When I read Deirdre McCloskey’s 2006 The Bourgeois Virtues soon after it was published, I was impressed. But when, four years later, I read her follow-up 2010 Bourgeois Dignity, I was gobsmacked. Few books have had as big an impact on my worldview as has Bourgeois Dignity. My deep admiration for this book is apparent in my 2014 essay for Liberty Matters. And nothing that I’ve learned in the intervening seven years has dimmed my assessment of this remarkable work. Indeed, the earth-shaking events that began in early 2020 have only further impressed upon me the validity of McCloskey’s foundational theme that the ultimate governor of human society is the prevailing set of everyday ideas as these are shaped and spread by the way we talk – and write, and blog, and text, and tweet. How extraordinarily quickly attitudes changed in 2020. What was unthinkable to do in February was unthinkable not to do in October (and perhaps earlier). Talk in March of using lockdowns to “flatten the curve” within weeks became talk of protecting everyone from Covid-19 indefinitely. Even young people, for whom Covid poses little risk, are to be protected with unprecedented restrictions. Judging by people’s widespread acquiescence to lockdown measures and other mandates, this talk was and continues to be singularly persuasive. People’s “habit of the lip” (to use one of McCloskey’s favorite descriptions of human conversation) soon included denunciations of those whose talk runs counter to the dominant narrative about Covid. According to this narrative – told by much talking to the public by public-health officials and members of the news media across the globe – Covid is so obviously a titanic threat to human life, and lockdowns so obviously the only effective means of addressing this threat, that any contrary talk must not be tolerated. And those who dare talk contrariwise must be explicitly and harshly ridiculed, thus imposing on these renegades a crushing “dishonor tax” (as in my 2014 essay I called the critical talk aimed in the pre-industrial age at merchants). If several personal reports made to me are to be believed, this dishonor tax is having its intended effect: Many people who disagree with the mainstream approach to Covid are keeping their silence out of fear of incurring the contempt, or even the wrath, of others. The validity of the mainstream approach is not here the issue. Whether you support completely or dissent utterly from most governments’ and people’s dramatic reaction to Covid, you cannot help but be impressed with how rapidly talk can change popular attitudes. Of course, in 2020 and 2021 technology supplies many more platforms for talk than were available even a mere quarter century ago. Today, nearly everyone can hear their health ministers, prime ministers, and presidents warn of Covid 24/7. Social media, instant messaging, YouTube, Zoom, and the ubiquity of handheld smartphones multiply and amplify the talk of Covid’s grave dangers and of the need for unprecedented responsive action. Why the doomsday narrative about Covid became the dominant one is a question for others to answer. Regardless of the reason, in the span of less than a year humanity witnessed, in real time, the awesome power of talk to change ideas, and of ideas to dramatically change behavior, policy, and social arrangements.   Talk about the tremendous power of talk! (0 COMMENTS)

Here’s Investor’s Business Daily: Biden proposes raising the capital gains tax rate to 39.6%, nearly double the current top rate of 20%, for millionaires and billionaires. . . . If enacted, the new higher cap-gains rate would impact just taxpayers with incomes over $1 million. Well, that’s good to know! People with incomes below $1 million presumably are not “impacted” if stock prices decline. And I guess workers don’t care if the nation’s physical capital stock gets smaller. You can argue that these effects might not be large, but it’s crazy to suggest they don’t exist at all.  Stocks fell on Biden’s announcement, despite the fact that it’s unlikely the proposal goes through Congress without being watered down. Biden’s proposal would push the top capital gains rate in the US to over 50% (including state taxes).  Biden should learn from Sweden where the top rate is 30%, roughly the same as the current US top rate.  Even better, emulate one of the developed economies with no capital gains tax at all (at least for passive investors). (0 COMMENTS)

I am often surprised by how many commenters say something to the effect, “I don’t get how taxing capital income is double taxing wage income.” Thus here I’ll present a simple numerical example. Imagine an island where residents produce 100 coconuts. They have the option of consuming the coconuts today, or planting them and having 200 coconuts in 10 years. In that case, the price of future consumption is 1/2 the price of current consumption. Now assume this society introduces a 40% wage tax to fund public goods. You must pay a tax of 40%, or 40 coconuts, on your wage “income” of 100 coconuts. In that case you can consume 60 coconuts today, or plant the 60 and consume 120 coconuts in 10 years. The ratio is still 1 to 2, and the relative price of future coconuts is still 1/2 the price of current coconuts. That sort of tax regime does not unfairly favor either current or future consumption. Now someone suggests that in order to be “fair” we need to also have a 40% tax on capital gains, added on to the 40% wage tax. Now the person who choses to save the 60 coconuts (after paying the wage tax, faces another tax bill in 10 years. When the coconut trees mature, they pay a tax of 24 coconuts (40% on the capital gain of 60 coconuts.) They are left with 96 coconuts to consume (120 – 24). In this case, the tax rate on current consumption is still 40%, but the tax rate of future consumption is 54% (200 – 96)/200. The choice is no longer between 100 coconuts today and 200 in ten years, or 60 today and 120 in 10 years. Now the choice is between 60 coconuts today and 96 in 10 years. People are being encouraged to eat their capital today, not save it and boost future consumption. The best argument for a capital gains tax is that it prevents people from disguising wage income as capital gains. This is one reason that many countries set the capital gains tax rate at a level lower than the personal income tax rate. It is assumed that when someone sells their own business, some of the rise in the value of the business doesn’t just reflect saving, rather it derives from the owner’s labor in building up the business. But if that’s the reason, then there is no justification for limiting how much non-business owners can put into their 401k plan, nor any justification for forcing them to withdraw funds at a specified age (currently 72). And yet I frequently see people claiming that the 401k program is some sort of “tax break”. It isn’t; all consumption (present and future) is taxed at the ordinary income tax rate. You pay the income tax on all of the funds pulled out of a 401k—including the capital gain—when you need the funds for consumption.  This is not double taxation, however, because the invested funds were not taxed when first earned. PS.  I know the coconut example is kind of unrealistic; choose a different kind of nut if you prefer.  I assume it takes labor to find the first 100 coconuts, but after 10 years the new ones just fall from the sky. (0 COMMENTS)

I have a Simplistic Theory of Left and Right.  A reader sent me their thoughts on the theory.  Reprinted anonymously with their permission. I’ve been thinking about your conception of the Right and Left in American Politics and thought I would run a thought by you. You say: 1. Leftists are anti-market.  On an emotional level, they’re critical of market outcomes.  No matter how good market outcomes are, they can’t bear to say, “Markets have done a great job, who could ask for more?” 2. Rightists are anti-leftist.  On an emotional level, they’re critical of leftists.  No matter how much they agree with leftists on an issue, they can’t bear to say, “The left is totally right, it would be churlish to criticize them.” While both sides form their views on an emotional level in this framework, the Left’s views appear more substantive.  Disliking the market seems far less personal and petty than categorically disliking a group of people who disagree with you, and anti-market intuitions could, at least in principle, develop as a reasonable response to repeated experience with market processes. But is this framework really getting to the heart of the matter?  If we grant that the left broadly shares an instinctive skepticism of markets, no matter their performance, it is still a little puzzling WHY this is so. In my view the left is reflexively critical of markets because they favor a society in which leftists have high status and exercise social control.  The more social processes we assign to markets, the smaller the role there is for leftists. At this point I can piggy-back off of the data brought to bear in this excellent article by Richard Hanania, which shows that leftists derive much more meaning from activism than the typical rightist, investing substantial time and money into these endeavors.  Leftists want to be actively involved in shaping policy, not sitting idly by while markets claim the credit.  In contrast, conservatives are often content to ignore politics–provided that leftists will leave them alone. Looking at your model from this angle, the underlying motivations of left and right appear much more symmetric.  “Anti-right” still doesn’t quite approximate the psycho-logic of the former, but conservatives become a natural enemy to the march of leftist-led progress.  “Anti-left” still basically fits the psycho-logic of the latter, but begins to resemble a plausible low-information heuristic for someone wary of leftist control.* At their best, leftists are proactive do-gooders and rightists are unassuming defenders of personal freedom.  At their worst, leftists are hubristic and totalitarian while rightists are paranoid and conspiratorial. Elijah *I noticed as I was writing this out that Thomas Sowell’s “Vision of the Anointed” analyzes the left and right in a similar vein.   (3 COMMENTS)

In a recent post on zoning, some commenters pointed out that new housing development can lower the property values of existing homeowners. That’s true, indeed the whole point of new development is to make housing more affordable for those who do not have a home in the area where they’d like to live. If one argues that we should use regulation to maintain property values, that’s sort of like saying that we should use regulation to prevent millennials from living in cities where their parent live, or that we should use regulation to make it harder for homeless people to find housing. Perhaps some people are mixing up pecuniary and technical externalities. A technical externality is something like air pollution, where one person’s activity physically damages another person. It may represent market failure.  A pecuniary (monetary) externality is like when a Chevron gas station opens up next to an existing Exxon station. It adds competition and thus reduces the monetary value of the Exxon station owner’s business.  It does not represent market failure. Every property is like a small business. Owner-occupied businesses are producing housing services for the owner, whereas rental property sells the service to someone else. Having a regulation that restricts new development is no different from have a regulation that bans new restaurants or gas stations, in order to protect incumbent businesses. It is theoretically possible that new housing construction could produce negative technical externalities, such as underpriced traffic congestion. But as a practical matter, dense infill development is good for the environment, which is why the smarter environmentalists favor the “YIMBY” position. If you don’t allow high rise apartment buildings along transit lines in LA or Silicon Valley, the alternative is more suburbans sprawl in places like Riverside and San Bernardino counties, which is even worse for the environment. And if people move from California to Texas, that’s even worse (in terms of carbon emission.) Zoning should not be used to prevent housing construction.  If zoning is to be used at all, it should only be for technical externalities, such as preventing a polluting steel mill from opening up next to a residential neighborhood.  Based on the experience of Houston, I’m not convinced that we need any zoning laws.   (0 COMMENTS)

Ayn Rand‘s Anthem only takes about an hour to read.  So while it’s her weakest novel, the literary value per minute of reading is high.  And it definitely belongs on any list of classic dystopian fiction.  Only recently, though, did I discover that there are two graphic novel adaptations. 1. The 2011 adaptation by Charles Santino and Joe Staton. This version heavily edits the text, and has exactly three panels per page.  The illustrations are basically just black-and-white sketches; skillful, but not exciting to me.  On the positive side, bright kids of 7 0r 8 would be able to follow the story easily.  One sample page: 2. The 2018 adaptation by Jennifer Grossman and Dan Parsons. This version uses almost all (all?) of the original text, and the illustrations and layouts are consistently thrilling.  While I enjoyed both graphic adaptations, this is definitely the better one for readers 13 and up.  Stellar!  And there’s even a full Youtube video adaptation of the graphic novel.  One sample page: Notice how panel 1 makes you feel like you’re actually climbing down the grating into the belly of the Earth.  The whole book is packed with similarly evocative panel arrangements.  And there’s even a shout-out to Orwell in the final panel. P.S. Anyone know how the Atlas Society got the rights to adapt Anthem?  I would think that Leonard Peikoff would have blocked this as long as it remained in copyright… HT: David Boaz for sending me the Grossman-Parsons version. (0 COMMENTS)

Do you have any idea what the balance sheets of your bank(s) look like? I don’t. I don’t know whom they lend to. I don’t have to. And the reason is deposit insurance. Even when my checking account hits 5 digits, the amount in it is well under the $250,000 limit that is covered by deposit insurance. So no matter how risky the loans my bank makes, I don’t have to worry. In Canada in the 1870s, by contrast, there was no deposit insurance. Indeed, deposit insurance was not introduced to Canada until 1967. In “Stability in the absence of deposit insurance: The Canadian banking system, 1890-1966, Journal of Money, Credit, and Banking, November 1995, Vol. 2, No. 4, University of Toronto economists Jack Carr and Frank Mathewson and Victoria University (in Wellington, New Zealand) economist Neil Quigley write: The Canadian Bank Act, 1871, was explicitly designed to prevent the public from thinking that the government was responsible for either the commercial administration of the banks or the ability of individual institutions to pay their creditors. It required banks to make monthly returns to the Department of Finance, but envisaged the self-interests of the shareholders and mandatory double liability as sufficient protection for the creditors. The related footnote states: “In this period, the banks undertook extensive advertising of their balance sheets in the press. In addition, newspapers reproduced the monthly financial statements that the banks provided to the government. Incentives matter. Depositors cared about how safe their deposits were and banks and newspapers responded to this concern by reporting balance sheets. Note: You might wonder what double liability is. Elsewhere in the article, Carr, Mathewson, and Quigley explain it: “Double liability of the shareholders meant that creditors of the bank were secured by both the value of the equity and retained earnings in the bank and a claim against the personal wealth of shareholders equivalent to the subscribed capital.”     (0 COMMENTS)

Derek Chauvin was found guilty on all charges in the heinous murder of George Floyd. It has taken me a couple days to fully process this; although the verdict was correct, it would have been no surprise to me had he been exonerated. I have had friends contact me with exclamations of joy and exultation, but I find that I have not been so moved. Part of me believes this should feel cathartic, as justice that is all too uncommon has been served. The other part of me wants this to feel banal, because justice should be the common outcome. In truth, I feel neither. The Chauvin verdict was the correct verdict, but it was also an outlier that likely changes little or less. In any given year, there are roughly 1000 fatal shootings by police. Of course, George Floyd was not shot, but his death was a function of excessive force utilized by the restraining officers, so the overarching concept is the same. According to the  Henry A. Wallace Police Crime Database maintained by Bowling Green criminal justice professor Phillip Stinson, only 121 officers have been charged with homicide or manslaughter since 2015, with 44 (now 45) of such cases resulting in conviction. Naturally, some of this has to do with the fact that a large number of police-related shootings are justified, but the fact that only 1.6% of police fatalities are treated as possible homicides (and this number is even lower when cases such as Floyd’s, where excessive force not involving a gun was used) belies the fact that there is a reticence among prosecutors to look at police-related deaths as possible crimes. In many cases, this is because the offending officer has actually committed no crime. The majority of state-level statutes governing the use of deadly force by law enforcement permit its use if the officer considers himself to be in imminent danger. The ostensible standard is that the perception must be reasonable, but due to the deference society generally affords the police, what is a reasonable perception to them is not necessarily the same as a reasonable perception for you and I. Doubtless, Bastiat would scoff at such an unseemly notion, but he is not responsible for writing statutory law. We often hear morbid jokes about how an officer in little to no danger feared for his life, but in a very real sense, this defense is as effective against criminal prosecution as qualified immunity is against civil. Conceptually, they are part of the same societal paradigm. Even in states such as Minnesota, where statutes are clear regarding what constitutes imminent danger, prosecutors are not necessarily wild about the idea of bringing charges against errant officers. For one thing, their jobs rely on the work of the police, and vice versa. The two institutions are inextricably, symbiotically linked. On a related note, district attorneys are often elected officials who rely, in part, on the support of police unions, whose endorsement or lack thereof can turn the next election[i]. Voters want their prosecutors to be tough on crime, and the perception of turning on their partners in the interest of public safety can be a career-altering turn. This last brings up a very uncomfortable truth regarding our criminal justice system; victims of police force are often members of groups the majority finds undesirable in some manner. As such, there is a presumed lack of innocence on the part of the victim in the eyes of their peers, providing perfect opportunities for the whims of officers acting in bad faith[ii]. In this sort of vicious circle, there is no incentive for prosecutors to bring charges, as the pool of potential jurors considers the actions of police justified. Moreover, a losing verdict is often the means by which suspended or terminated officers force reinstatement; if they are guilty of no crime, then they cannot be punished by their department for one. Vicious circles are self-feeding beasts that distort the formation of equilibria, and can only be negated by virtuous circles. Some have proposed that police officers should never be tried by prosecutors from their own districts, which has some merit, but the competition between municipalities opens its own set of perverse incentives. Others posit that the prosecution of police should be a Federal matter, but this creates problems of its own. For one, murder and manslaughter, the most common charges levied against police, are matters of state law. This would blur the separation of power between Federal and state governments. Additionally, criminal violations of civil rights, which are the purview of the Justice department, are notoriously difficult cases to bring, and generally drag on for years. Thus, there is a problem of inefficiency in this proposed solution. The root issue, however, is not the vagaries of statutory law, nor is it in which party is responsible for prosecuting offending officer. Economic sociology tells us that for all our pretense at being a society of law, and not men, the enforcement of law is society centric. Majority attitudes about the role of law enforcement in an ostensibly free society and the rights of suspected criminals – especially of those belonging to marginalized population subgroups – determine the path of law enforcement, and the rate at which bad actors are punished. If attitudes such as “he shouldn’t have resisted,” or “if he had nothing to hide, he would have complied” prevail, this conversation is entirely academic. The very first article I wrote for EconLog was a statement on why we needed to continue discussing incidents such as George Floyd no matter how uncomfortable they might make us, and despite our fears of what they might say about our society. In a truly free, liberal, cosmopolitan society, officers of the law cannot be above the law. In a general sense, this is true of all government officials. Ethically, even if not necessarily legally, they have a fiduciary duty to safeguard the natural rights and freedoms of those under their care, especially from violation by the government they represent. This is a critical necessity for law enforcement officers, who are quite literally the hired guns responsible for enforcing government mandates. Until the majority is willing to hold government responsible for fidelity to these principles, no amount of statutory reform will matter. No number of protests, peaceful or otherwise, will make any difference in the grand scheme of things. Unjustified police violence will continue, as bad officers will continue to have no incentive to stop. Charges will continue to be rare, and convictions even more so. Tragically, there will continue to be George Floyds to talk about.   [i] Human Rights Watch. (1998). Shielded from Justice: Police Brutality and Accountability in the United States. New York: Human Rights Watch. [ii] Asit S. Panwala, The Failure of Local and Federal Prosecutors to Curb Police Brutality, 30 Fordham Urb. L.J. 639 (2002)   Tarnell Brown is an Atlanta based economist and public policy analyst. (0 COMMENTS)

The noble Don Boudreaux builds on my ageless hypothetical: To avoid the many challenges with calculating the value of a statistical life, think of the matter in the following way: Suppose that a society, identical to ours, will – with 100 percent certainty – be stricken with one of three deadly pathogens. But this society can choose which of the three to suffer. Each pathogen will kill the same number of persons, with this number being significant, potentially as high as 0.15 percent of the society’s total population. Pathogen A will kill only people 80 years old and older. Pathogen B will kill only people 30 years old and younger. Pathogen C will kill indiscriminately across all age groups. The Fates give the society 24 hours to choose which of these three pathogens to endure. Perhaps it’s true that a surprisingly large number of very selfish and frightened people 80 and older will argue for pathogen B, while many other elderly people, being a bit less selfish, will argue for pathogen C. But surely the great majority of citizens – including, I suspect, elderly citizens – would argue for pathogen A. And this stance is the one that’s ethically agreeable. To see why, suppose further that just before voting on the pathogen is conducted, each person is given a shot that, for a few minutes, puts that person behind a veil of age-ignorance, causing each person to temporarily lose all knowledge of whether he or she is old, young, or middle-aged. Surely the great bulk of these age-blind people would vote for pathogen A over pathogen B or C. The age profile of Covid’s fatalities, of course, isn’t quite as stark as that of pathogen A. But it’s much closer to pathogen A than to pathogen B or C. Because pathogens B and C would each be regarded as far more devastating, heartbreaking, and frightening than pathogen A, if society were nevertheless stricken with B or C rather than with A, society would reasonably expend more effort and resources protecting against the pathogen than it would spend protecting against pathogen A. This point I cannot prove, but it does seem to me to follow firmly from the ranking of the three pathogens. But even if the amount of effort and resources spent combatting pathogen A would be as great as that spent combatting either of the other two pathogens, surely the pattern of this use of effort and resources would differ. Surely efforts would be made to focus protection on its victims (namely, people 8o and older). Surely younger people would not be treated as if they are as at much risk from the pathogen as are the elderly. The magnitude of Covid lockdowns and other indiscriminate, often draconian policies strikes me as what people would be more likely to endorse if Covid were akin to pathogen B or C. Yet Covid is much closer to pathogen A. If the responses that we’ve endured over the past 14 months are acceptable in light of the very obvious and steep age profile of Covid’s victims, what, I ask, would acceptable responses look like if Covid were akin to pathogen B or C? It’s terrifying to contemplate. (0 COMMENTS)

Non-discrimination can easily come to mean discrimination. Suppose a law bans discrimination against individuals of Group 1. If that means the interdiction of imposing special obstacles or constraints on individuals of Group 1, it is pretty clear what non-discrimination means. But suppose that non-discrimination against Group 1 means giving privileges (in terms, say, of affirmative action) to individuals who are part of that group. The consequence is to directly harm individuals of Group 2, who will resent being discriminated against for non-discrimination reasons. With this slip in the meaning of non-discrimination, discrimination has just been shifted from Group 1 to Group 2: the latter is now discriminated against in the name of non-discrimination against the former. A Senate vote of last week illustrated that, as editorialized by the Wall Street Journal (“A Revealing Vote on Anti-Asian Bias,” April 25, 2021). The occasion is a hate-crime bill that cleared the Senate with 94 votes against 1. But a Republican amendment to the bill had been defeated along party lines by 49 votes against 48: The GOP amendment was a single sentence. It said no college “may receive any Federal funding if the institution has a policy in place or engages in a practice that discriminates against Asian Americans in recruitment, applicant review, or admissions.” The editorial continues: Hawaii Sen. Mazie Hirono said on the floor that the amendment was “a transparent and cynical attack on longstanding admission policies that serve to increase diversity.” She means elite college policies that have been challenged in court by Asian-American students for penalizing them in admissions. … The amendment surely would have passed if the text had substituted another minority group for “Asian Americans.” Yet it did not get a single Democratic vote. Remarkable but not unexpected. If non-discrimination is taken to mean discrimination, any attempt to stop the discrimination will be considered as “a transparent and cynical attach” against non-discrimination. In Anthony de Jasay’s theory of the state, this slippery slope is unavoidable: because the interventionist state cannot please everybody, it will discriminate in favor of the clienteles that most support it (or most support the government in place) and, in the process, discriminate against other groups. Some people see fallacies in any form of reasoning, but a slippery-slope argument is obviously not a fallacy when incentives and the logic of institutions lead to its conclusion. As de Jasay wrote, When the state cannot please everybody, it will choose whom it had better please. Today, the state had better please the woke mob, partly made of rich kids who see the world in black and white. The intellectual and business establishment is scared of them. A comparison with China under the cultural revolution is not a total exaggeration. Preventing bigoted discrimination against minorities (racial or other) is certainly a worthwhile ideal. The problem is that anti-discrimination laws will likely become discriminatory. Using Gary Becker’s theory of discrimination, we can see that free markets reduce discrimination more effectively because they automatically oblige the discriminators to pay in lost profits a price for their discrimination, and without creating new discrimination. If you want to learn a bit more on this last topic, you may want to have a look at my Econlog posts “Jim Crow: More Racist than the Railroads,” “Markets Against the Mob’s Purpose,” and “Discrimination and Harvard Discrimination.” (0 COMMENTS)