In recent months, I’ve been attempting to better understand what conservatism means. Much of what I thought conservatism meant, and what conservatives stood for, was challenged if not outright upended by the election of Donald Trump, and the fervency of his support among much of the Republican party. Fortunately, many conservative thinkers have also felt that conservatism needs a restatement, and several books have been published attempting to reiterate conservative ideas. Among these, one of the most unabashed must be Conservatism: A Rediscovery by Yoram Hazony. Nobody who reads this book will have the impression the author is attempting to water down his message to ensure the broadest possible appeal. Here we find a full-throated advocacy of a distinct vision of conservatism. In another recent book, The Conservative Sensibility, George Will argues that American conservatism is dedicated to conserving the vision of the American founding, which itself was inspired by the liberalism of the Enlightenment tradition. So, to Will and to many others, conservatism is ultimately about classical liberalism. Not so for Hazony. He rejects the liberal tradition altogether to argue for a conservatism which is fundamentally different from the ideas of the Enlightenment. There is much I could write about the merits and flaws I find in Hazony’s argument and his worldview. But for today, I want to look at one area where I think he stumbles badly, and consider why I think he goes wrong. The topic I have in mind is his comments on free trade. Hazony spends much less time than Will discussing economics, but among his comments we find the following: [Free trade] policies were supported not only by the desire of private individuals (and, by extension, corporations owned by private individuals) to exercise their freedom in order to earn higher profits. They were also promoted by governments, media, and academics committed to the liberal theory that there should be no state-imposed barriers preventing individuals and corporations from freely buying whatever they want at the lowest price and selling whatever they want to the highest bidder. This is a policy couched entirely in terms of the individual, the state, and the individual’s presumptive freedom to do whatever he and his trading partners consent to do without state interference. It is blind to the nation, and to the bonds of mutual loyalty that bind nations and tribes together. Indeed, to the extend that bonds of national loyalty are even mentioned in discussions of free trade, they are described as irrational “market distortions” that may cause inefficiencies that make life more expensive – and therefore presumably less free. One of the biggest weaknesses in Hazony’s book is his tendency to ascribe views to his ideological opponents without ever quoting them. One is left wondering who, specifically, has described bonds of loyalty as “irrational market distortions” – we are left to guess, because Hazony won’t or can’t name names. Particularly odd is his suggestion that state actions which forcibly prevent people from engaging in free exchange lessens freedom in the eyes of free traders because it makes life “more expensive.” Hazony has badly misunderstood the arguments he is attempting to engage. Those who support free trade and the tradition of classical liberalism don’t believe the least expensive options are somehow the most freedom enhancing. It is the absence or presence of force, not the magnitude of expense, which is relevant to freedom. Nor is buying from the cheapest source or selling to the highest bidder some terminal value, from which deviating constitutes a market distortion. If someone makes their buying or selling decisions out of a sense of loyalty rather than in search of the most favorable price, no economist in the classical liberal tradition will accuse them of irrationally distorting the market. The classical liberal tradition presents no obstacles to engaging in the kind of economic decision making Hazony advocates. The problem for Hazony, I think, is that while classical liberal economics allows he and his fellow thinkers to operate according to the values he holds, it doesn’t require everyone to do as he wishes. In Bastiat’s work The Law, he describes a tendency of socialists to assume that any opposition to state enforcement of some ideal must be motivated by opposition to the ideal itself: And so, every time we object to a thing being done by Government, it concludes that we object to its being done at all. We disapprove of education by the State—then we are against education altogether. We object to a State religion—then we would have no religion at all. We object to an equality which is brought about by the State then we are against equality, etc., etc. They might as well accuse us of wishing men not to eat, because we object to the cultivation of corn by the State. Hazony suffers from this same misunderstanding. From the fact that classical liberals oppose using the state to force people to behave according to his conception of the “bonds of mutual loyalty,” it must mean classical liberalism is opposed to mutual loyalty and social bonds as such. But he is wrong – and his arguments against liberalism suffer accordingly.   Kevin Corcoran is a Marine Corps veteran and a consultant in healthcare economics and analytics and holds a Bachelor of Science in Economics from George Mason University.  (0 COMMENTS)

Joshua Rauh, an economist at Stanford University and a senior fellow with the Hoover Institution, has co-authored an important study of the effects on revenues of a major increase in marginal tax rates in California. In 2012, Californians voted to increase the top marginal tax rate from the then-high 9.3 percent to rates ranging from 10.3 percent to 12.3 percent. Add in the pre-existing 1-percentage-point extra tax on people making over $1 million a year, and you get rates ranging from 10.3 percent to 13.3 percent. Rauh and co-author Ryan Shyu of Stanford’s Graduate School of Business find that of the extra revenue the state government would have raised if high-income people had gone on with business as usual, 55.6 percent was lost over the first three years of the higher taxes. That was due to people leaving the state and to the high-income “stayers” making less income than otherwise in response to the higher tax rates. The effects were even larger in the last of the three years the economists studied. That makes sense because the longer the taxes were in force, the more time people had to adjust. The Laffer Curve in California is alive and well. Which is more than can be said for California. These are the closing paragraphs of David R. Henderson, “California’s Laffer Curve,” IPI TaxBytes, October 25, 2022. Read the whole thing, which is not long. (0 COMMENTS)

On various right-wing blogs, I found segments of the debate last night between Democrat John Fetterman and Republican Mehmet Oz in their race for Pennsylvania’s open seat in the U.S. Senate. Not surprisingly, they focused on Fetterman’s often-awkward answers to questions. I was curious about their views on the minimum wage, which, in Pennsylvania, is still the federal $7.25 an hour. Here’s a 4-minute segment, uncut, that nicely summarizes their views. Although Fetterman does state the issues awkwardly, I at least understood his point. I thought some of the conservative sites did Oz a disservice by not showing his cogent reasoning on the minimum wage. Watch the whole thing. As I said, it’s only 4-minutes long. I think that one thing Fetterman said didn’t make sense, and I think it had nothing to do with his recent stroke, because I’ve seen many “stroke less” Democratic politicians say similar things. The questioner says: What do you say to small business owners who have told us that if the minimum wage were increased to $15 an hour, it would put them out of business? Parenthetical comment before we get to Fetterman’s answer, similar to the one asked in the movie Butch Cassidy and the Sundance Kid when they are being relentlessly chased by a large number of people on horses: “Who are those guys?” I’ve never seen such a balanced and informed pair of questioners. They actually seem to want to get answers. And the “if … were” formulation is grammatical icing on the cake. Their performance is better than that of any questioners I’ve seen in presidential contests in the last 30 years. Now to the part of Fetterman’s answer that I found interesting: You can’t have businesses being subsidized simply by not paying individuals that just simply can’t evade [I’m pretty sure he means “afford”] to pay their own way. I’ve heard a number of people say that paying low wages amounts to a subsidy to businesses. I don’t see it. You might say “Well, they can pay lower wages than otherwise because of things like welfare and Medicaid that go to low-income people.” But many of these programs reduce the supply of labor, making wages higher than otherwise. And to the extent some government programs, like the Earned Income Tax Credit, do increase labor supply, making wages lower than otherwise, an attempt to judge the well-being of those wage earners without taking account of their gain from the EITC makes no sense. Check out how Oz lays out the idea of market forces driving wages and the importance of unblocking market forces, especially in the energy sector. I think he overstates the resulting wage rates, but he makes a good point. He also makes the point that $15 an hour has already been achieved in Pennsylvania by market forces. I bet that’s a bit of an exaggeration, but not much. Moreover, where you find people earning substantially less than $15 an hour, you should worry that a $15 minimum wage would wipe out their jobs. By the way, I do wonder what the names of the questioners are. A few searches on Google didn’t give it to me. (1 COMMENTS)

Here we study the economic effects of a large-scale experiment in the United States: nationwide, firm-level, natural randomization of restrictions on the employment of immigrants for low-skill jobs. The United States has one principal work visa for low-skill labor in the nonfarm economy— the H-2B visa. U.S. employers’ access to that visa is limited by a quota and allocated in part via a randomized lottery conducted by the federal government. This exogenous variation in restrictions on immigrant employment allows unusually transparent, policy-relevant estimates of how U.S. firms and workers adjust. After publicly committing to our hypothesis tests and predicted treatment effects with a pre-analysis plan, we collected data from both winners and losers of the 2021 H-2B visa lottery in a novel firm survey. This allows prespecified tests of basic theoretical predictions about the magnitude and hetergeneity of the effect of low-skill immigration restrictions. It furthermore allows estimation of the firm-level, immigrant-native “combined” elasticity of substitution (Hicks 1936). We find that exogenous permission to employ immigrants for low-skill work causes the marginal firm to expand production. Put differently, exogenous restrictions on employing the profit-maximizing number of immigrants for low-skill work cause the marginal firm to contract. These restrictions cause a large and statistically significant decrease in revenue and investment. The restrictions cause no increase, or a decrease, in the employment of low-skill native workers and the rate of profit. Losing the lottery reduces firms’ employment of low-skill immigrants by 56%. This decrease causes firms to contract, reducing operations with an elasticity of +0.164 for revenue and +1.03 for investment (statistically distinguishable from zero at conventional levels), and with an elasticity of +0.102 for low-skill U.S. employment, and +0.100 for the profit rate (statistically indistinguishable from zero at conventional levels). This is from Michael A. Clemens & Ethan G. Lewis, “The Effect of Low-Skill Immigration Restrictions on US Firms and Workers: Evidence from a Randomized Lottery,” NBER Working Paper #30589, October 22, 2022. The methodology is quite clever. Because the lucky employers are chosen by lottery, there’s no selection bias. That means that Clemens and Lewis can look at changes in employment of employers that won the lottery and changes in employment of employers that lost. The authors put it more succinctly in their abstract: Firms exogenously authorized to employ more immigrants significantly increase production (elasticity +0.16) with no decrease or an increase in U.S. employment (elasticity +0.10, statistically imprecise) across several pre-registered subsamples. The results imply very low substitutability of native for foreign labor in the policy-relevant occupations. In short, low-skilled Americans are not losing their jobs to low-skilled immigrants. HT2 Tyler Cowen.     (0 COMMENTS)

A new conservative administration takes power with a supply side agenda:  Corporate tax cuts Deregulation in areas such as energy production Six years later, another conservative administration takes office with an even more pro-growth agenda: Corporate tax cuts Deregulation in areas such as energy production YIMBY policies to encourage home building More high skilled immigration Seek out free trade agreements Which is a better agenda?  In the abstract, the second agenda is clearly better, more pro-growth.  So why was the first agenda (adopted by Donald Trump) widely viewed as a success, while the second (Liz Truss) was widely viewed as a disaster?  I see at least two factors:  Timing:  When Donald Trump was elected, the US fiscal situation was much less dire that the one faced by Truss in 2022.  Britain’s national debt had risen to a relatively high level, and her proposed tax cuts and energy subsidies would have pushed the budget even more deeply into deficit.  And this was occurring at a time when interest rates were rising throughout much of the world.  As a result, Truss’s tax and spending proposals spooked the bond market, causing interest rates to rise even further and pushing the pound toward record lows. Politics:  Congress was willing to pass many of Trump’s key economic proposals (apart from repealing Obamacare).  Truss faced a great deal of resistance to her supply side reforms, with reports that even Conservative MPs would balk at ideas such as encouraging more homebuilding and allowing fracking to boost energy production. The truth is that luck plays a big role in politics.  Most leaders are only partly responsible for the state of the economy during their tenure.  Truss’s policies might have been quite successful if adopted in a different time and place. The best way to look good is to inherit a depressed economy where stimulus is both politically popular and economically desirable (recall FDR).  The worst situation for a new administration is to inherit an overheated economy where unpopular contractionary policies are necessary (Reagan). PS.  This tweet helps to illustrate my point: Ouch! (0 COMMENTS)

Merriam-Webster online defines the verb “take over” as “to assume control or possession of or responsibility for [e.g.] military leaders took over the government.” So I was surprised to read in yesterday’s Wall Street Journal the following lead paragraph (“Rishi Sunak Wins Vote to Become U.K.’s Next Prime Minister After Liz Truss Resigns“): Former Chancellor Rishi Sunak, who warned that Liz Truss’s economic plans for Britain were a “fairy tale,” won the contest to succeed her as prime minister on Monday, taking over the world’s sixth-biggest economy at a time of deep financial and political turbulence. “Surprised” not because it would not make sense to think that, as the representative of the sovereign people in an unlimited democracy, the British prime minister is really taking over the economy. That may be how most people think, and they are not wrong as long as Mr. Sunak remains at the top of the state. I was surprised because usually nobody expresses this thought with the candor demonstrated by the two journalists or their editors. I suspect they would tell me that they used the expression “take over” in a figurative sense. But some figurative speech might be revealing of the zeitgeist of our times. I had a fleeting though of Friedrich Hayek’s The Road to Serfdom, which was written in England, where the future Nobel economist still lived. I could have thought of Anthony de Jasay’s plantation state. I asked two dear friends more familiar than I with the language of Shakespeare what they thought of the use of the verb “take over” there. One replied, with the other approving: “Take over” makes it sound like he is driving the bus or taking over running a company from the top-down. It makes it sound like the British economy is property. (0 COMMENTS)

If you don’t already have David Friedman’s “Ideas” in your RSS feed, I recommend it. He posts infrequently, but the probability that I learn something from each post exceeds 0.9. One outstanding case in point is his most recent post, “Special Pleading and How to Recognize It.” He discusses 3 examples. First is an argument from Lockean principles for income and/or wealth redistribution. He shows that if we take the argument seriously, we don’t get where those who use the principle want to get to. On this he cites philosopher Matt Zwolinski’s argument for welfare. The second is an argument for reparations for slavery. He shows that if we take that argument seriously, we should take wealth from poor Africans and give it to rich Americans. On this he concludes, “Not the conclusion that people making the argument wanted.” The third is on Wal-Mart and urban sprawl. All are worth reading and pondering. (0 COMMENTS)

I occasionally find myself pondering how libertarians agree and disagree with non-libertarians. How much disagreement is due to a deep divide in values, and how much is due to different ideas on how to pursue similar values? Of course, there is no single answer to this question, but broad trends can be noticed. I’ve noticed one area where libertarians and leftist (broadly) agree on the nature of a problem, but come to very different conclusions on the best way to respond to that problem. I’m thinking of how the state tends to favor powerful and entrenched interests over the interests of the less powerful. Leftists usually describe this with phrases like “we live in a corporatist state, and corporations control the government,” while libertarians are more likely to use phrases like “regulatory capture causes the state to serve the interests of the regulated industry over the public interest,” but both sides are describing the same phenomenon here. As an aside, I think leftists underappreciate how much libertarians share their concerns on this front. Those on the left will suggest libertarians advocate free markets and oppose economic regulation out of some kind of loyalty to or fondness of big corporations, but this is very far from the truth. For one, big companies don’t want an unregulated free market – they want the market to be regulated in their favor. Second, the more regulatory power the state possesses, the more incentive companies have to ensure that power is used in their favor. And third, the nature of politics ensures this is almost certainly how regulation will be used in practice. Milton Friedman expressed this well in the first episode of his Free to Choose TV series: I do not believe it’s proper to put the situation in terms of industrialist versus government. On the contrary, one of the reasons why I am in favor of less government is because when you have more government industrialists take it over, and the two together form a coalition against the ordinary worker and the ordinary consumer. Where libertarians and leftists disagree is in how to deal with the problem of this coalition between the state and corporations. Libertarians see this coalition as a strong reason to decrease the regulatory powers of the state – leftists disagree. Obviously, I think the libertarian approach makes more sense – and to illustrate why, let’s indulge in a nerdy sci-fi thought experiment. Imagine Earth was being slowly invaded by body-snatching aliens, who replaced humans with identical looking alien agents who worked behind the scenes to advance the aliens’ sinister agenda. Let’s say the government has tasked the NSA with countering this alien threat. Unsurprisingly, aliens begin to body-snatch their way into control of the NSA. What’s the best way to respond to this? One approach we should definitely not take is to say “Body-snatchers have taken over the NSA, therefore we need to increase the powers of the NSA so they can better protect us from the body-snatchers.” That would be a terrible idea – if the body-snatchers have already taken over the NSA, then increasing the NSA’s powers will only play into the body-snatchers’ hand. QED. Leftists who believe we live in a corporatist state, and advocate for greater state control of the economy as a counterweight to this concern, are making the same mistake. Their position amounts to saying “Corporations control the government, so we need to increase the powers of the government so they can protect us from the corporations who control the government.”   Kevin Corcoran is a Marine Corps veteran and a consultant in healthcare economics and analytics and holds a Bachelor of Science in Economics from George Mason University.  (0 COMMENTS)

French trade unions, exercising their state-granted, state-protected privileges, have been blockading some fuel depots in France. Many service stations have been running out of gasoline and diesel. Road users who have more need for gasoline (taxi drivers or commuters, for example) are forbidden to implicitly bid up its price in order to divert it from less imperative demand: the market is a continuing and silent auction. How is this prohibition instituted? Gasoline and diesel prices in France are controlled by a government formula on the basis of accounting cost. What happens then? A first-year economics student should be able to immediately answer: a shortage develops. “Shortage” means that quantity demanded is higher than quantity supplied at the legal price, and the cost of time spent in queues or of unsatisfied demand replaces market prices in rationing demand. Testimonies are clear, but many don’t understand the causes of what is happening (“France Battles to Avoid Winter of Discontent After Fuel Strike Chaos.” Financial Times, October 14, 2022): In the northern French city of Dunkirk, near a vast fuel depot hit by strikes for the past three weeks, shortages at petrol stations have become so severe that taxi driver Saïd Fertakh has seen his earnings dwindle as he spends time trying to find somewhere to fill up his car. “It’s becoming a struggle,” Fertakh said after filling up at one newly replenished station, where there was a long line of truckers and other motorists. “I spent an hour in a queue last week. I’ve had to say no to some customers because I needed to find somewhere to refuel.” … Other consequences follow from, and to extent of, control of prices and production: But [the government] also resorted this week to rarely used legal orders to force some critical fuel workers back to the depots. The move was sharply criticised by unions and led the CGT to extend its strike to another refinery. “We seem to be going back to a time of masters and slaves, where you have to work, you have no other choice,” said Benjamin Tanges, a CGT representative at the Total depot near Dunkirk. … Striking workers can face six-month prison sentences and fines if they do not comply with the so-called requisition orders. Of course, nobody is forced to work for an oil company and to go on strike (in France, trade unions may not prevent their members from reporting to work during a strike). The CGT representative has it exactly backwards. The CGT  (Confédération générale du travail) is a trade union, formerly of communist obedience, now simply socialist. They obviously did not read Friedrich Hayek’s 1944 book The Road to Serfdom, which explained how a state (or its trade-union agents) with the central-planning power to decide what to produce and to impose a “just redistribution” of income would have to direct workers to unfilled jobs. How else to make sure that what the consumers (or the government) want will be produced in the right quantities? Hayek quotes Richard Acland, founder of the socialist British Common-Wealth movement: It must be the community as a whole which will decide whether or not a man shall be employed upon our resources, and how and when and in which matter he shall work. In his book Capitalism, Socialism and Democracy, Joseph Schumpeter, who apparently believed that socialism could replace capitalism, suggested that, in an ideal socialist system, a strike would be mutiny. We should pity the poor individual who doesn’t have the theoretical tools, or the correctly-interpreted practical experience, to understand not only what economic planning implies but also, more simply, what happens when supply decreases and prices are capped. He sees the resulting shortage as an act of God, or of some greedy capitalists, or of Leviathan who does not do his job of protecting him at the detriment of others. And we should make efforts to teach him elementary economics. James Buchanan is probably right that maintaining a free society requires that individuals understand “simple principles of social interaction,” which entails “a generalized understanding of basic economics”; or else, they should be willing to defer to those who do understand. (0 COMMENTS)

Author Ryan Holiday talks about his book, Discipline Is Destiny, with EconTalk host Russ Roberts. Holiday discusses the mentor who taught him discipline, the self-control of Queen Elizabeth, the world-champion boxer who counseled the man who defeated him in the ring, and the forgotten Roman emperor who helped make Marcus Aurelius the man he would […] The post Ryan Holiday on Discipline Is Destiny appeared first on Econlib.