Remember “dehiring“?  Dehiring is when, instead of firing a bad employee, you conspire with him to get him a new job someplace else.  As this how-to guide explains: Managing a problematic employee is time consuming and negatively affects the cohesion of your fitness team. Unfortunately, hoping that a troublesome employee will just go away is not always realistic and may even make the situation worse. Instead of backing away from the problem, take action. By learning how to “de-hire,” you may never have to fire anyone again. […] Begin the conversation with statements such as “Sue, it appears that Club X is really not the place you want to be working. You have been calling in sick and arguing with members. Perhaps you’re not happy teaching here any more?” “Sue, are you truly happy at Club X or do you feel you might need a change?” or “Sue, it doesn’t appear that you want to be part of the team anymore. Why don’t you think about what you want to do and let’s meet again tomorrow.” Substacker Elijah Broadbent just emailed me an amusing example of how the University of Chicago dehired infamous genetics denier Richard Lewontin.  Elijah speaks: Hi Bryan, Hope you are well! I was reading this old Alice Dreger interview with E. O. Wilson and came across a great example of dehiring you might be interested in. I’ll tell you a story about all of this. Around 1970, we were searching for someone in population genetics. He looked very good then. And he had this brilliant personality in conversation, this brilliant presentation, a real theatrical power. The search committee decided he was the best person, but this was after he had just adopted his political and public persona and he was known to be joining protests. I remember watching a news report one day about the takeover of a stage at the University of Chicago, where some government functionary had come to speak at the height of the anti-war protests. And to my astonishment, I saw Dick Lewontin rush up and take the microphone! We had a meeting to take the final vote on Lewontin at Harvard, and a group of the older professors said they were worried about reports of his behavior at Chicago—that he might be disruptive or might have gotten away from genetics, and so would not be the right sort of person to be at Harvard. I made the speech I will regret for the rest of my life: I said we should never accept or reject someone because of their political views. I felt so good about myself making that political speech! “I know several key people at Chicago on the faculty,” I said. “Let me ask them about the key question: Is Lewontin’s new political activism affecting his performance at the University of Chicago, or affecting anything connected with his duties?” And they said, okay, ask and let us know.” So, I called several people who I knew personally. We were all young guys then and they all said, “No, it’s not causing any problems here. He’s doing fine.” That turned out not to be the case. I reported that, and Lewontin came, and then our troubles with him began. I could tell you stories about him and the department that would make for a hilarious evening. But I won’t, except to say that the whole anti-sociobiology thing broke out about three years after he arrived. It was Gould and Lewontin and Ruth Hubbard, mostly oriented by Lewontin, looking to attack sociobiology and to discredit me. I held up. In response to those attacks, I wrote On Human Nature, which came out in ’78, and it won a Pulitzer Prize, which helped strengthen my position considerably. I was increasingly confident in my own reputation and my security at Harvard. I wrote [entomologist] John Law, who was then a close friend who had done work with me on pheromones. I said, “John, we’ve had Dick Lewontin here three years”—so this would have been about ’76—“so now it’s your turn to take him back for three years.” John sent back a message on a scrap of paper written by the President of the University of Chicago, who was also named Wilson coincidentally. The note said: “From one Wilson to another, no way!” Apparently, they had already been having real problems with him. Best, Elijah     (0 COMMENTS)

Humorist P.J. O’Rourke died this morning, at age 74, of lung cancer. As well as being a humorist generally, he was the top economic humorist in the United States. I loved his book Eat the Rich: A Treatise on Economics. In a review of the book I wrote somewhere, I said, “So think of O’Rourke as a modern Adam Smith, with these two differences: O’Rourke’s data are more recent, and you’ll get side-splitting laughs on every page.” My favorite passage is the opening paragraph: I had one fundamental question about economics: Why do some places prosper and thrive while others just suck? It’s not a matter of brains. No part of the earth (with the possible exception of Brentwood) is dumber than Beverly Hills, and the residents are wading in gravy. In Russia, meanwhile, where chess is a spectator sport, they’re boiling stones for soup. Nor can education be the reason. Fourth graders in the American school system know what a condom is but they’re not sure about 9 x 7. Natural resources aren’t the answer. Africa has diamonds, gold, uranium, you name it. Scandinavia has little and is frozen besides. Maybe culture is the key, but wealthy regions such as the local mall are famous for lacking it. My second favorite passage, about his trip to the newly emerging Shanghai: And omnipresent amid all the frenzy of Shanghai is that famous portrait, that modern icon. The faintly smiling, bland, yet somehow threatening visage appears in brilliant red hues on placards and posters, and is painted huge on the sides of buildings. Some call him a genius. Others blame him for the deaths of millions. There are those who say his military reputation was inflated, yet he conquered the mainland in short order. Yes, it’s Colonel Sanders. My third favorite passage is the part where he discusses economics textbooks and one textbook in particular: Looking into an economics textbook as an adult is a shock (and a vivid reminder of why we were so glad to get out of school.) The prose style is at once peurile and impenetrable, Goodnight Moon rewritten by Henry James. And his comments on Economics by Paul A. Samuelson: And here was another shock. Professor Samuelson, who wrote the early editions by himself, turns out to be almost as much of a goof as my friends and I were in the 1960s. “Marx was the most influential and perceptive critic of the market economy ever,” he says on page seven. Influential, yes. Marx nearly caused World War III. But perceptive? Samuelson continues: “Marx was wrong about many things . . . but that does not diminish his stature as an important economist.” Well, what would? If Marx was wrong about many things and screwed the baby-sitter? P.J. was not just an economic humorist, though. He was a pretty decent economics thinker. Years ago, I opened, with some skepticism, P.J.’s book On the Wealth of Nations, in which he went through Adam Smith’s The Wealth of Nations pretty much chapter by chapter. He really got Smith, including a lot of nuances. Indeed, his book helped me realize why I could never get through the sections on taxation in The Wealth of Nations. I will miss P.J.   (0 COMMENTS)

The Economist has a thought-provoking article on the way that countries change as you go from the north to the south. While much of what they say will not be surprising to readers, one anomaly does stand out—the way these patterns (or stereotypes?) flip at each international border: The really startling detail is how often these stereotypes reset at national borders. Start in the southern Netherlands. According to common prejudice, the Dutch see their Flemish-Belgian neighbours as living an agreeably soft life, filled with fine food and drink (though almost any cuisine looks tasty from the Netherlands, where a business lunch may consist of cheese sandwiches and a glass of buttermilk). Cross the border into Belgian Flanders though, and national stereotypes place you in Germanic northern Europe. Keep driving into French-speaking Wallonia and Belgians reckon you have hit the south. But head across the international border into France, and—by common consent—you are back in a region that is unmistakably northern. Fans of France’s far north praise the locals as generous, earthy and plain-spoken. But the landscape is often bleak, with run-down industrial towns and seemingly deserted villages of grey houses with closed shutters. Head farther into France, past central regions called snooty though prosperous, and the lavender fields and hillside olive groves of the south are reached. Popular French prejudice credits southerners with knowing how to enjoy life in a hot, sunny land, but also accuses them of idleness and dishonesty. . . .Cross into northern Spain, and the clichés reverse. The north is cold and severe. Galicians are melancholic and Catalans proud and a bit miserly. The great bourgeois cities of the north, like Barcelona, look down on a backward south deemed too fond of fairs and fiestas to get anything done. To many Spaniards, these stereotypes are common sense: a reflection of real-world physical differences. But there is a hitch. Look at a map, and it becomes clear that one person’s north is another’s south. Take supposedly cold, northerly Barcelona. It lies some way south of the sun-baked, southern French city of Marseille, and enjoys almost the same climate.A similar reset may be experienced in Italy. By common consent, northern Italy is business-minded and a bit unfriendly; the south is Mafia-infested, inefficient and poor.  I’m not sure what to make of this.  One hypothesis is that cultural change is gradual and continuous, and that those in northern Spain and Italy are not really like the dour and business-like northern Europeans, they only seem that way relative to their compatriots in the south.  Another hypothesis is that people sort within each country, and that those who feel more comfortable with the culture of Milan or Barcelona migrate up there from the south. Later in the piece, a Vietnamese scholar is asked about Vietnam: By reputation, he says, northerners are more interested in politics and jobs in government, but southerners are drawn to commerce. Northern winters are very cold, he goes on. And because that is hard on farmers, life as an official is an appealing alternative. In the hot, tropical south, there is only a dry season and a rainy season. “They have an abundance of fruit and fish and rice, especially in the Mekong delta. So people don’t have to work as hard. So they are maybe a bit lazy,” says Mr Le. That is fascinating, I tell Mr Le from my office in Beijing, but also puzzling. For almost identical stereotypes—involving harsh winters that drive northerners into government, while southerners enjoy a life of ease—are applied to different bits of China. And here is another thing: on a map, China’s hot, southern, commercially minded regions lie above your frigid north. Mr Le pauses. “What is winter for Vietnamese people is maybe summer for other people,” he laughs. Any other ideas? PS.  Regarding North Vietnam’s “very cold” winters, I’d suggest that Mr. Le spend a January in Wisconsin, where I grew up. (0 COMMENTS)

The most painful part of writing The Case Against Education was calculating the return to education.  I spent fifteen months working on the spreadsheets.  I came up with the baseline case, did scores of “variations on a theme,”  noticed a small mistake or blind alley, then started over.  Several programmer friends advised me to learn a new programming language like Python to do everything automatically, but I’m 98% sure that would have taken even longer – and introduced numerous additional errors into the results.  I did plenty of programming in my youth, and I know my limitations. I took quality control very seriously.  About half a dozen friends gave up whole days of their lives to sit next to me while I gave them a guided tour of the reasoning behind my number-crunching.  Four years before the book’s publication, I publicly released the spreadsheets, and asked the world to “embarrass me now” by finding errors in my work.  If memory serves, one EconLog reader did find a minor mistake.  When the book finally came out, I published final versions of all the spreadsheets underlying the book’s return to education calculations.  A one-to-one correspondence between what’s in the book and what I shared with the world.  Full transparency. Now guess what?  Since the 2018 publication of The Case Against Education, precisely zero people have emailed me about those spreadsheets.  The book enjoyed massive media attention.  My results were ultra-contrarian: my preferred estimate of the Social Return to Education is negative for almost every demographic.  I loudly used these results to call for massive cuts in education spending.  Yet since the book’s publication, no one has bothered to challenge my math.  Not publicly.  Not privately.  No one cared about my spreadsheets. The upshot is that I probably could have saved a year of my life.  I could have glossed over dozens of thorny issues.  Taxes.  Transfers.  The effect of education on longevity.  The effect of education on quality of life.  The effect of education on crime.  How unpleasant school is compared to work.  Instead of reading multiple literatures to extract plausible parameters, I could have just eyeballed and stipulated for every tangential issue.  Who would have called me on it? Don’t get me wrong; The Case Against Education drew plenty of criticism.  Almost none of it, however, was quantitative.  Some critics appealed to common sense: “Education can’t be anywhere near as wasteful as Caplan claims.”  Some critics called me a philistine: “Education isn’t about making money; it’s about becoming a whole person.”  Never mind that I wrote a whole chapter against this misinterpretation.  A few critics bizarrely claimed that one recent paper had refuted my entire enterprise.  But as far as I recall, zero critics ever checked my math. The most novel feature of my return to education calculations was that I tried to count everything that matters.  I took the countless papers that start with the standard return estimates and tweak them with one novel complication.  Then I merged all the tweaks that seemed convincing to me to get final policy-relevant numbers.  If you wanted to use everything researchers know to craft optimal policy, that is precisely what you would do. In the end, however, I discovered that the true intellectual problem was not lack of supply, but lack of demand.  Education researchers don’t tweak standard return calculations to get the world closer to the truth.  They tweak standard return calculations to get another publication – then move on with their lives.  If the world handed out attention and tenure for synthesizing everything we know about the return to education, someone else would have done it long ago. It’s hard to avoid a disheartening conclusion: Quantitative social science is barely relevant in the real world – and almost every social scientist covertly agrees.  The complex math that researchers use is disposable.   You deploy it to get a publication, then move on with your career.  When it comes time to give policy advise, the math is AWOL.  If you’re lucky, researchers default to common sense.  Otherwise, they go with their ideology and status-quo bias, using the latest prestigious papers as fig leaves.  Empirical social science teaches us far more about the world than pure theory.  Yet in practice, even empirical researchers barely care what empirical social science really has to teach. (0 COMMENTS)

As I’ve often written, one of the most powerful ideas in economics is the idea of “thinking on the margin.” That applies to this year’s Super Bowl, Super Bowl LVI. Like hundreds of millions of people, I watched the Super Bowl yesterday. In case you haven’t heard, the Los Angeles Rams beat the Cincinnati Bengals by a score of 23-20 with a touchdown and a point after in the last 2 minutes of the game. When I see a score that close, I immediately think of margins. For a few minutes this morning, I watched Get Up on ESPN and although some of the commentary seemed well thought out, other comments showed little awareness of how a few little things could have changed the outcome. So, for example, commenter Dan Orlovsky thinks that Matthew Stafford, the winning quarterback, should be inducted into the NFL Hall of Fame. He might be right but his support leaned heavily on the idea that Stafford deserved it because he led the Rams to victory in the last 2 minutes. But at least one other commenter pointed out that it was defensive tackle Aaron Donald who cinched the victory with a sack of Cincinnati QB Joe Burrow in the last minute of the game. If I watched the game again, which I don’t plan to do, something for which my wife will thank me, I could probably find other important margins. One was a relatively tacky-tack penalty for pass interference against a Bengals defender on the Rams’ last touchdown drive, a call that, of course, automatically led to a first down and let the Rams continue their drive. Here’s how Berry Tramel of The Oklahoman describes it: Third-and-goal, Rams ball at the Bengal 8-yard line, 1:47 remaining in the game, Cincinnati up 20-16. Stafford threw across the middle to Cooper Kupp, but linebacker Logan Wilson dove and knocked down the pass. Then here came a penalty flag, for defensive holding. Replays showed very little. The Rams were facing fourth-and-goal from the 8-yard line, with the season on the line. Instead, LA scored four plays (counting three penalties) later. “Replays showed very little.” That was my take too. If the penalty had not been called, Stafford would have had only one more try to hit the end zone (unless, of course, on that 4th down they called another defensive penalty.) To his credit, Tramel points out an egregious non-call, one that my wife, who hates football, quickly noticed, but one that went unnoticed by the refs. Tramel writes: However, that didn’t cost Cincinnati the game. The Bengals were blessed by an officiating error. Burrow threw a 75-yard touchdown pass to Tee Higgins on the first play of the third quarter. Higgins grabbed cornerback Jalen Ramsey’s facemask, and quickly flung Ramsey out of the way, en route to the catch. No flag. So Cincinnati was on both ends of the NFL’s propensity to protect receivers at all costs – ticky-tack fouls on defenders in coverage, while ignoring egregious acts by receivers. Nope, can’t blame the officials for this one. Think on the margin. (0 COMMENTS)

I’ve done multiple debates with social democrats and avowed socialists.  Both groups unfavorably contrast the United States with Western Europe.  Social democrats tend to see Scandinavia as the pinnacle of human civilization.  Socialists usually hope for something more radical; “getting to Denmark” isn’t good enough for them.  But social democrats and socialists alike condemn the hard-hearted, Scrooge-like, laissez-faire United States. I have a standard reply.  Namely: Although I wish their description of U.S. economic policy were true, calling the U.S. “laissez-faire” is absurd – and they know it.  Even pre-Covid, the United States had Social Security, SNAP, unemployment insurance, Medicare, Medicaid, free K-12, heavily subsidized college, and many other redistributive programs. My opponents, too, have a standard reply to me.  Namely: If you actually look at the numbers, the United States government does next to nothing.  While it pretends to have a welfare state like other civilized countries, this is basically an illusion.  No matter how many programs I mention, the totality is just a rounding error designed to obscure the cruelty of American policy. My knee-jerk reaction is to go to the numbers.  The U.S. spends trillions on these programs every year; can they seriously deny it? On reflection, however, if someone is crazy enough to claim that all U.S. social spending is a rounding error, showing them numbers is probably a waste of time.  What I really ought to say is this: “If the U.S. welfare state is just a rounding error anyway, it wouldn’t make much difference if we simply got rid of it entirely, would it?  In fact, this might even be an improvement from your point of view, because the ruse of the status quo would be exposed.” Would this persuade my opponents?  Don’t make me laugh.  But however they respond, reasonable but undecided members of the audience will see them as hyperbolic if not dishonest.  And if you claim the U.S. “barely has a welfare state,” hyperbolic if not dishonest is precisely what you are. (0 COMMENTS)

[ANNUAL LISTENER SURVEY ends midnight EST, Feb. 14: https://www.surveymonkey.com/r/CQX28T6. Vote for your 2021 favorites!] Michael Eisenberg, venture capitalist and the author of The Tree of Life and Prosperity talks with EconTalk host Russ Roberts about the secret of the Start-Up Nation, the role of principles in investing, and why he’s optimistic about technology’s contribution to humanity. The post Michael Eisenberg on the Start-Up Nation, Storytelling, and the Power of Technology appeared first on Econlib.

When you think about it, this is a remarkable news item: Ford and GM have threatened sanctions on their dealers who, because the manufacturers themselves produce fewer cars, charge more to customers than the manufacturer’s suggested retail price (MSRP or “sticker price”). GM called them “bad actors.” Other car manufacturers have warned their dealers. (See “Ford and GM Warn Dealers to Stop Charging So Much for New Cars” Wall Street Journal, February 9, 2022.) Except for the saints, who are not many, sellers try to charge as much as the market will bear and buyers to pay as little as possible. Irrespective of the MSRP, which serves merely as a focal point, a market price is generated that equalizes quantity demanded and quantity supplied (in each sub-market, by brand, model, and trim). Until about one year ago, the final price paid in nearly all sales was below the sticker price. Because of lower car demand at the height of the pandemic and then of the so-called chip “shortage,” car manufacturers reduced their production. They could possibly have maintained it, but at much higher costs, notably by previously carrying higher stocks or by bidding up prices of the microprocessors available on the market. Not all producers of goods containing microprocessors reduced their production. Car manufacturers obviously believed that any alternative solution would reduce their profits more than cutting production. If marginal cost is higher than marginal revenue, a producer reduces his production: it’s economics 101. Reduced supply probably allowed manufacturers to charge to their dealers higher prices than they would otherwise have charged. To which extent they did it, I don’t know, but what we know is that many dealers, receiving fewer cars, were able to sell them at higher prices because customers bid up the prices. If the salesman thinks that a customer is willing to pay more, he will not accept a lower price from another customer. The reasons given by manufacturers to prevent dealers to let customers bid up car prices is apparently that it is bad for the brand reputation and will alienate customers. The brand justification is only an excuse, or it collapses into the alienation claim. If higher prices negatively affected brand reputation, lower prices would positively affect it. So why don’t the manufacturers reduce their prices to dealers? Indeed, why didn’t manufacturers cut them earlier? High prices as such are obviously not bad for a brand, otherwise BMW and Porsche would be in disrepute. In a free society, the manufacturers or the dealers or both will let consumers bid up the prices if the cars get scarcer (just as their competitors will bid them down if abnormal profits are realized). This is just a particular instance of a general phenomenon: the market is a continuous auction in which every consumer ends up getting what he wants if nobody else wants it more. The second justification—that higher prices will alienate buyers—is as suspicious as the first one. Why aren’t buyers antagonized by any price higher than zero? More importantly, one would think that, at least in a free society, customers would be more antagonized by the shortages, the queues, and the arbitrary allocation that follow from keeping prices below their equilibrium level. On a free market, some dealers can of course choose, for reasons of personal ethics, to eschew profits by selling some cars at lower prices than what they can get. We can even imagine some nice and saintly consumers who would choose not to buy the cars they want in order to leave them for somebody else. But the generalization of such behavior is unlikely—“unsustainable” as today’s cognoscenti would say—in a society of equally free individuals. Some will want to sell high (so-called “price gougers”) or to bid up prices to get what they want (egoistic consumers). In a free society, nobody would be forced to buy high and sell low, or be considered anti-social if he buys low and sell high. Is it possible that we now live in a society where a socialist culture is so widespread that producers and consumers all prefer waiting lines and that formal government price controls are not even necessary? The executives of Ford and GM seem to have descended to the level of the postal inspector who, during the worst Covid shortages created by government price controls, justified the arrest of a “price gouger” (who at least had some supplies to sell) by declaring that the conduct charged in the complaint is reprehensible and against our most fundamental American values. (0 COMMENTS)

Kenny G is a unicorn. He’s the best selling instrumental musician of all time. He is beloved by millions (and on the charts), yet the jazz community seems to hate him with an outsized vitriol. He is, as filmmaker Penny Lane suggests in her documentary, Listening to Kenny G, either loved or loathed. In this episode, EconTalk host Russ Roberts welcomes Lane to talk about her film and the phenomenon that is Kenny G. Kenny G has created the soundtrack of our lives… He even tells the Chinese when it’s time to go home. Is this a sweet (perhaps saccharine) social norm, or a creepy weapon of mass control? How can such  incredibly inoffensive music could cause such offense???     1- Roberts and Lane spend a lot of time discussing what constitutes art. Says Roberts, “…in the critical world, art is supposed to disturb you. It’s supposed to shake you up. It’s supposed to challenge you. If you like it right away, it’s not good art.” So is Kenny G’s art a failure? Is his music art???   2- Roberts recalls Adam Smith to suggest that while we  want our friends to like what we like, disliking the same things is much more important. To what extent do you think this is true, and how does it he,p explain these reactions toward Kenny G’s music? Roberts and Lane agree that Kenny G as an example of the sort of mass culture the United States used to have. Are they right that we’ve lost this sort of common culture?   3- Lane describes the seemingly unbridgeable gap between the public and Kenny G’s critics, notably Pat Metheny. What does she suggest the jazz community really has against Kenny G? What do you think?  Should the jazz community feel grateful to Kenny G, or should they distance themselves from him? Why?   4- Much is made in this conversation of Kenny G’s perfectionism- from how much time he spends practicing, to his ideas about what his music should sound like, to his dislike of surprises. What’s wrong with this approach to music? Lane reminds us that Kenny G was a rebel in the 1980s. (Recall the story of his appearance on The Tonight Show.) Roberts suggests that Kenny G needs some sort of challenge. What sort of challenge do you think he has in mind? What do you think Paul Bloom would recommend?   5- OK, the  moment of truth. Prior to this episode, did you love, hate, or just not think about Kenny G? What about now? As Roberts says in closing, “…I have a feeling, just an intuition, that in the next seven days after you’ve listened to this, listeners, you will stumble across a Kenny G song whether you know it or not.” Was he right??? (0 COMMENTS)

I have a new article at The Hill, which discusses various reasons why the Fed screwed up in the second half of 2021. Here’s an excerpt: I see at least three reasons for the Fed’s policy mistake. One was too much focus on closing the so-called “output gap” between actual real GDP and potential GDP, which is exceedingly difficult to estimate. . . . [second] At a press conference last month, Fed Chair Jerome Powell was asked if the Fed should aim for less than 2 percent inflation after a period of excessively high inflation in order to bring the average back down to the long-term target. Powell forcefully rejected that suggestion, directly contradicting the Fed’s new AIT policy. . . . The Fed’s sluggish response to economic overheating points to a third reason for its mistake: Officials were frightened by the market’s “taper tantrum” in 2013. As a result, they now prefer to signal policy changes very gradually.  Please read the whole thing. (0 COMMENTS)