In a constitutional democracy, elections are important, but not for the reasons that supporters of unlimited democracy think they are. Reflecting on this is useful in the context of the January 6 House Committee and of recent declarations by the president of Brazil, Jail Bolsonaro. Bolsonaro fears losing the upcoming election in Brazil and suggests that he could be the victim of electoral fraud as, he also suggests, Trump was (“Biden Pushes Back Against Waning U.S. Influence in Latin America at Summit,” Wall Street Journal, June 9, 2016): Mr. Biden held a one-on-one meeting later Thursday with Mr. Bolsonaro, a close ally of Mr. Trump who was one of the last global leaders to recognize Mr. Biden’s victory. … “The American people are the ones that talk about it (election fraud). I will not discuss the sovereignty of another country. But Trump was doing really well,” [Mr. Bolsonaro] said earlier in the week when asked if he believed there had been fraud in Mr. Biden’s victory. Bolsonaro is preparing to pull the same trick as the former American president did—and as political rulers regular do in backward countries. In fact, Trump suggested even before the 2016 election and before the 2020 election that he would recognize the results only if he won. Bolsonaro is also suggesting that the election outcome will be legitimate only if he wins: Mr. Bolsonaro has repeatedly criticized the country’s election system ahead of the October presidential election. Polls show he is currently trailing former Brazilian President Luiz Inácio Lula da Silva ahead of the vote. In a constitutional democracy (emphasizing “constitutional” as James Buchanan would say), elections are important not because they express “the will of the people.” Such a thing does not exist because individuals making up “the people” have different preferences, values, and wills (see my article “The Impossibility of Populism” in The Independent Review, Summer 2021). And elections are not important because of any divine right of numerical majorities. On the contrary, the only majority that has normative significance is a 100% majority, that is, unanimous consent; democracy is only meant to approximate, in a sense, this criterion (see my Econlib review of the classic book explaining this idea, Buchanan and Tullock’s The Calculus of Consent). In a constitutional democracy, elections are important for basically one reason: they allow a peaceful transfer of power. One could also say that elections have a symbolic importance as they remind rulers that all citizens are formally equal and that their consent is equally required. Once a certain proportion of voters think that that the function of elections is to choose God-on-earth, instead of just vetoing the rascals if necessary, dangerous consequences follow. First, any defeated candidate for the God-on-earth job will be strongly tempted to claim that he won, especially if he thinks that he embodies the people. How can the people vote against itself without fraud? Second, elections will have stopped playing their main, if not only, function. One objection to my argument could be formulated as follows: Granting that, in backward or backward-to-be countries, defeated candidates will succumb to the temptation of blaming fraud, why did the phenomenon, in advanced countries of our onw times, show up in America and not in Europe? Why, for example, did Charles de Gaulle not claim that his plebiscitary referendum of 1969 was stolen, instead of resigning? Is it because Europeans generally believe in unlimited democracy but not in personal power? A related question: Why is it that, in French elections, the citizens living abroad are encouraged to vote not with mail-in ballots but on the Internet, and that (thus far) no losing candidate blames his loss on these votes? (0 COMMENTS)

Chicago Booth’s “Initiative on Global Markets” (IGM) occasionally publishes the responses of fairly well-known economists at prestigious schools on various public policy issues. On June 7, IGM published responses on the topic of price gouging. It asked 2 questions. I’ll discuss the first and the answers to the first. Question A: It would serve the US economy well to make it unlawful for companies with revenues over $1 billion to offer goods or services for sale at an “unconscionably excessive price” during an exceptional market shock. What would my A and A- students have answered at the end of a course while the material was fresh? I think they would have said “No” or “Hell, no.” The options given were “Strongly Agree” (Hell, yes), “Agree” (Yes), “Uncertain,” “Disagree” (No), “Strong Disagree (Hell, no), “No Opinion,” or “Did Not Answer.” First the good news. 44% of respondents disagreed and 21% strongly disagreed. No one strongly agreed and only 5% agreed. Wait; there’s more good news. Weighted by each respondent’s confident, the results are even more lopsided. Only 3% agreed, 52% disagreed, and 32% strongly disagreed. Now the bad news prefaced with a little good news from Eric Maskin and Austan Goolsbee. Respondents were also allowed to give reasons. What would be a good reason? How about this: price controls cause shortages and it’s precisely when there are “exceptional market shocks” that it’s even more crucial to avoid price controls. Think of price controls on ice during an electricity blackout or on plywood during a hurricane. Many of them did not bother giving reasons. That’s understandable. These people are busy and they might well think that the reasons I think are obvious are indeed obvious. Eric Maskin of Harvard said it well: At a time of shortage, high prices can serve to stimulate an increase in supply. Actually, it’s quantity supplied (think of a movement along a supply curve), but again, I’m sure he was in a hurry. Austan Goolsbee of the University of Chicago has a good answer that expresses his frustration at the question being raised: How are we back on this again? This is in line with his earlier comment on a similar question. Caroline Hoxby of Stanford starts strong but then ends with a surprising concession: Prices re-equilibrate markets by generating supply & demand responses. Suppressing prices is counterproductive except in short-term events like hurricanes. No! Hurricanes are not an exception. It’s even more important to get supply and demand responses during a hurricane. If the hurricane is in Florida, it’s good to have trucks lining up in Georgia and South Caroline to ship plywood in for high prices. And it’s good to cause the wealthy mansion owner to question whether he can make do with plywood to fill in his picture windows but without plywood to fix his tool shed. If he foregoes the latter, that frees up plywood for the guy with the double-wide trailer. Some economists responded like lawyers instead of economists. Oliver Hart of Harvard, for example, wrote: The terms “unconsciously excessive price” and “exceptional market shock” are not well-defined and so enforcement would be a nightmare. All true, but even if enforcement were not a nightmare, the shortages caused would be. Similarly, Ken Judd of Stanford responded: What is the definition of “unconscionable”? Laws must be far clearer and more precise than vague phrases that express moral sentiments. Good point, but what if the laws were totally clear: for example, you may not raise prices by more than 50% of what they averaged in the previous 3 months? Would Ken be happy with that kind of law? Carl Shapiro of UC Berkeley writes: The first step is to define an “unconscionably excessive price.” Once that is done, economists can evaluate the effects of this bill. Sure. But why would his evaluation depend on the definition? If the price control is binding, there will be a shortage. So good on them for their brief answers but not so good on many of the explanations. (0 COMMENTS)

In the comment section after my previous post, Garrett provided another nice example of how America’s doctors are making us sick: My wife (early 30s) caught covid a few weeks ago. She noticed a scratchy throat on a Sunday night after we’d been out for dinner Friday night, and by that Tuesday she was bedridden with a fever nearing 103. For the next two days she couldn’t work or anything. I’d read about how paxlovid is a wonder-drug so I read up on the prescribing guidelines and saw that one of the risk factors is asthma.She scheduled a telehealth visit and spoke with a provider that Thursday afternoon via videocall. The doctor basically told her that paxlovid is for people over 65 and she didn’t need it because she’d get over it in the next couple days, but that if she’s worried about her asthma she’d prescribe her a different inhaler. My wife was too exhausted to stand up for herself so I had to step in and insist for it.I had the prescribing guidelines up on my phone but the doctor wouldn’t budge. I eventually said this is ridiculous, there’s no shortage of paxlovid, and sentencing my wife to another week of sickness was malpractice. My wife kicked me out of the room for that lol, so I walked the dog to cool off.When I came back though my wife said she got the prescription. After I left the room the doctor said “I don’t think you need it but if your husband insists I’ll prescribe it.” She took the pills a few hours later and just like Scott she immediately felt better! Yes, this case had a happy ending.  But how many of us would have persevered as Garrett did? What about the argument that there is a limited supply of Paxlovid and that it should be reserved for those most in need?  Unless your name is Matt Yglesias, the elasticity of supply is probably much higher than you think.  Recall how the vaccine companies produced far more doses than their supposed “capacity” allowed.  The same is true of Paxlovid.  This is from last November: The efficacy data for Pfizer’s oral COVID-19 drug now look so appealing that the Big Pharma company is boosting manufacturing capacity even before an expected emergency use authorization from the FDA. Pfizer now expects to make 80 million courses of COVID drug Paxlovid by the end of 2022, Pfizer CEO Albert Bourla, Ph.D., told CNBC during a Monday interview. The company previously said it plans to have capacity to make 50 million courses. The revelation came after Merck reported the risk reduction in hospitalization and death from its Ridgeback Therapeutics-partnered COVID antiviral, molnupiravir, fell from 50% to 30% in the final analysis. The updated result fueled expectations of increased demand for Paxlovid, which has shown an 89% risk reduction in outpatients. So as soon as its rival ran into problems, Pfizer miraculously discovered even more “capacity” than they had assumed. Six weeks later: In early November, Pfizer projected it could produce 50 million courses of the treatment in 2022; then, by late in the month, the company bumped that estimate up to 80 million. Monday, during the J.P. Morgan Healthcare Conference, CEO Albert Bourla, Ph.D., took it a big step further. “We have confidence that we can make 120 million treatments this year,” Bourla said. “That’s 3.6 billion tablets. That’s a very big capacity. But it is doable.” But why stop there? But wait, there’s more. The company is working to add more capacity by the end of this year, because several countries have indicated an interest in stockpiling the treatment, Bourla said. Unlike vaccines, this is an option with Paxlovid because the pill has a shelf-life of three years. “If those discussions progress, we will have to do more than 120 (million), so this is where we are aiming now,” Bourla said. PS.  Demand is also more elastic than you think.  When I was young, my dad used to say that cigarette taxes won’t stop anyone from smoking, as the product is addictive.  Much later in life, my mom told me that she had smoked when she was young, something I’d never known (and couldn’t even imagine.)  I asked why she’d stopped.  “When your father and I got married, we decided that we could only afford one smoker in the family.” Sadly, I was never able to confront my dad with this counterargument, as he died from emphysema at age 68.  My mom just turned 96 on Tuesday. (0 COMMENTS)

In the US, about 350 people die of Covid-19 each day. That figure is much lower than at the peak, but it’s still a disturbingly high death toll given that new Covid infections have fallen sharply in recent months.Last December, the FDA authorized the use of Paxlovid, which was shown to be 90% effective in treating Covid. Since that time, I’ve read numerous articles suggesting that many Covid sufferers are not being given this highly effective treatment.I know of a 97-year old man who was hospitalized immediately after contracting Covid, and then put on oxygen. He was not given Paxlovid until 6 days later, when he asked for it. In another case, a Covid sufferer I know asked her doctor about Paxlovid, and the doctor responded that she’d never heard of the drug. These cases seem to confirm what I’ve been reading in the media. I’m puzzled as to what’s going on here. We have this paternalistic health care system where people are not supposed to make their own decisions; rather they are supposed to rely on “experts” for advice and prescriptions. So why are the experts failing us? PS.  For what it’s worth, Paxlovid is the most effective drug I’ve ever taken.  I almost always take at least 7 to 10 days to recover from an illness with a fever, sometimes a month.  (I have a weak immune system.)   After taking Paxlovid, I recovered in about 12 hours.  Yes, there’s no proof of cause and effect in my case.  But recall that the Paxlovid clinical study also showed a high rate of effectiveness. In my case, I got the prescription after about a 15 second consultation with a person I’d never met over a telemedicine zoom meeting.  Couldn’t a pharmacist do that?  Apparently not: Even if you qualify, someone will still have to prescribe the drug, which means the pharmacy you get tested at will need to have a clinic, like CVS’ MinuteClinic, where a professional can screen, diagnose and prescribe. Only 10% of CVS drugstores and even fewer Walgreens have clinicians on site. I understand that pharmacists might make a few more errors in their 15 seconds of questioning than the telemedicine operator I spoke with.  But 350 people are dying every day.  Is the FDA looking at this on a cost/benefit basis? PPS.  We could also save many lives if more people got Covid vaccine boosters.  I also know of specific cases where the medical establishment dropped the ball on this issue. (0 COMMENTS)

The Ayn Rand Institute recently posted Johnny Carson’s 26-minute interview of Ayn Rand, aired in August 1967. This was his first of 3 interviews with her. I recommend the whole thing, whether or not you like or agree with Ayn Rand. Although she was hugely important in my intellectual development and there’s a substantial probability that I would be neither an economist nor an American if I hadn’t read her when I was 16 and almost 17, there are things I like her about her philosophy and things I dislike. The timing of this interview is interesting to me personally. In August 1967, I was running the dishwashing machine at the Minaki Lodge and I quit around the end of the month to move into our apartment we rented in Winnipeg. I started at the University of Winnipeg in around the middle of September. When I expressed to a friend of my brother’s how bored I was in college (except for Calculus) in about late October, he said he had a book I might like. He lent it to me. It was The Fountainhead. What stands out is how seriously Johnny Carson took her. He asks good questions. In more modern times, I could imagine Brian Lamb of C-SPAN being as good or better if he had had the chance. Is there anyone else? A few highlights follow. 13:30: The fly buzzing around. Notice Ayn Rand’s comment. 15:44: This is the first time some in the audience applaud. Notice the statements of hers that they are applauding. 18:25: Notice her opposition to the Vietnam War and her relatively narrow reasons for opposing it. I now think that I must have been one of the “beatniks” whom she criticized. 24:20: Notice who got bumped because Carson found Rand so interesting. HT2 Alex Tabarrok. (0 COMMENTS)

    Here’s a graph of workplace fatalities in the United States from 1933 to 1993. Without Googling, Binging, or DuckDuckGoing, figure out, from the graph, when the United States government started the Occupational Safety and Health Administration (OSHA.) Please keep your answer to yourself. Bonus question that you’re encouraged to share your answer to: Why were workplace fatalities falling? [HINT: What was happening to workers’ real income through this whole period?]   (0 COMMENTS)

Capitalist companies are, you know, impossibly greedy and quite oblivious to the genuine needs of customers. They are good, very good, at enticing us to buy products which we do not need nor truly want. The system, in itself, is a conundrum of unnecessary duplications: what’s the point of having shoes of different colours, or ties with different patterns? It is thus a relief to know that governments are watching out for consumers’ interests and properly setting standards which may spare us useless duplications and waste. Take the European Union. In the midst of the Ukrainian crisis, between the adoption of one package of sanctions and the other, while searching for new energy supplies outside Russia, the almighty European authorities also succeeded in harmonising chargers for all portable devices: cellphones and tablets. Under the new rules, consumers will no longer need a different charging device and cable every time they purchase a new device, and can use one single charger for all of their small and medium-sized portable electronic devices. Mobile phones, tablets, e-readers, earbuds, digital cameras, headphones and headsets, handheld videogame consoles and portable speakers that are rechargeable via a wired cable will have to be equipped with a USB Type-C port, regardless of their manufacturer. Laptops will also have to be adapted to the requirements by 40 months after the entry into force. The charging speed is also harmonised for devices that support fast charging, allowing users to charge their devices at the same speed with any compatible charger. Isn’t that wonderful? Producers have converged spontaneously towards chargers equipped with the USB Type-C port. If you try to remember how things were five or ten years ago, quite a different picture comes to mind. But common standards is something consumers tend to want and hence we are basically now in a situation in which either your charger has a USB-C or a Lightning port. The latter is the realm of iPhone and Apple, though a few Apple devices have a USB-C charger. The European regulator thinks she deserves a round of applause. She nudged (well, she pushed) the private sector to the last step. “One charger to charge them all”. On the one hand, some customers may appreciate the convenience, though others will need to dispose of lots of connecting cables past their useful life. But on the other hand, the move reduces the scope for innovation: it may be unlikely, but some may develop chargers which do not work well with USB-C and would do better with another system. Now, they can’t and they won’t. The real question is: why should political authority bother with this kind of thing at all? That’s the question which is seldom asked, and that we should ask more often. There is no shortage of problems in the world we live in: from the pandemic to Ukraine; we were showered with problems over the last couple of years. Aren’t these a big enough deal for our rulers and legislators? Shouldn’t they concentrate on obviously relevant issues? Why do they so eagerly sacrifice time and attention to dictate to private companies, such as Apple, how they should make their products? The EU decision looks trifling. But it signals an attitude and a habit- that of attaching no value to the basic economic freedom of an individual or a company to engage in the production and exchanges she wants to engage with. There might be legitimate instances in which such freedom is traded off with other values. But do authorities at least make an attempt at a cost-benefit analysis? And do they consider a presumption of sorts in favour of economic liberty? Euroskeptics used to make fun of Brussels legislating over the calibre of zucchini. Implicitly, they meant that the EU was quite impotent when it comes with significant stuff but took pride in regulating the smallest things. Let’s see if they’ll make fun of the Lady of the Chargers too. (0 COMMENTS)

Two days ago, I went to my bank (a branch of TD Bank) in my suburban Maine town. A classical liberal or a libertarian should be tolerant: that’s constitutive of the brand. Tolerance, or respect for others’ choices, is part of the implicit normative implications of microeconomic theory. This means, of course, to be tolerant of others’ individual liberty, not of their tyrannical longings. We should be tolerant of anything that does not directly threaten the spontaneous order in which every individual can choose the personal lifestyle that he wants. (I use “he” to mean he or she. Please be tolerant.) James Buchanan and Friedrich Hayek, two economists and political philosophers who each won a Nobel prize in economics, have done much work on these issues. My bank celebrates Pride Month with little posters inside and a big rainbow flag in the double door entryway of the tiny building. Inside, the personnel was, as usual, enthusiastically helpful and customer focused. Can we assume that the company, in line with its customer focus, is tolerant and that its next celebration will be, say, Individual Liberty Month or Free Speech Month or the Second Amendment Month? (Parenthetically, I was armed as I walked into the bank, but nobody is forced to be armed, which is part of the essential meaning of liberty and tolerance, and I did not shout about it: “Hey! Look at my Sig under my shit!”) The Free Speech celebration should in fact be called “Free Speech, Not Fair Speech” to make sure that it says what it means. The answer is no: they will not do this. Politicization of business is a zero-sum game; it leads to confrontation and makes tolerance more difficult. In a free society, tolerance between consumers and producers appears to be asymmetric. Producers (in the general sense of suppliers) are very tolerant of and certainly would not dare to challenge their customers’ opinions, while consumers normally don’t refrain from expressing opinions that their suppliers may not like. Your heating oil delivery company doesn’t advertise political opinions on its trucks but you don’t care whether or not a political sign on your lawn displeases your oil delivery man or not. There is a reason for this behavior, typical of commercial societies all over history: producers are serving consumers, not the other way around. Although most individuals are both consumers and producers (some, like children or social welfare recipients, are only consumers for a time), the sovereignty of the consumer reflects the idea that we produce in order to consume, not the other way around. This amounts to saying that an individual naturally wants prosperity, not slavery. It is different under an authoritarian regime where producers serve political power first and consumers must be content with that is left. In his 1969 book Éloge de la société de consommation (In Praise of the Consumer Society), French philosopher Raymond Ruyer succinctly described the difference between a market economy, where consumers are sovereign, and a planned economy, where producers run the show (under government control): In a market economy, demand is imperious and supply is supplicant . . . In a planned economy, supply is imperious and demand is supplicant. Dans l’économie de marché, la demande est impérieuse, et l’offre suppliante . . . Dans l’économie planifiée, l’offre est impérieuse, et la demande suppliante. » (0 COMMENTS)

In “The Taxing Part of the Summer Job,” Wall Street Journal, May 14-15, 2022 print edition, Laura Saunders tells young people what to expect from their first summer job. Saunders does it well by pointing out that the big amount taken will be from the Social Security (12.4%) and Medicare (2.9%), and that for employees half of this is taken out of the employee’s check. She writes: Because payroll taxes are flat taxes, lower earners often owe far more in payroll taxes than income taxes, says Mark Luscombe, principal tax analyst for Wolters Kluwer Tax & Accounting. She doesn’t mention that the Social Security tax is listed as FICA and the Medicare tax is listed as HI. I wish she had because many young people will see that Social Security deduction not listed as Social Security and will say some version of (I’m being polite here), “What the FICA?” I don’t blame them. Social Security is a chain letter, as the Social Security Administration explains here. Of course, the SSA doesn’t use that term but it states this: The money you pay in taxes is not held in a personal account for you to use when you get benefits. Today’s workers help pay for current retirees’ and other beneficiaries’ benefits. Any unused money goes to the Social Security trust funds to help secure today and tomorrow for you and your family.   (0 COMMENTS)

Can you think of a book you’ve read that could describe your experience in the world to someone else? That question is what motivated this episode, in which host Russ Roberts welcomed back Dwayne Betts, poet, author, and founder of Freedom Reads. To prepare for this conversation, Betts and Roberts each asked the other to read such a book. Betts asked Roberts to read Ralph Ellison’s Invisible Man. Roberts asked Betts to read Primo Levi’s If This is a Man. Having each read the other’s suggestion, the two gather to discuss. Can either ever really understand what it might be like to walk in the other’s shoes? Perhaps this episode prompted you to read one or both of these titles. If so, how were you affected? Here are some additional prompts for you to consider. As always, we love to hear from you.     1- In discussing Ellison, Betts says, “… I think Ellison is saying something so radically different about race in America than people first think.” What does he mean? How is the main character “invisible,” and to whom? If his invisibility is not a product of race, where does it come from?   2- How do transformative experiences affect people? (Betts reference this previous episode with L.A. Paul as well as Levi’s experience in Auschwitz.) How do the transformative experiences of others which one reads about affect the reader? Just how similar can these two experiences be, and what makes it more likely that the two versions- lived versus read- converge?   3- Betts says of Levi’s book, “…it’s a truly tragic book. But, when I think about it, I think about, like, hope and beauty and poetry.” How can a writer take all that horror and turn it into something beautiful? What do you think prompts such writers’ choice to choose beauty over horror?   4- Betts suggests that the big question for  Ellison is, what’s the best way to make change? He also opines that he was dismayed in reading the book for the second time that not that much had really changed in American society. To what extent does this suggest that “idea books,” as he calls them, can have little impact on social change?   5- Both Roberts and Betts shared their thoughts on the experience of reading the books together. Have you had any similar experiences? What exactly do you think it was about the experience that seems to have made it so profound for both Roberts and Betts?   (0 COMMENTS)