It’s been over two years since the COVID pandemic began, and a great deal of progress has been made. But how much have we learned? We have a vaccine available, now for people of almost all ages. It’s an extraordinary achievement, but how effective is it in the end? And perhaps more importantly, what do we now know about how to handle future pandemics? These are the sort of questions that are heavy on Dr. Vinay Prasad‘s mind (and mine!). In this episode, EconTalk host Russ Roberts welcomes Prasad back to explore these questions and more. Now we’d like to hear what struck you in this conversation. Use the prompts below to spark comments here, or use them to start a new conversation offline. The conversation is what we’re here for,     1- Prasad is clear that he believes the COVID vaccine to be a remarkable achievement which clearly benefitted us in this pandemic. What does he mean, then, when he says we may now face diminishing returns from the vaccine, especially in younger people?   2- Prasad says we now have two buckets of risk with regard to vaccination. The first is the “original antigenic sin” bucket, the second is the risk involving myocarditis. How do these buckets differ, and how does Prasad believe we should approach each? And importantly, what role does he think randomized control trials should play?   3- Roberts asks Prasad what “things public health distorted that will plague us over time.” How does Prasad respond? How have these issues affected the way you think about the pandemic?   4- Next, Roberts asks Prasad whether the most aggressive lockdowns prevented the most deaths? (FWIW, Prasad dubs this “one of the greatest economics questions of the next quarter century.”) How can we know if a lockdown helped or hurt a country, according to Prasad? What might we do to learn more?   5- The conversation concludes with a discussion of the impact of COVID on children, particularly mask mandates. According to Prasad, what do we know and what do we not know about them? To put it mildly, Prasad is very unhappy with the lack of randomized trials, which he thinks would be easy to accomplish. Why does he think that, and what does he mean when he says, “I think a nation that is willing to, I mean, print $5 trillion in money and lose $20 trillion in GDP [Gross Domestic Product], but is not willing to spend, you know, $10 million, a hundred million, on running sort of just basic public health randomized trials? I think that, to me, is a problem.”   (0 COMMENTS)

Inflation is caused by too much money chasing too few goods. That means there are only two ways to reduce inflation: reduce the growth rate of the money supply or increase the growth rate of the economy. The act would do neither. In fact, by raising taxes and diverting resources from the productive private sector to the inefficient government sector, the act would reduce economic growth. This is from David R. Henderson, “Inflation Reduction Act Will Increase Taxes for Most People,” TaxBytes, August 3, 2022, published by the Institute for Policy Innovation. Another excerpt: Fortunately, the Joint Committee on Taxation (JCT) has done its job, estimating the increase in taxes for people in each income group. The $54.3 billion tax increase for 2023, the JCT estimates, won’t increase taxes for anyone with income between $0 and $30,000. But the JCT also points out that its measure of income includes not just adjusted gross income but also employer contributions to health insurance, the employer’s share of the Social Security tax (FICA), and the insurance value of Medicare benefits. So millions of people whose adjusted gross income is below $30,000 will pay somewhat higher taxes. People with income up to $75,000 won’t pay much more. But people with income between $75,000 to $100,000 will see their average tax rate rise from 15.8 percent to 16.0 percent. The average tax rate for people with income between $100,000 and $200,000 will rise from 19.1 percent to 19.4 percent, and between $200,000 and $500,000 will rise from 24.1 percent to 24.4 percent. Read the whole thing, which is quite terse. (0 COMMENTS)

I frequently argue that there’s no such thing as public opinion. There is such a thing as public opinion polls. And there is such a thing as election results. But “public opinion” is an ambiguous concept. What does it really mean?A few weeks ago, I did a post pointing out that when abortion bans were put on the ballot in North and South Dakota; they were defeated by a very substantial margin. And yet we are constantly being told that conservatives oppose abortion, despite those being two of America’s most conservative states.Another test of my theory occurred yesterday in Kansas. This is how the abortion referendum was expected to come out: The vote will be an early bellwether for how Americans are thinking about abortion in the lead-up to the midterms. According to the first publicly released poll of the campaign, conducted by co/efficient and shared exclusively with FiveThirtyEight, 47 percent of likely primary voters say they plan to vote for the amendment [allowing the legislature to regulate abortion], while 43 percent say they plan to vote against it. And here’s how the referendum actually turned out: Tuesday marked the first vote on abortion in a post-Roe landscape. Kansans decided by a double-digit margin that the state constitution does, in fact, protect the right to abortion. With 99 percent of the expected vote reporting, 59 percent of voters voted “no,” on the amendment, or to clarify that the constitution does protect the right to abortion, while 41 percent voted “yes,” or to clarify that the constitution doesn’t protect the right to abortion. It’s notable that the yeses won by 18 points in a state that former President Donald Trump won by roughly 15 points in 2020. And this despite the weird timing of the vote—during a primary.  The pro-life side hoped that would reduce the turnout (their only hope). One thing is now pretty clear.  If left to voters, abortion would be at least partially legal in almost every single state in America (except perhaps a handful in the Deep South).  I’m not predicting that this will happen, as I don’t expect the decision to be left to the voters.  For instance, in Wisconsin (a much more liberal state than Kansas) voters are not allowed to vote in referenda.  Hence abortion is illegal in Wisconsin.  (Texas is also more liberal than Kansas.) There are millions, perhaps tens of millions of Americans that seem to believe both of these statements are true: 1. Abortion is wrong 2. The abortion question should be left to the woman and her doctor After all, people like life.  But they also like choice.  You’d be surprised at how many Americans are both pro-life and pro-choice: Doesn’t make sense?  Welcome to the world of “there’s no such thing as public opinion”. The Kansas pro-choice side won the battle with TV ads that framed the debate as being about the freedom of women to make decisions with their doctor, not whether abortion is wrong.  With different framing, the pro-life side might do better.     (2 COMMENTS)

Is there an official definition? Journalist Clark Merrefield contacted me last week for a piece he was writing on the topic of recessions. His article appeared yesterday at The Journalist’s Resource. It’s titled “Are we in a recession? 4 things journalists should know when covering an economic downturn.” In follow-on emails, Clark and I shared our pet peeves about sloppy journalist reporting on numbers. One of his is in #1 of his 4 tips: “Clarify the difference between quarterly changes and annual rates, especially in headlines.” That’s certainly high on my list. While he and I agreed that the NBER’s Business Cycle Dating Committee is an important arbiter of whether a recession occurred, we disagreed, as you can see from his article, about whether its definition is the official one. In response to his original question to me about how economists came up with the “two quarters in a row of negative GDP growth” definition, I wrote: The answer is that I don’t know. When I taught macro, which I did as early as 1975 and as late as 2014, I would tell my students that the the “two consecutive quarters of negative growth” was economists’ “seat-of-the-pants” definition. But I don’t know where I got it. The “seat of the pants” is my term because I knew all along that it’s not the technical definition. Of course, there’s no official definition. The 8 economists with NBER are stating their opinions. They’re informed opinions but they’re opinions, nevertheless. They have no official status. In his article referenced above, Clark writes: It’s not a recession until the Business Cycle Dating Committee of the National Bureau of Economic Research says it is. The nonprofit economic research organization, based in Cambridge, Mass., determines when recessions start and end. Its purpose is to establish the historical record for recessions, not to rush to say whether or not the U.S. economy is currently in one. The White House calls the Business Cycle Dating Committee the “official recession scorekeeper.” That’s too strong. Yes, it’s true that the committee “determines when recessions start and end.” But that doesn’t mean that their determination is official. Thus my statement above. Moreover, there’s a tense problem in Clark’s statement of the issue. He writes: “It’s not a recession until the Business Cycle Dating Committee of the National Bureau of Economic Research says it is.” That cannot be true. As is well known, and as he points out, the NBER comes to its conclusion with a lag. Let’s say that it announces in December 2022 that a recession started in March 2022. To say that it’s not a recession until the NBER says it is is to say that it’s not a recession until December 2022. I think Clark meant to say “It’s not a recession unless the Business Cycle Dating Committee of the National Bureau of Economic Research says it is.” That’s a pretty different statement. I think also that we shouldn’t get stuck in the weeds and should remember why so many economists use the “seat of the pants” definition of “two consecutive quarters of negative growth.” It’s because the NBER committee takes so long that its dating of recessions has limited usefulness. Economists want to know more quickly. Various economists have noted that, as economist Matt Rousu put it, “In the past 75 years, when the nation’s GDP has dropped in two successive quarters, it has been classified as a recession.” Will this one be different? I don’t know. But I’ll probably know before the NBER makes its announcement. Note: Here’s an excellent article on the issue from Phil Magness. It’s titled “Biden Borrows the Nixon Playbook on Recessions,” AIER, August 1, 2022. And here’s Phil’s op/ed in the Wall Street Journal, “A Recession by Any Other Name,” WSJ, July 27, 2022 (July 28 print edition.) A key quote: Economists have long defined a recession as “a period in which real GDP declines for at least two consecutive quarters,” to quote the popular economics textbook by Nobel laureates Paul Samuelson and William Nordhaus.     (0 COMMENTS)

Imagine a US president facing the following decision:An Asian country has split into two parts. The southernmost part has a democratically elected president and a population of roughly 20 million. The northern region is controlled by the communist party and has a powerful military. Now the northern part of the country invades the south, attempting to unify the entire country under a communist run government.  How should the US government respond? President Truman faced this dilemma in 1950.  I am just barely old enough to recall when President Johnson faced a similar decision in 1965.  I hope I never see a future US president face a third such decision. When I read articles on foreign policy, I am struck by the difficulty of modeling the use of military force.  We’d like to compare two counterfactuals, but in fact we rarely know what the alternatives actually look like.  You might think you know whether various past foreign policy decisions worked out well or poorly, but how can we be sure?  Chaos theory suggests that even a tiny change in initial conditions could have vast consequences in future years.  I defy anyone to create a counterfactual for post-1917 European history if the US had not entered WWI.  One can certainly create a number of plausible counterfactuals, but how could we possibly have confidence that any one alternative history is correct? Historical events often catch even foreign policy experts by surprise.  Think of the Iranian Revolution or the collapse of the Soviet Union.  Now image trying to not just predict what is actually going to actually happen, but also what would have happened if history had been diverted onto an entirely different track.   It’s basically impossible. Economists also have difficulty predicting events such as the Global Financial Crisis of 2008.  But at least we often know whether past policy decisions were correct or not, at least in retrospect.  Economists now understand that monetary policy was too tight in 1930 and too easy in 1968.  In contrast, the field of foreign policy is almost entirely up for grabs.  What if we had not fought the Spanish American War?  What if we had not embargoed oil shipments to Japan in the late 1930s?  What if we had not fought the Gulf War in 1991?  There are dozens of similar questions, and few reliable answers, even if the immediate impact of the decision is relatively clear.  There is too much complexity, too many “butterfly effects”, to model anything more than the immediate impact of foreign policy counterfactuals.  In some cases (such as Ukraine) even the immediate outcome was not forecast accurately, as most experts predicted a quick Russian victory. So then what do we do? PS.  The picture on top shows Herodotus and Thucydides PPS.  Tom Friedman has an outstanding essay explaining: Why Pelosi’s Visit to Taiwan Is Utterly Reckless But while I find the essay to be highly persuasive, how can we be sure? (0 COMMENTS)

More important, the reforms also created a system that strongly incentivizes cities and counties to approve new home permits in a timely way. When a builder or property owner submits an application to build a new home, cities and counties have 30 business days to process it or request corrections. If the government offices fail to respond in that time frame, the locality must refund 10 percent of the application fee for every additional business day of silence. Application fees can vary widely by locality, but the average cost in Florida is nearly $1,000, according to HomeAdvisor.com. If officials request corrections to the application, they have 10 business days to approve or disapprove of the resubmitted application. Blowing past that deadline leads to an automatic 20 percent refund, with a further 10 percent added for each additional missed day, up to a five-day cap. This is from Hayden Dublois, “Florida started penalizing bureaucratic delay. Housing permits spiked,” Washington Post, July 25, 2022. The results: In the years leading up to the new law, the rate of increase for new home construction in Florida was about the same as the national average. Though many factors can influence home building, and the law was in effect for only a portion of the year, Florida’s home building rate in 2021 was two-thirds higher than the national average. More than 30 percent more permits were issued in Florida last year compared with 2020. Reducing red tape surely aided the boom. (0 COMMENTS)

To many people, no current slogan appears so self-obvious than “people before profits.” For the Nth time, I saw it repeated, a few days ago, in a bien pensant attack on social media’s freedom: “How Social Media Platforms Put Profits Before People,” Financial Times, July 28, 2022). I suggest that there are few incantations as simplistic or non-sensical as that one. Profits go to people, not to animals or gods. So the slogan can only mean “some people before some people,” and it has to be explained why the redistribution or discrimination envisioned or intuited is better than some other among an infinity of possible ones. A priori, it makes no more sense to say “people before profits” than “profits before people.” In contradistinction, classical liberalism and libertarianism aim for no discrimination among individuals. If the idea should be reduced to a slogan, it would be something like “no set of people before any other set of people” or, more properly, no individual before any other individual because a set can contain only one element. The statement must of course be taken as calling for the formal equality (equality of rights, equal liberty) of all individuals because material equality would require constant redistributive meddling and, thus, the violation of the formal equality of those who find themselves on the wrong side of the wicket. This idea can be found in the writings of all modern (classical) liberals, notably perhaps F.A. Hayek and Robert Nozick. Incidentally, the profit is simply the form of remuneration that goes to residual claimants, who get whatever remains in the enterprise after everybody else has been paid, whether the residue or bottom line is positive (profit proper) or negative (loss). It must be distinguished from executive remuneration. Crony capitalism and “state capitalism” work differently. Stating the liberal solution does not, of course, solve all problems. One problem is that individuals who violate the basic requirements of life in a free society (unprovoked violence is the obvious case) may and should be punished. In a sense, these criminals are discriminated against, but the rule of law would insure that they knew in advance what is forbidden. Not all problems are solved but we are, intellectually, on the way to a liberal society. (0 COMMENTS)

California (and much of the West) is in the midst of its worst multi-decade drought in maybe a millennium. Los Angeles has received only a fifth of its normal near-desert-level rainfall this year. Indeed, LA’s rainfall to date in 2022 is just under the normal precipitation for the driest place in North America, Death Valley, which averages 2 inches a year. The state’s water problems are threatening, given that more than a hundred reservoirs in the state are well below capacity. Two major reservoirs are at 40 percent capacity, considered to be “critically low” (with the seriousness of the state’s water storage problem made vivid in the above photograph of the Lake Mead reservoir). Moreover, the snowpack in the Sierra Nevada Mountains, a major California water source, is down to a quarter of normal for this time of year.1 The central policy challenge is not whether Californians will reduce their water use for the rest of the year to bring demand in line with the constricted rainfall, but how they will do so—whether by appeals for voluntary conservation, by government fiats to force conservation, or by higher prices to induce less water consumption. Higher water prices can increase the state’s available water supply—without additional rainfall or the construction of desalination plants. California is annually losing a massive amount of accessed water in its distribution systems largely to known water pipe leaks that are going unrepaired because the added revenue from the sale of recovered water from leak repairs cannot cover the repair costs—at current low water prices. Thus, higher water prices can translate into greater leak repairs and reduced water losses. The Governor’s Conservation Appeals California Governor Gavin Newsom is, again, seeking a reduction in annual residential water use, this time up to 30 percent. His first action to solve the state’s water shortage problem has been to appeal to Californians to “Save Our Water.” LA County has recently restricted sprinkling to two times per week. Progressively tighter water use restrictions are likely this summer. The Metropolitan Water District of Southern California has already threatened, if usage doesn’t drop substantially this summer, to eliminate lawn sprinkling by the end of the year. Appeals for voluntary residential water conservation in the past have had an effect, but a very limited one. Perhaps Californians lack adequate communitarian impulses. No doubt, many don’t care about water conservation (and might never learn of the seriousness of the water shortage) and will balk at calls for a reduction in their water use. More likely, a substantial portion of Californians do care but may do little or nothing to cut usage, following a well-worn line of economic argument (developed by economist Mancur Olsen in the mid-1960s under the banner of the “logic of collective action”2): Each water user can reason (rightfully) that his or her water use is, literally, a drop in a very big bucket of all water used in the state and can conclude that an individual’s conservation efforts will have an inconsequential impact on achieving the state’s restrictive water-use goals.3 Besides, many users have fixed water needs to cover consequential investments in, for example, expensive landscaping. As economists have long recognized, appeals for conservation can work tolerably well in small groups (families, circles of friends, social groups, and churches), because each person’s contribution to the welfare of the whole group is consequential and detectable. However, the effectiveness of the appeals will tend to break down as groups become progressively larger and the effects of individual actions fade. In groups the size of California’s population, appeals to people’s “better angels” in past droughts have failed to achieve conservation goals without penalties, or threats of penalties, for officially defined “excessive use.” In July 2021 Governor Newsom appealed, because of the drought that year, for a voluntary 15 percent cut in water usage, and Californians across the state collectively reduced their water use by 1.8 percent that month over the year before, according to the California State Water Resources Control Board. Southern Californians reduced total water use by 0.1 percent over what they used in July 2020. People in Los Angeles and San Diego increased their water use by 1 percent over their usage in July 2020 (as estimated by the Los Angeles Times.4) Without water-price increases, which can give residents a personal economic incentive to conserve, “water police” will likely soon be prowling neighborhoods to enforce restrictions through fines (or the threat of fines) and shaming (a means of imposing personal penalties on those sensitive to others’ opinions). Water Losses Through Pipe Leaks The governor and other policy makers continue to overlook a substantial source of additional, largely accessible water buried, literally, under Californians’ feet: water pipe leaks. Authorities overseeing California’s 8,000 water systems are fully aware that a consequential amount of the water entering their systems never reaches consumers’ faucets. Why? California’s distribution systems, consisting of hundreds of thousands of miles of aging pipelines, are full of known leaks that are going unrepaired, mainly because water prices are so low that the revenue from water recovered from fixing them won’t cover the immediate repair or replacement costs. California water utilities distribute more than 1.2 trillion gallons of water a year to residents (equal to about a fifth of agricultural use), according to government data.5 At least 7 percent of residential accessed water—or at least 84 billion gallons—is lost to known leaks.6 This water volume could, if recovered through repairs, flood more than 191,000 football fields one foot deep—which is enough to meet state government’s targeted annual per person water use of at least 4 million Californians (a tenth of the state’s population). While the critical age and reliability of water pipes varies greatly by water district (as does the rate the consumer is charged), we stress the state’s consolidated estimate of water loss due to leaks is thought to be conservative by some industry insiders. Meaning, we believe there is a high degree of probability that focusing on the economics of water infrastructure repair and replacement could have a consequential offsetting impact to droughts and the need for water police. We’ve emphasized “at least” because many leaks in the state’s hundreds of thousands of miles of water pipes, if detected, go unreported and others remain undetected but are identifiable with the use of above-ground detection technology. Many water authorities have resisted adopting this technology because leak detection costs (conservatively) about $600 per mile of evaluated pipe, according to the California Water Resources Control Board. To deploy the technology, water authorities must expect the recovered water to generate more revenue than the cost of the repairs or replacement of aging pipes. Water districts may also be reluctant to find leaks because California law requires districts to report leaks they find and then repair those with water losses greater than “acceptable” loss levels—which means leaks discovered can be budget-busting with below-full-cost water prices. According to the state’s Water Board, the repair cost for service lines averages about $2,300. For a water main break, nearly $6,000—a conservative estimate according to some industry insiders. Of course, the sky is the limit for major breaks, the likes of which are expected to occur progressively as the water system replacement needs go unaddressed. The Economics of Water-Pipe Leak Repairs Broken Water Main Many leaks go undetected until pipes break and become above-ground geysers that often cause substantial economic damage. In November 2021, a San Diego Uber driver and his passenger were injured by a water geyser from a major pipe failure that took days to repair, causing a shutdown of a section of Interstate 5, resulting in a commuter nightmare, lost earnings for local businesses, and property damage for many residents in the area. The July 2022 break in a twelve-inch water main in the middle of the night in the Hollywood Hills area of Los Angeles caused the shutdown of a major freeway and flooded major streets deep enough to require rescues of drivers from the tops of their cars, as captured on LA nightly news video.7 The repair costs will likely be enormous. The problem of water pipe breaks and leaks will only worsen in coming years as water pipes continue to age. Two-thirds of LA’s water pipes were installed before 1950 and will reach the end of their useful life this decade. The water main that broke in July in LA’s Hollywood Hills was 91 years old, with many miles of water mains installed more than a century ago. Water officials agree that repairs will cost billions, which cannot be covered without water-price increases. Again, this means that leak repairs and water recovered depend directly on water prices: The higher the water prices, the more leaks can be detected and repaired—and the greater the potential recovered water. Yet, California water price increases have been checked by Proposition 218, passed in 1996, which places a high burden of proof on all water districts to show that rate increases are necessary and limited to a “cost of service” model (inclusive of the cost of operations, capital improvements, and debt servicing, not necessarily including leak repairs and replacement of pipes well beyond their “life expectancies”). This legislation is, in part, the cause of surprisingly low water prices in Southern California, given that the area is a “near desert,” meaning the normal rainfall is only modestly greater than the maximum rainfall received by desert areas, 10 inches. The annual rainfall in one author’s home city, Irvine (near the coast, 55 miles south of LAX), is 13 inches, one-third of the country’s average. Yet, he and his neighbors pay only 1 cent a gallon for water for home uses. “The stark fact is that many people in rain-drenched Louisiana and Mississippi have higher monthly water bills than many higher-income but drought-stricken Californians.” Other Californians pay higher prices, but not much more (with prices often graduated with use), excepting isolated areas such as Santa Barbara that operates as a private water district. LA receives less than a third of Atlanta’s rainfall but has residential water rates only 22 percent higher, but that means LA’s rate is higher by only $1.36 ($7.52 versus $6.16) per 100 cubic feet, or only 1 cent per 5 gallons. Los Angelenos can buy 748 gallons of water for less than the price of two lattes at Starbucks. The stark fact is that many people in rain-drenched Louisiana and Mississippi have higher monthly water bills than many higher-income but drought-stricken Californians. How Higher Water Prices Can Soften the Economic Damage of Droughts Higher water prices could be a major force in curbing the impact of droughts. They can encourage conservation as Californians more carefully consider their varied water uses—and reduce consumption in big and small ways that fit their preferences (not the preferences of state officials who may force cuts in easily monitored water uses, such as lawn sprinkling). With higher prices, Californians can be expected to reduce or eliminate water uses, with their conservation efforts focused on lower-valued water uses. Accordingly, one household might cut sprinkling while another might minimize shower times. Higher prices (and the prospects of even higher future prices, if the drought persists) can encourage greater residential adoption of more water-efficient sprinkler systems, appliances, toilets, and landscaping. They can cause water-intense production processes to move to wetter venues. For more on these topics, see “The California Water Crisis: Policing vs. Pricing?,” by Kathryn Shelton and Richard B. McKenzie. Econlib, Sep. 1, 2014. David Zetland on Water. EconTalk, March 2015. Elasticity of Demand. College Topics. Library of Economics and Liberty. Economists have long known that higher water prices can do the job of increasing water conservation to match shrinking water supply. The most fundamental of economic principles—the Law of Demand, or the inverse relationship between a product’s price and its consumption level—applies, as has been found to be the case in multiple econometric studies. Granted, as research has shown,8 the demand for water in California is highly “inelastic,” which means water use goes down only modestly with a given percentage price increase. However, this “inelasticity” can be extensively chalked up to prevailing extraordinarily low water prices in a near-desert climate. Many Californians don’t have a clue what they pay for water by the gallon or even a hundred cubic feet, because water prices are so low that they need not spend time assessing the price. A vast majority of Californians might not know that a minor water-price increase has been established if they are paying a penny per gallon and the price increase is, say, 20 percent a gallon, which works out to be an unnoticed 0.2 cent increase. Concluding Comments Higher water prices can do what the governor and other state officials can’t do: They can raise the revenue-value of recovered water from leak repairs, which can be expected to lead to more repaired pipes. In this regard, higher prices can, effectively, become the equivalent of “rainmakers.” When water becomes scarcer, as happens in droughts, by definition, policy makers have two stark choices: Ration the more limited amount of available water by fiat or by price. The former can do little to boost accessible water. The latter can, in a totally unheralded way. Footnotes [1] The Metropolitan Water District of Southern California maintains the state has experienced the driest three years (including a projections for all of 2022) on record and the driest three winter months (January-March) in 2022 on record. [2] Olson, Mancur, The Logic of Collective Action: Public Goods and the Theory of Groups. Harvard University Press, 1965. [3] This logic undergirding a likely limited reduction in voluntary water conservation underlies problems of pollution and overfishing in the seas and overgrazing on common-access ranges in the West. [4] Ian James, “Despite Newsom’s call to cut water use, L.A. and San Diego didn’t conserve in July.” Los Angeles Times, September 21, 2021. [5] United State Geological Survey, “Estimated Use of Water in the United States County-Level Data for 2015, ScienceBase-Catalog. [6] With the 7 percent water loss estimated by a sample of 268 water utilities by Kunkel Water Efficiency Consulting, 2018. Report on the Evaluations of 2016 Validated Water Audit Data of California Water Utilities. Philadelphia, Penn.: Kunkel Water Efficiency Consulting, April, p. 7. [7] “Two Rescued From Roof of Partially Submerged Car After Hollywood Hills Water Main Break”, by Toni Guinyard. NBC Los Angeles, July 20, 2022. [8] Juneseok Lee and Stephanie A. Tanverakui, “Price elasticity of residential water demand in California.” Aqua, 64, 2015. *John McKenzie is a former executive at one of North America’s largest water infrastructure manufacturers. Richard B. McKenzie is the Gerken Professor of Economics and Management Emeritus in the Paul Merage School of Business at the University of California, Irvine. He co-authored with Gordon Tullock The New World of Economics, which went through five editions (and five foreign languages) and was adopted at one time or another in almost all of the country’s colleges and universities in the 1970 and 1980s. The sixth edition was published in 2012. For more articles by Richard B. McKenzie, see the Archive. (0 COMMENTS)

A Liberty Classic Book Review of Socialism: An Economic and Sociological Analysis, by Ludwig von Mises.1 The hallmark of a great book is its ability to stand the test of time, for its lessons to apply across place and time, and for its underlying principles to resonate with future generations. On the occasion of the 100th anniversary of the publication of Ludwig von Mises’s Die Gemeinwirtschaft, translated as Socialism, it is important to ask why Socialism meets this intellectual standard, and how its relevance remains perennial. It has been just over a generation since the collapse of communism in Eastern and Central Europe, and since then, other countries such as China and India have gradually moved away from central planning as the predominant basis for organizing economic production. Although the aspirations for socialism in practice may have died with the fall of the Berlin Wall in 1989, its theoretical aspirations have never been completely buried. In this regard, one of Mises’s earliest students in the United States, Richard Cournelle, warned that, although Mises may have always been right about the impossibility of rational economic calculation under socialism, an exclusive preoccupation among libertarians with this argument after the collapse of communism would render the case for liberalism irrelevant. As Cournelle states, “in spite of these disappointments, the belief in the propriety of the Marxian indictment of capitalism persists with remarkable intensity, certainly in the East and to a considerable extent everywhere. The Marxian prescription, or at least its economic ingredient, may be in disrepute, but Marx continues to control the social from his grave in Highgate” (1992, pp. 3-4). Thus, we “need now understand voluntary social process as completely as we understand market process, and libertarians could again show the way” (1992, p. 7), and it is Mises, who “knew that economics is the beginning of the inquiry into the nature and metabolism of human action and certainly not the end of it.” Perhaps the way I am reframing Mises’s underlying thesis can be best understood in terms of the way Don Lavoie reframes Karl Marx’s Das Kapital in his classic account of the social calculation debate, Rivalry and Central Planning (1985). He writes: “Marx said little directly about the nature of socialism, but in Das Kapital he described its fundamental attributes over and over again by clarifying its antithesis. In many respects, where Das Kapital offers us a theoretical ‘photograph’ of capitalism, its ‘negative’ informs us about Marx’s view of socialism” (1985, p. 30). In similar fashion, I am suggesting here that, rather than placing Mises’s theoretical critique of socialism in the foreground of analysis, as it usually is, an alternative reading of Socialism is to place his account of the fundamental attributes of socialism (and its theoretical impossibility) in the background of analysis. From this standpoint, the richness of Socialism can be fully appreciated by placing his economic and sociological analysis of the nature and fundamental attributes of liberalism in the foreground. Understood in this respect, Mises’s Socialism is an account of liberalism understood by elaborating on its anthesis: socialism. Thus, Socialism can be best understood not only as an account of why rational economic calculation under socialism is impossible, per se. Rather, it is a broader theoretical account of what has become possible in terms of human progress as a result of private property under the rule of law becoming more secure over time. It is in this respect that Nobel Laureate Edmund Phelps has credited Mises as being “the originator of property rights theory” (emphasis original; 2013, p. 123). My point here is neither to downplay the importance of Mises’s critique of socialism, nor to deny its continued relevance and applicability for the present day. As F.A. Hayek wrote in his foreword to the book, “most readers today will find that Socialism has more immediate application to contemporary events than it had when it first appeared in its English version just over forty years ago” (Hayek 1978 [1981], p. xxiv). Unfortunately, with the renewed calls for the possibility of socialism based on improvements in computational technology, as recently put forth by King and Petty’s The Rise of Technosocialism (2021)—a resurrection of what Oskar Lange (1967) had argued—the same remains true if Hayek had written his foreword today.2 Given the attention that has already been devoted to the problem of economic calculation by Mises’s proponents as well his opponents, my goal here, rather, is to redirect our attention to Mises’s rich understanding of the role that property rights play for human progress, not just economically, but also politically and socially. The evolution of private property rights under the rule of law forms the underlying basis encompassing the discussion throughout his book. Absent the rule of law, the allocation of resources will be dominated by competition for privileges by acquiring political status, rather than competition for property rights through voluntary contract. Private property rights, according to Mises, are crucial not only to understanding the role that economic calculation plays in coordinating social cooperation under the division of labor, but also to explaining the coevolutionary relationship between capitalism and democracy. “It was the rule of law,” Mises writes, “that brought about the marvelous achievements of modern capitalism and of its—as consistent Marxians would say—’superstructure’, democracy” ([1922] 1981, p. 521). “Hand in hand with the development of Capitalism,” Mises elaborates elsewhere, “go attempts to expel from the State all arbitrariness and all personal dependence” ([1922] 1981, p. 171). This coevolutionary relationship also undergirds the liberating effects of other social relationships, such as marriage. As Mises argues: This evolution of marriage has taken place by way of the law relating to the property of married persons. Woman’s position in marriage was improved as the principle of violence was thrust back, and as the idea of contract advanced in other fields of the Law of Property it necessarily transformed the property relations between the married couple. The wife was freed from the power of her husband for the first time when she gained legal rights over the wealth which she brought into marriage and which she acquired during marriage, and when that which her husband customarily gave her was transformed into allowances enforceable by law. Thus marriage, as we know it, has come into existence entirely as a result of the contractual idea penetrating into this sphere of life ([1922] 1981, p. 82). A great illustration of this quote above has been made by Jayme Lemke (2016) in the context of the 19th century within the United States, where the women’s suffrage movement was led by a bottom-up process at the state level, granting women economic rights as result of jurisdictional competition, and from which political enfranchisement followed as a by-product. Understanding property rights as a set of social relationships defining our expected ability to interact with other individuals, including the particular assignment of consequences of such action, as Mises does, transcends the distinction between economics and sociology, and allows us to understand the relationship between liberalism and democracy, property rights and economic calculation, marriage relations, etc. The key to understanding how property rights undergirds all these topics is by elaborating on the distinction Mises draws between a “physical having” and a “social having” of resources (including to one’s labor), which corresponds to the distinction between the right to an object, and the right to an action (emphasis original; [1922] 1981, p. 30). Private ownership of the means of production does not entail that producers possess resources for their own purposes without taking into account the valuation of those resources by other individuals. Rather, if “[s]ociety is best served when the means of production are in the possession of those who know how to use them best” (Mises [1922] 1981, p. 66), then the nature of private property rights is to allow exchange to take place between those individuals in physical possession of resources with those who expect to be able to best use those resources at the service of other individuals, namely the entrepreneur, who bears the full consequences of their actions. The consequences of such action are revealed in the form of profit and losses after entrepreneurs have paid for such resources through buying and selling of land, labor and capital in the market process, hence incurring a social liability to utilize resources in a cost-effective manner. It is in this sense that a “physical having” of resources without a corresponding “social having” of resources implies the possession of privilege, and therefore a lack of social liability over resources. Thus, “the social function of private ownership in the means of production is to put the goods into the hands of those who know best how to use them, into the hands, that is, of the most expert managers. Nothing therefore is more foreign to the essence of property than special privileges for special property and protection for special producers” (emphasis added; Mises [1922] 1981, p. 277), who are excluded from the full costs of their decision making. “Rather than private property being an anti-social institution and the basis for an atomistic society, it is the most social of all institutions, since it allows individuals, regardless of their race, creed, or gender, the opportunity to learn and harness their creative abilities in social interaction with one another for the betterment of each other.” Rather than private property being an anti-social institution and the basis for an atomistic society, it is the most social of all institutions, since it allows individuals, regardless of their race, creed, or gender, the opportunity to learn and harness their creative abilities in social interaction with one another for the betterment of each other. The nature of competition in the market process is cooperative, since rival producers compete against each other to serve the infinite demands of consumers. As Mises elaborates, the “greater productivity of work under the division of labour is a unifying influence. It leads men to regard each other as comrades in a joint struggle for welfare, rather than as competitors in a struggle for existence. It makes friends out of enemies, peace out of war, society out of individuals” ([1922] 1981, p. 261). For more on these topics, see Property Rights. College Topic Guide. “The Right to Private Property Implies A Social Liability, Not a Private Privilege!” by Rosolino Candela. Econlib, May 13, 2021. “The Entrepreneurial Justice of the Market Process,” by Rosolino Candela. Econlib, June 6, 2022. Herein lies that symbiotic nature of the positive case against socialism and the positive case for liberalism: private property establishes the preconditions for market pricing, the communicative cord connecting producers and consumers in an ever-expanding scope of productive specialization and social cooperation under division of labor, such that “it turns the independent individual into a dependent social being”, but never at the mercy of any privileged group of individuals (Mises [1922] 1981, p. 270; see also Schmidtz 2016, p. 211)3. Therefore, the very slogan of “economic democracy” propagated by socialism masks the inherently anti-social and undemocratic nature of socialism, which rests on the fact that it not only depends on granting privilege, which is the negation of private property, but also that such privilege is concentrated in the hands of central planners, who dictate the allocation according to their whims, not the demands of individuals throughout society. Whereas the case for liberalism depends on a particular set of institutional conditions necessary to live up to the demands of humanity, the failure of socialism rests on the fact that “the Utopian socialist is obligated to make demands on men which are diametrically opposed to nature” (Mises [1922] 1981, p. 408). References Cournelle, Richard. (1992). “The Power and Poverty of Libertarian Thought.” Critical Review: A Journal of Politics and Society 6(1): 1-10. King, Brett, and Richard Petty. (2021). The Rise of Technosocialism: How Inequality, AI and Climate Will Usher in a New World. Rye Brook: Marshall Cavendish International. Lange, Oskar. (1967). “The Computer and the Market.” In C.H. Feinstein, (Ed.). Socialism, Capitalism and Economic Growth: Essays Presented to Maurice Dobb. New York: Cambridge University Press, 158-161. Lavoie, Don. (1985). Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered. New York: Cambridge University Press. Lemke, Jayme. (2016). “Interjurisdictional Competition and the Married Women’s Property Acts.” Public Choice 166(3): 291-313. Mises, Ludwig von. (1922 [1981]). Socialism: An Economic and Sociological Analysis. Indianapolis: Liberty Fund. Phelps, Edmund. (2013). Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change. Princeton: Princeton University Press. Schmidtz, David. (2016). “Adam Smith on Freedom.” In Adam Smith: His Life, Thought, and Legacy, edited by Ryan Patrick Hanley (pp. 208-227). Princeton: Princeton University Press. Footnotes [1] Socialism: An Economic and Sociological Analysis, by Ludwig von Mises. Translated by J. Kahane. Foreword by F. A. Hayek. Available at the Liberty Fund book catalog. [2] See also Donald J. Boudreaux’s recent book review, “Maybe It’s Not Time for Socialism,” on Thomas Piketty’s A Time for Socialism (2021). Library of Economics and Liberty, June 6, 2022. [3] The quote from David Schmidtz is as follows (emphasis original; 2016, p. 211): “The crucial bottom line is that when people achieve freedom in commercial society, such freedom involve depending on many, yet being at the mercy of none.” *Rosolino Candela is a Senior Fellow in the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics, and Program Director of Academic and Student Programs at the Mercatus Center at George Mason University. (0 COMMENTS)

A Book Review of Hitler: The Politics of Seduction, by Rainer Zitelmann.1 One could truly say that there is no end to books about Adolph Hitler. Every year brings new works to add to the library already in print. This despite there being what most regard as a definitive biography in the shape of Ian Kershaw’s two-volume work.2 What can any new book add to what we already know? In the case of Rainer Zitelmann’s book, Hitler: The Politics of Seduction, a great deal. In fact, Zitelmann’s book sets out clearly an important, even central aspect of Hitler’s career and the nature of what he represented that has been largely ignored or misunderstood, sometimes deliberately. In doing this it helps us reach a much clearer understanding of not only Hitler himself and the vision that drove him and which he sought to realise but also the nature of Nazism and its project. As such, it is of much wider and continuing relevance than one might suppose. The book in fact is not even new. It is a revised and updated republication of a work that came out first some years ago under a different title. It was originally published in German in 1987 and translated into English under the highly misleading title Hitler: The Politics of Seduction. Since then, there have been several further updated German editions but no further English ones, which is why this edition is a substantial update. The one major problem in this edition is the lack of a subject index, but otherwise this is an outstanding work of scholarship. Zitelmann’s subject is not Hitler’s actual policies other than incidentally. It is Hitler’s ideology or vision—the body of ideas that motivated his politics and career. This is obviously relevant to the question of the actual policies followed after 1933 and also to the question of why people came to support the NSDAP before 1933 and in many cases to join the party and its organisations. The focus is on what Hitler believed, his project or goal, and the kinds of arguments that he made in support of them or to express and articulate his ideas. This is done by examining in detail his speeches, programmatic documents, and his writings—obviously including but not confined to Mein Kampf. The result is a full and well-founded picture of a coherent and thought-out set of beliefs and ideas, and the sentiments associated with them in Hitler’s mind and thinking. The picture given is in striking contrast to the common notion of what motivated Hitler—or of his beliefs and ideology—and as such is controversial. One important argument is that antisemitism is not as central or primary for Hitler as most have assumed and played little or no part in the arguments made by the NSDAP between 1928 and 1933 or in attracting electoral support at that time. Instead, it is presented as being a very important but secondary part of his thinking, something that came as a consequence or corollary of other more foundational ideas, once those primary ideas were combined with a vehement personal prejudice. “Something that becomes very clear, and which is in sharp contrast to widely held beliefs, is that Hitler’s ideas were systematic and coherent. They were not simply rationalizations of animus or prejudice or an incoherent collection of ad hoc and ill thought-out notions.” An important aspect of the book is that it emphasises that Hitler’s ideas were not static or fixed but evolved and changed over time, although their underlying nature and content remained constant. Zitelmann is at pains to stress that the thinking and ideas set out were Hitler’s and that this should not be taken as a study of the ideology and thinking of the Nazi Party as a whole, although obviously Hitler played a central part in defining those. Some leading figures, such as Goebbels, shared Hitler’s way of thinking but there was a difference between his ideas and those of people such as Rosenberg, Himmler, and Darre (which Hitler himself dismissed as “mysticism”). Something that becomes very clear, and which is in sharp contrast to widely held beliefs, is that Hitler’s ideas were systematic and coherent. They were not simply rationalizations of animus or prejudice or an incoherent collection of ad hoc and ill thought-out notions. That means that, to the extent that his beliefs did shape Nazi policy, there was a definite large-scale and long-term project as opposed to a combination of prejudice and pragmatism (a common view). What though were those ideas and beliefs? Zitelmann identifies three central and mutually supporting elements. The first is that Hitler saw himself, accurately, as a revolutionary. Clearly it was a revolution of a different kind than that aimed at by Marxists, but it was still politics of a revolutionary kind and as such clearly distinct from the politics of the so-called bourgeois parties (liberals, social democrats, and Christian democrats) and also the conservatives and conventional nationalists. Zitelmann demonstrates that Hitler himself made this distinction, clearly and explicitly differentiating himself from the conservatives and putting the Nazi party, the Communists, and the Italian Fascists as rivals but fellow revolutionary movements, opposed to the constitutional politics of the bourgeois parties. He saw himself as a revolutionary because the political project he envisioned was one of fundamental transformation, a radical reshaping of the German social order, economy, and society. His politics was therefore total—encompassing every area of life, in the same way as communism—and he argued explicitly that this derived from its being a comprehensive weltanschauung (world view). This he explicitly contrasted to the limited and rule bound politics of liberalism and social and Christian democracy, which meant that it was conducted in a different way, one neither bound nor limited by law. The last aspect of this revolutionary approach was that the transformation of society it aimed at involved novelty and the creation of something new and unprecedented. This went along with a fascination, shared by most leading Nazis, with technology and modernism. This was all in marked contrast to the politics of radical reactionaries, such as the so-called conservative Maurras revolutionaries in Germany, and the Action Française in France, who looked to a reactionary politics of restoration and counter-revolution. What though was the new order that Hitler aimed at creating through a Nazi revolution? Zitelmann draws this out in detail. His aim was the creation of a volksgemeinschaft or people’s community. This was a political and social order in which the existence of different classes was recognized, but conflicts between them were resolved through their common incorporation into a unified collective social and political order. In this order, economic principles were explicitly subordinated to political ones and individualism was deprecated as being decadent and anti-social. A key aspect of this social thinking was hostility to the culture and interests of the bourgeoisie—the capitalist and managerial classes—and a vaunting of the working class as the location of true national identity (reflected in the full name of the Party—National Socialist German Workers’ Party—and its political tactics). A very important aspect of this that Zitelmann explores was an emphasis on social mobility and meritocracy at the expense not only of Jews but the traditional middle and upper classes in general. One important aspect of the idea of volksgemeinschaft was the use of symbolism and ritual and the explicit incorporation of aesthetic principles into such apparently mundane matters as motorway design. This is often seen as exemplifying the mystical element in Nazi ideology and the way it rejected liberal modernity for an imagined past. Zitelmann argues convincingly that while this may have been true for Rosenberg, Himmler, and Darre, it was not for Hitler. He explicitly rejected quasi-religious practices (dismissing them as “cultish” rather than scientific) and his use of symbolism and ritual was a case of the highly rational and deliberate use of non-rational sentiment. The main point though is that in Zitelmann’s account, Hitler saw the revolutionary politics as creating a new kind of political and social order—radically distinct from individualistic and commercial liberalism—a new kind of state and society. It was also, Zitelmann argues, a new kind of economy. This final point is the most controversial part of the book. The dominant view of the Third Reich and Hitler’s ideas and policy has it that there was no real coherent economic policy or vision and that the regime did not mark a clear break with capitalism, even in aspiration, never mind practice. There is also the Marxist view that fascism in general—and Nazism in particular—were a form of capitalist politics and political economy, produced by the response of monopoly capitalism to the challenge of communism. This last view is a minority one but still influential, while few take the “socialist” part of the Nazi Party’s full name as being anything but window dressing. Zitelmann takes on this assessment directly. He argues that from Hitler’s writings and speeches we can discern a definite economic philosophy and goal. He argues that this was a synthesis between socialism and nationalism. In this it was actually like the form that Soviet Communism took under Stalin by the end of the 1930s. Through extensive quotes and citations, he shows that Hitler explicitly rejected free markets as the way of organizing and governing an economy and capitalism as both an economic and social system. The usual term to describe capitalism was “plutocracy”, the label used for the Anglo-Saxon countries, but above all the United States. Hitler rejected Soviet socialism not primarily on economic grounds, rather because of its anti-national elements. He also argued for a form of socialism in which—while there was extensive state ownership of key sectors or individual firms—the bulk of productive assets remained in private ownership. The point was that the employment and disposal of those assets was directly controlled and directed by the collective political process. The socialist aspect of Nazi economic policy and the extent of state intervention in the German economy has received renewed attention recently, due mainly to Adam Tooze’s outstanding work Wages of Destruction,3 but Zitelmann’s older work makes the strongest case for there being a coherent economic philosophy behind this as well as political exigencies. Is it fair to call this socialism? On the “walks like a duck” principle we have to say that it is, unless we beg the question and define socialism in a way that makes this version non-socialist by definition (similar to ones saying that otherwise clearly capitalist societies like the Antebellum South cannot be capitalist because that is defined as excluding slavery). The conclusion we can clearly draw is that Hitler aimed at a socialist order of a kind—one different in important ways from the Marxist-Leninist version but a type of socialism nonetheless. Having this book available in an updated English translation is tremendously valuable. It uses close reading of the sources to give us a much more accurate and complete picture of Hitler’s worldview and the vision that motivated his politics. It makes it clear that he was another of the anti-liberal, anti-capitalist, and anti-bourgeois revolutionaries who had such a catastrophic impact on world history in the first two thirds of the twentieth century. It helps the reader to better understand the nature of fascism as a political project and the scope and scale of the ambition of leaders like Hitler and others. It was the overthrow of the form modernity had taken because of liberal victories in the nineteenth century and its replacement by a new kind of civilization—still modern in some ways but founded on very different principles. Like Marxism-Leninism, a similar yet distinct kind of project, it ended in failure but had a wide appeal while it lasted. For more on these topics, see “How ‘socialist’ was national socialism?,” by Alberto Mingardi. EconLog, June 22, 2020. “The Socialist Economics of Italian Fascism,” by Lawrence K. Samuels. Econlib, July 6, 2015. Socialism, by Robert Heilbroner. Concise Encyclopedia of Economics. Communism, by Bryan Caplan. Concise Encyclopedia of Economics. Fascism, by Richard Sheldon. Concise Encyclopedia of Economics. Capitalism, by Robert Hessen. Concise Encyclopedia of Economics. That is perhaps the most important conclusion of the book and one that Zitelmann does not fully bring out—the extent and depth of the appeal of Hitler’s vision. Today, we are so used to thinking of him as being a near-demonic figure (for good and obvious reasons) that we overlook the way that his worldview had great appeal and still would if it were detached from an association with the specifics of Hitler and German history. One area that is touched on but that must be explored in other works is the way Hitler’s vision worked out in actual politics. This would require something more like an actual biography, which this is not. Zitelmann does make clear though that Hitler managed to be guided by his general worldview throughout his career while at the same time making pragmatic adjustments to advance his ideals—a pragmatic revolutionary in fact. For anyone of a liberal, social democratic, or democratic conservative persuasion this is a clear map of a deeply hostile and dangerous way of thinking about the world and its clarity enables us to be better able to understand its past success and continuing appeal. Footnotes [1] Rainer Zitelmann, Hitler: The Politics of Seduction. Allison and Busby, 2000. [2] Ian Kershaw, Hitler: 1889-1936 Hubris (W.W. Norton & Company, 1999) and Hitler: 1936-1945 Nemesis (W.W. Norton & Company, 2001). [3] Adam Tooze, Wages of Destruction: The Making and Breaking of the Nazi Economy. Penguin Books, 2008. *Dr. Stephen Davies is the Head of Education at the IEA. Previously he was program officer at the Institute for Humane Studies (IHS) at George Mason University in Virginia. He joined IHS from the UK where he was Senior Lecturer in the Department of History and Economic History at Manchester Metropolitan University. He has also been a Visiting Scholar at the Social Philosophy and Policy Center at Bowling Green State University, Ohio. A historian, he graduated from St Andrews University in Scotland in 1976 and gained his PhD from the same institution in 1984. He has authored several books, including Empiricism and History (Palgrave Macmillan, 2003) and was co-editor with Nigel Ashford of The Dictionary of Conservative and Libertarian Thought (Routledge, 1991). As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)