In the City Journal, I have reviewed Jacob Soll’s new book, Free Market: The History of an Idea. Books arguing that “free market thought fails to account for periodic and devastating market failure,” or claiming that Milton Friedman stood for “libertarian corporate social-Darwinism” and rebuking him for his supposed affinity for Augusto Pinochet’s Chile, are not in short supply. That modern free-market economists were “crusading Cold War warriors with little patience for nuance or for contradictions in their own thought” is a ritornello of many scholars. … Yet Jacob Soll is smarter than his many competitors. His Free Market: The History of an Idea starts with Cicero and doesn’t get to Friedman until page 250. Soll enlists the wisdom of the ancients and 2,000 years of history in his battle—the enemy being, in this case, the idea of a deregulated economy, in which the government is severely limited. Soll refrains from using pejoratives like “neo-liberalism” and refers instead to the “free market.” Such chivalry—calling his adversaries what they would like to be called—is commendable. Still, a clearer definition of “free-market thought” and an explanation for his use of this expression would have been helpful in a broadside against individualism or capitalism. Soll is certainly more learned (and more interesting, when he speaks of things he actually studied and pondered) than your average critic of “neoliberalism” and, thank God, doesn’t use that word. Still the book is disappointing. Barton Swaim wrote a powerful review for the Wall Street Journal, a few days ago. Professor Soll replied to that explaining that “my critiques of free-market thinkers aren’t made in bad faith. I admire Friedrich Hayek and Milton Friedman and treasure individual liberties and economic freedoms. I simply remain perplexed that subsequent leaders dedicated to such ideas supported alliances with segregationists, whose ideas were the stark opposite of universal libertarianism”. I did not touch the point of that juxtaposition in my review, thinking that was just derivative, in Soll’s work, from his wider worldview. Note that even in Swaim’s excellent article this is merely tangential, whereas he aptly points out that “for Mr. Soll’s book to work—and this is true of many such books by economists, pundits and historians of the political left—he has to pretend that the free marketeers have basically run the show for the past 70 years”. So, Soll’s reply (though of course circumscribed by the needs of brevity) focuses on scoring a rhetorical point rather than addressing a substantial issue. It didn’t make me think higher of him . (0 COMMENTS)

Scholar and distiller Sonat Birnecker Hart of the Koval Distillery talks with EconTalk host Russ Roberts about her career move from academia to whiskey-making. She explains that the heart is the key to great flavor–when making whiskey, and when making the right choices in life. The post Sonat Birnecker Hart on Whiskey appeared first on Econlib.

The bad news is that America’s housing affordability crisis has gotten even worse. Rents will probably come down over time in places where housing construction isn’t prevented by excessive regulation. (Sorry, this is one policy area where blue states generally get it wrong while many red states get it right.) But NIMBYism in places like California and, yes, New York will do even more damage in the remote-work era. The housing story, then, is that the pandemic changed the way we live and work — or, more likely, brought forward changes that were going to happen eventually. This led people to want more space at home. And that’s OK. What we need now is to let markets give people what they want, at a price more people can afford. This is from Paul Krugman, “Wonking Out: How the Remote Work Craze Made Housing Affordability Worse,” New York Times, September 30, 2022. HT2 Cyril Morong. (0 COMMENTS)

The history of economic thought did not develop in a straight line from superstition to enlightenment. Rather, it contains a lot of back and forth, zig and zag to come to its present state. For this reason I would like to talk about Juan de Mariana’s “On the Coinage,” an essay by a 16th century Spanish Scholastic, in which he explained some of the fundamentals of issuing money. Mariana’s opinions on monetary theory can also be found in “A treatise on the alteration of money,” which includes an overview of his political views. For someone who wants to get into Mariana I suggest the essay first. Many of the arguments expounded here have similarities with modern theory, and in a particular case he makes a statement very similar to Milton Friedman’s. Mariana was born to a poor family in 1536 near Toledo, and in 1553 he was admitted to the prestigious University of Alcala. After completing his studies, he went on to teach theology and philosophy in Rome, Sicily, and Paris until the age of 37. He then retired due to problems with his health, but this did not stop him from becoming a prolific writer. Among many books, he wrote a famous history of Spain, Historiae de rebus Hispaniae, and De Rege et regis institutione (On the King and the royal institution); the latter will be of more interest to us since that text includes his political and economic theory.   Juan de Mariana is considered a forerunner to marginalism and the Austrian school of economics. Murray Rothbard called him “The learned extremist” and rightfully so. Mariana believed that government was based on popular consent, and any actions that went against this, like imposition of new taxes and appropriation of private property, were justification for the assassination of a king. He called this tyrannicide. He supported free trade and argued against the debasement of currency, which he condemned as intervening with the efficient operation of the economy. He was often judged harshly by his fellow clerics, and his books were banned in France as undermining the foundations of absolutism. However, he lived a life of relative safety and died at the age of 88 in 1624. For more on his life you can read Jesus Huerta de Soto’s Biography of Juan de Mariana: The Influence of the Spanish Scholastics (1536-1624). Mariana’s monetary theory has many interesting aspects. Regarding the debasement of currency by mixing gold and silver coins with copper, he says: I have always typically thought of those men who promise to transform metals by some magical method – to make silver out of bronze and gold out of silver – as being the most untrustworthy sort, like itinerant snake oil salesmen. Mariana uses harsh words against those who try to manipulate the value of the currency to solve economic problems. Yet today such policies have spread among the governments of the world. Some amount of currency devaluation is often used for a number of reasons, such as boosting exports or increasing short run employment. Mariana would be greatly disappointed. Mariana makes another interesting observation based on his theory of natural rights. As the king has no justification to mess with his citizens’ property or establish taxes without their consent, the same applies to inflation: “It, too, is a kind of tax by which an amount is extracted from the possessions of subjects.” This is very similar to what Milton Friedman would later say: “Inflation is taxation without legislation”.  Mariana explains that money has two values, intrinsic and extrinsic. The former is established by the quality and quantity of the metal and the latter is set by law. In plain language, intrinsic comes from the market, extrinsic comes from the state. Here again, Mariana has some harsh things to say about those who separate the two.  He is a fool who separates these two values such that the subsequent legal value does not stick to its natural value. Unfair is he who commands that something that is commonly valued at five be generally sold for ten. No one should try to make this happen through effort or strictness. The only reason for which debasement of currency is reasonable is as a last resort in the case of war, when all other means of paying the army have been exhausted and the independence of the state is uncertain. Even then, once the crisis has ended, the currency should be left to stabilize again at its former levels.  There is one point in Juan de Mariana’s reasoning that I have to disagree with. He argued that if a fiat currency was used, then no one would be willing to exchange goods and services for the new currency since it is intrinsically worthless, a mere piece of paper. I can acknowledge all the problems created by incompetent monetary policy,  but I doubt that such chaos in commercial activity would happen from its adoption. After so many years of being off the gold standard it is reasonable to say that de Mariana has exaggerated its consequences.  I will end with the same words de Mariana used to close his essay: I would like to give princes one last piece of advice: if you want your state to be a healthy one, do not touch the primary foundations of commerce – units of weight, measurement, and the coinage. A many-layered swindle lies hidden behind the appearance of a quick fix.   [Editor’s note: See also this Essay by Maryann Keating at AdamSmithWorks, Adam Smith, Classical Liberalism, and the Legacy of Hispanic Scholasticism.]   Chris Loukas was born in Greece and is an economic journalist and recipient of a bronze medal in the 2022 International Economics Olympiad. His articles have been featured by the Foundation for Economic Education, the Mises Institute and Adam Smith Works. (0 COMMENTS)

My motto is: if it moves, privatize it; if it doesn’t move, privatize it. Since everything either moves or does not move, the logical implication is, privatize everything. Why this radical call for privatization? Simple. There are only three ways to deal with property: government ownership, non-ownership, and private ownership. The problem with the first is exemplified by the failure of the USSR, East Germany, and North Korea. Without market prices, which can only emanate on the basis of private property, central planning is flying blind. It cannot grasp scarcities and alternative costs. It has no rational way of determining whether railroad ties should be made of steel or platinum, for example, or whether the new road should go through or around the mountain. Non-ownership, in turn, is subject to the tragedy of the commons. If no one owns it, the resource is all too quickly dissipated. Perhaps the most dramatic illustration of this debilitation is a comparison of the fate of the cow and the buffalo. Biologists will of course cavil at this, but to the average person (including me) they are all but the same animal. They are both big, smelly, dirty, hairy. If you run into either of them, in the absence of a tank, you’ll come off second best. Yet, the privately owned cow never came within a million miles of extinction; in contrast, this was almost the fate of the buffalo, until its privatization was legally allowed. Migratory birds are no exception to this general rule in favor of privatization. The challenge arises from the fact that they are a fugitive resource. The buffalo are too, of course, but the benefits of privatizing them clearly and radically outweighs the costs of so doing. It is entirely possible, at least given the present level of technology, that this will prove to also be the case of migratory birds. But it might not be. Would this undermine my motto? Not at all. After all, with present technology, the costs of privatizing land on the Moon or Mars- to say nothing of the other heavenly bodies in our solar system- are obviously vastly greater than any benefits we might possibly derive thereby. If not today, perhaps one day, technology will enable us to economically privatize both birds and planets. What about right now? In one way we are far from being prepared. The human race is still plagued by dishonesty. There is cattle rustling, and this would undoubtedly afflict migratory bird ownership too, when and if this program could get off the ground, so to speak. However, it must be conceded, it would be far easier to engage in criminal behavior with regard to our feathered friends than our bovines. That is, they would be far easier to steal from their rightful owners. Let us assume complete honesty and see where that takes us. If we do so, we can borrow a leaf from the possible ownership of whales, while they are still at sea. Shoot an electronic device into them which would warn all subsequent homesteaders that this particular one is now off limits. Such a device would not negatively impact the life, and hence the economic value, of that mammalian sea creature. But boids (as we say in Brooklyn) might, unhappily for their survival, be an entirely different matter. They are far more delicate. Perhaps, instead, a teeny, tiny, plastic band could be wrapped around their legs to indicate ownership. We might also consider private butterfly ownership. These species have been captured and placed inside large tents which include all the plants necessary for their prosperous existence. These amenities serve also as tourist attractions. True, birds cover greater distances that butterflies, and thus require far larger tents, but if there is a will, there is a way. That is to say, if a profit can be earned by housing birds in such a manner, it will presumably occur under the free enterprise system. At the very least, some members of these species may be saved in such a manner, even if many others succumb to the tragedy of the commons.   Walter E. Block is Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics at Loyola University New Orleans and is co-author of An Austro-Libertarian Critique of Public Choice (with Thomas DiLorenzo). (0 COMMENTS)

What are some places where people tend to voluntarily adhere to cultural norms?1. Japan2. Nordic countries3. Utah, VermontWhat are some places where Covid death rates were puzzlingly low:1. Japan2. Nordic countries3. Utah, Vermont By “puzzlingly low”, I mean low relatively to the government policy response and age distribution. (Yes, Utah’s rate was low even adjusted for its young average age). China’s death rate was even lower, but is not a puzzle given their draconian zero Covid policy. Australian and New Zealand also had zero Covid policies (before the vaccine), enforced by limits on travel. I’m interested in places where there’s no obvious regulatory explanation. I recently took a train from Dresden to Prague.  In Germany, a very high percentage of people on the subways and trams wore masks.  In Prague, almost no one wears a mask.  Interestingly, the cumulative death rate from Covid in Germany is less than half as high as in Czechia (which has a younger population than Germany.)  That’s obviously not all due to masks, but does largely reflect differences in willingness to voluntarily adhere to various cultural norms on things like masks, social distancing vaccination, etc.  Another comparison is Austria (where people wear masks on the subway) and Hungary (where they do not.)  Hungary’s Covid fatality rate is more than twice as high as Austria’s BTW, I am not arguing that wearing a mask makes much sense today—I rarely wear them—just that it once did make sense. PS.  Sweden’s death rate was low by global standards, but high by Nordic standards.  That fits with the fact that Sweden’s government did not encourage as much social distancing as its neighbors. PPS.  There’s yet another scientific study suggesting that masks are highly effective, although these studies are not very precise. PPPS.  On a recent train trip my wife wore a mask, while I did not.  I was the one that got sick a day later.  (Just a cold, not Covid.) (0 COMMENTS)

In retrospect, blockchain was a long time coming, given its potential for shifting power from governments and organizations to individuals—and addressing the government regulatory mess hobbling healthcare. Blockchain technology came on the scene in 2007-8 with its first “use case”— cryptocurrencies, beginning with Bitcoin. It took less than a decade for the technology to begin to pop up on several continents in healthcare, the cannabis trade, banking, and logistics—especially in biomedical fields such as clinical trials.1 Recent articles in Law and Liberty have focused on the cryptocurrencies and their promise and problems,2 especially as proposed substitutes for fiat currencies.3 But in a 2019 article in the Indiana Law Journal, John O. McGinnis and Kyle Roche predicted that blockchain would offer “a platform for other kinds of technological alternatives to traditional legal regimes, like smart contracts. Bitcoin’s order without currency law will facilitate other forms of order with less law.”4 Here, I will explore some recent examples of the potential of blockchain technology to enforce privacy and confidentiality without government regulation—indeed, where government regulation has made things worse. Privacy is among the most personal values gained by the individual in a free society—and among the dehumanizing losses in societies under collectivist dictatorship. Edward Snowden put it this way: “Privacy is the fountainhead of all other rights. Freedom of speech doesn’t have a lot of meaning if you can’t have… [a] quiet space within yourself, within your mind, within the community of your friends, within your home, to decide what it is you… want to say.”5 Conventionally, the blockchain has been viewed as abstruse—and the technology is sophisticated as are the proliferating use cases and applications (apps). But in concept, blockchain is readily understood. A blockchain is an online database (a software platform) often characterized as a “distributed ledger,” which is transparent, private, secure, and immutable. No one “runs” a blockchain. A blockchain is its users. All data and authority are distributed among those users or “nodes.” Any participant can enter transactions such as sales, contracts, and information-sharing, and every transaction is recorded on the blockchain. Everyone involved can see every transaction with which they are involved. This is the very definition of transparency. No transaction can be altered by anyone. Once a “block” of transactions is deemed complete (by consensus), that block is encrypted, given a hashtag describing its contents, and linked into the chain. If an error has occurred, it must be corrected in a separate transaction—like a newspaper story correction—which is a separate entry, not a correction of the published edition that carried the error. Access to an individual’s data, if that data is not part of a transaction, must be permissioned. (This clears a bottleneck that has been hampering healthcare for decades.) Participants can enter “smart contracts,” which are blockchain transactions specifying in advance the unambiguous conditions for fulfillment of a deal. All monies involved are sequestered when the contract is created. When you fulfill terms of the contract, the money owed goes to you automatically—no asking the other party, no haggling, no efforts at “collecting.” Contrast blockchain with a typical bank—with a database of transactions owned by a central authority (the bank), which accepts, approves, records, and modifies all transactions. This database in blockchain lingo risks a “single point of failure” (for example, corrupt bankers). A financial institution can be hacked, and its files frozen for ransom. Blockchain has no central authority. Regulation is achieved via transparency. Changes are by consensus of the parties involved. Hackers cannot hack every independent, distributed node, where the entire ledger resides. This came in very handy when states began to approve sales of cannabis products. Those products remained illegal on the federal level. Banks under federal regulation (that is, most banks) could not deal with an illegal industry or its businessmen or its revenues or payments. Blockchain systems sprang up in many states (and grew rapidly) to handle the financial transactions of growers, processors, sellers, and buyers of cannabis products.6 Purchases and sales at every level, not to mention complete records of shipping logistics, plant processing, and purity testing, are all transparent on the blockchain ledger. (Someone soon realized that this was handy for bookkeeping, reporting to state regulators, and paying taxes). The “use case” that gained acceptance most rapidly, however, was healthcare.7 Healthcare is typically administered by multiple independent providers, independently supplied, and records of care for reimbursement must be shared with insurance companies and governments. Analysts of the healthcare system repeatedly identified its greatest weakness as the impact of regulations concerning privacy and confidentiality of patient records. Doctors, hospitals, pharmacies, nursing homes, and insurance companies (to name but a few) keep records on visits of patients. No single, unified patient record exists anywhere—certainly not with the patient. But all players were hesitant to share their data because they were legally responsible for its privacy and the fines for violations were substantial.8 Hundreds of problems have been chronicled. A patient entering a hospital does not bring records from his doctor, pharmacy, nursing home, or testing laboratory. Nor does the hospital have access to those records, although it can apply for them. That means constant delays, even in emergencies. As a result, healthcare is only partially informed by the patient’s record, interviewing and testing patients is routinely repeated (with duplication of costs) by every new provider, and insurance reimbursements are delayed by cumbersome systems for entering patient data. This barely captures the elaborate tangles of delays, mistaken records, and waste that plague advanced healthcare systems. The problem often is characterized as lack of “interoperability” of medical record systems. You may have divined already the relevance of blockchain. All data from any provider can be entered into the blockchain under the single file that is the name of the patient. Providers then can access their own data, as entered, but access to other data must be “permissioned” by the patient. This can occur on the spot when a patient enters a provider’s office and gives permission, either one-time permission or until further notice. “If the individual patient using blockchain controls his total unified file of medical data, then the patient makes the choice to lend or sell his data—and what he asks in return.” The blockchain is inherently innovative. So new insights into blockchain’s potential kept cropping up.9 For instance, pharmacy companies, biomedical research institutes, medical schools and their teaching hospitals, and market researchers in the health field all have an insatiable need for data on millions of patients with different conditions who are get various treatments. And they pay for that data—constantly. If the individual patient using blockchain controls his total unified file of medical data, then the patient makes the choice to lend or sell his data—and what he asks in return. This system, in particular, has swept the field of genome testing, where huge specialized and segmented databases are needed along with patient confidentiality.10 At this writing, major pharmacies are using blockchain to record and track all prescriptions and record (and reward) patient compliance. Pharmaceutical companies are using blockchain to manage the logistics of getting new experimental drugs to participants in randomized clinical trials and documenting timely arrival, compliance, and even some results.11 Today, government has access to the data on a blockchain chiefly when invited into a given system as a participant (for example, for insurance reimbursements or when companies supply data to comply with regulations). Otherwise, the blockchain is inherently private for any type of transaction. How long is this likely to last? New industries and technologies seem to remain “wild west” at their outset. And then the entire logic of regulation begins to kick in. • Complaints arise from users and competitors who feel they have not gotten fair treatment or their fair share of profits. There are calls to regulate powerful “unfair” competition. • Lawsuits arise as firms have more money at stake and begin to dispute ownership of technology or it results. And, of course, anywhere business is done there inevitably are some instances of cheating and lawbreaking. • As blockchain enterprises gain power, influence, and wealth, politicians have incentives to control them—as social media grew into powerhouses that government cannot and will not leave alone. Many readers, I imagine, are saying, “Yes!” That is exactly what is happening in the earliest-developed, largest, and wealthiest blockchain enterprises—the literally hundreds of cryptocurrencies, with Bitcoin and Ethereum the leaders.12 But problems, too, have spilled over to the crypto exchanges, where blockchain users paid in “crypto” (hundreds of different “tokens” now exist) can exchange them for other currencies. Earlier eras of economic crisis—typically enabled by Federal Reserve policies as was today’s inflationary and market crisis—were used to justify bringing who segments of economic enterprise under government control (several installments of anti-trust legislation);13 economic systems under government control (creation of the Fed itself); and individual industries (as government has gone after Facebook and Twitter). Congress and state governments now debate how to regulate cryptocurrencies, which are taking blame for exacerbating the market crash that was set up by the Fed-driven inflationary boom.14 As a crisis creates pressure on all firms, and scrutiny and investigation increase, naturally a few firms in the crypto field are discovering malefactors.15 Back in 2018, G20 countries met to discuss regulation of cryptocurrency.16 Argentina, Australia, Turkey, South Africa, and the United Kingdom proclaimed that they would not regulate. This was not so much a matter of principle as the stakes. Mark Carney, head of the Bank of England and chairman of G20’s Financial Stability Board, declared crypto too small to pose risks to global financial stability—yet. Individual countries such as France, South Korea, and Brazil now have prohibitions and regulations in place. For more on these topics, see Marc Andreessen on Software, Immortality, and Bitcoin. EconTalk. Jim Epstein on Bitcoin, the Blockchain, and Freedom in Latin America. EconTalk. Eric Topol on the Power of Patients in a Digital World. EconTalk. Blockchain technology’s potential may be unstoppable, especially since the innovation is worldwide. But government regulation that required opening blockchain to bureaucratic scrutiny could defeat the confidentiality and privacy that define blockchain. In the end, we know, government cannot assent to leave anything important outside its power. Blockchain is inherently private and individual, inimical to government control. With government control, blockchain no longer would be blockchain. One immediate result would be the blockchain movement seeking freedom elsewhere. (Singapore, for example, already is a major locus for blockchain experimentation.) It would not be surprising to see the locus of blockchain platforms shift to islands where other industries have sought refuge. For example, “… small countries like Gibraltar, Bermuda, and Lichtenstein are all seeking to attract new capital and become crypto-friendly as a result.”17 The outcome of the present investigation of Bitcoin and other crypto, and calls for regulation, will be a telltale.18 Footnotes [1] Private Healthcare Blockchain (website). Available at: https://dclinic.co. [2] Law and Liberty (website). Search for “cryptocurrency.” Available at https://lawliberty.org/?s=cryptocurrency. [3] Alex J. Pollock, “Are Cryptocurrencies the Great Hayekian Escape?” Law and Liberty (website), March 30, 2022. Available at: https://lawliberty.org/are-cryptocurrencies-the-great-hayekian-escape/ [4] John O. McGinnis and Kyle Roche, “Bitcoin: Order Without Law in the Digital Age,” Indiana Law Journal 94, no. 4, pp. 1497-1554, at 1497. Available at: https://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=11350&context=ilj [5] Tarun Mittal, “Edward Snowden’s quotes on the importance of privacy,” Yourstory (website), April 8, 2021. Available at: https://yourstory.com/2017/06/edward-snowden-quotes-privacy/amp. [6] “The Future of the Cannabis Industry Starts Here.” Potcoin (website). Available at: https://www.potcoin.com/. [7] Medibloc (website). Available at https://medibloc.co.kr/. [8] iSolve (website). Available at: https://isolve.io/ [9] Dentacoin.com (website). Available at: https://dentacoin.com/. [10] Nebula Genomics (website). Available at: https://nebula.org/whole-genome-sequencing-dna-test/ [11] SAP Roche Tenthpin (website). Available at: https://www.nextgenctsm.com/icsm. [12] “Can the Government Regulate Cryptocurrency?” The NYU Dispatch (website). Available at: https://wp.nyu.edu/dispatch/can-the-government-regulate-cryptocurrency/ [13] “The Clayton Antitrust Act,” Investopedia (website). Available at: https://www.investopedia.com/terms/c/clayton-antitrust-act.asp [14] Sofija Vidjikant, “Bitcoin Regulation: What Is Happening and What to Expect,” Softjourn (website), May 13, 2022. Available at: https://softjourn.com/insights/will-bitcoin-ever-be-regulated. [15] “SEC Charges Former Coinbase Manager, Two Others in Crypto Asset Insider Trading Action,” SEC.gov (website), July 21, 2022. Available at: https://www.sec.gov/news/press-release/2022-127 [16] “Blockchain Regulation: Technology is Welcomed, Cryptocurrency Regulated,” IntellectSoft (website), April 23, 2018. Available at: https://www.intellectsoft.net/blog/blockchain-government-regulation/ [17] “Blockchain Regulation: Technology is Welcomed, Cryptocurrency Regulated,” IntellectSoft (website), April 23, 2018. Available at: https://www.intellectsoft.net/blog/blockchain-government-regulation/. [18] Sofija Vidjikant, “Bitcoin Regulation: What Is Happening and What to Expect.” Softjourn (website), May 13, 2022. Available at: https://softjourn.com/insights/will-bitcoin-ever-be-regulated. *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)

Hong Kong has shown the economic growth potential of a free economy. The 2017 Economist review of a book by Neil Monnery on John Cowperthwaite, the British civil servant who administered the British territory from 1945 to 1971, is required reading. The title and subtitle of the review announces its content: “Meet the Invisible Hand Behind Hong Kong’s Rise–Sir John Cowperthwaite Is That Most Unlikely of Things: A Bureaucrat Hero to Libertarians” (October 5, 2017). My VPN suggests that one can access this article without being a subscriber. If that is not the case, it is worth running (or flying an electronic carpet) to your university or local library to get it. You can also get the gist in the post you are reading: [Cowperthwaite] arrived in a Hong Kong in ruins from a brutal Japanese occupation. … He knew that the territory’s lack of natural resources meant that post-crisis prosperity depended on its ability to attract entrepreneurs and capital. That meant government’s role was to provide freedom rather than help. Cowperthwaite routinely rejected subsidy requests. He banned the collection of macroeconomic statistics lest they provide excuses for government controls. He said: We suffer a great deal today from the bogus certainties and precisions of the pseudo-sciences which include all the social sciences including economics. I myself tend to mistrust the judgment of anyone not involved in the actual process of risk-taking. He had been educated in classics and economics and was influenced by Adam Smith: That gave him the foundation to debate with free-spending colleagues influenced by John Maynard Keynes. Laissez-faire was needed for Hong Kong: As industries such as cotton spinning, enamelware and wigs declined and Cowperthwaite declined to offer assistance, businesses shifted their attention to promising areas such as toy and electronics production, and then finance. Migrants found work in the expanding industries, becoming a cog in a productive engine rather than merely a cost. It is also worth reading Milton Friedman’s short article “The Hong Kong Experiment.” There is some supporting video evidence at https://www.youtube.com/watch?v=xqh0zXSd4vc (the video quality is not as good as the original Freedom Network TV production). Amy Willis provides some more information including a link to an interesting EconTalk conversation between Russ Roberts and Neil Monnery. It is true that under Cowperthwaite, Hong Kong was not totally laissez-faire (see the conversation with Monnery on this), but its government was certainly the least interventionist of our time while protecting property rights and freedom of contract, with impressive results. The Maddison Project allows us to quantify the result of this laissez-faire policy better than Friedman was able to do (I am using the Maddison 2020 database). In 1950, according to this data, Hong Kong’s real GDP per capita was 27% of the US level. Until the territory was ceded to the Chinese state in 1997, Hong Kong grew so rapidly that this proportion had risen to 80% by 1997. Between 1997 and 2018 (the last estimate available), Hong Kong rate of economic growth diminished from 4.7% to 2.1%, but that was still sufficient for its real GDP per capita to reach 92% of the American level. (The Asian financial crisis of 1997 impacted Hong Kong’s GDP in 1998, but without changing the general portrait.) As the “one country, two systems” promised by the Chinese rulers for 50 years was fraught with uncertainty, and has indeed started to be degraded, the growth after 1997 remains an achievement, but is not likely to continue. The Chinese mainland itself, with its increasingly planned and regimented economy, will soon, if not already observable, reach the limit of the high growth that a rapid liberalization and participation in world trade previously permitted. (On the current economic problems in China, see “China Growth to Fall Behind Rest of Asia for First Time Since 1990,” Financial Times, September 26, 2022.) (0 COMMENTS)

I visited the DDR (also known as East Germany) back in the summer of 1990—just three months before that unhappy country ceased to exist.  After retiring in mid-September, my wife and I decided that East Germany was an ideal spot for a late summer vacation.  It isn’t–the weather was cool and rainy.  Nonetheless, the trip was still instructive, and even enjoyable at times. In 1990, I was struck by the grey and drab look of East Berlin.  The buildings were still pockmarked by bullet holes from WWII.  The other city I visited (Dresden) was still partially in ruins.  It was sad to see the pointless destruction inflicted on its beautiful baroque buildings, especially given that the war was all but over in February 1945.  (Full disclosure:  My dad was a mechanic at a US bomber base in Thetford, England during WWII.) I am happy to report that both cities have been rebuilt.  We arrived at a beautiful (and long delayed) new Berlin airport which opened in 2020, and our hotel was right next to a brand new subway line that opened the same year.  You cannot imagine a bigger contrast with New York’s subways—the attractively designed stations did not have any graffiti at all.  The central part of the line has three new stations and cost about 550 million euros.  In NYC, a similar recent project cost 4 billion euros. Overall, the scale of change in central Berlin since 1990 has been stunning (especially on the east side and the wall area), more comparable to a Chinese city than to an older European capital.  I can’t imagine why some East Berliners still vote for the renamed communist party (now called the Left Party.) Berlin is a textbook illustration of the superiority of capitalism over communism.  (Yes, part of the cost was born by German taxpayers, but what economic system allowed western Germany to have the resources to rebuild the failed communist experiment in the east?) Countries that unified relatively late, such as Germany and Italy, have smaller national capitals than countries with long continuous histories such as Britain and France.  What I like best about Berlin is its modesty.  I recall reading that Berlin is the only capital city in the world that is poorer than the nation over which it governs.  (Is that still true?). I suspect that the ratio of a capital city’s per capita income to the nation’s per capita income is a fairly decent index of corruption.  Let’s hope that Berlin remains modest. It has a nice mix of modern and traditional architecture, and a great new museum. Dresden is one of my favorite European cities, full of interesting museums.  We spent 2 1/2 days there, but could easily have spent twice as long. This was our subway stop in Berlin: And here’s the starry ceiling of another station: (0 COMMENTS)

Much of the push coming today from both the political right and the political left for industrial policy – and coming also for simple protectionism – has to do with helping Americans better ‘compete’ with China.  As the argument goes, China is a bad actor in part because, being communist, its government has no problem using large-scale government initiatives to promote China’s role on the world stage and to boost the Chinese economy by funneling resources toward Chinese producers, innovators, exporters. The results of these actions by the CCP are allegedly helping China achieve global economic dominance, which will in turn allow them to kick our American butts. The biggest of all these initiatives that American politicians and pundits love to be scared of is the Belt and Road Initiative (BRI). Senator Marco Rubio (R-FL) is one of those hyper-vigilant politicians who has been tirelessly warning us about the risks of this Chinese policy. He put out  report titled “Made in China 2025 and the Future of American Industry” outlining “the challenges posed by China’s whole-of-state industrial planning for America’s prosperity and productivity, including the jobs and wages of American workers.” He also offers a list of policy ideas meant to challenge Chinese central planning with our own central planning. I pick on Senator Rubio, but he’s far from alone. The CHIPS Act, which was enacted a few weeks ago by Congress and signed into law by the President, is all about using more subsidies and other protectionist measures to “compete with China.” While I can appreciate that there are some legitimate national-security concerns relating to China, I don’t buy the claim that to compete economically with the communist regime we must emulate that regime’s anti-market policies. To be sure, the Chinese government gets an A in spending a ton of its people’s money in subsidies and stuff. However, the assumption that this prosperity, economic growth, and innovation depends on who wins the battle of subsidies is ludicrous if you understand anything about the incentives that plague government decisions to spend money on special interests- not to mention that we have thousands examples of crony investments failing to achieve their goals. In addition, good reasoning and evidence offer ample that industrial policy, narrowly or widely defined, has always been, and still is, bad economics and as source of cronyism. Speaking of failure… A few days ago, the Wall Street Journal had a great piece by its chief China correspondent Lingling Wei on how China is working on an overhaul of its Belt and Road Initiative. The cause? After a decade and some $1 trillion BRI “investments” in 150 countries, most of which are in serious financial distress, mostly what it has to show for is malinvestments are high default rates on its loans and failure to deliver. A tidbit: Chinese President Xi Jinping once called the initiative “a project of the century,” but the overhaul exposes limits to his vision to reshape the global order. .. Nearly 60% of China’s overseas loans are now held by countries considered to be in financial distress, compared with 5% in 2010, according to economists Sebastian Horn, Carmen Reinhart and Christoph Trebesch, who have written about international debt…. The process could force Chinese banks to accept losses, something they’ve long opposed. For years, Beijing preferred to extend the maturity of troubled loans, a practice known in the finance industry as “extend and pretend.” That strategy risks prolonging countries’ debt woes rather than fixing them. Beijing has also dialed down its rhetoric in state media. … By 2017, Chinese banking executives were complaining to Beijing that they were being asked to finance projects that had little prospect of returns, according to executives involved in the discussions. Some lenders threatened to stop supporting certain projects unless regulators let them clarify that those loans were “policy-instructed,” the executives said, so the banks wouldn’t be held accountable for defaults. You can read the whole saga here. It’s not as if none of the initiative has worked. As the Journal reports: For all its troubles, the initiative has succeeded in drawing more countries into Beijing’s orbit over the past decade, with many recipient countries voting alongside China at the United Nations. But while reform of the BRI and more prudent lending can limit the program’s losses, bad incentives, bureaucracy, mismanagement and so on and so forth will still be at play. The road to prosperity isn’t paved with industrial policy, loan guarantees, and subsidies. Shouldn’t we know this lesson by now?   Veronique de Rugy is a Senior research fellow at the Mercatus Center and syndicated columnist at Creators. (0 COMMENTS)