[Editor’s note: Read Part One and Two of Lynch’s review.] At the beginning of Chapter 9, which finally marks the beginning of Ferguson’s writing on our current pandemic, the author claims that while he obviously cannot write the history of the crisis while it’s unfolding, “the act of thinking historically about an unfolding event is not without its value.”  I hope you will forgive me if I admit to you that the first thought I had upon reading this sentence was, “well Niall, it certainly has value to you!”  The value of this particular book project to the reader is an entirely different matter. So what is the value here?  What can we derive from this attempt to think historically about disasters, plagues, death, and destruction?  It seems to me that there is some value if the reader does not approach this project as a book per se, because it isn’t really a coherent book-length project.  It’s rather a mess.  But within that mess there are some very interesting observations about the limits of politics, the challenges that crises present, and even how we as individuals reacted to the pandemic while it was happening.  If you think about this book as a collection of essays, albeit disconnected, there are some things worth reading and other chapters best avoided. For example, Chapter 9 was probably dated the moment the book was printed, and looks even more so now.  Yes, the United States’ and United Kingdom’s initial responses to the pandemic were haphazard and cost lives; however looking at a still partially locked down and economically suffering China in 2022, one wonders if the Chinese leadership is simply forestalling the inevitable.  Furthermore, writing when he did, Ferguson seems to ignore the public fatigue to draconian measures against a disease that even he acknowledges was deadly for a specific subset of folks (the elderly and those with co-morbidity).  That fatigue eventually set in throughout the world.  Now contrast that rather dated chapter with one that has aged better: Chapter 10.  In it, Ferguson reviews the economic consequences of the pandemic and lockdowns.  He notes that the now widely dismissed and flawed model from the Imperial College London on the possible death rates of the COVID virus also ignored the social, economic, and political realities of human life.  He notes that the excess death rates of the US and Sweden looked remarkably similar at the time, a fact that became clearer and clearer as time passed.  Lockdowns didn’t seem to be helping control deaths, and they certainly made the collateral social and economic damage of the pandemic far worse.  His review of the social unrest during the summer of 2020 is more uneven and now looks ready for a rehash, but his point about the partisan nature of the pandemic and response is dead-on, even if his social overview seems dated. Whatever one thinks of Ferguson’s theories regarding empire and global hegemony, his penultimate chapter addresses how, at the time, he saw ever more clearly that the rising conflict between China and the US was the new Cold War.  I don’t think I need to rub it in, but obviously Russia has messed this up for him.  Pity the political prognosticator.  While China has obviously sided with Russia in its invasion of Ukraine, one can’t look at current silly Chinese COVID policies and slowing economic growth and see the Chinese leadership as the same rising adversary that appeared to have handled the virus better than the US did.  Furthermore, the relatively robust American and European response to helping Ukraine has probably given China more pause in gazing longingly at Taiwan as a future Hong Kong, particularly in light of the way Beijing has chosen to govern the territory.  Any Western leader who doesn’t admit what will happen in Taiwan should China move against it will be hard pressed to explain why.  So here again, Ferguson’s assertions and theories have not aged particularly well. I guess if I had to sum up this review in a sentence it would be this – the first part of this book is much better than the latter parts of it, but the key takeaway is that Ferguson’s book has given us a way to understand how intellectuals and pundits were reacting to the pandemic in real time.  If you want to revisit old discussions and debates from the lockdown period this book will revive old, probably unpleasant memories.  What have we learned for the next great plague or disaster?  This reviewer believes the main lesson from COVID was the need for political skepticism and a healthy dose of faith in individuals and markets creating wealth as a form of broad resilience; it’s not clear to me Ferguson highlights those factors enough.    G. Patrick Lynch is a Senior Fellow at Liberty Fund. (0 COMMENTS)

On Wednesday, Cato Institute economist Ryan Bourne wrote me the following: In the UK right now, there’s a Conservative leadership race. Liz Truss is promising to cancel the tax rises her opponent Rishi Sunak instituted as Chancellor. If she reverses all of them, it would be circa 2% of GDP cancellation of tax rises. Sunak claims this would make inflation much worse. Today in The Times newspaper there was an op-ed citing David Stockman on the 1980s about how Reagan cut taxes and then couldn’t cut spending. The implication was that, despite Truss’s promises to cut spending too, she won’t and the UK will be left with higher deficits pushing up inflation and leading to higher interest rates. I pointed out to the author of the op-ed that inflation fell under Reagan and, in any case, was a monetary phenomenon and he said “ok, but what happened to interest rates?” I checked and to my surprise nominal interest rates fell after the very early 1980s, although still remaining historically high in real terms. Now the economic research on the link between the larger structural deficit and those high real rates seems to give mixed results. Ben Friedman and Krugman say deficits pushed up real rates; Hendershott and Peek that it didn’t have much effect either way. I wondered if you had navigated this debate at all and had any thoughts about who is right? I had, and so I wrote back the following: I DID have strong priors about the connection between deficits and real rates all through the late 1970s and early 1980s. But the experience that you refer to dashed my priors. Not only that, but in the discussion from about 1984 on, lots of people, both academic economists and fairly smart politicians like Dick Cheney, argued that there wasn’t a connection. The politicians weren’t clear about WHY there wasn’t much connection. Some of the economists—I have in mind Paul Evans of the University of Houston in the mid to late 1980s—did give a reason: Ricardian equivalence. I recommend that you track down and read this article from the Journal of Political Economy in 1987: https://www.journals.uchicago.edu/doi/abs/10.1086/261440 And then I added my fun story because it involved my boss at the Council of Economic Advisers, Martin Feldstein. Marty was a deficit hawk who believed that there was a strong connection between deficits and real interest rates. Here’s the story: I was a senior economist with President Reagan’s Council of Economic Advisers from August 1982 to July 1984. I got there a few weeks before Marty Feldstein got there as chairman, the day after Labor Day in 1982. At the first meeting he called, he told us that if we ever saw him doing something wrong or making an incorrect statement we should call him on it. (I tried the next day on a fairly small issue and got some pretty negative feedback, which is what I expected.) Fast forward to the writing of the 1983 Economic Report of the President. It’s crazy time. It starts around early November and goes to late January. CEA hands exaggerate how hard we worked but it is true, nevertheless, that we worked harder than usual. So people are pumped up. It’s our exciting time. There was a junior staff economist named David S. Reitman, an undergrad whom Marty had brought with him from Harvard. Over lunch sometime in late December or early January, I think it was, David said that he wasn’t sure he would “let” Marty say that higher deficits implied higher real interest rates. His point, which was well taken, was that the evidence for this relationship was awfully slim. I silently laughed because I knew that if Marty wanted to say it, he would say it. He did, on p. 86.     (0 COMMENTS)

Comments after my post asking for libertarian monetary ideas mostly focused on the question of what it means to abolish the Fed.1. Some regard the phrase as not being literal, rather a call for the Fed to stop exceeding its mandate when intervening in the economy. According to this view, the Fed could still do something like inflation or NGDP targeting, but would stop doing things like bailouts.2. Some insisted on the Fed doing something even less discretionary, such as rule freezing the monetary base.  The Treasury could handle that.3. Some suggested having the US government replace currency with gold as the medium of account.  Again, no Fed would be required.4. Some suggested just getting government entirely out of money and seeing what the market comes up with. Perhaps something like Bitcoin might win the competition. Here’s what makes money so tough for libertarians.  The US dollar is already deeply embedded in our economy.  All sorts of contracts are denominated in dollars, and many of those contracts commit to dollar transactions decades out in the future.  That means the US government has an obligation to insure some sort of stability or at least predictability to the value of the dollar over time.  Right now they are not doing a great job, but things could be far worse. It’s sort of like holding a tiger by the tail.  You might wish that the US government had never created the fiat dollar, but now that it has it’s hard to let go. That doesn’t mean it’s impossible, but you need to insure there is some sort of asset called “US dollars” for the foreseeable future, if only to prevent a collapse in our financial system. That doesn’t mean that we must have a Fed.  Commenters pointed out that we had US dollars before the Fed was created in 1913.  However, even before 1913 the federal government had a monetary policy.  That policy had two components: 1.  A definition of the dollar as a specified quantity of gold. 2. Substantial government gold holdings, which changed over time.  This influenced the value (purchasing power) of gold. So it wasn’t pure laissez faire. Many people wondered why options #2, #3 and #4 are such a bad idea.  After all, we had a gold standard back in 1900.  Why not return to that system? I’d make two points here: 1. The gold standard was quite not as successful as advertised by its proponents. 2.  Abolishing the Fed would not recreate the historical gold standard.  That system is likely gone forever, much like the Holy Roman Empire. A fixed monetary base, gold, and Bitcoin all share the same problem, which makes them unsuited to be the medium of account.  In each case the quantity of the medium of account is fixed, or at least highly inelastic in the short run, and in each case the value (purchasing power) of the medium of account is likely to be highly volatile. It’s not enough to say the market will choose a money that produces price stability.  The value of Bitcoin has been extremely unstable, and yet the market chose Bitcoin over other cryptorcurrencies that have a much more stable purchasing power.  The market price of gold has also been highly volatile in recent decades, much more volatile than back in the 1800s. If the US adopted the gold standard it would make the value of gold slightly less volatile, but still nowhere near stable enough to serve as medium of account.  The US government isn’t influential enough, by itself, to recreate the sort of stability in the value of gold that we saw in the late 1800s and early 1900s.  That would require a level of international cooperation that is unthinkable today.  It would look more like the gold standard of 1918-33—in other words, a mess. In addition, if the changeover occurred at something close to the current market price of gold, then long run inflation expectations would fall from 2% to roughly zero.  This would lead to a massive transfer of wealth from borrowers to creditors.  In the case of Treasury bonds, we’d need a tax increase to finance the enormous transfer of wealth to T-bond owners.  Try selling that idea to voters! A fixed monetary base has the same problem.  The value of base money would be affected by changes in nominal interest rates and financial stability.  If nominal interest rates fell to zero and/or if there were a financial crisis, the demand for base money would soar, creating severe deflation.  With a fixed base, QE would be impossible during a financial crisis.  In contrast, technological innovation that made the financial system more efficient might reduce the demand for base money, creating inflation. As a practical matter, the amount of base money within the US would decline rapidly over time, as something on the order of $100 billion in currency flows overseas each year, hoarded by people in other countries.  So freezing the total monetary base would be equivalent to rapidly reducing the stock of base money remaining in the US.  That could cause a banking crisis. I think it’s a mistake to start from the premise “we need to get rid of the Fed.”  Perhaps the optimal monetary system would not involve a Federal Reserve.  But the reasoning process should begin with a search for the optimal monetary system.  (And when doing so, don’t assume that other countries will join us in abandoning fiat money.)  The second step is figuring out how to get from here to the optimal system.   Right now we have a tiger by the tail.  It’s not enough to say, “let go of the tiger”, you need a plan as to what to do next. (0 COMMENTS)

We know that, other things equal, war should be avoided because blowing up things and people is not the way to prosperity and liberty. By “we,” I mean those who have reflected on this issue with the benefit of some economic knowledge. The negative impact on (individual) liberty, besides the direct effects of war violence, works through the increased power that the state, victorious or not, grabs during a war and generally maintains afterwards, active or dormant. We can see this not only in Russia but also, as the war continues, on the Ukrainian side. Besides that, it seems to me that the war in Ukraine should have taught us two basic lessons. By “us,” I mean libertarians and classical liberals. One lesson is that, except if prevented by force or the threat of force, foreign tyrants will wage wars to grab resources and extend their dominion. Hence, if one lives in a somewhat free society, one should want it to be defended against these foreign tyrants. As Adam Smith said, “defence … is of much more importance than opulence”—if only because tyranny prevents opulence. It is not without reason that Anthony de Jasay, a liberal or perhaps conservative anarchist, sees the main problem of anarchy as the protection against foreign states. It is also a problem, although not necessarily the main one, for our current more or less free societies. In my opinion, it is a lame argument that foreign tyrants only show their teeth when states of (more or less) free societies organize or strengthen their defense capabilities; they would never attack doves. Not only history illustrates the contrary, but economic theory suggests that foreign tyrannical regimes will have less incentive to attack the more costly it is likely to be for them (just as would-be tyrants in our own societies will attack our liberties less if their expected costs of doing so are higher). Raising war disincentives for foreign tyrants quite certainly requires not to wait until one is at our shores or has conquered part of the world: alliances and treaties can be be a less costly way. Of course, if our society becomes as unfree as those who live under foreign tyrants, there will be no point fighting them. Another basic lesson of the war in Ukraine is that the distinction between soldiers and civilians has continued to shrink, despite the pronouncements of international law and Bertrand de Jouvenel‘s fears. And this is truer the freer and the more prosperous a society is: as we have seen in Ukraine, for the enemy, every civilian with a cell phone can be, and can be presumed to be, an enemy combatant. An occupier in the United States would have still another reason to consider any individual as a combatant: the guns he has at home or is carrying. (In other more or less free countries, civilians have been disarmed by their own governments.) (0 COMMENTS)

In the first part of my review I explained some of my initial misgivings about Niall Ferguson’s new book, in particular confusion over his historiography and content focus.  In this review I’d like to discuss some of what I like about this book, and there is some good stuff here.  My interest in the material perked up considerably during chapter 4 on human networks.  Here, Ferguson begins with yet another list providing his summary of what he views as the six major findings of modern network science. (Humility he does not lack, dear reader)  The list seems a bit random, but he’s raising a fundamental tension in the topic he’s addressing.  We live in an interconnected world that is profoundly vulnerable to pandemics like the one we just faced.  Our global and interconnected world is well suited to allow infectious diseases to spread rapidly. And yet that interconnection is one of the reasons we have developed resilience by increasing global wealth.  Just this summer (June 21st), an earthquake struck Afghanistan, one of the poorest countries in the world with one of the least developed infrastructures.  Tragically, and yet unsurprisingly, the death toll was staggering – more than a 1,000 people perished.  Such an outcome would be unthinkable in the developed world.  We are actively trading off resilience for vulnerability to future pandemics.  And yet, restrictions placed on international movement and international trade or burdensome government rules that undermine our wealth generation will be unlikely to prepare us for future plagues.  If we try to pursue risk abatement by closing those networks we are likely to make ourselves vulnerable to larger losses when disaster strikes. Ferguson does a very nice job reviewing some of the factors that can lead to suboptimal governance and leadership during crises.  Here his tendency to range widely across disciplines, events, and time paints a compelling picture of how individual choices during critical moments can avoid or exacerbate catastrophic outcomes.  For example, he discusses various droughts and famines that have struck different regions of the world including Bengal in the 1770’s, the Irish potato famine, the widespread death under Stalin and Mao in the USSR and China, respectively, to the devastating famine in Ethiopia in 1984.  In each, with dictatorial political leadership, the death rate was staggering.  When compared to the 1920’s and 30’s drought that struck the United States, which is obviously democratic and market-oriented, few died, and while the displacement and political upheaval was significant, hardly revolutionary or deadly. The next chapter on the little remembered Asian Flu pandemic of 1957 (yes that actually happened) is perhaps the book’s strongest and certainly the most provocative.  Interestingly, the mortality rate of COVID appears to fall closer to that of the Asian flu than the much more deadly Spanish flu to which it is regularly compared.  COVID is somewhat more deadly than the Asian flu, but not nearly as deadly as the Spanish flu was.  Interestingly though, unlike COVID, the Asian flu struck the young and the old most seriously.  From our perspective today, this should have led to school closures and lockdowns, but then President Eisenhower did not pursue those strategies.  Instead, based partially on his experience in the military during the Spanish flu and the remarkably quick development of a vaccine, no part of the country ever shutdown.  Eisenhower managed the crisis with a hands-off approach and while he did take an electoral beating in the 1958 midterm elections, the political consequences were minimal.  Ferguson also has a very nice bit at the end of the chapter about how risk aversion seems to have increased dramatically since the 1950’s.  That five-and-a-half page part of the book alone is well worth reading.  It’s also well worth reflecting in a world where we seem obsessed with mitigating risks to children – reasonably so – that we continue to assess trade-offs so poorly.  As a transition to my third post, consider that while we kept kids masked at schools long after we knew the risks from COVID were minimal, we did not fully grasp the academic, social and developmental consequences of these policies.  The choices we made may well turn out to be horrendous, particularly in the developing world where many schools have been effectively closed for almost two years with little capacity for online learning.  But Ferguson largely overlooks this, because the manner in which he wrote the book made it impossible.  More on that in my final post.   G. Patrick Lynch is a Senior Fellow at Liberty Fund, Inc.  (0 COMMENTS)

The Plural of Anecdote is Data. The line above comes from a story that, according to Gregg Jarrell, one of my former colleagues at the University of Rochester, George Stigler told him in the 1970s. If you have a lot of anecdotes, then beyond some point they become data. I thought of that based on a story I heard a few days ago about a death attributed to Covid. I’m going to hide a few details because I don’t have permission to tell the story with the name and place. Here’s the story: A friend who’s a very careful empirical economist told me that a relative’s wife died recently. The cause was clearly a heart attack. But when they tested her, they found Covid. The widower was told that FEMA, the Federal Emergency Management Agency, pays for funerals if the person died of Covid. So did he want the cause of death to be written down as Covid. What do you think he answered? I wonder how many other cases there are like this. Here’s a quote from a June 6, 2022 press release from FEMA: WASHINGTON — FEMA has provided more than $2.5 billion to over 389,000 individuals and families to assist with COVID-19-related funeral costs for deaths occurring on or after Jan. 20, 2020. This assistance helped pay for the funerals of more than 398,000 people who died from COVID-19. 398,000 people by June 6 is close to 40% of the total number of Covid deaths in the United States. What fraction of those deaths were really due to Covid? I don’t know. We may never know. But the answer is crucial. Oh and, by the way, why the hell should we taxpayers we forced to pay for those funerals? Note: The pic above is of George Stigler.   (0 COMMENTS)

These words were spoken by Vladimir Lenin in 1917. The results were not inspiring. It shouldn’t be too surprising why this effort failed – the socialist order he sought to create is impossible. Ludwig von Mises argued this point decisively in his Economic Calculation and the Socialist Commonwealth, and history has demonstrated the point many times since then. Eventually, the Soviet Union collapsed, and Russia attempted to move to a capitalist order. However, the results we see today are less than inspiring. What went wrong? We know that a capitalist order, unlike a socialist one, is possible, so this calls out for a different explanation. Many explanations have been offered. In his book Why Perestroika Failed: The Economics and Politics of Socialist Transformation, Peter Boettke begins his analysis by noting that despite prominent announcements for “ten radical plans for economic restructuring, not a single one was ever implemented.” However, I’m not sure the implementation of these plans would have changed things. We can see how attempting to construct an impossible situation is doomed to fail. Less obvious is the idea that just because a particular order is possible, it doesn’t follow that it can be constructed. Capitalist orders are possible, and can work, but this doesn’t mean they can be constructed. Instead, it may be the case that they need to be allowed to evolve, rather than being built. To see how this can work, one should read the book How China Became Capitalist by Ronald Coase and Ning Wang (from which all the below quotes originate). While Russia attempted to become capitalist by political decree, Coase and Wang describe how “China became capitalist with marginal revolutions.” It started small. Here and there, small villages began to operate private farms, quietly operating under the radar. During the Great Leap Forward, this kind of behavior would have been condemned as counterrevolutionary, and quickly crushed. This time, however, the Chinese government backed off, and allowed these fledgling markets room to develop. China did not plan to transition to private farming, nor did they deliberately design a model or framework within which such farming would operate. Centralized attempts at agricultural reform had taken place before, but they were always attempts to find a new “right way” to do things and dictate it from the top down, such as “an attempt to impose a model developed in the village of Dazhai on the whole nation” which “denied local governments the freedom to take into account local circumstances.” There was no official plan for how private farms should operate, because “private farming was not a single practice, but an umbrella name for a family of non-collective farming practices that had emerged spontaneously in rural China.” It was not until 1982 that the Chinese government officially recognized private farming as a legitimate project, well after it had emerged and established itself across the country. One of F. A. Hayek’s most important ideas is the difference between law and legislation. Laws are realities of the world which operate separately from our designs or our wishes. This includes laws of physics, but also economic laws, such as the law of supply and demand or the reality of opportunity cost. Legislation, in contrast, is what is written down and produced by human beings. We can create and change legislation, but we cannot simply create or change laws. The best we can do is to try to embody what the law is with our legislation. By recognizing the legitimacy of the various farming developments which had emerged, China was using legislation to reflect the law. By contrast, Russia had always attempted to use legislation to guide and direct these processes, rather than reflect them. Numerous marginal revolutions took place throughout China over the years. The truly remarkable thing about it was how little of it was planned or directed. For example, by the 1990s “Shenzhen already had more than 300 offices where people could buy or sell stocks, despite the fact that there was no official permission to trade in this way.” This is just one example of the “lag between practice and regulation.” Rather than trying to direct what changes should occur and how they should be structured, the Chinese authorities pulled back, allowing new forms of economic activity to develop independently. After they had grown into place, laws would be written after the fact, around the practices which had developed. Legislation was made to reflect economic activity, rather than being used to try to design it. China is far from a bastion of free markets, and much progress that had been made has also been undone. Still, there is a lesson to be learned here. Lenin couldn’t construct a socialist order, but we can’t construct a capitalist order either. These things take time, and freedom.   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)

Matt Yglesias has a new post discussing Switzerland. I have a longstanding interest in Switzerland, and thus cannot refrain from commenting. In the first part of the post, Yglesias establishes that Switzerland is indeed a highly successful country. He also explains that this success is not due to some sort of gimmick, like secret Swiss bank accounts. The Swiss economy is extremely productive, and very little of that success relates to retail banking.  He includes a graph showing how since 1880 Switzerland has outpaced its European neighbors by a wide margin: That section of the post is very effectively presented.  When it comes to explaining Switzerland’s success, however, the post is less impressive.  Yglesias concludes as follows: Maybe Swiss institutions could make us better citizens. But to be unsatisfying about this, I’m skeptical. A lot of the politeness and consensus-oriented aspects of the Swiss system seem to clearly be emergent properties of the political culture rather than formal properties of the institutional arrangements. Swiss prosperity and its reputation as a well-governed little state predate the current form of the referendum system. And lots of things in Switzerland, not just the politics, seem well-organized and well-considered. It could easily just be that an unusually diligent and conscientious group of people can make all kinds of weird stuff work. This may be correct, but the arguments that are offered in support fall well short of being persuasive.  Yglesias discounts a bunch of (mostly right wing) explanations such as free markets, low taxes, decentralized government and widespread use of referenda. When praising the Swiss system, people tend to talk a lot about decentralization and subsidiarity. But what does this really amount to? Switzerland has a national pension system. They adopted a universal health care program in 1996. They have, as previously noted, a national state-owned railroad. They have a national decarbonization program. I’m obviously not denying that they have a good deal of cantonal autonomy, as well as municipal governments wielding real authority. This level of federalism doesn’t seem particularly different from what you see in Italy or Germany or the United States or Canada. If you look at OECD countries, you observe that (with the exception of Mexico) all of the countries with a federal system are richer than the average developed economy: There are not enough federal systems to be statistically significant, but surely there’s no reason to reject the notion that decentralization is beneficial, based on the list above. I would add that in some respects Switzerland is even more decentralized than many other federal systems.  Switzerland has less than 10 million people, which is fewer than individual states such as Ohio, Bavaria and Ontario.  And that small number gets further divided into self-governing cantons, and then into even smaller local governments.  It’s a highly decentralized system.  (There’s a vast difference between a California referendum and a Swiss cantonal referendum.) Some American rightists told me Switzerland’s success is due to their love of free markets. And Switzerland does seem market-oriented for a European country. But still, their tax share of GDP is higher than ours in the U.S. They have sectoral bargaining with a much higher share of workers covered by collective bargaining agreements than the United States. There’s universal health care. College tuition for citizens costs $1,168 per year. There is a national minimum child allowance of about $2,500 per year and most cantons offer a bonus above that. So while I’m not saying that Switzerland is a leftist utopia, they have achieved a lot of the things that American progressives push for, and they did it in a political system where the center-left parties never secure a parliamentary majority or control the cabinet. Instead, centrist and center-right elites have consistently preempted left politics by incorporating sensible versions of progressive demands into the Swiss firmament.  By Yglesias standards, this is a really weak argument.  Here’s a more accurate description of Switzerland’s taxes: Switzerland has very low taxes compared to other Western European countries.  They are slightly higher than in the US, but only because we run massive budget deficits.  (Government spending in the US is higher than in Switzerland.)  And Switzerland has lots of features that supply-siders like, such as no tax on capital gains from stock sales.  More importantly, both the US and Switzerland are outliers, with very low taxes by rich country standards.  And these two countries are also outliers in one other important way.  Like Switzerland, the US is much richer than other developed countries (excluding a few tiny European principalities and oil rich Norway.)  That’s an interesting coincidence! I am not an extreme supply sider who thinks taxes explain everything (the Nordic countries are also fairly affluent), but I do believe low taxes to be one factor in the unusual success of Switzerland and the USA.   As for health care, I suspect that the US system is actually further from the free market ideal than the Swiss system, despite the fact that the Swiss system is more universal.  Our government spends as much as most European countries on health care, and our regulations and subsidies produce grotesque distortions in the health care market.  The Swiss system involves unusually large out of pocket payments for health care. The US and Switzerland also hold a much larger than average number of referenda. Here’s a list of some of the things that unusually rich Switzerland and unusually rich America have in common: 1. Relatively decentralized. 2.  Lots of referenda. 3.  Traditionally more free market than most developed economies (although the edge is eroding.) 4.  Much lower than average taxes for a rich country. 5.  A long period of isolation from warfare (on their soil), and a haven for dissidents fleeing persecution.  Also a good place for migrants who want a business-friendly system. With this final point I’d like to circle back to where Yglesias ended up.  He suggested that the Swiss were in one sense superior to other people.  Not genetically superior, but superior at making political decisions.  More specifically, he points out that they are unusually well informed voters.  Perhaps that’s because they have a direct say in policy. I do not believe that Americans are superior at making political decisions, but I do believe we have one other type of superiority.  We have an unusually talented extreme right tail of the talent distribution.  Our economic system and political freedom make this place relatively appealing to talented migrants like Elon Musk.  Thus while I don’t believe that Americans are more talented than citizens of places like Canada, on average, I do believe the top tenth of 1% of American talent is extremely impressive.  This might help to explain our increasing dominance of intellectual capital-intensive industries such as software, biotech, filmmaking, finance, etc.  Switzerland also does well in industries that require highly skilled individuals.  When thinking about cause and effect, it’s very hard to disentangle the impact of human talent and good institutions, for the simple reason that talented people tend to produce better institutions.  Compare Switzerland to (less well-educated) mountainous and landlocked nations such as Afghanistan, Bolivia and Laos.  Where would you prefer to migrate to?) I live near Irvine, California, which has very good schools and very expensive homes.  Talented people pay extra to move to Irvine, in order to get their kids into the good schools.  Over time, less talented people are gradually priced out.  That makes Irvine’s schools even better.  But are they better because the new people are better at running schools, or because their kids are more talented? I don’t think anyone is going to be happy with my conclusion.  When analyzing Switzerland’s success, I believe progressives are wrong to discount the importance of what might be viewed as right wing (or libertarian) political and economic policies.  At the same time, I suspect that Yglesias might be correct that Switzerland’s success is partly due to its people, not just its institutions.  On the other, other hand, Switzerland’s good institutions have probably helped to attract the sort of people that make Switzerland successful. Thus it’s almost impossible to completely disentangle the various explanations.  If only the Swiss were willing to do a controlled experiment.  How about if the French region adopts France’s economic and political system?  Run the test for a few decades and see how it goes.  Then the rest of the world could determine if the Swiss institutions really are superior, and we could all adopt their system.  (If the French region adopts high-speed rail and suffers a loss of export competitiveness, then we can infer that institutions do matter.)  Alas, it’s the very fact that Switzerland is hyper-democratic that makes such a crazy experiment impossible.  But maybe there’s a lesson there.  Nothing stopped Mao from his Great Leap Forward experiment. Although we cannot do controlled experiments, there are lots of natural experiments out there.  And what do they show? 1. Institutions are really important (North vs. South Korea) 2. Within the same regime, talent differences are really important (Malays vs. Chinese within Malaysia.) So it’s probably not a question of which explanation is right for Switzerland, rather it is a question of how important is each factor. (1 COMMENTS)

“What was once destiny is now a decision.” — Russ Roberts   Russ Roberts on Lessons from F.A. Hayek and Nassim Taleb, Decision-Making Insights from Charles Darwin, The Dangers of Scientism, Wild Problems in Life and the Decisions That Define Us, Learnings from the Talmud, The Role of Prayer, and The Journey to Transcendence   Russ Roberts switches roles, appearing as a guest on the Tim Ferriss Show to answer questions about his new book, Wild Problems in Life and the Decisions that Define Us. Longtime fans of EconTalk, Conversations for the Curious, (Roberts’ acclaimed podcast) have listened to this book idea evolve as Roberts has wrestled with aspects of the project through many conversations with influential guests. Tim Ferriss takes the discussion beyond the eagerly awaited book where both authors do what they are deeply admired for: making complicated ideas understandable. A uniting theme of this journey of ideas is exploring how we might pay better attention to our journey so that we might celebrate our life as one well-lived. Please share your insights with us; we love to hear from you.      1- Early in the discussion, Tim Ferriss admits little familiarity with F.A. Hayek. How does Roberts’ explanation of the profound message in Hayk’s Nobel address, “The Pretence of Knowledge“ and the “The curious task….” quotation from The Fatal Conceit illuminate how the lesser known Hayek beat the famous John Maynard Keynes in the battle of the marketplace of ideas?   2- In what ways (other than the Amazon book recommendation example) is the Internet superior to human interaction at sorting and predicting? Do you believe it is possible that AI might shape our future choices about some of life’s wilder problems? Why or why not?    3- Darwin marries. Was his “Q.E.D.”, added at the end of his cost/benefit list, facetious? What other techniques outlined by Roberts might Darwin have employed to reach his “irrational” outcome?   4- To what extent do you agree or disagree with Roberts’ borrowed claim, “Until you’re married, you’re an idiot”? How about his strong belief in the superior nature of the marriage covenant to a contractual agreement or the choice to remain single? Do these ideas offer insight into declining marriage rates in the younger generations? Explain.   5- Roberts shares several things that give his life texture, such as music appreciation, religious practice, and marriage, to name a few. In considering your own list, how does it help you answer the question, “What is a life well-lived”?   (0 COMMENTS)

I am neither famous, nor Oxford trained.  I do not hold a prestigious position at the Hoover Institute, nor have I won “many prizes” as Niall Ferguson’s bio at the end of his book, Doom: The Politics of Catastrophe, proclaims.  So I begin this review with several obvious disadvantages compared to the esteemed author.   But much like Ferguson I have written a few pieces about COVID during the recent pandemic.  I also have a multi-disciplinary perspective on things and a lot of sympathy for the political outlook he brings to this work.  So I’m not here either to unduly praise the book or savage it.  However, one has to acknowledge what this is.   First off, it’s kind of a frantic mess.  It’s like trying to drink water out of a fire hydrant, using a straw.  Keeping up with Ferguson’s learned and descriptive stories that supposedly help illustrate various points can be exhausting.  His reliance on lists and terms from writers and thinkers throughout the social sciences can be overwhelming.  Second, there’s the nature of the project.  Is this history?  Is it social science?  Is it policy proscription?  Is it all three?  And finally one has to ask now, in 2022, are his observations about the pandemic and the US government’s response to the crisis timely and helpful in understanding what went wrong and how to prevent a similar crisis in the future? Rather than trying to cram this all into one essay I’ve opted to divide into three parts.  In this first part, I’m going to address the issue of what, academically, he’s doing here by asking a question I often ask my history colleagues, namely what exactly is the nature of history and how should we approach studying it? In his extremely timely and relevant introduction to the edited volume Capitalism and the Historians, F.A. Hayek addresses one of the key issues that any historian writing about controversial political questions must face, namely what questions are relevant and important to study.  He notes: There is indeed no legitimate reason why, in answering questions of fact, historians of different political opinions should not be able to agree.  But at the very beginning, in deciding which questions are worth asking, individual value judgments are bound to come in.  And it is more than doubtful whether a connected history of a period or of a set of events could be written without interpreting these in the light, not only of theories about the interconnectedness of social processes, but also of definite values – or at least whether or not such a history would be worth reading. Hayek’s goal is to present a series of essays defending the Industrial Revolution in the wake of left-wing histories that focus on workers suffering during the development of modern industrial growth.  Ferguson’s agenda here is much murkier, and therefore much more difficult to determine.  What kind of history is this exactly? In the first substantive chapter, he explores the nature of death, which seems more philosophical and meandering than direct and clear.  In the next chapter he briefly examines cliodynamics, which focuses on data collection as a way to understand social and national decline.  But then he moves quickly into Jarod Diamond’s work on social and economic collapse and then human heuristics and biases.  Is this a book about social and economic collapse?  Is it about population dynamics and environmental forces?  Disease?  It’s a bit bewildering and we’re only about 70 pages into it. Ferguson then takes the reader abruptly into various types of disasters that seem, to this reviewer, unrelated to the issue of the pandemic, such as population carrying capacity, social collapse based on environmental forces, and human biases.  I mean, how do we relate catastrophic earthquakes and volcanic eruptions to heuristics and biases?  These types of disasters seem like unpredictable exogenous shocks, not errors based on human nature.  I’m not sure we can reasonably expect the ancient Romans or Chinese authorities in the 15th century to have been able to use seismic information to predict earthquakes and move cities accordingly. None of this is to say that the information Ferguson provides to the reader isn’t interesting, written with flair, or incorrect.  But it’s not organized in a coherent way to address the theme we are presented in the beginning.  Furthermore, it’s not clear what his historiography is either.  Is this history?  Showing off one’s intellectual breadth?  Displaying how stir crazy we all were during lockdown?  I’m not sure, but I think this effort could have used a little thematic clarity in the first third to aid readers who are likely to be frustrated with the nature of this project.   G. Patrick Lynch is a Senior Fellow at Liberty Fund. (0 COMMENTS)