One groups wants to preserve the traditional way of living, with an extended family dwelling in little single-family homes. Another group wants to embrace progress, erecting soaring futuristic skyscrapers: We’ve seen this dynamic play out over and over again, all over the world.  What might surprise you is that in this case the progressive group that wants to build massive skyscrapers is a Native American tribe, while the people who wish to live according to the old ways are the European and Asian residents of Vancouver, Canada. This reminds me of Connecticut, another state full of complacent westerners that wish to preserve things just the way they’ve always been.  A few decades ago, a group of Native Americans saw a huge unmet need for gambling services, and erected some truly enormous facilities in the countryside of eastern Connecticut. In Vancouver, the residents of the affected neighborhood are fighting the new development, but according to The Economist they will almost certainly lose.  You can’t fight progress when someone else has sovereignty over the area in question: It’s easier to elect a pope than to approve a small apartment building in the city of Vancouver,” says Ginger Gosnell-Myers, of Nisga’a and Kwakwak’awakw heritage, and formerly the city’s first-ever indigenous-relations manager. Such is the power of local NIMBYS that it is difficult to build new homes, and legions of young people are doomed to live with their parents for years, if not decades. But on some land the normal rules do not apply. No one can tell the Squamish First Nation, an indigenous group, what to build on their territory. One patch of its reserve is in Kitsilano, a ritzy part of Vancouver. Despite being close to the city centre, it is full of single-family homes and duplexes. Residents fiercely resist the construction of tall buildings. But they cannot stop the Squamish from erecting 59-storey skyscrapers. This year could see the ground broken for Senakw—12 towers containing 6,000 flats, mostly for renting. There is a serious point to all of this.  Regulatory competition can be good.  It might sound “efficient” to have a provincial, national or even supra-national organization set all the rules.  But if they make the wrong call then people have no option to do things a different way.  If you have many competing jurisdictions, then any attempt by one area to stand in the way of progress will simply push people toward nearby areas where enterprises are willing to respond to their needs: In 2019 the city vowed to put up 20,000 new rental units. Senakw would meet roughly a quarter of that target, points out Ms Gosnell-Myers. “The Squamish Nation is more responsive to average Vancouverites than Vancouver city hall.” (0 COMMENTS)

The Nobel Factor,1 a 2016 book by Avner Offer and Gabriel Söderberg, looked to be right up my alley. Offer, an emeritus professor of economic history at the University of Oxford, and Söderberg, a researcher in economic history at Uppsala University in Sweden, do a broad overview of most of the winners and briefly lay out their contributions. They also criticize many of the Nobel Prize winners, sometimes with ad hominem arguments. They have two major themes. Their first is that the Nobel Prize was initiated in the late 1960s as a way to raise the public’s respect for economics as a science. The second is that economics fails at being empirical and the pro-free-market views of many of the winners reflect an ideological commitment more than a scientific understanding. They succeed at the first and fail at the second. Even though I think they fail at the second, and I’ll say why shortly, the book is chock full of interesting facts. Here’s one nugget: In 1968, economist Milton Friedman, a major player in the Mont Pelerin Society [MPS], nominated philosopher John Rawls for membership in MPS. Rawls became a member and withdrew three years later. This is from David R. Henderson, “The Nobel Factor: What Does the Prize Reward?” Econlib.org, April 5, 2021. It’s my review of The Nobel Factor: The Prize in Economics, Social Democracy, and the Market Turn, by Avner Offer and Gabriel Söderberg. My review is mainly critical, but I end on a high note: Being a glass-half-full person, I’ll end on two positive notes that show that maybe the authors are not so closed as they sometimes seem to economic freedom. They note that Robert Fogel, co-winner of the 1993 price, wrote that slavery “was economically as efficient as free farming.” They then spot the error, writing, “What he meant to say was that it was as profitable, which is not the same thing. This finding was hardly consistent with the economic conception of efficiency, which stressed free choice, or with its focus on individual welfare, such individuals presumably including slaves.” Bravo! The second glimmer of hope is in their recognition of the difference between voluntary and coercive funding. In discussing how the funding for the economics Nobel differs from the funding of the other five, the authors write, “Alfred Nobel’s motivation was sublime, and the money came out of his will; the chain of causes for the economics prize was something of a farce, and was paid for by Swedish taxpayers.” I couldn’t have said it better. Read the whole thing. (0 COMMENTS)

with Peter van Doren   U.S. house prices surged in 2020, rising 11.2 percent for major metropolitan areas according to the Case–Shiller Home Price Index and 12 percent according to the Federal Housing Finance Agency. This has raised concern that a new housing bubble has formed and is threatening a repeat of the “Great Recession” of early this century. If “housing bubble” means that home prices rise in a relatively short time and then fall back to long-term trend, then a bubble likely has formed over the past year. But this bubble, by itself, would be different—and less ominous—than what happened early this century. That said, there is something troubling going on in the U.S. housing market and government should take steps to address it. The sharp increase in U.S. house prices over the years 1998–2006 was driven by a rise in demand (or, speaking carefully, an outward shift in the demand curve) for homes in major coastal metropolitan areas and some other places, even as home construction reached high levels. Those areas were booming economically, attracting workers who bought or rented dwellings in the cities and their suburbs and exurbs. At the time, financial markets (and their regulators) considered instruments tied to mortgages to be (to borrow a Victorian idiom) “safe as houses,” encouraging them to finance all this homebuying. Small-time investors got in on the buying spree by purchasing second (and additional) houses, either to “flip” or rent out in the hot market. When gasoline prices spiked in 2005–2008, long commutes from the suburbs and exurbs became costlier, bringing financial hardship to households and subsequent mortgage defaults. Mortgage-related investments soured, setting off a financial crisis. The crisis spread to the broader economy, which was already struggling with a business downcycle from the suddenly cooled housing market and its effects on related industries and household wealth, yielding the Great Recession. This time around, there’s at least one important difference: the spike in home prices over the past year is to a large extent supply-driven. Because of the coronavirus pandemic, homeowners have become less inclined to put their houses on the market, and government-mandated forbearance has further reduced the availability of homes. As the Wall Street Journal reported in January, the number of houses for sale in November 2020 was 22 percent less than the year before. This decreased supply has disrupted the normal “churn” in housing markets as households grow in size and seek bigger homes and then shrink and seek smaller ones. (We note there also is evidence of recent increased demand for housing in suburbs and exurbs as newly telecommuting workers flee population-dense areas because of the pandemic. We’ll see if this outmigration persists long-term and if it affects overall house prices or just increases suburban and exurban prices relative to urban ones.) The supply constraint should ease as more Americans are vaccinated against the coronavirus and the nation approaches herd immunity. It’s likely that, once the pandemic fades, pent-up churn and delayed foreclosures will result in a flood of homes hitting the market, accompanied by a decline in house prices. The bubble of the last year should deflate without much hardship. That said, things are not well in the U.S. housing market. The surge in prices over the last year is just the tip of a longer rise in house prices dating back to the end of the housing bust in 2012. Indeed, the increase can be traced all the way back to 1998, suggesting the 1998–2006 price increase wasn’t a bubble, but rather the 2006–2012 bust was the short-lived departure from trend. Higher home prices hurt homebuyers (especially young professionals and new families), both because of higher mortgages (though low interest rates in recent years have kept monthly payments lower than they would have been otherwise) and by reducing the supply of homes that would better fit families’ particular needs. This needs to change. The decline in long-term interest rates is one contributor to the higher house prices, as well as the prices of other assets. Another contributor—one that government can address—is its many anti-housing policies currently in place, from restrictive zoning and “smart growth” requirements, to tariffs on building materials that have sent lumber, metal, and home appliance prices soaring, to immigration restrictions that have reduced construction labor. Fortunately, government can undo those anti-housing policies without increasing public spending, taking on risk, or imposing more burdensome regulations. This would not only produce more housing units, but also increase the supply of existing housing for sale and put downward pressure on overall home prices. Such reform shouldn’t cause a painful sudden collapse in house prices. The time involved in home construction—not to mention the interminable permitting and inspection process—would moderate the flow of new housing. Hopefully, there would be a gentle, long-term decline that would return house prices to their pre-1998 trend. But even if house prices would just plateau or slow their rise, that would give many American households a much-needed break.   Peter Van Doren and Thomas A. Firey are senior fellows at the Cato Institute and, respectively, editor and managing editor of Cato’s policy journal Regulation.   (0 COMMENTS)

Now that we correctly understand Hsieh-Moretti’s results, let’s put them in context. 1. Immigration researchers have focused heavily on the economic effects of full deregulation of immigration.  Hsieh-Moretti (henceforth HM), in contrast, focus on the economic effects of moderate housing deregulation.   Their chief hypothetical is not, “What would happen if there were zero housing regulation?” but “What would happen if the Bay Area and NYC only had as much housing regulation as the rest of the U.S.?” 2. Immigration researchers find truly enormous economic benefits of full deregulation; roughly speaking, open borders would double Gross World Product.  HM’s results aren’t quite as dramatic, but in absolute terms they  still boggle the mind.  Their conservative estimate is that moderate housing deregulation would increase US GDP by 14%.  Their corresponding optimistic estimate is +36%. 3. In both cases, we’re talking trillions of dollars of annual gain, implying an astronomical present value. 4. How can the gains be so big?  Because (a) the regulations have a large effect per person, and (b) affect large numbers of people.  Big times big equals enormous. 5. What’s the mechanism that yields these gains?  The answer in both cases is the same: Moving workers to places with higher productivity.  Deregulating immigration lets workers in low-productivity countries move to high-productivity countries.  Deregulating housing encourages workers in low-productivity regions to move to high-productivity regions. 6. In both cases, focusing solely on the direct victims of regulations is misleading.  The direct victims of immigration restriction are would-be migrants deterred by the First World’s immigration restrictions.  But the whole world loses the benefit of the extra stuff they would have created if they moved.  Similarly, the direct victims of housing regulation are would-be internal migrants deterred by rich regions’ housing restrictions.  But the whole country (indeed, the whole world) loses the benefit of the extra stuff they would have created if they moved. 7. How can such enormous gains be so overlooked?  For immigration, I’m convinced the main answer is anti-foreign bias, but that’s barely relevant for housing deregulation. 8. So what’s the right story?  I’m still weighing a few competing explanations. (a) Housing regulation increased very gradually from the 1960s on, and its direct victims tend to be young.  So the obvious victims barely know what they’re missing – and therefore rarely raise their voices in protest to alert the rest of society. (b) The main victims of housing regulation are not people who pay high prices for real estate, but people who stay in low-productivity regions because the cost of housing in high-productivity regions is too high.  Since the latter victims are barely visible, it’s hard to feel much pity for them.  Indeed, since the losers rarely see the houses and jobs they could have had, they don’t even feel much self-pity. (c) The main victims of deregulation, in contrast, are ultra-visible and ultra-relatable.  New construction leads to lower real estate prices and at least temporary inconvenience for long-term residents.  Remember Up? (d) Pessimistic bias leads people to obsess over the downsides of deregulation, while ignoring enormous upsides – even for existing owners. (e) Given populist resentment of markets and business, real estate developers inspire severe antipathy.  They’re ideal instantiations of the hated “fatcat” archetype. (f) Housing regulation is really boring for most people. 9. If the whole U.S. housing market were as regulated as the Bay Area, the benefits of liberalizing immigration would be modest.  What’s the point of telling people “You’re free to come work here” if they can barely afford to rent a shack?  Fortunately, housing regulation varies widely by city and state.  So even though most migrants can’t afford to move to the most productive regions of the U.S., they can totally afford to migrate to the rest of the country.  And the less-productive regions of the U.S. are still vastly more productive than almost anywhere in the Third World. 10. I’ve long urged libertarians to put immigration deregulation at the top of the pro-liberty agenda.  Now I’m going to urge them to make housing deregulation their #2 priority.  And to be the change I want to see in the world, I am now writing a second graphic novel on this topic.  Working title: Build, Baby, Build: The Science and Ethics of Housing.  Stay tuned for updates!   (1 COMMENTS)

Some brief but straightforward algebra. The part of my post yesterday that dealt with deadweight loss from taxes was a little brief. Even if you go to the original article in Defining Ideas, you won’t find the actual computation. So here it is. DWL is is proportional to t^2, where t is the tax rate. (t^2 means t-squared) Original tax rate for our high-income Californian is 54.1%. New tax rate for our high-income Californian is 56.7%. This 2.6-percentage-point increase is a 4.8% increase. (2.6/54.1 = 0.048, which is 4.8%.) So why doesn’t the DWL increase by just 4.8%? Because of the square relationship I referred to in the article and above. Let original DWL be DWL1. Because of the proportionality property, we can lump all the other components of DWL into C. C is the same whether we are dealing with the original tax rate or the new higher tax rate. So DWL1 = C*t1^2, where t1 is the original tax rate. DWL2 = C*t2^2, where t2 is the new tax rate. To get the percent increase in DWL, first divide DWL2 by DWL1. DWL2/DWL1 = C*t2^2/C*t1^2 = t2^2/t1^2. t1 = 0.541; t2 = 0.567. So DWL2/DWL1 = 0.567^2/0.541^2 = 0.321/0.293 = 1.096. Therefore DWL increases by 9.6%.  QED.   (0 COMMENTS)

A Book Review of The Nobel Factor: The Prize in Economics, Social Democracy, and the Market Turn, by Avner Offer and Gabriel Söderberg.1 Since 1996, I’ve had a deal with the editors of the Wall Street Journal. I get up early on the West Coast the day the Nobel Prize in Economic Science is announced, decide within an hour whether I know enough to write an article on the winner(s), and, if I do know enough, get the article to the editors later that morning. For 19 of the last 25 years, I’ve been able to come through. So The Nobel Factor,1 a 2016 book by Avner Offer and Gabriel Söderberg, looked to be right up my alley. Offer, an emeritus professor of economic history at the University of Oxford, and Söderberg, a researcher in economic history at Uppsala University in Sweden, do a broad overview of most of the winners and briefly lay out their contributions. They also criticize many of the Nobel Prize winners, sometimes with ad hominem arguments. They have two major themes. Their first is that the Nobel Prize was initiated in the late 1960s as a way to raise the public’s respect for economics as a science. The second is that economics fails at being empirical and the pro-free-market views of many of the winners reflect an ideological commitment more than a scientific understanding. They succeed at the first and fail at the second. Even though I think they fail at the second, and I’ll say why shortly, the book is chock full of interesting facts. Here’s one nugget: In 1968, economist Milton Friedman, a major player in the Mont Pelerin Society [MPS], nominated philosopher John Rawls for membership in MPS. Rawls became a member and withdrew three years later. One person whose work and thoughts the authors highlight is Swedish economist Assar Lindbeck, who died earlier this year at age 90. I had always thought of Lindbeck as a socialist but the authors lay out a much more nuanced story. Early in his life, Lindbeck was a Social Democrat but the authors argue that even though in his twenties he was close to the party elite, he was “already inclined towards heresy.” Of what did his heresy consist? Lindbeck parted ways with some of the more interventionist views of the Social Democrat Party. For instance, he was very outspoken against rent control. Disappointingly, the authors don’t quote Lindbeck’s famous broadside against rent control: “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.” They argue instead that Lindbeck opposed rent control for the narrowest of motives. They write that to Lindbeck, “Rent control was bad, because he himself had to queue for an apartment.” His experience, they write, was “atypical.” Their claim would surprise the dozens of economists who have studied rent control over decades and understand that when a government keeps a price from rising in the face of either inflation or increases in demand, the result is a shortage and, yes, queues. The two authors’ view is that rent control is “a social intervention intended to mitigate monopoly pricing.” Again, that would surprise most economists who have carefully studied rent control and observe a fairly competitive market in rental housing. The reason the authors highlight Lindbeck is that he was pivotal in persuading the Nobel Foundation to go along with the idea of a Nobel Prize in economics and was also a major player for a quarter of a century, from 1969 to 1994, in deciding who got the prize. What happened was that Per Asbrink, the governor of the Riksbank (Sweden’s equivalent of the U.S. Federal Reserve) from 1955 to 1973, wanted to raise the respect given to economics. He proposed to his aide Assar Lindbeck the idea of a Nobel Prize in economics. Lindbeck agreed that it made sense and, interestingly, consulted Swedish economist Gunnar Myrdal about the idea. Myrdal agreed. Possibly not coincidentally, Myrdal was co-winner of the prize in 1974 along with his ideological rival Friedrich Hayek. The authors put a heavy interpretation on those facts. They argue that, given Asbrink’s and Lindbeck’s criticisms of the size of Sweden’s welfare state, the initiation of the prize “was a belated incident in one of the central plots of modern history, the distributional struggle between the owners of wealth and the rest of society.” They make a decent case that the prize came about due to a struggle between those who were more in favor of free markets and a limited welfare state and those who wanted more intervention in the market and an expanded welfare state. It’s a much bigger step, though, to argue, as they do, that being in favor of free markets and reining in the welfare state amounts to supporting “the owners of wealth” and ignoring the rest of society. Basic economics casts grave doubt on that interpretation. Reducing heavy taxes on capital increases the incentive to create more capital. More capital makes labor more productive, increasing average wages. We saw this in a big way after the 2017 Trump cut of the corporate income tax rate from 35 percent to 21 percent. Median incomes and real wages grew substantially from 2017 to 2019, and especially from 2018 to 2019.2 The authors, quite rightly, criticize economic models in which the actors have perfect information. They note that Friedrich Hayek criticized such models also, both in his contributions to the socialist calculation debate and in arguably his most famous article, “The Use of Knowledge in Society.” They write, “Hayek assumed (more realistically) that every individual in the economy could know only a small part of the whole, conveyed to him by prices. Markets co-ordinated this multitude of individual choices and gave rise to the ‘spontaneous order’ of the liberal society.” Then they add, “This order was assumed, not proven with any rigour.” It’s true that Hayek didn’t prove it: the idea of economics as a set of theorems was foreign to him. But he certainly didn’t just assume. In his “Use of Knowledge” article, Hayek gave his famous example of how participants in the market for tin, whether as buyers or sellers, didn’t need to know whether the price of tin rose because of an increase in demand or a decrease in supply in order to know how to adjust to the higher price of tin. That’s not proof, but it’s way more than assumption. It accords with what we see every day in real-world markets if we pay attention. “The authors use this absence of proof to cast doubt on the efficiency of a free market but their preferred alternative, Social Democracy, ‘is pragmatically successful, analytically coherent, economically efficient, ethically attractive, and theoretically modest.'” The authors use this absence of proof to cast doubt on the efficiency of a free market but their preferred alternative, Social Democracy, “is pragmatically successful, analytically coherent, economically efficient, ethically attractive, and theoretically modest.” Also, they write, “Social Democracy was willing to pull health, education, welfare, and housing out of the market, to de-commodify the provision of well-being.” And how has that worked? They give little evidence. Moreover, surely an important component of well-being is food, without which we are unable to have any kind of being. In most advanced societies, a large part of food provision, though regulated, is carried on in a relatively free market. Given their endorsement of Social Democracy, would the authors favor “de-commodifying” food? And if not, why not? One of the more interesting Nobel Prize winners they discuss is British economist James Mirrlees, an adviser to the Labour Party, who was co-winner of the 1996 award for his theory of optimal taxation. His famous two results were that because of the damaging effect of income taxes on incentives, the marginal tax rate on the top earner should be zero and most tax rates should be between 20 and 30 percent. As I noted in my October 1996 Wall Street Journal article, “When Economics Rises Above Politics,”3 Mirrlees was stunned by his own result. “I must confess,” he wrote, “that I had expected the rigorous analysis of income taxation in the utilitarian manner to provide arguments for high tax rates. It has not done so.” Indeed. How do the authors handle Mirrlees’s finding, given how at odds it was with their own preferences on tax rates? Here’s how: “Optimal taxation demonstrates how liberal formalists could end up endorsing conservative norms. They put together hybrid theories which combined the bad faith of asymmetric information with the good faith implicitly assumed in equilibrium analysis.” A few pages earlier they had argued that bad faith “is just as likely in private transactions as in public ones.” They don’t explain how bad faith even applies to taxation. Are they saying that people will cheat on their taxes? I don’t think they are, but if they are saying that, wouldn’t that imply, all else held constant, that marginal tax rates should be lower rather than higher because then the incentive to cheat would be less? They quote French economist Thomas Piketty’s statement that economists advocating that rich people pay zero tax “have an unfortunate tendency to defend their private interest while implausibly claiming to champion the general interest.” That’s classic Piketty misstatement because it’s hard to find an economist who advocates that the rich should pay zero tax; at most Mirrlees advocated that the most productive person should pay a marginal tax rate of zero, not a zero tax. To their credit, the authors defend Mirrlees from the Piketty ad hominem, writing, “There is no reason to assume that Mirrlees had any ulterior motives.” The authors don’t extend that same generosity to 1976 Nobel winner

Book Review of Predict and Surveil: Data, Discretion, and the Future of Policing, by Sarah Brayne.1 Sarah Brayne has done some excellent sociological research by spending several years embedded in the LAPD [Los Angeles Police Department]-one of the most technologically advanced police departments in the country. By doing so, she has given us a chance to glance behind the curtain of big data in policing just as it is in its ascendency. While she issues some warnings and even possible solutions to the inevitable overreach for which such a shift allows, she also admits that there are some real advantages to be gained in terms of crime prevention (although it’s too early to properly assess the overall trade-offs between privacy and crime prevention). “Will big data lower crime and reign in police abuse? Or will it exacerbate structural inequalities that already typify our criminal justice system?” The most striking thing about this excellent and timely book is that it leaves one in a state of healthy ambivalence: Will big data lower crime and reign in police abuse? Or will it exacerbate structural inequalities that already typify our criminal justice system? Predict and Surveil1 will be of great interest to anyone thinking deeply about privacy, policing, and the way either of these interact with the law in this technologically revolutionary moment. The Way We Live Now We all have a general sense that we’re leaving digital trails wherever we go, and there’s been much consternation about the use of such data in the marketplace. Brayne argues that we are dealing not just with a giant leap forward in terms of the sheer quantity of data that’s being collected on us, but also in terms of the aggregation of data from multiple sources, which allows individuals to be closely monitored. While police are often legislatively restricted in terms of what data they can collect on citizens, they can now work around most limitations since there are no limits on what data they can buy from private sources. Private companies, like Palantir, that help police aggregate their own data have encouraged this ‘function creep’ in which police become consumers of private data collections as well as of government intelligence originally meant for other purposes. Brayne notes that Palantir itself was “originally designed for counter-insurgency efforts in Iraq and Afghanistan,” and I couldn’t help but think of Coyne and Hall’s Tyranny Comes Home, a close documentation of the migration of military efforts to the control of the domestic population (7). Brayne is quick to point out benefits, such as in her opening example of a body dump case that was solved in just two days with the help of a license plate reader and the gang-tracking system CalGang. Predictive algorithms that send officers to particular areas (called “red boxes”) to patrol may have a real deterrent- or at least, displacement-effect. Further, data can do as much to exonerate as to convict us, since it can demonstrate that we were nowhere near a crime scene, for instance. Big data also has the potential to finally provide a watcher for the watchmen as well, as police activity can be more closely monitored and analyzed too. However, before the reader is tempted to romanticize the efficiency, precision, and potential social advantages of big data policing, Brayne suggests a few ways it can go very wrong. Power Imbalances First, while one would hope that data-driven policing would reduce bias and disproportionate enforcement by removing the ‘human element,’ it can also serve to reinforce and perpetuate these things. The best example she gives is the LASER program and the attendant Chronic Offenders Registry, although we find out at the end of the book that this particular program has been shut down due to public outcry. Police prioritize targets with a point system -five points if someone is in a gang, five for prior convictions, and so on. This allows the more likely offenders to float to the top of consideration when searches return a large number of results. So far, so good. But one point is also added any time someone has contact with the police, even if officers are just having friendly conversations, or ticketing someone for jaywalking or failing to use their turn signal. There’s a strong incentive to fill out field interview cards (FI’s) in order to build data by getting people into the system (64-67). She recounts a few shocking, but quite real, scenarios, as when parolees are visited by police three or four times in one day, or “ghetto-birds” (police helicopters) fly over a neighborhood 80-90 times a week. It’s not hard to imagine how a person from a rough neighborhood could start racking up points without any criminal activity at all. Since high-crime neighborhoods are far more likely to be under surveillance, people are more likely to be caught for trivial things, even though only a small percentage of the neighbors are involved in the sorts of dangerous activities that we’re really interested in addressing. The higher one appears on the points list, the more likely one is to be surveilled, leading to more interactions with the police, more points, and so on. In contrast to this snowballing of police interaction and surveillance for marginalized groups, those with more political clout can avoid surveillance. Gun owners have successfully avoided a federal gun registry, and police themselves actively resist their own surveillance on the job through their police unions. Brayne tells of a ride-along in which she expressed surprise that the officer had to call in his location. When she informed him that she had assumed the cars all had GPS trackers, he responded that they do, but that the police unions threw a fit and so they’ve never been turned on. Brayne does not argue that there should be a federal gun registry or that officers should be tracked everywhere they go. She simply points out that those least able to legally and politically resist being constantly surveilled are also those most likely to be under surveillance. Data and the Law A central take-away of the last portion of the book involves the inability of traditional privacy law to deal with the way data works now. Here, Brayne makes her boldest claim: “[l]egal constructs like the third party doctrine are set up in a way that is basically inapplicable to modern life” (131). The third party doctrine holds that government officials can access any information that I voluntarily give out to others without violating my Fourth Amendment rights. But in today’s environment, it’s nigh impossible to communicate with other people at all without “exposing data to a third party,” so that “the third party exception has become the exception that swallows the rule.” Computer-aggregated data is just not the same animal as the data an officer can collect by reading a letter I wrote to a friend. Furthermore, she highlights the programmatic nature of police surveillance: “ongoing, cumulative, and sometimes suspicionless data collection and use” (129). In response to these new challenges, she considers various academic views, including the suggestion that administrative law, rather than criminal law, may be a more appropriate way to govern this type of surveillance. She cites Orin Kerr’s work on the Fourth Amendment as an example of the hope that regular calibrations through case law will still be sufficient, even in our digital age. She also worries that the exponential increase in plea bargaining and the correspondent loss of trials means that many relevant cases to this issue will never see the inside of a courtroom. What’s worse, so much of the big data story happens before any real evidence is collected, by a kind of case-building process that will remain unseen even if the case itself does come to trial. Police have even learned how to create ‘parallel constructions’, a process of lying about the way that the case actually progressed in order to obscure that a surveillance strategy had anything to do with the course the case took. Assessing the Trade-Offs Although police departments talk big, there is no overwhelming evidence that algorithms are serving us better than humans have when it comes to good policing. We certainly see some correlation between big data platform implementations and reductions in crime, but those reductions are often a continuation of a trend that had already begun before such resources were available. Remember that the LAPD is a first adopter, so Brayne is giving us a window into a world that is only just beginning in many cities. For more on these topics, see the EconTalk episodes Franklin Zimring on When Police Kill and Cathy O’Neil on Weapons of Math Destruction. Brayne has high hopes for positive uses of data in policing, such as the direction of non-punitive interventions (as in mental health cases) and to clear current cases and solve cold cases. But she’s right to warn us that we do not yet know whether the dangers of big data are outweighed by the possible gains, and we won’t know that till we have more independent research. Her most chilling warning, though, is the legal one. Is the world of big data so different from the old world that the usual adjustments of the common law will be unable to maintain the reality of privacy? And for those of us who want to avoid the expansion of administrative law to address our new reality, what’s the alternative? Footnotes [1] Sarah Brayne. Predict and Surveil: Data, Discretion, and the Future of Policing. Oxford University Press, 2020. * Rachel Ferguson is a Professor of Managerial Philosophy, co-chair of the Lindenwood Honors College, and Director of the Liberty and Ethics Center in the Hammond Institute. Her research interests include Hume’s classical liberalism, the philosophy of economics, and Aristotelian virtue theory. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

If you’re currently parenting a 5-year old or remember what that was like, you can skip over the next few paragraphs. You’ve lived this story before. For the rest of you, here’s the scene. It’s 6:30 on a school night. Daniela has finished her dinner. (And, no, the names have not been changed to protect the innocent. There’s nothing innocent about a 5-year old before bedtime.) The next hour and a half is critical. She needs a bath, book, and all the other items on the pre-bed checklist. School starts tomorrow morning at 8:30. If Dani is not in bed by 8 pm, tomorrow morning will be a desperate struggle with a tired cranky kid, likely ending in a late arrival and the dreaded Walk of Shame past the office of the Head of School. The next few minutes play out in an entirely predictable way. Dani bounces down from her chair, announces she’s ready to play and vanishes into the family room. If she’s strategic, she’ll seize on some diversion—spilled milk, misbehaving cats, something like that—to make her escape before we can get her heading for a bath. I mention the strategic behavior not as some whimsical observation on family life. This is solid evidence that our 5-year old can connect current events, and future events. She’s beginning to reason temporally. When I finally catch up to her, she will be fully engaged with one of the many toys scattered about the family room. I will tell her it’s time for her bath. She will resist. I will insist. What happens next depends. Parenting is exhausting. Sometimes I’m too tired to behave like an economist and will just demand compliance. That seldom ends well. Sometimes, though, I’ll try to pull some tools out of my Econ 101 tool bag. That seldom ends well either, but it gives me a chance to think about what parenting can teach me about economics. When I’m in economist mode, I will ask her to make a choice involving intertemporal substitution. I’ll say something like “Ok, you can play in here for another 10 minutes but that means less time playing in the tub. Do you want me to set my timer?” She will always take the deal. And she will always renege. When the timer goes off, she’ll beg for another 5 minutes. If I’m still in the mode of an optimistic economist hopeful for a Pareto optimal solution, I’ll agree. But I’ll carefully explain that extra time playing with her magnetic blocks now means less time playing with her bath sharks later. I’m indifferent to that tradeoff. I only want her decontaminated and in bed by 8 pm. And so it goes. When it’s time to get out of the tub she’ll beg for a few more minutes. I will say no. She will complain. Whining will happen. Tears may be shed. Later, I’ll wonder why I bothered to give her choices. Contracts, Choice and Imagination The answer, of course, is that learning to make choices, especially choices involving intertemporal substitution, is one of the most important skills a kid needs to master. I give her choices because she needs the practice. “The kind of mutual good will that permitted you and your partner to capture the gains from specialization and enjoy sharing the crossword over Sunday brunch will not work with kids.” All families began as socialist institutions, but once kids arrive, the happiest families become rigid communist states. The kind of mutual good will that permitted you and your partner to capture the gains from specialization and enjoy sharing the crossword over Sunday brunch will not work with kids. Your kids will love you, but they will not cooperate with you. You will need to create a centralized, command-and-control hierarchy. A benevolent hierarchy, of course, but one in which the grown-ups are clearly at the top. That last bit is important. But even good communists rely on markets. They negotiate, offer tradeoffs, and come to terms. The contracts formed in a collectivist enterprise may not look like the explicit contracts that develop in a market economy, but they do the same things. And so one question for an economist to ponder is: Why is it so difficult to form efficient contracts with your kids? It’s a real puzzler. You and your kid know each other better than any commercial counterparties can know each other. No need to waste time haggling over terms that don’t matter to either of you. (In econ-speak, you both know the core of the bargaining set.) What’s more, you’re plugged into the biggest repeated game ever. This should work to minimize opportunistic behavior. Yet, it is still very hard. The reasons for this are something I might ponder in some other essay. But I actually think the bedtime dilemma helps us think about an even more interesting economic problem. It also suggests ways I might become a better teacher and, more importantly, help me understand how to better help Dani grow up into a flourishing adult. Parents worry a lot about certain developmental milestones—when did the baby first smile, when did she speak her first word, when did she begin reading to herself, and so forth. But we largely ignore another important class of milestones: the development of preferences. It’s an easy thing to miss since it happens so naturally. Around two months of age many babies show a preference for their mother. Not long after that kids typically develop a deep affection for one or two toys, usually a stuffed animal or lovey. Once they start eating solid foods, they will have favorites. Our 5-year-old is the very model of a rational consumer. I mean that literally; she is the rational consumer of our models. If you confront her with bundles of goods that are well understood (no ignorance or uncertainty) and immediately in front of her (no time lag as to when they will be consumed), she can provide a ranking. What’s more, those rankings will be consistent with the axioms you see described in all the best textbooks: the choices are transitive, consistent with non-satiation and so forth. I’m not going to claim that I can write down her utility function, but I could easily determine her marginal rates of substitution. And that’s a good thing. Despite her complete indifference to calculus, Daniela has mastered constrained optimization. If we take time to learn her preferences—if, figuratively at least, we map out her indifference curves over these sorts of goods—we can predict some of her choices. Even better, we can begin to nudge her into all sorts of behaviors we think appropriate. She’s 5. We control the budget constraint. But parenting is about more than incentives and constraints. And economics should be too. Both parents and economists need to understand that all choices require an exercise in imagination. When Daniela chooses to dress Barbie in pink rather than purple, she’s imagining which outfit will be more appropriate for the gala to follow. When you choose to snack on a Snickers instead of a Milky Way, you’re imagining the taste of each treat. The thing is, though, some choices require more imagination than others. Economists should pay more attention to those differences. I know in one sense microeconomics does this already by distinguishing different kinds of decision-making environments (certain v. uncertain, static v. dynamic and so forth). But we mostly use the same framework—constrained optimization—to analyze choice. We focus on the optimization process, usually making some not particularly helpful suggestions about how the problem can be modeled and solved. But we mostly ignore the cognitive demands that choices place on the decision maker’s imagination. I’m still working all this out in my own imagination, but I wonder if paying more attention to the way we imagine things can help economists better understand the kinds of choices people make. I wonder if doing so might help us better support our kids, and perhaps even help us make better choices for ourselves. Towards a Hierarchy of Choice And so at the risk of stating what may be obvious to any decent psychologist, let me suggest some categories of decisions that are distinguished by the kinds of imagination required of the decision maker. This may be more a multi-dimensional continuum than a set of discrete buckets, but I think it’s a good way to frame our understanding. At the most basic level we have the pink gown/purple gown and Snickers/Milky Way kinds of choices. These decisions don’t require much imagination. The goods are ordinary, well understood kinds of things—little girls know the difference between pink and purple. And, since the goods will be consumed very soon after making the choice, it’s easy to imagine the consequences of the decision. These are the hypotheticals we present to undergraduates taking intermediate microeconomics. We stick with the simplest kinds of choices because we don’t care all that much about whether economics majors understand decision making, we want them to understand constrained optimization. Shame on us. A second tier of choices demands a significantly higher level of imagination. These are the ones where we know our preferences but we have to imagine some important aspects of the experience on offer. Think, for example, about what goes through your mind when you’re dining in an unfamiliar restaurant and the server asks whether you’d like the soup or the salad. You know how to rank certain types of soup and certain types of salad—you can easily imagine your preferences—but you also have to imagine the quality of soup that will be served. I suspect that many economists who’ve managed to read this far are thinking: All he’s talking about here is decision making under uncertainty. This is part of a huge literature stretching back to the Bernoulli boys in the 17th Century. This talk about ‘imagination’ and 5-year olds is just a distraction. I hope not. I teach a class called “Decision Making Under Uncertainty” and I worry about whether I’m leaving my students with the idea that the key to making better decisions is getting more information to help you come up with a better stochastic representation of outcomes. If it’s a cold winter’s day and you don’t want lukewarm soup, does better information about the distribution of serving temperatures lead to a better decision? Sure. But that obsession with a better stochastic representation misses what matters more: your imagination of outcomes. I’m not saying we should ignore the stochastic element of decision making—it’s helpful to be able to calculate the moments of the Bernoulli distribution. I’m just saying we can’t pretend that once we’ve got that we’re all good to go. Decisions over murky outcomes aren’t just an exercise in statistics, they’re an exercise in imagination. Now once again, I can hear the voices of all those grumpy decision theorists muttering in the background about how this is not at all an original concern. Decision theory, they will assert, isn’t just applied statistics. Good economists don’t just work lottery-like problems with cleverly measured probability distributions spread over known domains. They’ll talk about known unknowns and unknown unknowns. They’ll affectionately cite Frank Knight’s famous distinction between risk and uncertainty. A few of the braver ones may even grudgingly acknowledge Nassim Talib and his aviary of black swans. Is all this literature just a fancy way of telling people to use their imaginations? I hope so. But I’d like to see some evidence that it’s working. The way the Masters of the Universe in finance evaluated risk during the financial crises should be an embarrassment to every right-thinking business school professor. That wasn’t a failure to properly calculate “value at risk” or some similarly silly thing. That was a failure of imagination. The third tier of decision problems is, in some sense, a mirror image of the second. Here, the choices are well understood and easy to imagine. The challenge is imagining how you will feel about those outcomes when they occur. I put this on a higher tier of decision making because I think the cognitive demands are much higher. And I think it explains why it’s hard to get your kid to bed on time. Remember, the deal I offered Daniela involved intertemporal substitution: more time in the family room for less time in the bath. You and I make tradeoffs like that every day. And most of these seem like straight-forward choices. That’s because we can imagine the preferences of our future selves. I know that if I eat pizza for lunch, I won’t want pizza for dinner. I don’t know much about the cognitive ability of other animals, but I wouldn’t be surprised to learn that this is something only humans can do well. I do know we’re not born with that ability. I know that because I know that my perfectly normal, imaginative 5-year old can’t imagine how she will feel about things in the future. She can imagine the future—remember, I said earlier she can think strategically—but she doesn’t yet seem very good at imagining her future preferences. She knows that dinner will follow lunch, but she doesn’t know that pizza at lunch will make pizza night less satisfying. There is a fourth tier of the imagination, one that I’m almost reluctant to bring up since I’m not even sure this one belongs as part of a discussion on decision making and preferences. But it’s really interesting and important. So here goes. Some people believe that we have the capacity not just to imagine what our future preferences will be, but to imagine what our future preferences should be. The philosopher Agnes Callard uses the word “Aspiration”—she actually wrote a book with that title—to mean “the rational process of values acquisition.” Professor Callard thinks that we’re capable of aspiration. Others disagree. But what matters is that I want Professor Callard to be correct. I want my daughter to be able to imagine different versions of herself. I want her to imagine how different kinds of values can give her life different kinds of meaning. I want her to want to be kind and generous, not because people tend to be nice to nice people, but because kind and generous people flourish in ways that selfish people don’t—even selfish people who make lots of money by convincing people that they’re nice. I want her to want to value transcendent things—art, music, nature—that she’ll pick. So What? I titled this essay “Parenting Tips.” I’m not going to pretend to be an economist version of Dr. Spock, PhD, bringing wisdom from the Kingdom of Experts. I’m not even going to pretend to be an ersatz Emily Oster, bringing hard data to help you figure all this out. I’m just going to end by telling you how thinking about all of this may change the way I do things. I’ll get to the parenting in a moment, but let’s start first with teaching. Is it helpful to tell our students that choice is an exercise in imagination? Does it help to encourage them to think about the kinds of imagination demanded by certain sorts of choices? If we can’t find data on imagination, should economists think about it at all? Is imagination such an elusive concept—something so difficult to measure and quantify—as to make it impossible to study, or should we encourage them to expand their imaginations? I think we should, and I’ll be looking for ways to do just that. For example, if I’m brave enough, maybe I’ll give the MBA students taking my class in risk and uncertainty a bit less expected utility theory and a bit more fiction. It’s been years since I’ve read Joseph Conrad’s short novel, Typhoon, but maybe that’s a good way to think about risk management. When I was a kid I thought I loved Jack London’s The Sea Wolf because I loved adventure stories. But maybe I loved it because the aggressive Wolf Larsen forced the bookish Humphrey van Weyden to imagine himself as a different sort of person. That could be a good lesson for business students who imagine themselves as leaders. Now for the parenting tip: Pay more attention to two very important tigers, Daniel and Hobbes. Daniel Tiger is the character imagined by the late Fred Rogers for his path-breaking show, Mr. Rogers’ Neighborhood. Hobbes is the tiger imagined by Calvin, a 6-year boy imagined by Bill Watterson as the star of his comic strip, Calvin and Hobbes. If you were a fan of the comic strip, you probably remember it as being reliably funny, sophisticated, smart, and thought-provoking, a comic about kids, not for kids. If you remember Mr. Rogers’ Neighborhood, you probably remember it as a sweet—maybe treacly—show for preschoolers; a show that delivered useful lessons in a package far less dreadful than the typical kid’s show. I’m not sure that Calvin and Daniel could have become best friends (although it’s fun to imagine that playdate), but I’m quite certain that Fred Rogers and Bill Watterson could have found lots to talk about. That’s because they both understood that imagination is central to our humanity. The most important moments in Calvin and Hobbes happen when the grownups disappear, allowing Calvin’s imagination to transform a stuffed toy into an endlessly fascinating (and funny!) creature. The most important moments in a 4-year old’s time spent watching Mr. Rogers’ Neighborhood happen when the trolley goes to the Neighborhood of Make-Believe, validating the child’s own imagination. For more on these topics, see the Library of Economics and Liberty articles “How Should Econ 101 Be Taught?”, by Donald J. Boudreaux, Jan. 6, 2020; and “Adam Smith, Ayn Rand, and the Power of Stories” by Caroline Breashears, Mar. 2, 2020. See also the EconTalk podcast episode Emily Oster on Cribsheet. Imagination is not just another perk that comes from being human, some cognitive appendix that helps a few special people compose glorious operas and others write bawdy limericks. Imagination is the essential element in decision making. Without imagination rationality has no meaning. Without imagination we can’t choose the sorts of creatures we aspire to become. So to finish, let me just repeat. It’s important that economics students work through challenging analytical puzzles and do complex statistical analysis. But as teachers and parents we need to imagine how their lives might become, and we need to cultivate their imaginations. That’s not only important, that’s one of the greatest joys we can experience. * Michael L. Davis is a senior lecturer in business economics at the O’Neil Center for Global Markets and Freedom at Southern Methodist University’s Cox School of Business, and the Bridwell Institute for Economic Freedom at Southern Methodist University. For more articles by Michael L. Davis, see the Archive. (0 COMMENTS)

In all the fields touched by the six boomers profiled here—technology, entertainment, economics, academia, politics, law—what they passed on to their children was worse than what they inherited. Helen Andrews, Boomers: The Men and Women Who Promised Freedom and Delivered Disaster, p. 196.1 Helen Andrews passes her verdict on the Baby Boom generation after presenting essays about several prominent figures who were born between 1946 and 1964. She argues that in middle age, the boomers were saved from the worst consequences of their excesses by the very institutions that they were rebelling against. She worries that the Millennial generation has the same iconoclastic mentality in an environment that is less institutionally robust. One of the institutions that has decayed is journalism. Media scholar Andrey Mir says that we are in an era of “post-journalism,” in which the attempt to pursue truth wherever it leads has been replaced by the activist goal of dictating a narrative, even if that requires distorting the facts. In an essay devoted to Mir’s thesis, Martin Gurri tells the story of how the New York Times descended into post-journalism in response to business needs and pressure from Millennials on its staff and on social media. Gurri recounts a melodrama over standards at the Times, featuring a conflict between radical young reporters and befuddled middle-aged editors. In a crucible of pr oclamations, disputes, and meetings, the requirements of the newspaper as an institution collided with the post-journalistic call for an explicit struggle against injustice. 2Gurri and others lament the absence of any authoritative source for truth. In fact, trust in the authority of mainstream news sources has fallen so low that polls showed that at the end of 2020, millions of Americans agreed with former President Donald Trump that November’s Presidential election was “stolen.” Our political divisions are accentuated by different perceptions of reality. During the Trump era, readers of the New York Times or the Washington Post were fed the story that Donald Trump as a candidate and President conspired with Russia’s Vladimir Putin against American interests. At the same time, listeners of conservative talk radio were fed the story that the FBI and the CIA conspired with mainstream media to take down Mr. Trump against American interests. We used to rely on journalism and academia to paint a realistic picture of our world. As these institutions have eroded and our trust in them has declined, what will replace them? One thought that occurred to me is that public intellectuals could compete for rankings, the way that chess players do. The highest ranking for a chess player is “grandmaster.” In my scheme, the best public intellectuals would be grandmasters of wisdom. “Helen Andrews portrays the prominent boomers as anything but wise. The talent they share is a talent for gaining attention and recognition.” Helen Andrews portrays the prominent boomers as anything but wise. The talent they share is a talent for gaining attention and recognition. They are grandmasters of self-promotion. Her first essay discusses Steve Jobs, the co-founder and CEO of Apple. Apple’s products had an image of attractive design. Jobs himself had an image of being a hippie CEO. Many Silicon Valley origin stories are made up by publicists, and there was an element of that to the legend of the garage. The PR maven Regis McKenna, who signed Apple as a client in 1976 before the articles of incorporation were even filed, knew from the moment the two Steves [Jobs and Wozniak] walked into his office that their story could make the company. (21) Andrews credits Jobs with being relatively true to his hippie image. But she contrasts the humanitarian, anti-establishment rhetorical stance of Silicon Valley with its actual economic effects. All of America’s coastal cities have become playgrounds for well-credentialed meritocrats and the casual workers who serve them… … The fastest-growing jobs in America are in “wealth work,” that is, the servant class for the metropolitan elite. (30) Another essay looks at Jeffrey Sachs, a prominent economist who styles himself an expert on economic development. Andrews writes, Sachs, like most other Americans working in what we have learned diplomatically to call the underdeveloped world, believes that his work is like the nasty old imperialists’ but with the bad bits thrown out. The first half of that is true; the second half is almost the opposite of the truth. From Eastern Europe to Africa, Sachs has talked leaders into attempting grandiose schemes for development. Critics see him as having left a trail of disastrous failures in his wake. Many economists have served as advisers to leaders of underdeveloped countries, usually with mixed results. What is unique about Sachs is his cultivation of a superstar aura. When he launched an African development initiative called the Millennium Villages project, Andrews writes, He introduced his project to the wider world with the MTV documentary The Diary of Angelina Jolie and Dr. Jeffrey Sachs in Africa. He campaigned for donations with Hollywood stars like Sharon Stone, Richard Gere, and Madonna, who gave $1.5 million of her own money, some of it earmarked to build a school in Malawi that would teach, among other classes, Kabbalah spirituality. Other aid projects claim to alleviate poverty. Sachs claimed that the Millennium Villages model would quite literally end extreme poverty within the present generation. (85) Andrews selected Al Sharpton as representative of political leaders of the boomer era. She distinguishes between two approaches to leadership. Transactional leaders engage in the mundane give-and-take of everyday politics. Transformational leaders promise to “change the course of history,” in Sharpton’s words. Andrews writes, Sometimes transactional leadership can be the more noble type. The transformational mentality looks at opposition and sees nothing but reactionary holdouts who don’t deserve to be accommodated, only defeated. A transactional leader sees potential allies whose cooperation could be gained if their concerns were placated. (127) For more on these topics, see the EconTalk episodes Martin Gurri on the Revolt of the Public and Jeffrey Sachs on the Millennium Villages Project. See also “Political Romance in the Internet Age”, by Arnold Kling, Library of Economics and Liberty, Aug. 5, 2013. Sharpton’s stance as a transformational leader comes across as a pose. The same appears to hold for many of the leading political figures of the Boomer generation. Again, the pattern is one of self-promotion in lieu of achievement. Presidents Clinton, Obama, and Trump all were the center of attention while in office, and yet they made little impact on the direction of the country and were unable to achieve results comparable to building the Interstate Highway system or passing Civil Rights legislation. As the availability of information rises exponentially, the competition for attention becomes increasingly intense. To succeed in this environment, boomers mastered the art of self-promotion. Andrews effectively contrasts triumphant boomer self-hype with dismal boomer results. We need to find a cultural adaptation that works in the other direction. Footnotes [1] Helen Andrews, Boomers: The Men and Women Who Promised Freedom and Delivered Disaster. Sentinel, 2021. [2] Martin Gurri, “Slouching Toward Post-Journalism,” City Journal, Winter 2021. *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)

Robert Mundell recently passed away at the age of 88. Mundell was one of the most important macroeconomists of the past 100 years, and his work greatly influenced my own research. While he made important contributions in many areas of international trade and macro theory, here I’ll focus on one aspect of his work. There are three basic approaches to monetary economics.  The most famous is the rental cost of money approach, which focuses on the interest rate as a policy instrument and also as an indicator of the stance of policy.  This approach was developed by Knut Wicksell and extended by Keynes.  The second is the quantity of money approach, which was developed by David Hume, among others, and extended by Milton Friedman.  In this approach, monetary policy is all about changes in the quantity of money, which today is controlled by the central bank.  Then there is the price of money approach, based on work by Gustav Cassel, Irving Fisher, and others.  This focuses on the price of money in terms of some other asset, such as gold or foreign exchange.  Robert Mundell is the most important proponent of this approach. Mundell’s work became the basis for the supply side view of monetary policy, and also influenced much of the “New Monetary Economics” of the early 1980s.  I was also heavily influenced by this research, particularly in my work on targeting the price of CPI or NGDP futures contracts.  And my book on the role of gold in the Great Depression is also quite Mundellian in spirit. While I sometimes disagreed with Mundell’s specific policy views, particularly regarding the euro (which he favored), there is no doubt that he was a brilliant economist and that his many important contributions to trade and macro will influence future generations.  He will be missed. PS.  One of my biggest regrets is that I never got a chance to meet Mundell, or to visit his lovely home in Siena, Italy. (0 COMMENTS)