The Washington Post recently invited some people to offer ideas on how to fight inflation. A majority of these suggestions aren’t just bad, they are stunningly bad. Behold! Robert Hockett recommends that the government makes America produce again. The president and White House Cabinet, in consultation with experts from industry, should plan a national reindustrialization across industries in every region of the country, and the Federal Financing Bank within Treasury can fund projects devised by all relevant federal agencies. We can once again make the United States the world’s workshop for democracy. That will reverse not only inflation, but also four decades of decline. If this sounds like a good old industrial policy, that’s because it is. Why it never works see this, and this, this, this, this, this and this. And those people who think that the best way to ‘fight’ China is for the U.S. to adopt Beijing’s anti-market/pro-industrial policy approach, check this out. Lauren Melodia recommends government-subsidized child care to address … …our nation’s complex history of underfunding, undervaluing and under-compensating care work and women’s labor more broadly [generating] the gender pay gap … where they make 83 cents on the dollar to men. … [T]he child-care industry is built around low wages and thin, unsustainable profits that have contributed to the failure of the market to deliver a greater supply of child-care centers to meet demand. Lastly, the government’s existing consumer subsidies program, while making child care more affordable for many, has not resulted in the growth of the supply of child care. It would take too long here to correct all the fallacies and the overall economic illiteracy in Melodia’s allegations about a ‘pay gap’ and other market ‘failures.’ It’s also amazing that some truly believe that constraining the supply of child care through minimum wage and other requirements was ever the way to address high prices. Some reading on this particular question can be found here, here and here. Oh, and don’t miss  this warning from the Cato Institute’s Ryan Bourne about letting the government take over child care. William Spriggs recommends more taxes on wealthy investors. The economy proved far less resilient to the shock of the global coronavirus crisis than most people had expected…. A tax on short-term capital gains and dividends would disproportionately target wealthy Americans who are currently responsible for very high demand. This would alleviate the pressures on the supply chain without leading to a broader economic slowdown. This passage would be funny if it weren’t so depressing. The economy proved itself to be remarkably resilient considering that the government ordered much of it shutdown, and then created all sorts of disincentives to return to normal at a time when people were panicked about getting sick. As for the idea that class-warfare taxation is the solution to inflation, read Dan Mitchell here. Lindsay Owens recommends antitrust intervention: [N]o one is claiming that taking on corporate consolidation and profiteering will “fix” inflation on its own…. corporate concentration has hollowed out and nearly eliminated redundancy in our supply chain… This extreme consolidation has also left us with a bare-bones workforce and just a handful of companies in industries that are absolutely essential to the functioning of our supply chains. Second, monopolies leave us more vulnerable to price-gouging, collusion and pandemic profiteering. … The whole thing is amazing, including the language of profiteering. I am the first one to complain about cronyism, but in my view it’s the existence of government’s ability to grant corporate privileges that creates such noxious business behavior. Upon reading things like this piece, there is a part of me that wishes that these economically ignorant people experience life in alternate universe where all their favorite government policies are implemented. In any case, a few things on this here, here and here. Todd Tucker recommends price controls: There are some sectors where price controls have particular appeal — in monopolistic or otherwise highly concentrated industries; for products and services essential to human flourishing; and in “upstream” sectors that produce the inputs many other industries use. I wrote about Tucker’s proposal here. But of all the many wackadoodle analyses in the Washington Post piece, the wackiest-doodliest is the one offered by Darrick Hamilton and Derreck Drummer, who assert that inflation is a plot to hurt Progressives: We are nowhere near an inflation crisis. The real pain families are feeling from price increases today is not a result of stimulus spending. Rather, it is structural — the result of policy failings and an economic policy infrastructure that has been for years designed to keep wages low and enable the hoarding of economic resources by the super wealthy and the upper-middle class. To be clear, we do not want to see hyperinflation. But the political anxiety around inflation is a straw man intended to curtail a progressive agenda.   I think this one speaks for itself.   (1 COMMENTS)

New-York based Strategas Asset Management believes that lobbying is so profitable for corporations that it launched an EFT (exchange-traded fund) based on the stocks of the most lobbying-intensive companies. “If it works,” notes a Financial Times journalist, “small investors will now at least be able to grab their share of the spoils” (Steve Johnson, “Corporate lobbying ETF seeks to profit from influencing politicians,” Financial Times, February 7, 2022). Dan Clifton, lead portfolio manager of the new EFT (symbol: SAGP), defends the ethics of lobbying with a simple argument. Everybody (or at least every group) can be involved: The beauty of the American system is that everybody is involved. NGOs, labour unions … I would argue there might be more power on that side than on the corporate side. We believe in lobbying. It helps avoid mistakes. If you are not at the table, you are going to be on the menu. At any rate, he adds, “we don’t make the rules, we just figured out there was alpha there.” (“Alpha” is a finance term meaning excess returns over and above the average return on financial markets.) This remark is interesting in itself: many people think that the system is so stable that they can try to game it as much as they want in their own interests and no systemic consequences will follow. In a free society, it is true… up to a point. The existence of government lobbying is easy to explain. One doesn’t lobby a pauper, but only a person, group, or organization that has much to give away. The more government has to give in terms of money or privileges, the more profiteers will come to eat at the trough. The bigger the treasure, the more treasure hunters and the more resources they will spend in their quest. We expect government growth to be accompanied by an expansion of lobbying and, in turn, the latter to fuel the former. This last point (the effect of lobbying on the size of Leviathan) only applies to “bad” lobbying. “Good” lobbying is the sort that companies and other participants in the economy do to protect themselves against the higher taxes or competitive handicaps imposed on them by the bad lobbying of their competitors. For example, objecting to a competitor’s subsidy or market protection (regulations that restricts entry into the industry) would be good lobbying. Bad lobbying, also called rent seeking, consists in trying to gain privileges for oneself to the detriment of others. But why is rent seeking bad? As well studied by public choice economics, rent seeking has wasteful economic consequences. If producer A obtains a production privilege (say, a subsidy) that harms producer B, the latter may be tempted to ask for a compensating privilege (a subsidy or some other privilege for itself). In this special case, the net result would be that none of the two producers get any net benefit, but the taxpayer ends up paying the bill with some “deadweight loss” given the reduced incentives to work or other distortions. If all producers in an industry obtain a subsidy, the lower prices and increased quantity demanded that follow will divert resources away from other industries, which wastes scarce resources on producing a good that is, in reality, more costly (a deadweight loss again). Disadvantaged consumers or producers will try to get some compensating privileges. As co-blogger David Henderson explains about rent-seeking expenditures by businesses, Although such an expenditure is rational from the narrow viewpoint of the firm that spends it, it represents a use of real resources to get a transfer from others and is therefore a pure loss to the economy as a whole. And as Mr. Clifton suggested above, if you don’t try to devour your competitors through lobbying, they will eat you up with the government’s teeth through their own lobbying. An unlimited democracy is a real political jungle. As rent seeking spreads, each company or individual is harmed and harms others, in multiple and convoluted ways. In this churning, an individual will typically be unable to know whether the effect of all government actions translates into a net benefit or a net loss for him individually. Yet, deadweight losses reduce the total production and consumption in the economy. What would be the ultimate end of the process of competitive rent seeking if nothing stops it? Anthony de Jasay developed an interesting model to answer this question. As the government becomes the focal point for all grievances and the source of all solutions, more and more demands for special privileges and assistance are addressed to it. Because of political competition, the government will try to respond to all the demands (or, at least, to all politically-imperative demands), however contradictory: to increase the minimum wage and reduce unemployment, to increase the money supply and fight inflation, to help businesses and regulate them, and so forth. Otherwise, a new political party or demagogue will win the next election by promising to cater to the frustrated demands. The government, argues de Jasay, becomes a drudge who has to use all its power merely to satisfy the clienteles necessary to stay in power—or to bring it to power, and the process continues. The only way out will be for the state (of which a particular government is a “tenant”) to restrict political competition more and more. At the end of the process, the state will control everything and will be to the “citizens” what the master was on a Southern plantation–sort of the dictatorship of the proletariat by another route. There are other economic models of how politics works. Which one is the closest to reality represents a crucial question. (0 COMMENTS)

“Why can’t everything be free?”  I’m always delighted whenever a child asks me, because I have an intellectually solid answer even a child can understand.  Namely: If everyone had to produce for free, there would be virtually nothing to buy.  If everything had a price of zero, consumers would strive to fill their shopping carts with anything they could get their hands on.  Producers, however, would basically stop working.  (To be clear, this assumes that government strictly enforces this disastrous law.  In the real world, even terrified North Koreans break the law when starvation is their only alternative). What few children would understand is the following diagram.  In a perfect world, I would have just copied it out of the textbook.  But as far as I know, no textbooks actually contain this diagram, so I made it myself.   In a normal supply-and-demand diagram, the shaded area shows total gains from trade.  With a price control of zero, however, the shaded area becomes the deadweight cost.  How can deadweight costs equal gains from trade?  Because a price control of zero annihilates the entire market, driving production down to zero.  The unintended consequence of a price control of zero is a market quantity of zero. Is any government demented enough to impose such draconian price controls?  Yes; virtually all governments do so.  Most notably, while organ donation is normally legal, organ markets are almost always banned.  In other words, organs are something you can give away for free but may not sell at any price.  Which is equivalent to a price ceiling of zero. Still, price controls this draconian are extremely rare.  What is not rare, however, is a seemingly slight variation on zero-pricing.  When children ask, “Why can’t everything be free?,” they might be visualizing a world where charging money for goods is illegal.  Most of the time, however, they are probably visualizing something quite different: A world where government directly gives everyone what they want, free of charge.  Gratis. What’s wrong with that?  The easy answer is to say, “Well, someone has to pay for stuff, so government freebies ultimately mean enormous taxes.”  That’s true, but misses the deeper economic insight.  Namely: Giving people whatever they want, free of charge, is extremely wasteful, because it leads people to consume products they barely appreciate.  I’ve said it before and I’ll say it again: Gratis is not great.  To see what I have in mind, ponder the following diagram: What’s going on?  On the generous assumption that government keeps per-unit costs at their original level, the efficient outcome is for consumers to go to the intersection of supply and demand.  This maximizes the excess of benefits over costs.  But if goods are free, consumers don’t stop there.  Instead, they consume and consume and consume until they hit the dashed vertical line, which shows total quantity when demand intersects the x-axis.  All units to the right of the intersection of supply-and-demand cost more to produce than the benefit they yield.  Summing all these losses gives us the shaded area – which could in principle (though not as drawn) exceed the total surplus generated by the good’s existence. Upshot: It is entirely possible that giving goods away for free without limitation is even less efficient than the good not existing at all! Does this really happen in the real world?  Verily.  Any country that lets people have unlimited health care or education for free qualifies.  To avoid this massive waste, you need death panels and such.     Is gratis pricing always bad?  Not quite.  For thoroughly non-rivalrous goods, gratis pricing is maximally efficient, at least in the short-run.  (Though the long-run can be a totally different story).  Similarly, gratis pricing is maximally efficient if other prices have already done their job.   In a free market, landlords charge people for their location, so there is no need for an additional “immigration charge” on top.  And of course, when transactions costs are high relative to the value of the goods, gratis pricing can be the least-inefficient option.  Charging people for soap at a hotel makes little sense, because almost everyone wants a little soap, hardly anyone wants a lot of soap, soap is cheap, and collecting soap fees is expensive. What about positive externalities?  Gratis pricing can be efficient if positive externalities are massive.  In all other cases, however, free is overkill.  Usually severe overkill. The pathologies of zero-pricing are one of the most important topics that every econ textbook I know of totally neglects.  And I can’t help but think that the reason is Social Desirability Bias.  Human beings love the image of giving everyone what they need, free of charge.  Demagogues capitalize on this love.  That’s probably why education and health spending are so bloated; giving everyone all they want is folly, but this folly sounds ever so sweet.  To discover that “Gratis is not great!” is crucial for economic literacy.  But so enlightening your students is as thankless as telling them that Santa Claus doesn’t exist. (1 COMMENTS)

Rules are only for the little people. California Governor Newsom is at it again: breaking rules that he wants to punish us for breaking. And he gets away with it. Sure, he gets a lot of bad publicity, although not enough. But no one has charged him with anything. What Newsom did was completely reasonable. He went maskless both in posing with Magic Johnson and, at times, while watching a football game. He even gave a good reason: while posing with Magic, he wanted to be “gracious.” Here’s what he said that was completely unreasonable: he said that that was the only time he went without the mask. It wasn’t. Newsom lied. Newsom was right to break the absurd mask rule. He’s wrong to let a government official working under him dictate such a rule. What about the rest of us who want to be gracious, the rest of us who want to have human interaction regularly with members of our species? There’s an old line that you might think fits: “Practice what you preach.” But it doesn’t fit. Newsom should preach what he practices. He practices disobedience of his rules. He should either preach disobedience for others or get rid of the rules. (0 COMMENTS)

Commenters often express skepticism that monetary policy should be conducted by experts. They point to the fact that expert policymakers have made a number of errors over the long history of the Fed, and suggest that we might be better off giving non-experts a chance.But which non-experts? Should we turn the Fed over to farmworkers who pick tomatoes? How about people that work in nail salons? The world of non-experts is vast, and it’s not clear which non-experts would be best. How about plumbers?At this point people might respond that we should try appointing really smart non-experts. But who would they be? Perhaps brain surgeons or particle physicists?If you press hard enough, I think the people who are skeptical of elitists running the Fed often have a very specific set of non-experts in mind—people in business and finance.  People with “real world” experience.  Unfortunately, there is no real world experience relevant to monetary policy.[Coincidentally, many of the commenters who read my two blogs work in business and finance. So perhaps when they are thinking of non-experts to lead the Fed, they are thinking of the person they see when looking in the mirror.]Here’s the problem with this view. It turns out that running a bank gives you no more expertise to run monetary policy than does running a nail salon. That’s because monetary policy is very different from banking, indeed they are essentially unrelated fields.At this point I probably sound like snob, suggesting that only experts like me should be able to run monetary policy. That’s a bit misleading for two reasons. First, I would turn down any offer to join the Federal Reserve Board because I’m not qualified. I believe that I am qualified to vote on FOMC monetary policy decisions, but I am not qualified to do all of the other duties that have been (unwisely) given to the Fed, such as bank regulation. So I am not arguing that the Fed should hire people like me.There is another reason why I am less elitist than might appear at first glance. While I want the Fed to hire the best experts, unlike many other economists I don’t care at all about credentials. As far as I am concerned one can be a self-taught expert. I suspect that someone like Matt Yglesias would do a decent job.  Thus while I would not argue that Powell is the absolute top expert in monetary policy, he does have a lot of expertise in the field, despite lacking a PhD in economics. But that expertise did not come from working in the financial industry, rather much of his expertise was acquired at the Fed. Some people argue that Powell shows that expertise is not essential, because he did a better job promoting recovery than Bernanke or Yellen, who both have had much more formal training in monetary economics. But when Powell first joined the Fed, his views were if anything slightly more hawkish than those of Yellen, at a time when a more dovish policy would have been appropriate. Powell benefited from what he learned over the 2010s, and also from the lessons other top Fed officials learned from what (in retrospect) was inappropriately timid monetary stimulus during the 2010s.Recently, the Fed overshot its implicit target for aggregate demand, a mistake that Bernanke or Yellen would have been slightly less likely to make. Thus while in an overall sense Powell has done a very good job, in some ways better than his two predecessors, a closer look at his record does not provide much support for the claim that monetary policy is best left to the non-exports. He’s gotten better as he’s acquired more expertise.While some of my better non-economist commenters are knowledgeable enough to do a reasonably good job managing monetary policy, I think they are often fooled into overestimating how easy the job is. At any point in time, policy might be too easy or too tight. If you guessed one way and the Fed went the other, and then you turned out to be right, then it would be easy to conclude that you were smarter than the Fed. But even an 8-year old child would often be correct when asked to guess whether policy was too easy or too tight.True expertise in monetary policy requires much more than being lucky in your intuition about whether policy is too easy or tight at the moment. For instance, suppose I asked you to explain when the concept of money neutrality is appropriate and when it is not. Then I asked you when the concept of monetary superneutrality is appropriate and when it is not. Can you answer both questions off the top of your head? If not, then there are plenty of other people (mostly economists) who are more capable of running monetary policy than you are.  These concepts are often not important for day-to-day policy.  But at the times they are, such as during the late 1960s, you sure as heck need to understand them.I want experts piloting the airliners I fly in. I want experts doing brain surgery if I have a tumor. And I want experts running monetary policy.But I’d also like to shift to a monetary regime where expertise is less important, such as my “guardrails” approach. If we get there in my lifetime (unlikely), then I’ll be more open to hiring a farmworker to run the Fed. PS.  Most recent presidents have made lots of mediocre appointments to the Fed, and a few excellent choices.  Given the importance of monetary policy, we really ought to be appointing no one but the most highly qualified.  Pay them whatever it takes. (0 COMMENTS)

Chapter 5 of Public Choice Theory and the Illusion of Grand Strategy taught me the most.  Hanania provides a great survey of what we know about the effects of trade sanctions – and then gets meta. He starts by emphasizing the terrible harm of sanctions.  “Humanitarian” exceptions mean little in practice: Sanctions regimes that target the economy of a country usually have humanitarian exceptions. Despite this, other regulations usually serve to limit their effectiveness. For example, federal law prohibits the president from implementing sanctions on Iran that involve “the sale of agricultural commodities, food, medicine, or medical devices …” (22 U.S.C. § 8806(c)). Still, sanctions related to the financial sector and other parts of the economy work to nullify these exemptions. To see why, imagine an American company that tried to trade in food or medicine but did not have access to banking services, such as the ability to take out loans or accept credit cards ( Cullis and Handjani 2019 ). Compounding the problem is the fact that Iran is a largely state- run economy, which makes it diffi cult to do business there while completely avoiding the government sector. Even when one can potentially operate within the letter of the law, the sanctions regime is of such complexity, and the potential consequences of running afoul of US law so dire, that there is a chilling effect on many businesses ( Cunningham 2018 ). The idea that sanctions will lead to regime change is silly wishful thinking: Politicians who support sanctions typically argue that economic pressure can help propel major changes in policy, perhaps even regime change. Occasionally, American leaders spell out precisely how this is supposed to happen. They sometimes argue that by hurting the economy of the targeted country, the people will become fed up, blame the regime for their problems, and get rid of it. Secretary of State Mike Pompeo, for example, predicted that the Trump administration’s “maximum pressure” campaign against Iran “will lead the Iranian people to rise up and change the behavior of the regime” ( Harb 2019 ). Sometimes policymakers expect regime elites, rather than regular citizens, to rise up against the government. The Trump administration sanctioned Venezuela beginning in 2017 in the hopes that military leaders would overthrow President Nicolás Maduro ( Wyss, Ordoñez, and Torres 2018 ; Cohen, Spetalnick, and Rampton 2019 ). Proponents of sanctions also occasionally expect that the process of starving the targeted government of resources will lead to regime change. Thus, after the Obama administration placed sanctions on the Syrian government in August 2011, then Secretary of State Hillary Clinton assured the American public that the new measures would “strike at the heart of the regime” by making it unable to fund its security forces ( Wilson and Warrick 2011 ). Each one of these theories about how sanctions lead to regime change or major policy shifts has serious theoretical flaws. First of all, even if citizens living under tyranny and economic deprivation dislike their government, they still face a collective action problem in overthrowing it ( Olson 1971 ). Regime elites, almost by definition, benefit from the current system, so even if they face less of a collective action problem, they usually should not be expected to take major risks in order to bring down their government. Furthermore, there is little reason to expect any government to simply run out of money to pay its security forces. A regime facing an internal threat should prioritize security above all else. While international arms races are expensive, domestic repression is cheap, with governments having been known to even compensate private militias by allowing them to loot civilians and enemies of the regime ( Steinert, Steinert, and Carey 2019 ). Sanctions policy, too, is incoherent: [P]olicymakers show little interest in actually using the leverage that sanctions give them to achieve foreign policy goals. If the instrumental explanation of sanctions is correct, then the United States should, at the very least, talk to targeted regimes in order to make its demands clear and provide a clear path toward the removal of restrictions on trade. Yet American administrations have done the opposite, in certain cases both demanding the impossible from their adversaries and cutting off all contact. So why do sanctions exist?  Action Bias!  Something must be done, this is something, therefore this must be done. Political psychology can explain the appeal of sanctions. A leader who engages in an unpopular foreign intervention can see his presidency destroyed. That happened during the presidencies of Lyndon Baines Johnson, who decided not to run again when facing pressure over his policies in Vietnam, and George W. Bush, who, although he won reelection, saw Iraq contribute to the collapse of his approval ratings during his second term and damage the electoral prospects of his party. At the same time, there is often domestic pressure to “do something” about human rights violations and cases of military aggression. Sanctions can thus appear to be a moderate and measured response to unacceptable behavior abroad. British diplomat Jeremy Greenstock was expressing a common frustration when he said that “there is nothing else between words and military action if you want to bring pressure upon a government” ( Marcus 2010 ). Sanctions are an “easy” option because the death and destruction that they cause are unlikely to stir large- scale domestic opposition. The War on Terror has also been incoherent: Throughout American policy toward the region, we see much stronger evidence for the public choice perspective. The Afghanistan papers reveal uncertainty about the mission at the highest levels of government, generally matching what we see in memoirs and other first-hand accounts of what happened… In Iraq, I show that the decision to go to war was based on the victory of one bureaucratic faction over the other. The lack of planning for the postwar aftermath can be explained in part by the fact that the hawkish faction, centered around the Pentagon and the Office of the Vice President, did not believe in nation- building. Yet after Saddam was removed, President Bush adopted the views of what had been the anti-war faction, which involved a rejection of the exiles championed by the war hawks and a more long- term strategy oriented toward creating a democratic Iraq with new leaders. President Bush, who worked with dedication on a year-long campaign to bring the country into war, made the most important decisions about the postwar planning at the latest date possible and with the most careless indifference. While the Iraq War was sold as a preemptive strike that would protect Americans from direct attack, it became a humanitarian intervention based on an ad hoc theory that forced democratization was achievable, that it would have a domino effect, and eventually end terrorism. This was due to the embarrassment over the lack of WMDs and connections between Saddam Hussein and al-Qaida that became apparent not long after the occupation began. The freedom agenda was born because it was the only way that the Bush administration could justify a continuing occupation, which was necessary because pulling out would have been interpreted as an embarrassing defeat. Culpable negligence abounds: We fi nd that the origins of both Iraq and Afghanistan follow a pattern. In each case, the United States ostensibly wanted something – bringing al- Qaida to justice in Afghanistan and verification of disarmament in the case of Iraq – but did not seriously consider ways to achieve those ends short of war. Once it conquered the targeted country, American behavior appears to have had little to do with the original justification for war. The United States could have stayed narrowly focused on terrorism in Afghanistan, as it has when striking countries like Somalia and Yemen, and it could have removed Saddam Hussein and then left, putting into power the Iraqi National Congress or even keeping the old regime intact with a new president. In both cases, top American officials made or delegated key decisions about their postwar policy with little thought given to the issues involved. Why is there so much culpable negligence? The simplest explanation for why the United States went into Iraq and Afghanistan and removed the governments of those states is that there were psychological and political incentives to engage in regime change. War in response to terrorism was good politics; it also soothed any wounded pride that officials had. Putting U.S. defeats in economic perspective: Most scholars who write on the topic widely acknowledge that it was a mistake to go into Vietnam and Iraq, and that even if the war in Afghanistan was originally justified, the mission was too ambitious and went on for too long. Yet the field has not yet come to terms with the magnitude of these failures. In each of these countries, the United States has tried to secure a nation by spending many times what that country produces in a given year. Comparing what these countries produced before American troops arrived to what the United States has sacrificed, even setting aside the number of lives lost, the money spent to GDP ratio has been 74:1 in South Vietnam, 43.3:1 in Iraq, and a stunning 396:1 in Afghanistan. In other words, the United States has spent in Afghanistan the equivalent of that country’s level of production, assuming it stayed constant, for close to four centuries. While scholars will acknowledge that American foreign policy has had serious failures, they have yet to grapple with what these conflicts mean for the rational actor model, in which foreign policy is said to be based on some kind of cost– benefit analysis and serve the national interest. If only the U.S. responded to humanitarian disasters by welcoming refugees instead of sending soldiers.  Helps far more, costs far less, with near-zero collateral damage. The book ends by grappling with public choice fatalism – though by this point I did find it hard to retain any optimism. (0 COMMENTS)

The story of how I became an economist is its own odyssey: I started college as an English major, intending to hone my creative writing skills, and hopefully to drop out after I wrote the first book of an extremely long, best-selling fantasy epic. The winds of fate blew in other directions and I found myself fascinated by economics: here was a way to describe the world plainly and powerfully. Even when I found flaws large and small with the analysis of economists past and present, economics just made sense to me. It gave me a powerful analytical framework and vocabulary to describe the social world. I was lucky to have great teachers, including one who would eventually become my doctoral advisor, who described economics as “the scientific study of all aspects of the social world,” which hooked me from the beginning. Like most of my students, I had initially thought of economics as being in some sense closely connected to money, a study that never appealed to me. I was wrong. Although I changed my field of study drastically, I was never interested in anything other than what it means to be human and live among humankind. The big questions which motivated the greatest poets and storytellers are still what give life to my work. Unfortunately, many people are introduced to economics as a branch of applied mathematics having mostly to do with solving optimization problems of one kind or another. This never had any appeal to me, and appeals to virtually no students. When I teach economics, I try to impress from the first day that economics—like anything worth studying—is about understanding what it means to be human. Ideally, it might even help us make a better life for ourselves and others. Literature has the same function. Homer’s Odyssey1 is one of my favorite stories filled with many truths about these fundamental questions. For all the truth it conveys, though, poesy lacks the analytical precision that the economic way of thinking affords. That said, students are often ready to believe that great stories have a lot to say about the human condition while they are skeptical that economics can do the same. Talking about the Odyssey with my students lets me explore economic concepts with them and demonstrate how examples of how these concepts are at work in various themes of the epic. Strategy and Game Theory “Nobody—that’s my name. So my mother and father call me—and all my friends.” Odyssey Book ix. Odysseus is a master strategist, a cunning tactician. In game theory, a strategy is a plan to choose among various options where the actions taken by both you and other agents matter for the outcome. The Odyssey contains myriad examples of Odysseus employing strategic thinking to achieve his goals. A perfect example of strategic thinking is in the cyclops’s cave. Odysseus knows that even if he could kill the cyclops, he could not move the boulder in front of the cave. Even if he were a great fighter who could defeat the cyclops, that path would lead to death for the entire trapped crew. So, instead of slaying the cyclops, Odysseus blinds him, and he and his men sneak out in the morning, when the boulder is moved so the cyclops’s sheep can exit the cave to graze. A key strategic principle which we see at use here is backward induction, a solution concept in game theory where actions are analyzed from the end to the beginning. In another such example, since no man can resist the sirens’ song, Odysseus knows he will fall victim if he engages them head on. So, he has his men tie him to the mast before the ship comes close enough to hear their song. With these precautionary protections in place, he is able to hear their song and live to tell the tale. Another game-theoretic concept at work in the Odyssey is the importance and viability of cooperative strategies between strangers. Hospitality customs are at work in several scenes of The Odyssey, for instance when Telemachus and Pisistratus are welcomed in the house of Menelaus. Why should strangers—who might very well be enemies, or at least opportunistic free loaders—be treated with lavish hospitality by others? Is a stranger a potential threat, or a potential ally? For more on this, see Catherine Tracy “The Host’s Dilemma: Game Theory and Homeric Hospitality” (2014)2. Those who value hospitality traditions are rewarded by the gods, reinforcing cultural norms that allow for greater levels of coordination between strangers of good will. Comparative Advantage “Each man delights in the work that suits him best.” Odyssey, Book xiv. “The gods don’t hand out all their gifts at once, not build and brains and flowing speech to all. One man may fail to impress us with his looks but a god can crown his words with beauty, charm, and men look on with delight when he speaks out.” Odyssey, Book, viii. One of the main themes of The Odyssey is the value of cunning over brute strength. Odysseus recognizes throughout the tale that, unlike the great Achilles in The Iliad, he lacks the requisite strength and martial prowess to reach his goals by fighting. This recognition leads him to employ his mind whenever possible. He is “a man of twists and turns.” His cunning is really what makes him a compelling character from a storytelling perspective, and within the story this gift is what makes him of such interest to the gods, especially Athena. It is not that Odysseus is not a great fighter or lacks strength. He is, after all, the only man strong enough to string his famous bow. He has spent years fighting and leading men in battle and against the elements. His heroism, however, rarely comes from any application of his strength. For more on these topics, see “The Relentless Subjectivity of Value,” by Max Borders, Library of Economics and Liberty, May 3, 2010; and “Adam Smith, Ayn Rand, and the Power of Stories,” by Caroline Breashears, Library of Economics and Liberty, March 2, 2020. See also Game Theory, by Avinash Dixit and Barry Nalebuff in the Concise Encyclopedia of Economics; Comparative Advantage, by Donald J. Boudreaux in the Concise Encyclopedia of Economics; and Comparative Advantage, by Lauren Landsburg, Library of Economics and Liberty. In economics, an economic agent is said to have a comparative advantage when he can produce some output at a lower opportunity cost than another. Comparative advantage is an important principle for establishing the importance of trade. We gain by trading and cooperating with one another because when we focus on our comparative advantages, we are able to have more total output even if no one improves through specialization. Odysseus is good at many things, but has a comparative advantage when it comes to cunning. For most of my students, comparative advantage is seen as a counter-intuitive concept. Developing an understanding of it requires the persistent application of as many examples as I can think of. Trade-0ffs and Subjective Value “There is a time for many words, and there is also a time for sleep.” Odyssey, Book xi. “So then, royal son of Laertes, Odysseus, man of exploits, still eager to leave at once and hurry back to your own home, your beloved native land? Good luck to you, even so. Farewell! But if you only knew, down deep, what pains are fated to fill your cup before you reach that shore, you’d stay right here, preside in our house with me and be immortal. Much as you long to see your wife, the one you pine for all your days…” Odyssey, Book v. The pervasiveness of tradeoffs is one of the fundamental realities of human life. The concept of scarcity describes the condition where choices have to be made. Unfortunately, economics textbooks often describe all this as an optimization problem. The sharp-minded student of economics recognizes that each person’s tradeoffs are different because each perceives costs and benefits in a unique way. For Odysseus and his crew, home and family serve as a primary motivation for all the action of the book. At several junctures, the heroes have the opportunity to give up on the quest and make a new home. Odysseus even has an opportunity to live an immortal life with the beautiful and powerful immortal nymph Calypso. He chooses his wife, Penelope, and his home, Ithaca, over an immortal life of divine luxury, and the audience is meant to think of this choice as noble. It can be hard for students to understand the decision to choose domesticity over divinity, but in life, motivations are complex. Every person responds to his or her own incentives, and we each respond in different ways. When teaching economics, it is easy for students to believe that economists see human beings as automatons that respond in entirely predictable ways, just as they might in a homework problem. I use The Odyssey to show that beauty is in the eye of the beholder. What is valuable to a person is entirely individual. Agency Dilemma “‘This dog,’ answered Eumaeus, ‘belonged to him who has died in a far country. If he were what he was when Odysseus left for Troy, he would soon show you what he could do. There was not a wild beast in the forest that could get away from him when he was once on its tracks. But now he has fallen on evil times, for his master is dead and gone, and the women take no care of him. Servants never do their work when their master’s hand is no longer over them, for Zeus takes half the goodness out of a man when he makes a slave of him.” Odyssey, Book xvii. One of my favorite parts of the Odyssey is our hero’s homecoming and his battle with the suitors. Upon his return, though, he finds a number of suitors have arrived to win the hand of his wife Penelope. Scholars disagree on exactly why they want this, though clearly Penelope is a beautiful bride and marrying her is a key to the kingship of Ithaca. When Odysseus returns home, his dog recognizes him, but without his master there to care for him, he has fallen into a state of disrepair, and soon after, expires. In economics, an agency dilemma or principal-agent problem occurs whenever an economic agent is acting on behalf of someone else (the principal), presumably in the interest of the principal. But the agent has interests of his own, creating a moral hazard where the interests are not aligned. The above quotation about the neglected dog Argos is a perfect example of the principal-agent dilemma, and solutions to this problem are something that humans have been trying to figure out for thousands of years. “Great stories help us better understand ourselves. Economics does the same.” Great stories help us better understand ourselves. Economics does the same. Economics also comes with its own technical vocabulary for describing the world and the actions of the people in it. As a teacher of economics, I have often found that students assume that economics only has applicability in the modern world of markets and impersonal, optimizing agents. The examples in this essay should not only be helpful to economists looking to emphasize the timeless and universal relevance of the economic way of thinking, but also to teachers of literature who want to show how the story includes all sorts of practical lessons for understanding people today. Footnotes [1] Available online at the Online Library of Liberty: The Iliad and the Odyssey. Available for purchase, the Robert Fagles translations: The Odyssey, by Homer, translated by Robert Fagles at Amazon.com.* [2] Illinois Classical Studies, No. 39 (2014), pp. 1-16 *Zachary Gochenour is a Lecturer in Economics at James Madison University. He uses economics to write about politics, law, and history. He received his Ph.D. from George Mason University in 2014. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

(A revised and extended version of a tribute to Gordon Tullock published as Professor Gordon Tullock: A Personal Remembrance, by Richard B. McKenzie. Library of Economics and Liberty, December 1, 2014.) Professor Gordon Tullock would have turned one hundred this month. He died in 2014 at age 92 and was eulogized with an outpouring of fond memories and acclaim from colleagues, students, and friends. He will long be remembered by economists around the world who never met him. Gordon—I call him that because he was a mentor, co-author, and good friend—was one of the hundred most influential economists of the twentieth century. Many still lament the fact that Gordon did not share the 1986 Nobel Prize in Economics with James Buchanan, who won it for his development of public choice economics. Gordon, along with Buchanan, nurtured public choice from its birth in the late 1950s, co-authoring or authoring several of the subdiscipline’s classic works. Many economists reflected, at the time of his death, on how Gordon could well have been on the so-called “short list” for a future Nobel for his path breaking work on “rent seeking,” which is concerned with how businesses and other interest groups seek—through lobbying and campaign contributions—monopoly profits, or “rents,” from government-provided largesse or market restrictions.1 Gordon’s work on rent-seeking spawned a mountain of journal articles that changed people’s assessment of how political processes work. The concept of rent-seeking is now so widely adopted in economists’ public commentaries that the expression no longer needs to be placed in quotes. Gordon Tullock, An Original Academic Character “He was an economist who saw argument as a serious sport. He would not drop arguments or even sugarcoat them out of concern for political (or personal) correctness.” Beyond his many path-breaking accomplishments, however, Gordon was a real character. Many who knew him still carry the sting of a (usually gentle) dismissal or insult, while others remember epiphanies that Gordon freely distributed. Gordon could be abrasive, especially in his early years, and especially when he could readily pick out flaws in arguments. Some who felt (and may still feel) his sting but did not stay around long enough to really know him may remember him as mean-spirited. But those of us who lingered came to realize that he was virtually incapable of being intentionally mean-spirited. He was an economist who saw argument as a serious sport. He would not drop arguments or even sugarcoat them out of concern for political (or personal) correctness. For Gordon, argument was a sport that gave his life meaning, and he was a gracious sportsman, never willing to press points with those who found him difficult. On his death, law professor and economist David Friedman related a personal story similar to those of others who could draw from their memories of Gordon, “My wife remembers meeting [Gordon] when she was my girlfriend. He started the conversation by asking why she was wearing a backpack. Her interpretation was that the only form of conversation he knew was argument. He knew only two things about her—that she was my girlfriend, and she was wearing a backpack—so she flipped a mental coin and chose the backpack. He never made the common mistake that an argument was a quarrel.” As National Review columnist John Miller recalled at the time of Gordon’s death, Gordon was proud to announce that he didn’t vote, with Gordon explaining that the late “Anthony Downs [one of the earliest public-choice economists] convinced me long ago that I stand a greater chance of being killed in a car accident on the way to the polls than I do of making a difference with my vote. So why bother?” Miller added that his friends, colleagues, and students delighted in pinning their “I voted” stickers to his office door. I am confident that Gordon was silently pleased to see the stickers. After all, they engaged him, albeit at a safe distance. One might surmise from Gordon’s allegiance to marginal economic thinking that he was always and everywhere a cost minimizer. On the contrary, I’ve never encountered a more principled and generous economist, or human being, which I suspect was at the heart of the outpouring of tributes on his death. He gave of his time generously in argument with colleagues and students alike, always leaving them with grist to ponder. But then there was his willingness to develop comradery among his colleagues and students, current and former. Gordon was not a cook, which means he shied from entertaining in his townhouse in Blacksburg. But he was “old school” and firmly believed that convivial interactions among colleagues over wine and cheese and dinners was important to department cohesion and to the advancement of intellectual arguments. Many of Gordon’s colleagues and students know that I am referring to the many dinners he hosted for twelve to twenty invited guests and spouses at an upscale French restaurant outside of Blacksburg. These events started at his townhouse with cheese, crackers, and wine but would soon move in a caravan of cars to the restaurant Gordon had reserved for the evening. The conversations were never chit-chat—for long. They quickly became substantive as Gordon and Jim Buchanan, or other guests, would spike discussions with observations. Never have academic discussions been so wide-ranging and productive for me. When I was invited back to Virginia Tech in summer 1977 as a visitor, Gordon arranged one of these dinners for me. He misunderstood when I would arrive in Blacksburg, which was after his gathering had left for the restaurant. My townhouse was doors away from his, which means I heard the guests returning late after their dinner. When I realized the mistake, I knocked on his door to apologize as profusely as I could for my absence. I was surprised and greatly relieved at his cordial reaction, “No problem. I will arrange another one for tomorrow night,” which he did. A Natural Economist Gordon Tullock was, in James Buchanan’s words, a “natural economist” who saw economics as his way of understanding all of life.2 He talked and wrote much about personal interest and profit as motivations in markets and politics. Yet he gave much of himself and his time to others—especially to his students, including me, early in our careers—by promptly reviewing countless of our papers. Gordon did not have an economics pedigree, and that made him proud. Indeed, he received his JD degree from the University of Chicago without having an undergraduate degree. With a publication record in economics journals that has rarely been matched, he was never more pleased than when he told people that he had taken only one formal course in the subject, which, he insisted, provided poor training at best and freed him to find insights where traditional economists believed they should not tread. He seemed convinced that being an untrained economist was an advantage, because he could freely think outside the box that he was never in. A Fountain of Insights In spite of Gordon’s occasional barbs, a privileged group of economists who were his students and colleagues will remember Gordon fondly for his many and varied oddball observations of the world. These observations abounded with insights and were sometimes laced with the peculiar humor of a purebred contrarian. The foyer and hallways of the Public Choice Center at Virginia Tech in Blacksburg, Virginia were yeast vats for fruitful and sometimes off-the-wall arguments, fueled by Gordon’s relentless search for those prized new ideas, big and small. I remember, as a young graduate student in the early 1970s, listening to several faculty members in the foyer discussing the case for regulating the internal safety of automobiles, then an emerging hot political topic. They were refining standard arguments regarding mandates for the installation of seatbelts, collapsible steering columns, padded dashes, and airbags, all proposed to save lives. Gordon emerged from his office on hearing the discussion and pressed a new and, at the time, startling insight: “You have it wrong! Interior safety features in cars will reduce the costs of accidents for drivers and encourage them to drive more recklessly, causing more pedestrians’ deaths. To reduce deaths, the government should require the installation of a dagger at the center of the steering wheel with its tip one inch from the driver’s chest. Who would take driving risks then?” One of the economists in the group dared to challenge Gordon, “I think you have it wrong. If there were such daggers on steering wheels, drivers about to hit pedestrians crossing the street would not hit the brakes. They would hit the accelerator so the car would jolt very little on impact. The daggers will increase deaths of pedestrians.” Gordon adjusted his argument, “My point is that greater safety in automobiles should be expected to increase pedestrian deaths.” Subsequent econometric research has proved him right.3 Today, many economists delight in generating such oddball arguments. Back then, such arguments were viewed in some quarters as peculiar, if not reckless. Interestingly, this small academic anecdote has been repeated so often in so many places that it has many “fathers,” but I am fairly confident that it originated with Gordon that day. Even if the dagger argument was not original to Gordon, it describes vividly the way his mind worked. Large groups of economists insist that they have no professional expertise in determining what people want, or should want. After all, they say, preferences are subjective and unobservable. On hearing an economic novice make that point in the Center’s hallway, Gordon snapped, “Do you really believe that? Well, I am fairly certain that you would not want me to pour a bucket of boiling oil over you.” He then quickly turned and retreated to his office. Indeed, he often made a quick about-turn just after he twisted his verbal knife. Gordon was on my dissertation committee. After reading all 252 manuscript pages of my dissertation within twelve hours of my submitting it, Gordon caught me in the hallway to give me his terse assessment: “Minimal but acceptable.” To which I replied, “That’s optimal. Done.” After completing my Ph.D. and taking a professorship, I continued, out of respect, calling Gordon “Professor Tullock.” A year after I graduated, Gordon rebuked me for addressing him so formally: “You know, you can now call me ‘Gordon’… although I really prefer ‘Your Majesty.'” I suspect that a number of Gordon’s students have, like me, borrowed that quip. In the mid-1970s, Gordon and I co-authored The New World of Economics, which was the Freakonomics of the era and was widely adopted for what seemed to be its outlandish (for the era) applications of economic analysis—from sex to dying, from mate search to marriage to divorce, and from presidential elections to crime. A life-long bachelor and very private person, Gordon asked me, “Please tell people I didn’t write the sex chapters.” I assured him, “Gordon, I don’t think you need to worry.”4 A Keynesian Maverick In the 1970s, the “Phillips curve,” which graphically describes the presumed tradeoff between inflation and unemployment rates, was still the rage in macroeconomic circles (although it was beginning to lose professional respect). Gordon caught several of us in the Center’s foyer to show us a roughly drawn graph without the axes labeled but with scattered points on it that formed an upward sloping band. He asked us to guess the variables on the axes. No one tried. He then announced that they represented the combinations of the inflation and unemployment rates over the past two decades or so, a revelation that suggested that higher inflation could be hiking unemployment, a bit of macroeconomic heresy to the then dominant Keynesian economists, who were committed to the downward-sloping Phillips-curve, which they considered sacrosanct. Gordon’s point about the slope of the Phillips curve eventually won the argument (at least through the 1970s and 1980s). Following the substantial success of our New World of Economics, publishers pursued us to write a full-year economics textbook. On agreeing to write our introductory text, Modern Political Economy, in the late 1970s, Gordon and I divided the workload. He would write the macroeconomics half and I would write the microeconomics. This was a questionable division of labor, given that macro was hardly Gordon’s professional comparative advantage. After six months, he left his dictated 500 or so manuscript pages on macroeconomics on my desk. After reviewing what he had done, I had to press him, “Gordon, you have only five manuscript pages on Keynesian economics. That won’t work.” He quickly retorted, “Well, tell me what I left out that’s important.” I was lost for an answer that he would find convincing, other than explaining to him that all other textbooks had a dozen or so chapters on Keynesian economics and adding that our book would be dismissed for adoptions as a result. This was an argument that left Gordon unmoved. I agreed to add the missing content if he would add chapters on public choice economics, which no other textbook had. The Buchanan/Tullock Calculus Sadly, people’s personal reflections on Gordon’s career will soon fade from historical relevance as the many students he directly affected age out of their careers. What will last will be his massive body of work, which cannot be done justice here (selections of which have been collected by Charles Rowley for Liberty Fund.5) Gordon’s lasting impact on the profession, of course, got its biggest boost with The Calculus of Consent, in which he and James Buchanan worked through “the logical foundations of constitutional democracy” (the book’s descriptive subtitle.)6 In that book, Gordon and Buchanan dared to assume (at least for theory’s sake) that the people who toil at building national constitutions and work through the politics of policy making, within constitutional constraints (or binding rules), are very much like people in the market—no better and no worse—and all are driven by their own interests (broadly determined). People in private markets, who pursue their “self-interest,” should not be expected to pursue some grand construct of the “public interest” when they enter political markets. With that shift in assumptions (again, if for no other reason than for the sake of a coherent theory), Gordon and Buchanan were able to deduce several necessary constitutional constraints to limit political operatives’ pursuit of their strictly selfish goals, much as competition limits market players’ pursuit of their selfish goals. One such natural candidate for control was the rule of the majority, which avoided the political log jam that would be expected from the rule of unanimity (under which everyone could engage in strategic voting.) Majority rule would also avoid the potentially oppressive outcomes of votes of small pluralities (under which minorities could vote themselves favored government programs and impose the costs on everyone through higher taxes, resulting in a collection of government programs that a large swath of the polity believes fail a cost-benefit test.) Gordon soon followed The Calculus of Consent with analytical extensions in his Toward a Mathematics of Politics, in which he notably explained why most voters have little incentive to be informed about political candidates’ favored policies.7 Nonetheless, voters from private interest groups would tend to be well-informed on policies that furthered their private agendas. Among the numerous and diverse topics Gordon covered in his career, two should receive more attention than they do. The first is the concept of “transitional gains trap.”8 Economists have long recognized that government programs (such as farm subsidies) are almost impossible to curb, much less terminate. Gordon provided a simple, yet powerful, explanation: The benefits governments provide (for example, crop subsidies) often become capitalized in the market value of capital (say, farmland). This means that many of the people who currently gain from these programs paid full market value for those gains. If the government curbs or eliminates these programs, it will impose a huge transitional loss on people who never got a windfall in the first place. Those people will lobby intensely to avoid a capital loss. For more on these topics, see “Rent-Seeking: Not Just a Public Problem,” by G. Patrick Lynch, Library of Economics and Liberty, Oct. 29, 2019; and “The State Is Us (Perhaps), But Beware of It!,” by Pierre Lemiuex, Library of Economics and Liberty, Jan. 3, 2022. See also Public Choice, by William F. Shughart II in the Concise Encyclopedia of Economics; and The Tragedy of the Commons, by Garrett Hardin in the Concise Encyclopedia of Economics. A second notable contribution that should receive more attention is his article in the Journal of Theoretical Biology, in which he applied the logic of the “tragedy of the commons” to forestry.9 He reasoned that each tree in an unmanaged forest has a private interest in spreading its leaves as broadly as possible and in outgrowing other trees to access as much sunlight as possible. Trees in an unmanaged forest are in something of an “arms race” that must be suboptimal: if all trees checked their growth (or were forced to check their growth by “managers”), they all could receive as much sunlight as with unchecked growth, with less energy spent on becoming spindly. Hence, Gordon concluded (surely with a smile) that if trees could (which they obviously can’t) be given a choice between being managed or not, they would collectively choose to be managed. A Lasting Legacy Many of us feel fortunate today as we reflect on how Gordon Tullock affected our lives and careers—so much for the good. We remember the verbal wounds, but we also remember how he made economics productive, fun, and relevant. In no small way, Gordon, along with a few others, changed the way hordes of people across the globe assess constitutions, politics, and bureaucracy, as well as outlining the important issue of the appropriate division between the public and private sectors. Many people, far removed from academies who provide political commentaries today, don’t know they are relating versions of arguments Gordon originated and nurtured during his long career. Much of the modern skepticism about government solutions to market failures— among academics and in society generally—can be traced in significant, albeit unheralded, ways to the flow of words and incisive arguments coming from Gordon Tullock’s pen (or, rather, from his Dictaphone). Footnotes [1] Gordon Tullock. 2005. The Rent-Seeking Society, in The Selected Works of Gordon Tullock, vol. 5, edited by Charles Rowley. Indianapolis: Liberty Fund (with details of the collection available from the Liberty Fund Book Catalog). [2] For his major writings that pushed the disciplinary boundaries of economics, see Gordon Tullock. 2006. Economics without Frontiers, in The Selected Works of Gordon Tullock, vol. 10, edited by Charles Rowley. Indianapolis: Liberty Fund. [3] See Sam Peltzman. 1975. “The Effects of Automobile Safety Regulation.” Journal of Political Economy 83(2): 677, accessible (with a fee or university affiliation) from JSTOR. [4] Richard B. McKenzie and Gordon Tullock. 1975 (with following editions in 1978, 1981, 1985, 1989 and 2012). The New World of Economics. Homewood, Ill.: Richard D. Irwin (first five editions) and Heidelberg, Ger.: Springer sixth edition). [5] Gordon Tullock. 2005. The Selected Works of Gordon Tullock, vols. 1-10, edited by Charles Rowley. Indianapolis: Liberty Fund (with details of the collection available from the Liberty Fund Book Catalog. [6] James M. Buchanan and Gordon Tullock. 2004. The Calculus of Consent: The Logical Foundations of Constitutional Democracy, in The Selected Works of Gordon Tullock, vol. 2, edited by Charles Rowley. Indianapolis: Liberty Fund. Available online at the Library of Economics and Liberty. [7] Gordon Tullock. 1967. Toward a Mathematics of Politics. Ann Arbor, Mich.: University of Michigan Press. [8] Gordon Tullock. 1975. “The Transitional Gains Trap.” Bell Journal of Economics, 6(2): 671-678, accessible (with a fee or university affiliation) from JSTOR. [9] Gordon Tullock. 1971. “Biological Externalities.” Journal of Theoretical Biology, 33(3): 565-576, accessible from ScienceDirect.com. *Richard B. McKenzie is the Gerken Professor of Economics and Management Emeritus in the Paul Merage School of Business at the University of California, Irvine. He co-authored with Gordon Tullock The New World of Economics, which went through five editions (and five foreign languages) and was adopted at one time or another in almost all of the country’s colleges and universities in the 1970 and 1980s. His latest book in economics is The Selfish Brain: A Layperson’s Guide to a New Way of Economic Thinking (2021). Photo of Gordon Tullock courtesy of the Mercatus Center at George Mason University. For more articles by Richard McKenzie, see the Archive. (0 COMMENTS)

Individuals feel their way toward those situations in which, through the local combination of ingredients making an Interaction Ritual happen, the Emotional Energy payoff is the highest. —Randall Collins, Interaction Ritual Chains,1 p. 177 Sociologist Randall Collins offers a theory of human nature that is probably more realistic than that employed by economists. Instead of “economic man,” who is concerned with obtaining and deploying material resources, what we might call “sociological man” is concerned with obtaining and deploying Emotional Energy (EE). “Economic man” makes his calculations as a separate individual. Economists can and do analyze how a Robinson Crusoe translates his preferences into decisions. However, EE only arises in interactions among two or more people. Because EE is obtained and deployed in personal interactions, sociological man is socially constructed. Your personality emerges out of the sequence of significant social encounters that you experience as you go through life. These are what Collins calls interaction ritual chains. EE plays a central role in Collins’ 2004 treatise, Interaction Ritual Chains, as well as in Napoleon Never Slept (henceforth NNS), a 2015 book co-authored with Maren McConnell that was written to appeal to a business audience. Interaction Ritual Chains is laden with academic jargon and references to prominent works of sociology. NNS is more accessible but too light to be convincing on its own. In NNS, Collins describes Emotional Energy as follows. High EE is feeling pumped up, bodily and mentally. High EE persons are confident and proactive. They are forward moving; they have a path to a goal and they convey it to other people. Emotional energy can vary from high to low. Some social interactions pump up people’s EE. Other kinds of interactions bring them down. People with low EE are hesitant, passive, even depressed. They quickly lose enthusiasm and are easily tired. Great leaders make their social encounters generate high EE. And they avoid the kinds of encounters that bring EE down. … people in the group build up a shared emotion; the stronger the emotion, the more they feel themselves in tune with each other, and the more tightly they focus together. And the more tightly they focus, the more their shared emotion pumps each other up. … the leader of the group—the one at the center of attention—is getting the most energy of all… They are getting high on their work, getting high running a successful organization. —Napoleon Never Slept,2 p. 9 Imagine a quarterback leading his team on a drive toward a game-winning touchdown in a home game. The emotional energy of the quarterback feeds that of the rest of the players and the fans, and their energy in turn raises the emotional energy of the quarterback. Or imagine a group very engaged in church worship, singing hymns and clapping in unison. They experience shared emotions and a feeling of solidarity, giving them high EE. Your emotional energy is lowest when you feel excluded from a group. Imagine being among people all speaking a language that you do not understand. A few years ago, I was seated at dinner with a number of people, several of whom I had never met. I was looking forward to interacting with them. However, a Rude Law Professor took over the conversation, telling story after story about people in his legal circles known to at most a couple of others at the table. Every time I tried to open up the conversation to hear from more dinner guests, the Rude Law Professor quickly re-asserted control and returned to telling his stories. If I were to describe this episode using Randall Collins’ terminology, I would say that the Rude Law Professor engaged in Emotional Dominance. The Rude Law Professor probably enjoyed the dinner and gained EE from it. I, on the other hand, felt marginalized. My emotional energy would suffer if this were to happen to me often. Collins’ theory of Emotional Energy has many interesting applications. One aspect that particularly struck me was his emphasis on the important role that co-presence plays in generating experiences with high EE. For example, he asserts that if you are not physically present at a funeral or a wedding, you will not experience the same grief or joy felt by those in attendance. If you watch the football game by yourself on television, it will not be as powerful an experience as if you were in the stadium. “In a live lecture, if everyone else is paying close attention to the speaker, you will sense this joint attention and this will lead you to focus on the lecture.” This emphasis on the importance of co-presence may explain what is missing in remote learning. A teacher in the classroom is better able to engage students using EE. In a live lecture, if everyone else is paying close attention to the speaker, you will sense this joint attention and this will lead you to focus on the lecture. On the other hand, if the audience seems distracted (people checking their phones), the lack of common focus will cause people to experience the event as having low EE. Collins says that a large-scale, formal ritual can come across on television, but a small, informal gathering cannot. Since he wrote that book, the pandemic and Zoom have given us an opportunity to test that hypothesis. In a paper published in October of 2020, Collins points out a number of ways in which Zoom differs from face-to-face (F2F) meetings: Achieving synchrony with others is hard to do with a screen full of faces, delayed real-time feedback, and lack of full body language… In ordinary F2F conversation, persons do not stare continuously at others’ eyes, but look and look away… Thus, seeing a row of faces staring directly at you is artificial or even disconcerting. … Continuously seeing one’s own face on the screen is another source of strain.3 In the paper, Collins says that: Writing, inscriptions, paper, books, postal delivery, newspapers, all became capable of transmitting emblems of social membership and its markers in distinctive group meanings, but even here people had to learn to read them and give importance to them, and this was done in F2F settings. Can we say, though, that as media become more ubiquitous and mimic more aspects of F2F interaction, social connections become increasingly transferred to media connections while the bodily interactional basis fades away? His answer is that so far it seems that people are suffering a loss of EE from social distancing. In the conclusion to his paper, Collins writes: If people are deprived of embodied interactions, we can expect they will be more depressed, less energetic, feel less solidarity with other people, become more anxious, distrustful, and sometimes hostile. For more on these topics, see “The Sociology of Sociologists,” by Arnold Kling, Library of Economics and Liberty, Oct. 2, 2017; and Masks and Mutual Adjustment, by Steven Horwitz, AdamSmithWorks, July 13, 2020. This seems to have occurred. Even prior to the pandemic, researchers were claiming to have found these sorts of effects of social media on people, especially teenagers. Market activity and political activity take place within a social order. Our communications media appear to be disrupting this social order. Economists would do well to keep our eye on sociological man. Footnotes [1] Randall Collins, Interaction Ritual Chains, Princeton University Press, 2005. [2] Randall Collins and Maren McConnell, Napoleon Never Slept: How Great Leaders Leverage Social Energy. Maren, Ink., 2016. [3] Randall Collins, “Social distancing as a critical test of the micro-sociology of solidarity,” American Journal of Cultural Sociology, October 2020. *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)

Also, competition is a hardy weed, not a delicate flower. I was shocked last week to learn that GoFundMe, which I have used a lot in the last 3 years, withheld money that had been contributed to the Canadian truckers who are protesting vaccine mandates. It was only after extreme pressure that GoFundMe relented and agreed to return contributions to those who had contributed. Elon Musk’s comment helped. But it was only within days that another organization came along and said that people who contributed to the truckers through its site would actually have their money reach them. That organization is GiveSendGo. Interestingly, there’s another competitor that Facebook advertised: Facebook. When I went on Facebook to tell friends that I would no longer used GoFundMe, an immediate message from Facebook came up. It said: When you need to raise money for something or someone important to you, your friends can help. Create a fundraiser on Facebook in a few quick steps. I follow the NBA; well, actually, I follow the Golden State Warriors. One of the lines I have seen NBA commenters use is “Scoring cures a lot of ills.” Postscript: There has been a lot of misinformation about the truckers’ protest. As this interview with one of the leaders of the protest makes clear, it is NOT about opposition to vaccines. It’s about opposition to vaccine mandates. (0 COMMENTS)