Jean Baechler passed away a few days ago. I’ve written a short obituary for the Wall Street Journal. I’ve tried to highlight the key insight of his short-but-great 1971 book, The Origins of Capitalism: Economic growth, Baechler maintained, is the result of millions of “experiments” by people who act and think differently from the mainstream. For growth to happen, such acts of mutinous innovation must be permissible, if not explicitly permitted. Baechler saw capitalism as an offspring of Europe’s peculiar political condition. Despite the attempts of Charlemagne, Charles V, Napoleon and Hitler, Europe never became an empire. A great cultural homogeneity, provided mainly by Christianity, failed to produce a Continent wide political order. Baechler thought that political anarchy had been key to the development of the market economy in Europe. His book was not so much a work in economic history but rather in the history of political thought, addressing critically Karl Marx and Max Weber on the origin of capitalism. A few years ago I invited Baechler to give a lecture at Istituto Bruno Leoni in Turin. You can listen to it (in French) here. He was an eclectic scholar, who dealt with a number of different subjects, mostly in sociology, after that old book of his, though he regularly surveyed the status of the historiographical debate on the same matter. For the time we spent together, I can say he was a rather reserved man, with a dry sense of humour and with a prodigious memory. RIP. (0 COMMENTS)

One problem with anti-abortion laws is that we can count on the state to use them as a new tool for privacy invasions, surveillance, and control—just as unconditional abortion leads to the debasement of human life. The government of the state of Georgia wants to prove that the first of these slippery slopes exists. (“Georgia Abortion Restrictions Spark New Debate Over Claims to Fetal Parenthood,” Wall Street Journal, August 27, 2022): Ed Setzler, the bill’s Republican author, said the recognition of fetal personhood is the logical extension of abortion bans. “If at the point of detectable heartbeat we’re going to protect children from the violence of abortion, naturally that protections should apply across Georgia law,” he said. Democrats and some legal scholars say the law opens the door for any of the dozens of local Georgia prosecutors to charge women with murder for taking abortion pills or traveling to an abortion clinic in another state. But the state is benevolent and serviceable: Setzler said that pregnant women could be allowed to drive alone with their fetuses on commuter lanes reserved for cars with passenger. But here is the catch: The state Department of Transportation said the issue would be one for local law enforcement to decide. According to the Georgia Department of Revenue, parents of an unborn child “with a detectable heartbeat” will be able to claim a personal income tax exemption of $3,000. But there is a catch again: The department declined to explain how someone would provide proof of an unborn child, or what should happen in the event a woman miscarries after claiming the exemption. The department will answer further questions about the impact of the law on taxes later this year, a spokesman said in an email. This sort of invasion of the “protected domain” (as Friedrich Hayek called it) around each individual and his property is reckoned to be illegitimate in much if not all the classical liberal and libertarian tradition. A general, impersonal, abstract principle would have to be found that both protects private property and allows checkpoints for women’s uteruses—a tall order, although the proliferation of checkpoints and decline of the Fourth Amendment have gone some way towards this Brave New World. In James Buchanan’s constitutional setup, such a rule would have to obtain, or be capable of obtaining, the unanimous consent of all individuals, which is even less likely. Philosopher Robert Nozick developed a Kantian theory of individual rights as strict constraints against what others, including the state, can do to an individual (Anarchy, State, and Utopia, Basic Books, 1974). It is interesting that both Hayek and Buchanan invoke Kant to buttress their otherwise quite distinct theories. Whatever the goals of the state, there are barriers it must not cross. If checking women’s uteruses does not cross them, one wonders what would. The state has already breached many barriers, often with approving clamors from the mob. On May 28, 2014, the Habersham County police in Georgia carried a late-night no-knock raid on a home where they thought a drug suspect would be. The SWAT rammed the door and tossed a flash-bang grenade inside. It landed in a playpen where a relative’s 19-month-old baby was sleeping, disfiguring him. Pardon the macabre joke, but the baby, called Bou Bou, had unfortunately been born 19 months before. No cop was criminally charged, except one who was indicted by a federal grand jury for lying on the affidavit requesting the warrant; she was acquitted. The parents received many millions of dollars in damages and settlements from municipal agencies. (See, for example, Mark J. Perry, “Baby Bou Bou Update, the Toddler Disfigured in a SWAT Drug Raid Based on a Warrant Obtained with False Information, AEI, July 24, 2015; “Ex-Georgia Deputy Acquitted After Flash Bang Grenade Hurts Toddler,” NBCNews, December 13, 2005; or google “Bounkham Phonesavanh.”. (Incidentally, that sort of story, which is not infrequent, suggests that Mar-a-Lago does not represent the most shameful home invasion in American history. Ordinary people get worst.) Selling drug to adults is a victimless crime because nobody is forced to buy. Readers who have seen my previous post on abortion know that I don’t believe that abortion is always a victimless crime (“Economic Reflections on Abortion,” EconLog, August 8, 2022). The general lesson is that we must be conscious of the permanent danger of coercive government interventions; mission creep is part of the danger. Federalism and the liberty to move to another state attenuate the danger, but don’t eliminate it. And my apologies for the slightly tabloid image I chose for this post. It can’t happen here? Frightened woman during the interrogation (0 COMMENTS)

Author Amor Towles talks about his book, A Gentleman in Moscow, with EconTalk host Russ Roberts. Along the way they discuss the craft of writing, the wellsprings of persistence, and Towles’s reading habits. The post Amor Towles on A Gentleman in Moscow and the Writer’s Craft appeared first on Econlib.

I have a new piece at The Hill, discussing the prospects for a soft landing: A useful definition of a soft landing would be a period of at least three years of economic growth with low inflation even after the labor market has full recovered from recession. Surprisingly, there is no evidence that the United States has ever achieved a soft landing, at least as far back as we have economic data. . . .Oddly, this is not the case in other countries, where soft landings are not particularly unusual. Japan has had extended periods of very low unemployment and low inflation. A notable example of a soft landing occurred in Britain during 2001-08, when unemployment stayed in the 4.7 percent to 5.5 percent range for seven years and inflation remained relatively low. Australia had no official recessions between 1991 and 2020. Note that the US has never even achieved a soft landing when conditions were favorable, such as a period when inflation and NGDP growth were relatively moderate and hence a tight money policy was not needed.  Today, we have very high inflation and NGDP growth, which makes it much more difficult to achieve a soft landing.  It’s like trying to land a 747 on an aircraft carrier in the midst of a typhoon. If three years from today the US has roughly 3.5% unemployment and roughly 2% inflation, then we could say that the Fed achieved a soft landing.  Unfortunately, that doesn’t seem very likely. PS.  Without Covid, I think we might have achieved a soft landing in the early 2020s.  But we’ll never know. (0 COMMENTS)

The New York Times and Wall Street Journal editorials on the Mar-a-Lago search affidavit were more or less as expected. The New York Times argued expansively that nobody is above the law, including a current or former president. The Wall Street Journal (which tried hard to love Trump during a few years but understandably failed) argued that whatever crime Trump committed in keeping classified documents is a minor thing compared to the consequences of the Department of Justice going after him. It is useful to look at the issue in light of the theories of law developed by economists since the mid-20th-century century. One theory, identified to the Law and Economics movement or school, is that law should be efficient, in the sense that it should weigh the benefits and costs of any legal intervention, including of course its effect on incentives (an unorthodox view is given by David Friedman in his 2000 book Law’s Order). Both the New York Times’s and the Wall Street Journal’s editorials seem consistent with this theory. They simply don’t have the same evaluation of costs and benefits or apraissal on whom they fall—as typically happens in a cost-benefit approach. The two other major political-economy theories of law may look less “scientific,” but this mainly, if not only, because the scientific claims of cost-benefit analysis are much overrated. One theory was developed by FA. Hayek, a 1974 Nobel laureate in economics (see his Law, Legislation, and Liberty, especially the first volume, originally published by the University of Chicago Press in 1973, and my Econlib review of this book). The basic idea is that legal rules are those general, impersonal, and abstract rules that are essential for the maintenance of a free society, that is, for a social order where coercion is minimized and each individual can pursue his own purposes. In this perspective, the question would be something like: Can we universalize, in a free society, the rule that the chief executive of the government, in or out of office, may treat national security documents as he sees fit? Or is this rule just a rule applying to the organization called government? If yes, leave Trump alone on this matter. If not, the search of his office and residence is prima facie justifiable. The other major economic approach to the analysis of law is the constitutional political economy mainly developed by James Buchanan, laureate of the 1986 Nobel prize in economics (see, for example, his 2006 book Why I, Too, Am Not a Conservative and my review in Regulation). The basic idea is that, accepting the axiom that all individuals are “natural equals,” all politics must be based on, and limited by, general rules (“general” in the same sense as Hayek’s) that must be unanimously consented to or capable of unanimous consent, by all individuals of a society in a virtual social contract. Before giving his consent or opposing his veto, each individual balances his own benefits and costs. In this perspective, the question would be: Is it plausible that all Americans, fearful of Leviathan, would accept that the social contract allow a current or former chief executive of the government to use national security documents as he sees fit? If yes, leave Trump alone on this matter. If no, the search of his office and residence is prima facie justifiable. The answer to our question appears to be substantially the same whether we follow Hayek’s or Buchanan’s theory of law. The Hayek or the Buchanan approach would apply to other current or former rulers who misuse classified information—although some misuse may be more culpable than others. Whether it should also be applied to private parties who leak classified information is a different matter. One however cannot avoid wondering why Trump, when he was in power, did not work towards loosening the legal risk of those who use proprietary government information. It also bears remembering that the rulers are, or should be, tasked with maintaining a free society (Hayek’s approach) or with enforcing a unanimous social contract (Buchanan). One would think that the law would hold them to a very high standard. As a citizen, a ruler has exactly the same rights as other citizens; as a ruler, he must accept some special constraints. It is Donald Trump who had the job of protecting Edward Snowden’s rights, not the other way around. “It’s hard to believe that a dispute over documents would yield a criminal indictment,” says the Wall Street Journal, but they are speaking about Mr. Trump! This reminds me of the historical example that Mancur Olson, another famous economist, reported (Power and Prosperity, 2000, p. 40): In Venice, after a doge who attempted to make himself autocrat was beheaded for his offense, subsequent doges were followed in official processions by a sword-bearing symbolic executioner as a reminder of the punishment intended for any leader who attempted to assume dictatorial power. Little economic exercise to go further: (1) What would be the criterion by which political dignitaries would be judged under Anthony de Jasay’s “capitalist state”? (2) Did  Mr. Trump work to establish this “capitalist state”? (0 COMMENTS)

In the year to June, the Consumer Price Index increased by 9.1%, “the largest 12-month increase since the period ending November 1981.” Back then, the rate was declining from its peak of 14.6% in March and April 1980 and would bottom out at 2.3% in July 1983. What caused that inflation? How was it slowed? In the 1960s, monetary policy was grounded in a concept called the Phillips Curve. This held that there was an inverse relationship between inflation and unemployment so that as one rose the other fell. Policymakers could buy lower unemployment at the price of higher inflation and vice versa. At the end of the 1960s this relationship broke down. The inflation rate rose from 1.6% in 1965 to 5.9% in 1970 but unemployment rose too, from 3.5% in 1969 to 6.0% in 1971. Federal Reserve chairman Arthur Burns complained: “The rules of economics are not working in quite the way they used to. Despite extensive unemployment in our country, wage rate increases have not moderated. Despite much idle industrial capacity, commodity prices continue to rise rapidly.” In 1971, President Nixon imposed wage and price controls but inflation went on rising. The CPI rose by 11.0% in 1974 and President Ford launched the ‘Whip Inflation Now’ – WIN – campaign, whose most memorable component was the wearing of badges reading ‘WIN’. And unemployment continued to rise, hitting 8.5% in 1975. In 1978, with inflation at 7.6%, President Carter, said: “Inflation is obviously a serious problem. What is the solution? I do not have all the answers. Nobody does. Perhaps there is no complete and adequate answer.” This wasn’t quite true. Based on his monumental study with Anna J. Schwartz, A Monetary History of the United States, 1867–1960, the economist Milton Friedman – who had exposed the Phillips Curve fallacy in 1968 – had long been arguing that: “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” Friedman rejected popular inflation bogies, notably the energy price hikes of “Arab sheikhs and OPEC:” “They have imposed heavy costs on us. The sharp rise in the price of oil lowered the quantity of goods and services that was available for us to use because we had to export more abroad to pay for oil. The reduction in output raised the price level. But that was a once-for-all effect. It did not produce any longer-lasting effect on the rate of inflation from that higher price level.” He contrasted the low inflation of Germany and Japan, which imported all their energy, with the high inflation of the United States, “which is only 50 percent dependent, or…the United Kingdom, which has become a major producer of oil.” The key variable was monetary policy. Inflation was not an impenetrable mystery: it resulted from printing money at a rate greater than the expansion of the real economy. It followed that if you controlled the growth rate of the quantity of money, you could control inflation. In July 1979, Carter appointed Paul Volcker Fed chair. He knew what he was getting. On their first meeting, Volcker told the President “You have to understand, if you appoint me, I favor a tighter policy than [his predecessor].” Volcker proved as good as his word. In October, he initiated a fundamental change in Fed policy. Changes in the daily level of the fed funds rate “tended to be too little, too late to influence expectations,” Volcker recalled, “We needed a new approach.” “Put simply, we would control the quantity of money (the money supply) rather than the price of money (interest rates). The widely quoted adage that inflation is a matter of ‘too much money chasing too few goods’ promised a clear, if overly simplified, rationale.” Interest rates would fluctuate and as money growth slowed, rates rose: rates on three-month Treasury bills exceeded 17%; the commercial bank prime-lending rate hit 21.5%; mortgage rates approached 18%. The consequences were brutal. Real GDP fell at an annual rate of 2.1% in the second quarter of 1980 and the unemployment rate rose from 5.6% in May 1979 to a peak of 10.8% in November and December 1982. To his credit, Carter, unlike his predecessors, did not push Volcker to loosen policy, even as he entered an election year. Ronald Reagan defeated him in a landslide. Volcker had once advised Nixon, “If you have to have a recession, take it early.” Reagan did and reaped the rewards. Real GDP growth hit 7.2% in 1984, the inflation rate fell to 1.9% in 1986, and unemployment to 5.3% in 1989. It was ‘Morning in America,’ Reagan said, and he was reelected in a landslide. Then, as now, ‘it’s the money supply, stupid.’   John Phelan is an Economist at Center of the American Experiment. (0 COMMENTS)

HEADS UP, Monterey Peninsula business owners. A wheelchair bound disabled man who’s filed more than 800 lawsuits alleging violations of disability access laws has taken aim at more than a dozen mom-and-pop shops in Salinas, and the Peninsula could be his next target. Since July 5, Orlando Garcia — with the help of a San Francisco law firm that prosecutors in two major cities have accused of “shaking down” businesses — has filed 13 civil complaints in Monterey County Superior Court. Garcia and his attorneys allege the Salinas shops, bakeries, laundromats and other small businesses he visited earlier this year had inadequate or nonexistent disabled parking, high counters, tight door handles and other obstacles that made it difficult for him during his visits. Represented by the Center for Disability Access, a division of the Potter Handy law firm, Garcia and his attorneys boast of their litigation prowess. “In the year preceding the filing of this complaint, Garcia has filed approximately 634 lawsuits alleging violations of construction-related accessibility standards,” according to a July 19 complaint Garcia filed against the owners of La Mariposa Bakery & Deli in Salinas. This is from Kelly Nix, “Serial ADA plaintiff targets Salinas shops,” Carmel Pine Cone, August 26-September 1, 2022. It’s a front-page story. What I find refreshing about it is that even though it’s a news story, it doesn’t pull its punches. It’s more like a “news analysis,” to use the term the New York Times uses. But the Times editors would never have the guts to run a story like this. Here’s another interesting part: Los Angeles District Attorney George Gascon and former San Francisco District Attorney Chesa Boudin contend that Potter Handy’s scheme is to combine lawsuits court, allowing them to circumvent repeated attempts by the California Legislature to end ADA lawsuit abuse. The trick is to “falsely” assert standing in federal court, Gascon and Boudin said, thereby avoiding the strict requirements to file a claim under the state’s Unruh Civil Rights Act, while demanding small businesses pay “the heavy damages available under the Unruh Act. Notice the names Gascon and Boudin, two of the most unpopular California District Attorneys in recent history, Indeed San Francisco voters recently recalled Boudin. Later: The tactic is not what federal and state civil rights and accessibility laws were intended for, the prosecutors’ suit says. “It is a shakedown perpetrated by unethical lawyers who have abused their status as officers of the court,” according [to] Gascon and Boudin’s lawsuit. The fact that even Gascon and Boudin are on board with this is a somewhat hopeful sign.     (0 COMMENTS)

In this episode, former EconTalk guest and author of Gut Feelings, Gerd Gigerenzer joins host Russ Roberts to talk about his latest book, How to Stay Smart in a Smart World: Why Human Intelligence Still Beats Algorithms. Whether fearful or excited about the impact and potential of AI, we think you will find this discussion scintillating. What aspects of AI concern you the most? What claims do you doubt? As always, we would love to hear what you think about and hope these questions will inspire you to share your thoughts with us.      1- Cancer treatments and investments are two areas where numerous variables and uncertainties abound. What else comes to mind that supports the “ common sense beats AI” argument?   2- EconTalk listeners are familiar with a favorite quotation of Russ Roberts’, ‘We are storytelling, pattern-seeking animals.’ How does Gigerenzer argue that AI can turn this human tendency against us?   3- What do you think about the coffee house analogy of online platforms? Which part rings truest to you- the free coffee, sales people as customers, or us as the product being sold? How much should you/we care about being surveilled?    4- PISA scores indicate that 90% of 15-year-olds, who are digital natives, do not know how to tell facts from fakes. Gigerenzer proposes that students should be trained to check the About Us tab, but the majority of Stanford undergrads don’t know this lateral reading technique. Do you believe this risk literacy deficit and inability to discern trusted sources is unique to this age group? Explain.   5- Better problem solving skills and knowledge of statistics might reverse the negative error culture that pervades corporations and individuals today. What other educational investment is needed to prepare students for complicated decision-making in a world of uncertainty?   (0 COMMENTS)

In recent months, my interest in financial bubbles, their causes, and how they form impelled me to buy an exciting book. Specifically, I purchased a copy of Boom and Bust: A Global History of Financial Bubbles by William Quinn and John D. Turner. Although they are not Austrian economists, and they do not cite the Austrian Business Cycle Theory (ABCT), their theories are very similar. At first, I was amazed by its theoretical framework and its way of addressing the concept of speculation bubbles.   What is the Bubble triangle? Quinn and Turner provided a simple explanation to understand financial crises and named their analytical framework The Bubble Triangle. This triangle is composed of 3 elements: speculation, marketability, and credit/money. Speculation they define as is the purchase (or sale) of an asset to sell (or repurchase) the asset at a later date with the sole motivation of generating a capital gain.” To Quinn and Turner, speculation can become a problem when novices enter the market when it is getting heated. This relates to the ABCT in that entrepreneurs sometimes may see speculative opportunities due to a mistake (usually, a governmental intervention), and sometimes they lose the capital saved. Another side of the triangle is marketability. When illiquid assets become relatively more liquid than they used to be, they can be purchased or sold with respective easiness. Of course, when an asset has high levels of liquidity, buyers and sellers can find each other without hassle. According to the authors, this aspect is critical because when an asset bubble forms, it increases its marketability; this has a similar effect on the economy as if someone trying to stop the fire pours gasoline on it. It becomes highly problematic, especially if everyone holds one through an investment or pension fund. The last and most crucial element is the credit and money available in the economy. In this aspect, Quinn and Turner have Austrian-like elements that are not present in many other accounts. Essentially, they point out that by increasing the credit available in the economy, entrepreneurs and enterprises would invest in deficient projects that otherwise would not have been undertaken.   How does the Bubble Triangle relate to the Austrian Business Cycle Theory? By incorporating the ABCT model, the increased marketability of malinvested assets, and the entrance of novices into the exchange system in a highly speculative period, we can explain why the bust part of the cycle is so hurtful. A good analogy is that sometimes the economy may spark a fire; if everything goes well and there are firefighters near, the fire remains under control. If, on the contrary, each person has a gallon of gasoline near them, the fire can spread more quickly and cause more damage. For instance, look at the malinvested mortgage loans in the Great Recession. Many agencies back in 2005 graded many of these securities as AAA. After the crisis hit, 83% of these AAA securities were downgraded because firms misinterpreted the real risk of these assets. In a non-liquid market, the failures of loans wouldn’t have the same impact as if these loans were made more liquid so anyone could purchase them. That is to say, when high-liquid assets result from an error induced by a decrease in interest rates, every economic agent seems to be affected in one way or another. This issue could explain the harshness of the bust stage and why it takes so long for the economy to recover. A greater focus must be put on the mismanagement of the central banks. Anyone who has read I, Pencil by Leonard Reed would understand how complex the various stages of production are, and how division of labor and voluntary cooperation are so impossible to coordinate through central planning. If  economists have agreed that central planning has failed to coordinate the production of goods and services, how can we expect that the manipulations of interest rates could bring any good? It is more challenging to coordinate intertemporal production than immediate future production. Overconfidence is not enough to explain why this generalization of bad investment happens not just among novice investors but also through investment firms. Yes, novices may commit mistakes when they are trying to speculate. But this part of the arbitrage process of the market is looking to clear and balance profit rates between different investment demands.   Conclusion There is still much to work to do on the theory of business cycles. Whether the explanation comes from one school of thought or the other is irrelevant to  each individual. Even so,  the introduction of different financial concepts to the Austrian analysis might help us understand the extent of the boom and the suffering of the bust.   Carlos Martinez is a Cuban American undergraduate student attending Rockford University. He is pursuing a BS in financial economics. Currently, he holds an Associate of Arts degree in economics and data analysis. (0 COMMENTS)

Inflation in the United States and elsewhere has generated a great deal of commentary. Some, such as Senator Elizabeth Warren (D-Mass) and Marxist economist Richard Wolff have attributed inflation and increased prices to the greed of capitalists and corporations and corporate concentration. Such claims are questionable at best.  Greed, or any kind of personal motivations, are a bad explanation for a rise in price, whether of specific goods or the general price level. If greed or self-interest are present, then they are behavioural constants. Such accounts fail to explain why prices ever go down. Are businesses less greedy when prices fall? If so, we never hear it, and that suggests motivated reasoning. Another reason for doubt. While a corporation might have a great deal of market power, it cannot affect the entire Consumer Price Index. Inflation is also unrelated to corporate concentration. Further, prices reflect decisions by a multitude of sellers with competing interests. Sellers are too numerous to collude and fix prices, because transaction costs rise as the number of colluding actors increases. The number of people who would need to be aware of each other, meet, and agree on a price is huge. Further, price-fixing agreements tend to break down due to defectors trying to beat out the competition by lowering their prices against the majority.  More generally, prices do not result from the will of specific actors. Prices are emergent products of supply and demand. They reflect the myriad decisions of producers and consumers with a variety of preferences and differing opportunity costs. Inflation (a general rise in the price level) tends to derive from an excess amount of liquid currency available, relative to the amount of real goods and services being produced at a given moment. In simple terms, inflation is a problem of “too much money chasing too few goods”. Overall, personal motives have no impact on specific prices or the general price level. Motives as an explanation for market equilibria is the social science equivalent of believing that hurricanes occur because the gods are angry. On the motive-centric account, greed or self-interest becomes a quasi-mystical, generalized force to be defeated, rather than a consistent (but partial) component of human nature.  Here’s an illustrative parody by the economist Mark Perry applied to oil:                           Folk intuitions and their discontents Why are motivational explanations intuitive to so many? Such errors are common in what Paul Rubin calls “folk economics”, or “the intuitive economics of untrained persons.” Put differently, what kinds of gut feelings or patterns of informal logic mislead us, and why are they present?  One reason might be the search for control, an impulse that contributes to conspiracy theorizing (among other tendencies). Attributing causal explanations from the triumph or failure of a select group with a great deal of presumed power is easier to cope with. Compare this with explanations based on multifactorial causes resulting from the emergent patterns of many different actors. The former provides a sense of psychic security about the world as a much more simple place with problems that can be resolved through moralized struggles between defined groups. The latter does not. This argument is related to (but not identical with) F.A Hayek’s claim that our minds are evolutionarily unsuited to the complexity of the modern world. We often reason using the logic of collective resource acquisition and distribution common in tribes, families, and other small groups with heavily shared inputs and outputs. Such groups were important for our survival in prehistory. However, centralized acquisition and distribution are not how contemporary economies with a complex division of labour function.  Tyler Cowen argues similarly in a recent book: One of humanity’s key problems is that human beings evolved to make sense of an environment where a lot of the main problems were caused by individual human agency. Our biggest benefactors, and also our biggest threats, were small groups of other people who sought to either aid or harm us with very deliberate, conscious intent. We evolved in groups of status-conscious primates, for whom building the right social alliances was a key to reproductive success and thus important to our well-being. So, for better or worse, we are geared to think in terms of what small groups of socially allied people will do to us and what their intentions are toward us. We are rather less well constructed for thinking about abstract systems, the import of rules, and how the secondary or tertiary consequences of those rules may improve (or harm) human well-being in non obvious ways. A related reason might be what I’ll call a desire for karmic justice. This is the idea that social or economic outcomes and patterns should track the moral virtue of actors. However, market dynamics such as inflation and price changes affect people regardless of their personal character. Likewise, all the market rewards is relative effectiveness in responding to the preferences of others and productive applications of capital. You can be a good person and do quite poorly on the market or a bad person and do very well (though markets do reward many virtues). The idea that systems do not reflect karmic justice is likewise hard for us to accept. The invisible hand relies on the incentives of rational self-interest, not benevolence, to give people their daily bread. Likewise, economic misfortune such as inflation is caused by rational actors responding to price changes, which they too must accept as givens, and thus they are not being not strictly virtuous or vicious.  Jacob Levy notes that while ancient thinkers sought to connect the character of institutions directly to the virtue of individual actors, modern social thought since Adam Smith has recognized that the parts don’t always equal the whole. Nor is it necessary for people to be virtuous in order to create good outcomes, as reflected in Smith’s famous discussion of the invisible hand. Further, Levy argues, as in cases of perverse emergent orders, social injustice can occur without it being any individual’s intention, as in Thomas Schelling’s analysis of white flight as a “tipping point” problem. Perhaps what popular responses to inflation tell us is that despite our highly advanced systems of economics and politics, we still need a lot of cognitive adaptation to our very abstract modern world, governed by general rules and the interactions of complex systems. Overall, they are the “result of human action, but not the execution of any human design.”   Akiva Malamet is an M.A candidate in Philosophy at Queen’s University (Canada). He has been published at Libertarianism.org, Liberal Currents, Catalyst, and other outlets. (0 COMMENTS)