I recent read an excellent book on rationality and asset markets, entitled Rational Myopia: How Capital Markets Learn. When discussing a certain type of efficient market, the author (Kent Osband) makes the following observation: Even though traders compete vigorously against each other and share no information other than the bids that determine price, the market behaves like an optimally unified rational learner. I call this the Invisible Mind theorem. . . . However, capital markets are not fully Kelly-driven.  Suppose my research suggests that the fair price is E, while the market consensus sets a fair price for F.  Out of respect for the consensus, I might accord it a 1 – f chance of being correct.  This shaves my bet to a fraction f of full Kelly, which if applied consistently is known as fractional Kelly.  Fractional Kelly can be viewed as a type of herding.  While the term is often used pejoratively to suggest that people are too dumb or lazy to think for themselves, it is hard to fault some deference to the wisdom of the crowd. That got me thinking about the question of when we should defer to the crowd, and when we should think for ourselves.  My strong support for the Efficient Market Hypothesis, and more broadly the wisdom of crowds, makes me a contrarian within the economics profession.  I deny the existence of a bubble in the US housing market during 2006, or the NASDAQ in 2000.  Is there something oxymoronic about being a contrarian believer in the wisdom of crowds?  More broadly, when should we trust our own personal view and when should we trust the consensus view? Imagine the US government holds an auction for offshore drilling rights in a section of ocean off the coast of Louisiana.  Suppose you are one of ten companies bidding on the tract.  How much should you bid?  One answer would be to estimate the value of the drilling rights to your firm, and then bid that amount (or slightly less.)  But you also know that your bid doesn’t matter unless you win the auction, in which case your bid—i.e., your estimate of the value of the tract—would be higher than for any other bidder.  If you also believe in efficient markets, then conditional on winning the auction your firm is likely to overestimate the value of the drilling rights.  If oil firms are rational, they presumably factor in this “winner’s curse” and bid a fraction less than their estimate of the value of the drilling rights in order to offset the fact that if they win they will likely have overestimated the actual value.  Perhaps they could look at previous actions and estimate the difference between the typical winning bid and the typical average bid. In every single area of our lives we might want to assign a weight of f to our personal view of what is correct, and a weight of 1 – f to the consensus view.  But how do we determine f?  And how would this fraction vary between religious beliefs, political beliefs, scientific beliefs, estimates of asset values, and beliefs about economic policy issues?  A good place to start is with a famous remark by G.K. Chesterton: There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it. Suppose I read an article by a contrarian scientist that rejects the theory of evolution.  He raises some objections to evolution that seem quite persuasive to me.  I cannot think of any objection to his argument.  Should I accept the critique?  According to Chesterton’s Fence reasoning, the answer is a resounding NO!  Paradoxically, it would never be rational to accept this contrarian theory of the origin of species unless I could see what was wrong with it.  After all, I know that roughly 99% of scientists support the theory of evolution, in some form.  They presumably have reasons for rejecting these contrarian theories.  So what are those reasons?  If I don’t know, then I have no basis for accepting the heterodox scientist and rejecting the consensus.  I’m merely an outsider, with no expertise in science. People occasionally send me articles taking a contrarian stance on climate change.  I’d be much more impressed if they also sent me an article explaining why mainstream climatologists reject that contrarian take, and then why the mainstream climatologist’s critique of the contrarians is wrong.  In contrast, I am an expert on a few areas of economics. When I take a contrarian stance on a particular topic—as with my opposition to FDIC—I try to make sure that I understand why my views are contrarian.  Why do other economists disagree with me on FDIC?  It is only because I believe that I do understand their objection, that is, I understand why the conventional view tends to favor government deposit insurance, that am I willing to take a contrarian view.  [When I attended the University of Chicago in the late 1970s, I felt that we understood mainstream economics better than mainstream economists understood Chicago School economics, for essentially the same reason that Canadians understand the US better than Americans understand Canada.  We were in the minority.  (I don’t know what the UC is like today.)] Strictly speaking, one could argue that I should not say, “FDIC should be abolished”, rather I should say that I place a probability f that FDIC should be abolished and a probability 1 – f on the claim that the consensus in favor of FDIC is correct.  I don’t do that because I assume that the intelligent reader already makes this mental adjustment.  In my recent book entitled The Money Illusion, I wrestled with the question of why should readers accept my contrarian take on the Great Recession: Also keep in mind that even if markets are efficient, it is only because each trader is willing to take a fresh, independent look at the situation and do his or her best to make accurate forecasts. Similarly, the market for ideas does tend toward efficiency in the long run, but only because intellectuals are willing to continually probe weaknesses in existing theories, and seek better ones. I view myself as just one tiny component of the wisdom of crowds, which means I can’t do my job if I blindly accept the conventional wisdom. In a world where most intellectuals are arrogant, if I try to appear overly modest and humble then people will get a misleading impression of the strength of my argument, just as employers misjudge a person in a job interview that is modest about their abilities.  At the same time, intellectuals should never appear more confident than they actually are.  Let readers decide how to weight our views against those of the consensus.  Readers will understand that I am a contrarian on the Great Recession (and on FDIC). The wisdom of crowds can also be affected by motivated reasoning.  It is possible that residents of Spain checked out all of the possible religions and just happened to (mostly) adopt Catholicism, whereas residents of nearby Morocco went through the same careful analysis and chose the Muslim religion.  More likely, cultural factors played a role in both cases—people like to fit in with their neighbors.  Motivated reasoning is also important in politics.  Teachers prefer to believe that more spending on education isn’t just good for them personally, but is also good for society as a whole.  Farmers feel that way about crop subsidies.  Some have even claimed that there is a sort of tribalism behind the surge in GameStop stock, which has become very popular among a certain internet subculture.  Nonetheless, motivated reasoning is probably less of a factor in financial markets than in politics.  Stocks soared when FDR devalued the dollar in 1933, even though many of the conservative financiers in the Wall Street subculture opposed FDR’s decision to abandon the gold standard.   Bryan Caplan’s BetOnIt approach to debate can be seen as a way to push people away from motivated reasoning, and toward their actual beliefs.  Talk is cheap. PS.  While Osband’s book is full of thought-provoking ideas, be aware that it is also fairly technical in places. (0 COMMENTS)

Piketty and Saez (2003) found a pronounced U-curve pattern of American income inequality since 1917, displaying a precipitous decline during World War II to a level that would hold until 1980. We offer revisions to their income inequality estimates prior to 1960 with three important findings. First, Piketty and Saez overstate inequality levels in this period. Second, the decline during WWII was smaller than depicted. Third, the Great Depression, rather than WWII, played the more significant role. These findings indicate a need to reevaluate commonly held assumptions about the evolution of inequality during the period of the ‘Great Leveling,’ as well as the nature of its posited relationship to tax policy. This is from Vincent J. Geloso, Phillip Magness, John Moore, and Philip Schlosser, “How Pronounced in the U-curve? Revisiting income inequality in the United States, 1917-1960,” The Economic Journal, March 8, 2022. The Economic Journal is a prestigious British journal that also charges you a lot to buy the paper. So instead, you can read an earlier version that was published on SSRN. It’s here. Here’s an excerpt from that earlier version: The purpose of this paper, we must emphasize, is not to assert that the United States was an exception to century-long international patterns in inequality. Neither do we question the idea that top income shares fell then rose over the 20th century. We accept the general occurrence of the “great levelling,” subject to further investigation of its shape and magnitude. We show instead that the left-side of the PS [Piketty/Saez] U-curve likely overstates the original height and ensuing decline of top income shares, with implications for distributional pattern[s] over time and for other derivative works that rely upon the PS series. Our adjustments do not change the fact that inequality fell between 1929 and 1945. What they do is attenuate this decline so that, when combined with other proposed corrections to the right-side of the U-curve, we see a much shallower “tea saucer” of inequality in the United States over the the course of the twentieth century. We confirm an inequality peak in 1928-1929, which is actually much more acute to those years than in PS. However, the “great levelling” (an expression we borrow from Lindert and Williamson [2016]) becomes a comparatively gradual story where the Great Depression is a more readily visible factor. This draws into question numerous inferential claims that wartime income tax policy and its subsequent entrenchment as a permanent feature of the mid-century tax system played a major role in the observed levelling. Past editors of The Economic Journal included Francis Y. Edgeworth (from 1891 to 1911) and John Maynard Keynes (from 1912 to 1944.) HT2 Phil Magness. (0 COMMENTS)

Kyle Smith reviews on National Review a film on Carl Icahn. Icahn is among the most famous activists investors of the 1980s, and is still, pardon the pun, active. For example, he acquired a stake in McDonald’s and challenged its governance, not because of poor performance but for reasons related with animal welfare and the conditions in pig farms. The HBO documentary Icahn: The Restless Billionaire, produced and directed by Bruce David Klein, offers a portrait of the investor and shows his life as a (quasi) rags-to-riches story (“The family didn’t have much. Dad was a cantor in the local synagogue, but only because he liked to sing: He was a “dogmatic atheist. But Icahn got into Princeton, became a stockbroker, and got a loan from an uncle in order to buy a seat on the New York Stock Exchange”). Judging from the review, Klein does something which is miraculous in a movie: that is, he offers a fair treatment of activist investing, showing it as an antidote against the complacency of the business establishment. Smith reminds us that Icahn inspired Oliver Stone’s Gordon Gekko and suggests that Stone was not repelled but also fascinated by Icahn: Icahn so impressed Oliver Stone that, as the filmmaker explains in a new interview, he used several of the financier’s ideas in Wall Street. An amusing interlude intercuts an actual Icahn speech from the Eighties with Gordon Gekko’s very similar remarks at the shareholder convention in the 1987 film. Icahn mentioned a company that had five floors of overpaid vice presidents doing nothing much, and Gekko mocked the same corporate gluttony. Stone was intrigued by Icahn, which is why Gekko makes such strong arguments. Today, the director describes Icahn as half right and half wrong for making private profits while neglecting public profits. Read the whole piece. I really look forward to the movie. By the way, The Guardian also reviews the movie. The piece by Andrew Lawrence is less enthusiastic, but there is a glimpse of admiration. Far less dubious is the rationale for spending 100 minutes with the 86-year-old businessman whom one pundit affectionately calls capitalism’s “great white shark”. Immediately, you see how Stone could be inspired. Good or bad, the man is definitely a character. (0 COMMENTS)

Why would a rational person believe a government? Given the politicians’ and their minions’ incentives to lie and their capacity to avoid (their low cost of avoiding) accountability, there can be only one circumstance: when free speech and competition in the provision of news provide continuous tests of the statocrats’ declarations. For example, one is justified to give more credence to the US government than to the Russian government about the war in Ukraine. It is not necessarily because American politicians are more virtuous than Russian ones, even if it is true that more freedom generates more virtue; it is instead because US government rulers and agents have less incentive to lie than their Russian counterparts, that is, the cost of lying is higher for the former than for the latter. It is therefore troubling, although not totally unexpected, to see European governments, including that of the European Union, censoring RT (“Russia Today”), a TV and Web outfit that is part of the Russian Leviathan. The Wall Street Journal reports (“EU Orders Removal of Russian State-Owned Media From Search Results, Social-Media Reshares” March 10, 2022): Europe’s effort to cut off access to Russian state-owned media extends to search engines and social-media posts, not just their television channels and online-video feeds, according to a copy of an email from the bloc’s executive arm. … In response to last week’s sanctions, telecommunications companies were obliged to remove the RT television channel from their TV services in Europe, and so far in at least some EU countries, they have also blocked the RT and Sputnik websites from being accessible to internet users. … The email from the European Commission, the EU’s executive arm, specifies that its sanctions order should be interpreted to cover search engines because they “facilitate the public’s access to the content of RT and Sputnik.” It also says that social-media companies must either not post or delete posts from individuals that broadcast or recopy content from RT or Sputnik. It is true that our governments should not go out of their ways to protect the freedom of speech of the Russian government. But they should not interfere with the freedom of their “citizens” to listen to what they want and make up their own opinions. If European residents are prone to blindly believe Russian propaganda (which, on RT, is more discrete because aimed at, and only available to, foreigners, and has the potential advantage of informing the careful student on what Russian rulers think), what legitimacy do the elected rulers of such a democracy of idiots have? How can the infantilization of citizens make them anything else than subjects? What does this portend for the future? (0 COMMENTS)

In his recent State of the Union speech, President Biden stated, “Unlike the $2 trillion tax cut passed in the previous administration that benefited the top 1 percent of Americans, the American Rescue Plan helped working people — and left no one behind.” Excuse me? It’s true that the Trump tax cut benefited the top 1 percent of Americans. But it also helped Americans at all income levels. It helped in two ways. First, it cut taxes for virtually everyone and often by a lot. Second, the 2017 tax cut increased incentives to invest in more capital. With more capital to work with, workers were more productive and their higher productivity showed up in higher wages. These are the opening two paragraphs of David R. Henderson, “Correcting Biden,” Taxbytes, Institute for Policy Innovation, March 9, 2022. Final paragraph: In his speech, President Biden used the term “trickle down” to refer to the idea that tax cuts on corporations and on the most productive people will help workers generally. Here’s the interesting thing about that term: no one who advocates such tax cuts uses the term “trickle down.” There’s an obvious reason why. Given how well tax cuts have worked, a much more accurate term is “gush down.” Do read the whole thing. It’s quite short.   (0 COMMENTS)

I just saw a documentary on the Rolling Stones infamous free concert at Altamont, California, which took place in December 1969. In popular mythology, it was a drug-fueled orgy of violence that led to four deaths, in contrast to the peaceful concert earlier in the year at Woodstock. As with most myths, there’s a grain of truth and some exaggeration.No one seems to have died of a drug overdose at Altamont, although some of the festival’s other problems were related to drugs (and beer.)  Two died in a hit and run traffic accident, one person drowned when on drugs, and another was stabbed when he approached the stage brandishing a gun. Presumably, most fans had a good time.  (BTW, there were also three births among the 300,000 fans at the concert.) But that’s just an anecdote.  Were the late 1960s as bad as portrayed in the media? Here’s a graph showing annual drug overdose deaths in the US: And even this graph is out of date.  By 2021, drug overdose deaths in American were running at an annual rate of over 100,000, which is more than ten times higher than during the late 1960s, even allowing for population growth.  Compared to today, drugs at the time of the Stone’s Altamont concert were a fairly minor problem in America. So what went wrong?  There is some evidence that a combination of technological “progress” and misguided regulations created a sort of perfect storm, making drug use in America particularly dangerous. During the 2000s, policymakers became increasing concerned with abuse of legal painkillers such as Oxycontin, which led to tighter restrictions on opioid prescriptions.  (The Supreme Court is currently considering the issue of when doctors can be prosecuted for inappropriate opioid prescriptions.)  As a result, addicts turned to illegal alternatives such as fentanyl.  Because the potency of illegal drugs is highly unpredictable, overdose deaths skyrocketed after the crackdown on legal opioids:  Research shows that what’s driving the overdoses crisis today are illicit drugs contaminated with fentanyl — everything from MDMA, powder and crack cocaine, methamphetamine, counterfeit Xanax and other pills, and powder sold as heroin. That’s why harm reduction advocates say it’s so important for people who use unregulated drugs to have access to fentanyl test strips — an easy-to-use tool that can detect the opioid’s presence in drug samples. Originally manufactured to test for fentanyl in a person’s urine, they are largely distributed today for personal drug supply testing by harm reduction programs, local health departments, and some law enforcement agencies.  Unfortunately, in many states even those testing kits are illegal: But an overview by the nonprofit Legislative Analysis and Public Policy Association (LAPPA) shows that fentanyl test strips remain illegal to possess and distribute in much of the U.S. . . . because they qualify as “drug paraphernalia.” Possession is typically a misdemeanor, but in some states including Florida and Tennessee distribution is treated as a felony. But there’s an effort underway to get these state laws changed, and it’s already racked up some wins in the South. Policymakers view any attempt at harm reduction as something that will only encourage more use of illegal drugs.  Recall earlier opposition to providing clean needles to drug addicts as a way of reducing the transmission of AIDS.   I don’t doubt that any attempt to make drugs less dangerous will encourage a bit more drug use at the margin, but when I look at the soaring death toll from illegal narcotics, I have to wonder if the benefits to the war on drugs is worth the cost.   PS.  I previously saw this film about 40 years ago, and it felt different on a second viewing.  I can still recall that time period, but from the vantage point of 2022 it feels like ancient history.  It’s funny how one can feel nostalgic even for bad times.  I suppose nostalgia is never really about the past; it’s about being young.   (0 COMMENTS)

The Trial of Benjamin Netanyahu has run into a bit of a snag. According to recent charges by the defense, the prosecution have benefitted from illegal wiretapping, spying, and other such underhanded tactics. Pegasus spyware was reportedly used to monitor Netanyahu’s son and others of his confidants. What would happen if this trial was conducted under United States’ standards? The doctrine, “fruit of the poisonous tree” would have prevailed, and anything found as a result of these machinations, whether directly or indirectly, would have been tossed out of court. The Fourth Amendment to the Constitution provides that all governmental searches must be conducted with strict limitations. They must be based upon “probable cause.” No hunting and fishing expeditions allowed. A judge must issue a warrant, prior to the investigation. This document specifies the who, where, why and when of the search. It is considered illegal fact gathering if these provisos are abrogated. There are severe repercussions when this occurs. Suppose something untoward was discovered through this illegal process. The prosecution may not then, in an entirely licit manner, seek to obtain the same information. Since the initial discovery was made via a rule violation, anything based on that information, too, is precluded, even if, in the ordinary course of investigation, it would have been unearthed, without the help of the illicit search. The courts take these limitations very seriously. There have been cases in which it was abundantly clear that the man accused of murder was indeed guilty of this crime. Evidence attesting to this fact was garnered entirely legitimately. But information previously attained improperly was used in that search. The actual guilty party was set free. In Israel, the Pegasus spyware of the NSO Group Technologies (NSO stands for Niv, Shalev and Omri, the founders of this organization) was reportedly used against former Prime Minister Netanyahu. If so, and to the extent Israeli law is congruent with our own, anything found out to his detriment will be tossed out, whether unearthed directly or indirectly. Why such stringent results? The philosophy behind this practice is that the government is the most powerful institution in society. Prosecutors can call upon almost endless resources, vast manpower, and legal expertise. The fear is that dictatorship is just around the corner unless the wings of this organization are at least somewhat clipped. But is there not a better way to accomplish this entirely justified goal? At present, the main- if not the only- incentive operational upon government employees to conform to these rules is that if they do not, guilty parties will be set free. Yes, this is powerful motivation, but we can do better. For, at present, they, themselves, bear no direct costs. Surely, it would be better from a pragmatic point of view that a murderer be made to pay for his crime rather than be let go as a result of prosecutorial misconduct; and instead the guilty parties, the police who violate warrants, the prosecutors who fail to make available to the defense material they are legally obliged to supply, etc., be themselves punished. However, there are more than mere utilitarian considerations in support of this suggestion. Yes, the philosophy of limited government is an eminently justified one. But, too, this “fruit of the poisoned tree” perspective violates another principle of just law: that the guilty party should suffer, not innocent bystanders. A murders B. Due to the malfeasance of C, A is allowed to go, to roam free. This negatively impacts the D’s, the wife and children of B, and other potential victims. Surely, C should be if not fired, and least fined. His prospects for promotion should be curtailed. D should not be made to bear the brunt of C’s error. If Netanyahu is really guilty of the crimes for which he is charged (I pray he is not; I am a big fan of his), he should pay for them to the full extent of the law. He should not be given a bye due to police and prosecutorial error. Otherwise the D’s in Israel, the entire populace, will suffer. So will the rule of law, and, with it, civilized order. Walter E. Block is Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics at Loyola University New Orleans and is co-author of An Austro-Libertarian Critique of Public Choice (with Thomas DiLorenzo). (1 COMMENTS)

It is one thing to impose economic sanctions on Russian rulers and plutocrats, that is, to impose targeted sanctions on Americans and companies that do business with them; as I suggested before, this is preferable to war for virtually everybody. It is another thing, if only a matter of degree, to forbid Americans and their companies from importing energy products or some other broad category of goods or services from any Russian exporter: this is what the Biden administration (see his Executive Order of March 8) and Congress seems to be doing more and more openly (“Biden Bans Imports of Russian Oil, Natural Gas,” Wall Street Journal, March 8, 2022): The U.S. ban takes effect immediately and applies to new Russian crude-oil imports, certain petroleum products, liquefied natural gas and coal, according to an executive order Mr. Biden signed on Tuesday. … The order also bars new U.S. investment in Russia’s energy industry and blocks Americans from financing foreign companies that invest in the sector. The governments of other Western countries are doing the same. These moves will directly affect consumers: gasoline and gas prices will likely continue to increase (if the expected bans were not already all priced in), pushing up the price of other forms of energy such as electricity. Ordinary Americans will be hit hard, even discounting a possible recession. But the sanctions will also affect ordinary Russians, who are not individually worth less than ordinary Americans. At least, this the moral postulate underlying classical liberalism, Enlightenment ideas, and the implicit values in standard political economy. Ordinary Russians, not only Putin’s plutocrats, produce Russian oil. Ordinary Russian workers are, and will be, victims of our own government after having been victimized by their autocratic one. The idea that the Russian victims of this double hit just have to rise up against their tyrant looks morally wrong and strategically short-sighted. Sure, any liberal hopes they will rise up, to the extent possible. But would it be acceptable to starve slaves to motivate them to revolt against their master? There is more. Wide-ranging shotgun sanctions come on top of the liberticidal powers already grabbed from their citizens by American and Western governments, and will contribute to feeding our own Leviathans. President Biden already suggests informal price controls of oil products which, especially if decrees were to follow exhortations, would create actual shortages, that is, waiting lines and eventually political allocation. The Wall Street Journal noted: Mr. Biden said he wants to do everything he can to insulate Americans from continued oil and gasoline-price increases, but he warned that the crisis in Ukraine could have domestic costs. He urged companies not to impose excessive price increases in response to the ban. The House speaker will not be outcompeted in the race to the bottom of the interventionist barrel as a remark of her indirectly suggests: Mrs. Pelosi (D., Calif.) said in a letter to her caucus that the House would … review Russia’s access to the World Trade Organization. These further sanctions are unwarranted anyway since many Western companies have decided to reduce their business in Russia or with Russian entities, either because they fear violating the first sanctions, or because of their business interests, or because they agree with the general condemnation of Putin’s bullying. Everybody now knows the political risk of engaging in long-term contracts or ventures with businesses subject to the Russian autocrat. The systemic effect of state interventions that come on top of previous interventions and further shrink the domain of individual liberty is often forgotten; and we cannot count on politicians to remind us. Extraordinary powers assumed during an emergency would be more justifiable, or arguably only justifiable, if the standing powers of our own governments were not already liberticidal. In his book Capitalism and Freedom, whose 60th anniversary we celebrate this year, Milton Friedman wrote (prudently): We shall always want to enter on the liability side of any proposed government intervention, its neighborhood effect in threatening freedom, and give this effect considerable weight. Just how much weight to give to it, as to other items, depends upon the circumstances. If, for example, existing government intervention is minor, we shall attach a smaller weight to the negative effects of additional government intervention. This is an important reason why many earlier [classical] liberals, like [University of Chicago economist] Henry Simons, writing at a time when government was small by today’s standards, were willing to have government undertake activities that today’s liberals would not accept now that government has become so overgrown. A politician who believed in individual liberty would heed Friedman’s warning and keep his head cool in emergency situations. (0 COMMENTS)

  Nikole Hannah-Jones, 45, retweeted a post Sunday claiming the “supremacy around the media coverage of [the war] isn’t even subtle” while sharing a clip of an Al Jazeera report citing the “prosperous middle class” in Ukraine who were desperately trying to board a train to escape the war-ravaged country. “What if I told you Europe is not a continent by definition, but a geopolitical fiction to separate it from Asia and so the alarm about a European, or civilized, or First World nation being invaded is a dog whistle to tell us we should care because they are like us,” Hannah-Jones tweeted Sunday to her 671,000 followers. This is from Joshua Rhett Miller, “NYT’s Nikole Hannah-Jones blasts ‘racialized’ coverage of Ukraine war,” New York Post, February 28, 2022. When I read this at the time, I, like many of my friends on Facebook, pooh-poohed the idea. Then I started thinking about the Saudis and Yemen. Read this: The armed conflict in Yemen has killed and injured thousands of Yemeni civilians since it began. As of November 2018, 6,872 civilians had been killed and 10,768 wounded, the majority by Saudi Arabia-led coalition airstrikes, according to the Office of the United Nations High Commissioner for Human Rights (OHCHR). The actual civilian casualties are likely much higher. Thousands more have been displaced by the fighting and millions suffer from shortages of food and medical care. I’m pretty sure that that number is much higher than the number of Ukrainian civilians killed by the Russian military in the war that started last month. A March 4 news story in the Washington Post last week put it at 227. Yet we in the west have never seen the outpouring of support for Yemen and outpouring of criticism of Saudi Arabia that we see for and against Ukraine and Russia, respectively. Why is that? I think it’s because many of us feel a stronger connection to people in Europe than in Asia. So, to answer the question in this title, Yes, I think Nikole Hannah-Jones is on to something. HT2 Phil Magness. (0 COMMENTS)

Yet in recent years, libertarians increasingly seem less concerned with how their policies might actually impact people. Convinced that markets are virtually always the best way to approach any issue, they have allied with many of the same forces – monopoly capital, anti-suburban zealots and the tech oligarchy – which are systematically undermining the popular rationale for market capitalism. This is one of the opening paragraphs of Joel Kotkin, “The limits of libertarianism,” spiked-online, March 4, 2022. The article’s title caught my attention because Kotkin’s work would often lead someone to believe that he is sympathetic to libertarianism, and I think he is. What’s his criticism? He gets to it quickly, writing: Nowhere is the disconnect between libertarianism and its traditional base of small-property owners more obvious than in housing. In their zeal, sometimes justified, to end the worst zoning abuses, the libertarians have allied themselves with two forces, monopoly capital and social engineers (also known as city planners), whose goal is not to expand the blessings of ownership, but to squelch it for all but a few. Their end game is to leave most people stuck in small apartments. Libertarians have served as fellow travellers and allies to the hyperactive, oligarch-funded YIMBY (‘Yes in My Backyard’) movement. In essence, as former Cato fellow Randal O’Toole notes, the libertarian right has ‘betrayed’ the very middle class that most supports conservative causes. O’Toole, who had been Cato’s land-use expert since 2007, was forced out in favour of an alliance, as he puts it, working hand-in-hand with left-wing groups seeking ‘to force Californians to live in ways in which they didn’t want to live’. Some libertarians see this as a ‘free-market housing fix’, although in their worship of markets most have said little about policies that prevent construction on the periphery – a principal contributor to excessively high housing costs. Expanded ownership is a noble cause. But it is hardly the intention of the strongest advocates for these policies. Victoria Fierce of the YIMBY pro-density lobby in California, for example, favours increasing urban density in part because it ‘promotes collectivism’. In some senses, the approach of some YIMBYs reflects the planning orthodoxy seen in the late Soviet Union. In the 1950s, Alexei Gutnov published The Ideal Communist City, which, while acknowledging the appeal of suburbia, rejected it as unsuitable for a society that prioritises equality and social control. Consider the first of these 3 paragraphs. Normally, when one criticizes zoning for restricting the supply of housing, one would be seen as being against “monopoly capital.” But Kotkin sees the Cato Institute’s opposition to zoning as being part of an alliance with monopoly capitalists. He’s pretty vague about how that works. If you read the link at the end of that first paragraph, you learn that developers are taking advantage of the new California law that allows more building on land zoned for single-family housing and that they are making lots of money doing so. What he seems not to confront is what this means for housing prices: they will fall or at least not rise as much as they would have. Increases in supply, all else equal, bring prices down. I would have thought that that would be a great way to help normal people. Kotkin is right that more building on a given amount of land leads to denser housing. What he doesn’t successfully do is explain why this is bad. Instead, he makes two arguments, one that is legitimate and one that is essentially guilt by association. His legitimate argument, if he’s right about the facts, is that “in their worship of markets most have said little about policies that prevent construction on the periphery – a principal contributor to excessively high housing costs.”  I don’t know if Kotkin is right about Cato’s relative silence on this issue. Let’s take as given that he is right. Then the answer should be that they should say more about such policies, not that they should defend single-family zoning. We have 2 contributors to higher housing prices: restrictions on building in areas zoned for single families and restrictions on building on the periphery. Cato and others should go after both. But that’s not an argument against going after one of those. There’s no either/or here. His guilt by association argument is this: Expanded ownership is a noble cause. But it is hardly the intention of the strongest advocates for these policies. Victoria Fierce of the YIMBY pro-density lobby in California, for example, favours increasing urban density in part because it ‘promotes collectivism’. Let’s say he’s right about Victoria Fierce’s and others’ intentions. Kotkin doesn’t make clear whether Cato is allying with her and those others. But let’s say they do. How is Cato responsible for what their intentions are? Moreover what happened to the idea of going beyond intentions and actually looking at the likely expected effects? One main effect will be to bring down the price of housing. Kotkin continues: Yet it’s not just YIMBYs who favour densification and an end to single-family zoning. This notion also appeals to large financial institutions that seek to develop a rentership society, where homes, furniture and other necessities are turned into rental products, offering an endless cashflow to the oligarchs. Kotkin makes it sound as if people wouldn’t have a choice about whether to rent. But they would. People could rent or buy. And with lower housing prices, buying would be easier. By the way, the link in the above paragraph is to a gated article in the Wall Street Journal. The gist of the article is that people are finding it increasingly attractive to rent things instead of buying them, not just housing but also cars and textbooks. What’s wrong with that? Surely, Kotkin, generally a nuanced analyst, doesn’t think that the fact that large institutions can make money off something is evidence that people don’t want that something. The usual presumption is the opposite: you don’t generally make much money by providing what people don’t want. Kotkin writes: Ultimately, the great values that libertarians bring to the policy debate are more relevant than ever. But their suggestions will only be heard if they can demonstrate – particularly to the young generation – the potential of markets to make lives better. In the end that is the real issue. While libertarians are so valuable in ferreting out government cronyism, they need to face up to the prospect that markets, although theoretically free, are in reality becoming ever more oppressive and controlled. I talk to young people in coastal California who would like to be able to afford to buy a house or a condo. I haven’t had that much trouble convincing them that when there’s a greater supply of houses or condos, the price is lower. They think that will make their lives better. As to whether markets are becoming more oppressive and controlled, that’s true in some areas and not others. But one area in which they are becoming less controlled is housing. There’s a long way to go. Don’t get me started about building codes. But let’s take those first steps. (0 COMMENTS)