There is an increasing focus on the Fed’s recent losses on its bond portfolio, which has declined in value as interest rates have risen: The US Treasury will see a “stunning swing,” going from receiving about $100 billion last year from the Fed to a potential annual loss rate of $80 billion by year-end, according to Amherst Pierpont Securities LLC. Here are five perspectives on the issue: 1. The Fed is part of the federal government’s consolidated balance sheet.  Thus when Treasury bond prices decline, the loss to the Fed is exactly offset by the gain to the Treasury.  It’s not an issue. 2. While point #1 is true, if the Fed had not bought those bonds then the Treasury would have gained when T-bond prices plunged.  Thus the Fed’s decision to buy lots of T-bonds has created a loss relative to the counterfactual world where they did not accumulate a large bond portfolio. 3.  While points #2 is true, the ultimate cause of the sharp bond price decline is the recent surge in inflation.  Inflation helps borrowers (such as the US Treasury).  That inflation surge would not have occurred if the Fed had not purchased lots of bonds in its QE programs. 4.  Point #3 is partly true, but the Fed’s large bond portfolio also reflects its decision in 2008 to begin paying interest on bank reserves (IOR).  Had the Fed not made that decision, it could have operated with a smaller balance sheet, and thus would have occurred smaller losses during the recent upsurge in interest rates. 5.  Point #4 is true, but it’s also true that the Fed’s large bond purchases allowed it to make extraordinarily large profits during the low interest rate era of 2009-2021.  It remains to be seen whether this policy is a net negative or positive in the long run. On balance, I oppose IOR for a variety of reasons.  But I don’t believe there is any clear and straightforward way of thinking about the Fed’s recent losses.  I tend to view policy issues from the perspective of “counterfactuals”.  If policy X produces the best result, then a less ideal result that we actually get is the true opportunity cost of not doing policy X.  I tend not to focus very much on Fed accounting profits and losses, because the macroeconomic effects of Fed policies is many orders of magnitude more important.  If the Fed stops paying IOR and focuses on the policy that results in low and stable NGDP growth, then the profits and losses will become a trivial issue.      (0 COMMENTS)

Most grownups don’t believe in magic anymore. Sometimes, though, it can be helpful to imagine it. A powerful ring turns the wearer invisible in J. R. R. Tolkien’s The Lord of the Rings. That power means the wearer can act with relative impunity. (For that device, Tolkien had Plato to thank.) We can also imagine characters with superhuman abilities. These thought experiments sometimes help us put ourselves and our societies into perspective. In Tolkien’s world, we wrestle with questions on the nature of power. In our world, we can explore the nature of peace. Let’s imagine that wizards exist in our world, and one supremely powerful wizard has cast a spell over the realm. The Spell of Nonviolence The wizard’s spell is of nonviolence. Call it “The Spell of Ahimsa.” Under this spell, no one can threaten or commit any act that injures another person or their property. When a brigand tries to attack a caravan on the road, his fingers weaken, and his dagger simply falls from his grasp. When a tax collector tries to arrest a merchant in the town, the handcuffs slip from his fingers. When a bully tries to push another girl, she discovers an invisible wall of protection. It doesn’t matter whether the perpetrator thinks he is using violence to serve good or evil. The fact is, the spell ensures a condition of complete nonviolence in society. What should we make of this? Would the realm be better off under the wizard’s spell? Answers will vary. Nearly every society has laws against theft, fraud, and physical injury, which means something is justifiable about the spell. So at least a fair number of people might agree intuitively that the world would be better without violence. As soon as we get into questions about the justification for authority’s threats of violence, though, answers start to diverge. Differences are starkest when we think of the spell affecting government officials. Consider “The Spell of Nonviolence” as it relates to issues of government-issued welfare. In other words, if the wizard used magic such that officials had to abstain from violence, how would authorities implement redistribution schemes? Specifically, how would authorities tax the rich to give to the poor? Redistribution as Rooted in Violence The modern redistributive state is relatively recent in history. In fact, what made the welfare state affordable was the rapid advances of industry and enterprise. After about 1800, this advance—known as the “hockey stick” of prosperity—helped generate opportunities for people to create more value for each other. For maybe the first time in history, there were more people trading than raiding. People living in this Great Enrichment rocketed out of poverty.1 According to economic historian Dierdre McCloskey:, Earlier prosperities had intermittently increased real income per head by double or even triple, 100 or 200 percent or so, only for it to fall back to the miserable $3 a day typical of humans since the caves. But the Great Enrichment increased real income per head, in the face of a rise in the number of heads, by a factor of seven—by anything from 2,500 to 5,000 percent. A few entrepreneurs got amazingly wealthy in the Great Enrichment, but a massive middle class emerged, too, as people figured out how to organize themselves into productive firms. These firms weren’t perfect, but they were responsible for unprecedented improvements in living standards. With such gains, even the poorest improved their lot. In the late nineteenth and early twentieth centuries, governments began instituting welfare programs and other centralized forms of social welfare. The idea was to see that the least fortunate in society could meet their basic needs. But these systems brought along a set of perverse consequences. And as these systems began to predominate, existing voluntary systems of civil society disappeared. Essential features of voluntary systems, such as the practice of compassion and community, not to mention the development of personal responsibility, slowly disappeared along with them. The Spell of Ahimsa helps us see a feature of the redistributive welfare state that is frequently overlooked: its very existence depends on state-sanctioned violence. In other words, how would the system operate if authorities couldn’t threaten to imprison those who refused to pay for it? Most people don’t think about matters this way, accustomed to the idea of the welfare state as a permanent fixture of life. But as we will see, it hasn’t always been this way. Human beings naturally organize themselves. Savings Clubs Around the World Tanomoshi is a locally organized system of mutual aid. These community resource pools have existed in Japan at least since the middle Kamakura period of 1185 to 1333 BCE. Under this system, each member would contribute a small sum at regular intervals and would receive a single, lump payment whenever the member experienced a significant life event. In medieval Japan, per capita GDP is estimated to have been between 500 and 800 dollars in 2011 dollars. (Compare this with today’s United States poverty level of $12,880 for a single person.) Every month, people would travel to the tanomoshiko to leave a little bit of money. A trusted party there would accept their contribution with a bow. Tanomoshiko is translated as “reliable group,” so the community selected a steward of integrity. Though most medieval Japanese earned very little, they were committed. One family might have arranged for a daughter to be married. Another might have found a parent has become gravely ill. Each would be able to go directly to the tanomoshiko for support. In some of the poorest parts of the world, there is little capacity for government welfare, much less modern banking. So in places like sub-Saharan Africa, people contribute a modest monthly allotment to a su su (or sou-sou). Those who aren’t very good at saving money by themselves are encouraged to use a su su because club members hold one another accountable. Here’s how it works, according to South African writer Lihle Z. Mtshali, describing the Afro-Caribbean variant in America: The group elects a treasurer who will collect the members’ contributions. She will also create a payout roster, or members can request to receive their hand at any given date during the cycle. Everyone agrees on how much and how often they want to contribute. If ten members are contributing $100 a week, each week a member will receive a $1,000 hand or cash lump sum. The cycle begins again after ten weeks. Any member who can afford it, can also double their contribution and get paid two hands in one cycle.2 Because there is no interest to be collected, members always get out the exact amount they put in. The recipient changes each period in a rotating fashion such that every member of the group is eventually a recipient. Curiously, this arrangement has sprung up in various forms worldwide throughout history. A similar system called kye in Korea is still around today, even among Korean immigrants to the United States. Similar rotational systems include tandas (Latin America), cundinas (Mexico), partnerhand (Caribbean/United Kingdom), hui (Asia), Game’ya (Middle East), pandeiros (Brazil), and arisan (Indonesia). These systems facilitate personal savings, investment in property and enterprise, insurance, personal loans, and assistance to poorer people. In developed countries, people can use these systems to build credit. Mutual Aid in America Seal of the Souvereign Grand Lodge of the Independent Order of Odd Fellows Today, if you were to ask the average man or woman on the street to name a mutual aid society, you would be lucky if he or she could name a single one. But at one time in America these organizations were everywhere. They had funny names like the Oddfellows, the Free African Society, and the Brotherhood of Locomotive Engineers. At one time, they included health insurance and unemployment support. Because they were a mix of the communitarian and the charitable, surplus dues could go to growth and giving. As most organized into local chapters and lodges, they featured the undocumented acts of kindness and tough love we would scarcely recognize if we saw them today. They are the forgotten social safety net. This vast empire of human good was built not by federal largesse but on the moral conviction of free people weaving their lives together as a community to guard against hardship. Once held together by tight neighborhoods, mutual support, and barn raisings, a communitarian society has been torn apart by redistribution. Beholden to banks or bureaucracies, most Americans are dependent on authorities’ plans thousands of miles away. The rest are compelled to foot the bill—or else. At one stage, this system was affordable. But in time, the system became corrosive and dependent on public and private debt. “As we have fallen deeper into debt, we have forgotten how to take care of one another.” As we have fallen deeper into debt, we have forgotten how to take care of one another. The rise of the administrative welfare state corresponds to civil society’s decline. Whether it’s correlation or causation, I cannot say. But the circumstantial evidence is pretty damning. The Decline of Community When Alexis de Tocqueville came to America in 1831, he saw something profound. Maybe you’ve read the following passage before. But as you read it again, ask yourself whether or to what degree this is an America you recognize: The political associations that exist in the United States are only a single feature in the midst of the immense assemblage of associations in that country. Americans of all ages, all conditions, and all dispositions constantly form associations. They have not only commercial and manufacturing companies, in which all take part, but associations of a thousand other kinds, religious, moral, serious, futile, general or restricted, enormous or diminutive. The Americans make associations to give entertainments, to found seminaries, to build inns, to construct churches, to diffuse books, to send missionaries to the antipodes; in this manner they found hospitals, prisons, and schools. If it is proposed to inculcate some truth or to foster some feeling by the encouragement of a great example, they form a society. Wherever at the head of some new undertaking you see the government in France, or a man of rank in England, in the United States you will be sure to find an association. I suspect that if you see today’s America in the above, it’s been weakened and politicized. Reading Tocqueville, one can imagine a time when the organs of civil association extended to spheres of life such as childhood and old age. But these are institutionalized and segregated today. Children are warehoused by the state so that parents can work to pay bills and taxes. The elderly are similarly warehoused and told more or less that their participation in productive society is optional after age 65. Beyond that point, many become liabilities to be managed by the Congressional Budget Office. Consider then the lost array of mutual aid societies, lodges, and fraternal orders of which a third of Americans were once members. Historian David Beito painstakingly investigates3 a handful of these to offer a clearer picture: century illustrates the many variants of this system. Each had a distinct membership base. Two of the societies, the Independent Order of Saint Luke and the United Order of True Reformers, were all-black. Both had been founded by ex-slaves after the Civil War and specialized initially in sickness and burial insurance. The other societies had entirely white memberships. The Loyal Order of Moose was an exclusively male society that emphasized sickness and burial benefits. It became best known during the 20th century for its orphanage, Mooseheart, near Aurora, Illinois. The Security Benefit Association (originally the Knights and Ladies of Security) followed in a similar tradition but broke from the mainstream by allowing men and women to join on equal terms. Even as we shake our modern heads at segregation along racial lines, we can still appreciate the power of civil association that has all-but-disappeared in the twenty-first century. There is no doubt that most human beings care for others. This care can extend to strangers. At some level, we all want to be assured that poor people can get help when they need it. Most of us want to know that those who seek our help really need it and that assistance doesn’t create dependency. Mutual aid societies served this function because members kept an eye on other members. Government welfare views successful people as human ATMs and the poor as statistical plot points. There is no discernment. A mutual aid renaissance would discourage people from simply outsourcing their compassion. Instead, we would all have to learn to be compassionate again. The Fundamental Questions In an age of rapid technological advances and material abundance, we must ask penetrating questions about whether the current socio-political order is morally justifiable. First, if you could choose non-violent means of achieving social goals such as poverty relief, wouldn’t you? After all, violence causes suffering. Causing unnecessary suffering against innocent people is wrong. One might respond by arguing that non-violent forms of poverty relief are impossible, so the extent to which the relatively well-off suffer from taxation is a necessary evil. But isn’t this line of argument just a failure of imagination? Remember that mutual aid was robust in the past without the benefits of modern technology. It’s easier to dispel skepticism about voluntary arrangements when we reflect on mutual aid in the era of digital ledgers. (Remember, we haven’t yet discussed improvements to the charity sector that the Internet has enabled.) Now, if we can demonstrate that mutual aid and charity could be robust enough to help the least advantaged, wouldn’t that mean the violent redistributive state causes unnecessary suffering? Advocates for the welfare state argue that wealthier members of society don’t suffer all that much when authorities compel them through redistributive taxation. But if we agree that the goal is to help the poor rather than punish the rich, then all such suffering is unnecessary. Moreover, the vast majority of the rich’s assets don’t go to consumption but rather to capital that fuels other poverty-fighting endeavors such as investments in companies and a thousand experiments in effective altruism. Capital is rarely idle–passing over, for now, the perverse distortions created by central banks. Finally, if it’s possible to help the poor (or the poor to help each other) without resorting to violence, isn’t this something we ought to do? If the answer is yes, we have a moral obligation to transition away from the violent welfare state to a nonviolent condition of community support, charity, and mutual aid. Sadly, moral suasion isn’t likely to work. But if governments around the world find they can no longer afford the bloat and unprecedented debt, it could be that mutual aid is the last remaining option. Becoming the Social Safety Net We have demonstrated that mutual aid is possible and probably more effective even among the poorest people. Even if a subset cannot afford to participate in mutual aid, the least advantaged would be able to rely more on families, churches, charities, and communities, all of which would likely receive greater comparative support. Again, the poor are more likely to find these options without a vast government welfare empire. In 1900, when U.S. per capita GDP was only $4,000, one-third of American men belonged to a mutual-aid society. Just think what this sector could look like with an average per capita GDP of $65,000—with only about 11 percent living below the federal poverty limit. Mutual aid arrangements are not just superior because they are voluntary. These systems build in mechanisms of accountability and integrity for members—the practice of compassion. By contrast, government welfare is impersonal and treats everyone the same, reducing incentives to work and engendering an unhealthy sense of entitlement. Again, the debt spending that is needed continuously to prop up the welfare system has created risks of a global contagion. For more on these topics, see Welfare, by Jeffrey M. Jones and Thomas MaCurdy. Concise Encyclopedia of Economics. Charity, by Russell Roberts. Concise Encyclopedia of Economics. Christy Ford Chapin on the Evolution of the American Health Care System. EconTalk. Democracy in America, by Alexis de Tocqueville. English Edition. 2 vols. Online Library of Liberty. The mutual aid sector is thus due for a renaissance. It might seem radical, but charity and mutual aid systems create more trust, engender more integrity, and offer greater responsibility. Suppose, though, that the compulsory redistribution system continues to grow. There will be fewer opportunities for experimentation in mutual aid, that is, until the economy drowns in a sea of red ink. Casting the Spell Of course, there is no Spell of Nonviolence. It is impossible to cast such a spell on everyone. But one thing is possible: You and I can cast this spell on ourselves. We can form a moral community of people who refuse to support institutions that threaten violence to operate. I’d be willing to bet that where there is more peace, there is also more compassion. As more people cast this spell upon themselves, we will find we live in a world of increased dignity, flourishing, and love. Footnotes [1] Deirdre McCloskey, “The Great Enrichment Was Built on Ideas, Not Capital.” FEE, Nov. 22, 2017. [2] Lihle Z. Mtshali, “Everything You Ever Wanted to Know About Those Sou-Sou Savings Clubs African and Caribbean Women Love.” Essence, December 6, 2020. [3] David T. Beito, From Mutual Aid to the Welfare State: Fraternal Societies and Social Services, 1890-1967. University of North Carolina Press, 2000. *Max Borders is executive editor at Free To Choose Network. As a 2011 Robert Novak fellow of the Phillips Foundation, Max will be writing a book on wealth creation. He lives in Austin, TX. For more articles by Max Borders, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

The year 2022 marks the 75th anniversary of the founding meeting of the Mont Pèlerin Society organized by F. A. Hayek. What is particularly interesting is the fact that—as highlighted in the transcripts of that meeting recently published by Bruce Caldwell as Mont Pèlerin 1947 (2022)—the role of public policy in regulating market power and the necessity of laws enforcing competition remain a current academic debate. The purpose of this essay is not to make any policy recommendations of my own, per se, in light of renewed calls for regulation against monopolies, particularly with respect to the rise of platform economies. Rather, it is to point out, as Mark Twain once put it, that “history never repeats itself, but it does often rhyme.” Therefore, my point is simply to render explicit some of the underlying assumptions upon which calls for anti-trust regulation are based. In doing so, I will highlight that—in the case for regulation of platform economies—this represents a new application of an old argument, one that had been discredited by economists working in the tradition of the Austrian school (Kirzner, 1979; Armentano, 1982), the Chicago school (Brozen, 1982), and the UCLA school of economics (Demsetz, 1973, 1982). This particular argument is the justification of regulation for the purpose of correcting a “market failure” associated with monopoly power based on economies of scale, which are regarded as a barrier to entry. My argument can be distilled into three particular questions regarding the relationship between digital platforms and antitrust policy: (1) First, are markets “imperfect”? (2) Second, what is the relationship between entrepreneurship and barriers to entry associated with economies of scale? (3) Third, what role does limited liability play in reinforcing or eroding the conditions for corporate power, particular with respect to digital platforms? I have argued elsewhere what it means for markets to be “imperfect,”1 but it is nevertheless relevant to highlight that the word “imperfect” is not only a by-product of our understanding of economic theory, but also has subtle yet important implications for public policy. Most economists would conclude—regardless of where they lie on the political spectrum—that because markets are “imperfect,” this means that they are flawed or suboptimal when compared to an “ideal market” of perfect competition in which no firm or group of firms can exercise monopoly power. “… markets are imperfect, but precisely why they exist in the first place. They serve as a mechanism for error correction, learning, and entrepreneurial discovery.” According to this narrative, government intervention is the deus ex machina that saves the market from its own “imperfections” through regulations that enforce “competition.” But rather than claim that a particular market is flawed, suboptimal, or non-ideal, another way to interpret the meaning of “imperfect” is as an act or process that is not thoroughly done, or incomplete. So, indeed, markets are imperfect, but precisely why they exist in the first place. They serve as a mechanism for error correction, learning, and entrepreneurial discovery. None of this implies that markets operate outside of an institutional vacuum. Rather, it raises a particular conclusion with public policy implications. That is, if a market is imperfect due to monopoly power, representing a future profit opportunity for entrepreneurs to enter a particular market or industry, and if such an imperfection persists, then a barrier to entry must be stifling competitive entry. One might argue therefore that monopoly power can persist due to barriers to entry not set up as a result of government privilege. This brings us to the second question: what is the relationship between entrepreneurship and barriers to entry associated with economies of scale? According to the argument first popularized by economist Joe Bain (1956, 1968) incumbent firms, by virtue of their ownership of capital, are able to enjoy a monopolistic or oligopolistic position—particularly if such a resource is prohibitively costly to purchase by many potential competitors. Capital requirements to realize economies of scale may serve as a barrier to entry, and therefore operate to confer imperfectly competitive market structures upon industries. Thus, the most plausible argument in favor of regulation of digital platform economies is based on the notion of market imperfections due to barriers to entry associated with capital ownership and economies of scale, which in turn create the conditions for monopoly power. The role of digital platforms—such as Airbnb, Amazon, eBay, Google, and Facebook—is not to offer a specific product per se. Rather, such digital platforms serve to reduce transaction costs by acting as a connector between sellers that would otherwise compete separately with potential buyers (see Munger, 2018). Markets in which digital platforms have become important players are often characterized by a tendency towards concentration (Haucap and Heimeshoff, 2014). The implication here is that monopoly power is secured by the necessity for a firm to incur high fixed start-up costs in order to take advantage of the economies of scale due to the network effects provided by a platform. While the argument that capital requirements constitute a barrier to entry is strengthened by the existence of scale economies, since these will increase the amount of capital needed to compete effectively, the argument does not depend on the superficial identification of large size with monopoly power. This is because entrepreneurial profits are not discovered by virtue of the fact that firm owners are owners of capital (Kirzner, 1979). Indeed, capital is required to later realize an entrepreneurial opportunity to enter a market, but the ownership of capital is a consequence of having first discovered that a profit opportunity exists, and therefore concentration of capital ownership does not necessarily constitute a barrier to entry that would cause monopoly profits. If this were the case, then every industry could realize higher profits simply by becoming more concentrated. Superior economic efficiency in pursuit of profitability tends to produce market concentration. Therefore, if concentration is a by-product of profitability—not necessarily its cause—due to the realization of efficiency gains, antitrust policy may have the counterproductive result of sacrificing the efficiency gains platform economies realize and raising prices for consumers (see Demsetz, 1973). The conceptual distinction between entrepreneurship and capital ownership is particularly important, for it leads to the third question I raised: what role does limited liability play in reinforcing or eroding the conditions for corporate power, with particular respect to digital platforms? To address this question, let me begin by quoting economist Ronald Coase, who in his Nobel Prize address states that “a large part of what we think of as economic activity is designed to accomplish what high transaction costs would otherwise prevent or to reduce transaction costs so that individuals can freely negotiate and we can take advantage of that diffused knowledge of which Hayek has told us” (1992, p. 716). According to the thesis first raised by Adolf Berle and Gardiner Means in their book, Private Property and the Modern Corporation (1932), since there is a separation of ownership among a diffuse group of shareholders—and since decisions are not made by such owners (i.e., shareholders) to whom profits accrue, but instead by a new class of corporate managers who control the firm—they find little personal incentive in providing corporate profits to shareholders. This separation of ownership and control in the corporate structure of firms creates the potential basis for corporations to exercise political power and influence (see Zingales, 2017). However, the role of limited liability, which may be regarded as the source of corporate power, is also the very basis for its discipline and erosion. This is because “limited liability considerably reduces the cost of exchanging shares by making it unnecessary for a purchaser of shares to examine in great detail the liabilities of the corporation and the assets of other shareholders” (Demsetz, 1967, p. 369). Otherwise, “any extension of liability beyond the assets of the firm to the personal (extra-firm) assets of the shareholders must, in order to be enforceable, impair transferability of shares” (Woodward, 1985, p. 601). Although limited liability facilitates a distinction between ownership and control of the firm, this should not be regarded as a source of market power. Rather, limited liability becomes the source of market discipline of corporate management since it facilitates the ability of shareholders to buy and sell ownership shares on the stock market, deflecting corporate management from indulging preferences inconsistent with maximizing profit (see Demsetz, 1983). In effect, limited liability allows potential entrepreneurs, who would otherwise be constrained if limited in their ownership of capital, to reduce the transaction costs of raising capital as a by-product of their entrepreneurial insight This allows markets to take advantage of the dispersed and tacit knowledge of potential competitors eroding the potential of corporate power. The point I am raising here is best stated by Israel Kirzner, who argued “where the corporate form of business organization permits a measure of independence and discretion to corporate managers, this is an ingenious, unplanned device that eases the access of entrepreneurial talent to sources of large-scale financing. Instead of the entrepreneur having to borrow capital—with all of the transaction costs we have seen this to involve—the corporate form of organization permits would-be entrepreneurs to hire themselves out to owners of capital as corporate executives. The capitalists retain formal ownership, permitting them, if they choose, to divest themselves easily of their shares in badly managed firms or, in the last resort, to oust incompetent management” (Kirzner, 1979, p. 104). To conclude, I want to return to Hayek’s The Road to Serfdom, in which he refers to the law “as a kind of instrument of production” ([1944] 1994, p. 81). This is a particularly timely quote given the theme of the most recent meeting of the Mont Pèlerin Society: Renewing the Infrastructure of Liberty. If the legal framework governing competition is analogous to a factor of production—such as land, labor, and capital—what we all wish to avoid is turning a legal of framework of rules (shared and enforced impartially across all competitors) into a framework of discretion for the sake of expediency to combat what appears to be a threat to open competition. If rules are abandoned for discretion, then the law will become a scarce factor of production—and like with any scarce resource, competition will result, only such competition will manifest itself in politics rather than markets in the form of rent-seeking and regulatory capture. For more on these topics, see Michael Munger on Antitrust. EconTalk. “The Entrepreneurial Justice of the Market Process,” by Rosolino Candela. Library of Economics and Liberty, Jun 6, 2022. A Conversation with Ronald H. Coase. Intellectual Portrait Series, Liberty Fund Video. Indeed, the surest way to secure a monopoly is the monopolization of a particular resource or factor of production, for such a barrier to entry can effectively preclude access into a market from new competitors. But such a condition can only be created if we open Pandora’s box by abandoning the framework of rules that constrain policymakers from exercising discretion. This will create the worst source of monopoly: control over legal discretion by firms through rent-seeking and regulatory capture. The implication here is that what entrepreneurs will identify as a profit opportunity will be contingent upon the relative returns to entrepreneurship, which are shaped by public policy. That is, public policy based on discretion will decrease the returns to productive entrepreneurship, which excludes potential competitors by learning to satisfy consumer preferences and increase the relative returns to unproductive entrepreneurship, which excludes potential competitors by learning to capture regulators. References Armentano, Dominick T. Antitrust and Monopoly: Anatomy of a Policy Failure. New York: John Wiley & Sons, 1982. Brozen, Yale. Concentration, Mergers and Public Policy. New York: Macmillan, 1982. Bain, Joe S. Barriers to New Competition: Their Character and Consequences in Manufacturing Industries. Cambridge: Harvard University Press, 1956. Bain, Joe S. Industrial Organization. New York: Wiley & Sons, 1968. Berle, Adolf A., and Gardiner C. Means. The Modern Corporation and Private Property. New York: The Macmillan Company, 1932. Caldwell, Bruce (ed.). Mont Pèlerin 1947. Stanford: Hoover Institution Press, 2022. Coase, R. H. “The Institutional Structure of Production.” The American Economic Review 82, no.4 (1992): 713–719. Demsetz, Harold. “Toward a Theory of Property Rights.” The American Economic Review 57, no. 2 (1967): 347–359. —— “Industry Structure, Market Rivalry, and Public Policy.” Journal of Law and Economics 16, no. 1 (1973): 1–9. —— “Barriers to Entry.” The American Economic Review 72, no. 1 (1982): 47–57. —— “The Structure of Ownership and the Theory of the Firm.” The Journal of Law & Economics 26, no. 2 (1983): 375–390. Haucap, Justus, and Ulrich Heimeshoff. “Google, Facebook, Amazon, eBay: Is the Internet Driving Competition or Market Monopolization?” International Economics and Economic Policy 11 (2014): 49–61. Hayek, F. A. The Road to Serfdom. Chicago: University of Chicago Press, [1944] 1994. Kirzner, Israel M. Perception, Opportunity, and Profit: Studies in the Theory of Entrepreneurship. Chicago: University of Chicago Press, 1979. Munger, Michael C. Tomorrow 3.0: Transaction Costs and the Sharing Economy. New York: Cambridge University Press, 2018. Woodward, Susan E. “Limited Liability in the Theory of the Firm.” Journal of Institutional and Theoretical Economics 141, no. 4 (1985): 601-611. Zingales, Luigi. “Towards a Political Theory of the Firm.” The Journal of Economic Perspectives 31, no. 3 (2017): 113-130. Footnotes [1] See “Are Markets Imperfect? Of Course, But That’s the Point! by Rosolino Candela. EconLog, May 18, 2020. * This essay is based on remarks delivered on October 6, 2022 at the 75th Anniversary General Meeting of the Mont Pèlerin Society in Oslo, Norway (October 4–8, 2022). I am particularly grateful for comments and feedback offered by Peter Boettke, Don Boudreaux, Christopher Coyne, Larry White, and Amy Willis. Any remaining errors are entirely my own. Rosolino Candela is a Senior Fellow in the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics, and Program Director of Academic and Student Programs at the Mercatus Center at George Mason University. (0 COMMENTS)

A Book Review of The Great Reversal: How America Gave Up on Free Markets, by Thomas Philippon.1 The Great Reversal defends a provocative and surprising thesis: the United States has given up on free markets while Europe has embraced them. As a result, Europeans pay less and get more in a lot of industries, like telecommunications and air travel. Throughout the book, New York University economist Thomas Philippon explains why the United States is no longer the seat of dynamic, innovative capitalism that it once was. It resonated with some of my recent experiences. In August, I visited the Center for Political Studies in Copenhagen, Denmark for a week and gave a few lectures. One of my lectures applied some of the insights Deirdre McCloskey and I explored in our 2020 book2 to the Danish retail sector. I was surprised when I was doing some research for the talk and learned that according to OECD data, Danish retail shoulders a smaller regulatory burden than American retail even though Danish land use laws make it so that grocery stores there are inefficiently small and Danish consumers pay higher prices.3 “Philippon makes a convincing case that we would do well to revise our belief that the American economy is a free market while European economies are not.” In fifteen clearly written, easy-to-read chapters plus an introduction, a conclusion, and a technical appendix, Philippon shows why some of my Danish audiences should have stifled their laughter when I described their country as a free-market paradise compared to the United States. He defends his thesis by exploring numerous data sources, including the Mercatus Center’s database4 working to quantify the intensity of regulation in the United States (pp. 94-96). They tell the same story: European markets have gotten freer while American markets have gotten less free. As he explains with respect to occupational licensing, the United States and Europe are moving in opposite directions, with the United States moving toward more tightly controlled labor markets and Europe moving toward freer labor markets (p. 283). Philippon makes a convincing case that we would do well to revise our belief that the American economy is a free market while European economies are not. He goes industry-by-industry to explain where and how European markets have become freer than American markets. He also looks at the data to see how “new” and “unprecedented” firms like Google, Apple, Facebook, Amazon, and Microsoft are, and he finds that while they definitely represent important new technologies, they aren’t really that different from other superstar firms of the past, relative to the rest of the economy. Philippon is a self-described “free market liberal” who approaches his subject with a set of arguments and tools that are straight out of the neoclassical mainstream. Philippon writes explicitly that by “free markets,” he means “markets are free when they are not subject to arbitrary political interference and when incumbents are not artificially protected from competitive new entrants” (p. viii). From what I can gather, he believes with most economists that free markets work wonderfully in most instances, fail miserably in some instances, and can be fixed with appropriate regulations, taxes, and subsidies. I’m less sanguine about “our” ability to fix markets by relying on experts, no matter how much data they are able to assemble. In 2009, I asked, “is the definition of the market too important to be left to the market?” in response to the Federal Trade Commission’s effort to block the Whole Foods-Wild Oats merger.5 I think Philippon, like many economists, does take the implications of F.A. Hayek’s argument about the use of knowledge in society as seriously as he should. Hayek isn’t arguing that markets calculate more efficiently than central planners. He argues that the knowledge problem is of a wholly different kind than the problems experts can solve with enough data and powerful enough computers. There is a great deal of often tacit, rarely articulated knowledge of “the particular circumstances of time and place” that cannot confront an expert or regulator as meaningful data. Forsaking the market necessarily substitutes the regulator’s imagination for the combined but unarticulated wisdom embodied in prices and evolved rules. Political economy gets about fifty of the book’s roughly three hundred pages, and Philippon concludes that American markets are not as competitive as they would have been without lobbying and rent-seeking. I’m reminded of my late friend Steven Horwitz’s first law of political economy: “no one hates capitalism more than capitalists,” and a point Donald J. Boudreaux made once: “if rents can be created, they will be sought.” It would be useful, I think, for future work building on Philippon to focus more on the supply side of the market for economic rents a la Randall Holcombe in Political Capitalism and Fred McChesney in Money for Nothing: The Political Economy of Rent Extraction. It warmed my heart to see Philippon bring Mancur Olson’s analysis into the conversation, but I would have preferred that he carry the public choice analysis further and more clearly highlighted the difference between how coercion and cooperation work as crucibles in which social knowledge is tried and authenticated. He argues that “(t)olerating well-intentioned mistakes is therefore part of good regulation, provided that there is due process and that there is a mechanism to learn from these mistakes” (p. 4), but there is nothing analogous to profits and losses in the regulatory world, and few of those making the rules have much skin in the game. Since they don’t enjoy large rewards for being right or suffer large losses for being wrong, they are likely biased toward errors. Consider antitrust policy, which is in theory about protecting gains from trade, but which is in practice often about protecting incumbents’ rents. Judge Learned Hand’s decision in United States v. Alcoa (1945) is instructive. Without irony, he excoriated Alcoa for hustling to innovate, lower prices, and produce more whenever and wherever the company’s executives saw opportunities. In short, he denounced Alcoa as a monopolist for doing the exact opposite of what monopolists do. I think Philippon and would both agree that organizations like the Food and Drug Administration and various licensing boards should lose their power to block entry and thwart competition. I for one would love to see a reciprocal approval agreement where (say) any drug approved in any OECD country is automatically approved for sale in the United States. It falls short of the free market utopia I would like to live in, but it’s a definite improvement over the status quo. Similarly, Philippon points out that foreign airlines are not allowed to fly U.S. domestic routes. There is no compelling economic or even security reason for this, and we would see lower prices and better service if airlines like Etihad and RyanAir could carry passengers from New York to Los Angeles and back. I would also like to see more reciprocal licensing agreements among licensed professions in the United States along with permission for people trained in foreign medical schools to practice in the United States. I’m not going to hold my breath, though, given what I know about the dynamics of the rent-seeking society. For more on these topics, see “Occupational Licensing,” by S. David Young. Concise Encyclopedia of Economics. “The Regulator’s Calculation Problem,” by Arnold Kling. Library of Economics and Liberty, Apr. 6, 2015. Michael Munger on Antitrust. EconTalk. While I have various disagreements with what is otherwise a fine book, it is important not to lose sight of the fact that we fundamentally agree that markets work and that if a government is going to do anything, it should work around the margins to make markets work better. It’s easy to forget that this widely-shared consensus among professional economists is most definitely not shared by the general public or by many intellectuals and scholars who are not economists. Philippon explains why we should embrace competition, and if more people do so after reading The Great Reversal, he will have done an important job. Footnotes [1] Thomas Philippon, The Great Reversal: How America Gave Up on Free Markets. Belknap Press, 2021. [2] Deirdre Nansen McCloskey and Art Carden, Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World. University of Chicago Press, 2020. [3] Art Carden, Why Free Market Economies are Superior to Centrally Planned Economies. Lecture delivered at the Centre for Political Studies, August 17, 2022. YouTube. [4] See QuantGov.org. [5] Art Carden, “Defining the Extent of the Market: The Whole Foods Case.” The Mises Institute, June 2, 2009. *Art Carden is Assistant Professor of Economics at Samford University in Birmingham, AL, a Senior Research Fellow with the Institute for Faith, Work, and Economics in McLean, VA, a Research Fellow with the Independent Institute in Oakland, CA, and a Senior Fellow with the Beacon Center of Tennessee. For more articles by Art Carden, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

This book is our story, an unlikely account of how two outsiders—a charter school principal and defrocked philosopher… are now fortunate to preside over one of the most successful early-stage funds in the business… in the top one or two percent of all funds in its class… I do not write as a disinterested outsider but as a crazed participant gone berserk. If the Rust Belt has come to define the hollowed-out industries of the Midwest, in the next ten years the Paper Belt will come to define the paper-based industries from Washington, D.C., to Boston. In D.C., they print money, visas, and laws on paper. In Delaware, companies incorporate on paper. And in Boston, Harvard and MIT print diplomas on paper. I am dedicated to lighting the Paper Belt on fire. —Michael Gibson, Paper Belt on Fire.1 The first quote is from the prologue, and the second quote is from chapter 8, “The Nakamoto Consensus” Michael Gibson’s Paper Belt on Fire weaves together a memoir and a manifesto. Without the memoir describing his accomplishments and how he achieved them, the manifesto might seem deluded and grandiose. Without the manifesto, the memoir would lack passion. Together, they make for a compelling read. Lessons from the Memoir Gibson was hired by Thiel Capital in 2010, primarily to assist Peter Thiel in teaching a course. But immediately Gibson became involved with the Thiel Fellowship, an initiative to pay select young people $100,000 a year for two years to do something other than attend college. A few years later, Gibson and his co-worker, Danielle Strachman, broke away to start a venture capital fund called 1517, that would back very young entrepreneurs, including teenagers. Screening candidates for the Thiel Fellowship and then searching for young entrepreneurs gave Gibson and Strachman a unique experience finding unusually gifted individuals. Like Tyler Cowen and Daniel Gross in their book Talent, Gibson and Strachman were looking beyond the standard indicators of intelligence to find intangible qualities. Gibson’s chapter “Intelligence Redefined,” is at least the equal of the Cowen-Grossman book. For Gibson, the key quality is a sort of wily resourcefulness. The great founders are the ones who always find a way. This is their highest virtue. What does it take to “find a way” in the world of tech start-ups? Gibson lists five abilities founders need: First, the ability to confront unknowns and uncertainty without being either too tentative or too overconfident. Gibson calls this “edge control.” Second, the ability to adapt as a company grows from a handful of people in a room to a giant corporation. I myself have noticed that small firms can and should be managed informally, but when you get past the Dunbar number of about 150 employees, you start to need formal mechanisms—organization charts, company manuals, internal training programs, and so the like. Third, what Gibson calls “hyperfluency.” The founder must have superior knowledge of a technology/market niche but also must be able to communicate that knowledge to ordinary people unfamiliar with the niche. Fourth, … founders of a company have to have the social and emotional intelligence to make hires, work with customers, raise money from investors, and gel with co-founders. The complexity of this total effort is incredibly demanding and emotionally exhausting. Finally, The initial motivation for starting a company is often the excitement of doing something new and risky… but the sustaining motivation to keep going year after year, through all the twists and turns, has to be tied to something deeper, something richer in meaning. “Previously, working in a large organization, my experience had been that when an idea of mine became a corporate project, someone else was put in charge.” When I started one of the first commercial sites on the Web, I had something to prove. Previously, working in a large organization, my experience had been that when an idea of mine became a corporate project, someone else was put in charge. That was deeply frustrating. Going out on my own allowed me to try to implement an idea myself. But once the Web-based business became successful enough to provide me with sufficient validation, there was no sustaining motivation for me to stick with it. I also appreciated another chapter of the memoir called “The Cram-Down,” which describes how as early-stage funders the 1517 Fund could get mistreated by later investors. I had a similarly bitter experience when I attempted an angel investment, and until I read this chapter, I thought that in getting screwed over I was uniquely inept. The Manifesto I wonder whether writing this book means that Gibson has lost a bit of his sustaining motivation for running the venture fund. Perhaps his heart is now in what I am calling the manifesto. Finding a score of geniuses to be Thiel Fellows and then founding an investment fund to steer wily, resourceful young people into entrepreneurship is just a start. The beginning of the manifesto can be found in the prologue. It makes four claims: The first is that science, know-how, and wisdom are the source of almost all that is good: higher living standards; longer, healthier lives; thriving communities… The second is that the rate of progress in science, know-how, and wisdom has flatlined… since about 1971… The third claim is that the complete and utter failure of our education system, from K-12 up through Harvard, is a case in point… The last, chief point is that the fate of our civilization depends upon replacing or reforming our unreliable and corrupted institutions, which include both the local public school and the entire Ivy League. Gibson’s final chapter, “Coda: The Invisible College,” is even more expansive. It is essential that we find solutions to the top unsolved problems in the following fields: energy creation, transportation, health, education, freshwater abundance, increasing crop yields for less, cleaning the air, and, lastly, human flourishing. He proceeds to enumerate various teams—ranging from obscure start-ups to project groups in leading corporations—that are working on these problems. Most people are in favor of scientific progress. But the mainstream approach is to give more money to universities and government funding programs. In the chapter “Intelligence Redefined,” Gibson writes: Grant-making bodies cover their ass by awarding research funding only to the established over the new, the prestigious over the experimental. The National Institute for Health, for example, allocates just two percent of its funding to scientists younger than thirty-five, while 98 percent of its money goes to scientists older than thirty-six. If scientists and inventors are more creative in their twenties and thirties, then this funding policy has things completely backward. In his “Coda” chapter, Gibson writes: To accelerate progress, we need young people working at the frontiers of knowledge sooner than they have in the past. They also need greater freedom. What that means is institutions that trust them to take risks and demonstrate some edge control with their research. For more on these topics, see Michael Munger on the Future of Higher Education. EconTalk. Tyler Cowen on Talent. EconTalk. The blend of memoir and manifesto in Paper Belt on Fire appealed to me. The memoir is well-paced and tells colorful stories of famous figures, such as Peter Thiel and Vitalik Buterin, along with colorful but lesser-known characters. The manifesto is more than a mere complaint about the sorry state of key institutions. It is a bracing attempt to chart a new course. Footnotes [1] Michael Gibson, Paper Belt on Fire: How Renegade Investors Sparked a Revolt Against the University. Encounter Books, 2022. *Arnold Kling has a Ph.D. in economics from the Massachusetts Institute of Technology. He is the author of several books, including Crisis of Abundance: Rethinking How We Pay for Health Care; Invisible Wealth: The Hidden Story of How Markets Work; Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy; and Specialization and Trade: A Re-introduction to Economics. He contributed to EconLog from January 2003 through August 2012. Read more of what Arnold Kling’s been reading. For more book reviews and articles by Arnold Kling, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

  I watched substantial parts of the Stanford academic freedom conference on Friday and a little on Saturday. (I didn’t go because after being in a car, an airplane, and a bus for a total of over 20 hours to visit a friend in New Hampshire, my left leg was hurting, and I couldn’t imagine driving 2 hours to Stanford and then sitting for hours more.) Overall, the parts I saw were excellent. I thought some of the best talks were by Jay Bhattacharya, Tyler Cowen, John Ioannidis, John Hasnas, Peter Arcidiacono, and Solveig Gold. Arcidiacono’s talk reminded me of a wonderful poem called “The Paradoxical Commandments.” I posted about it some years ago here. There was one discordant note, though, in a speech by Peter Thiel. Thiel was laying out what he sees as the failure of STEM. He thinks that we just have not made the amount of technological progress that we should have made in the last few decades and he attributes that, in part, to the failure of universities in the hard sciences. I have no opinion on that; he knows more than I do about technological progress and so he may well be right. After making that point, he stated that with 4% economic growth annually, a lot of our economic problems would go away. I agree with that. Then he said that the Boskin Commission, which was appointed by the U.S. Senate Finance Committee in the mid-1990s to evaluate how good a measure the Consumer Price Index is, lied (his word). Instead of getting 4% growth, said Thiel, they handled the issue by claiming that 2% growth is really 4% growth because the CPI overstates inflation by understating quality improvements. They didn’t lie. That was a scurrilous attack by Thiel. First, the Commission stated that the CPI overstated inflation by 1.1 percentage points, not 2 percentage points. Second, it had good grounds for that. Later, Mike Boskin actually laid out the grounds for thinking that the CPI systematically overstates inflation by 0.8 to 0.9 percentage points per year. It’s in “Consumer Price Indexes” in David R. Henderson, ed., The Concise Encyclopedia of Economics. Here’s what the Commission said in its report: Our Interim Report of September 15, 1995, presented initial estimates of biases in the CPI. We estimated that the overall bias had been 1.5 percentage point per annum in recent years, but changes in the CPI methodology then in prospect from BLS would eliminate as much as 0.5 percentage point per annum of this bias, reducing the bias going forward to 1.0 percentage point per annum. We have now revised our estimates to reflect changes in the CPI announced by BLS on March 29, 1996, and new estimates of the impact of biases due to the introduction of new products and changes in the quality of existing products. The BLS has eliminated some of this bias totaling 0.24 percentage point per year, raising our estimate of the bias going forward by one-quarter of one percentage point. In addition, we have revised our estimates of new products/quality change bias upward by 0.10 percentage point per year. I get a little lost in the weeds here but whatever the exact bias, the point is, with regard to Thiel’s claim, that the Commission had a good basis for its conclusions. Moreover, quality improvements were only part of the story. Another part was substitution bias. Yet another was outlet bias. Boskin explains it all here. If there was a liar, and I’m not saying there was because I don’t know if Thiel is simply ignorant, it was not Mike Boskin or the Boskin Commission. Thiel wound up this part of his discussion by saying that the economists were saying (and I’m quoting as exactly as I remember) that we should tell grandma that because her cell phone is a little thinner, that makes up for the fact that she’s eating cat food. I’ll leave you to judge whether that’s close to an accurate conclusion based on what economists are saying about quality changes, new products, substitution bias, and outlet bias. The picture above is of Mike Boskin. Disclosure: During the extreme Santa Clara county lockdown, Mike Boskin had some very pleasant interactions by email, to the point where he has become somewhat of a friend. (0 COMMENTS)

In 2021, I predicted that the mood of the public would become increasingly gloomy, partly due to the removal of stimulus. This past June, I cited a Michigan survey that showed record low consumer sentiment. A new article in The Economist cites evidence that this phenomenon is affecting most OECD countries, and provides some reasons. The Economist notes that sentiment is even worse than what a model would suggest based solely on the inflation figures, and cites a number of factors including slow productivity growth.  But this caught my eye: The second relates to the comedown from the stimulus bonanza. In 2020-21 rich-world governments doled out trillions of dollars to households, boosting disposable incomes by an unusually large amount. This year governments have largely stopped the handouts. Average disposable incomes are now falling, even without accounting for inflation. Nobody likes that. The third relates to the stimulus bonanza itself. A new working paper by Ania Jaroszewicz of Harvard University, and colleagues, finds tentative evidence that people who get modest cash payments of up to $2,000—the sort of amounts given out during the pandemic—actually become unhappier. These payments are not big enough to be life-changing, and may simply highlight what recipients are unable to afford. The fiscal response to covid, it seems, has a sting in its tail. I am becoming more and more convinced that much of the fiscal stimulus was a mistake.  Even if it made people happier (which seems increasingly doubtful), society will have to pay a price over the next few years in terms of painful austerity.  Once again, there are no free lunches.   (0 COMMENTS)

“Your vote counts” is an empty slogan or an illusion or a lie. In virtually all cases, it does not count at all. I am always surprised to find intelligent people thinking that an ordinary voter, by using his single vote, has a significant chance of influencing the results and consequences of an election. We meet this idea again, in a slightly different form, in Simon Kuper’s Financial Times column (“The Most Powerful Voters Aren’t Who You Think,” October 3, 2022). Many people seem surprised when an economist or political scientist tells them that an ordinary and rational voter has no reasonable hope of deciding an election, that is, of changing who is elected (or which proposition is adopted in a referendum) compared to what would have been the case had he voted differently or not at all. These people either have never reflected on the mathematics of the claim, or have never wondered where they can observe elections when one vote made a difference, or they are so engrossed in a simple, not to say simplistic, democratic ideology that they just imagine a reality that matches it. The basic math are relatively simple. Consider a committee of three persons, including you, who vote to choose one of two alternatives. If the probability that each of the other two committee members votes for either alternative is 0.5, the probability that your voice will be decisive is given by the ratio of the two possible results with a tie to the total number of four possible outcomes, that is, 0.5 also. But if the committee has 4 persons besides you, your probability of being decisive decreases to 0.375. If the committee is a group of 1,000 voters plus you, the probability that you will be decisive drops to 0.0189. These probabilities decrease dramatically if the probabilities of any other voters’ voting one way or the other changes only slightly. For example, if this probability is respectively 0.49 and 0.51 for the two issues, we can calculate that, in an electorate of 1,000 plus you, the probability that you will break a tie goes down to 0.0155; in an electorate of 100,000,000 plus you, it is astronomically lower that the inverse of the number of particles in the observable universe. (See the sidebar “Does Your Vote Really Count?” in my “The Public Choice Revolution,” Regulation, Fall 2004; based on Dennis C. Mueller, Public Choice III [Cambridge University Press, 2003], pp. 304-306.) Let me answer a standard objection immediately: “But all together, we make a difference.” Of course, if one voter controlled the votes of 50%+1 of the electors, he would be certain to be decisive. But the probability would drop dramatically if he only controlled 25% of the votes or 10% or, ultimately, just his own vote. QED. Another objection is that rare events do happen. Yes, but not often. Following the November 2017 election for Dictrict 94 of the Virginia House of Delegates, the Republican candidates first had a 10-vote lead on 23,215 votes. A recount changed the result to a one-vote lead for the Democratic candidate. A three-judge panel then found a vote incorrectly disqualified, which produced a tie. After further litigation, a random drawing was held on January 4, which gave the victory to the Republican candidate. At best, every Republican voter can claim to have produced a tie, and that was in one relatively small district. This simple mathematical approach has been improved, for example, by considering that before voting the voter knows, notably through opinion polls, that a certain number of his fellow voters have made their minds for a candidate or a party, which decreases the effective size of the decisive set in which he is competing and increases his chances to be decisive. Yet, the probability that a single voter changes the result of a large election remains very low. So low that it virtually never happens. Considering more complications of the real world, the districts and the electoral college, Andrew Gelman, Nate Silver, and Aaron Edlin used the 2008 presidential election to evaluate what probability the average American could have reasonable formed that he could elect the president, i.e., that without his vote another president would be elected. It was at most 1 in 10 million depending on locations, and 1 in 60 million on average over the United States. (See “What Is the Probability Your Vote Will Make a Difference,” Economic Inquiry 50:2 [April 2012], 321-326.) Gelman et al. also calculated that if a voter in New Mexico could have brought 5,000 of his fellow voters to switch to his side, he would have had a 1.3% chance of flipping the state and a 1 in 6,000 chance of changing the nationally-elected president. But no ordinary voter influence as many votes, although a very popular pundit or media personality or popular singer may. To give some perspective, the estimated 1 in 60,000,000 chance of an average American to elect the president he wants is still five times higher than his odds of winning the jackpot in a Powerball drawing (apparently 1 in 292,000,000). We do occasionally see somebody winning the jackpot, but an ordinary voter has never been decisive in a presidential election. The best that Kupel can find is the Bush-Gore 2000 election, when the difference was of “537 possibly miscounted” votes in Florida; Wikipedia would have provided him with better examples in smaller elections. It is true, of course, that we would need a large number of such elections before we can test the 1/60,000,000 probability. Finally, note that the single voter hypothetically decisive after perhaps thousands of presidential elections may end up disappointed because “his” president would break the single promise that motivated the lucky voter. To be fair to Mr. Kuper, his column was more about the fact that a double citizenship, which both he and his wife have, allows one to vote in two different countries. But note that twice a minuscule probability of having an influence in two different countries still means a minuscule probability of having an influence. He should instead have emphasized that the great benefit of double citizenship is not a double vote but the possibility of voting with one’s feet, which counts much for an individual’s liberty. I am not denying that there are moral reasons for an individual to vote, at least for a candidate who is very likely to contribute to the maintenance of a free society. I am not denying either that democracy has advantages. I am just reiterating the basic argument that an individual who votes to influence the outcome of an election in anything but a small committee must suffer from a cognitive limitation, or be an inveterate gambler, or must enjoy expressing his opinion to the winds. (See also Geoffrey Brennan and Loren Lomasky, Democracy and Decision: The Pure Theory of Electoral preferences [Cambridge University Press, 1993].) (2 COMMENTS)

The Miller’s Organic Farm Case: Part 1 Why write about a disturbing misfortune when to all appearances nothing can be done? In the Amish village of Bird-in-Hand in a remote area of Pennsylvania, Miller’s Organic Farm has been in business for a century. Today, it supplies organic foods—grass-fed beef, raw milk and eggs, dairy from grass-fed water buffalo, and all types of produce—to a private food club of 4,000 members who pay top dollar for high-quality whole food. Members want food from a farmer who doesn’t process his meat and dairy products at U.S. Department of Agriculture facilities. Aaron Miller,  the owner, chooses to defend his preparation of food as the way God intended it. He himself has run the farm for a quarter of a century with no electricity, no fertilizer, and no gasoline. Observers are impressed with crop yields he achieves by the oldest and 100 percent organic methods. The farm’s website says:  “…we are proud to be entirely chemical, cruelty, and GMO-free. The animals are born and raised without antibiotics or hormones, and they spend their entire lives naturally and stress-free out on pasture. All the farm’s food is traceable, pure, and grown on nutrient-dense soil, under traditional time-honored methods.” Sounds to me like the consolidated dream about a dozen environmentalist organizations: opposing animal cruelty, GMO, and use of chemical fertilizers—not to mention eliminating fossil fuels (no gas, no electricity). Last summer, armed federal agents sent by the USDA demanded that Miller cease operations and prepared to hit him with more than $300,000 in fines. That would shut Amos Miller down. They demanded that he stop selling meat until he comes under federal agencies that regulate it. Miller responds that such regulation “hurts the nutrition of the food…you wash it in these things, you’re given these vaccines, and the cows get all types of medicine, I don’t do any of that…your regulatory process will actually hurt the quality of my food and that’s what I’m being paid top dollar for…” Federal agents camped at the farm to take inventory of his meat, dairy, and other food to make sure he is not selling anything and not increasing his production. Miller took the case to the U.S. District Court of Eastern Pennsylvania, which ruled in favor of the USDA. The USDA dictated the following text required to be posted on the farm’s website: “To the Members of Miller’s Organic Farm: Please be advised…Miller’s Organic Farm violated the Court’s Injunction Order and Consent Decree. Accordingly, we will not provide fresh or newly slaughtered amenable meat, meat food products, poultry, and poultry products for sale or purchase unless and until Miller’s Organic Farm liquidates its existing…frozen meat and poultry inventory and complies with other requirements of this Order and other orders of the Court… “…We are working diligently with the government to find some long-term solutions…” But what “long-term” (or even short-term) solution? Miller’s farm is in violation of what might be called “bedrock” USDA regulations. The court order listing violations is an outline of the USDA’s Food and Inspection Service regimen. Farmer Miller’s own judgment of how to produce the highest quality food is a flat-out rejection of regulation. A decision of the court suggests the government’s position on Miller’s methods. On July 21, 2021, Federal Judge Edward G. Smith signed a 39-page order imposing sanctions on  Miller and the farm, including a $250,000 fine and other penalties “to effect defendants’ future compliance, by making them aware  of the seriousness of their violations and the consequences of future violations…” The farm was ordered to pay the fine within 30 days or face further penalties “including imprisonment of Amos Miller.” The farm is ordered not to slaughter any animals in violation of the order or face a $25,000 a day penalty. Miller is ordered to cease and desist all meat and poultry retail operations, except to get rid of inventory. In summer, 2022, Amos Miller, continuing his six-year legal battle with the USDA (represented by the U.S, Justice Department), filed papers with the Eastern District Court of Pennsylvania. Miller also has taken some of the decision-making to the Third Circuit Court of Appeals in Philadelphia, including an appeal to change attorneys (which has been denied).   Walter Donway is an author and writer with more than a dozen books available on Amazon and an editor of the e-zine Savvy Street. He was program officer or director at two leading New York City foundations in the healthcare field: The Commonwealth Fund and the Dana Foundation. He has published almost two dozen articles in the Blockchain Healthcare Review. (0 COMMENTS)