At a time when majorities everywhere seem to believe that the market is imperfect and the government (the government each one thinks he would run, not the current one run by others) is perfect, America sometimes or perhaps often looks like a relatively enlightened spot. Compared to probably all advanced countries, a sizeable minority- if not sometimes a majority- of Americans hold opinions that are economically more realistic and more consistent with the ideal of a free society. Thanks to Peter Van Doren, editor of Regulation, for bringing to our attention a working paper titled “Price Gouging in a Pandemic” by Christopher Buccafusco (Yeshiva University School of Law), Daniel Hemel (University of Chicago Law School), and Eric Talley (Columbia Law School). The authors compared the results of a 1985 Canadian opinion survey on the “fairness” of increasing shovel prices by 33% following a big snowstorm with their own survey and (extensive) analysis of American opinion on the “fairness” of increasing prices of hand sanitizer by 33% in May 2030. In most American states, such an increase is forbidden during emergencies, as precisely documented by Buccausco et al. While 82% of Canadians found this sort of increase unfair, the researchers report, “only” 47% of Americans did so. I may add that Canadian opinion is probably representative of the typical opinion in what used to be called the “free world.” This being said, the fact that the Canadian survey covered only two cities, Toronto and Vancouver, may have affected its representativity. Strangely, nearly all Americans surveyed expressed a preference for rationing scarce supplies instead of auctioning them off, oblivious to the fact that auctioning is equivalent to letting the market determine prices, which a majority of them thought was not unfair! Perhaps this is just an instance of voters’ irrationality (the paradox of voting)? Still, three-fifths opposed any legal punishment to charging higher prices, which suggests that their preference for rationing was only a moral one—like when stores voluntarily reduce the number of items a customer can purchase in one visit. These results must have something to do with the American tradition of individualism and liberty. I would conjecture that they are also related to the large proportion of Americans who have real business experience. This reminds me of a fascinating Wall Street Journal story featuring a 16-year-old American, Max Hayden, who, during the pandemic, purchased and resold scarce goods such as game consoles with a profit of $110,000 (see Sarah E. Needleman, “Sixteen Years Old, $1.7 Million in Revenue: Max Hits It Big as a Pandemic Reseller,” June 9, 2021; it’s well worth reading). Max was able to do this—thus making sure that the scarce goods were going to those who valued them most as well as smoothing prices over time—without being sued or prosecuted by the government because, in New Jersey, goods deemed to be luxury goods are not hit by the “price gouging” legislation. His father, though, did not have a very enlightened opinion; the WSJ wrote: Max’s father, whose name is also Max Hayden, said he was initially uncomfortable with his son’s business success because he benefited from a situation created by the health crisis. But he concluded that it was permissible because his son only resells luxury goods, not necessities. “It is a real distinction,” said Mr. Hayden, 61. “This is capitalism.” Perhaps the older Mr. Hayden never reflected on the idea that letting each consumer decide for himself what is a necessity or a luxury is also capitalism, and so is moving goods in time—buying now for the purpose of reselling later when the anticipated price is anticipated to be higher. French economist Jean-Baptiste Say explained the last point two centuries ago. In A Treatise on Political Economy, Say wrote: There is a further branch of commerce, called the trade of speculation, which consists iu the purchase of goods at one time, to be re-sold in the same place and condition at another time, when they are expected to be dearer. Even this trade is productive; its utility consist in the employment of capital, warehouses, care in the preservation, in short, human industry in the withdrawing from circulation a commodity depressed in value by temporary superabundance … so as to discourage its production, with the dcsign and purpose of restoring it to circulation when it shall become more scarce … The evident operation of this kind of trade is, to transport c0mnodities in respect of time instead of locality. If it prove an unprofitable or losing concern, it is a sign that it was useless in the particular instance, and that the commodity was not redundant at the time of purchase, and scarce at the time of resale. The young Max Hayden was a successful entrepreneur and did not create “an unprofitable or losing concern.” As for the older Mr. Hayden’s moral concern, he was probably just caught in the conventional statist wisdom. The paper by Buccafusco et al. also provides a good review of the debates on the economics and ethics of letting prices rise and fall with the conditions of supply and demand. (0 COMMENTS)

  “John Tamny bravely describes the terrible and senseless economic pain caused by politicians panicking in the face of a health concern that—let’s be real—is no worse than a bad flu season.” So writes Forbes publisher Rich Karlgaard in his blurb for John Tamny’s latest book, When Politicians Panicked. Let’s see: The worst flu season in the last 100 years was in 1957–1958, when the Asian flu (technically H2N2) killed between 70,000 and 116,000 Americans. If a flu today killed the same percentage of the U.S. population, the U.S. death toll would be between 135,000 and 223,000. Given that the official U.S. death toll from COVID-19 is nearing 600,000 as this goes to print, and given that 600,000 is almost three times the upper limit of the worst flu in a century, it’s Karlgaard who should “be real.” After reading that blurb, I didn’t expect to find Tamny’s book impressive. Fortunately, I did. The highest compliment I can give it is that it’s Hayekian. Friedrich Hayek, in his 1945 article “The Use of Knowledge in Society,” argued that central planners could not successfully plan an economy because they didn’t have the necessary knowledge of people’s individual circumstances. Although I read every page and every footnote of When Politicians Panicked, I didn’t see Tamny ever referencing Hayek. (The book doesn’t have an index.) But his book is thoroughly Hayekian. He argues that government officials didn’t know enough, and couldn’t know enough, to shut down whole sectors of the economy. He also argues quite persuasively that government policies like the Paycheck Protection Program badly misallocated both labor and capital, making us poorer than otherwise. This is from David R. Henderson, “Overreacting to COVID,” Regulation, Summer 2021. Another excerpt: And then there was the federal government’s more than $600 billion Payroll Protection Plan, which paid small businesses substantial amounts to keep their employees on the payroll even if the employees were being underemployed. Was that a good idea? Absolutely not, says Tamny. He points out what should have been obvious to all but apparently wasn’t: government officials had no way of knowing which jobs should be kept and which ones shouldn’t. Precisely because some customers might want less human interaction because of their fear of the virus, “it was possible that businesses would devise all manner of ways to save on labor while meeting new or evolving needs of customers that they didn’t express before the spread of the coronavirus.” He notes that some factories and warehouses were rushing to “automate away some aspects of human exertion simply because employees of companies like Amazon were demanding the evolution.” But isn’t it important that government save jobs? Every economist knows, or should know, the problem with that view, but Tamny has a particularly refreshing way of making the point. In a chapter titled “They Would Stop You at ‘Job Creation,’” Tamny writes that the fact that the Paycheck Protection Plan “was all about job preservation was the surest sign of how pointless and wasteful it was.” No one, he writes, starts a business with the goal of creating jobs. You create a business to make money and you make money by creating goods and services that people value. Indeed, often you do well by introducing technologies that allow you to produce more with fewer workers. That’s the story of agriculture, steel making, auto production, and pretty much everything else. Tamny writes, “If readers are looking for 100 percent labor force participation, just travel to the world’s poorest countries.” There you will see very little unemployment and a lot of people working in “unrelenting drudgery.” I also point out a major failing in an otherwise very good book: his mistaken caricature of economists. Read the whole thing. (0 COMMENTS)

The Economist has an interesting article discussing regulatory changes regarding child safety seats: During the Reagan era, only the truly wee—tots aged under three—had normally to be secured in child-safety seats. But states’ governments have, since then, gradually ramped up the requirements. Today, most places in America make children sit in safety seats until their eighth birthdays. That concern for youngsters’ safety has had the unintended consequence, Dr Nickerson and Dr Solomon suggest, of fewer three-child families. . . . They discovered that tightening those laws had no detectable effects on the rates of births of first and second children, but was accompanied by a drop, on average, of 0.73 percentage points in the number of women giving birth to a third while the first two were young enough to need safety seats. . . . They estimate that laws requiring children to sit in special seats until they are eight years old saved about 57 lives in 2017 and contrast that number with the 8,000 children who might have been conceived and born in the absence of such rules. There is, they conclude, no “compelling social interest” in requiring child seats for children over four. This seems weird. Comparing putative lives forgone to actual lives saved is, to put it politely, a strange moral calculation. The writer for The Economist seems to think the government’s moral calculation is more sensible than the one employed by the authors of this paper, but doesn’t explain why.  Do they entirely reject cost/benefit analysis (an approach The Economist generally favors), or do they reject the specific moral calculation in this case?  And if so, what’s the numerical equivalence that they think is more accurate? Does one life lost equate to one foregone child?  To 10 foregone children? To 100 foregone children?  How about a million foregone children?  A billion? It seems to me that the “strange moral calculation” is being made by the government regulator that believes they are better positioned than the child’s parents to solve these difficult moral problems. I’m completely agnostic on this issue; I don’t have a clue as to how one should weigh 57 lives lost against 8000 children never born.   If you are confident that you can do that sort of moral calculation, then please tell me your conclusion.  What is the correct equivalence ratio to employ in this sort of cost/benefit analysis? Because I don’t know the answer, I’d prefer to leave those decisions up to parents, not government regulators. PS.  This has nothing to do with my view on the value of a higher birth rate.  I use the same agnostic moral reasoning on issues like abortion, where deregulation cuts in the other direction. PPS.  The decision to have children is implicitly a decision to risk the life of a living mother in order to gain a potential human being. (0 COMMENTS)

Scott Lincicome and Huan Zhu have a new Cato working paper on industrial policy. The paper is very good and reviews—and builds on—the recent literature on the subject. It also makes a point of clarifying what industrial policy is and what is not, and what successes it can and what it cannot claim. Here’s an enlightening bit on industrial policy and Covid-19 mRNA vaccines: the COVID-19 vaccines developed under “Operation Warp Speed” have been heralded as a triumph of American industrial policy, but the first vaccine to market (Pfizer/BioNTech) disproves the assertion. BioNTech was a German company that had been working on mRNA vaccines for years and began its collaboration with Pfizer (based on an earlier working relationship) months before the U.S. government began OWS in May 2020 or contracted with the companies for a vaccine in July of that same year. (Management actually predicted in April 2020 that distribution of finished doses would occur in late 2020.) The companies famously refused government funds for R&D, testing and production–efforts that instead leveraged Pfizer’s substantial pre-existing U.S. manufacturing capacity, as well as multinational research teams, global capital markets and supply chains, and a logistics and transportation infrastructure that had developed over decades. In fact, the Trump administration’s contract with Pfizer was for finished, FDA-approved vaccine doses only and expressly excluded from government reach essentially all stages of vaccine development (i.e., “activities that Pfizer and BioNTech have been performing and will continue to perform without use of Government funding”). There is even some evidence that OWS’ allocation of vaccine materials to participating companies (some of which still have not produced an approved vaccine) may have impeded non-participant Pfizer’s ability to meet its initial production targets and expand production after the vaccine was approved. Surely, some state support (e.g., support form RNA research and a large vaccine purchase commitment) was involved both before and during the pandemic, but it all lacked the necessary commercial, strategic, or nationalist elements of “industrial policy.” In fact, mRNA visionary Katalin Karikó actually left her government-supported position at the University of Pennsylvania “because she was failing in the competition to win research grants” and thus “moved to the BioNTech company, where she not only created the Pfizer vaccine but also spurred Moderna to competitive imitation.” The NIH grant supporting her early work actually came through her colleague, Drew Weissman, and “had no direct connection to mRNA research.” Other efforts, such as Moderna’s mRNA vaccine, had more state support, but the BioNTech/Pfizer vaccine shows that it was not a necessary condition for producing a wildly successful COVID-19 vaccine (0 COMMENTS)

Don Boudreaux hosted an excellent podcast discussion on Discourse Magazine Podcast on the abolition of the Corn Laws. The debate involved Steve Davies and Douglas Irwin and Arvind Panagariya. It is worth listening to today, as it was on June 25th, 1846, that the Duke of Wellington persuaded the Lords to approve the repeal of the Corn Laws (following the Commons). The conversation is really great and a lot of interesting points are made. Both Davies and Irwin explain clearly how grain protectionism functioned. Steve Davies captures the political spirit of the age, placing the Anti-Corn Law League in context and alluding to the power of that movement, perhaps one of the first that really heralded contemporary politics by putting together “a mass movement which made use of all of the means of communication that were becoming available at the time, such as the use of the newly established railways and turnpikes, to build a national organization”. Circumstances of course helped. This is a crucial point, a point often overlooked by politically oriented people, either classical liberal/ libertarians or, I suppose, within different political movements too, hardly see. “The Anti-Corn Law League was increasingly pushing, if you like, at a door that was being slowly opened by the Whig aristocrats.” One crucial part of the League’s success was rooted in its circumstances, which of course does not imply to diminish the role and courage and commitment of people like Cobden and Bright, nor the admirable ability to communicate with people they displayed, nor their organizational efforts.   Davies sees the long term consequences of the League not so much in the Repeal itself (Peel may have been persuaded purely on intellectual grounds: quite a sentence to write about a prime minister!) but on two fronts: One is it ensured that when the repeal came, it was total and immediate—well, free of a phasing-in period, but effectively immediate. It wasn’t a kind of slow, gradual or half-hearted process. It was an abrupt and dramatic one. But the other, more important thing was the thing you alluded to that Frank Trentmann talks about. They had a huge effect on the popular culture, and they fixed in the minds of the British working class in particular, right up to the present day, the profound belief that free trade is good for the poor and the working man and woman and that protectionism is basically a conspiracy by the rich and special interests to screw over the working class. On this latter point, how the repeal influenced long term consensus, see also this admirable essay by Sam Gregg on Law & Liberty. Gregg refers to Clement Attlee endorsing a free trade position vis-à-vis Neville Chamberlain. See how long allegiance to free trade lasted. My favorite bit of the conversation is a summary of a recent paper of his by Irwin: The Corn Laws had been revised in 1815. There was a huge debate that involved David Ricardo and a bunch of others. Some pressure to reduce it in the 1830s, but it was really appeals for reforms in the 1840s that got rid of it. At that time, when the Corn Law tariff, the ad valorem equivalent, hit about 40%, it was basically prohibitive. In the late 1830s, early 1840s, there were no imports of grain for certain periods when world prices were low. Therefore, the tariff was high. But right around the time of the repeal, the tariff was about 28%. So what Maksym and I do in our paper is we do a simulation of, what is the economic consequences of getting rid of a 28% tariff on grain? This is a time when agriculture is a pretty big sector in Britain. About 9% of employment was in grain agriculture. About 24% of total British employment was in agriculture altogether. First of all, that’s an important note, that grain agriculture was not all of British agriculture; it was just a segment of it. There was pastoral agriculture, which is actually exporting from Britain. BOUDREAUX: That would be things like sheep farming and— IRWIN: Exactly. Wool, meats, other things like that. That’s important because the claim is always “You can’t open up your market because it will devastate the sector.” Well, there’s different components of the sector, and some actually did very well after the repeal of the Corn Laws. Not grain agriculture, which is important for bread, as Steve was saying. When you get rid of an import tariff, you’re going to import more of those commodities. You’re going to have to pay for that, so your exports of other goods will go up. You’re going to be reshuffling resources around the economy when you do that, and we basically find three things. One is, yes, there are efficiency gains from doing this. You’re going to reallocate capital labor to where you have a comparative advantage, and the economy will be better off for that. But also, Britain was a large player in world markets at this time, and there are some adverse terms-of-trade effects, namely that the prices of your exports will go down because Britain was a big player in the world textile market. You might depress some of those prices. You’re going to drive up the world price of grain and cotton because you’re once again drawing on the world’s resources, and Britain was such a major economy. It turns out what we find is the terms-of-trade losses and the efficiency gains basically wash out. They offset each other. The second thing is that there’s going to be a lot of redistribution of income within the country. Here’s where David Ricardo and others really nailed it. Land grants went down, and that’s what we find in our simulation, but real wages will go up and the return to capital will go up. Then the third thing we find is we actually disaggregate income distribution effects a little bit in a very crude way. What we find is that the top 10% of income earners were worse off and the bottom 90% were better off. Read (listen to) the whole thing. (0 COMMENTS)

  Washington’s new bill will “increase housing unit inventory by removing arbitrary limits on housing options.” In plain English, what that means is that groups of people who aren’t family will be allowed to live together. Washington is one of many states with old laws on the books prohibiting such living arrangements — a vestige of zoning regulations aimed at prioritizing the nuclear family and limiting the availability of affordable housing through boarding houses. In their zeal, however, such laws put an end to a useful urban housing model: affordable dwellings shared by strangers, a form that’s perfect for today’s housing-stressed cities. This is from Diana Lind, “A Centuries Old Idea That’s Making Cities More Affordable Today,” June 11, 2021. HT2 Tyler Cowen. The Washington referred to above is Washington state. Later she writes: Boarding houses and SROs [single room occupancy] used to be very common in the United States. In the 1800s an estimated one-third to one-half of urban residents either hosted boarders or were boarders themselves. This style of housing accommodated a quadrupling of the American population over the 19th century, and enabled people to live affordably enough in walking distance of daily needs and amenities. But throughout the second half of the 20th century, these housing types gradually disappeared as a result of zoning that prioritized single-family housing, and explicitly made these housing types illegal. While racist practices like redlining prevented people of color from buying homes in white neighborhoods, policies banning group living were likewise intended to keep white, single-family neighborhoods out of reach of certain groups: people of color, lower-income extended families, groups of friends, or single laborers. It didn’t help that the only SROs or boarding houses that continued to operate were often in disinvested urban areas. I had experience with both SROs and boarding houses in the early 1970s, both quite positive. In late May 1970, after graduating from the University of Winnipeg, I hitchhiked from Winnipeg across Canada to Vancouver and down to Los Angeles, stopping along the way to visit existing friends and new friends. (One of my friends called this my “libertarian pilgrimage.”) The new friends tended to be libertarians I had heard about or read. In  San Francisco I didn’t know anyone and I thought that asking one libertarian woman I met if I could sleep on her couch was too forward. So I found a divey San Francisco hotel and paid $5 or $6 a night for my own room without a bathroom: the bathroom was a shared facility down the hall. I did the same in Los Angeles. In the summer of 1973, after I had spent one year in the Ph.D. program at UCLA, I was a summer intern in Nixon’s Council of Economic Advisers, working under Herb Stein. I wanted to save as much money as I could to help pay for living expenses at UCLA. I had heard about a Harvard undergrad named Larry Siskind who was heading something called the “Libertarian Task Force.” He, the people who worked under him, and a few other libertarians and conservatives (one worked as an intern for columnist Jack Anderson and one worked in Vice-President Agnew’s office) were renting a divey house on East Capitol Street. I asked if I could join them and pay a modest rent. Larry accepted and I shared a room with a guy named Steve Beckner. It was cheap housing and lots of fun. Allowing such housing would help a lot of people who want to move to a city and take a new job. (0 COMMENTS)

Years ago I was on a flight out of Monterey and, as is my wont, I struck up a conversation with the passenger beside me. She was a local and somehow we got talking about the local daily newspaper, the Monterey Herald. I told her that because of its price relative to value, I had dropped it a few years earlier but that I thought I was missing important local news and was thinking of resubscribing. “Oh, you should,” she said. “Why?” I asked. “I admit I’m biased,” she said, “my husband is one of the reporters.” I asked her his name and she told me. I recognized it. He had had a fairly snarky attitude in some of his reporting, especially on issues having to do with libertarian or conservative causes. Not always, by the way, and maybe not even often, but often enough for me to notice. I could have launched into a critique of her husband. But what would have been the point? It might have led to an uncomfortable flight for both of us. So I went a different route. I told her something I liked about  him. I told her about my favorite piece he ever wrote in the Herald. I had clipped it and it had burned in my office fire but I remembered it well. He had written an op/ed about his own experience decades earlier as a reporter for a different newspaper in the central California valley. It was during Jerry Brown’s first 2 terms as governor, sometime between January 1975 and January 1983. Brown was looking for someone to fill a judge slot and in order to satisfy a particular constituency, he thought he had to choose someone of Greek descent. So he and his people looked around to find someone to fill the slot. This reporter had happened to follow the story closely and was struck by how the people making the choice seemed to put zero or close to zero weight on anything about the potential appointee other than his Greek heritage. Would he be a good judge? They didn’t seem to care. This reporter concluded the Herald op/ed by stating his hope that this is not how government works and that what he saw was rare. I told his wife that I had concluded, based on my experience and reading, that what her husband had seen was in the normal range. Government officials just didn’t have strong incentives to make good decisions. I told her that I wished he had written more articles in which he delved into how government actually works. (0 COMMENTS)

According to the BLS, TV prices (olive green line) fell by 94.5% between 1997 and 2015: A TV set that cost $200 in 1997 cost $11 in 2015.  Today the price would presumably be even lower.  Try to imagine visiting your local BestBuy and asking to look at their $11 TV sets. Of course, what’s actually going on here isn’t so much that people are spending less money of TV sets, rather that they are getting better TV sets when they spend $200 at the local retailer.  But how much better?  The BLS estimate suggests that a $200 TV set purchased in 2015 was 18.2 times better than a $200 set purchased in 1997.  But what does that mean? Does it mean the screen is 18 times larger?  Does it mean that George’s foibles on Seinfeld are 18 times funnier on the 2015 TV set?  Is a 9th inning home run in Yankee Stadium 18 times more thrilling on the 2015 TV set? When I’ve raised this issue in the past, commenters have occasionally suggested that “revealed preference” provides some sort of objective way of ascertaining the subjective value of TV quality improvements.  But that view is based on a misunderstanding of concepts like “willingness to pay” and “consumer surplus”. For many decades, the TV market has generated a large amount of consumer surplus.  People spend a lot of time watching TV, and would be willing to pay a fairly large sum for TV sets if they had to.  But they don’t have to, because supply has increased sharply due to technological progress, and also because the industry is pretty competitive, with many sellers to choose from.  So the price that people actually pay for a TV set doesn’t tell us how much value they derive from the set (except at the margin). A slightly more sophisticated argument is that if one set sells for 10 times more than another set, then consumers must derive 10 times more value for the fancier set.  Again, this is wrong.  The people buying expensive TV sets are different from those who choose to buy cheaper sets.  Why wouldn’t Bill Gates want to get the best TV set at almost any reasonable price? Let’s say the average TV set is $200 (call it set A), and then manufacturers come out with a fancier set (B) that sells for $1000.  Some people then (wrongly) assume that set B is viewed as 5 times better than set A.  Eventually, the price of set B falls to $200.  At that point, manufacturers come out with even fancier set C, which sells for $1000.   Set C is (wrongly) viewed as 5 times better than set B, and by inference 25 times better than set A.  Over time, the price of set C falls to $200.  Now the BLS says that the price of TVs has declined by 96%, to only 1/25th of their original price. The problem here is that the fact that set B sells for 5 times more than set A does not mean that it is 5 times better.  For instance, my current TV set cost $7000.  And yet I don’t view it as being 7 times better than a $1000 TV set.  So why did I buy it?  Because I do view it as being at least $6000 better than a $1000 set.  Thus my maximum willingness to pay for a big $7000 OLED might well have been $107,000.  And my maximum willingness to pay for a ordinary $1000 big screen might have been $100,000.  In that case, even if I regarded the OLED as being only 7% better than an ordinary TV set, I’d prefer it at a price of $7000 over an ordinary TV selling for $1000. The older I get, the less confident I am that we have any objective way to measure utility.  Keynes (1936, Ch. 4) had the same view: But the proper place for such things as net real output and the general level of prices lies within the field of historical and statistical description, and their purpose should be to satisfy historical or social curiosity, a purpose for which perfect precision — such as our causal analysis requires, whether or not our knowledge of the actual values of the relevant quantities is complete or exact — is neither usual nor necessary. To say that net output to-day is greater, but the price-level lower, than ten years ago or one year ago, is a proposition of a similar character to the statement that Queen Victoria was a better queen but not a happier woman than Queen Elizabeth — a proposition not without meaning and not without interest, but unsuitable as material for the differential calculus. Our precision will be a mock precision if we try to use such partly vague and non-quantitative concepts as the basis of a quantitative analysis. BTW, Is there anything worse than an economist mocking the public for being consistently “biased” in their forecasts of inflation, as if economists have some sort of scientific way of ascertaining the “true” rate of inflation?  Should we really be scolding the public for not understanding that since 1997 the price of a brand new $200 TV set has fallen to $11? PS.  On the other hand, the nominal aggregate expenditure on TVs is a relatively objective concept, and does have real meaning. PPS.  After his comments on the price level and real output, Keynes suggested that what we should actually be focusing on is the money value of income/output, and also the total level of employment.  I agree. (0 COMMENTS)

During my recent interview with Andrew Sullivan, he repeatedly accused me of being totally oblivious to the realities of human nature.  In his view, I hew to an absurdly economistic view of what people are really like.  In reality, people care about culture, identity, and community at least as much as they care about material consumption.  Indeed, this is how practically everyone describes themselves, right? False humility aside, I maintain that my understanding of human nature is far deeper than Sullivan’s.  Indeed, my understanding of human nature is nothing short of profound. Like Sullivan, I am well-aware aware that human beings routinely claim to place supreme value on culture, identity, community, and so on.  Unlike Sullivan, however, I refuse to take such hyperbolic claims at face value. Actions really do speak louder than words.  And the vast majority of people who claim to place supreme value on culture, identity, or community show otherwise with their deeds. In the interview, I presented Sullivan with a simple hypothetical.  What do you say about a Christian who insists, “My religion is the most important thing in my life,” yet never goes to church?  I say this is mighty evidence that this self-styled Christian dramatically overstates her religious commitment.  “Most important thing”?  More like, “Thing of marginal importance at most.”  Sure, she could change my mind if she read the Bible for ten hours a week, or habitually discussed religion on social media, or spent Sundays knocking on neighbors’ doors to ask them to adopt Jesus as their personal savior.  But when sometime puts little effort into something they claim is extraordinarily important to them, we should conclude that their self-description is false. Why would a human being say such falsehoods?  Sometimes they’re consciously lying; more often, they’re just too intellectually lazy to check their words for accuracy.  Either way, their underlying motive is to say things that sound good – to yourself and other people.  Why bother?  To feel good about yourself – and persuade other people to feel good about you.  Saying what sounds noble, and doing what feels pleasant: Now that’s human nature. What does this have to do with culture, identity, or community?  Simple.  If you passionately care about such things, you will pay a lot of time and money to get a heavy dose.  If you are passionate about being Irish, for example, you will pay a sizable premium to live in an Irish community.  If you are passionate about patriotism, you will be an active member of groups like the American Legion.  If you are passionate about your community, you’ll regularly volunteer to beautify it.  Yet as we know, only a tiny minority of people do anything in this ballpark. Yes, I know that humans are heterogeneous.  People who voluntarily live in communes show by their actions that their community is deeply important to them.  Yet the vast majority of people who don’t voluntarily live in communes ipso facto show a lower level of commitment, with the median just a little above zero. Can’t we just express our deep commitments via voting?  Absolutely not.  In any real-world election, the probability that you change an electoral outcome is near-zero.  For practical purposes, then, voting is talk, not action.  Voting is on par with threatening to leave the country because your side loses an election.  To count as action, you would actually have to follow through with your threat.  Hardly anyone does. You could reply, “Bryan, if you really had a profound understanding of human nature, you would keep your mouth shut about all this, because you’d realize that people hate hearing these ugly truths and aren’t going to reform.”  Rebuttal: Normally I do keep my mouth shut about all this.  I share my profound understanding of human nature with the rare minority of people who are genuinely curious about the social world.  Self-selected folks like you, dear EconLog readers. (1 COMMENTS)

It is not totally impossible that, despite diminishing economic freedom and near-zero free speech, the Chinese economy will continue to grow at high rates. That these rates will reflect genuine economic growth, that is, increased production that responds to consumers’ demand. That some other way than free markets will be discovered to express consumers’ demand. That industrial policy will coerce businesses into efficiently satisfying consumers’ demand. That the centralized Chinese state will find a solution to the central planner’s information problem—what individuals prefer, which trade-offs each is willing to make, and what are all the production functions and all local conditions in the economy. That a dictatorial central government will erase the experience of two millennia of Chinese empires stifling liberty and economic growth. That Chinese businesses will out-compete free Western entrepreneurs (assuming that the latter still exist), and that the fears of American statists that China will (in some real sense) overcome America will be realized. Perhaps three hundred years of economic analysis have been wrong. In a Popperian way, we must view our current beliefs as conjectures that have not been proven wrong. It is however much more likely that the current Chinese state is a giant with clay feet and that the country’s economy will suffer the effects of strengthened authoritarianism. The suspicion that a Wuhan laboratory accidentally released SARS-CoV-2, if it turns out to be true, and the incident at the Taishan nuclear power plant last week are consistent with the hypothesis of a fragile economy run by an inefficient central planner. The Chinese government wants to make China “great” again—as it was under Mao and the preceding two millennia of stifling imperial government. (On imperial China compared to the West, the recent books of Joel Mokyr and Walter Scheidel are worth reading.) In a Regulation article three years ago, I wrote: As the Chinese government has veered back toward authoritarianism, the prospects for continuing growth have dimmed considerably, even if this does not yet show in economic statistics. Those who, often for invalid protectionist reasons, fear the economic growth of China can relax. The main danger is that, in order to hide its failures and keep its grip on its subjects, the Chinese Leviathan would excite the latter’s nationalist emotions and lead the world into war. Freedom of speech is as important for economic efficiency as it is in the search for truth. In their 2012 book How China Became Capitalist, a title that now looks more like an optimistic prediction, Ronald Coase and Ning Wang prudently wrote that “without a free and open market for ideas, China cannot sustain its economic growth.” The intimidation and closing of the last anti-government newspaper in Hong Kong further point to where the system is heading (Elaine Yu, “Honk Kong’s Apple Daily Newspaper Prints Last Edition as Free-Press Era Ends,” Wall Street Journal, June 23, 2021). One question can still be raised for the future: Is it possible that, past a certain point, a tightly regulated and crony “capitalist” economy could become less productive than an economy dominated by an openly tyrannical government that allows for some limited and closely monitored economic entrepreneurship by state corporations? (0 COMMENTS)