The Economist magazine coined the term “Dutch disease” back in 1977: The Economist coined the term in 1977 to describe the woes of the Dutch economy. Large gas reserves had been discovered in 1959. Dutch exports soared. But, we noticed, there was a contrast between “external health and internal ailments”. From 1970 to 1977 unemployment increased from 1.1% to 5.1%. Corporate investment was tumbling. We explained the puzzle by pointing to the high value of the guilder, then the Dutch currency. Gas exports had led to an influx of foreign currency, which increased demand for the guilder and thus made it stronger. That made other parts of the economy less competitive in international markets. That was not the only problem. Gas extraction was (and is) a relatively capital-intensive business, which generated few jobs. And in an attempt to stop the guilder from appreciating too fast, the Dutch kept interest rates low. That prompted investment to rush out of the country, crimping future economic potential. (This is from a 2014 article discussing whether Russia suffers from the Dutch disease.) That description doesn’t really give us very much to go on.  For instance, the following graph in a paper by Olivier Blanchard shows that unemployment soared throughout Western Europe during the 1970s: In that case, why should we conclude that the Netherland’s employment problems during the 1970s had anything to do with a discovery of natural gas reserves?  Furthermore, the most effective way to fix inadequate employment is with sound monetary policy and supply-side reforms to make labor markets more flexible. It’s also odd to name an economic disease after one of the most successful countries in global economic history.  This ranking shows the Netherlands to be number 15 on a global ranking of GDP per capita (PPP), but most of the richer countries are small oil exporters or even smaller tax havens.  It’s actually the second richest country in the world with a population of more than 10 million, trailing only the USA. You might argue that while the Netherlands is rich, perhaps the gas discoveries hurt their non-energy exports.  But the Netherlands is also a phenomenally successful exporter of all sorts of products: Being #4 in a global list of exporters is particularly impressive when you consider than the other countries in the top five all have vastly larger populations.  Other developed countries with natural resource bonanzas—such as Australia and Norway—also seem to have done well in recent decades.  So what’s the problem? Here are two possibilities: 1. Creative destruction:  An energy boom causes the currency to appreciate.  This moves resources from manufacturing to energy and services.  Manufacturing jobs are somehow special, and hence this sort of economic restructuring is harmful. 2.  Corruption:  And energy boom leads to corruption, as elites compete for economic “rents”.  If the first concern is a genuine problem (and I’m skeptical) the resource producer can prevent excessive currency appreciation by boosting national saving, as Norway has done with its sovereign wealth fund. A recent article in The Economist discussed the second concern: Uruguay has some structural advantages. Spanish colonialists called it the “land of no profit”, as it had neither precious metals nor cheap indigenous labour. These seeming flaws actually turned out to be strengths, however. A lack of easy rents helped ward off oligarchs. A fairly homogenous population prevented the stark racial inequality of places like Brazil. I see no evidence that natural resource booms have caused countries such as Norway, the Netherlands or Australia to become more corrupt than otherwise.  While you can find examples of major oil producers with a high level of corruption, such as Nigeria, it’s not clear to me that the public sector in those countries would be less corrupt without the oil. (0 COMMENTS)

On Saturday March 5th, Italian economist and former minister Antonio Martino died at age 79. Martino was well known in libertarian and conservative circles: he was loosely associated with different think tanks and had been, in 1988-1990, the President of the Mont Pèlerin Society. Those who met him at conferences are likely to remember his contagious laugh and his knack for jokes. Martino came from a political family: his father, Gaetano, was Minister of Foreign Affairs in the 1950s, promoted the Conference of Messina and signed the Treaty of Rome- both acts of paramount importance in the making of postwar “united” Europe. He passed away when his son was 25. Besides his scholarly work, Antonio Martino also had a political career, whose highlights were in the province of foreign affairs. For many years, like his father, he was a member of the Italian Liberal Party. He was a University professor, for a little while he managed the first – and alas unsuccessful – attempt at an Italian free-market think tank (CREA), and he wrote frequently for newspapers. Yet he was also a party member and once even tried to compete for the secretary role, the top job within the party. He had absolutely no chance. Why? Basically, because the Italian Liberal Party had drifted towards a form of (moderate) socialism and Martino became more or less a lone wolf. In the 1980s, Italian liberals despised Ronald Reagan and Margaret Thatcher. Hence one of his most truthful jokes, “The parties we call liberal in Europe have two things in common: they ain’t classical liberal at all, and they invariably lose elections”. In the Italian case, the liberals had a good year back in 1963, when they grew their consensus by being the only voice against the government’s takeover of the energy industry and other left-leaning reforms. Since then, they have moved little by little back into the “consensus,” and subsequently lost votes. By the way, a “good” election meant they won 7 percent (1963) whereas afterward they floated between 5 and 2 percent. Everything changed in 1994. The judiciary was swept away, with the so-called “clean hands” investigation, with an entire system of political parties. The Communist Party somehow survived the allegations of corruption (many thought because it enjoyed the sympathies of the prosecutors themselves, besides never having held national government) and it was poised to win elections. This would have been quite paradoxical: the end of the Soviet Union hardly suggested that a left-of-center future was inevitable for Italy or any other country for that matter. In 1992 Italy voted for a change of the electoral system which aimed at bringing it closer to Anglo-Saxon democracies, and that change was supported by people who had sympathy with the idea of a smaller and more restrained state. Still, these people were quite unsuccessful building unity until a “new man”, TV tycoon Silvio Berlusconi, entered the picture. Berlusconi understood that “moderate” political parties may have been in disarray, but that their voters were still there and were searching for a new home. He founded “Forza Italia” which, in the beginning, was a Reaganesque party. Berlusconi was the man who brought competition in TV to Italians, and now he was bringing technicolor politics. His message of reform and liberalization was crafted, by and large, by Antonio Martino. The university professor moved almost overnight from political pariah to political star, a voice that could explain the principles of classical liberalism, spending cuts, and lower taxes in terms that Italians found surprisingly congenial. Berlusconi will go down in history as a master of political communication, but so was Martino. At that time, Italy was a country in which politicians tended to speak in their own idiom, quite different from the everyday language of the public. Berlusconi and Martino were able to make themselves understood by the grocer and the cleaning lady. Berlusconi’s appeal was based upon an extraordinary mastery of TV as the media of the time, plus a larger than life persona. Whatever his own (ironic) attempts in one-upmanship, Martino’s case was different. He studied in Chicago, in the late 1960s (where he met his wife, Carol), and when he returned to Rome he soon became a University professor. In Chicago, he’d befriended Milton Friedman. Meeting Friedman reshaped his worldview. He was expecting professors to be cold and distant, as, particularly at that time, they used to be in Italy. Friedman was accessible, kind, and funny, and took the young Sicilian under his wing. Martino would write a monograph on Friedman and a textbook based on monetarism, both in Italian. He was not the most original or the most academically accomplished of Friedman’s students. But different from many others, he took up Friedman’s mantle – perhaps not so much as an economist but as a public intellectual. Once back in Italy, he engaged in public discussion by writing op-eds, and he did so beautifully, with a prose which was profoundly indebted to Friedman’s lessons. He was simple, accessible, and often funny and witty. His ideas were Friedman’s too: from school vouchers to flatter taxes, Martino spent his entire life promoting Friedman’s policy proposals and strove to improve his master’s presentation style. In 1986, he ended up (with two colleagues, Sergio Ricossa and Gianni Marongiu) haranguing a rally of Italians who were fed up with excessive taxes in Turin. It was an unprecedented event in the country. The leader of the Italian Socialist Party, Bettino Craxi, dismissed it by saying that “they’re all tax cheaters”. Martino replied: “it’s like I say all socialists are thieves”. He was ousted from the newspaper La Stampa, for that. When Martino suddenly became a celebrity in 1994, it seemed as if he’d prepared all his life for that. He had an arsenal of quotations and witticisms, and could easily explain complex economic concepts to any audience. Until then, he had had an impact on his readers and his students and was confined to the periphery of politics. But now he was at the center of the scene and transformed the way many right of center voters think. He had the talents of the popularizer, not necessarily those of the politician. All the people who were energized by his economic rhetoric were suddenly and irreparably disappointed when he became Minister of Foreign Affairs (like his father). Later on, when Berlusconi won election again in 2001, he was appointed Minister of Defense. The country benefited from his perfect mastery of the English language and his solid understanding of US politics and a certain “idem sentire” with the Bush 43 administration. But, once again, he was not in a position to produce market-leaning reform. Italians should be grateful that he accelerated the transition towards a purely professional army, with no draft. A reform which he passionately believed in, remembering Milton Friedman’s anti-draft commitment. Berlusconi and his party did sometimes showed admiration for Martino and brought him to Parliament for years, but the 1994 honeymoon was soon over. Berlusconi softened his liberal message and the party oligarchy regarded Martino’s blend of liberalism at best useful in the opposition but impractical once in government. Martino was a Sicilian and was not an easy man, he enjoyed his fights and was the sort of person whose friendships could end abruptly. He did not leave behind a Martinian faction in the Berlusconi party, but many admirers. Two of his protégées, Nicola Porro and Giuseppe Moles, are respectively now one of the country’s most successful anchormen and an Undersecretary to Prime Minister Draghi. In a recent interview with Porro, he commented (correctly, I think) that there are more classical liberals in Italy now than ever (admittedly, the baseline was very low), but they are repelled by politics. Antonio Martino speaks at Istituto Bruno Leoni in 2009. Friedman was his intellectual hero. In foreign policy, reminiscent of the Cold War, he sympathized with American neo-conservatism. But he always encouraged and appreciated people who were, so to say, “classical liberal extremists” (including, a long time ago, the present writer). His favorite political philosopher was Anthony de Jasay, whose book The State he loved. That says something. In the early 2000s the Liberty Fund published a collection of his essays, edited by Dwight Lee, under the title Promises, Performance, and Prospects. Essays on Political Economy, 1980–1998 (0 COMMENTS)

A Book Review of Cogs and Monsters: What Economics Is, and What It Should Be, by Diane Coyle.1 Economics has arguably been under greater scrutiny than ever before. Its ontological premises, methodological postulates, conceptual insights, and analytical techniques are under intense appraisal within the academy, with social scientists from non-economic disciplines and even heterodox economists urging the need for comprehensive reform for the discipline. This critical attention has been compounded by the avalanche of best-selling books and popular media commentary that critically reflect on the domain of economics, with the criticisms ranging from charges of excessive formalism through the perceived lack of racial and gender diversity of academic representation within the discipline. It is difficult to identify a more beleaguered endeavor, nowadays, than economics. In the context of the contemporary revolt against economics, one might be at risk of airily dismissing the value of Diane Coyle’s latest book, Cogs and Monsters: What Economics Is, and What It Should Be. One may be tempted to merely note in passing the book as yet another literary assault on an academic discipline and profession under immense strain, but to dismiss Coyle’s contribution would be a significant mistake. I identify two key reasons as to why scholars, policymakers, and interested lay people should obtain Cogs and Monsters, and to carefully consider its key messages. The first is that Coyle presents a multi-dimensional critique of economics, but strategically does not overdo some of the well-worn arguments about the ontological realism of homo economics, that much-caricatured economic actor making choices in accordance with well-ordered (and fixed) preferences. As is mentioned early in the book, “[e]conomics has changed a lot in recent decades. It needs to change a lot in future—but the critique needs to move on too, to address what really needs attention” (p. 2). Heterodox economists are prone to critique the economic mainstream but, as illustrated by Cogs and Monsters, the mainstream itself has evolved in relation to the scope of empirical methods and strategies, topical scope, and propensity to engage with other disciplines (such as ethics, psychology, and sociology). In addition to acknowledging intra-disciplinary changes, Coyle sets out a new set of intellectual wrinkles for economists—including challenges to thinking that arise from such phenomena as digitalization, the limits of technocratic expertise, and the public role of economists. “With its calls for a refashioned economics featuring epistemic humility, and an embrace of the heterogeneous aspects of economic life, the reader of Cogs and Monsters is left with the distinct impression that economics can, once more, be regarded as an indispensable intellectual aid for understanding the bases of material progress, and, in turn, human flourishing.” The second reason underlining the significance of Coyle’s book is that she complements her contemporaneous criticism of economic science with constructive suggestions to move forward. What impresses upon the reader is that Coyle’s decades-long expertise in policymaking and scholarship has not left an imprint of jaundice and resignation about the possibilities for rehabilitation of economics as a discipline of high esteem and good reputation. Nor does one find the destructively critical presentation of markets that disconcertingly goes with the latest niche-industry of economic critique: “[m]arket economies have made many people better off, innovating in ways that improve our lives, enabling us to make the choices that best suit us, given the constraints of income and time” (p. 39). With its calls for a refashioned economics featuring epistemic humility, and an embrace of the heterogeneous aspects of economic life, the reader of Cogs and Monsters is left with the distinct impression that economics can, once more, be regarded as an indispensable intellectual aid for understanding the bases of material progress, and, in turn, human flourishing. There is sufficient insight and provocation presented in Diane Coyle’s book to cater for a wide reading audience. What will please scholars and other readers with an interest in Austrian and Virginia schools of political economy is that Cogs and Monsters amply acknowledges the importance of what Mark Pennington has described as “knowledge” and “incentive” problems,2 with such problems especially affecting the quality—if not the reasonableness—of technocratic policy advice and implementation in a complex world. It is often said that economics places boundaries upon the extent to which policies may be conscripted in the service of refashioning the world. Awareness of the dispersed—and oft-tacit—nature of economic knowledge, opportunity costs, costs of policy implementation and enforcement, the calculational limits of planning, and strategic interest-group incentives to seek rents are all seen to dampen the tendency toward misguided schemes reconfiguring the everyday business of economic life for the sake of grand political visions. As also indicated by Coyle, the reflexive nature of economic policy, whereby agents adjust their behavior in order to minimize the burdens posed by policy constraints, also warrants greater attention. The ever-present challenge is that awareness of economic policy limitations is not sufficient to incentivize political agents (particularly legislators and their bureaucratic advisors) to engage in good (rule-guided) policy conduct. The temptation to deviate from accumulated economic knowledge—as to what kinds of economic institutions are more likely to harness market-tested entrepreneurial betterments—in an effort to garner the favor of certain interests or constituencies seems always to be in play. Coyle speaks of the continual pressures faced by economic policymakers to please their political paymasters by producing “policy-based evidence” in support of the politically-ordained policy position. In particular, “economists often end up appearing or claiming to be certain where they are deeply uncertain, while at the same time being too diffident about expressing inconvenient truths about which we can be much more certain” (p. 56). The ever-tightening entanglement of bureaucratic advisors with economic qualifications with the legislative class—whom, in turn, entangle with close-knit policy communities that include consultancy firms, large financial intermediaries, and similar organizations—have been increasingly called into question. For her part, Coyle raises issues regarding the tendency toward policy groupthink, and the reliance by technocrats upon close-ended quantitative models in the construction of economic policy advice. An important contribution of Cogs and Monsters is its critical appraisal of the tendency toward “big data” haulage by policymakers in the development of public policies. The development of information and communication technologies have not only engendered the emergence of a digital economy characterized by increasing returns that, even now, is conceived to be evading comprehension using economic theories and empirical tools devised decades, if not centuries, ago. The Internet, mobile phones, and a new wave of technologies centered upon artificial intelligence, robotics, blockchain, and so on, are being viewed as the catalysts for the reinvigoration of dreams of a “computer socialism,” wherein digitalization is supposed to usher in possibilities for the central planning that Mises and Hayek previously warned about in the famous “socialist calculation” debates of the 1920s and 1930s. In Cogs and Monsters, Coyle incisively punctures the hopes of computer socialism to advance the technocratic dream of comprehensive economic planning. The first problem is that a world characterized by increasing returns and network effects radically increases the effective challenge of processing the interactions transpiring in the real economy. The second problem for computer socialists is that computation is incommensurable with what Hayek described as the tacit economic knowledge generated by interactions by heterogeneous agents in circumstances of time and place. Furthermore, “[c]omputers do not do constructive ambiguity” (p. 186) in light of genuinely interpersonal differences in desires and priorities, which are prone to spill over into irreconcilable conflicts. Whilst Coyle urges her economic peers “to start providing policy-makers with guidance for an increasing returns economy,” her ultimate conclusion on the computer socialism question is that “a bias toward government solutions is no answer. The idea that clever people in the centre can now have big enough data to solve such big problems remains illusory” (p. 209). In light of the difficulties associated with economic policymaking, Coyle invites the reader to carefully consider the intersection of economics and ethics. What is the public contribution and role of economics in a complex, evolving world? What is it that economists should do now? Consistent with the rise of economics within the firmament of the modern bureaucratic state, economists have attributed a host of metaphorical markers to describe what they see as the appropriate contribution of economics toward the policymaking process. John Maynard Keynes believed that economists should work to modify economic deficiencies in a manner akin to the humble competency of a dentist. Esther Duflo urged economists to assume the mindset of a tinkering plumber. Others have considered economists to embrace engineering, in the spirit of adapting planning methodologies and technological availabilities to reconfigure an economy. To varying degrees these ideas hint at a neo-feudalistic, social control mindset in which the advice of economists qua physicians/plumbers/engineers supports projects of nudging (or, perhaps more aptly, shoving) otherwise freely-interacting individuals into modes of economic behavior and conduct as prescribed by policy objectives. Coyle offers an intriguing alternative descriptor for the role of the modern economist: the economist as storyteller. If my interpretation of her suggestion is correct, the position of the economist as a storyteller (or at least, an interpreter of economic narratives) is intended to encapsulate the inherent endogeneity of an economist as one-of-many interdependent actors in the world. On this view, economists are ultimately incapable of standing outside the models they use to try to represent reality, and the agents that economists try to model are not things of stone and wood—they are fallible-yet-capable beings with the capacity to create, think, persuade, and act entrepreneurially. Coyle’s economist-as-storyteller vision is, then, intended to equip the economist with agency to adjust their narratives as actions and norms reflexively, and potentially structurally, change. I consider Coyle’s suggestion that economists narrate stories about the economy in which they, and others, interact feeds into broader understandings of the economy as constituted by webs of conversation combined with prices and other symbols.3 A key insight here is that how economists, and all others, normatively speak about the economy has economic effects. In short, talk is not cheap. After a decade of severe limitations of economic activity—first due to the GFC [Global Financial Crisis] and the subsequent sovereign debt crisis and, now, due to pandemic lockdowns and related restrictions—there is room for economic storytelling not only recognizing the limits of discretionary policy but that underlines the inherently emancipatory function of economic liberalism. Talk that inspires people to pursue their ambitions, to experiment, to use their knowledge in the fruitful economic service of others, and to become who they wish to become might well be necessary to help break the shackles of largely policy-induced economic repression. Conversation of this nature would desirably be accompanied by talk, and indeed action, of a nature institutionally constraining the degree of policy discretion on the part of the legislative-bureaucratic neo-feudal lords of the economic manor. For more on these topics, see Diane Coyle on the Soulful Science. EconTalk. “Ludwig von Mises’s Socialism: A Still Timely Case Against Marx,” by Steven Horwitz. Library of Economics and Liberty, Oct. 1, 2018. “Sick of Metaphors: Reading Shiller’s Narrative Economics,” by Sarah Skwire. Library of Economics and Liberty, Apr. 6, 2020. “What Should Economists Do? An Appreciation,” by Donald J. Boudreaux. Library of Economics and Liberty, Mar. 4, 2019. Diane Coyle’s Cogs and Monsters is an important book that is deserving of wide attention and deep contemplation. With a clear talent for writing about complicated economic ideas in a straightforward manner, Coyle illustrates how mainstream economics has evolved yet remains hamstrung by conceptual and empirical constraints. Economics is not internally unreformable, however, and Coyle provides a range of thoughtful suggestions as to what economists should do now (and next). Fundamentally, Cogs and Monsters presents a call for a humble and humane economics that is genuinely attentive to the needs and concerns of diverse beings as they continually seek material betterments. Scholars familiar with Austrian and Virginia political economy theories, and other heterodox economists, will discover much of value in this book. Footnotes [1] Diane Coyle, Cogs and Monsters: What Economics Is and What It Should Be. Princeton University Press. 2021. [2] Mark Pennington, Robust Political Economy: Classical Liberalism and the Future of Public Policy. Edward Elgar. 2011. [3] Deirdre McCloskey, Knowledge and Persuasion in Economics. Cambridge University Press. 2010; Don Lavoie, “Subjectivism, entrepreneurship and the convergence of groupware and hypertext.” In Jack Birner and Pierre Garrouste (eds.), Markets, Information and Communication: Austrian Perspectives on the Internet Economy, pp. 21-46. Routledge. 2004. *Mikayla Novak is a researcher with the School of Sociology, Australian National University, Canberra. Her research interests include classical sociology, economic and fiscal sociology, political economy, and social theory. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

In a November 2021 article in The Guardian,1 authors Geoffrey Supran and Naomi Oreskes—a research associate and a professor in Harvard’s Department of the History of Science—denounced Big Oil for advertisements that the authors’ claims were misleading or worse. Lest there be any doubt about the authors’ conclusions, the article, The Forgotten Oil Ads that Told Us Climate Change was Nothing, is categorized under: Climate crimes. The authors make seven distinct charges. The first is that oil companies have known about global warming and its potentially dire effects for six decades, yet industry ads falsely promoted: • Global warming as theory, not fact • Climate science uncertainty • Economic scaremongering • Consumer culpability • False solutions (“greenwashing”) • “We’re part of the solution” claims To make their case, Supran and Oreskes cite ads that they find particularly egregious. But were the ads egregious at the time? And are they today? Oil Companies Knew? The authors offer three pieces of evidence: 1. Physicist Dr. Edward Teller informed a 1959 API-organized symposium that “a temperature rise corresponding to a 10 percent increase in carbon dioxide will be sufficient to melt the icecap and submerge New York.” 2. “An internal Exxon study warned of ‘dramatic environmental effects’ before 2050.” 3. “By the late 1970s”, a former Exxon scientist recalled, “global warming was no longer speculative.” This evidence is unconvincing. First, Teller was mistaken. In 1959, the global atmospheric CO2 level was 318 ppm (parts per million). Today, it is one-third higher and rising. Yet the ice cap has not melted, and New York City remains comfortably above sea level. The Exxon study to which Supran and Oreskes link2 was done by a summer employee, and its accompanying cover memo (written, presumably, by a supervisor) provides important context: Present climatic models predict that the present trend of fossil fuel use will lead to dramatic climatic changes within the next 75 years. However, it is not obvious whether these changes will be all bad or all good… It must be realized that there is great uncertainty in the existing climate models because of a poor understanding of the atmospheric/terrestrial/oceanic CO2 balance. Much more study and research in this area is required before major changes in energy type usage could be recommended Finally, in the 1970s, contrary to the impression given by the former Exxon employee (a chemical engineer, not a climate scientist), global cooling was the reigning fear, not global warming. Moreover, the verdict was still out regarding the tradeoff between global cooling from sulfur dioxide (SO2) emissions and global warming from CO2. In Ecoscience: Population, Resources, Environment (1977: p. 686), Paul Ehrlich and John Holdren wrote: [T]here can be scant consolation in the idea that a man-made warming trend might cancel out a natural cooling trend. Since the different factors producing the two trends do so by influencing different parts of Earth’s complicated climatic machinery, it is most unlikely that the associated effects on circulation patterns would cancel each other. Global Warming as Theory, Not Fact? “The predominance of anthropogenic global warming is now widely accepted as fact, although amount, timing, and response remain open questions. But when the ads in question were published, that fact had not yet been established.” The predominance of anthropogenic global warming is now widely accepted as fact, although amount, timing, and response remain open questions. But when the ads in question were published, that fact had not yet been established. James Hansen’s 1988 Senate testimony proclaiming anthropogenic global warming was particularly controversial. As Richard Kerr wrote in Science magazine the next year3: If many of Hansen’s colleagues find his first point about the warming trend regrettable, they view his second–that the warming could, with “high confidence,” be linked to the greenhouse effect–as unforgivable. None of the select greenhouse researchers at the meeting could agree with him. ‘Taken together, his statements have given people the feeling the greenhouse effect has been detected with certitude,’ says Michael Schlesinger, himself a modeler at Oregon State University. “Our current understanding does not support that.” Scientific Uncertainty? The ad titled Lies They Tell Our Children (Mobil Oil: 1984)4 lists a half-dozen environmental threats, including the greenhouse effect, that had sent Herbert I. London’s 13-year-old daughter home from school in tears. She had been taught that the threats would eliminate her future, inspiring London to write, Why are They Lying to Our Children?5 The ad quotes London’s book, which documented real progress made in reducing pollution—progress that has since continued apace. The second ad, Apocalypse No (Mobil Oil: 1993),6 dealt directly with global warming. It mentions the Heidelberg Appeal signed by over 250 scientists from around the world, which warned against “making important environmental decisions based on ‘pseudo-scientific arguments or false and non-relevant data.'” The ad lists some of the uncertainties surrounding climate change—uncertainties that still exist today, nearly 30 years later—such as “the interplay between oceans and the atmosphere,” cloud complexity, and the inability of computer models to accurately “back-predict” global temperatures over the last century. Science: What We Know and Don’t Know (Mobil: 1997),7 provides a summary of the issues surrounding CO2 emissions. It notes that an “IPCC lead author conceded to the ‘uncertainty’ inherent in computer climate modeling”—uncertainty that still exists. The ad also questions the efficacy of proposed solutions. This is a real concern given that government-imposed “solutions” such as corn-based ethanol have (a) often made the problem worse (as The Guardian reported8 in 2014), and (b) are politically impossible to kill. If climate change truly is an existential threat, it is imperative that we understand the science well enough so that we “first do no harm.” The fourth ad, Unsettled Science (ExxonMobil: 2000),9 discussed the causes, then still being debated, behind the one-degree Fahrenheit temperature increase in the previous 150 years and the problems of modeling future trends. As James Hansen stated at the time: “The forcings that drive long-term climate change are not known with an accuracy sufficient to define future climate change.” The Climategate controversy that erupted nine years later revealed that leading IPCC scientists were debating the very issues that ExxonMobil raised, including the existence of a Medieval Warming Period. This ad also notes naturally occurring climate shifts during Earth’s history and the fact that increasing atmospheric CO2 concentrations “promote crop and forest growth.” Finally, the ad admits, “Science has given us enough information to know that climate changes may pose longer-term risks… Consequently, people, companies, and governments should take responsible actions now to address the issue.” Economic scaremongering? “Don’t Risk Our Economic Future,” a 1997 ad from the Global Climate Coalition (of which Exxon was a member)10 warned of energy rationing from a United Nations climate treaty that would disadvantage the United States relative to other nations not under similar requirements. Today, the risks of government-driven substitutions of wind and solar for natural gas and coal in electric generation are well known. The Great Texas Power Shortage of 2021 and the UK/EU energy crisis of winter 2021/2022 are testament to the dangers of climate policy. Finally, the charge of “scaremongering” coming from climate alarmists requires more than a bit of chutzpah. In 2005, for example, The Guardian published the article, 50m Environmental Refugees by end of Decade, UN Warns.11 Not Our Fault, It’s Yours? The authors criticize advertisements by “beyond petroleum” BP (formerly British Petroleum) for focusing attention on individual “carbon footprints,” which “mimics big tobacco’s effort to combat criticism and defend against litigation and regulation….” But oil companies are in business because people, industries, and governments need their products and buy them. Hundreds of millions of their customers, quite literally, can’t live without them. And, unlike tobacco, as James Hansen noted, “Fossil fuels raised living standards in much of the world.” He also observed that “The frequent comparison of the fossil fuel and tobacco industries is nonsense.” Talk Clean, Act Dirty Supran and Oreskes have their best case with these ads; big oil plans to remain big oil for the foreseeable future. While companies have invested in alternative fuels research, their focus is on petroleum and petroleum products. Eco-lobbyists have forced oil companies to investigate renewables, but that begs the question by assuming that renewables are, in fact, “green.” For example, Great Britain has invested heavily in biomass power plants; environmentalists complain that Britain’s biomass plants are dependent upon wood pellets that come from U.S. forests. Industrial wind turbines have negative health effects on nearby residents, and hundreds of wind and solar projects have been stopped or delayed because of environmental concerns. Further, the authors ignore the very real environmental advantages of fossil fuels. Not only did crude oil save Great Britain’s forests and kerosene save sperm whales from extinction, but gasoline also helped clean up our cities’ streets. Animal power turned streets into filthy breeding grounds for disease, reeking of manure and urine and swarming with flies. In addition to the tons of waste that had to be collected and carted away each day, the bodies of thousands of dead horses also had to be removed. Every year, large American cities had to remove 10,000 to 15,000 horse carcasses from their streets. Fossil fuels also ended the need for clear-cutting forests for firewood and for burning wood and dung to keep warm. The health benefits of ending such practices are substantial. Wind and solar rely on natural gas turbines for backup. Moreover, America’s switch from coal to natural gas as its primary fuel for producing electricity was a major factor in its CO2 emission reductions over the last few decades. The authors’ statement that, “In contradiction to the science of stopping global heating, big oil asserts that fossil fuels will be essential for the foreseeable future” is demagoguery. The “science of stopping global heating” does not and cannot address the vast technical, political, and economic issues associated with ending global reliance on fossil fuels. The truth is that fossil fuels will be essential to human existence and flourishing for the foreseeable future. Conclusion For more on these topics, see The Great Texas Blackout of 2021: Is Planning Necessary? by Robert Bradley. EconLog, May 6, 2021. Greenhouse Effect, by Thomas Schelling. Concise Encyclopedia of Economics Bjorn Lomborg on the Costs and Benefits of Attacking Climate Change. EconTalk. “Climate Change: What is (Not) To Be Done,” by Pedro Schwartz. Library of Economics and Liberty, Apr. 6, 2020. Supran and Oreskes condemn oil company ads on their premise of a man-made climate “crisis”; their divination of a sinister industry strategy; disregard for the environmental, economic, and health benefits of high-energy civilization; and on a liberal use of pejorative words and phrases such as “disinformation,” “propaganda,” “climate denial,” “scaremongering,” and “greenwashing.” Fortunately for their readers, and unfortunately for their claims, the authors included images of advertisements that presumably represent the worst of the worst. But an impartial reading of them reveals rational commentary on the knowns and unknowns of energy and climate. The ads are hardly controversial. Footnotes [1] Supran, Geoffrey and Oreskes, Naomi, “The forgotten oil ads that told us climate change was nothing,” The Guardian, Nov. 18, 2021. Available online at: https://www.theguardian.com/environment/2021/nov/18/the-forgotten-oil-ads-that-told-us-climate-change-was-nothing [2] “1979 Exxon Memo on Potential Impact of Fossil Fuel Combustion.” ClimateFiles.com. Available online at: https://www.climatefiles.com/exxonmobil/1979-exxon-memo-on-potential-impact-of-fossil-fuel-combustion/. [3] “Hansen vs. the World on the Greenhouse Climate Threat,” by Richard Kerr, 1989. Columbia.edu, 2015 [Apr. 2, 2013?]. Available online at: http://www.columbia.edu/~jeh1/mailings/2015/Kerr.1989.HansenVsWorldOnGHThreat.Science.pdf [4] “Lies They Tell Our Children.” Mobil 1984 Aug 16 New York Times. Documentcloud.org. Available online at: https://www.documentcloud.org/documents/6958603-Mobil-August-1984-NYT-Lies-They-Tell-Our-Children [5] London, Herbert, Why Are They Lying to our Children? Stein and Day, 1984. [6] “Apocalyse No.” 1993 2 25 MOB [Mobil Oil] New York Times. Documentcloud.org. Available online at: https://www.documentcloud.org/documents/357243-1993-2-25-mob-nyt-apocalypse-no [7] “Science: what we know and don’t know.” Mobil 1997 Nov 6 New York Times. Documentcloud.org. Available online at: https://www.documentcloud.org/documents/705547-mob-nyt-1997-11-6-whatweknow.html [8] “Corn biofuels worse than gasoline on global warming in short term-study.” The Guardian, April 20, 2014. [9] “Unsettled Science.” XOM 2000 Mar 23 New York Times, Exxon Mobile. Documentcloud.org. Available online at: https://www.documentcloud.org/documents/705605-xom-nyt-2000-3-23-unsettledscience#document/p1/a241889 [10] “Americans Work Hard for What We Have, Mr. President.” 1997 GCC New York Times “Don’t Risk Our Economic Future” Ad, “A Message from members of the Global Climate Coalition.” Available online at: https://www.documentcloud.org/documents/5976312-1997-GCC-NYT-Dontriskfuture [11] Adam, David. “50m Environmental Refugees by End of Decade, UN Warns.” The Guardian, October 12, 2005. *Robert Bradley Jr and Richard Fulmer are coauthors of the primer Energy: The Master Resource (2004) and other writings on free-market energy and climate policy. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

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)