French President, Emmanuel Macron, might witness a game-changing moment in India as we go bullish on nuclear energy and say goodbye to our energy crisis for good. As he plans to visit India in early 2023, there is a newfound sense of urgency to expedite the construction of 1,650 MW nuclear power reactors at Jaitapur in Maharashtra, which could become the nation’s largest nuclear power site once completed with a total capacity of 9,900 MW. India is the world’s second most populous country, with over 1.4 billion people, and it is projected to be the world’s most populous country by 2023. India is also the world’s fastest-growing major economy, with an annual growth rate of 8.9%. India must ramp up its energy production to sustain this rapid economic growth. And for this, nuclear energy is a safe, reliable, and carbon-free source of energy that can help India achieve its energy and climate goals. Since the last few decades, nuclear energy has faced skepticism and fierce resistance in Europe and the western world at large. Influential non-profits such as Greenpeace lobby against nuclear energy and claim that it “has no place in a safe, clean, sustainable future. Nuclear energy is both expensive and dangerous, and just because nuclear pollution is invisible doesn’t mean it’s clean. Renewable energy is better for the environment and the economy and doesn’t come with the risk of a nuclear meltdown.” They are, of course, wrong and wrong by a long margin. Accidents at nuclear power plants are extremely rare. In the nearly 60 years that nuclear power plants have been in operation, there has only been one major accident: at the Fukushima Daiichi power plant in Japan in 2011. This accident was caused by a tsunami, which knocked out power to the plant’s pumps and led to nuclear fuel meltdown. However, the safety systems worked as they were designed to, and no one was injured or killed by the release of radiation. Talking about the Chernobyl disaster, it was a failure of the top-down government system of the Soviets and not of nuclear power. The Soviet Union’s centrally-planned economy meant that decisions about safety and risk were made by few at the top, without much input from those who handled the technology. This resulted in a culture of secrecy and cover-ups, preventing the spread of information and the implementation of necessary safety measures. The Chernobyl disaster was a direct result of this top-down decision-making approach. If the Soviet Union had better institutions, the tragedy could have been avoided. European politicians chose to ignore these facts and closed their nuclear plants. And now they are stuck with Russian gas. Nuclear is still their best shot — along with fossil fuels, only because they chose to close down their nuclear plants — at reducing their dependence on Russia. Still, European policymakers have forced a rapid transition from fossil fuels and nuclear energy to renewable sources. The problem is that renewable resources are not ready yet, which has caused an energy shortage, leading to price spikes and gas shortages. European policymakers should allow energy buyers to sign long-term gas import contracts, reverse nuclear phaseouts, and give natural gas a new look to make their respective country’s energy secure and independent. If such discourse has hijacked the energy policy narrative in Europe and managed to cause an energy shortage there, it can happen to India too. We have active anti-nuclear energy movements and chapters of anti-growth organizations in our country, including Greenpeace. Thankfully, India is choosing to invest in nuclear power. Even the pandemic did not stop the government from progressing on this path. Minister of State for Personnel, Public Grievances, and Pensions Jitendra Singh announced in the Rajya Sabha that by 2024, nine new nuclear reactors would be up and running, with a capacity of 9000 MW. This is in addition to the 12 reactors approved during the pandemic. This is the right thing to do, and we must continue investing in nuclear power and stand against any unfair criticism. Nuclear power is a low-carbon energy source that can help India reduce its greenhouse gas emissions and combat climate change. Nuclear power plants do not emit greenhouse gases or air pollutants and have a very small land footprint. In comparison, coal-fired power plants are a major source of air pollution and greenhouse gas emissions. As researchers have found, “Compared with nuclear power, coal is responsible for five times as many worker deaths from accidents, 470 times as many deaths due to air pollution among members of the public, and more than 1,000 times as many cases of serious illness, according to a study of the health effects of electricity generation in Europe.” Investing in nuclear energy would also help India achieve energy security and independence. India is currently heavily reliant on coal imported from other countries. This dependence on imported coal leaves India vulnerable to price fluctuations and supply disruptions. In contrast, India can build nuclear power plants to use indigenous uranium resources, providing the country with a secure and reliable energy source. One can switch to solar, wind, or hydroelectric power, but these energy sources have limitations. Solar and wind energy are variable and intermittent, meaning they cannot be a constant and reliable energy source. Hydroelectric power causes floods, which in turn, causes damage to people’s homes and their way of life. Hydropower also blocks sediment flow and disrupts fish movement, which negatively impacts the local ecosystem. In contrast, nuclear power is the only carbon-free energy source that is scalable, reliable, and available today. India must increase its energy production to maintain its status as a world power and leader in economic growth. The world would have had 72 billion more tonnes of carbon dioxide in the atmosphere if it were not for nuclear reactors. Imagine what our county — and the world — can be if most of our energy is produced using nuclear power. Nuclear power is a proven and commercially available technology that can provide India with the clean and reliable energy it needs to power its economy and meet its climate goals. We must continue to be bullish on nuclear energy and ignore the critics whose agendas are based on the degrowth movement rather than science.   Adnan Abbasi is currently pursuing a Bachelor of Arts (Hons.) degree in Social and Political Science from Ahmedabad University. He is the Regional Coordinator for Academics & Research with Students for Liberty and a Writing Fellow at Students for Liberty’s Fellowship for Freedom in India. (0 COMMENTS)

We should expect politicians to lie, or at least to make misleading statements, whenever they can get away with it. But we would normally expect the Financial Times to be careful with information (which is why I have been an addict to this newspaper for most of my life). An exception is their story of yesterday on president Joe Biden’s proposed budget (“Biden Proposes Big Tax Rises in Budget to Shave $3tn off US Deficit,” March 9, 2023): According to the economic assumptions underpinning the budget, the White House expects the consumer price index to fall to 4.3 per cent in 2023 and 2.4 per cent in 2024 — a significant step down from its current 6.4 per cent level. The unemployment rate, meanwhile, is projected to rise to 4.3 per cent in 2023 and climb another 0.3 per cent in 2024 to peak at 4.6 per cent. There was still no erratum or correction at 10:48 Eastern Time today, nearly 24 hours after the original publication online The first sentence is simply false, or totally nonsensical. The consumer price index (CPI) is an index of the general price level. The index stood at at 296.797 in December 2022. It can never ever be 4.3% or 2.4% (contrary to the  unemployment rate, reported in the second sentence, which is a percentage by definition). What the Financial Times means is that the consumer price index is expected to continue increasing by (a change) 4.3% in 2023 and 2.4% in 2024, but at a slower rate than the increase of  6.4% from January 2022 to January 2023. These percentages are the inflation rates of the CPI level. (More technically and precisely, they are the inflation rates as estimated by the changes in the CPI level.) The Wall Street Journal did not commit this elementary error. We should discount the possibility that the Financial Times journalists or their editor don’t know the difference between a level and a change, between the value of a variable and its first difference. Is it just very sloppy writing or editing, then? Note that replacing “to” with “by” in the first sentence is still incorrect, for inflation will continue to increase according to the government’s own assumptions. Errare humanum est, of course, but the Financial Times has accustomed its readers to higher standards. I cannot find the same error in the government’s actual budget documents. So the Financial Times can probably not pretend that they just reproduced a government’s blurb without quotation marks, which would be at least as inexcusable anyway. The elementary confusion between a variable’s level and its change often leads to more consequential problems and is a choice means of governments’ subliminal propaganda. For example, a budget deficit corresponds to an increase (a change) in the level of the public debt. When Biden writes that his budget is “lowering deficits by nearly $3 trillion over the next decade,” he means that the otherwise forecasted accumulated deficits of $19.9 trillion over the coming 10 years are now forecasted to be reduced by $2.9 trillion (largely through his tax increases). But this means that the accumulated deficits will have added $17 trillion (a change) to the public debt level over that period. Upon reflection, the title of the Financial Times story is also misleading. Especially on the first error, the only other excuse I imagine the Financial Times could find is to claim that its readers are sophisticated enough know all this; and that it can consequently afford impressionistic writing. Risky assumption! And if it had a strong connection to reality, what would be the use of analysis? Why doesn’t the Financial Times just publish quotes from the government budget documents along with a few tables (notably Table S-9 on “Economic Assumptions”)? Or even better, simply give a link the White House budget web pages? (0 COMMENTS)

Oh my God, checks and balances.  In “Economic Lessons From COVID-19,” Reason, June 2021, I ended my article with the following: Just as even paranoids can have real enemies, even optimists can have real grounds for hope. I think almost all of us were surprised at how quickly most governors and many mayors moved to close down major sectors of the economy. This was a really large attack on economic freedom, the largest in my lifetime, and it happened within days. In most cases, executives did it with zero consent from legislatures. They used existing law to the limit and, some legal scholars say, beyond the limit. I doubt those officials typically thought in March 2020 that we would still be locked down in January 2021. But the lockdowns took on a life of their own. Recall, though, an earlier anti-liberty episode that was not nearly as shocking as the lockdowns. In 2005’s Kelo v. New London, the U.S. Supreme Court gave its blessing to a city government’s use of eminent domain to expropriate property from homeowners and transfer it to a private entity, the New London Development Corporation. This sent shockwaves through the country. The Institute for Justice, which represented the losing side before the Supreme Court, has noted that the decision “sparked a nation-wide backlash against eminent domain abuse, leading eight state supreme courts and 43 state legislatures to strengthen protections for property rights.” Could we see a similar response to the lockdowns? Already there have been some moves at the state level to limit governors’ lockdown powers. A bill that passed both the House and the Senate in Ohio would have limited the Ohio Department of Health’s power to quarantine and isolate people, restricting it to only those who were directly exposed to COVID-19 or diagnosed with the disease. Similarly, in Michigan, the Senate and House passed a bill to repeal a 1945 law that Gov. Gretchen Whitmer had used to impose the state’s rather extreme lockdowns. Both bills were vetoed, but I doubt that will be the end of the story. Even if it doesn’t happen until this particular pandemic is over, there’s good reason to believe that some state legislatures will want a say in future decisions. Whatever the case for letting governors move so quickly early last year, that case gets weaker and weaker the longer the lockdowns last. At some point, legislators just might roll back those powers. Or so we can hope. When I wrote, “Could we see a similar response to the lockdowns?” in January 2021 (there was a long lag before publication), I proceeded to make a hopeful prediction. According to the Washington Post, what I hoped for has come about in many states. The WaPo, as is its wont, makes it sound scary. And Tyler Cowen repeats the WaPo’s fear-mongering without comment. In “Covid backlash hobbles public health and future pandemic response,” Washington Post, March 8, 2023, Lauren Weber and Joel Achenbach write: When the next pandemic sweeps the United States, health officials in Ohio won’t be able to shutter businesses or schools, even if they become epicenters of outbreaks. Nor will they be empowered to force Ohioans who have been exposed to go into quarantine. State officials in North Dakota are barred from directing people to wear masks to slow the spread. Not even the president can force federal agencies to issue vaccination or testing mandates to thwart its march. But when it gets to details, it becomes more understandable. A few paragraphs down, Weber and Achenbach write: Health officials and governors in more than half the country are now restricted from issuing mask mandates, ordering school closures and imposing other protective measures or must seek permission from their state legislatures before renewing emergency orders, the analysis showed. The conjunction “or” is doing a lot of work in the above paragraph. Many people of various persuasions have thought that during the pandemic the public health bureaucracies exercised too much power with too little oversight and, moreover, focused on one variable rather than admitting tough tradeoffs. Disappointingly, Tyler Cowen was never clearly in this group of critics. So it’s refreshing to see legislatures taking back their power. That’s what checks and balances are all about. Near the end of the article, Weber and Achenback write: “One day we’re going to have a really bad global crisis and a pandemic far worse than covid, and we’ll look to the government to protect us, but it’ll have its hands behind its back and a blindfold on,” said Lawrence Gostin, director of Georgetown University’s O’Neill Institute for National and Global Health Law. “We’ll die with our rights on — we want liberty but we don’t want protection.” That brought back memories. About 15 years ago, Lawrence Gostin and I shared a limo from Topeka to Kansas City, Missouri. We had both spoken earlier that day at a conference of cardiologists. I mainly questioned and listened and got to know a lot about how he thought. By the end, although I found him likable, I also found myself hoping he would never get much power over people’s lives. My sense then, and my sense from this quote, is that he would almost always trade away liberty for protection without thinking about tradeoffs the way economists trained since the marginal revolution have done.   (0 COMMENTS)

How would you react if a close friend made the following statement:“Of course, I am firmly opposed to infidelity, but I’ve discovered that it’s not so bad as I had thought. I have a friend who is currently having a passionate affair that is adding spice to his life. He says that he will eventually end the relationship and then go back to being a faithful spouse, refraining from future affairs.  His partner will not discover the indiscretion, and hence no harm will be done. Again, I’m firmly opposed to infidelity, but on reflection I have grown to appreciate its silver linings.”I suspect that you’d have roughly the same reaction as I would.Tyler Cowen has a new Bloomberg column explaining why conservatives might benefit from a bit of inflation. It begins with a standard criticism of inflation: I myself am not happy about an inflation rate of 4% to 5%, which seems embedded in the economy right now. After this statement, Tyler discusses a number of benefits from the recent bout of high inflation. Toward the end, he warns readers not to be entranced by his rosy description of inflation’s effects: Of course the Fed should put such considerations aside and stick to its mandate for price stability. The rest of us, however, are free to appreciate some of the benefits of higher inflation, at least for a while. Hmmm. I’m reminded of Marc Anthony’s famous eulogy in Shakespeare’s Julius Caesar.  Obviously, Tyler doesn’t have space to list all of the negative effects, but readers may ask themselves if inflation actually has all the pleasant effects described in the column, then why is it “of course” the case that the Fed should stick to price stability?  Inflation is a complex subject, and it’s not always clear what people mean by “the effects of inflation”. Supply side inflation? Demand side inflation? The welfare effects of these two shocks are radically different.  In context, it’s pretty clear that Tyler is referring to demand side inflation in the Bloomberg column, as he alludes to effects such as the reduction of the ratio of public debt to GDP (which doesn’t occur unless NGDP growth rises.)  In other words, when discussing “inflation”, Tyler is actually considering some benefits from faster NGDP growth.  So I’ll focus on demand side inflation. I don’t want to get into a line-by-line rebuttal of Tyler’s column.  The standard model predicts that demand side inflation has important short run non-neutralities and no important long run real effects on the economy.  That also seems to be Tyler’s working assumption.  But when discussing the welfare effects of inflation, it makes more sense to focus on the long run effects.  I worry that many people think in the following terms: 1. The short run effect of inflation on X is positive. 2. The long run effect of inflation on X is zero. 3.  Therefore, the combined short and long run effect of inflation on X is positive. I don’t know if that’s Tyler’s view, but I suspect many readers will draw that conclusion.  In my view, that’s not how things work.  Take the example of the public debt.  It’s tempting to view inflation as a short run boom to taxpayers, as it reduces the real burden of the debt.  Perhaps if the Fed quickly gets inflation under control, there’ll be no long run damage.  Here’s Tyler: To be clear, it is not easy to reap very large gains through this inflationary mechanism. If high inflation continues for too long, interest rates will adjust upwards to the point at which inflation may be increasing the burden of future debt. The past debt may be worth less, but the higher costs of future borrowing may, on net, push government budgets further out of balance. In that scenario, the US might end up with both tax hikes and high inflation. So the risks are real. But there is a decent chance it will work out, at least if the Federal Reserve can get inflation back under control again fairly soon. I don’t believe there is a “decent chance” that things will work out in this way.  That’s not to say inflation and interest rates won’t decline at some point–I believe they will.  But this sort of monetary infidelity will impose a price on future borrowings.  If inflation really were painless, the government would do it again and again.  More likely, it won’t be painless.  Investors will understand that the Fed is less committed to 2% inflation than they had previously imagined, and demand a higher inflation premium when lending to the Treasury.  (Recall the 1980s.) It’s best to view public finance from a “timeless perspective”.  Over a period of decades and centuries, policymakers will occasionally enact inflationary policies.  Over the long run, investors will rationally adjust their behavior in such a way as to be compensated for the risk of occasional high inflation.  During actual bouts of unexpected inflation (such as the 1970s), lenders will not be fully compensated.  During other periods (the 1980s), they’ll be over compensated.  It’s analogous to the way that insurance companies over charge you during periods when you drive safely and undercharge you during years when you have a major accident.  Over the long run, insurance companies figure out a level of premiums that provides an appropriate compensation. Tyler also looks at the impact of inflation on the wages of different segments of the labor market.  Once again, the effects of inflation are neutral in the long run, and thus any distributional effects will reverse after a few years. Don’t be attracted by the siren song of short run monetary non-neutralities.   (0 COMMENTS)

The Parliamentary Budget Officer (PBO) recently released a report on the effects of greenhouse gas emissions on Canadian GDP growth over the next 80 years. I’ve written previously about the recent economics literature investigating the link (or lack thereof) between global warming and economic growth. It’s a fascinating topic and I’ve been actively working with on it one of our PhD students for several years. While I would quibble with some aspects of the PBO report, the overall conclusions are not out of line with mainstream thinking on the topic. Which is why the findings are so astonishing and radical compared to what the government has been saying. The PBO estimated what would happen to the Canadian economy between now and 2100 if temperatures and precipitation change as expected due to greenhouse gases. The report’s authors consider two scenarios—first, if emission-reduction policies stall at today’s levels and nobody complies with their Paris commitments, and second if countries comply with all their Paris commitments in full and on time. Under the first scenario Canada’s GDP in 2100 will be 6.6 per cent smaller than it otherwise would be. Let’s pause there for a moment: 6.6 per cent after 80 years is a very small number. Canada has set out ambitious economic growth plans based on high levels of immigration and continued efforts to boost productivity and income. Suppose this results in 2 per cent real GDP growth from 2021 to 2100. That would mean Canada’s economy will grow by 388 per cent over those 80 years. According to the PBO, if we do nothing about global warming, it will instead grow by about 381 per cent. This is from Ross McKitrick, “Parliamentary Budget Officer Just Demolished Climate Alarmism,” Financial Post, December 7, 2022, republished by the Fraser Institute, of which Ross is a senior fellow. Ross is also a professor of economics at the University of Guelph. I hadn’t heard of the Parliamentary Budget Officer before. It turns out that Prime Minister Stephen Harper established it in 2006, when he first came to power. It’s kind of like California’s Legislative Analyst’s Office, in that both are independent of the various parties. There is one error in the segment quoted above. If in 2100, Canada’s GDP, absent anyone complying with the Paris commitments, will be 6.6 percent lower than it otherwise would be, then Ross gets the overall growth wrong. Here’s the math: Let x be GDP today. Then, with the Paris commitments complied with, growth will be 2 percent annually. So GDP in 2100 will be x(1.02^79) = 4.78x. So Ross is right so far. GDP grows by 378 percent. Now, with the Paris commitments not complied with GDP in 2100 would be 6.6 percent lower. That means it would be 478x*(0.934) = 4.64x. So GDP grows by 364 percent, not his 381 percent. It’s not a huge difference but it’s important to do the math right. Notice that either way, Canadians would have much higher GDP in 2100. I think the most important part of the quote from his article is this: While I would quibble with some aspects of the PBO report, the overall conclusions are not out of line with mainstream thinking on the topic. Which is why the findings are so astonishing and radical compared to what the government has been saying. It’s nice to see the budget officer not denying the economics of global warming.         (0 COMMENTS)

Progress in knowledge and ultimately in economic growth and prosperity requires some freedom of speech and some economic freedom; and the more of them, the better. This is not to say that these freedoms only have benefits, but that they have more advantages than drawbacks. The deposition of Rupert Murdoch in the defamation lawsuit of Dominion against his company Fox News may serve to illustrate—keeping in mind that only part of the information has been made public. What has come out of Mr. Murdoch’s deposition is that he knew very soon after the November 2020 election that Trump’s claim of decisive fraud, as well as claims that Dominion’s voting machines were complicit, did not make rational sense. Perhaps some of that was delusion, but many must have lied to make the delusion stick. The Financial Times reports (Anna Kicolaou, “‘Panic Station at Fox News’: How the Murdochs Agonised Over Trump Loss,” Financial Times, March 3, 2023): The evidence—consisting of depositions and hundreds of internal company communications harvested during legal discovery—shows that Fox for months agonised over how to handle Trump’s election denialism. … The December [2020] email to [network’s chief executive, Suzanne] Scott came after Murdoch and his eldest son Lachlan, Fox chief executive, received a panicked text from Paul Ryan, former speaker of the House and a Fox board member. … The filings paint a picture of Murdoch and Fox executives as being terrified that viewers would desert the channel. … “It’s not red or blue, it’s green,” Rupert Murdoch said of the channel when deposed in Los Angeles in January as part of the lawsuit. Murdoch conceded that while he did not believe the fraud claims, he did not want to antagonise Trump because “he had a very large following, and they were probably viewers of Fox.”. … Fox’s own internal fact-checkers concluded as early as November 13 [2020] that the fraud accusations were incorrect. … Scott was worried about “pissing off the viewers”, she told Murdoch, according to an email. Green is of course the color of dollar bills. In other words, Fox News and most of its hosts and executives were consciously promoting the opposite of the truth because they did not want to lose audience, that is, money. They knew that what a large part of their audience wanted to hear was that Trump had won the election. They were consciously selling the lies that their audience wanted to hear. The Murdoch family is also a large shareholder of News Corp, owner of the Wall Street Journal, which is better staffed and managed, presumably because its clientèle is in large part made of people who need true economic information to navigate the economy and make money, or simply to actually understand the world. Two days ago, the WSJ ran a story that confirms what the Financial Times had revealed (see Joe Fling and Keach Hagey, “Inner Workings of Fox News on Display in Defamation Case,” Wall Street Journal, March 6, 2023). A Martian landing on earth who knew nothing of human history might conclude that this lack of concern for the truth is the unavoidable cost of a regime of liberty. The free press, he would think, sells to its audiences entertainment and confirmation of their prior biases. He might infer that, for humans, information should be delivered free and good by the government only. But if he only knew some political history or economic theory, he would know that the outcome this alternative system would be worse, soon producing only one-sided propaganda and dull entertainment. With a free press, at least, truth and information still have a chance because competitors can supply true information as long as some consumers are willing to pay for it. The most troubling fact is that millions of Fox News watchers were not interested in the truth, at best because they were dead sure that they already had found it in their wishful intuitions and the utterances of hero-demagogues; at worst because they are happy to live in a lie. Of course, one must always keep his mind open to rational challenge and refutation of his beliefs by evidence. Heir to the Enlightenment, classical liberals thought that popular education would prevent the victory of lies and the spread of snake oil. In America and elsewhere in the world, it seemed to work for a while. Why has the engine stalled? The best hypothesis, it seems to me, is that the institutions of schooling and education have degenerated, probably captured by bureaucrats, trade unions, and authoritarian democracy. We see this on the left and on the right, which both favor education as a propaganda machine. (1 COMMENTS)

I recently read an interesting book on reality, entitled The Fabric of Reality.  In the book, David Deutsch constructs a unified theory of reality by combining four fundamental theories: 1.  Quantum mechanics (multiverse interpretation). 2.  Turing principle of computers and artificial intelligence. 3.  Popperian epistemology. 4.  Darwinian evolution. Deutsch says: In all cases the theory that now prevails, though it has definitely displaced its predecessor and other rivals in the sense that it is being applied routinely in pragmatic ways, has nevertheless failed to become the new ‘paradigm’.  That is, it has not been taken on board as a fundamental explanation of reality by those who work in the field.   Thus practitioners may reject the multiverse, which Deutsch regards as the straightforward explanation of quantum mechanics.  Or they may deny that a machine could replication a human brain.   Or they may argue for “exceptions” to evolution, such as punctuated equilibria.  Or they may argue that Popperian epistemology has a “problem of induction” and create alternative models such as the Kuhnian explanation of scientific progress.  Unlike many others, Deutsch takes the straightforward interpretation of these 4 theories quite seriously: My thesis, therefore, also takes the form ‘the prevailing theory is true after all!’ . . . I have also argued that none of the four strands can be properly understood independently of the other three.  This is possibly a clue to the reason why all these prevailing theories have not been believed.  All four individual explanations share an unattractive property which has been variously criticized as ‘idealized and unrealistic’, ‘narrow” or ‘naive’ — and also ‘cold’, ‘mechanistic’ and ‘lacking in humanity’.       [Note:  When Deutsch says: “the reason why all these prevailing theories have not been believed”, I believe he means the straightforward interpretation of these theories have not been believed.  See the first quote above.] Deutsch is doing something quite strange.  He’s claiming to be a contrarian because he accepts a straightforward explanation of all four standard models.  I don’t have enough expertise to evaluate his views on the nature of reality, but these comments reminded me of many of the disputes that I see in economics.  Hypotheses such as the Efficient Markets Hypothesis and Rational Expectations lie right at the center of modern finance and macroeconomic models.  And yet many economists claim not to believe these theories.  They regard them as ‘idealized and unrealistic’, ‘narrow” or ‘naive’.    Like David Deutsch, Paul Krugman found himself playing the role of being a rebel, merely by defending the standard model of comparative advantage: There is nothing that plays worse in our culture than seeming to be the stodgy defender of old ideas, no matter how true those ideas may be. Luckily, at this point the orthodoxy of the academic economists is very much a minority position among intellectuals in general; one can seem to be a courageous maverick, boldly challenging the powers that be, by reciting the contents of a standard textbook. It has worked for me! But to many non-economists, and even some economists, concept such as comparative advantage and creative destruction can seem (to quote David Deutsch): ‘idealized and unrealistic’, ‘narrow” or ‘naive’ — and also ‘cold’, ‘mechanistic’ and ‘lacking in humanity’.      At times, I find myself in a small minority simply by defending the standard model.  I argued that the 2000 tech stock boom and the 2005 house price boom were not bubbles, because the EMH says that bubbles do not exist.  People have rational expectations regarding the future path of asset prices.  I really believe that. Or take the standard model of money, spending and the business cycle: 1. Monetary policy determines the path of nominal spending, at least when interest rates are positive. 2.  A crash in nominal spending would cause a severe recession. 3.  NGDP growth plunged dramatically during 2008, at a time when interest rates were not stuck at zero. So . . . what is the straightforward interpretation of these three uncontroversial claims?  I argued that this suggests the Fed caused the Great Recession with a tight money policy that drove NGDP growth from positive 5% to negative 3%.  But almost no one accepts my claim. “Yes, that’s what the model suggests, but it sure didn’t look like the Fed caused the recession.” I feel a bit reassured that people much smarter than me run into the same resistance: “Yes, Ricardian theory suggests that the US benefits from imports, but it sure feels like they hurt our economy.” “Yes, the EMH suggests that the stock market is efficiently priced, but it sure looks like there are periods of irrational exuberance.” “Yes, quantum mechanics seems to suggest that there are a dizzying number of universes, but that seems implausible.” “Yes, the Turing Principle suggests that a computer could have human-like consciousness, but my own consciousness seems sort of special, not merely mechanical.” (0 COMMENTS)

Most modern fairy tales have very misleading endings. There’s a phrase they almost all end with – you can probably already guess what I’m thinking: “And they all lived happily ever after!” What’s misleading about this? It implies that in life, there’s some kind of end state you can reach called “happily ever after” where the classic pursuit of happiness is, well, completed. Play your cards right, and you will reach the state of “happily ever after” where your continued life satisfaction is locked in. Of course, in the real world, things don’t work that way. The pursuit of happiness is what the philosopher Kieran Setiya calls an atelic activity in his conversation with Russ Roberts on EconTalk. Telic activities are completable and are time-bounded – planning a vacation with friends, for example. An atelic activity is one that is open ended, not time-bounded, and has no defined completion point – friendship would be an example of that. Friendships may end for various reasons, but there really isn’t a sensible point where you can say, “We have fully completed the activity of friendship!” Friendships are ever-ongoing processes. So, too, is happiness. If happiness were a telic activity, one that was completable once a particular end point was reached, we would cease to actually do much of anything. Ludwig von Mises was right when he argued that all human activity is ultimately driven by some sort of deficiency or dissatisfaction. We act because we anticipate it will create a new set of circumstances we prefer more, to replace our current circumstances we prefer less. A life where total satisfaction was fully and permanently achieved would be a life where nothing actually happens anymore. As fairy tale endings go, that one is pretty grim. (Yes, I did intend that pun, and I am appropriately pleased with myself for it.) If Mises’s work undercuts the idea of “happily ever after,” there are a couple of other Austrian economists who undercut two other fairy tales in mainstream economics. I’m thinking about F. A. Hayek on “perfect competition,” and Israel Kirzner on “market equilibrium.” Hayek pointed out that in mainstream models of perfect competition, there is no actual competition occurring. For example, when thinking about how businesses compete with each other, one of the first things that comes to mind is price competition – I try to gain an edge on my competitors by offering lower prices than they do. But in the perfectly competitive model, every business is a “price taker” – that is, they have no options about the price they set, and everyone sets the same price as everyone else. Prices are of course just one way firms can compete with each other, but the larger point is that competition is an active and ongoing process, and that in perfectly competitive models, no such process takes place. Kirzner makes a parallel point about market equilibrium and market process in his book Competition and Entrepreneurship. Kirzner sets out to describe a theory of market process that stands in contrast to the mainstream idea of market equilibrium. Central to his theory of market process is the entrepreneur and their alertness to opportunities. Entrepreneurs acting on opportunities helps supply the information and competitive pressure that drives economic process forward. But this kind of activity doesn’t exist in equilibrium analysis. As Kirzner notes: Were this competitive process to run its course to completion – in other words, were all decisions to become fully dovetailed – each participant would no longer be under pressure to improve the opportunities he is currently offering to the market…This situation of market equilibrium is surely one in which competition is no longer an active force. The cessation of the market process which we have already seen as characteristic of the equilibrium state is the cessation of a competitive process. In markets with perfect competition, no competition actually takes place, and in markets that have reached general equilibrium, there is no market process being carried out. Nothing really happens anymore in such a world – everything is stable and static. Of course, in the real world, markets are never perfectly competitive, nor are they ever in a state of equilibrium. But just as it is a mistake to view life satisfaction through a lens of achieving a state of “happily ever after,” it is also a mistake to judge the economic system by how closely it resembles perfectly competitive markets in a state of general equilibrium. According to much mainstream economic theory, markets falling short of perfect competition, or existing out of an equilibrium state, is a sign that there is a problem with the market itself, perhaps necessitating a solution to be imposed by the state. But wiser minds realize that markets not being perfectly competitive or in a state of perfect equilibrium isn’t a problem to be solved – it’s the whole point of having markets to begin with. (0 COMMENTS)

Ms. Hannah-Jones interviews Duke University economist William A. Darity, one of the most prominent academic voices behind the $13 trillion number. Darity has advanced similar dollar amounts in his scholarly work, including a 2022 article in the Journal of Economic Perspectives. As with the Hulu episode, he offers this figure while eliding difficult questions about financing this redistributive payout. Vaguely sensing that there’s no such thing as a free lunch, Hannah-Jones asks where the federal government would get the money to pay such a massive amount. Wouldn’t taxes have to be raised, she queries. Mr. Darity confidently asserts that no such action is necessary. “It’s a matter of the federal government financing it in the same way that it financed…the stimulus package for the Great Recession” and the COVID-era CARES Act, Darity continues. To do so, the federal government need only “spend the money but without raising taxes.” This verges on tooth-fairy economics. This is from David R. Henderson and Phillip W. Magness, “The Tooth-Fairy Economics of Slavery Reparations,” American Institute for Economic Research, March 7, 2023. Another excerpt: If the Federal Reserve monetized the whole amount, base money, which is currency in circulation plus bank reserves, would increase by $13 trillion. M2, the conventional measure of the money supply, is 3.96 times the monetary base. If that relationship held, then increasing the monetary base by $13 trillion would increase M2 by 3.96 times $13 trillion, which is $51 trillion. M2 is currently $21 trillion. $51 trillion is a whopping 245 percent increase. So if the spending occurred all in one year, inflation would be about 240 percent. Critical Race Theory would unite with Modern Monetary Theory in an inflationary spiral. Thanks to Jeff Hummel for checking our M2 numbers in an earlier draft. Read the whole thing.   (0 COMMENTS)

What is the relevance of tourism to a classical liberal? For the casual observer, tourism may “merely” be interpreted as an opportunistic, temporal break from everyday routines. As important as this may be for many, tourism is an important subject of research inquiry for liberals. Alongside arts, film, literature, music, and sports, tourism is a talismanic marker of enrichment increasingly enjoyed by the many. Not only is tourism economically significant, but its non-economic implications are profound. Indeed, we should consider the potential role of traveling and tourism in shaping liberal worldviews of cosmopolitanism. Tourism as an element of material growth and change: Economic dimensions of tourism The sizable contribution of tourism to aggregate measures of economic activity is well known. According to one estimate, prior to the Covid-19 pandemic tourism accounted for about ten percent of global GDP.1 Perhaps of greater interest to classical liberals, and to economists in Austrian and related heterodox traditions particularly, is the sheer breadth, complexity, and dynamism of tourism activities, and the sense of value that they generate. It is in this respect that one begins to understand why tourism matters to liberal theory and practice. Speaking generally, tourism is a facet of human action characterized by a diverse array of cultural, emotional, physical, social, and other experiences. These are all made feasible through a highly complex array of contestable economic activities aimed at bringing tourists experiential bundles of joyfulness, insight, leisure, and recreation, irrespective of their traveling distances. The complex nature of tourism is not simply the result of its patterns of activity unfolding over space and time, potentially touching all corners of the globe, but by virtue of ever-changing offerings aiming to provide new activities and experiences. There can be little doubt that tourism’s complexity is shaped by constantly energetic acts of entrepreneurship. It is here that individuals bear economic risks and uncertainties when striving to deploy capital and other resources (tangible and intangible) in anticipation of profitable outcomes, secured by attaining sufficient (and, hopefully, repeat) visits by travelers. The entrepreneurial decision not only involves spatial dimensions, in which attractive and interesting geographical locations are selected for tourism facilities, but time is also of the entrepreneurial essence. Consider the temporally extensive, and capital intensive, processes engaged by entrepreneurs when building critical infrastructures—such as airlines, hotels, and other facilities—together with building organizational, logistical, and other capacities. All of these economically painstaking activities are performed with the objective of realizing commercial viability. The exercise of economic alertness and the talent for interpreting socio-cultural meanings valued by potential tourist clientele, are necessary for successful tourism entrepreneurship. To the extent that entrepreneurial ventures in tourism do succeed they are empirically observed to be implicated in the long-run reduction in consumption inequality.2 Take, for example, the efforts of Thomas Cook, the famed nineteenth-century British travel agent who introduced an assortment of package tour offerings to European markets. His efforts represent one of the innumerable examples of how entrepreneurial action, during Cook’s time and beyond, substantially improved tourism accessibility for individuals and families of lower- and middle-class backgrounds. An implication of all this complexity is that tourism itself is beset with definitional ambiguity. What is tourism? Is it travel to a place for rest and relaxation? Is it travel to a place for business opportunities, such as networking? Is it a digital experience in the comfort of one’s home? Who is a tourist? Is the tourist a hedonic pleasure-seeker? Is the tourist someone who is profoundly touched by religious and spiritual experience? Is the tourist a medical patient? Arguably tourism and the role of being a tourist can suggest all these things and more, “In a turn of phrase that an iconic figure such as Friedrich Hayek might approve, tourism encapsulates the inherent marvel of the market as a process, ordered in no uncertain terms by the entrepreneurship and innovation that are hallmarks of value-adding commercial activity.” From the complexity perspective, tourism defies definition and rigid attempts at boundary specification. This might frustrate top-down planners with seemingly well-defined, ex-ante plans for how other people should conduct themselves but, for liberals, this complexity is inherently praiseworthy. In a turn of phrase that an iconic figure such as Friedrich Hayek might approve, tourism encapsulates the inherent marvel of the market as a process, ordered in no uncertain terms by the entrepreneurship and innovation that are hallmarks of value-adding commercial activity. Tourism is not just complex, it is also typified by entangled relations among a web of individuals and collectives, including individual suppliers, conglomerates of interested intermediaries, and public sector entities. The dense ecology of human relations is conducive to the sharing of commercial insights about present-day successes and failures, and future growth prospects, as well as the economic densification of certain activities as network effects promote scaled emulations of successful, early-stage tourism entrepreneurialism. What I describe here could be regarded as the “bright” commercial side of tourism entanglement. A twist in the tail of entangled political economy is that the pursuit of gains is actively undertaken in variegated contexts. One context is political. Legislators, bureaucrats, vested interests, and others are embroiled in an entangled chain of activities that includes compulsorily acquiring revenues, imposing regulations, expending funds, and absorbing resources in the name of attracting mobile tourists. Political involvement in tourism activities, unsurprisingly, attracts lobbying and other rent seeking activities which, along varied margins, derange market processes. But lacking the incentives ordinarily faced by commercial entrepreneurs, tourism politics is, furthermore, prone to poorly-valued initiatives failing to sustain tourism growth. The “dark,” political side of tourism entanglement has recently darkened further, this time not by distortive subsidies but by mass travel restrictions during the Covid-19 pandemic.3 The consequences of government responses during the period have been stark, entailing the severe reduction of consumer welfare, not to mention damage to the tourism production structure in many parts of the world (including, for example, island economies and sub-national regions dependent upon overseas visitors). Acknowledgement of the political dimensions of entangled tourism interaction serves as a reminder to liberals of the great risks of governmental interference with the terms and conditions of where people wish to go to enjoy themselves. Learning more about others and self: Socio-cultural dimensions of tourism Liberal thought is inseparably possessed with the cosmopolitan spirit. This claim is suitably affirmed by the writings of an esteemed twentieth-century liberal, Ludwig von Mises. Mises, an immigrant with a cross-continental traveling history, spoke of liberalism as possessing “the whole of humanity in view and not just parts. It does not stop at limited groups; it does not end at the border of the village, of the province, of the nation, or of the continent. Its thinking is cosmopolitan and ecumenical: it takes in all men and the whole world.” During recent years liberals have meditated on cosmopolitanism as a response to the tensions and strains of a polarizing world. In his recent reflections on the subject, Peter Boettke refers to two principles of cosmopolitanism.4 First, we are another’s dignified equals. Second, we are strangers nowhere in the world. Those two principles are relevant to tourism. The relevance of the first point is that dignified equality applies to both tourist and resident, regardless of their backgrounds and circumstances. As for the second point, the lack of earthly estrangement remains operational, irrespective of one’s location and for how long one might stay in any given location. A liberal may, thus, lay claim to tourism as a practical instantiation of cosmopolitan attitudes seen as necessary to forge economic cooperation and social peace. The “crowding in” of cosmopolitan values through tourism materializes via the capacity of travel to facilitate encounters amongst diverse individuals. It is, then, through exposure to the customs, norms, and practices of people in the host destination that visitors can learn about, and learn to tolerate, others and their differing ways of doing, knowing, and being. The specialized sub-strand of cultural tourism is especially held to facilitate tourists’ exposure to divergent lifestyles, including those pursued by certain minority groups. Even so, to the extent that conventional, majoritarian cultures vary cross-country the processes described here should remain applicable. In this context, tourism could also be seen as a broad ranging catallactical process; tourists and their hosts, even in the face of strong cultural, linguistic, religious, and other differences, engage convivially in exchange processes with overlapping economic, cultural, and social implications. The cosmopolitan idea implies something greater than social learning and, through it, toleration, as important as these are. There is a strain of thinking within academic literature suggesting that certain facets of tourism align well with the cultivation of liberal values such as empathy and solidarity. For example, researcher Hazel Tucker considers that tourism providers are incentivized to show empathy to their traveling customers. A range of experiences—even confronting ones, such as visiting Cambodia’s Killing Fields or Poland’s Auschwitz—can generate empathic opportunities through the combination of abridging socio-cultural divides and revealing historical injustices. Others have posited that tourism could help promote peace, in accordance with the dictum (often attributed to Frederic Bastiat, but in fact, originated by Otto Mallery) that “when goods (or, in this case, tourists) don’t cross borders, soldiers will.” These issues are the subject of a critical book-length treatment edited by Moufakkir and Kelly,5 and by other scholars. When extolling the liberal virtues of tourism as an indelibly cosmopolitan affair, we should be mindful of a related idea: travel might shape the construction of an individual’s sense of self in a diverse and kaleidic world. Academic studies indicate that some people tour local, regional, and global locations as part of an existential process of becoming an authentic, or knowledgeable and worldly, self. Specialized tourism experiences, such as backpacking tours, or visits to specific places in the world (e.g., young Australians traveling to the Indonesian island of Bali), are justified based on securing a “rite of passage” to adulthood. Others engage with tourism to achieve a sense of religious or spiritual enlightenment, or to seek an experience of cultural worth (such as visiting ancestral homes). The contributions of tourism toward the development of individual beliefs, identities, and understandings rest upon maintaining an environment which not only permits, but affords dignity and respect toward easy freedom of movement. Tourism has long been identified as presenting socio-cultural opportunities of the nature described above. Of note is the emergence of tourism practices, observed by a variety of suppliers and demanders, of consciously ethical traveling experiences and standards. Similar ideas are conveyed about tourism as a means to promulgate social change, for both tourists and for residents in host destinations. But the notion that tourism can make the world a more cosmopolitan place is not universally shared. A budding critical literature questions whether the consumption of foods, music, and the like by tourists represents more than just ephemeral signaling. Sensational reports in popular publications often refer to travelers apparently conducting themselves in ways that offend local sensibilities. Added to these critiques is the phenomenon of anti-tourism agitation, with more than an unnerving hint of xenophobia, demanding the suppression of future visits. What is a liberal to make of these criticisms? A two-part response would be, first, to recognize that members of the traveling public do trek around the world for an incredibly diverse range of purposes. The second would be for liberals to assert the legitimacy of tourists acting upon their subjective preferences for travel—and this can range from “highbrow” tourism as a moral experience through to “lowbrow” tourism to have fun and leisure in all its variety. This position appears to fit well with the general liberal commitment to freedom. Conclusion For more on these topics, see Entrepreneurship, by Russell S. Sobel. Concise Encyclopedia of Economics. Liberalism: The Classical Tradition, by Ludwig von Mises. (1927) Liberty Fund edition. “The Future of Travel,” by Steven Horwitz. Library of Economics and Liberty, Sep. 4, 2020. In this essay, I consider tourism as a subject of intellectual inquiry, in the hope of opening conversations and research by others about the nature and consequences of tourism from a liberal perspective. How does tourism, this intriguing mode of short-term movement, affect our broader understanding of freedom? I, among so many others in this modern age of affluence, have extensively engaged in travel and tourism activities. In addition to traveling through much of my home country (Australia), I have traveled to Cambodia, Czech Republic, Hong Kong, New Zealand, and the United States where I now live and work. Tourism has long represented an activity of great personal value. I see tourism as a practical facilitator of cultural, economic, political, and social learnings about how other people live, and a means of reflecting upon my own life experiences. Tourism has added to many other features of life experiences that, in turn, combine to encourage personal growth. In short, tourism matters. So far, so good. But what also stands out, and I’m not the only one to observe this, is the sheer sense of wonder that going from place to place enduringly imprints upon the mind and the senses. In this respect, tourism, much like liberalism itself, opens new vistas of perception and the confidence to grasp the abundant opportunities available in our world. Footnotes [1] From the World Travel & Tourism Council, Economic Impact Reports. [2] For more on this topic, see chapter 1 of Jean-Philippe Delsol, Nicolas Lecaussin, and Emmanuel Martin, 2017, Anti-Piketty: Capital for the 21st Century, Washington DC: Cato Institute. [3] Tourism dependent economies are among those harmed the most by the pandemic, by Adam Behsudi. International Monetary Fund. December 2020. [4] Benjamin Klutsey, “Reaching our Potential as a Liberal Society,” Discourse Magazine, July 16, 2021. [5] Tourism, Progress, and Peace. CABI, 2010. *Mikayla Novak is Senior Fellow, F.A. Hayek Program for Advanced Study in Philosophy, Politics and Economics, Mercatus Center at George Mason University. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)