In an era marked by increasing tensions over social justice, wealth redistribution, and the role of the state, it is wise to reflect on the roots of inequality and determine whether they are inherently unjust. From a free-market perspective, inequality can be seen not only as a natural outcome of economic dynamics but also as a condition that drives innovation, social mobility, and economic growth. However, we might ask: is this perspective ethically acceptable? In a free economy, economic disparities do not arise from centralized design but from voluntary interactions among individuals. Many factors contribute to these differences: Unique Skills and Talents: Each individual possesses abilities and knowledge that vary in demand and value according to the market. For instance, a specialized neurosurgeon may earn more than a farmer—not because the former is intrinsically more valuable as a person, but because the complexity and impact of their services are rarer and more sought after. Personal Preferences and Individual Sacrifices: Inequality also reflects individual choices. Some people opt to work long hours or take significant financial risks by starting businesses, while others prioritize work-life balance. These personal decisions have economic implications. Innovation and Value Creation: Entrepreneurs who develop groundbreaking products, such as Steve Jobs with the iPhone or Elon Musk with Tesla, accumulate significant wealth because of the benefits their innovations generate for millions of people. This perspective does not imply that all inequality is fair or desirable but rather that much of it arises from legitimate and ethical processes within a free-market system.   Is Inequality Unjust? The ethics of economic inequality can be addressed in terms of legitimacy. Legitimate inequality arises from meritocracy, innovation, and personal effort. For instance, when someone accumulates wealth by creating jobs or developing products that improve others’ lives, this wealth is not only ethical but also socially beneficial. Illegitimate inequality occurs when political or economic actors manipulate the system to gain disproportionate advantages. State-backed monopolies or policies that favor certain sectors at the expense of others are clear examples of unjust inequality. Robert Nozick argued that if inequality arises from voluntary exchanges and respects property rights, it should not be considered immoral. Therefore, the focus should not be on inequality itself but on the conditions that create it.   Wealth Redistribution: Solution or Problem? Redistributive policies aim to reduce inequality but often come with negative side effects: Economic Disincentives: High taxes on income and wealth can discourage hard work, investment, and innovation. Inefficient Resource Allocation: Redistributive policies often divert resources to government programs that may be less effective than private initiatives in addressing poverty. Institutional Dependency: Prolonged subsidies can foster structural dependency rather than empower individuals to overcome poverty. Milton Friedman argued that forced redistribution destroys the incentives for productive effort, ultimately harming both the poor and the rich in the long run.   Inequality and the Reduction of Absolute Poverty A key point in favor of the free market is its capacity to reduce absolute poverty, even if relative inequality persists or increases. Over the past 30 years, more than a billion people have escaped extreme poverty, primarily in economies that have adopted more open market policies. Although internal inequality has risen in many of these countries, overall well-being has improved significantly. In a free-market environment: Competition Drives Innovation and Job Creation: Historically, trade liberalization has allowed millions of people in developing countries to access higher-paying jobs in export sectors. Private Capital Fuels Growth: Investors seek opportunities in emerging markets, facilitating the transfer of technology, infrastructure, and access to quality goods and services.   The Crucial Role of Equality Before the Law In a free-market system, no one should receive preferential treatment from the state, whether through specific subsidies, protectionist regulations, or exclusive contracts. Justice is ensured when everyone competes under the same rules, economic outcomes more accurately reflect individual effort and the satisfaction generated by a product or service. Economic inequality in a free-market system is not necessarily an evil to be eradicated. Rather, it is an intrinsic feature of a society that values individual freedom, innovation, and the diversity of talents. However, this does not mean ignoring illegitimate inequalities, which must be addressed with transparent and robust institutions that protect property rights and fair competition. As economist Friedrich Hayek observed, social justice, in its pursuit of equalizing outcomes, risks sacrificing the freedom and prosperity that only the market can provide. In the end, the goal should not be to impose material equality but to ensure that all individuals have equal opportunities to reach their full potential, free from artificial barriers and state coercion.   Omar Camilo Hernández Mercado is a law student at the Universidad Libre de Colombia, Senior coordinator of Students for Liberty in Colombia, and a seminarist in “The Austrian School of Economics” at the International Bases Foundation.  (0 COMMENTS)

I saw an interesting tweet by Joe Weisenthal, discussing the question of what determines interstate migration: This is the classic chicken and the egg problem—which comes first? I view this question as an example of the fallacy of composition—what is true for the individual is not always true for the group.  I suspect that Weisenthal is correct that when specific people move they are motivated by the availability of jobs.   However, that’s not the entire story.  Jobs are also moving to specific states, mostly in the sunbelt.   And that migration is at least partly driven by the ready availability of labor fleeing areas with high housing costs, such as California. And housing is not the only factor.  Illinois is also losing residents, despite housing costs in that state being quite reasonable.  Taxes and regulations are also more business-friendly in states like Texas. When a firm considers where to locate a business, the availability of skilled labor is an important consideration.  Suppose that a firm is able to pay lower wages in Texas due to its lower taxes and housing costs.  In that case, a firm may decide to locate a new headquarters in the Lone Star State, even before a single new employee has been hired.  From the perspective of the individual worker, they see their move as motivated by job availability.  But the jobs are available precisely because employers know that there is a large inflow of workers into states like Texas, motivated by low housing costs and taxes.   At the aggregate level, it probably makes more sense to think in terms of employers following the workers—moving to where there is a large pool of workers willing to take jobs at a reasonable salary.  But at the individual level it is often he case that the worker is following the employer, moving to where the jobs are.   As is often the case in economics, it is an equilibrium phenomenon.  For instance, shoppers often like to visit an area that has a half dozen car dealers in close proximity, so that they can compare several different models.  Car dealers like to locate their dealership next to other dealers, because they know these areas have plenty of shoppers for new cars.  Are the dealers drawing the shoppers?  Or are the shoppers drawing the dealers?  In equilibrium, the answer is “both”.   (0 COMMENTS)

I was thrilled to join Nicholls State University student DJ Insomniac of KNSU Radio on his podcast “Philosophicast.” We discussed the history of economic thought from Adam Smith to Vernon Smith, and many things in between.  You can listen to the whole thing here. (0 COMMENTS)

Barry Lam’s Fewer Rules, Better People: The Case for Discretion raises a number of interesting arguments, and I think he makes a compelling argument for expanding the role of discretion. Early in the book, Lam suggests his argument would seem unappealing to libertarians, on the grounds that to the libertarian, “Top-down authority in general is suspicious, so more top-down authority given to bureaucrats is an evil.” But I think his argument can be framed in a way that would be far more appealing to libertarians, particularly those of the Hayekian variety. What is of great concern to a Hayekian liberal or libertarian isn’t just top-down authority per se – it’s centralized, concentrated authority that attempts to make an entire society operate by a one-size-fits-all plan. Lam’s argument that on-the-street level bureaucrats ought to have more discretion to decide whether or how a particular rule applies to particular circumstances would make authority less top-down and centralized – the locus of decision-making becomes far more dispersed than otherwise. This dispersion of decision-making authority, in a way that allows decisions to be made according to particular circumstances of time and place, is actually very congenial to a Hayekian libertarian. In the same way, Lam’s argument that discretion is necessary to make the best use of dispersed information is a textbook Hayekian insight – when Lam speak of discretion holding the advantage of “thousands of individuals making thousands of decisions based on the thousands of micro-situations they encounter,” he’s describing an idea that could easily have come straight from Hayek’s The Use of Knowledge in Society.  Lam’s argument also neatly accommodates the wisdom found in the idea of Chesterton’s Fence. Some people naively oversimply Chesterton’s Fence as the idea that the existence of a rule is proof positive that a rule is justified or valuable. But this was not Chesterton’s point. He said that a mere lack of understanding regarding the point served by a rule (or tradition, or fence) is not itself evidence that the rule (or tradition, or fence) is without value and should be discarded. As Chesterton put it, There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.” Chesterton is saying that we must first understand the reason the fence was put up, and only then does it make sense to talk about taking it down. In the same way, Lam frequently talks about the reason behind the rules. Lam wants people to think about the purpose the rule was meant to serve, and once they understand that purpose, to think about how it best applies to the situation at hand. Understanding this allows us to recognize when applying the rule as written fails to serve that function, or actively works against it. Those who are merely trained to follow a rule because it’s a rule can often end up sabotaging the very purpose for which the rule exists in the first place – and never realize that’s what they are doing. Lam’s argument that the by-the-book bureaucrat is every bit the threat to freedom and human flourishing and liberty as a tyrant resonated with me. Douglas Adams imagined what an entire alien species of by-the-book bureaucrats would be like. He described that species, the Vogons, in the following way: They are one of the most unpleasant races in the Galaxy—not actually evil, but bad-tempered, officious and callous. They wouldn’t even lift a finger to save their own grandmothers from the Ravenous Bugblatter Beast of Traal without orders signed in triplicate, sent in, sent back, queried, lost, found, subjected to public inquiry, queried, lost again, and finally buried in soft peat for three months and recycled as firelighters. A nonfiction description of what it’s like to live under the rule of the by-the-book bureaucrat was brilliantly written up by Scott Alexander, describing his experience attempting to carry out a very basic medical study under the supervision of an Institutional Review Board. While it was no doubt a terribly frustrating experience to go through, Scott Alexander manages to describe it with the humor of a Dave Barry essay (high praise, from my perspective). It’s well worth a read, if you have the time. I’ll just briefly describe one of the hurdles he faced. Apparently, for Alexander’s study, patients would sign their forms with pencil, but according to the IRB forms needed to be signed with pens. Alexander explained to the IRB that this was because patients at a mental hospital weren’t allowed to use pens because maybe they’ll doing something mentally unstable like stab themselves in the eyes. (Apparently according to The Rules™, it’s okay to risk someone stabbing themselves in the eye with a pencil but not a pen.) And the response from the IRB was that even though patients were indeed not allowed to handle pens, and they would continue to not be allowed to use pens and were only allowed to use pencils, this was not a good reason to allow them to sign forms with pencils and the patients must sign the forms using pens. Don’t blame us, we’re just Following The Rules™! Another important point I think Lam gets right is how legalism (and Legalism) can both lead to the moral and mental stupefaction of both enforcers and the obedient. One of my favorite ideas put forth by the late James C. Scott is what he called anarchist calisthenics – the purposeful cultivation of a rule-breaking spirit in cases where following the rules makes no sense. He describes this idea to a hypothetical German listener in the following way: You know, you and especially your grandparents could have used more of a spirit of lawbreaking. One day you will be called on to break a big law in the name of justice and rationality. Everything will depend on it. You have to be ready. How are you going to prepare for that day when it really matters? You have to stay ‘in shape’ so that when the big day comes you will be ready. What you need is anarchist calisthenics. Every day or so break some trivial law that makes no sense, even if it’s only jaywalking. Use your own head to judge whether a law is just or reasonable. That way, you’ll keep trim—and when the big day comes, you’ll be ready. In the same essay, Scott describes an unfolding idea in favor of improving traffic coordination and efficiency by removing traffic lights. He cites the case of a traffic engineer in the Netherlands named Hans Monderman, who removed “the busiest traffic-light intersection in Drachten, handling 22,000 cars a day.” This led to the following result: In the two years following the removal of the traffic light, the number of accidents plummeted to only two, compared with thirty-six crashes in the four years prior to the redesign. Traffic moves more briskly through the rotary, since all drivers know they must be alert and use their common sense, while backups and the road rage associated with them have virtually disappeared. Monderman likened it to skaters on a crowded ice rink, who manage successfully to tailor their movements to those of the other skaters. Scott argues that this system worked better precisely because it required drivers to be attentive to their circumstances and engage with what they were doing relative to others, in a way that drivers simply never engage when they passively allow their movements to be dictated by lights and signals: Red-light removal can, I believe, be seen as a modest training exercise in responsible driving and civic courtesy. Monderman was not against traffic lights in principle; he simply did not find any in Drachten that were truly useful in terms of safety, improving traffic flow, and lessening pollution. The traffic circle seems dangerous—and that is the point. He argued that when drivers are made more wary, they behave more carefully, and the statistics on “post–traffic light” accidents bear him out… The shared-space concept of traffic management relies on the intelligence, good sense, and attentive observation of drivers, bicyclists, and pedestrians. At the same time, it may actually expand, in its small way, the capacity of drivers, cyclists, and pedestrians to negotiate traffic without being treated like automata by thickets of signs (Germany alone has a repertoire of 648 distinct traffic symbols, which accumulate as one approaches a town) and signals. Lam argues that embracing the use of discretion, in a similar way, forces us to relate to people as people, to think about what we are doing and why and how it impacts others, and to consider the full point and purpose of why things ought to be done in a particular way. Yes, sometimes the attempt will fail, maybe even fail badly – but it’s important that such attempts are still made. A world filled with people who never even try to make this effort is a worse world, both in character and in consequences. Humanity would not be improved by becoming more like Vogons. I also think Lam is right that there is something self-defeating in trying to keep discretion at bay by making rules increasingly precise. Lam is a philosopher, not an economist (not that there’s anything wrong with that!), but he makes an argument that can be put in terms of diminishing and negative marginal returns. Recall the “guidance value of law” that Lam cites. The guidance value of a law is how clearly helps people understand what kind of behavior is within bounds, and what kind of behavior crosses the line. If a law is too vague, it has poor guidance value. Making the law more precise increases the guidance value of the law – but only to a point. As rules become more detailed, you get less bang for your buck in guidance value. A rulebook that’s twice as long and detailed may provide additional clarity, but it won’t provide twice as much clarity. But, the first law of bureaudynamics also pushes laws and rules to continue to get more complex and more detailed – and that moves the guidance value of the rules into negative marginal returns. A rulebook that’s a thousand times longer doesn’t merely fail to provide a thousand times the guidance value – it will actually provide worse guidance value than a shorter, less precise rulebook, because it becomes too lengthy and cumbersome to understand. So overall, I think Lam is really on to something important and makes a number of good points. Still, I do find places where his arguments have room for pushback, as well as places where there are counterpoints that need to be considered. I’ll review some of those in my next post. (0 COMMENTS)

A recent Bloomberg article by Dan Wang and Ben Reinhardt had some interesting things to say about US manufacturing. Instead of high tariffs, they suggested that the US encourage foreign investment into facilities producing goods in America.  I particularly liked this paragraph: But the more that Trump makes the country captive to his impulses—whether on trade policy, immigration or the treatment of investors—the more likely that it won’t be China that’s isolated from the rest of the world, but America itself. But what if the entire premise of the article is false.  Is it possible that the US is not in fact falling behind in manufacturing?  Given all of the stories about the hollowing out of the Rustbelt, that optimistic view seems a bit far-fetched.  But consider this graph provided in the Bloomberg piece: It is important to recall that China has more than 4 times America’s population.  Thus in per capita terms, American manufacturing output is more than two and a half times larger than that of China.  Indeed in per capita terms the US leads every single country on that list, except for Germany (which has 1/4th our population).  We even lead countries like Japan and South Korea in per capita manufacturing output, despite their impressive export sectors.  I suspect that people underestimate American manufacturing because it is a relative low share of GDP.  But that doesn’t reflect that fact that our manufacturing sector is doing poorly–it isn’t–rather that our other sectors are so productive that out total GDP per capita greatly exceeds that of almost all other countries.   A recent article by Gary Winslett showed that the decline in the Rustbelt was largely caused by a re-allocation of industry to other regions, especially the Sunbelt.  Another article by Ben Glasner showed that workers in manufacturing are actually more likely to be college graduates than workers in other sectors of the economy.  American manufacturing is doing far better than many people assume. PS.  The strong dollar may somewhat overstate our manufacturing strength.  But recall that manufactured goods are often traded internationally, and hence “PPP” type adjustments are much less important than in the service sector. (0 COMMENTS)

Writing at the Hoover Institution’s Defining Ideas publication (“Clearing the Air on Tariffs and Deficits,” 24 April 2025), co-blogger David Henderson mentions two plausible arguments for a non-zero tariff.  One of those is within an optimal tax regime: One other intellectually respectable argument for tariffs is that they are part of an optimal tax structure. Our federal government taxes many things: individual and corporate income, capital gains, commodities like gasoline, etc. How can we be sure that a positive tax rate on imports is not part of an optimal tax system? We can’t. We do know that the deadweight loss, which is the overall loss from the tax minus the gain to the government, is proportional to the square of the tax rate. For example, doubling a tax rate quadruples the deadweight loss. So, it could be true that reducing the top marginal tax rate on income from its current 37 percent to, say, 35 percent, and replacing it with a 5 percent tax on imports could reduce overall deadweight loss. I want to expand on David’s discussion and discuss what I think is a unique aspect of tariffs that makes them more than just some other tax.  But first, it is worth using this opportunity to dispel a common myth about free markets and free trade.  Free markets do not mean zero taxes (including tariffs).  Rather, free markets to me mean non-distortionary taxes.  In other words, taxes should seek to raise revenue in as neutral a manner as possible.  Any taxes will have some distortionary effects, to be sure, but the goal is to minimize them as much as possible.  To put it in Adam Smith’s words (emphasis added): All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord…The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society (Wealth of Nations, Book IV, Chapter IX, paragraph 51, pg 687). Smith would go on in Book V (Chapter 2) to lay out his maxims of taxation, which would (in his theory) lead to minimal distortions: taxes should be proportional, taxes should be certain and not arbitrary, taxes should be levied at a time convenient to the payer to pay it, and taxes should be contrived to take as little as possible. (To this last point, he adds protective tariffs as a clear violation of this maxim). So, to wrap up this digression quickly: free markets do not imply no taxes.  A government can co-exist with a free market.  Likewise, tariffs can co-exist with free trade.  What makes taxes and tariffs bad is when they are distortionary and non-neutral. That is: when they attempt to direct the economic activity of people.   Now, back to the main topic: tariffs are unique among taxes.  The vast majority of taxes are purely domestic.  However, tariffs are taxes imposed on imports.  Thus, they are international.  With domestic taxes, how they might be perceived by other governments is irrelevant (unless you have a leader who doesn’t understand the tax, as when they believe that a VAT is an export subsidy).  However, tariffs can be seen as a political threat even when not intended as such.  It’s possible, then, that another country’s government retaliates, thus rendering a tax that would otherwise be optimal suboptimal.  Indeed, this threat of retaliation has long been discussed as a fundamental problem of optimal tariffs.  In his 1987 article “Classical and Neoclassical Roots of the Theory of Optimum Tariffs,” Thomas Humphrey notes that even initial theorizers of the optimum tariff (such as JS Mill) mentioned that a major failing was other countries retaliating (see page 27).  Thus, a theoretically optimal tariff may be practically suboptimal if it is misinterpreted by other governments.  The same threat does not exist with domestic taxes. In a slightly different context, Edwin van de Haar writes of a security dilemma among countries (emphasis added): In a world devoid of a supreme authority, all states face a security dilemma (Booth and Wheeler 2008). This means that they cannot count on the existence of a stable and peaceful order, even if such an order would be best for general human well-being. There is always the threat of a state, or a group of states, taking advantage of the absence of a global government. The security dilemma is therefore existential. States need to take care of their own security, first and foremost militarily, if they want to survive. Leaders and elites can never be certain about the intentions of leaders of other states, even when they have no intention of harming any other state. In the same vein, weapons that are procured purely for self-defence can be seen as offensive by others. Perceptions matter a lot in a world of uncertainty  (Human Nature and World Affairs: An Introduction to Classical Liberalism and International Relations Theory, pg 78). Consequently, a nation building its military for self-defense could accidently put itself at a greater threat of invasion if the build-up is misunderstood by other governments.  We can see the same dilemma with tariffs; call it a tariff dilemma.  A tariff may be part of an optimal tariff scheme, but if it is misperceived by foreign governments as an aggressive action, such an optimal tariff could invite retaliation, making the optimal tariff suboptimal.  As is often the case with such policies, we subsequently see increases in rent-seeking and lobbying as domestic firms try to get subsidies or protections from these retaliations, consequently adding more distortions into the system. [1] Taking into account all these political distortions, it may be the case that the optimal tariff is, indeed, 0%.  To build on David’s example quoted above, absent retaliation, a 5% tariff with a 35% top marginal tax rate may be optimal absent tariff retaliation.  But, if there is retaliation, then it may be the case that the 37% with no tariff is actually optimal. At the end of the post, David wonders why the Trump Administration hasn’t tried to justify tariffs as part of an optimal tax system: Surprisingly, I have not seen any of Trump’s economists make this case. Maybe that’s because to do so would be to admit that tariffs are taxes and that taxes impose costs on those who are taxed. Is it just possible that Trump wants his supporters to be as ignorant of the cost of tariffs as the MAGA dairy farmer in upstate New York was? Since David has written those words, the Administration and its allies have started to admit that tariffs do impose costs, although the messaging is inconsistent.  And I do not disagree with his assessment either.  There is always an incentive to obfuscate the costs of political projects. But let me propose another reason why the “optimal tariff” discussion hasn’t come up: the Trump Administration is openly and shamelessly mercantilist.  The repeated attacks on trade deficits indicate the Trump Administration’s tariff scheme is focused on distortionary political goals, not any sort of optimal taxation.   — [1] On a related note, Dom Pino writes that lobbying is up some 277% over last year because of tariffs.  The man who wanted to “drain the swamp” is making it deeper (0 COMMENTS)

  Frequent commenter Monte, who commented on my blog post titled “Mind Your Own Business!”, asked “Do Libertarians believe that government should play a role in setting limits on self-ownership?” I didn’t answer in the comments because I think the question is of more-general interest, and only a small percent of readers read the comments. I’ll start by pointing out 2 important distinctions. First, the word “Libertarian” with an “L” is usually used to refer to people who are members of the Libertarian Party, whether here or in Canada or in other countries with Libertarian Parties. I haven’t been a member of the Libertarian Party for at least 3 decades. So I’ll answer as if Monte asked about small “l” libertarians. Second, I’m only one libertarian and so I’ll answer about my views. Other libertarians may have other views, although I think there’s a large amount of agreement. Now I’ll answer the question Monte asked as if he were asking my view. The basic answer is No, for all adults of sound mind. The exceptions are for children and for adults who are not of sound mind. If you say, “Wait a minute; you haven’t completely answered,” you’re right. Specifically, what’s the age limit for defining a child? My answer is 18, but I realize that that’s arbitrary. I remember David Friedman being asked this question after a speech. He pointed out that the answer “Someone is not a child if he/she can make mature decisions” is not a good answer. He noted that some people make a lot of bad decisions when they’re 30 and others make mainly good decisions when they’re 14. Let’s say that we settle on the age 18. What happens when, say, a 14-year-old wants to get the surgery to transition to a different gender? The surgery is pretty much irreversible. Should that 14-year-old be able to choose it? I say no. Will that mean that there will be 18-year-olds who missed their chance to get the surgery when they were 14 and regret that? Yes. But it also means that many people will be glad at age 18 that they didn’t get the surgery at age 14. If you agree with me that 18 is the cutoff, there’s still the issue, for those under age 18, of who gets to decide for the child. Chase Oliver, the Libertarian Party’s candidate for president in 2024, believed that the parents ought to be able to decide. I’m not sure about that. The question I ask people who agree with Oliver is: “If a 14-year-old wants to ingest heroin or meth, and the parents think it’s alright, should they be able to allow the child to do so?” After all, surgery for gender transition is way less reversible, typically, than the effects of heroin. How about not of sound mind? Would someone with an IQ of 40 be of sound mind? I think not. But you can see that this is arbitrary. Would I have a good argument against someone who said the cutoff for IQ should be 30? 50? No, I don’t. (0 COMMENTS)

John Stuart Mill famously wrote, about pushing principles to the extreme, that “unless the reasons are good for an extreme case, they are not good for any case” (On Liberty). This is not obvious, for extremes often produce antinomic or non-generalizable results. One may perhaps affirm that stealing $25 from Elon Musk without anybody knowing (I suspect that Musk rounds up his accounting figures to the nearest thousand) and giving it to a very poor family for a meal at McDonald’s would increase the latter’s utility more than it would decrease the former’s. But in less extreme cases, it becomes obvious (or so I argue with many if not most economists) that any concept of “aggregate utility” is meaningless because interpersonal comparisons of utility are scientifically impossible. As Anthony de Jasay kept repeating, it’s “my say-so against your say-so.” (See also my review of Lionel Robbins’s 1935 An Essay on the Nature and Significance of Economics.) Some principles or “laws”—such as the impossibility of interpersonal comparison of utility—may be considered absolutes, but they are only “relatively absolute absolutes” (to use James Buchanan’s expression) and may break down in extreme cases. A Cretan’s statement that “all Cretans are liars” is antinomic: either it is true, which implies it is false; or else it is false, which implies it may be true. But, as Anthony de Jasay observes with his usual common-sense, down-to-earth approach, when we say in ordinary discourse that all Cretans lie, we are not literally meaning it; we metaphorically mean that most of them lie. This helps de Jasay build his argument for the possibility of private production of “public goods” in anarchy by ruling out extreme cases. If, concerning a given public good, all potential customers believe that none of them will free-ride (refuse to contribute or subscribe to the public good), then all of them will free-ride. In reality, some potential free riders will bet that some will free-ride and others not, and will cautiously decide to subscribe in case their own contributions could be decisive for the production of a public good they intensely want. (See de Jasay’s Social Contract, Free Ride, which I reviewed in Regulation.) It may be a general phenomenon that, in our universe, extremes are puzzling or antinomic, at least for our limited minds. Mathematical infinity is an extreme that is difficult, if not impossible, to manipulate. But “tending toward infinity” is a useful concept. It is essential for calculating the present value of a perpetuity (or its special cases of a perpetual bond or a consol) as the recurrent coupon divided by the discount rate. Thinking about a nearly omnipotent God may provide solutions to every problem, but an infinitely powerful God produces the “omnipotence paradox”: Can God create a rock so heavy that he cannot lift it? Aquinas answered that God is only omnipotent in “possible things,” in “whatever does not imply a contradiction.”—Summa Theologica, Part 1, Question 25, Article 3. So even God, it seems, cannot go to the extreme of canceling logical contradictions. Needless to say that a human government cannot be omnipotent, but it can cause much damage by moving in that direction. The problem remains to find where the extremes are and to identify the extreme cases that cannot be used to test a theory. In some instances at least, identification is possible—for example, when a variable goes from 0% to 100%, as for the proportion of the Cretans who lie or the voluntary subscribers to a “public good.” ****************************** “Woman walking toward infinity” (0 COMMENTS)

Barry Lam’s Fewer Rules, Better People: The Case for Discretion makes a series of second-order arguments for why discretion based on the spirit of the law should be expanded over legalism according to the letter of the law. But he doesn’t just make arguments for why things should be different from how they currently are. He also offers a series of concrete suggestions for how to implement this expansion in the scope of discretion. His first suggestion is to make the use of discretion an official, rather than implicit, part of all bureaucratic structures: (1) Build discretion into all top-down mandates, essentially allowing for exceptions. This is justified by the simple recognition that no rule will ever be constructed that brings about the best solution without exception: We should allow street-level bureaucrats to make exceptions in the cases where morality requires that they be made, in the cases where shoplifting isn’t a jailable offense or where a particular drug possessor does not deserve ten years in prison or where purchasing Starbucks coffee is not a corrupt act. No matter that a rule maker can’t envision an exception, it will arrive, so give selective discretion to your enforcers. From making selective discretion official, Lam moves onto his second idea: (2) Live with interpretive discretion. Lam specifically says this is something we must “live with” because it unquestionably comes with its own downsides. Still, Lam argues that allowing for interpretive discretion is better overall, while also encouraging us to develop our moral and social capacities: In my own life, I have come to embrace the virtues of vague rules, knowing full well their pitfalls, that is, bad calls made by mediocre people… I have also become a fan of vague house rules such as “do chores in a timely way” and “keep rooms in reasonable order.” Sure, there will be arguments and charges that the chore doer is exploiting a loophole or the enforcer is being arbitrary and nitpicky. People are not completely aligned in their interpretations of timely and reasonable, but the rules develop a person’s knowledge of their own boundaries of timeliness and reasonableness, while forcing them to think about other people’s boundaries. These kinds of rules require thinking about other people, precisely what living together demands. Lam’s third idea calls back to his second law of bureaudynamics – the idea that pressures to remove discretion are always stronger than pressures to grant it. To account for this, Lam makes the following suggestion: (3) Build mechanisms into the rules and the system that periodically restore discretion as a check on the excesses of legalism, such as earned-discretion clauses. Earned-discretion clauses allow those who demonstrate the ability to use discretion well to gain more discretion, while maintaining bounds on the discretion of those who fail to demonstrate the same ability. One example Lam gives is of an officer who has no excessive-force complaints compared to another officer with many – the first would be allowed more discretion while the second would be more restricted. This is meant to work to the benefit of citizens: Earned discretion gives a way to grant those with wise judgment more power to exercise those judgments when needed. This is not to benefit the wise bureaucrats, but to benefit us, the people they serve. This is made explicit in Lam’s next idea: (4) Give all enforcers a discretionary budget, an ability to exercise selective, interpretive, or adjudicative discretion up to a certain limit and allow increases in that budget as they show a reputation for good judgment. Lam sees this as a compromise that still allows some of the real benefits of legalism to be preserved: One benefit of this system is that legalists can have it their way; the mediocre can continue to trudge along in their by-the-book roles without the power to bring down the entire bureaucracy. However, those who have displayed excellent judgment, the Confucian ideal, will not be hamstrung by mandates, bad rules, or poorly designed systems that do not allow people in the system to make exceptions to rules. But discretion must also come with accountability. In a legalist system, those who simply apply the rules by the book face no accountability when they inflict harm by enforcing bad rules, and never have to offer any explanation for their decisions beyond mutely gesturing at some policy manual. In a world with discretion, however, they will have to be able to explain themselves if questioned and should be able to do so: (5) Bureaucrats ought to have – and citizens are entitled to know – specific moral decision-making frameworks that govern their discretionary decision-making, so we do not hire only by-the-book bureaucrats who have no way of seeing outside the rules of their organization. This isn’t just to let bureaucrats know they will be accountable for the choices they make. It is also to encourage the citizenry to expect – and demand – better from civil servants than simply repeating a rule that’s been written down for them: Under legalism we expect nothing of our bureaucrats. With restored discretion we should expect a lot more. Accountability is all the more important because discretion does come with the risk of real downsides – the fact that discretion is allowed cannot by itself be wielded as a proverbial “get out of jail free card”: Discretion means the opportunity for bad, even catastrophic, decisions. Just because a bad decision is allowed by discretion does not mean people who make those decisions cannot be held accountable for them. To this end, Lam suggests that bureaucrats with discretion should be under continuous examination: (6) In the same way that professions have codes of ethics and professional associations have ethics boards, there should be ethics boards that evaluates discretionary decision-making and informs bureaucrats of how they are falling short. It should be possible to remove individuals for patters of egregious moral errors, even if discretion legally permits them. Lastly, discretion is not like a fixed rulebook – it is a constantly evolving process. Bureaucrats should be trained to think of discretion as an art requiring consideration and judgment, rather than a fixed process of mechanically applying rules and clauses: Discretionary decision-making, when considered a practice, rather than a necessary evil, should make us use all of the same tools as other practices. Thus Lam’s final suggestion for integrating greater discretion into decision-making: (7) There should be regular training in the latest best practices in areas in which people have discretionary power so that decision-making is informed by the best available empirical evidence. All of these suggestions are meant to help move institutions above their current level of performance. Lam does not think that legalism is bound for catastrophe, but he does think it’s at best mediocre and we can and should do better. And the way to do better is by recognizing the value of human agency, judgment, and the ability to distinguish differences in circumstances rather than treat different situations by an one-size-must-fit-all mandate: True, [legalist bureaucracies] are better than the worst fears of political philosophers. They are better than famines, tyrants, civil wars, and the complete lack of civil institutions. But that is a very low bar. If you have ever been trapped inside a sprawling bureaucracy, sent to one by-the-book bureaucrat after another to get a permit, medical procedure, or reimbursement approved, you will know how low everyone’s expectations are. You will know how helpless everyone inside of that system feels. We’re sorry, they will say, but this is the system, these are the rules, we all have to work within them. No, we do not. We do not have to treat human agency like a venom to civil society, sucking and draining every last bit of it from the institutions that matter most. We can instead treat agency and the cultivation of its virtuous practice as essential to all people in all jobs, especially the jobs of people in power. This wraps up my outline of Lam’s argument. In my next post, I will highlight the areas where I most agree with Lam and think his arguments are strongest. After that, I will offer some criticisms and pushback against other points he makes, followed up with one last post summarizing my overall take on his book. (0 COMMENTS)

  In two EconLog posts (“Canada’s Decline in Press Freedom,” August 24, 2021, and “Canada’s Decline in Press Freedom, Part 2,” December 14, 2021), I documented the fact that Canada’s federal government under Justin Trudeau was subsidizing journalism. This is an attack on press freedom. As I wrote in an article on this same issue in 1971, freedom of the press does not guarantee that someone will subsidize your press any more than freedom of speech guarantees a working larynx. When government subsidizes the press, it has to choose whom to subsidize. That’s no different in principle from levying a special tax against other members of the press. As I noted in the December 14, 2021 post, those who got subsidized needed only one customer, the politician in charge of the program. I recently learned that California’s governor, Gavin Newsom, started a similar program to subsidize journalism in California. That’s the bad news. Here’s the good news. Because California’s government is facing a $12 billion budget deficit, Newsom is proposing to cut the state subsidy to “California newsrooms” from the promised $30 million to $10 million. It’s not enough of a cut, but it’s a step in the right direction. (0 COMMENTS)