Jack (@jbwells2 on TikTok) runs her store Jack’s Vintage on the secondhand fashion app Depop. She posted a video on Jan. 24 where she tries on a variety of thrifted clothes, modeling skirts and jackets that she would later post to her online store. “This right here is the best thrift haul you will ever see,” she says, holding up a large bag overflowing with clothes. This is from Steffi Cao, “People Are Calling A Depop Seller ‘A Bad Person’ After She Posted A Haul Of The Thrift Store Finds She Planned To Sell,” Buzzfeednews.com, February 22, 2023. When you read the article, you learn that Jack appears to make her living by finding diamonds in the rough, buying them, and selling them at much higher prices than the prices she paid. In buying, she benefits the thrift stores from which she bought; otherwise, they wouldn’t sell to her. In selling, she benefits the people she sells to; otherwise, they wouldn’t buy. And Jack is better off in the process. So it’s win-win-win. But some people object. A person who calls herself “kat” says: people who go to thrift stores, find amazing s**t like this, and then sell it all on depop for 4x the price are the landlords of this generation. Kat is unwittingly correct. Jack is like a landlord. She, like landlords, performs a valuable service. Landlords buy properties, often improve them, usually maintain them and rent them to people who want to rent. Now if Kat’s objection to landlords is that the rents are too high, she’s singling out the wrong villain. The main reason rents are so high is that governments in the United States have systematically prevented people from building. Kat and others could object that because Jack is buying up undervalued clothing, she’s making it harder for people like Kat to find those diamonds in the rough. That’s true. But that’s true of every good or service. When someone buys something, it’s not available for someone else to buy. Would Kat object to book buyers finding undervalued books and then reselling them online? Possibly. But it’s not a good objection. Interestingly, many people who defended Jack argued that she was simply being repaid for her time. That’s true and it’s a good point. But imagine that Jack was really good at what she does and can make $200 an hour. (I know that that’s highly unlikely but work with me here.) Would that make the gains to the sellers or to the buyers any less? No, it wouldn’t. Also, Jack is modeling some good behavior for others who are willing to see. She posted on Instagram that: selling vintage clothes is how she is able to support herself as a college kid without family financial support. “I started Jack’s Vntg in February of 2022, still in school, with $100 to my name, and a lot of hope,” she wrote. “Not to sound dramatic, but it saved my life. I was able to pay my bills, eat, and survive on my own as an 18 year old.” Keep it up, Jack. We need more, not fewer, people like you. HT2 to Abby Hall. (0 COMMENTS)

Since nationalism is a form of collectivism, it is not surprising that its vulgate plays so much on “together” themes. Vladimir Putin just declared in a public speech in fromt of a “jubilant crowd, amid a sea of Russian flags” (“Putin’s Wartime Russia: Propaganda, Payouts and Jail,” Wall Street Journal, February 22, 2022): “When we are together, no one can match us,” he said, before singing the national anthem along with the crowd and greeting servicemen who were there. The crowd responded with chants of “Russia, Russia” and “Putin, Putin.” We could compare this with former president Donald Trump’s declarations, with his fans’ idolatry, or with the “USA, USA” chanted by the crowd at his meetings. We can also find something similar in the nationalism of Joe Biden, who is in many ways Trump 2.0 or, if you prefer, Trump with a human face. In his recent State of the Union speech, Biden said: We are the United States of America and there is nothing, nothing beyond our capacity if we do it together. There may be some exceptions, and nuances have their importance as do hopefully constitutional constraints, but when a political ruler says “let’s do that together,” what he really means is “do what I say.” (0 COMMENTS)

I recently took a car ferry across to the island of Chiloé.  In the distance, I could see work being done on a big new suspension bridge, which when completed will connect the large island province to the mainland.  My first reaction was disappointment; I came too soon to experience the convenience of the new bridge. My second reaction was to wonder whether greater convenience actually makes us happier.  Riding the car ferry is a rather interesting experience, while driving over the bridge is somewhat more boring.  On the other hand, there’s the revealed preference argument—if there were an option between the bridge and the ferry, I’d have taken the bridge (even if the toll were equal to the ferry charge.) But is this revealed preference argument actually as strong as it seems?  I don’t believe so.  To explain why I’ll use the example of GPS navigation. I have always had a good visual memory (and a poor verbal memory).  Thus I am pretty good with maps, and am able to navigate in unfamiliar places based on the map in my mind.  When I was younger, I got great satisfaction from using this skill when traveling overseas.  My girlfriend called me “map head”.  It may sound odd, but I derived great utility from creatively solving a series of problems. GPS has rendered my navigation skill to be almost worthless.  Now while driving in Chile I am just as much on autopilot as if I were driving to the grocery store in Orange County.  Yes, I am free to continue doing things the old way, ignoring GPS.  Indeed I often so so when alone.  But with my wife?  Who’s she likely to trust? Progress imposes negative externalities on those who insist on doing things the old way.  The knowledge that something better exists tends to devalue the inferior product.  As a child, I watched The Wizard of Oz once a year on a black and white TV set.  Now that I know the film is actually (mostly) in color, I could not bear to watch it in black and white. Or, as food experts tell us:  “Hunger is the best sauce.” Nonetheless, I do believe that progress and happiness are closely related, but not because all these shiny new toys make us happier.  Rather I suspect that both progress and happiness are the effects of a third factor—freedom.  More specifically, I believe that people are happier when they are free to creatively engage in problem solving with the aim of making their lives better.  Whether the new inventions actually make them happier is immaterial; people derive satisfaction from pursuing their dreams. Here’s V.S. Naipaul: Familiar words, easy to take for granted; easy to misconstrue . . . This idea of the pursuit of happiness is at the heart of the civilization to so many outside it or on the periphery.  I find it marvelous to contemplate to what an extent, after two centuries, and after the terrible history of the earlier part of this century, the idea has come to a kind of fruition.  It is an elastic idea; it fits all men.  It implies a certain kind of society, a certain kind of awakened spirit.  So much is contained in it: the idea of the individual, responsibility, choice, the life of the intellect, the idea of vocation and perfectibility and achievement.  It is an immense human idea.  It cannot be reduced to a fixed system.  It cannot generate fanaticism.  But it is known to exist; and because of that, other more rigid systems in the end blow away.  (From a talk given in 1991–when the future still seemed bright.) Of course, this post is merely restating a longstanding idea in philosophy—that it’s all about the journey, not the destination. PS.  My wife and I were recently walking on a trail through the woods of Chiloé.  We could see the beach in the distance, and decided to walk in that direction.  Right before the beach we encountered a stream that blocked our path, so we never reached the beach.  At the same time, my wife was chatting with our daughter on the telephone.  My daughter was surprised that we didn’t know about the stream.  She could see it on a map that was tracking our movements on her phone, even though she was 6000 miles away!  She had that exasperated  “What’s wrong with you boomers” tone in her voice. Modern technology allows us to plan trips in incredible detail.  But I sort of miss the serendipity of the travel that I did when young, when I didn’t know exactly what my trip would involve before leaving home. But that’s just me.  My wife likes to plan. Here’s that bridge project in the distance, through a porthole on the car ferry: PPS.  Just as I am good with maps, I am lousy with languages.  I took three semesters of Spanish in college, and all I recall is “hola”.  While I find GPS to be annoying, I’d really appreciate an instantaneous language translating device when traveling overseas.  (My wife uses the iPhone translator, but it doesn’t actually work in the real world.) (0 COMMENTS)

Oxfam, a global confederation of charitable organizations, just released a report demanding that billionaires be abolished. The report, Survival of the Richest: How We Must Tax the Super-Rich Now to Fight Inequality, states that: [T]he world should aim to halve the wealth and number of billionaires between now and 2030, both by increasing taxes on the top 1% and adopting other billionaire-busting policies. This would bring billionaire wealth and numbers back to where they were just a decade ago in 2012. The eventual aim should be to go further, and to abolish billionaires altogether, as part of a fairer, more rational distribution of the world’s wealth. Oxfam correctly identifies source of much of this wealth: Billionaires have seen huge gains during the pandemic. A flood of public money pumped into the economy by rich countries, which was necessary to support their populations, also drove up asset prices and wealth at the top. This meant that in the absence of progressive taxation, the super-rich pocketed unprecedented fortunes. The U.S. government, for example, responded to both the Great Recession and COVID by increasing the nation’s money supply. As a result, between the beginning of 2009 and today, the average home price has more than doubled. During those same years, the Dow Jones Industrial Average tripled in value. Thus, asset inflation has increased homeowners’ and investors’ “paper wealth,” widening the disparity between the country’s rich and poor. Oxfam’s solution to the gap created by government monetary policy is for governments to aggressively confiscate wealth through draconian taxation, including increased capital gains taxes, wealth taxes, taxes on unrealized capital gains, and higher property and inheritance taxes. To keep the rich from escaping, Oxfam recommends granting additional powers to national revenue agencies and strengthening international government-to-government data sharing mechanisms. In one of the report’s two forewords, José Antonio Ocampo, Colombia’s Minister of Finance and Public Credit, makes clear that the goal isn’t just to reduce inequality by making the rich poorer: By abolishing decades-long tax privileges and loopholes that benefit only the richest, there will be more money to invest in free, quality public services like education and healthcare. To invest in agriculture. In climate and nature. And in peace. Minister Ocampo’s faith in the efficacy of government to ensure good and prevent bad is touching, but hardly realistic. Far more likely, political leaders will use the funds to line their pockets and those of their allies, further cementing themselves in power. Meanwhile, shifting resources to government and away from the private, productive sector, is likely to make the average individual – not just the rich – much poorer. Yes, Jeff Bezos is a multi-billionaire, but most of his wealth is in the form of Amazon stock. Bezos owns only an insignificant fraction of the nation’s physical wealth (factories, machinery, offices, houses, cars, aircraft, computers, TVs, microwaves, dishwashers, washing machines, and so on and on) and an even smaller share of its human capital (knowledge, experience, skills, values).  Confiscating his wealth would force him to sell his shares, tanking the value of Amazon stock and causing much, if not most, of his “wealth” to vanish. While a worldwide collapse of market share prices might make Oxfam happy, it would starve whole industries of resources leading to worldwide depression. Great for equality, but terrible for human flourishing.   Richard Fulmer worked as a mechanical engineer and a systems analyst in industry. He is now retired and does free-lance writing. He has published some fifty articles and book reviews in free market magazines and blogs. With Robert L. Bradley Jr., Richard wrote the book, Energy: The Master Resource. (0 COMMENTS)

Economists are more likely than most to emphasize the importance of decentralized decision-making and the way it allows dispersed knowledge to be fully utilized. But the argument doesn’t just apply to a high-level view of the economy as a whole. Decentralization isn’t just good economic policy – it’s also good business policy. This thought crossed my mind when I came across an interesting Substack article by Ted Gioia on how the previously dying Barnes & Noble is now managing to grow at a time when seemingly invincible tech giants like Amazon and Facebook are in decline. He attributes this remarkable turnaround to a few key factors, including a new CEO who loves books and bookstores. But it takes more than a CEO who has his heart in the job, important though that may be. Shifting away from top-down decision-making and towards a bottom up, decentralized approach has been crucial. (Full disclosure – during my college years, I also worked full-time at a Barnes & Noble. While I love books, I didn’t much care for my time working there. I’m just ill-suited for retail work.) It’s worth noting that Gioia attributes part of the Barnes & Noble turnaround to a certain form of top-down decision making – specifically, deciding from the top that decisions shouldn’t be made from the top. As he puts it: I’ve seen that firsthand so many times. I now have a rule of thumb: “There is no substitute for good decisions at the top—and no remedy for stupid ones.” It’s really that simple. When the CEO makes foolish blunders, all the wisdom and hard work of everyone else in the company is insufficient to compensate. This reflects an important line of thought also shared by the late Jeffrey Friedman and recently highlighted by David Henderson – when centralized decisions are mistaken, the mistake is imposed across the entire system. Bottom-up decisions could also be mistaken in any given instance, but they are also smaller in scope and not imposed system wide, allowing them to be weeded out through comparison and competition in a way that top-down decision making doesn’t allow. The new CEO of Barnes & Noble, James Daunt, employed the same line of thinking he used during his time at Waterstones, a British book retailer. Previously, the decision about what books should be in stock at which stores was made in a top-down fashion, where publishers worked at “convincing a head buyer at headquarters” regarding inventory and display decisions. Daunt ended that practice. As Gioia puts it: [Daunt] wanted to put the best books in the window. He wanted to display the most exciting books by the front door. Even more amazing, he let the people working in the stores make these decisions. Leaving those decisions up to individual stores allowed local knowledge to work in favor of the company as a whole. What kind of books are in demand can vary a lot from local market to local market. Publishers and people sitting behind desks and headquarters simply are not well suited to discover this kind of information. But Gioia points out: But Daunt used the pandemic as an opportunity to “weed out the rubbish” in the stores. He asked employees in the outlets to take every book off the shelf, and re-evaluate whether it should stay. Every section of the store needed to be refreshed and made appealing. As this example makes clear, Daunt started giving more power to the stores. But publishers complained bitterly. They now had to make more sales calls, and convince local bookbuyers—and that’s hard work. Even worse, when a new book doesn’t live up to expectations, the local workers see this immediately. Books are expected to appeal to readers—and just convincing a head buyer at headquarters was no longer enough. Of course, Barnes & Noble is not the only example of the importance of decentralized decision making in business. Occasionally, overly exuberant critics of the market process suggest that giant firms like Wal-Mart show that the economic calculation problem and the knowledge problem highlighted by Mises and Hayek can be overcome. Richard Fulmer has pointed out several flaws in this line of thinking already. But longtime listeners of the EconTalk podcast will also remember when Charles Platt talked with Russ Roberts about working at Wal-Mart. Despite what the socialist writers at Jacobin imagine, Wal-Mart is far from an example of successful top-down central planning. It relies very heavily on decentralized decision making in its business structure, with decision-making authority dispersed throughout the system rather than being centrally directed. Companies sometimes forget this lesson – and they are the worse off for it. But Barnes & Noble is showing what can happens when old wisdom is rediscovered – to the benefit of themselves and book lovers as well.     (0 COMMENTS)

We’re coming to our third online reading group discussing Bruno Leoni’s Freedom and the Law. So far the discussion was lively and insightful, a good reminder to me that the only way to really *know* a book is re-reading it periodically, as it may speak differently to you and you may notice things that you did not before. Doing so for a Liberty Fund conference, albeit a virtual one, is always a privilege. One very important part of Leoni’s book lies in the author’s discussion of democracy. Leoni, as we have hinted before, is looking at the law as a spontaneous order, somehow completing the insights of Austrian economics. In this context, he compares the common law and the operation of the market, as bottom-up processes, whereas legislation is compared to economic planning – if nothing else because, as he pointed out, economic planning is done by legislation. This latter point may seem obvious but Leoni thought many economists, including those most critical with central planning, were often thinking of it as a series of “policies” but they were not concentrating on the fact such policies were enabled only by the sort of centralized law-making that is legislation. The two things cannot be examined separately. Perhaps in a “genuine” common law system, some example of central planning would have emerged, but it would have been far more precarious, being exposed to a steady wave of judicial challenges and adjustments, instead of being solemnly written up in statutes. What has driven the triumph of legislation in the modern world? Leoni suggests that a twist in the concept of representation may have played a role. The very idea of a “representative” should point to a relationship imbued with trust, as it happens in “private life” where “anybody may contact anybody else whom he trusts and engage him as an agent to negotiate a contract, for example, according to instructions that can be clearly stated, clearly understood, and clearly carried out”. There are problems – as Leoni reminds us that, …economists and sociologists have already drawn our attention to the fact that representation in big private corporations works badly. Shareholders are said to have little influence on the policy of the managers, and the discretionary power of the latter, being a result as well as a cause of the ‘managerial revolution” in our times, is the greater, the more numerous are the shareholders that the managers “represent” in a business. It is worth noticing that Freedom and the Law was published in 1961; its author had first hand knowledge of business as an attorney and he neatly summarized issues of corporate governance which are way more apparent to us these days. What about politics? How does representation work, between the many voters and the few elected officials? For Leoni, …it is a truism that issues at stake in political life are too many and too complicated and that very many of them are actually unknown both to the representatives and to the people represented. Under these conditions, no instructions could be given in most cases. This happens at any moment in the political life of a community when the self-styled representatives are not in a position to represent the actual will of the alleged “people represented” or when there are reasons for thinking that the representatives and the people represented do not agree about the issues at stake. Leoni was critical of the idea that “representation” in a proper sense may happen in politics. Democratic voting procedures apply to group decisions, and are a means to reach them by majority rule. But somebody who has been chosen through majority rule can hardly be a “representative”, in the more traditional, fiduciary sense. In a way, majority rule ensures that the preferences of a certain subset of individuals trump the preferences of other subsets. Hence it is paradoxical to call the very instrument by which this happens, the elected official, a “representative”. She knows well she does not represent those who voted against her. Bruno Leoni was a great friend of James M. Buchanan and admirer of public choice, that resonated very well to him also because, as a highly educated Italian lawyer and political scientist, he knew the work of Mosca and the Pareto schools (the so-called Italian school of elitism) very well and these authors inspired, at least in part, Buchanan and the development of public choice. Notice how Leoni, who is strongly interested in using the economist’s toolbox in dealing with political issue, is skeptic of the parallel between competition and political competition: Of course, choosing between potential competitors is the proper activity of a free individual in the market. But there is a great difference. Market competitors, if they are to keep their position, are necessarily working for their voters (that is, for their customers), even when both they and their voters are not completely aware of it. Political competitors, on the other hand, are not necessarily working for their voters, since the latter cannot actually choose in the same way the peculiar “products” of the politicians. Political producers (if I may use this word) are at the same time the sellers and the buyers of their products, both in the name of their fellow citizens. Freedom and the Law is short but so rich in insights. I hope you may give it a look. (0 COMMENTS)

Photo by: Patti Perret/Hulu Hulu’s series “The 1619 Project” blames economic inequality between blacks and whites on “racial capitalism.” But almost every example presented is the result of government policies that, in purpose or effect, discriminated against African-Americans. “The 1619 Project” makes an unintentional case for capitalism. The series gives many examples of government interventions that undercut free markets and property rights. Eminent domain, racial red lining of mortgages, and government support and enforcement of union monopolies figure prominently. These are the opening two paragraphs of David R. Henderson and Phillip W. Magness, “The 1619 Project on Hulu Vindicates Capitalism,” Wall Street Journal, February 20, 2023. (February 21 print edition.) Read the whole thing if you’re subscriber. I will post the whole thing in 30 days. (0 COMMENTS)

The Financial Times has a very good article that exposes some of the internal contradictions of progressive economic policy: A shortage of construction workers is putting at risk the Biden administration’s ambitious plan to fuel a historic building boom in the US, according to industry executives. The construction sector could be short as many as half a million workers this year, according to the Associated Builders and Contractors, an industry group, increasing project costs and delaying a building campaign that executives say is comparable to that of the second world war. For much of the past 15 years, we’ve been assured that the economy was full of unutilized resources and “unmet needs”. Classical economics (with its emphasis on production constraints and opportunity costs) was out of fashion. We had multi-trillion dollar stimulus (even under GOP presidents) and Congress recently enacted several enormous programs to create infrastructure, clean energy, and chip making. Even without these vast new programs, the economy is currently experiencing a labor shortage due to excess monetary stimulus.  This situation is quite different from the WWII arms build-up, which began (in the spring of 1940) at a time when unemployment was relatively high.  We don’t have enough skilled labor: In Columbus, Ohio, Intel has pledged $20bn to build two semiconductor factories, and Honda is building a $4.4bn battery plant with LG Energy Solution. The projects will require nearly 10,000 construction workers. “The entire state of Ohio does not have the number of professionals to perform this alone,” said Catherine Hunt Ryan, manufacturing and technology president of Bechtel, one of the companies building Intel’s factories. Costs are being pushed up even further by some of the regulatory provisions that require “prevailing wages” (code word for union workers) in the new projects: “The administration is effectively tying one hand behind one’s back because of the regulatory restrictions on who can engage productively in these construction projects,” Basu said. So why not import the needed workers?  Apparently, that’s also off limits: To meet labour demand, construction bosses are pushing for immigration reform, an issue unlikely to gain traction in a divided Washington. . . . One problem, according to Brian Turmail, a spokesperson for the AGC, is a contradictory attitude towards building jobs in the US. “We just don’t want our own children to work in construction and we don’t want anyone from outside of the country to work in construction.” Progressive economics is full of internal contradictions.  In its crudest form (e.g. Bidenomics), it’s little more than a wish list.  Wouldn’t it be nice if we had plenty of jobs and high living standards (consumption) and high investment and high wages and a clean environment and the re-shoring of chip making. The problem is that one cannot have all those things at once.  Choices must be made.  Something has to give. On economics, President Biden has the instincts of FDR, but he’s presiding over an environment that is very different from the 1930s.  After taking office, Bill Clinton figured this out—let’s hope that Biden is equally adept at learning. (0 COMMENTS)

  Value and cost are not the same. I remark often to students that, all things considered, I would probably rather have the life and the opportunities of a lower-income student in today’s United States in material terms than the life of John D. Rockefeller. This is from Lawrence Summers, “Liberty, Optimism, and Superabundance,” Cato’s Letter, Winter 2023, Number 1. The article is Larry’s comment on Marian L. Tupy and Gale L. Pooley, Superabundance. The book is on my shelf but I haven’t read it yet. My impression, like Larry’s, is that the book is quite good and quite important. After the quote above, Larry explains in some details why he would rather be a lower-income American student today than John D. Rockefeller a century ago. An excerpt: The chance of suffering a fatal illness at a young age would be much lower. The range of goods that would be obtainable would be much larger. The extent of the entertainment op- tions available would be much greater. The comfort of being able to live in a room whose temperature was adjusted to suit would be vastly better for that student. The ability to get to a place 3 or 5 or 6 or 10,000 miles away quickly would be immensely larger. The number of things about which that person could learn would be far greater. The freshness, the range of foods that would be available to eat would be substantially more, and the comfort of the available clothing would be substantially greater. Then Larry says something strange: There is something slightly odd about using the notion of time cost in a Cato Institute publication, since, after all, it was Karl Marx who put forward a labor theory of value and sought to explain the value of all things based on the extent of labor input that went into them. The idea of using time cost is not odd at all; it says nothing about value. Value and cost are distinct. The time cost of an item is the number of hours you would have to work at a given wage to earn enough to buy the item. It says nothing about how much you value the item. So recognizing time cost is not at all like accepting a labor theory of value. Fortunately, Larry gets the gist anyway, writing: But I think it is a very powerful way of capturing the progress that we have all observed. The truth is that an hour of labor cur- rently translates into far more in the way of goods that provide necessities for satisfaction or services that provide utility than has been the case at any point in human history.     (0 COMMENTS)

When psychiatrist Marco Ramos of Yale University prescribes antidepressants to patients in distress and they ask him how they work, Ramos admits: We don’t really know. And too often, they don’t work at all. Despite decades of brain research and billions of dollars spent, psychiatry has made little progress in understanding mental illness. Listen as […] The post Marco Ramos on Misunderstanding Mental Illness appeared first on Econlib.