When the 20-year-old overachiever Johnathan Bi‘s first startup crashed and burned, he headed to a Zen retreat in the Catskills to “debug himself.” He discovered René Girard and his mimetic theory–the idea that imitation is a key and often unconscious driver of human behavior. Listen as entrepreneur and philosopher Bi shares with EconTalk host Russ Roberts […] The post Johnathan Bi on Mimesis and René Girard appeared first on Econlib.

The possible shortages—not metaphorical, but literal shortages—of natural gas and electricity this winter in New England are the product of our own politicos, their protectionism, price controls, dirigisme, and populism. I already mentioned the issue in a September EconLog post. A Financial Times story just provided an update; the lead paragraph says (Derek Brower and Myles McCormick, “New England ‘Importing European Prices’ in Looming Gas Supply Crunch,” Financial Times, November 17, 2022): A European-style winter energy crunch is looming over New England in the north-east US, even as American natural gas producers export record volumes and a wave of fuel heads across the Atlantic. In brief, the problem is the following. Environmental regulation in New England prevented the construction of power lines from Canada and a pipeline from Pennsylvania. A 1920 protectionist law, the Jones Act, forbids non-American ships from transporting liquified natural gas (LNG) from the Gulf coast to the north-east; and there are no American LNG thankers—“American” as defined in the law. So LNG is imported from foreign countries instead. The FT mentioned that a LNG thanker from Trinidad had just moored in Massachussetts, a frequent occurrence this year. Moreover, the price of electricity is controlled by state governments, preventing its increase in response to more costly gas prices, which would generate shortages in the economic sense, including blackouts. Recall that higher prices are the market’s way to signal increased scarcity and prevent shortages. Note that gas prices have also increased in the US because of arbitrage (buying low, selling high), gas being traded internationally. However, because of the high cost of liquification and transportation of LNG as well as long-term contracts, American prices remain typically lower than European prices. Despite more than two centuries of economic analysis, most people, from the most humble to the most conceited, apparently understand little about that. A utility executive is reported as saying: “You would think that charity would begin at home . . . that American fuel would go to American ports,” Joe Nolan, chief executive of Eversource Energy, one of New England’s biggest utilities, said in an interview. “We’re going to have to compete just like everybody else — in the global market.” Nothing in this sentence makes economic sense. One does not have to compete in the global market, but one will refrain from considering it only if one’s own government forbids it or, of course, if one enjoys leaving money on the table. And trade is not a matter of charity but of satisfying one’s wants at the lowest cost. More than two centuries ago, Adam Smith wrote in his Wealth of Nations: It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. … Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens. Even a beggar does not depend upon it entirely. … The greater part of his occasional wants are supplied in the same manner as those of other people, by treaty, by barter, and by purchase. With the money which one man gives him he purchases food. The old cloaths which another bestows upon him he exchanges for other old cloaths which suit him better, or for lodging, or for food, or for money, with which he can buy either food, cloaths, or lodging, as he has occasion. Despite being a former Harvard University professor, the person who is perhaps the best representative of left-wing populism in America and, from this viewpoint, a Trump twin, Elizabeth Warren added to the obfuscation. The Financial Times reports: As Gulf terminals export record volumes of gas, Elizabeth Warren, the Democratic senator from Massachusetts, this year urged the administration of Joe Biden to curb LNG exports “to keep prices low for American consumers”. In other words, since Americans are forbidden to import the services of foreign ships to transport goods between American ports, they should also be forbidden to export the LNG they produced. That is only one illustration of how coercive state interventions have consequences that have to be partially corrected by further state interventions. If the state prevents people from trading, that is, exchanging among themselves, something other peacrful activities will need to be forbidden. Such authoritarian interventions in cascade might explain a strange claim reported in the FT story, without further explanation, about the Trinidad deliveries of LNG at the Massachusetts terminal: The terminal owner, Constellation Energy, said the US Coast Guard prohibited it from publicly disclosing information about cargoes arriving into the terminal. It would be interesting to know more about what is really happening there, in what was known as the country of free enterprise. (0 COMMENTS)

In recent years, the US government has focused its attention on Chinese espionage. Here is one example: Chen was arrested in 2014 and charged with espionage by the FBI, which alleged that she illegally accessed a government database to share sensitive information about American dams with Chinese scientists. Further investigation revealed that what Chen had actually done was use a shared password, widely known within her office, to access a database for her work. The lack of evidence led the Justice Department to drop its charges five months after filing them. Still, Chen was fired from her job—for the same now-discredited reasons that led to the FBI charges. In 2018, the US government announced the China Initiative, aimed against Chinese spying in the US.  The program was a product of the deep suspicion regarding the loyalty of ethnic Chinese people residing in the US.  Here’s Politico: At one point during the dinner, Trump noted of an unnamed country that the attendee said was clearly China, “almost every student that comes over to this country is a spy.” (I wonder if that includes my wife?) The FBI program targeted ethnic Chinese residents, gradually drifting away from its original goal of national security.  It’s hard to get accurate information on the program, as the federal government appears to be engaged in covering up the fact that it targeted Chinese researchers for very minor technical violations, and many of the cases were thrown out:   Two days after MIT Technology Review requested comment from the DOJ regarding the initiative, the department made significant changes to its own list of cases, adding some and deleting 39 defendants previously connected to the China Initiative from its website. This included several instances where the government had announced prosecutions with great fanfare, only for the cases to fail—including one that was dismissed by a judge after a mistrial. Rather than improving US national security, it has probably hurt our security by discouraging highly talented researchers from migrating from China to the US. Fortunately, there are signs the government may be pulling back a bit: The faulty information came from the Commerce Department’s Investigations and Threat Management Service (ITMS), an internal security unit that a July 2021 Senate investigation found had engaged in broad patterns of unfounded, discriminatory investigations aimed at Chinese-American and other employees—and which named Chen’s case as an example of misconduct. ITMS was disbanded shortly after the report was published.  The Biden Administration ended the program in February.  And Sherry Chen is finally receiving justice: Chen’s settlement—$550,000 up front, followed by $1.25 million to be paid out over the next 10 years—is the culmination of those efforts. In addition to the monetary damages, Chen’s lawyers say that the Commerce Department will also host a private meeting with the scientist and provide a letter acknowledging her record and accomplishments as a government hydrologist.  Unfortunately, anti-Chinese bigotry is still a part of our political system.  Top politicians routinely mock Chinese names in a way that would be unthinkable if aimed against other ethnic groups (here and here and here and here).  A Senate committee is engaged in a witch hunt aimed at showing that Covid-19 escaped from a Chinese lab, even going to the point of using false evidence.  Our top universities have informal quotas limiting the admission of Asian-American students.  If these quotas were applied to any other minority group, there would be outrage.     (0 COMMENTS)

For Russ Roberts’ long-running EconTalk podcast fans, here is a chance to hear the tables turned as Russ responds to outstanding questions from another expert “OG” interviewer. Sam Harris delivers by taking this lengthy conversation on this Making Sense podcast in many interesting directions. Harris opens with warm remarks about his experience of taking long walks while listening to the audible version of Wild Problems, Roberts’ most recent book. Decision-making is the overarching theme.  What if there is no right decision, no best decision to our most important circumstances in life?  How well do we understand human flourishing? What about our own free will? The episode title is aptly named, “Steps in the Right Direction”.      1- Harris is interested in (wary of?) how economics is taught today. Russ discusses the shortcomings of the field as it has been defined and believes we should be looking at variables beyond the utilitarian calculus. Does he diminish or refine these two definitions? Economics is the study of choice under constraints.  There is only one social science and we are its practitioners”  (Stigliz)    2- A recurring theme of Roberts’ is to critique teaching at most educational institutions, particularly U.S. public education. He contests that the “passing on of information and knowledge”, ignores that the “mind is not a vessel to be filled but a fire to be kindled”. What approaches to learning does Russ argue are effective? To what extent do you agree or disagree with what leads to effective learning, of different subjects, by different learners, in different circumstances?   3- Wild problems and tame ones. What is worth thinking about? How does the story of Darwin’s cost-benefit analysis of marriage and his culminating decision illustrate Roberts’s counter to the “Max U” approach to problems?   4- Harris proposes that we might be better at making probabilistic judgments than we realize. We could get better at aggregating information to use the totality of information to apply to our future decisions. Are there other tools we can hone for improved decision-making?   5- Harris thinks we conquer moral ground the “more of us more of the time realize that caring about the suffering of distant strangers is being a good person,” and that we are in fact doing better with accepted moral norms as a general trend. Roberts is less enthusiastic about this outlook and uses the destruction of freedom of speech as a disturbing example. Where do you fall on the optimism continuum? Explain.   6- Harris and Roberts discuss meditation practice as one that leads to increased empathy, enhanced freedom, thoughtfulness, change, experience in the present moment, anger reduction and more. How do they relate the “paying attention” of meditation to what is free will (or the illusion of free will)?   (0 COMMENTS)

For decades, Colombian Free Trade Zones (FTZs) helped attract investment and grow the economy – but all of that is about to change. On August 8 2022, the Colombian government passed legislation that will strip FTZs of most of their tax incentives. Colombia’s free trade zones are a development tool designed to spur job creation and new capital investment. They do this by offering tax and regulatory incentives, making it easier for businesses to operate in Colombia. As a result, 50% of the companies in zones receive foreign investment and primarily produce exports. The new tax reform threatens the stability of Colombia’s FTZs. It includes higher taxes in the hydrocarbon and mineral industry, increased FTZ export rates, more bureaucracy in courier shipments, and a huge tax differential treatment between Colombia’s different types of zones.   Overview of Colombia’s FTZs Across the world, a Free Trade Zone is typically considered a “geographical area delimited within the national territory, where industrial activities of goods and services, or commercial activities are developed, under the special tax, customs, and foreign trade regulations.” Article 1 of Law 1004 in Colombia adds that goods entering the Free Trade Zones are considered outside the national customs territory for import and export tax purposes. (1) In Colombia, the first Free Trade Zone was created in 1958 in Barranquilla (2). Today, the country has 122 Free Trade Zones, which are classified into three types (3): Permanent Free Trade Zones (multi-user): a determined area where several companies develop their industrial, commercial, or service activities. Special Permanent Free Trade Zone: these are where a single company (industrial user), regardless of the geographical area where it is located, has the possibility of covering its activity with the incentives of the Free Trade Zone Regime. Temporary Free Trade Zones: these are temporarily authorized for the celebration of fairs, exhibitions, congresses, or seminars of transcendental importance for the economy and national or international trade of the country. According to the 2018 Free Trade Zone Statistical Report, the highest growth in these territories occurred in 2009, when an increase of 60% was recorded compared to 2008. The trend has been positive for the following years, accumulating $44 billion, of which 13% represent foreign direct investment, and generating 114,603 direct and indirect jobs in the 22 states where they are present. (4) Colombia’s Free Trade Zone regime has offered the same benefits for different users for years. However, the Law Decree 278 of March 15, 2021 (5) improves incentives for SEZs in the country. Changes include: Promoting the 4.0 economy and the export of services, electronic commerce availability, the reduction of 15.2% of the minimum amount of investment, and the number of requirements that have been reduced from 57 to 24. (6) Among the tax benefits (7) are: Income tax rate of 20%. No customs duties (VAT and tariffs) are caused or paid. VAT exemption for raw materials, inputs, and finished goods acquired in the National Customs Territory. On the other hand, customs benefits (7) include: Nationalize as needed. Nationalize raw materials or finished products. Partial processing outside the Free Trade Zone. Sales between free zone users are exempt from VAT on inbound and outbound exports.   2022 Tax Reform Colombia has had 21 tax reforms between the 1990s and 2022. Since 1990, with César Gaviria as President of the Republic, the country has had to adapt to 21 tax reforms every 18 months (8). However, taxation in Colombia is still high, and tax incentives in free trade zones tend to be lower than in other Latin American countries. Source: El País On August 8, 2022, a bill was filed before the Congress of the Republic to adopt a new tax reform in Colombia, which aims to raise 25.9 billion annually (9). This has led to a review of taxes, as is the case of the free trade zones. The current free trade zone tax regime has been the target of permanent criticism not only because of the potential cost of the tax benefits granted but also because of the inequity in the tax treatment of companies operating outside them. For example, companies within the national customs territory (TAN) are taxed at 35%, and those in free trade zones are taxed at 20%. (10) Under this new reform, Permanent Free Trade Zones (multi-user) and Temporary Free Trade Zones could maintain tax benefits at 20% if they comply with an approved Internationalization Plan. They would also need to have an area of more than 80 hectares and more than 40 users (both domestic and foreign companies are counted). The income tax rate proposed at a general level of 35% will be applicable for legal entities that do not comply with this requirement. (11) Then, the first implication could be that Colombia breaches its commitments with the WTO since performance requirements cannot be created for FTZ, in this case, export commitments, in exchange for receiving a differential benefit in terms of direct taxes, such as income tax. It is unclear whether the increase of the tariffs and the inclusion of new requirements for their application to existing users would be constitutional since they have complied with investment and employment generation commitments under the current rules, waiting for the application of the special tariffs.  Besides, conditioning the tax rate to export indicators could result in uncertainty for the taxpayer (tenants), who, in the end, could decide to sue the FTZ or local governmental agencies. In the worst scenario, even the WTO could sue Colombia. Meanwhile, the Special Permanent Free Trade Zone (SPFTZ) won´t have the option to implement an internationalization plan. As soon as this reform is implemented, this type of FTZ will be taxed at 35%. According to the government, the reasoning behind this measure is that 75% of companies that benefit from the FTZ tax regime do not export. Moreover, SPFTZ represented 50.1% of the exports made by the country’s free zones and 6% of Colombia’s non-mining-energy exports (11). Also, companies in these areas tend to invest in areas where there is usually no investment. One good example is Puerto Antioquia, a multipurpose port with an estimated investment of $672.4 million. Also, the Centro de Tratamiento e Investigación sobre el Cáncer (CTIC), an SPFTZ for health services operating in the north of Bogotá, and many other SPFTZ that are good examples of this development in the country in the Open Zone Map here. Nevertheless, the second implication showcases that the tax rate increment would force the SPFTZ to change its business model or look for another regional destination to carry out its operations. Third, the VAT exclusion for courier shipments to Colombia would be modified, maintaining the limit at USD 200 but clarifying that its application would depend on the origin of the imported product and the international commitments acquired by the country. This obliges companies engaged in postal traffic to strictly observe the origin of the goods and Colombia’s international commitments to avoid a mistaken application of the special treatment, meaning more bureaucracy and affecting the expected shipment timeline. Fourth, free zone users engaged in the hydrocarbon and mineral industry will have to assume a new and higher tax on oil, coal, and gold exports. This would inevitably affect one of the biggest deals for Colombia, with the Dubai Multi Commodities Centre (DMCC) and UVentures, which signed an agreement to develop a free trade zone in Cartagena de Indias, Colombia. (12)   What do companies think about it? José Antonio Ocampo, the National Association of Foreign Trade (Analdex) president, debated the proposal. He believes “the problem of the SPFTZ is more significant than the others. The free zones were initially created to export. Still, today 85% of what they export is produced in the domestic market, and this competes inequitably with the companies established in the national territory, which have to pay 35%”. (13) On the other hand, Luz Stella Murgas, president of Naturgas, states that free zones are also a concern because “the investments made in offshore exploration and production are significant in comparison with the continental areas. So, the free zones were a mechanism that allowed boosting investment in these fields”. (13)   References: Law 1004 of 2005 Law 105 of 1958 Free Trade Zone Regime Study of the legal, economic, and fiscal impact of free zones Decree 258 of March 15, 2021 Modification of the free zones regime Benefits to Free Trade Zones – EXENNTA  Colombia has had 21 tax reforms between the ’90s and 2022. Colombia: Tax Reform Project 2022  Free Trade Zones in Colombia  What are the effects of the tax reform on the free zone model?  DMCC signs historic agreement with Dakia U-Ventures     Michelle Bernier is an attorney specializing in commercial and international law. She is Research Manager at Adrianople Group, a business intelligence firm in the United States focused on consulting for companies and Free Trade Zones, as well as market research and geopolitical analysis.   (0 COMMENTS)

The Labor Department’s new classification rules could give workers for companies like Uber and DoorDash more rights — if they ever take effect. So reads the line, underneath the title, of a recent Vox article by Rachel M. Cohen titled “The coming fight over the gig economy, explained,” Vox, October 12, 2022. What that line doesn’t even hint at is that if the Biden rules on gig work prevail, the federal government will disrespect one of the most fundamental rights people have: the right to choose whether to engage in contract work. It reminds me of a story that Duke University economist Michael Munger likes to tell about his time in Germany. He saw an older lady with an empty shopping cart that she was returning to the store and, being the gentleman he is, he tried to take it from her to return and save her the trouble. He got into a tug of war with the lady until a policeman came along and explained that when you return your shopping cart, you get back the Euro that you had put in the slot to get the cart. She saw him as trying to steal from her rather than doing her a favor. Similarly, millions of workers don’t see the federal government as giving them rights but as refusing to recognize their right. Mike Munger had an excuse: he didn’t know the German practice. What’s the Biden Labor Department’s, and the Vox headline writer’s, excuse?   (0 COMMENTS)

In the latest episode of CBS Sunday morning is a 7+ minute segment on recovering bits of bodies from a military transport airplane that crashed in Alaska in 1952. Probably most viewers will get out of it what the CBS producers wanted them to: how neat it is and important it is to the relatives to recover these bits of bodies. I don’t challenge their values; different people have different values. My own are quite different. When I arrived in Toronto in November 2018 to visit my sister and learned that she had died 2 days earlier, I had the option of going to the morgue and seeing her body. I chose not to. To me, that body wasn’t her. What I got out of the segment was very different. It was an indicator of how wealthy we are. Various people with various values of time, some of them probably pretty high, go out each year to help recover possessions and parts of bodies. The cost of that in time value alone has to be huge. Which means the value is even huger, or they wouldn’t do it. (Unless, of course, they’re subsidized by the government but my sense is that subsidies, if any, are small.) So why is the value so high? Because we’re so wealthy. These kinds of activities are what economists call “normal goods.” We want more of them as our wealth increases. Note: The pic above is of the C-124 Globemaster, the type of plane that went down in Alaska. (0 COMMENTS)

Considering the abysmal state of the economy and the unpopularity of President Biden, with few exceptions, the Republicans took a serious beating in the recent U.S. midterm election. Whatever the Republican strategy is and has been, that strategy isn’t working. It isn’t working because former President Donald Trump is polarizing and an increasingly unpopular person. His influence is leading the party toward more electoral defeats. Think about it. The guy barely won in 2016 against a singularly unpopular candidate. Since then, his electoral successes have been nil. He has even actively engineered some GOP defeats, such as the Georgia senate runoff in 2020, with his temper tantrums.  And, of course, his favored candidates for the 2022 midterms were terrible. With rare exceptions, they lost their races. Since when are Republicans voters so enamored with losers? All that said, the GOP has a problem that runs deeper than Trump (though it may have gotten much worse under Trump). It’s this: Republicans today stand for nothing, and on the rare occasions that they do stand for something, that something is woeful. From protectionism to vile anti-immigration rhetoric, from government-engineered paid leave to the extended child tax credit, and from threatening to punish big tech and to impose industrial policy, with a contingent shouting “free-markets are actually bad”, the party is in disarray intellectually – a fact that plausibly contributes to its current disarray politically. Some serious intellectuals on the right recognize this problem. Here is National Review’s Philip Klein on this. To be sure, it perhaps started with Trump, who was never committed to free markets, quite the opposite in fact with very light exceptions (he more credit that he truly deserves for his economic policies, but that’s a topic for another day). His election and policy positions effectively freed Republicans and many conservatives to openly embrace the statist policies that they always wanted to adopt because, you know, it’s difficult to fight for sound budgeting, to resist special-interest groups, and to stand up consistently for small government. However, unless Republicans wake up and realize that this crusade against “market fundamentalism” isn’t working for them—if only because it’s a sloppy, lazy and economically ignorant agenda—they will continue to be ridiculed and lose elections long after Trump has gone bye-bye. Now, I don’t have a stake in either party. My loyalty has always been to classical liberal principle such as constitutionally limited government and free, entrepreneurial markets. Until a few years ago, some of the economic policy changes I favor were more likely to come from Republicans. I don’t know what I believe anymore as both sides are cheering for more government and more command and control of the economy. But for the record, I will put out there that if the Democrats were ever to decide that they once again want to be the party of opportunity (and some are) and of economic freedom while Republicans continue to somersault leftwards, I will work with them and cheer them along as they do push for more supply-side freedom, and hence economic growth and opportunity for all. One last thing: obviously I wish that all parties would discover the wonders of a market economy. Here’s a beautiful fact: the same classical-liberal policies that would unleash market-generated prosperity will also promote many of the other worthwhile goals that Americans have, such as crime reduction, and stronger families, civil society, and much more. But part of the classical-liberal package is also a rejection of hostility to immigration. There are many reasons why we should welcome immigrants to this country, no matter their skills and education levels. Bryan Caplan and many others have made the economic case better than I could. There are many moral and economic arguments worth having about how much immigration we need and how to go about reforming the system. But recently, arguments coming from the right haven’t been about immigration but about immigrants themselves. Immigrants, especially lower skilled immigrants, are often talked about, as a class, in  obnoxious and demeaning ways revealing a fundamental ignorant way about what it means to uproot oneself from a country and move to another. Immigrating to this country back in 1999 was the hardest thing I ever did. I didn’t do it lightly. It is never an easy decision to leave one’s family, friends, native country, and culture in order to start fresh in a new country. I was lucky and my life wouldn’t have been at risk had I stayed in France. But I am sure that those who leave to escape dictatorships or poverty leave a piece of their heart behind all the same. It was hard to leave, but the reality is that as hard as I thought it would be, it was much harder. I had friends, but I was so alone. I was relatively poor compared to what I left behind. I missed my family even more than I thought I would. I even missed French culture, even though when I left, I thought I had for it an incurable dislike. Again, I was one of the lucky ones. I had a job and a place to live when I arrived. Also, as big as are the cultural differences between France and America, that gap is smaller than for some immigrants who come to the U.S. from radically different cultural and religious backgrounds. Enduring this hardship alone and having the courage and gumption to uproot oneself, I believe, deserves respect rather than the demeaning and baseless charges that so many Americans have, over the past seven years, flung at immigrants. We immigrants aren’t angels, and some truly awful. But so are native borns. However, what sets us apart and should please Americans is that we’ve come here and decided to leave our homeland because we see something remarkable about the United States – ironically, something remarkable that is no longer seen by so many native-born Americans. All of us – native born and immigrants – will next week celebrating Thanksgiving with a turkey (which for me is a special commitment since I don’t really didn’t like turkey!).  Immigrants don’t ask or deserve any special treatments; a chance at their American dream is enough. Many of them, I am sure would still come here even if they believed they would never receive welfare benefits (whether that a good idea is a topic for another day too). These are debates worth having but I urge Republicans and conservatives, especially as they consider dumping Trump once and for all, to reconsider their attack on immigrants and engage in the serious conversation of immigration reform.   Veronique de Rugy is a Senior research fellow at the Mercatus Center and syndicated columnist at Creators. (0 COMMENTS)

“Gig workers get a break from Biden Labor Department.” That’s the title of an October 11 article by Emily Peck of Axios Markets. What break is Peck referring to? The Biden administration’s Labor Department proposed a regulation to get many “gig workers” classified as employees. Peck refers to this as a “pro-labor turn.” Interestingly, Peck doesn’t explain why having the government classify gig workers as employees without taking account of gig workers’ wishes is good for those workers. Peck takes as given that they would want to be employees. But is that true? When economists observe people doing activity X when activity Y is an option, we tend to conclude that those people prefer X to Y. So if we observe millions of people choosing what’s variously called “gig work” or “independent contracting,” and there are millions of jobs available for those who want to be employees, the odds are high that those millions of gig workers want what they chose. Therefore, to argue for not allowing them to engage in gig work (the term I’ll use from now on), you need to show that they, by their own standards, would be better off as employees. That case has yet to be made. These are the opening two paragraphs of my latest article for the Hoover Institution, “Give Gig Workers a Real Break,” Defining Ideas, November 17, 2022. Another excerpt: The Labor Department proposes six “economic reality” tests as a basis for deciding whether someone is an independent contractor or an employee: (1) “opportunity for profit or loss depending on managerial skill”; (2) “investments by the worker and the employer”; (3) “degree of permanence of the work relationship”; (4) “nature and degree of control”; (5) “extent to which the work performed is an integral part of the employer’s business”; and (6) “skill and initiative.” The idea with (1) is that the greater the opportunity for profit or loss and the greater the managerial skill required, the more likely is it that the person is an independent contractor. With (2), the idea is that the greater the worker’s investment, the more likely he or she is an independent contractor. Interestingly on (2), the Labor Department states that buying one’s own tools is not “evidence of capital or entrepreneurial investment.” Hmmm. Tools are definitely a capital investment by any reasonable standard. Here the Biden Labor Department’s bias in favor of declaring an employment relationship is clearly on display. It’s on display in another way also. Notice the wording of (2) and also of (5). Both implicitly assume that the entity engaging a potential contractor is an employer and that the potential contractor is an employee. But isn’t that what’s supposed to be determined? On (3), the Labor Department proposes that if the “work relationship is indefinite or continuous,” that argues in favor of the person being an employee. The department doesn’t bother to say why. Test (5) is also interesting. It resembles the “B” part of California’s ABC test. It’s also incoherent. If the work is not integral to the employer’s business (oops—they’ve even caused me to assume that the entity wishing to engage a contractor is an employer), then why the heck does it want to engage a contractor? When a contractor delivers food to a restaurant, you can be pretty sure that that food delivery is integral to the enterprise. But how exactly would that make the food deliverer an employee? And if, by some chance, the Labor Department would exempt food deliverers from being employees, how would it justify that? Interestingly, there is one huge gap in what the Labor Department calls a “totality of the circumstances” analysis, a gap that gives the lie to any claim that the Labor Department will consider all the circumstances. Can you guess what that gap is? I bet the Labor Department can’t but many independent contractors can. Not even mentioned is whether the contractor wants to remain a contractor. Read the whole thing, especially if you want to comment and more especially if you want me to respond to your comment. If you want to see my humorous remark, read my Disclosure at the end. I’m surprised, but delighted, that Hoover’s editor let me keep the last line. (0 COMMENTS)

The Cato Institute has put out a new paper on reforming our financial system. Here are their recommendations on monetary policy: Narrow the Fed’s statutory mandate. Congress should replace the Fed’s dual mandate with a single stable spending mandate. The mandate would require the Fed to maintain a stable, if steadily rising, level of total spending on goods and services or, in other words, a stable dollar value of national income. Congress should also repeal the financial stability mandates that it gave to the Fed in Title I of the Dodd–Frank Act. Require the Fed to follow a policy rule. Congress should require the Fed to implement a simple rule that Congress can easily monitor and use to hold the Fed accountable. The rule should require the Fed to commit itself to maintaining a specific growth rate for nominal gross domestic product (NGDP), a popular measure of total spending. The specific rate, as well as other details, might be left to Fed officials to decide, but most experts would place the desirable growth rate of NGDP somewhere in the range of 3–5 percent. Shrink the Fed’s balance sheet and reestablish a “scarce” reserve regime. In a scarce reserve regime, instead of holding substantial reserve balances, banks would economize on reserves. To make up for temporary reserve shortages, banks would turn to either the private repo market or the Fed’s Standing Repo Facility. To ensure that the Fed returns to a scarce reserve regime, Congress should insist that the Fed follow the 2006 Financial Services Regulatory Relief Act, a law that stipulates that the rate of interest the Fed pays on reserve balances should not exceed “the general level of short‐​term interest rates.” Those are basically my views, although I’d prefer to leave the Congressional monetary policy mandate as it is and have the Fed make the decision as to how best to fulfill the mandate.  Let a different agency handle financial stability. But the specific monetary policy proposals of Cato are sound, and would dramatically improve policy.  All I would add is that the NGDP target definitely needs to be a level target, to minimize the risk of policy producing the sort of NGDP undershoot seen in 2008-09, or the overshoot seen in 2021-22.  The biggest problem with current monetary policy is the lack of level targeting. (0 COMMENTS)