of chemistry to industry and agriculture, steam-navigation, the railways, electric telegraphs, the clearing of entire continents for cultivation, the canalization of rivers, the conjuring of entire populations out of the ground–what earlier century had even a presentiment that such productive forces slumbered in the lap of social labor? Then DeLong writes: Yet compared to the pace of economic growth in the twentieth century, all other centuries–even the nineteenth century that so impressed Karl Marx–were standing still. DeLong backs it up, by the way. The other person who does something similar to what Lucas does, but with an imaginative and illuminating video that shows the connection between income growth and increases in life expectancy, is Hans Rosling. Here’s his “200 Countries, 200 Years, 4 Minutes, The Joy of Stats.” I highly recommend it: educational and entertaining. Now back to the paragraph from Lucas that I quoted near the start. The last line is particularly important. If we focused on getting the conditions that lead to economic growth right, then distribution would become less important: a rising tide lifts almost all boats–and has been lifting almost all boats. There is something missing, though. Economists who see big gaps in prices tend to think of arbitrage. I would have expected Lucas, a first-rate economist if there ever was one, to note that the huge discrepancy between wages and productivity between India and the United States, for example, would lead to a movement of resources–labor–from India to the United States. One way to get a huge increase in world productivity over a time period as a short as a decade is to allow hundreds of millions of, and maybe even a billion, people to move from poorer countries to rich countries. In other words, allow much more immigration. In all the work I’ve read by Lucas, and I read a lot when I wrote his biography in The Concise Encyclopedia of Economics, I don’t recall seeing him say much about immigration. Do any of you know whether he wrote or spoke in favor of allowing more immigration? Postscript: If you read Lucas’s article carefully, you’ll notice that someone made a mistake in labeling the vertical axis in Figure 1. It’s labeled “Population Growth Rate.” It should be labeled “Population.” (0 COMMENTS)

Why do you visit museums, and what do you hope will “happen” while you’re there, or after you’ve left? How do the objects within a museum affect your experience, and how do we know that a given piece “belongs” there? Tiffany Jenkins, author of Keeping Their Marbles, and EconTalk host Russ Roberts’ guest in this episode, suggests there’s something transporting about visiting a museum, an experience she especially appreciates since COVID forbade such opportunities. To visit a museum, Jenkins hopes, provides one with an encounter with the past and the people of the past, noting that the things that impress us in museums weren’t created by people to impress us. Much of the conversation focuses on the issue of artifact repatriation- the Elgin marbles at the British museum being the dominant example from Jenkins’ book. These sculptures, taken from the ruins of the Parthenon more than 200 years ago, reside half in London and half in Athens (at the Acropolis Museum). While technically legally acquired, many questions remain as to whether the marbles ought to remain in Britain. What do you think? How does the case of the Elgin marbles illuminate the larger purpose(s) of museums in society today? We’d love to hear your thoughts.     1- What are the bases of the demands to “return” artifacts such as the Elgin marbles to their country of origin? What is Jenkin’s argument against returning them to Athens? What does she mean when she says, “objects do different things in different places?” Do you think they should be returned? Explain.   2- Jenkins describes how Brits’ feelings were mixed at the time of the marbles’ acquisition. To what extent does it “matter” that the sculptures’ legal agreement still exists? How does the “looting” of the French compare to that of the British (which Jenkins describes as “much more accidental and haphazard and informal”)? How does the way in which such artifacts are acquired affect the argument for their repatriation?   3- Jenkins makes the bold prediction that the Elgin marbles will never leave the British Museum, while Roberts suspects they will be returned, perhaps replaced by casts. (Roberts mentions his appreciation of the Burghers of Calais at Stanford, of which there are many copies.) How does it matter whether an exhibit features original works versus reproductions? Couldn’t the exhibit at the British Museum be equally enthralling with casts or full-color reproductions of the marbles? Explain.   4- What should be the role of museums today? How do museums of the Enlightenment age compare to those of the present day, according to Jenkins? How has the notion of accessibility in particular changed from the time of the Enlightenment till today? Have museums become moralized? Do we have more or less interest in other cultures today than in the past? In what way(s)?   5- The conversation includes a good deal of discussion about how the mission of museums has changed over time, and many changes in the way in which exhibits are presented have also occurred in an attempt to illuminate the “hidden histories” of the past. (Roberts and Jenkins cite the National Museum of the American Indian as one such example.) Are we in danger of “quarantining the past rather than exploring it,” as Jenkins suggests?     (0 COMMENTS)