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As the battle heats up on the Democrats’ voting legislation in the Senate and on the push to change the 60% practical majority rule to ensure its passage, large American corporations are again under pressure to take a political stance (“US Companies Condemn Election Fraud ‘Falsehood’ on January 6 Anniversary,” Financial Times, January 6, 2022). Business for America, a corporate lobby group whose members include PayPay, declared: We urge all companies to ensure their future donations go to those supporting free, fair, accessible, and secure elections that represent the will of the people. A hint that Business for America, just as the Business Roundtable, is not defending constitutional democracy (the classical liberal ideal of limited democracy in a free society) is the invocation of “the will of the people.” This expression is a trademark of right-wing and left-wing populists. It has no meaning in a constitutional democracy. Who is “the people”? Fifty percent plus one? Sixty-six percent? The “patriots”? The woke? I elaborated on this approach in a few Econlog posts as well as in an Independent Review article, “The Impossibility of Populism” (Summer 2021). At any rate, it is pretty clear that most corporate tenors are not defending a free society. One reason is that the vast majority of them don’t know what a free society is. In a Regulation article of last Summer, I wrote: In his 1973 book Capitalism and the Permissive Society, the late Financial Times columnist Samuel Brittan observed that “businessmen can usually be relied upon to defend the indefensible aspects of their activities while giving in to their collectivist opponents on all essentials.” They are bullied by the woke and caught in debates they don’t understand. James Buchanan proposed an interesting analysis. He defended a (classical) liberal and Smithian presumption of “natural equality” among individuals and thus opposed the power of the cognoscenti or any other elite. Yet, he emphasized that the maintenance of a liberal society does require citizens to have an understanding of simple principles of social interaction and thus basic economics, or else be willing to “defer to others who do.” (See his Why I, Too, Am Not a Conservative [Edward Edgar Publishing, 2005].) If Buchanan is right, the corporate elite is digging its grave or preparing its move to the Nomenklatura class. I would add that corporations are not obliged to, and should not, choose between wokism and fascism, which are not so different anyway. In their ideological fog, they should focus on what they know, that is, how to efficiently produce the goods and services wanted by individual consumers in all their diversity. The separation of economy and state is a feature, not a bug, of a free society. (0 COMMENTS)

In this episode, Nobel laureate James Heckman and EconTalk host Russ Roberts delve into issues of inequality and economic and social mobility with emphasis on Heckman’s paper (with Rasmus Landers) on inequality in Denmark. Heckman describes his access to the rich longitudinal datasets on all Danish citizens that enabled the research that led to a finding about social mobility that surprised him and many others. We hope you, too, are challenged and intrigued by this multi-faceted conversation. Now we’d like to hear your thoughts!       1- According to Heckman, what Danish social and economic policies are most significant in providing a basis for social and economic equality among households, and why? How directly does each policy mentioned affect children?    2- If intergenerational mobility is measured in skill attainment and equal educational access is available to all Danes, what specifically does Heckman conclude from the findings, given that social mobility is no higher than in the U.S.? How do economic and social policies ignore this fundamental source of inequality?   3- How does Heckman compare the role of the state in shaping the “final consumption bundle” through boosting and limiting disposable income to the Universal Basic Income approach that is focused more on boosting? What great costs, beyond financial, do direct subsidies to individuals incur?   4- Education, social and emotional skills, striving/grit, and engagement in society are all identified as valuable life skills. How does Heckman explain the disincentives of programs attempting to target and subsidize disadvantaged students?    5- How do Roberts and Heckman assess the Danish “model social welfare state” provision of material improvement and access to opportunity? If it’s not money, what do you believe can or should be done to target family life so that children might flourish to their full potential? (0 COMMENTS)

In the race for a COVID vaccine, how did a couple of companies who had never produced a successful vaccine make it to the finish line so quickly? Gregory Zuckerman talks about his book, A Shot to Save the World, with EconTalk’s Russ Roberts about the daring, deranged, and damaged visionaries behind one of science […] The post Gregory Zuckerman on the Crazy Race to Create the COVID Vaccine appeared first on Econlib.

David Levey directed me to a thoughtful post by Olivier Blanchard, which discusses the case for using fiscal policy.  Here’s how he starts the post: Over the last decade, it has become obvious that the decline in real interest rates forced us to revisit the scope and the role of fiscal policy. This is what I have tried to do in a book that I just finished. The book, Fiscal Policy Under Low Interest Rates, is now available on an MIT Press open source site, where I encourage you to leave comments and suggestions. I shall revise the book in light of those comments early next year, and the book will come out in hard copy at the end of 2022. Then Blanchard carefully explains why he believes that low interest rates are likely to be around for a long time, and why this makes fiscal policy a more attractive option.  Blanchard’s analysis of the causes of low rates is excellent, but I don’t find his policy views to be persuasive.  Here’s how I’d rate the options for responding to low equilibrium interest rates, in order of desirability: 1.  NGDP level targeting at 4%/year combined with a “whatever it takes” approach to asset purchases, in order to keep NGDP expectations on target. 2. Raising the inflation target high enough to avoid the zero bound issue—probably around 4% inflation. 3.  Aggressive use of fiscal stimulus during recessions. 4.  Ban or severely restrict the use of currency. 5.  Do nothing—allow deep recessions when money demand exceeds money supply. In my view, Keynesians overestimate the costs of the first two options, and thus move too quickly to the third option. Because many developed countries have used aggressive QE and still fallen short of their targets for inflation, it is often assumed that hitting those targets would require even larger levels of QE.  In my view, the opposite is true.  If the Japanese had maintained an average inflation rate of 2%, instead of near zero inflation, the demand for base money in Japan would be lower than it is today and the Bank of Japan would have engaged in less QE than they have actually done thus far. What evidence do I have that Keynesians are misinterpreting Japan?  Consider the following from Blanchard, from a concluding discussion of where fiscal policy has worked, and where it has failed: A case of just right? Faced with a strong case of secular stagnation, Japan has run large deficits for three decades and debt ratios have increased to very high levels, while the Bank of Japan remained at the effective lower bound. Was it the right strategy (if indeed it was a strategy)? The answer is a qualified yes, but, looking forward, the high debt ratios raise issues of debt sustainability. Alternative ways of boosting demand should be a high priority. The case he cites as “just right” is actually perhaps the greatest failure of demand stimulus in all of world history.  Because the Bank of Japan has had a low inflation monetary policy since the mid-1990s, even massive fiscal stimulus has failed to boost aggregate demand in Japan.  Indeed Japanese NGDP has barely increased at all over the past 25 years.  I know of no other country with such a dismal record of stimulating spending. To be sure, the Japanese economy has not done all that poorly over the past 25 years, but to the extent it has done OK (not great) in real terms it is 100% due to supply-side factors.  But Blanchard is focusing his analysis on the problem of maintaining adequate aggregate demand, and so Japan is absolutely the last country you’d want to cite as even a qualified success story. Even worse, the only brief period of strong growth in Japanese NGDP occurred during the first few years of the Abe government, when Japan did exactly the opposite of what Keynesians (and MMTers) recommend.  They relied on monetary stimulus and actually tightened fiscal policy, as Paul Krugman pointed out back in 2018.  Check out what happened to Japanese aggregate demand (i.e. NGDP) in the 5 years after Abe took office: To summarize, not only is Japan not a good argument for fiscal stimulus, it’s the most powerful argument against fiscal stimulus that I know of. Nonetheless, my first option does have one potential downside.  It is possible that in order to achieve a 4% NGDP level target the central bank would have to buy more than just government securities.  They might also have to purchase lots of risky assets.  In that case, the second option might be best—raise the inflation (or NGDP growth) target.  Why is that option still better than fiscal policy? The major downside of raising the inflation target is that it results in higher nominal returns on capital, which increases the effective tax rate on capital income.  But if this target were raised because the equilibrium interest rate had fallen sharply, then this downside to a higher inflation target would hardly matter.  Real tax rates on capital income would not be significantly affected. Another cost of inflation in the textbooks is called the “shoe leather cost”, the cost of having to walk to ATMs more frequently because you don’t want to hold a lot of cash when other assets offer higher nominal rates of return.  But again, this cost is trivial in a world where nominal interest rates are low, and in any case most Americans don’t even carry very much cash these days.  Most people holding huge stores of $100 bills are either foreigners or Americans avoiding taxes, making a little bit more inflation a minor problem for law-abiding Americans. The cost of adjusting prices due to higher inflation is also trivial.  Most prices that are adjusted frequently reflect changes in relative prices, not inflation.  Gas stations and groceries are going to adjust gasoline and produce prices almost as frequently with 4% inflation as with 2% inflation. So while raising the inflation rate to 4% is not my first choice, it’s a far less bad option than massive and wasteful fiscal stimulus. If I’m right, then what exactly is the case for fiscal policy?  I still don’t get it.     (0 COMMENTS)

Like many people, I was a fan of John Madden, the NFL coach and game commenter who died last week at age eighty-five. He was a larger-than-life character who made football more understandable to people like me who wanted to watch football on TV but didn’t know what to watch for. If the only things to comment about were Madden as a person and an expert, and football as a game, it wouldn’t make sense for me, an economist, to write about him. But the history of Madden as commentator, and Fox as his employer, illustrates some important truths about economic competition, truths that many people in the Biden administration either have forgotten or, more likely, never knew. The truths can be summed up in a few pithy statements. First, competition is a tough weed, not a delicate flower. Second, it takes only a few to compete. Third, if you insist on judging the extent of competition by the presence or absence of “perfect competition,” you will miss most of the competition that matters. This is from David R. Henderson, “John Madden, Joseph Schumpeter, and Competition,” Defining Ideas, January 6, 2022. Competition between Fox and CBS: In a December 2018 article, “The Great NFL Heist: How Fox Paid for and Changed Football Forever,” Bryan Curtis illustrates this with his great discussion of the competition for televising NFL games when Fox entered the picture in the early to mid-1990s. CBS was the established broadcaster of the National Football Conference (NFC) football games. Airing NFC games was valuable to whoever won the competition for two reasons. First, NFC teams had dominated previous Super Bowls and so generated more fan interest. Second, NFC teams tended to be in bigger markets: Philadelphia, Chicago, Washington, Dallas, and San Francisco, to name five. Rupert Murdoch, owner of newcomer Fox, saw that also. But an additional factor made the NFC games even more valuable to him. Trying to establish Fox as the fourth network, he and some of his key advisers saw the TV rights for NFC games as a potential cornerstone around which to build the network and expand into a number of major cities. For that reason, Murdoch was willing to bid substantially more for the NFC rights than CBS was willing to bid. Fox won out. What’s Wrong with Perfect Competition as an Ideal: When I was an active, rather than emeritus, economics professor and I taught my students about competition, I would start by asking them to name various kinds of competition. They typically came up with a fairly long list. It included advertising, service, location, guarantees and warranties, and additional features of a product or service that would make it more valuable to consumers, to name five. Occasionally a student would mention competition on price. Then I would tell them that that’s how I think of competition also but that, if they read the chapter we were about to discuss, they would find the textbook author narrowing competition down to one variable: price. Moreover, I pointed out, even that was a little strange because for economists to regard competition as “perfect,” all the competition on price had to already have happened so that each seller was producing the identical product and charging the same price. I first came across the concept of perfect competition from a textbook by Paul Samuelson when, at age nineteen, I was taking my first course in economics. As I wrote in my book The Joy of Freedom: An Economist’s Odyssey, my first reaction was: “This didn’t seem perfect to me at all. It just seemed boring.” But it’s worse than boring. It leaves out the essence of competition. Read the whole thing. (0 COMMENTS)

Does God exist? Is anarchy desirable? The two sorts of question are obviously different and only on the second one does economics have something instructive to say. In the Winter issue of Regulation, I review Michael Huemer’s recent book Knowledge, Reality, and Value: A Mostly Common Sense Guide to Philosophy, but this also served as an excuse for reviewing his 2012 The Problem of Political Authority: An Examination of the Right to Coerce and the Duty to Obey. The latter argues that the government has no moral authority to do anything that ordinary individuals may not do and that nobody has a moral obligation to obey the government just because it is a government; the book also presents an economic defense of anarcho-capitalism. Both books are well worth reading. Consequentialism, utilitarianism, and deontology are among the topics that, following (and sometimes opposing) Huemer, my review discusses. My current, provisional, incomplete conclusion on anarchy: The jury is still out on anarchy, and it will remain out until an actual experiment is realized. Perhaps classical liberalism or non‐anarchist libertarianism is as far as we can go toward anarchy? In his 1969 book Éloge de la société de consommation (In Praise of Consumer Society), French philosopher Raymond Ruyer suggested as much: “Real anarchism, feasible and realized … is simply the [classical] liberal economy.” Certainly, we should at least aim to maintain or recover the “feasible and realized anarchy” and push the limits of classical liberalism. The ideal is anarchy, not authority. (0 COMMENTS)

A libertarian friend wrote me recently to urge me to speak out against former President Donald Trump’s threat to democracy. Specifically, he said “There’s been too little classical liberal/libertarian writing on the dangers Trump now poses to our democracy.” I agree with him. Donald Trump’s refusal to accept his loss in the November 2020 election and his outrageous January 6, 2021 speech to his supporters were, in my view, the low points of his administration. Truth seems to have no value to him independently of how it affects his fortunes. I think it’s important to estimate, as accurately as possible, the size of the Trump threat. It’s important not to understate it, and it’s as important not to overstate. If we’re in the business of defending democracy, we also need to identify all the major threats. In my view, the threats from the Progressives are greater. The January 6 Riot Notice the subtitle. I didn’t say, as many writers do, “The January 6 Insurrection.” What we know is that it was a riot. Many of the participants in the mob that entered the Capitol building did so violently, smashing windows and trying to break down doors. I was telling a close friend that day, who had pointed out that they weren’t as violent as many antifa rioters the previous summer, why I found this riot particularly upsetting. Here’s how I put it: “They’re violently going against one of the few things that works in the federal government: the peaceful transfer of power.” I told her how I had got goose bumps watching C-SPAN on a different January 6, in 2001, when Vice-President Al Gore, the loser, and some would say the sore loser, in the November 2000 election, presided over the counting of the electoral votes that gave the election to his opponent, George W. Bush. Gore, as part of his job and to his credit, insisted that the four Democratic members of the House of Representatives who challenged Bush’s election needed a U.S. Senator to back their particular charges. In each case, the House member admitted that he or she had no U.S. Senator’s backing, and so Gore did what he was supposed to do: moved on. This was American democracy at its finest. (Watch from about the 11:00 point to about the 13:00 point to see how Gore, whom I usual detest, caused me to feel deep patriotic feelings about how the transfer of power works at its best.) My point is that the January 6 riot was a serious mob action, and its seriousness should not be understated. Many people, in my view, have indeed understated it. They have pointed to the fact that virtually no one in the mob had guns. True. But that doesn’t mean that the members of Congress who feared for their lives knew that at the time. Many of the mob chanted death threats against Vice-President Pence. I don’t know about you, but if a mob were to chant that they wanted me dead and were pushing to get into the room where I was located, I would be pretty scared. And you can kill people without guns. Was it an insurrection? I’m not sure. The Merriam-Webster dictionary gives as its “full” definition of an insurrection “an act or instance of revolting against civil authority or an established government.” One could certainly regard what happened as a revolt against an established government. Tellingly, though, even though there is a federal law on the books stating the penalty for insurrection, the feds are charging none of the rioters with insurrection. I would also point out that if what the mob did is, in fact, insurrection, then certainly what many antifa rioters did against established local governments, which was often much more violent, were insurrections also. At this point, I can imagine some readers accusing me of “whataboutism,” which is defined as “the technique or practice of responding to an accusation or difficult question by making a counteraccusation or raising a different issue.” But I’m not engaging in whataboutism. I’m taking totally seriously the threat posed by the January 6th mob and laying out an implication of seeing that threat as an insurrection. The problem with the charge of whataboutism is that it too often substitutes for thought. “Oh, I’ve cleverly identified what the author is doing, so I don’t have to think about what he’s saying.” So if you don’t want to think about what I’m saying, I invite you to exercise a freedom we all still have: the freedom to quit reading. But if you actually want to think, I invite you to continue reading. The Continuing Threat from Donald Trump In case you haven’t noticed, even though Donald Trump is no longer on Twitter, he has not shut up. He still claims that he was robbed of the election. There almost certainly was fraud in the last election. Why would 2020 have been different from pretty much every other presidential election we’ve had? Was there enough fraud to swing the vote to Biden? I haven’t seen clear evidence of that. And notice that it was Republicans in Michigan and Arizona who, after their investigations, announced that Biden had won those two states fair and square. As I said above, Trump has little regard for the truth. When someone has little regard for the truth, he’s always a threat. But here’s what I think people leave out that causes them to overstate the threat: Donald Trump, although a smart guy, is intellectually lazy. He doesn’t seem to read, and, given his stated goals, he doesn’t delegate well to achieve those apparent goals. These traits can be good or bad, depending on the goals. If his goals are bad, I want him to be incompetent at achieving them. If his goals are good, then his incompetence is bad. Take the threat Trump made during his first term to target NBC for its report that he favored a large increase in the U.S. nuclear arsenal. What did he do about it? Nothing. And as I wrote in a January 2018 article, “if Trump really wanted to follow through on his threatened censorship of television networks, he chose the wrong chairman of the Federal Communications Commission. Ajit Pai is one of the most deregulatory officials in the Trump administration.” I also put his threats in perspective by contrasting his fizzling action with that of a mastermind in using government power to squash dissent: Franklin D. Roosevelt. Here’s what I wrote: Consider, by contrast, someone who effectively quashed radio criticism of his policies: Franklin D. Roosevelt. In 1934, as University of Alabama historian David Beito has noted, President Roosevelt’s FCC put radio stations on a short leash by reducing the license-renewal period from three years to six months. He appointed Herbert L. Pettey as head of the commission. Pettey had been FDR’s radio adviser during his 1932 presidential campaign. Shortly after this licensing change, NBC announced that it would limit broadcasts “contrary to the policies of the United States government.” CBS went further, announcing an end to broadcasts “in any way” critical of “any policy of the Administration.” Who was more effective—the unsophisticated Trump threatening in public, or the warm and fuzzy (but ruthless and strategic) operator behind the scenes, Roosevelt? The record speaks for itself. But Trump also had made noises during his campaign and early in his administration about reducing U.S. military intervention in other countries’ affairs. How did he go about achieving that goal? By successively appointing two National Security advisers, H.R. McMaster and John Bolton, who favor U.S. government intervention in many countries’ affairs. That’s why he achieved so little of his worthy goal. There’s one other reason that Donald Trump isn’t as much of a threat as many people fear. He has none of the powerful institutions: the media, the education sector, and corporate America. The first two are vehemently anti-Trump and pro-Progressive and the last is mainly anti-Trump and pro-Progressive. I’ll examine what I regard as the major threat next.                   (0 COMMENTS)

Are you a fan of spicy food? Horror movies? Super hot baths? If so, why? Is it an oxymoron to say that suffering can make us… happy? In these trite instances, it might not seem so radical, but psychologist Paul Bloom argues an even grander point. In this episode, he joins EconTalk host Russ Roberts to explore just how much- and how often- suffering might do us good. So why do we do things that are unpleasant and/or hard? “We’re motivational pluralists,” argues Bloom. He and Roberts talk a lot about having kids, for example. Whether in the short or long-term, (i.e., hot sauce versus parenting), Bloom suggests suffering is a necessary part of living a meaningful life, as opposed to a merely pleasure-filled life. As usual, I have a lot of questions lingering after listening. I hope you’ll take a moment to consider some of them. I’d love to see your reactions in the comments, and we’d also love to hear about any offline conversations these questions or this episode sparked. You can always reach us at econlib@libertyfund.org.     1- Bloom argues that the projects that make life worth living involve suffering; but that the ordering of suffering and joy is not just important but essential. What does he mean by this? (And how does this also help explain the typical story ark as well- Roberts notes the film Shawshank Redemption here.)   2- Roberts draws a comparison between “classical” and “popular” art, suggesting that the latter are much more likely to haver happy endings. Do you think Russ is right? Why?   3- The conversation takes up Robert Nozick‘s Experience Machine. To what extent ought we to consider this thought experiment a refutation of simple hedonism? Nozick said people would refuse the machine, but Bloom insists some people would use it, and further that we must respect that moral pluralism. How right is Bloom? How many people do you think would agree to life in the Experience Machine?   4- Bloom and Roberts turn to the phenomenon of the anti-hero, and speculate on the dangers of becoming the kind of people you hang out with. As with a common argument about video games, while we may no longer be concerned that people will copy the actions of characters, somehow it still seems “bad” to many. Why does Roberts suggest it’s somehow nice to imagine yourself like Tony Soprano or Walter White? Is it morally somehow wrong to watch The Sopranos or Succession?   5-  Apropos of the title of Bloom’s book, where’s the sweet spot? Bloom suggests it’s a curse to have too much or too little anxiety. So how do/can you add “the right kind if suffering” to your life? (0 COMMENTS)