I’m enjoying Jason L. Riley’s book Maverick: A Biography of Thomas Sowell. In a chapter titled “Higher Education, Lower Expectations,” Riley adds to his discussion of Sowell’s critical views on affirmative action by telling of Yale law professor Stephen Carter’s experience with school officials at Harvard Law School. Carter had been rejected when he applied but then received phone calls from Harvard officials apologizing for their mistake. What was their mistake? They had thought he was white. Here’s the passage Riley quotes from Carter’s Reflections of an Affirmative Action Baby. They were quite frank in their explanation of the “error.” I was told by one official that the school [Harvard] had initially rejected me because “we assumed from your record that you were white.” (The words have always stuck in my mind, a tantalizing reminder of what is expected of me.) Suddenly coy, he went on to say that the school had obtained “additional information that should have counted in your favor”–that is, Harvard had discovered the color of my skin…. Naturally, I was insulted…Stephen Carter, the white male, was not good enough for Harvard Law School; Stephen Carter, the black male not only was good enough but rated agonized telephone calls urging him to attend. And Stephen Carter, color unknown, must have been white: How else could he have achieved what he did in college?   (1 COMMENTS)

Answering Fred Hiatt’s challenge. As an electronic subscriber to the Washington Post, I get an email early every morning highlighting various items at the Post. Yesterday morning, Fred Hiatt, editorial page director of the Post, emailed me (and, presumably, tens of thousands of others) to praise the work of WaPo columnist Catherine Rampell. Exhibit A was her recent column titled “The GOP rebrands itself as the party of tax cheats,” October 21, 2021. Hiatt writes: She [Rampell] minces no words in “The GOP rebrands itself as the party of tax cheats” — but the argument that she soberly puts forward strikes me as pretty difficult to refute. Well, let’s see how difficult it is to refute. Rampell’s basic claim is that the latest recruit to the Republicans’ big tent is tax cheats. That’s the point she needs to establish. Then she goes on to discuss the “tax gap,” the IRS’s estimate of the difference between what taxpayers owe and what they pay. The gap, she writes, is “predominantly owed by wealthy individuals.” I have no reason to doubt this. She also points out that rank-and-file wage earners find it harder to “shortchange Uncle Sam.” Again, she’s probably right. Then she gets a little more controversial. She writes: Tax cheating is not a victimless crime. When (disproportionately high-income) people don’t pay their bills, everyone else must pay more to fill the shortfall. Her implicit assumption is that the IRS is going to raise x dollars and if it receives x – 100 billion dollars, it will raises taxes on others to get that $100 billion. She could be right, but I think that’s less clear than she thinks. We don’t have a good enough model of the IRS or of Congress to judge that claim. But let’s grant her point and see where she goes with it. We’re almost there. Rampell writes: This solution [more reporting] is exactly what Democrats have proposed as part of their big budget bill. What’s that reporting solution? She writes: Under Democrats’ latest proposal, banks would — once a year — also report the sums of all deposits and withdrawals for certain accounts. Not every transaction; just the year-end totals. Only accounts with flows of more than $10,000 not tied to wage income or exempted benefits would be affected — the idea being that the IRS already knows about the wage income anyway. How would the IRS know whether the flow of $10,000 or more is not tied to wage income? Wouldn’t it have to check? And in checking, wouldn’t it have to know which deposits to the account are wages? She doesn’t address that. Rampell argues: Banks complain that reporting requirements might be burdensome to financial institutions and taxpayers. Actually, banks already must file a report on any account that earns more than $10 in interest in a year; adding a couple of lines for aggregate inflow and outflow numbers is hardly outrageous. Her argument seems to be that the burden is minimal. But then she needs to explain why banks are lobbying so hard against it. She doesn’t. And then she goes “there,” with the standard “if you have nothing to hide, you have nothing to worry about.” She writes: As for taxpayers, the only ones who have anything to fear are those who cheat. Really? So if someone is not cheating, he or she would not at all worry about the IRS having data on inflows and outflows to his/her account? Can Catherine Rampell not think of any other reason why people wouldn’t want their financial privacy violated more than it already is? And remember that she started off talking about the high rollers who are cheating on huge amounts of undeclared income. What does that have to do with the contractor who has an inflow or outflow of just over $10,000? And then she lets her hand show. She writes: “Democrats want to track every penny you earn so they can then tax you and your family at the maximum possible amount,” fearmongered House Minority Leader Kevin McCarthy (R-Calif.). This is an interesting euphemism for “rich people are going to pay the minimum amount of taxes the law already requires.” But wait. Wasn’t Rampell’s whole point supposed to be about tax cheats? I would have thought that “tax cheats” are people cheating on taxes. But  if rich people are going to pay the minimum amount of taxes the law already requires,” then that means that they are NOT tax cheats. It sounds as if Catherine Rampell wants either: (1) rich people to pay more than the minimum amount the law requires or (2) to change the law to raise taxes on rich people. With either meaning, this is NOT about tax cheats. So her whole discussion up to that point was a shiny object, as Greg Mankiw would say, to distract us. Hey, Fred Hiatt, throw us another soft pitch.   (1 COMMENTS)

On December 11, 1941 Adolf Hitler declared war on the United States.  Almost everyone who has analyzed this decision has been puzzled.  Why go out of your way to antagonize the United States when it’s consumed with fury against Japan? The leading reply: At this point, Hitler saw that war was inevitable, so he might as well take the moral high ground for propaganda reasons. I’m unconvinced.  In the absence of Hitler’s war declaration, there must have been at least a 5% chance that the U.S. would have delayed war with Germany for at least another year.  And even if the U.S. seized the initiative and declared war, there must be at least a 10% chance that the U.S. would have focused more on Japan in this scenario.  Even if war was “inevitable,” timing and intensity matter. In any case, I maintain that Hitler had a simple way to dramatically reduce the risk of war with the U.S. after Pearl Harbor.  Namely: Instead of declaring war on the United States, he should have declared war on Japan.  Something along the lines of, “While we have had grave differences with the Americans in the past, I was horrified to see fellow Aryans attacked by Asian Untermenschen.  We stand shoulder to shoulder with the Americans – and I offer my sincere condolences to President Roosevelt.” “War with Japan” would be a token military commitment for Germany.  They already lost all their Asian colonies after World War I.  Just sink a stray Japanese vessel or two in the Atlantic and wage a second Sitzkrieg, a “Phony War.”  It is hard to see Japan doing much to retaliate.  Germany and Japan almost totally failed to coordinate their war effort.  And despite their common border in the East, Japan wasn’t in much of a position to Soviet resistance. I say this strategy would have at least a 25% chance of keeping U.S. troops out of the European theater until 1944. Am I wrong? (0 COMMENTS)

If we believe what its chairman is saying, the Fed does not seem to know what inflation is. The Wall Street Journal of Friday wrote (Nick Timiraos, “Powell Says Supply-Side Constraints Have Worsened, Creating More Inflation Risk,” October 22, 2021): “Supply-side constraints have gotten worse,” Mr. Powell said Friday at a virtual conference. “The risks are clearly now to longer and more-persistent bottlenecks, and thus to higher inflation.” The economic definition of inflation is a sustained or persistent (not transitory)  increase in the general price level as the Journal hinted to just before the quote above, but it is not clear if it was paraphrasing Mr. Powell. What is pretty sure is that inflation cannot be caused by mere “supply-side constraints,” except if those increase over time. Suppose that production (GDP) decreases by 5% in one year, that it stays at this new level, and that the Fed keeps the money supply constant (and that people do not demand more money in preference to other assets). We would then expect an increase of 5% in the general price level, but this would be only a one-year affair: the higher prices would stay at their new level and would not continue to increase by 5% every following year. For this increase in the general price level to be sustained, production would have to continue to decrease by 5% every year. Or the Fed would have to continue increasing the money supply by the same proportion every year. From February 2020 through August 2021, while production dipped and recovered, the money supply (measured by M2) increased by 34% (see chart). This is equivalent to an annual growth rate of 21.8% and no end is in sight. No wonder why so many economists expect the annual rate of inflation to continue if not to increase—until the Fed stops boosting the money supply. Note that “long and variable lags” are involved, as Milton Friedman is reported to have said. Blaming inflation on “supply-side constraints” looks like a cover-up by the Fed, which previously tried to make us believe that its money creation in response to federal deficit financing could not cause inflation, contrary to what economic theory predicts and history frequently confirmed. A Wall Street Journal op-ed by Steve Hanke of John Hopkins University and John Greenwood explains inflation with a plumbing metaphor that some may find too scientistic, but which does illustrate the phenomenon (“The Monetary Bathtub Is Overflowing,” October 21, 2021). We are not in Germany after WWI, Zimbabwe, or Venezuela, but it would be prudent to recall that some roads lead there which are paved with good intentions. According to the WSJ, Mr. Powell said it would be important for the central bank to stay flexible in the months ahead. The central bank will “need to make sure that our policy is positioned for a range of possible outcomes.” This reminds me of what I heard from a politician in the 1970s—if my memory serves, it was California governor Jerry Brown: “What we need are flexible policies for an ever-changing world.” Useless at best, dirigiste at worst! (0 COMMENTS)

Author and psychologist Paul Bloom of the University of Toronto talks about his book, The Sweet Spot, with EconTalk host Russ Roberts. Bloom argues that suffering is underrated–suffering is part of happiness and meaning. This is a wide-ranging discussion of popular culture, religion, and what we hope to get out of life. (0 COMMENTS)

Author and psychologist Paul Bloom of the University of Toronto talks about his book, The Sweet Spot, with EconTalk host Russ Roberts. Bloom argues that suffering is underrated–suffering is part of happiness and meaning. This is a wide-ranging discussion of popular culture, religion, and what we hope to get out of life. The post Paul Bloom on Happiness, Suffering, and the Sweet Spot appeared first on Econlib.

Hoover’s Peter Robinson does an excellent job of interviewing Stanford’s Jay Bhattacharya on various aspects of the COVID pandemic and lockdown. I recommend the whole thing: it’s all informative, especially for those who might have forgotten what facts about the pandemic “we” were pretty sure of when. I want to highlight two things. First, something Jay said that I don’t quite understand. At about the 3o:00 point, Jay states that the fact that child abuse figures fell is not evidence that child abuse fell. He points out that one of the main ways we know that child abuse occurs is that it is noted at schools and schools, of course, particularly government ones, were shut down. Then Jay goes on to say we had a huge increase in child abuse, unmeasured, that was not dealt with. My question: If it was unmeasured, how do we know it happened? I see his theoretical point: that when child abuse is not reported, the cost of engaging in it falls, and so more of it is engaged in. That’s the law of demand. But I don’t see how Jay can know it was a huge increase, as opposed to, say, a small increase. Second, deaths from COVID in Florida, which had less drastic and shorter-lived lockdowns and California, which had extensive, long-lasting lockdowns. At about the 48:00 point, Jay points out that 85-year-olds have had a lower incidence of death from Covid in Florida than in California; 75 to 84-year-olds, ditto; 65 to 74-year-olds, ditto. Again, watch the whole thing. (0 COMMENTS)

I often have conservations with people about protectionism. One common complaint I hear is that America is a free trader that plays by the rules, whereas foreign countries are protectionist and don’t play by the rules. In fact, the exact opposite is more nearly true. In a recent post, I pointed out that the US has the highest tariff rates in the entire world among developed nations. But what about “the rules”, don’t we at least play by the rules? Here’s The Economist: In 2017, rejecting the idea that rules-based dispute settlement serves American interests, it began blocking appointments to the WTO’s appellate body. If the government thought another country was undermining its interests, it would decide unilaterally on suitable punishment. France received tariff threats after proposing to tax American tech giants And it’s not just the Trump administration: The Biden administration is chummier towards allies. But on China and the WTO, it is not much different from its predecessor. Enforcement of rules through the WTO does not seem to be part of its plan, so it continues to block appointments to the appellate body. Based on a narrow view of self-interest, this may seem to make sense, as it has no big offensive disputes to win, and faces defensive ones it might lose. (One example is China’s complaint about America’s tariffs, which the Trump administration sent into legal limbo by appealing against it last October.) There is a perception that European-minded lawyers in Geneva read more into rules than America wishes, and have been too eager to constrain its use of defensive trade remedies. “It’s not going to be a quick fix,” comments a USTR official. Not only do we not play by the rules, we try to pressure other countries to join us in flouting the rules: Elsewhere in the world, many see America and China brawling outside the WTO’s rule-based system, and braying to allies to join in support. . . . Moon Chung-in, a senior adviser to South Korea’s president, says American pressure on South Korean companies to move away from China would be an “outright violation of WTO norms and principles”. The US no longer cares about WTO norms and principles, indeed we’ve sabotaged the WTO: Many would prefer America to repair the WTO’s dispute-settlement system. Mr Moon says the WTO is “one of the greatest inventions of the human race, but we are destroying it.” Some 121 WTO members, including China, make monthly appeals to America to restore appointments to the appellate body. Damien O’Connor, New Zealand’s trade minister, calls this the only way to ensure fairness, and warns of a return to a lawlessness “that allowed the big countries to simply dominate and often destroy opportunities for others.” Unfortunately, things are likely to get worse before they get better: It also implies an inward turn. The “Buy America” laws that the Biden administration hopes to strengthen will further reduce foreign access to a massive public-procurement market. So why do Americans have such a mistaken view of our role in the international trade regime?  Why do so many Americans believe that we are the good guys, trading with a bunch of devious, rules-breaking protectionist foreign countries? I blame nationalism, an ideology that advocates teaching people a sugarcoated and often false version of their country’s history.  We need fewer nationalists and more patriots—more people who understand that telling the truth, even painful truths, is the best way to correct bad policies and move forward. (0 COMMENTS)

I’ve been following economic policy closely since Richard Nixon’s assault on economic freedom with his August 15, 1971, economywide price controls. While there have been ebbs and flows in economic freedom in the fifty years since then, I have never seen anything like the full court press against economic freedom exercised by President Biden and his administration. To the extent it succeeds, it will not only reduce our freedom but also slow the growth of our real income. If you think Biden’s policies compare to Jimmy Carter’s, you would be wrong. Carter’s energy policies were horrendous. He continued Nixon’s and Ford’s price controls on oil and gasoline until he finally started to phase them out in his last year in office; he dictated minimum and maximum temperatures for buildings; and he set energy standards for appliances that have made them less useful and more expensive. In one of his worst hires, he appointed G. William Miller as chairman of the Federal Reserve and Miller went on to print more money and cause more inflation. But Carter was a leader in ending economic regulation of airlines, of trucking, and of railroads. Airline deregulation made airline travel cheaper and made it much easier for middle-class people to fly multiple times a year. Trucking and rail deregulation made those shipping modes more efficient and cheaper. And in 1979 he appointed Paul Volcker as fed chairman and Volcker went on to follow a semi-monetarist policy that, under President Reagan, brought inflation down to low single digits. Carter also signed a tax bill in 1978 that reduced the tax rate on long-term capital gains. Nothing that the Biden administration has done or is proposing on economic policy is comparable to Carter’s accomplishments. On every front, Biden and his appointees are pushing for massively higher spending, taxes, and regulation. Moreover, simply looking at the budget numbers, scary as they are, understates the damage because of the particular way the proposed programs are structured. Many of the programs set up bad disincentives and also intrude in private decision making that has worked out fairly well. These are the opening three paragraphs of David R. Henderson, “The Biden Assault on Economic Freedom and Prosperity,” Defining Ideas, October 21, 2021. And note this on the proposal for reducing further people’s financial privacy: Arguably the most intrusive regulation the Biden administration proposes is the one on people’s accounts in financial institutions. USA Today recently corrected an InfoWars exaggeration of the plan. The InfoWars headline: “Biden’s Treasury Dept. Declares IRS Will Monitor Transactions of ALL U.S. Accounts Over $600.” USA Today pointed out two mistakes. First, the Treasury can’t make such a move without Congress’s authorization. Second, writes Ella Lee of USA Today, “[E]ven if the proposal is adopted banks would not provide access to individual transactions, just the total amount flowing in and out of an account annually.” The correction is important but is it supposed to be comforting? Democrats announced that they would raise the threshold from $600 to $10,000. But you need only have an average of $834 a month flowing out of your account to trigger IRS surveillance. So the IRS would know more about the majority of account holders than they do now. Recently, Norah O’Donnell of CBS News asked Treasury Secretary Janet Yellen about the proposal. Yellen claimed that it was to catch wealthy people who are massively evading taxes. Yellen gave an example of someone who reports income of $10,000 but has $3 million flowing out of his checking account. Said Yellen: “That tells the IRS that’s an individual you might audit.” And this has exactly what to do with people whose flow out of their bank account is $10,000? Yellen was widely regarded as a first-rate economist. Surely, she’s still enough of an economist to know the difference between $10,000 and $3 million. Her sticking to her guns on the surveillance proposal suggests something more sinister: that she wants to go after, not the just the high-rolling tax cheats, but also, say, the gardener who gets away with paying a few hundred dollars less in taxes in a year. Read the whole thing. (0 COMMENTS)

Read Part 1 here.   There have been numerous instances of people being bitten by coyotes in Stanley Park, the Jewel in the crown of Vancouver, British Columbia, Canada. The Stanley Park Ecology Society (SPES) and the Vancouver Board of Parks and Recreation together run, own, and manage this massive 1,000 acre forested recreational center, located cheek by jowl with the Pacific Ocean and Hollywood North. What is their reaction to this more than merely annoying state of coyote affairs? They seem most interested in getting to the bottom of exactly why it is that these beasts are now mauling park attendees. They are also cautioning people not to feed the animals. Oh, that, and, also, the park is now closed from 7pm to 7am, and people are being warned not to enter at any other time of the day either. One cannot help but thinking of the Vancouver Park Board while also contemplating Nero playing his fiddle while Rome burned. Suppose, just suppose (I’m glad you’re sitting down while reading this, otherwise you are going to keel right over) that it was not these bureaucrats in charge of Stanley Park, but a real estate corporation which owned it- lock, stock, barrel, and coyote. Might they act any differently? Presumably so, since they would have the bottom line in mind; they would know that the way to maximize profits is to satisfy the customer. The latter would pay entrance fees by the day, week, month, or year, similar to the financing of Disney World, or other such comparable holdings. What options might such an entity conceive of? Option 1. Round up all the coyotes and kill them. There is precedent for this sort of thing, in that bears have been inundating the North Shore of Vancouver, and the authorities recently euthanized almost a dozen of them. This would cure the biting problem, but all too many paying customers have a soft spot in their hearts for these four footed marauders and might well object. Better would be, Option 2. Capture all of these beasts and send them to zoos where they will be safe, appreciated, and add to the GDP, instead of detracting from it. The difficulty is that zoos are not politically correct and more of them are shutting down than starting up. Coyotes, too, are not exactly an exotic breed. Hence, Option 3. Once again lasso them, or corral them the modern way with darts that put them to sleep (poison would affect other animals), and set up a zoo right there in the middle of Stanley Park; the denizens would be limited to the coyotes captured therein. Even “Friends of Coyotes” who don’t want them to be disturbed in their natural habitat would vastly prefer that they be preserved in this manner, rather than be obliterated. The rest of us would then be able to breathe a sigh of relief; we could then have our cake and eat it, too. Our friends of field and stream would be safe, and so would we. Would this special “Coyote Zoo” last forever, or would it end when the present inhabitants die off, assuming they were not allowed to breed? This issue we could safely leave to the profit-maximizing tendencies of the owners. They would do whatever they think will garner them the greatest returns; that is, satisfy the most paying customers. Walter E. Block is Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics at Loyola University New Orleans (0 COMMENTS)