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Artificially low rates? Yes, finally.

During the 2010s, I was frequently annoyed by claims that the Fed was “artificially” holding interest rates below their equilibrium level. If interest rates actually were being held below equilibrium for over a decade, then inflation would have quickly risen to a very high level.In response, some people claimed that through some sort of inexplicable process the inflation that would normally result from easy money was showing up in asset price inflation. And yet I know of no mechanism by which easy money could inflate asset prices without inflating the prices of goods and services. This was a classic example of ad hoc theorizing—a conclusion in search of a model. Given enough time, however, almost any macroeconomic claim will come true.  Today, Fed policy is indeed holding interest rates below equilibrium.  I don’t base that claim on the current high rate of inflation (which in principle might be due to supply shocks), rather the evidence for excessively expansionary monetary policy comes from the recent surge in nominal GDP, which most certainly is not caused by supply shocks. Nominal GDP growth is already well above the pre-Covid trend line, and the consensus forecast of economists is that NGDP will continue growing at over 6% over the next 12 months.  That sort of growth in nominal spending is not even close to being consistent with the Fed’s goal of 2% inflation.  In that sort of macroeconomic environment, it is difficult to understand how the Fed can justify its zero interest rate policy.  Just as in late 2008, I’m at a loss to understand what the Fed is doing. BTW, David Beckworth directed me to this tweet: I find it dispiriting that after everything we’ve experienced since 2008, the Fed still doesn’t understand that they need to focus on NGDP.  Of course there’s “one damn thing after another”, just as there was one damn thing after another in the 1970s, when NGDP was growing at 11%/year.  With spending growth that rapid, excessive inflation is inevitable.  If it’s not oil and cars, it will be rent and restaurant meals, or health care and food.  Inflation will always show up when NGDP growth is excessive, it’s just a question of where.  Why doesn’t the Fed see that?  Are they not paying attention to NGDP?   (0 COMMENTS)

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Constraints on the Feds

Regular reader Kevin Corcoran sent me the following. I’m posting with his permission and then I’ll add my own thoughts. Here’s Kevin: While I was out on vacation last week, I had the opportunity to try some new craft beers. In general, this is a wonderful time to be a person who enjoys beer–the varieties of craft beer and number of local breweries have skyrocketed over the last few years. But, because I’m me, I couldn’t just enjoy some of the local offerings without having thoughts about the nature of government and freedom, and the following thought occurred to me. Isn’t the 18th amendment remarkable? You might take that to mean I think it’s remarkable that it was possible to get the support needed to pass a constitutional amendment banning alcoholic beverages in the United States–and that certainly is remarkable in its own right. But I have a different take on it. It’s remarkable because it illustrates the degree to which lawmakers used to be constrained by the constitution, and how little of that constraint is present today. Madison once described how the Constitution would limit the power of the federal government with these words: “The powers delegated by the proposed Constitution to the federal government, are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which the last power of taxation will, for the most part, be connected.” And, for a while at least, the powers of the federal government really were few and defined and focused in the way Madison advocated. That was enough the case that if the federal government wanted to ban the use of a mind-altering drug like alcohol, it lacked the authority to do so, because controlling what substances people were able to ingest was not among the “few and defined” powers enumerated in Article I Section 8 of the Constitution. For the federal government to pass such a law, and for that law to be consistent with the Constitution, the Constitution would need to be amended – and it was. These days, instead of amending the Constitution to allow for whatever new powers are believed should be given to the federal government, we seem to have fallen into a system where the courts interpret the enumerated powers in the Constitution so broadly that limitations have all but ceased to exist in practice. This is perhaps most infamous in the Wickard v. Filburn case, where the Supreme Court interpreted the federal government’s power to regulate interstate commerce in Article I, Section 8, Clause 3 so broadly that a person growing his own food to feed his own animals, and who did not sell that food to anyone, across state lines or otherwise, was still engaging in an act of “interstate commerce” by doing so, and under the authority of the federal government. With court rulings broadening federal authority so much, why spend the time on persuasion and debate to build the broad consensus and support necessary to amend the Constitution anymore? It used to be that if the federal government wanted to control alcoholic beverages, the Constitution needed to be amended to allow it. Now, it’s just taken as given that of course the federal government has the authority to control just about every aspect of what people can consume, food, drug, or otherwise–no Constitutional adjustment needed. I prefer the old system. Alas, I don’t know how to get back there from here. His thoughts led to 4 of my own. First, while I share Madison’s view of the U.S. Constitution, not everyone at the time, even those who put it together, did. As my economic historian friend Jeff Hummel put it to me once, the U.S. Constitution was a compromise. It was the most statist the statists could get. And it was the most pro-limited government the limited government people could get. In short, it was an equilibrium. That’s how to understand vague things like the first few words of Article I, Section 8: The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; (italics added). Second, notice how selective the Madison view was even before Prohibition. The Harrison Act, which regulated drugs such as cocaine and opium, was passed in 1914. The players who were victorious didn’t seem to think that they needed a Constitutional amendment to do so. Although, to be fair, I should note that they did it in the form of a tax, which Congress had the power to do. Third, back to Madison’s, Corcoran’s, and my view, I’ve often wondered how so many Constitutional lawyers, even those who seem to share Madison’s view, can justify the federal government having any role in immigration. I’ve never received a satisfactory answer. A few years ago, I was at a conference in which I had a chance to ask a question about that. I can’t tell you the name of the law professor because the proceeds were conducted under the Chatham House rule. I asked, “Where in the U.S. Constitution do you find support for either the President or Congress having a role in immigration law?” I was shocked by his answer because he didn’t even try to answer. Instead, he painted a picture of what it would be like to have no federal role in immigration. Whether or not his dire picture was accurate, he seemed to think that was grounds enough for the federal role. Because of the rules at the time, I didn’t get a follow up. Fourth, Kevin’s thoughts reminded me of something I read about Biden in the summer of 2008, shortly after Obama chose him as his running mate, and how it contrasted with FDR. A reporter reported that because Biden regularly took Amtrak, he would almost certainly push to increase the subsidy for Amtrak. The reporter wrote this matter of factly, as if such a conclusion were obvious. It was obvious, but only because of the weakening of the belief in limited government. Contrast this with Franklin D. Roosevelt, who was not exactly a believer in limited government. FDR had polio, starting in 1921. He became president in 1933 and was president until his death in 1945. He founded the March of Dimes in 1938 to help people with polio. Think about that. While being the most powerful U.S. president in history up until that point, he founded a voluntary organization to go after polio. He didn’t start a government agency or push for government funding to do so. And that was probably as unremarkable then as Biden’s purported favoring of further subsidizing his own form of transportation was unremarkable 70 years later.   (0 COMMENTS)

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No sanctions without globalization

The war in Ukraine has led some pundits to declare the end of globalization. We heard that after 9/11, after the Great Recession, after the US/China trade war, and again after Covid, and none of those predictions have panned out. Ukraine will likely be no different, as the threat of war actually makes the argument for globalization stronger. There are two valid arguments for sanctions.  First, denying money and material to an enemy nation can reduce their ability to wage war.  Second, the threat of sanctions makes countries less likely to “go rogue”.   In general, I am rather skeptical of the efficacy of sanctions.  I believe they are used far too often.  And yet even I would not have favored allowing US firms to sell steel and oil to Germany and Japan during WWII.  I don’t have strong views on what sanctions are appropriate for Russia today, except that the case for sanctions against Russia is stronger than for almost any other situation since WWII.   But sanctions only work when there is globalization.  If a country is an autarky, i.e., relying solely on domestic production, then sanctions are ineffective.   People say, “Obviously globalization doesn’t work, as we still have bad things happen in the world.”  Yes, the advantages of globalization have been oversold.  (Recall the McDonald’s test.)  But what is the counterfactual?  Suppose we end globalization and each country becomes as autarkic as North Korea.  Does that make the world more peaceful or more violent? Our best hope for world peace is to enmesh every country so deeply in a web of interdependence with its neighbors that even our dimwitted leaders will be able to see the negative sum nature of war.  Globalization may not prevent war, but it makes war less likely at the margin.  And if war does break out, economic interdependence gives us a weapon to use in place of violence. Globalization also makes the world a richer place.  Economic development doesn’t guarantee peace, but greater wealth does make countries more peaceful, on average.  They have more to lose from war. (0 COMMENTS)

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“Where did we go wrong? Is it our fault?”

A moving story by the Financial Times Berlin Bureau Chief, Guy Chazan, allows us to see a hidden kind of individual tragedies resulting from Putin’s invasion of Ukraine: its cost to ordinary Russians (“A message from Moscow: ‘It’s like I’m in a nightmare. And I can’t wake up,’” March 11, 2022): A week earlier, Russia had invaded Ukraine, unleashing the largest military assault on a European country since the second world war. The west responded with a fusillade of sanctions to isolate Russia and cripple its economy. Lena and her friends, a band of liberal intellectuals, found their lives turned upside down. … “I grew up in the Soviet Union and only ever wanted to live a normal life—to work . . . travel, drink delicious wine,” Lena wrote, in the 150-word message, bashed out on Facebook. “God knows, these weren’t exactly wild aspirations. But even they have now been taken from me . . . I watch, rigid with fear and shame, as my world collapses and rockets land on Kyiv . . . Where did we go wrong? Is it our fault? I just don’t know.” … She travelled widely, expanding her world, which now seems to be narrowing again to a vanishing point. “It’s pure Orwell,” she wrote. The journalist also writes about another Russian friend of his, Dima, who fled to Western Europe but whose Moscow business is now likely to go bankrupt: “I’ve lost everything and have to start my life here from scratch,” he wrote to me. Dima says he’s in favour of sanctions and is prepared to pay a personal price to see Putin punished. But he adds that they’re a double-edged sword, causing the most hurt for the 20 per cent of Russians who were always against Putin. One lesson is indeed that economic sanctions—Western governments prohibiting their own citizens from trading, directly or indirectly, with Russians—are a double-edge sword. A second lesson, lies in Lena’s question, “Where did we go wrong? Is it our fault?” Assigning any fault or blame to powerless ordinary individuals is not warranted, but we can answer the question of where “we” went wrong. “We,” in both Russia and the West, went wrong in not taking seriously enough the danger of unlimited political power as it stands in Russia and as it has been growing in the West for more than a century. Such a classical-liberal and individualist approach helps us focus on individuals behind the collectives such as “Russia” or “the West.” The individualist approach may also help answer the question: Isn’t the threat of admitting Ukraine in NATO or establishing closer relations between Ukraine and the West the main cause of Putin’s invasion? University of Chicago political scientist John Mearsheimer defends this argument in The Economist. It is a strange thesis that organizing the defense of a group of individuals can be viewed as an aggressive activity. It makes some sense in a world paved with powerful Leviathans or Leviathans-to-be—powerful enough, for example, to tightly control with whom their subjects exchange and how they spend their money. If the free world was populated by humble classical-liberal states, even assuming they enter into military alliances, defensive activities could not so easily be viewed as aggressions. We have to somehow escape the logic of state power and war, but it is not easy to go there from here. (0 COMMENTS)

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Quinn Slobodian and some unlikely admirers of the Mont Pelerin Society

This article by historian Quinn Slobodian is fascinating. Slobodian tells the story of the Hewlett Foundation’s attempt to “reverse-engineer the neoliberal project and replace it with a new economic paradigm”. Slobodian refers to this memo by Larry Kramer that triggered a substantial donation by the Hewlett Foundation (all together, $60 million) to “remake the intellectual paradigm” to go “beyond neoliberalism”. The project was taken, Slobodian argues, from the neoliberal playbook, in particular from F. A. Hayek‘s aim, which reverberated in the work of many classical liberal think tanks, to persuade “professional secondhand dealers in ideas” of the virtues of the market economy, from high school teachers to journalists. The Hewlett Foundation grant, Slobodian reports, has helped in developing a network of committed anti-neoliberals. The story he tells is about the influence of a movement, and in particular of a certain number of scholars who happened to contribute to a symposium and to a special issue of the Democracy journal and who, in a matter of a couple of years, ended up in government: One dealer in the ideas to oppose neoliberalism was this very journal. In spring 2019, a special issue of Democracy supported by the Hewlett Foundation, assembled some of the brightest lights in the academic and policy world feeling out the contours of a post-neoliberal project…. Among the contributors in 2019 were Heather Boushey, the president of the Washington Center for Equitable Growth. She concentrated on the academic discipline of economics where she saw a hopeful shift from theory to empiricism in recent years. Another was law professor K. Sabeel Rahman, who laid out the need to reclaim the language of freedom from neoliberals as “emancipation from conditions of structural inequality and subordination.” Yet another was Felicia Wong, who dwelled on the need to build “post-neoliberal” institutions, imagining a “pro-public equivalent of the Chamber of Commerce.” . The director of Hewlett’s Beyond Neoliberalism initiative, Jennifer Harris, named some of those institutions in her programmatic piece. They included Demos (directed by Rahman), the Roosevelt Institute (directed by Wong), and the Open Markets institute (praised by Chris Hughes, another contributor to the special issue, in his call to “break up Facebook”). … Less than two years from the publication of the special issue, the ambitious, if vague, ruminations of the special issue came down to earth as all of the authors named above took on roles in the incoming Biden Administration. Boushey was a member of the new Council of Economic Advisors. Rahman was Senior Counselor in the Office of Information and Regulatory Affairs. Wong was the U.S. representative on the G7 Economic Resilience Panel. And Harris became a member of both the National Security Council and the National Economic Council. Lina Khan, a veteran of the Open Markets Institute and founding member of the Law and Political Economic Project at Yale, itself funded by a $600,000 Hewlett grant, was the director of the Federal Trade Commission. This was an astonishing success, a seizure of some of the commanding heights of policymaking by a cohort defining their project self-consciously as transcending neoliberalism. The second part of Slobodian’s article is devoted to the changes that this coterie of revolutionaries has already brought back and the areas in which they are running behind. It is an interesting, “in motion” history of an intellectual movement – and I have learned a lot from his piece. I am more dubious that the Mont Pelerin Society can be an unwilling forerunner of this brilliant operation of political entrism. For one thing, whatever success classical liberals had in influencing public policy in the 1980s, it took more than 30 years from the foundation of the Mont Pelerin Society to run into friendly politicians. Also, it would be hard to argue that it was the leaders (intellectual or organizational) of the classical liberal movement who ended up in Parliament, in government, or in regulatory bodies. The major classical liberal theorists were, well, theorists: think Mises and Hayek but also Buchanan, Stigler, or Coase. Milton Friedman became a very popular figure because of his talents in popularizing free-market ideas – yet you can compare him with Paul Krugman, as they’re both highly influential public intellectuals, but not to anybody who actually took a government post. Founders and managers of free-market think tanks often had a brief experience in government before becoming think-tankers (I think of Chris De Muth). Sometimes they were recognized with honors by political leaders (Ralph Harris was raised to the peerage by Margaret Thatcher), but I cannot think of a major think tank leader who became a legislator or minister himself. If we can assume an intellectual in government carries her ideas with her, assessing the indirect influence of scholars and books is not that easy. We tend to think intellectual debates change policies, but how they do that is not crystal clear. For its critics, it is hard to accept the Mont Pelerin Society was (and is) a genuine intellectual association. Of course, Hayek and the other founders wanted to “do something” for liberalism to thrive again. But in part they really wanted to be in contact with one another (far more difficult in 1947 than in 2017), to be able to share ideas and discuss them among friends who would not be outraged by their mere sympathy for the free market, and eventually, yes, to sharpen their ideas in order to win more minds and hearts back to the liberal cause. They wanted to sharpen their arguments and improve their ideas, more than conspire and lobby for appointments (in politics or the academe). If you go by the “liberal playbook” Slobodian quotes, I am not sure you can consider Hayek’s endeavor so successful. MPS membership has grown over the years; we are about 700 now- not quite enough to rule the world. In the 1980s the Society had around 400 members, not quite enough to occupy the world’s universities. If you assess its influence on second-hand dealers in ideas, the overwhelming majority of journalists, not to mention high school teachers, were socialists even at the height of Reaganism and Thatcherism. True, thanks to MPS, free-market think tanks, and especially thanks to the better arguments for the free society developed through time, we went from “no free market journalists at all” to “some”. But still a minority. Also, the most effective ones (like Henry Hazlitt or, in England, Andrew Alexander) belong to a generation long gone. I think Hayek somehow grew more critical of his own strategy and later in life (in Law Legislation and Liberty and The Fatal Conceit, for example) came to consider the innate instincts and the cognitive biases which make for everybody, including intellectuals, so hard to understand, let alone to embrace, the notion of bottom-up, “spontaneous” orders, including the market economy. Critics of neoliberalism tend to read the Mont Pelerin Society as an attempt to establish cultural hegemony in society, somehow understanding Hayek through Gramscian lenses. Strategies to infiltrate institutions (academia, publishing houses, the judiciary) in order to sow the seeds of a change in the political order were used, for example, in Italy by the left, following Gramsci’s inspiration, with a certain success. The intellectual left is playing by its own playbook. By quoting Hayek and the Mont Pelerin Society, it pays them a paradoxical tribute, perhaps to fashion its own efforts as a form of brave intellectual resistance rather than a (highly successful, to be sure) attempt to drive the mainstream further left, played by esteemed members of that very mainstream. (0 COMMENTS)

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Maxine Clark on Building the Build-a-Bear Workshop

Stuff it, fluff it, stitch it, dress it: Build-a-Bear Founder and former CEO Maxine Clark built a retail-entertainment empire by letting people make their own furry friends. Two hundred million of them. What’s the secret to her success? Listen as she tells EconTalk’s Russ Roberts how she developed a customer-focused culture, why she sought to […] The post Maxine Clark on Building the Build-a-Bear Workshop appeared first on Econlib.

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James Watt: “Bringing the Treasures of the Abyss to the Summit of the Earth.”

In his opening speech at the recent 2021 United Nations Climate Change Conference (COP26) held in Glasgow, British Prime Minister Boris Johnson told politicians and activists they were meeting in the city where, 250 years before, James Watt “came up with a machine that was powered by steam that was produced by burning coal.” In Johnson’s take, Glasgow was the birthplace of the ticking “doomsday machine” that heroic eco-worriers, much like the (imaginary) Scotsman James Bond, had to defuse before it was too late. Some locals have also defamed Watt and his legacy. High ranking officials for the University of Glasgow thus tried to appease a few Extinction Rebellion activists dressed in modern clothing who had chained their necks to their institution’s gate. Instead of telling protesters none of these three things would have been possible without petroleum and coal, they reminded them that theirs was the first university in Scotland “to declare a Climate Emergency” and of their commitment to “the ambitious target of achieving net carbon neutrality by 2030.” One wonders how past generations of Britons who celebrated Watt and his machine would have reacted to this indictment. One can surmise that people raised in much harsher conditions would have little patience for well-to-do rebels looking for a cause. Perhaps the biggest substantive disagreement would be over calls for leaving carbon fuels in the ground in the name of social justice, for earlier generations often celebrated this development. A case in point is a moving tribute to Watt published shortly after his death by Sir Walter Scott. Mr. Watt of Birmingham (for it is there he conducted his most important work), readers were told, was the “man whose genius discovered the means of multiplying our national resources to a degree perhaps even beyond his own stupendous powers of calculation and combination.” He made it possible to bring the “treasures of the abyss to the summit of the earth” and give the “feeble arm of man the momentum of an Afrite.” From then on, man was able to command “manufactures to arise, as the rod of the prophet produced water in the desert.” It also afforded him the “means of dispensing with that time and tide which wait for no man,” and of “sailing without that wind which defied the commands and threats of Xerxes himself.” Watt was thus a “potent commander of the elements,” an “abridger of time and space,” a “magician, whose cloudy machinery has produced a change on the world, the effects of which, extraordinary as they are, are perhaps only now beginning to be felt.” He was also “not only the most profound man of science, the most successful combiner of powers and calculator of numbers as adapted to practical purposes,” the “most generally well-informed,” but also “one of the best and kindest of human beings.” In his 1840 treatise on the steam engine, the Irish scientist and political economist Dionysius Lardner praised the new technology for having “penetrated the crust of the earth, and drawn from beneath it boundless treasures of mineral wealth, which, without its aid, would have been rendered inaccessible.” It had also simultaneously “drawn up, in measureless quantity, the fuel on which its own life and activity depend.” Through the steam engine, coal was “made to spin, weave, dye, print and dress silks, cottons, woolens, and other cloths.” It made “paper, and print books upon it when made.” It “convert[ed] corn into flour” and “express[ed] oil from the olive, and wine from the grape.” It drew up “metal from the bowels of the earth; pound[ed] and smelt it, to melt and mould it; to forge it; to roll it, and to fashion it into every desirable form.” It transported “these manifold products of its own labour to the doors of those for whose convenience they are produced.” It carried “persons and good over the waters of rivers, lakes, seas, and oceans, in opposition alike to the natural difficulties of wind and water.” It carried the “wind-bound ship out of port” and placed it “on the open deep ready to commence her voyage.” It transported “over the surface of the deep persons and information, from town to town, and from country to country, with a speed as much exceeding that of the ordinary wind, as the ordinary wind exceeds that of a common pedestrian.” People who lived through these changes understood why the steam engine triumphed over water mills and windmills. The American economist Francis Wayland thus wrote in 1837 that water power was capable of “exerting great mechanical force” and was often “cheap [and] tolerably constant.” Unfortunately, it could only be used in “situations where it has been created by nature” and the best sites were often “at a considerable distance from the seaports whence the manufacturer derives his supplies” and exports the products, thus adding significant transportation costs to the price of manufactured goods. Water could also often not “be commanded in sufficient quantity.” Mill-seats often “suffer[ed] from the want of water” in “seasons of drought.” As a result, “a large number of the laborers must be unemployed, and a large portion of the expenses of the establishment must be incurred, without yielding any remuneration to the proprietor.” Water power was further liable to “dangers from inundation.” (Wayland could also have added freezing conditions and siltation to his list.) In the end then, costlier steam engines triumphed because they could be used “to create any required degree of mechanical force” while being “perfectly under human control.” Power could “be created in any place where fuel can be obtained,” be “used at will” in either stationary or locomotive applications and “be made to act with perfect regularity.” The Caribbean planter Thomas Kerr similarly observed in 1851 that “water power exists only in some favoured localities.” Although it was “economical, powerful, and easily regulated,” its supply was “often irregular, and, in seasons of drought, cut off either totally or partially.” It was therefore “liable to one of the same objections as wind power, viz., that it cannot always be made available.” The steam engine then was “far superior to any other motive power in economy, force, regularity of action, independence of all local influences which affect other motions, the perfect control under which it can be maintained, the ease with which it can be directed, and its readiness of adaptation to any purpose for which it may be required.” The waste steam was also “useful for many purposes in the manufactory, where elevated temperatures are necessary.” In his 1865 The Coal Question, the economist William Stanley Jevons similarly wrote that the water-wheel “possesses a natural tendency to uniformity of motion, even more perfect than that bestowed on the engine by Watt’s “governor.” It was therefore sometimes even preferred when a “very delicate machine requires to be driven at a perfectly constant rate.” Nothing could be “cheaper or better than water power” when an “abundant natural fall of water is at hand.” Unfortunately, the best sites had long been secured and many of the remaining ones (e.g., destructive mountain torrents, streams and rivers that often dried up, flat countries) were not conducive to manufacturing operations. Another problem was the necessity of “carrying the work to the power, not the power to the work.” This prevented the “concentration of works in one neighbourhood which is highly advantageous to the perfection of our mechanical system” while the “cost of conveying materials often overbalance[d] the cheapness of water power.” Even worse is that water power could never deliver the energy required by the United Kingdom, for at the time of his writing “steam power employed in factories” already exceeded “water power six-fold.” Jevons further observed that while some windmills were “powerful machines,” their intermittency meant that “in a long tract of calm weather the mines were drowned, and all the workmen thrown idle.” Thus, while the wind was free, the real costs of “these machines were very great.” Moreover, windmills only proved somewhat useful in “open and elevated situations” and “no possible concentration of windmills” could “supply the force required in large factories or iron works.” Another problem with today’s activists is that their single-minded emphasis on decarbonisation and net zero mandates the sacking of biodiversity on Earth, for arguably the greatest environmental benefit of the steam engine was that it started a process of substituting resources produced on the surface of the planet by others that came from below. Crucially, coal made great quantities of energy available from smaller volumes than biomass while alleviating crippling fuelwood and charcoal shortages. As Jevons observed, “forests of an extent two and a half times exceeding the whole area of the United Kingdom would be required to furnish even a theoretical equivalent to [the country’s] annual coal produce.” Coal solved this problem while sparing the landscape. The historical demographer and economic historian Edward Anthony Wrigley later argued that economic growth was ultimately made possible only when the organic economy – or the economy as it existed before the impact of the steam engine became significant – was able to break free from photosynthesis. This came “by gaining access to the products of photosynthesis stockpiled over a geological time span.” It was therefore the “steadily increasing use of coal as an energy source which provided the escape route.” The development of synthetic products out of coal tar also paved the way to drastically reduced overall demand for wild fauna such as whales (e.g., whale oil, baleen, perfume base), birds (e.g., feathers), elephants, polar bears, alligators and countless other wild animals (e.g., ivory, fur, skin); trees and other plants (e.g., lumber, firewood, charcoal, rubber, pulp, dyes, green manure); agricultural products (e.g., fats and fibers from livestock and crops, leather, dyes and pesticides from plants); work animals (e.g., horses, mules, oxen); and human labor in various forms (e.g., lumbering, weeding). In later years, refined petroleum products such as gasoline, diesel, kerosene and bunker fuel proved a superior alternative to coal in the transportation sector while natural gas proved preferable in electricity production and home heating. Unlike the ruinous and unreliable “renewable” energy transition currently being foisted on us through subsidies and mandates by the likes of Boris Johnson and COP attendees, these substitutions occurred spontaneously because they delivered numerous technical and economic advantages. For instance, refined petroleum products have a higher energy density than coal and subsequently helped give much greater range to ships and railroads while displacing early electric cars and trucks. Both petroleum products and natural gas burnt more cleanly and were easier to get out of the ground. They were also easier to handle, transport and store in a wide variety of applications. Coal burning was never perfect, but with its judicious use, Jevons noted “almost any feat is possible or easy.” Giving up on its power and versatility would have thrown humanity “back in the laborious poverty of earlier times.” The same can be said for petroleum and natural gas today. “Building back better” while ignoring the lessons of history will not make these realities go away. Pierre Desrochers, is Associate Professor of Geography, University of Toronto Mississauga. Joanna Szurmak, is Research Services and Liaison Librarian, University of Toronto Mississauga. (0 COMMENTS)

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That Awful Russian Oligarch

  The UK has imposed sanctions on Russian businessman Roman Abramovich, freezing his assets even after he vowed to sell off a major football club and donate the proceeds to victims of the war in Ukraine. The much-needed humanitarian aid is now in limbo amid a Western inquisition against all things Russian. This is from Kyle Anzalone and Will Porter, “UK Sanctions Russian Billionaire, Barring Him From Aiding Ukrainians,” Antiwar.com, March 10, 2022. Another excerpt: In announcing the sanctions, UK Foreign Secretary Liz Truss said “oligarchs and kleptocrats have no place in our economy or society,” and that their “close links to Putin” make them “complicit in his aggression.” “The blood of the Ukrainian people is on their hands. They should hang their heads in shame,” she added. However, Truss failed to explain how Abramovich is “complicit” in the Russian invasion. The industrialist – who also owns Millhouse Capital and holds a major stake in the steel and mining giant Evraz – has not endorsed the attack on Ukraine. In fact, in the press release announcing his plan to sell the team and create a charitable foundation for war victims, Abramovich appeared to sympathize with Ukrainians. Fortunately, Ms. Truss was not around to prevent Oskar Schindler from selling pots and pans to the Nazis. Note: I’m taking as given the idea that Abramovich is sincere in wanting to help Ukrainians. I could be wrong. But what I found interesting in researching this and finding a lot of denunciations of the guy is that no one who denounced him, at least no one that I could find, addressed the issue of what he planned to use the funds for. Their argument was no more complex than this: Abramovich had a relationship with Putin; Abramovich is rich; Putin probably helped make him rich; therefore we should freeze his assets even if he wants to use them to implicitly go against Putin. (0 COMMENTS)

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Your Favorite Episodes of 2021

For 2021, here are the top 10 episodes, which is actually 12. Number 10 was a three-way tie: Sebastian Junger on Freedom; Lamorna Ash on Dark, Salt, Clear; and Don Boudreaux on Buchanan. Number 9, Jason Riley on Race in America. Number 8, Tyler Cowen on the Pandemic, Revisited. Number 7, Dana Gioia on Learning, Poetry, and Studying with Miss Bishop. Number 6, Megan McArdle on Belonging, Home, and National Identity. Number 5, Mike Munger on Free Markets. Number 3, a two-way tie: Daniel Shoup on Parking; and Mike Munger’s second appearance in the top five, Michael Munger on Constitutions. And a tie at Number 1 for your favorite episode of 2021: Sam Quinones on Meth, Fentanyl and the Least of Us; and Rowan Jacobsen on Truffle Hound. I want to thank the 1,300 or so people who voted. Many thanks. –Russ Roberts (0 COMMENTS)

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The Promise of Bitcoin

It’s clear that governments can use financial censorship to squeeze worthy and unworthy targets alike for the time being, but it’s less clear if governments can maintain this power for much longer. The moment raises a pressing question for cryptocurrency enthusiasts: Does bitcoin solve this? Does a global, decentralized monetary system that nobody can manipulate or control take away the power of the state to use financial censorship as a weapon, for good or for ill? A surprisingly successful bitcoin-based crowdfunding campaign called “Honk Honk HODL,” which raised more than $1 million worth of bitcoin for the Canadian truckers, shed some additional light on that question. And the answer appears to be, “eventually, maybe, but there’s more work to be done.” This is from Zach Weissmueller, “The Canadian Government Couldn’t Stop Bitcoin,” Reason, March 11, 2022. Having never bought or sold Bitcoin or any other cryptocurrency, I don’t claim to understand all the ins and outs that Weissmueller discusses, but I kind of get them. The bottom line is that there is some reason for hoping that Bitcoin and other cryptocurrencies will protect us from some of governments’ worst assaults on our financial liberty. The whole thing is worth reading. (0 COMMENTS)

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