A Book Review of Rules and Order, by Friedrich Hayek. Jeremy Shearmur, ed.1 Fifty years ago next year, F.A. Hayek, soon to be awarded a Nobel Prize in economics, published Rules and Order, the first volume of his trilogy Law, Legislation, and Liberty.2 Two thousand and twenty-two marks the publication of a new consolidated edition of the three volumes under the capable editorship of Jeremy Shearmur. Rules and Order is the first part of the new book. A dozen years before Rules and Order, Hayek published another monumental work, The Constitution of Liberty, with a Postscript titled “Why I Am Not a Conservative.” The reader of Rules and Order, especially perhaps its first chapter, might find Hayek more conservative than he announced. Evaluating this issue provides another reason for reviewing this important book on the eve of its 50th anniversary. Hayek as a Conservative? Rules and Order proposes a strong defense of traditional moral and legal rules—”rules of just conduct”—as a product of the experience of generations and an adaptation to our ignorance of all the multitude of facts we need to take into account when acting. These rules are customs, habits, practices, even prejudices, which may not be formulated or even capable of articulation. “Man,” Hayek wrote, “is as much a rule-following animal as a purpose-seeking one.” Law is made of those rules of conduct that need to be enforced for the maintenance of society. Historically, law is older than legislation. It was considered as given, something that a “legislator” might discover but not change. Especially under democratic assemblies, the law morphed into what legislators say it is. People now speak of “lawmakers.” Efficient rules and institutions, including law, are a product of social evolution. These evolved rules “enabled the group in which they had arisen to prevail against others.” Hayek explains that he is speaking of cultural evolution, not selection by war. Viewing society as intentionally designed by humans is, in his opinion, naively rationalistic, constructivist, and anthropomorphic. Our language reflects a childish anthropomorphism with “current notions as that society ‘acts’ or that it ‘treats’, ‘rewards’, or ‘remunerates’ persons, or that it ‘values’ or ‘owns’ or ‘controls’ objects or services or is ‘responsible for’ or ‘guilty of’ something, or that it has a ‘will’ or ‘purpose’, can be ‘just’ or ‘unjust’, or that the economy ‘distributes’ or ‘allocates’ resources.” Interestingly, as Hayek shows, it was the classical liberal social theorists of the 18th and 19th centuries who developed the evolutionary approach. They were “Darwinians before Darwin.” Charles Darwin copied them and applied their idea to biology. So-called “social Darwinism” was a later sociological corruption of biological Darwinism. Autoregulated Order and Reform The spontaneous or autoregulated order of society is neither natural in the sense of the exact sciences nor cultural in the sense of man-made. It is, as Adam Ferguson said in a 1767 book, “the result of human action, but not the execution of any human design.”3 A related distinction is between an organization and a spontaneous order. An organization (say, an association or corporation) is designed to accomplish a particular purpose and is ultimately managed by commands. A spontaneous order, on the contrary, is self-regulating. The rules that guide it are not directed towards a common purpose. They are “the same, if not necessarily for all members, at least for whole classes of members not individually designated by name” and apply “to an unknown and indeterminable number of persons and instances.” These rules are thus said to be “abstract,” as opposed to the concrete information (Hayek uses the word “knowledge”), to the purposes of the several individuals, and to individualized, discriminatory rules. Two clarifications may be useful. The concrete knowledge or information that Hayek talks about pertains to what each individual knows about his own circumstances and the constraints and opportunities of his immediate environment. In an autoregulated order, there is no common purpose—except the purpose of maintaining the abstract order serving all individuals. The function of social rules is to coordinate the expectations of the several individuals. A social order is called an order precisely because it asures the “matching of the intentions and expectations of individuals.” Evolved rules embody information dispersed across all individuals. They work like prices in the economy, conveying more information than any single individual can possess.4 This capacity for marshaling information explains why only a spontaneous social order can generate prosperity. A general argument against government interference follows. It is impossible to improve the results of a spontaneous order with specific commands from political authorities, as those prevent people from using their own information for their own purposes, thereby maximizing the use of information. Rulers, including democratic assemblies, cannot possess all that information and are thus incapable of “running the country” as one runs a factory or any other organization. The best they can do is to assist the functioning of an abstract social order. In a dynamic order, of course, “only some expectations can be protected.” Protecting everybody’s expectations would lead to economic and social stasis. In practice, it means that “authority is to decide who is to be hurt.” The maximal coincidence of expectations is achieved by “the delimitation of protected domains,” that is, equal private property rights in a general sense. This way, in pursuing their own goals, individuals don’t constantly bump into each other. Hayek does not deny that rules guiding a spontaneous order are sometimes in need of reform, which makes him less conservative than it may first appear. The common law (which is spontaneously grown law) may develop in undesirable directions, in favor of a ruling elite for example, and deliberate corrective legislation may be the only practicable way out. Note also how Hayek’s spontaneous order is categorically opposed to the traditional European right’s vision of society as a biological organism whose brain is an elitist state. Principles Vs. Expediency Each individual being allowed to use his own knowledge for his own purposes is, for Hayek, the very definition of individual freedom. It underlies his whole thesis: The thesis of this book is that a condition of liberty in which all are allowed to use their knowledge for their purposes, restrained only by rules of just conduct of universal application, is likely to produce for them the best conditions for achieving their aims; and that such a system is likely to be achieved and maintained only if all authority, including that of the majority of the people, is limited in the exercise of coercive power by general principles to which the community has committed itself. Public policy must be guided by principles, not by expediency (or cost-benefit analysis): Since the value of freedom rests on the opportunities it provides for unforeseen and unpredictable actions, we will rarely know what we lose through a particular restriction of freedom … And so, when we decide each issue solely on what appear to be its individual merits, we always over-estimate the advantages of central direction. “Hayek believed that ‘freedom will prevail only if it is accepted as a general principle whose application to particular instances requires no justification.'” Hayek believed that “freedom will prevail only if it is accepted as a general principle whose application to particular instances requires no justification.” “Opinion,” in the sense of long-term general agreement on basic principles, as opposed to the temporary fluctuations of public opinion, is what ultimately guides government policy. He hoped that opinion would return to classical liberalism. A Theory of the Rule of Law Although grounded in economics, Rules and Order is more about the legal theory of a free society. Hayek laments the invasion of public law, which for a century has been dislodging the rule of law in favor of rules of organization and commands from authority. It was mainly under the excuse of social justice that the distinction between rules of just conduct and rules of organization “has been progressively obliterated.” Hayek had more to say about this last point in The Mirage of Social Justice, the second volume of Law, Legislation, and Liberty. In Rules and Order, he presents an impressive argument in favor of the common law, judge-made law, trying to demonstrate that its properties are conducive to a spontaneous order. This kind of law produces “rules regulating the conduct of persons towards others, applicable to an unknown number of future instances and containing prohibitions delimiting the boundary of the protected domain of each person.” It will apply to all individuals equally. In this classical-liberal perspective, law is not opposed to liberty but, on the contrary, a guarantee of equal liberty to all, an idea dear to Hayek. He persuasively explains how, in a common-law system, “a judge cannot be concerned with the needs of particular persons or groups, or with ‘reasons of state’ or ‘the will of government’, or with any particular purposes which an order of actions may be expected to serve.” Thus, “a socialist judge would really be a contradiction in terms.” I would add that this crucial point would also apply to a fascist judge, and Hayek would certainly agree.5 He expresses a strong idea that the more radical Anthony de Jasay, who claimed to be both liberal and anarchist, later pushed to its logical end. 6 Hayek wrote: Since [the representative assembly] possesses authority to arrange everything, it cannot refuse responsibility for anything. There will be no particular grievance which it will not be regarded as capable of removing; and since in every particular instance taken by itself it will generally be capable of remedying such a grievance, it will be assumed that it can remove all grievances at the same time. However, it is a fact that most of the grievances of particular individuals or groups can be removed only by measures which create new grievances elsewhere. Some Interrogations Rules and Order contains some unresolved questions. One is, what is the scope of government? Its essential function, Hayek answers, is “to secure obedience to universal rules of just conduct.” Another function that justifies coercion is the levying of non-exploitative taxes. The government should also be barred from reserving itself a monopoly in any of its other endeavors. But this leaves a relatively wide domain of potential intervention, including “the provision by government of certain services [to] the weak or those unable to provide for themselves … either on moral grounds or as an insurance against contingencies which may affect anybody.” Volume 3 of Law, Legislation, and Liberty, also part of the Shearmur consolidated edition, further adds to the scope of government through regulation. It is true that, in line with Hayek’s non-discriminatory principles, legislating “higher wages for particular groups of workers, or higher incomes for small farmers, or better housing for the urban poor” would be illegal. Obviously, so would subsidies to special corporate interests. This limit might satisfy the typical classical liberal, but it is clear that Hayek did not support a minimal state. He was not a radical libertarian. A second unresolved issue in Rules and Order is, where exactly must the law stop encroaching on the individual’s private choices? Hayek argues that actions not directed towards others, “such as what a person does alone within his four walls, or even the voluntary collaboration of several persons, in a manner which clearly cannot affect or harm others, can never become the subject of rules of conduct that will concern a judge.” This would also ban rules “imposing religious conformity,” but he immediately suggests a worrying exception: “at least where it is not believed that the whole group may be punished by a supernatural power for the sins of individuals.” With the creeping irrationality of public opinion that seems to mark the beginning of the 21st century, this sort of externality argument looks like a door wide open to virtually any abuse. Hayek did not solve the problem that a general, abstract, and non-discriminatory rule can still be tyrannical. For more on these topics, see Moshe Koppel on Norms, Tradition, and Resilient Societies. EconTalk. Michael Munger on Constitutions. EconTalk. Don Boudreaux on Law and Legislation. EconTalk. “The Power and Pervasiveness of Spontaneous Order,” by Elaine Sternberg. Library of Economics and Liberty, July 5, 2021. “Hayek, Mises, and the Methodology of the Social Sciences,” by Adam Martin. Library of Economics and Liberty, Apr. 1, 2019. While sharing most of Hayek’s classical-liberal ideas, James Buchanan, another economist and Nobel prizewinner, served a pointed criticism to the former’s reverence for traditional legal rules. Buchanan argued that any evolved rule must pass a rational-calculus test in the sense that it must be shown to presumably meet the consent of all rational individuals, as if it had been designed that way.7 He believed that Hayek had become too conservative after The Constitution of Liberty. After more than half a century, Rules and Order remains an essential book for anybody interested in politics or law. The other two books in the (now consolidated) trilogy are largely elaborations of the basic ideas of Rules and Order. For somebody new to Hayek’s work, Jeremy Shearmur’s observation is relevant: Law, Legislation, and Liberty “is not an easy read.” As Hayek himself recommended, The Constitution of Liberty may provide a useful introduction. Footnotes [1] F.A. Hayek, Law, Legislation, and Liberty (1973-1978), edited by Jeremy Shearmur (Chicago: University of Chicago Press, 2022). My quotations are from the Shearmur edition. [2] Rules and Order, by F.A. Hayek. Volume 1 of Law, Legislation, and Liberty,. University of Chicago Press, 1973. [3] Adam Ferguson, An Essay on the History of Civil Society, 5th Edition (London: T. Cadell, 1782), available online at https://oll.libertyfund.org/title/ferguson-an-essay-on-the-history-of-civil-society. [4] Hayek started developing this idea in the 1930s and 1940s: see his “The Use of Knowledge in Society,” American Economic Review, 1945, available online at https://www.econlib.org/library/Essays/hykKnw.html. [5] See his The Road To Serfdom (Chicago: University of Chicago Press, 1944; and my review “Where Are We on the Road to Serfdom,” Regulation 44:3 (Fall 2021), p. 58-59, available online at https://www.cato.org/sites/cato.org/files/2021-09/regulation-v44n3-8.pdf. [6] Anthony de Jasay, The State (1985) (Indianapolis: Liberty Fund, 1998), available online at https://www.econlib.org/library/LFBooks/Jasay/jsyStt.html. See also my review of that book: “An Unavoidable Theory of the State,” Econlib, June 4, 2018. [7] James M. Buchanan, Why I, Too, Am Not a Conservative (Cheltenham UK and Northampton MA: Edward Elgar, 2005), pp. 74-75. *Pierre Lemieux is an economist affiliated with the Department of Management Sciences of the Université du Québec en Outaouais. He blogs on EconLog. He lives in Maine. E-mail: PL@pierrelemieux.com. For more articles by Pierre Lemieux, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

In an ideal alternate reality… only the good people—let’s refer to them for simplicity as incorruptibles—would be our leaders, our bosses, our police officers. Meanwhile, the people you wouldn’t want to have in charge—let’s call them corruptibles—would have no power at all…. You would want to make sure that incorruptibles seek power, get it, and hold onto it. —Brian Klaas, Corruptible,1 p. 41 We are familiar with the phrase “Power corrupts.”2 Brian Klaas argues that the problem lies in the process by which people obtain and retain power. If we fix that process, we can get better leaders. Klaas says that our first focus should be on the way that we attract leaders. We need to be aware that: … power tends to draw in people who want to control others for the sake of it. p. 59 He points out that the position of president of a homeowners’ association just looks like a burdensome job to anyone who does not thirst for power: If homeowners’ associations want to avoid being governed by the neighborhood despot, then they should consider creating incentives (including decent pay) to recruit people who want to do the job for better reasons than to harass the people down the block. p. 59 More generally, we should not limit the candidates for office to the people who want it the most. We should instead try to draft those who are less eager for power. Klaas uses the example of recruitment advertisements for police officers. An ad that emphasizes the military-style equipment that the department possesses is likely to attract a much more abusive recruit than an ad that emphasizes the police officer’s role in community relations. Klaas says that we tend to select leaders based on criteria inherited from prehistoric conditions. Height and gender are instinctively appealing to us. Women and short men need not apply. In presidential elections: Candidates who are taller usually win more votes than their shorter opponent(s). Taller presidents also have a higher chance of being reelected. p. 78 However, it gets worse than just selecting leaders based on irrelevant criteria. Klaas warns that we have a tendency to give power to people with the personality characteristics known as the dark triad: Machiavellianism… refers to a personality trait marked by scheming, interpersonal manipulation, and moral indifference to others. Narcissism… refers to personality traits that often manifest as arrogance, self-absorption, grandiosity, and a need for recognition from others. And psychopathy—the darkest trait of the dark triad—often shows up as someone who lacks the ability to feel empathy and is impulsive, reckless, manipulative, and aggressive. p. 90 All of us possess these traits to some degree. But people who have them to a very great extent are quite dangerous, particularly if they also have the ability to mask their natures. Unfortunately, we tend to choose leaders with disturbingly high values of dark-triad traits. I see considerable narcissism in Bill Clinton, Barack Obama, and Donald Trump. Mr. Trump’s tweets strike me as manifesting behavior that is impulsive, reckless, manipulative, and aggressive. Klaas cites a study indicating that, by one indicator, psychopathy is found in 4 percent of aspiring corporate managers, compared with less than 1 percent in the population as a whole. He warns: Dark triad traits may have a double effect: they make such corruptible people crave power, but can also make them more effective at getting it. And that may come down to an ability to focus laser-like on ruthless self-interest. p. 97 If the process by which people select themselves and are selected for power is a problem, the experience of being in power makes things worse: Powerful people tend to lose their inhibitions. Being “drunk with power” is an apt description. Increase people’s sense of feeling powerful and they won’t care as much what others think of them. They’ll become less effective at reading people because they’ll feel less of a need to empathize with others. They’ll start to feel as if the rules don’t apply to them. p. 157 Think of all of the politicians who advocated widespread mask-wearing and social isolation during the pandemic and then were found mask-less in social settings. “How can we better choose leaders and how can we limit the worst tendencies of people who obtain power?” Klaas turns from diagnosis to prescription. How can we better choose leaders and how can we limit the worst tendencies of people who obtain power? One way to select leaders who are not worse than normal relative to the population would be to choose them randomly. Klaas sees this process, known as sortition, as impractical for choosing officials. But he does think that it would work for creating an advisory board. When a leader is faced with a decision, the advisory board would be consulted: Elected officials would be under no obligation to follow this advice, but the wisdom of the randomly selected crowd would be visible to everyone. If politicians had a different view, they’d at least have to explain why they were deviating from the assembly’s proposed solution. p. 190 I think that this would be beneficial to the extent that the only reason that leaders differ from the general public in their views is that leaders are corrupted by power. But I am afraid that the general public has its own dangerous biases—childish economic views, for example—that could be at least as problematic. Klaas says that we could do more to alleviate two factors that corrupt leaders. One is that they become too remote from the people that they lead. When they lose empathy, leaders make cruel decisions. Another factor is a sense of invulnerability. All of us behave more judiciously when we are watched. When leaders claim the privilege of making policy in secret, they are more likely to abuse power. Klaas argues that we should make sure that leaders cannot evade scrutiny: If we’re going to watch people, we can focus on those at the top who do the real damage, not the rank and file. p. 246 Klaas uses research to justify both this diagnosis and his prescriptions. But I thought that he occasionally applies too much scientific veneer. For instance, he writes: Psychological distance is therefore a dilemma that can be solved by what social scientists call a Goldilocks solution. p. 218 Klaas means that a leader can make bad decisions by being too empathetic with others as well as by being insufficiently empathetic. Klaas could have made this point without trying to make it sound as if he dipped into a deep well of social science and retrieved a profoundly original concept. The problem that Klaas is trying to address in Corruptible is a challenging one. There is no perfect system for selecting leaders or for ensuring that they use power judiciously. For more on these topics, see Arnold Kling on Knowledge, Power, and Unchecked and Unbalanced. EconTalk. Corruption, by François Melese in the Concise Encyclopedia of Economics “Absolute Power” in the Cyclopædia of Political Science, Political Economy, and the Political History of the United States “How the State Has Grown to Be the Monster We Know: Bertrand de Jouvenel’s On Power,” by Pierre Lemiuex, Library of Economics and Liberty, July 1, 2019. For example, I think that the reforms that have made American politics more democratic in recent decades have actually made things worse. I think that one of the better presidents during the last 100 years was Dwight Eisenhower. He did not campaign for his party’s nomination. Instead, he was drafted by party leaders. Today, in order to win a nomination, a candidate needs to work much harder to get it. To go through the process, one really has to crave power. There is room for much more thought in this area. Klaas has contributed some provocative ideas. Footnotes [1] Klaas, Brian, Corruptible: Who Gets Power and How It Changes Us. Scribner, November, 2021. [2] From Letter I. of the Acton-Creighton Correspondence, available at the Online Library of Liberty. *Arnold Kling has a Ph.D. in economics from the Massachusetts Institute of Technology. He is the author of several books, including Crisis of Abundance: Rethinking How We Pay for Health Care; Invisible Wealth: The Hidden Story of How Markets Work; Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy; and Specialization and Trade: A Re-introduction to Economics. He contributed to EconLog from January 2003 through August 2012. Read more of what Arnold Kling’s been reading. For more book reviews and articles by Arnold Kling, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

Many people think schools are no place for teaching character. Psychologist Angela Duckworth of the University of Pennsylvania and founder of Character Lab, disagrees. She talks with EconTalk’s Russ Roberts about the implicit curriculum for character, the critical role early education plays in shaping our adult values, and why the Marshmallow Test doesn’t determine our destiny. […] The post Angela Duckworth on Character appeared first on Econlib.

Harvard, Yale, and Princeton are three of the richest universities on the planet. Harvard has an endowment of $53.2 billion dollars as of 2021. Yale has an endowment of $42.3 billion dollars, and Princeton has $37.7 billion in the bank. Despite being flush with cash and consistently breaking records for the lowest acceptance rates ever, these institutions do not seem interested in expanding enrollment, or providing more people access to an elite education.  Each of these universities have a checkered history of racism. Harvard’s law school can trace its origins to slave owners; Yale was founded by a slave trader; and Princeton’s first nine presidents owned slaves, in addition to penning letters describing its complicity in systemic racism. It seems clear that elite institutions have played a role in laundering racism, and have projected their moral failings onto everyone else. These endowments are maintained by wealthy people who pass their share of the tax burden onto people significantly less affluent. For instance, more than half of New Haven’s jurisdiction is non-taxable. Public services cost money, and the reduction of the tax base shifts the cost away from the wealthy to poor inner-city New Haven-ites. Yale has engaged in a crusade involving lawsuits and lobbying to prevent paying twenty-six times more in taxes than what they currently do. Princeton has also been caught in the tax hustle. In 2016, it ended up paying more than $18 million to settle a case when residents noticed a huge jump in their property tax bill and asked why. This doesn’t even get into the way that elite colleges receive exemptions from federal taxes, massive public research grants, and tax-free capital endowments.  Jordan Weissmann of Slate points out “normal hedge funds have to pay taxes on their earnings. Because it’s a nonprofit, Harvard doesn’t. And since bestowing tax exeuniversitymptions is the same as spending cash from the government’s perspective, that means the American public effectively subsidizes Harvard’s moneymaking engine.” Historically, elite schools became elite by excluding the undesirables, in effect, creating wealthy social networks. A recent study by Raj Chetty, John Friedman, Emmanuel Saez, Nicholas Turner, and Danny Yagan adds that the idea of elite higher education as an engine for upward mobility is wrong. Instead, top universities are largely closed to the poor and primarily help well-off students remain well-off. Instead of continuing to subsidize institutions that manufacture ‘prestige’ out of privilege, we should tax them.  These taxes need not be destructive. In fact, taxing endowments and property may remove inefficiencies in the market and appear to be Kaldor-Hicks efficient. Insofar as a property tax is a way of putting a price on land usage, providing tax exemptions to universities encourages them to use more land than would be socially optimal. In effect, raising the marginal cost of land for universities may decrease the marginal cost for others. Taxing the gains of endowments beyond a certain point may encourage endowments to focus more of their efforts on providing services for students by increasing the price of saving. Conversations about reparations often center around the idea of moral culpability and rectifiability. Who’s at fault? Who benefits? The rent-seeking structure of America’s elite universities and their history of racism makes their culpability clear. At the very least, elite colleges no longer deserve special treatment, and certain forms of taxation may be welfare maximizing.  One thing better than giving back is paying your fair share. The money this raises can be reallocated to the communities surrounding these elite universities, many of which are in shambles. New Haven’s largest zip code is 46.05% Black. Philadelphia is 44% black. Giving money back to its rightful owners divests the wealthy of unfair advantages, while giving the city and by extension, its residents the ability to decide where the money ought to go.   (0 COMMENTS)

This article caught my eye: Sen. Lindsey Graham, R-S.C., was rebuked by lawmakers from across the political spectrum after calling for the assassination of Russian President Vladimir Putin. “Is there a Brutus in Russia?” asked Graham via Twitter Thursday evening. “Is there a more successful Colonel Stauffenberg in the Russian military? The only way this ends is for somebody in Russia to take this guy out. You would be doing your country — and the world — a great service.” I understand why governments traditionally refrain from trying to assassinate the leaders of enemy nations—they fear retaliation. Is that a good reason? I’ve never given the issue much thought. I suppose it’s what Tyler Cowen would call a “game theory problem”.  Interestingly, Graham is not suggesting that the West try to assassinate Putin, rather he wants their the Russian people to do so.  (And then there is this. Ouch!!) David Henderson recently did a post expressing concern about the way that war can hurt the innocent: An old saying goes “Truth is the first casualty in war.” I’m not so sure. I think I’ve got a contender for the first casualty that’s either ahead of truth or tied with truth: rule of law. A basic rule of law principle is that governments don’t violate the rights of innocent people. But various governments around the world, including the U.S. government, seem to be relishing the chance to go after people in Russia who are thought to support Putin, even if they have violated no law. My views on war are probably not all that different from David’s view, but I don’t get there using the concept of “innocence”. (After all, I’m a utilitarian.)  For instance, I wouldn’t object to characterizing the Japanese-Americans who placed in concentration camps as “innocent”. But I’d say the same about 18-year old Japanese boys drafted into their army to fight the US.  And what do we make of ordinary German citizens who voted for Hitler, or Russians who voted for Putin?  How about those who did so enthusiastically, specifically supporting their militarist rhetoric?  I think it’s possible to view them as not being completely “innocent”, and yet also not deserving of being killed just because they exercised poor judgment in the voting booth.  I’ve exercised poor judgment in the voting booth.  Overall, I view an 18-year old draftee that is ignorant of politics as being more innocent than a 40-year old mother of three who voted for Hitler.  But that’s just me. The US policy during wartime is to kill lots of young soldiers drafted into the enemy army, but we don’t generally try to kill the leaders who made the decision to murder thousands or even millions of people. And make no mistake; decisions such as the Japanese invasion of China and the Russian invasion of Ukraine clearly amount to mass murder. (Some US actions might also amount to mass murder, but the situations have generally been somewhat more ambiguous.) So where does that leave me? My utilitarian framework leads me to reject “innocence” as a useful tool for making decisions in wartime. But war is so complex that I don’t know exactly what the correct (utilitarian) policy would be. Criminal justice analogies only go so far. We can all agree that it’s wrong to take away someone’s freedom. But we also agree that if a person murders someone else, it is appropriate to take away their freedom, placing them in prison. Similarly, we can all agree that one country should not invade and annex its peaceful neighbor. But if it does, how do we react? Put the enemy leader in prison? We cannot capture the foreign leader unless we win the war—which means killing lots of innocent people (with bombs) and economically hurting many other innocent people (with sanctions).  Unfortunately, war is so complex that even if we could agree that utilitarianism is the right criterion for making foreign policy decisions, we have little ability to predict the results of our actions.  So I have a great deal of sympathy for those who throw up their hands and advocate strict moral rules.  Indeed, I’ve previously endorsed “rules utilitarian” approaches such as our Constitution’s Bill of Rights. War is so evil that we should do almost everything possible to prevent it from occurring. This is why I’m such a strong supporter of NATO. A mutual defense pact encompassing most of the developed world, including the world’s most powerful military, is a very tough nut to crack. Deterring war is better than fighting it. We should do whatever we can to prevent war from occurring in the first place–and mutual defense pacts are one way of doing so. When war does break out, the victims won’t be the mass murderers; it will be the average people that suffer. To summarize, I’d love to avoid punishing the innocent; I just don’t see how the good guys can win a war without doing so.  At the same time, let’s not lose sight of the fact that people in enemy countries are just as human as we are.  The people that died at Hiroshima back in 1945 were just as deserving of life as an equal number of Americans.  Unfortunately, most people don’t look at things that way.  They find it easier to demonize the “other”.  Indeed, that’s a major reason why we have wars. PS.  Some people say, “I don’t care about Ukraine”.  That reminds me of Trotsky’s remark: You may not be interested in war, but war is interested in you. (0 COMMENTS)

I do. I remember the rate of inflation rising dramatically. I recall people offering these explanations:1. A Soviet crop failure that caused global wheat prices to soar.2. A war in the Middle East that caused a global oil price shock.3. Too much fiscal stimulus during the previous year.None of these were the actual cause of high inflation. The real problem was nominal—easy money. Nominal GDP shot up at a rate of 11.4% in 1973. While real GDP also grew at a relatively fast pace, high inflation is almost inevitable in a year with 11.4% NGDP growth.BTW, we don’t yet have NGDP growth data for 2022, but the most recent 4 quarter growth rate is 11.8%.   I’m certainly not predicting 1970s-style inflation for the 2020s, but the Fed needs to get its act in gear.  Saying, “it’s just supply shocks” doesn’t address the excessive NGDP growth. PS.  The Datsun in the picture above brings back memories.  I recall that almost everyone in America thought the company’s executives were nuts when Nissan changed the name of their US exports to that of the parent company.  I still think that.  Datsun sounds way better to an English ear. (0 COMMENTS)

In my most recent Defining Ideas article, “Let Freedom Rein in Big Tech,” I made a case against the kind of regulation of Big Tech that many on the right favor. In that article, I promised to lay out the problems with some of the regulations of Big Tech that many on the left favor. One such set of regulations is in the American Innovation and Choice Online Act (AICO), sponsored by Senator Amy Klobuchar (D-Minnesota). My further research surprised me. I had thought that this was a bill favored mainly by the left. But it seems to have populist anti-big-business support from both left and right. Five of the bill’s co-sponsors are Democrats and six are Republicans. That makes analyzing the bill more, not less, important. The fact that the words “innovation” and “choice” are in the bill’s title might suggest that the bill’s sponsors think those are good things. But what the bill would actually do, if implemented, is severely restrict innovation and choice when those innovations are undertaken by the Big Tech firms that are targets of the bill. Just as antitrust laws in the past seemed more designed to protect competitors rather than consumers, so with AICO. Moreover, what the proponents seem not to recognize is that innovation often occurs in unpredictable ways and that the firm with market power today is often, ten years later, the firm that has been displaced by innovative competitors. This is from David R. Henderson, “A Populist Attack on Big Tech,” Defining Ideas, March 3, 2022. I hadn’t realized until  I started to look into AICO how bipartisan it is. Another excerpt: AICO defines a “covered platform” as one that has “at least 50,000,000 United States–based monthly active users on the online platform” or “has at least 100,000 United States–based monthly active business users on the online platform.” It must also have net annual sales or a market capitalization greater than $550 billion. Why $550 billion? The answer is telling. Originally, the cutoff in the bill was $600 billion. But on February 8, 2022, the market capitalization of Meta, owner of Facebook, fell below $600 billion for the first time since May 2020. CNBC writer Lauren Feiner thought at the time that the lower market value could help Meta avoid being regulated under AICO. But no such luck. Senator Klobuchar quickly revised the bill to make the threshold $550 billion, which was below, and is still below, Meta’s market cap. If there was ever any doubt as to one of her targets, Klobuchar’s revision of the bill removed that doubt. I also dig into the “robber baron” issue. Read the whole thing. (0 COMMENTS)

Vladimir Putin, the Russian autocrat, repeats an old protectionist canard that few economists would admit in its nakedness after David Hume and Adam Smith studied the matter in the 18th-century. We have often heard remnants of the same discarded intuition from Washington, especially over the past half-dozen years. According to the Financial Times (“Russian Forces Seize Ukrainian Nuclear Plant After Fire,” March 3, 2022), Putin acknowledged that punitive sanctions imposed by Western government were harming his country, but that they (“we“) would ultimately benefit: In the end, we will only gain advantages from this, since . . . we will acquire additional skills. In other words, since protectionism, imposed by one’s friendly local government or by a foreign one, forces some degree of autarky on people would would otherwise trade, the latter benefit because they will have to eschew some division of labor and learn to do more things by themselves. This intuition is false. If it were true, individuals in any town would benefit from being forbidden to trade with individuals of other towns, and mutatis mutandis for individuals in every neighborhood, every street, and every house. Ultimately, following that logic, every individual should be banned from exchanging with any other individual. Or, to use a “revealed preference” argument (as economist say): if an individual, free to either make a trade or decline, chooses to trade, he thereby reveals that he evaluates the net benefit for him to be higher than the net benefit of not trading. This is a powerful argument that only an elitist or a paternalist can easily counter. (0 COMMENTS)

An old saying goes “Truth is the first casualty in war.” I’m not so sure. I think I’ve got a contender for the first casualty that’s either ahead of truth or tied with truth: rule of law. A basic rule of law principle is that governments don’t violate the rights of innocent people. But various governments around the world, including the U.S. government, seem to be relishing the chance to go after people in the Soviet Union who are thought to support Putin, even if they have violated no law. In his State of the Union address on Tuesday night, President Biden said: Tonight, I say to the Russian oligarchs and the corrupt leaders who bilked billions of dollars off this violent regime: no more. The United States Department of Justice is assembling a dedicated task force to go after the crimes of the Russian oligarchs. We’re joining with European allies to find and seize their yachts, their luxury apartments, their private jets. We are coming for your ill-begotten gains. Hold on. If you’re going after crimes, you should show that there is a crime before you take what you claim are the proceeds of the crime. Make your charges, take them to court, and then make your case. Until then, hands off their gains. Note 1: It looks as if the feds are going to use civil asset forfeiture to go after the assets. That’s just as contrary to rule of law, properly understood, for foreigners as it is for the fed’s many domestic victims. I give money to the Institute for Justice due, in part, to the fact that they fight back against asset forfeiture. Note 2: Calling them “oligarchs” proves nothing. The picture above is of a yacht owned by a company linked to Igor Sechin and seized by the French government. Postscript: I see that Tyler Cowen agrees with me. Good for him.   (0 COMMENTS)

I don’t remember meeting Professor Paul Cantor, but I read him voraciously, I admired him greatly, and I corresponded with him in the context of an upcoming collection of essays. I was shocked in learning that he died on February 26. Cantor was an accomplished literary scholar who, as David Gordon wrote in an obituary, “attended Ludwig von Mises’s seminar while he was in high school, and he had a lifelong interest in Austrian economics”. Such an interest in Austrian economics brought him to be that rare thing: an intellectual in the humanities, even more- a literary critic- who had some sympathy for capitalism. At one level, this sympathy emerged in the very fact that he was not a snob: together with his Shakespeare studies, he cultivated an interest in popular culture that he understood as a living thing, and sometimes a beautiful thing too. He wrote extensively on the matter, including his recent book The Invisible Hand in Popular Culture: Liberty vs. Authority in American Film and TV (2012), where you can find essays on John Ford and Martin Scorsese’s The Aviator but also on South Park and X-Files. Cantor’s essay on The Aviator (to which he had prefixed, in epigraph, a quote from Ludwig von Mises: “the first thing a genius needs is to breathe free air”) is one of my favourites. In that movie, Scorsese portrays Howard Hughes as “visionary and creative, even heroic” and celebrates his “perfectionism” as a businessman. Wrote Cantor: Precisely because the world does not satisfy him, Hughes is always out to change it and improve it. His obsessive perfectionism continually drives him to new heights of achievement. He wants the perfect motion picture, the perfect airplane, and even the perfect woman, and in each case he keeps on holding and remoulding reality to fit his vinery expectations. From the movie we take away the idea that “the thin line between madness and genius … cannot be drawn clearly,” but such a genius is clearly, and beautifully, identified with entrepreneurial activity. In Cantor’s work, it was quite evident that he had in mind the way in which Austrian economists try to understand entrepreneurship: besides the references to Mises and Hayek, it was his very description of the entrepreneurial role which smells of that tradition. Cantor’s perhaps most famous book, insofar as his work on pop culture is concerned, is perhaps Gilligan Unbound: Pop Culture in the Age of Globalization (2003). In this book he deals with four American shows (Gilligan’s Island, Star Trek, The Simpsons, and The X-Files) and reads through them an evolution of the American understanding of government and political power. I read the book ages ago (when it came out!), and I still remember the brilliant dedication; the book is dedicated to one of Cantor’s VCR players (younger readers may Google what such things were), which passed away in the attempt to record a Star Trek marathon on the sci-fi channel. In that work, if I do remember correctly, Cantor thought that the American audience was getting more skeptical toward government, as X-Files was cultivating such a skepticism. I wonder if such a trend, however broadly defined, still holds or not (I guess not). It is customary to lament, at libertarian gatherings, that we are relatively unsuccessful, as a movement, because we do not pay enough attention to pop culture and lack people who could master it. Well, such criticisms may be correct but scholars or political activists cannot turn themselves into novelists or movie makers only because they wish so, as these professions require very different talents. But scholars can take pop culture seriously and seriously analyse it. Paul Cantor did that, and I hope many will follow his example. (0 COMMENTS)