Following up on information that Covid-19 vaccines were available there, I walked into the small Maine pharmacy. I saw nobody inside, not even at the cash register. I continued to the back of the store: nobody manned the two counters of the pharmacist’s hideout. I stood in front of one. After just a few minutes, an employee appeared on the other side. “Could I see the pharmacist?” I asked. The pharmacist came. “I have been told that you have Covid vaccines,” I said. “We have a waiting list,” she replied. I asked to be put on it but she would not, or could not, tell me when they were likely to phone me for an appointment. I recognized something like the Canadian health system, under which I lived for decades. “Is it a matter of days, weeks, months, or years,” I asked. “Days. At least.” That looked good, except for the “at least.” In some of the on-line and mortar-and-brick places, there is not even a queue you can get at the back of. At this stage, the actual vaccines don’t seem to be the problem. In the United States, the manufacturers have delivered twice as many vaccines as have been administered. According to the Wall Street Journal (Jared S. Hopkins and Arian Camp-Flores, “Demand for Covid-19 Vaccines Overwhelms State Health Providers,” February 8, 2021), [a]lthough state officials often cite limited vaccine supply, manufacturers are producing largely on schedule. Pfizer Inc. and Moderna Inc. since December have supplied about 60 million doses, nearly one-third of the 200 million the companies together must deliver by the end of March. State governments are supposed to distribute the vaccines that the federal government, after literally monopolizing the market, makes available to them. The length of the queues varies from place to place, perhaps depending partly on the success of whatever entrepreneurship can creep into what is basically a socialized distribution system. One Missouri hospital has a waiting list of 100,000 names and no vaccine left. Queues are not an efficient way to ration demand. In the former Soviet Union, the government always had an excuse for shortages. The real problem was different: no private property, no market prices to signal scarcities, and no free entrepreneurship to respond to the signals. In America, once the federal government has purchased them, the Covid vaccines are priced at zero, which implies that government allocation is required. At a zero price, demand is much larger than the quantity that bureaucrats can supply. The fee governments pay providers (hospitals, pharmacies, and such) for administering the vaccines may not be higher than the latter’s cost. For example, Medicare pays about $40 for administering the two doses of the currently available vaccines. In a flash of economic realism, Joe Biden has expressed some concern that this fee may not be sufficient. It is no consolation that all governments in the “free” world have adopted similar policies. No “American exceptionalism” here. For Soviet agricultural production, the weather was often the excuse. For Covid vaccines, we are told that “the supply chain” and logistics are the problem. The Wall Street Journal‘s Jennifer Smith reported (“Mass Vaccination Sites Will Mean Scaling Up Logistics Coordination,” January 30, 2021): Other local health departments might need information technology help to cope with overwhelmed appointment systems, or assistance with planning and sourcing the labor, supplies and procedures needed to administer hundreds of shots a day. “People underestimate that this is a massive logistics operation,” Dr. Wen said. “That type of expertise is often missing in state and local public health.” But except for governments—that is, political and bureaucratic processes—that should not be an unsurmountable logistics problem. Private businesses without central coordination produce and deliver the food, in innumerable configurations, for the daily meals of 320 million Americans. Recall the Russian official who, shortly after the collapse of the Soviet Union, asked British economist Paul Seabright, “Who is in charge of the supply of bread to the population of London?” In 2020, Amazon shipped 4.5 billion packages to American consumers—more than 12 million per day. The UPS hub in Louisville, Kentucky has a five-million-square-foot facility for sorting and treating more than 400,000 packages or documents per day. The hub sees 387 inbound or outbound flights daily from the company’s fleet of nearly 600 aircraft. What is more impressive is to think of the millions of individuals around the country and around the world who work in long and diverse supply chains to provide the equipment and inputs necessary for UPS’s operations. We are reminded of Leonard Read 1958 essay I, Pencil, which explains how the manufacture of a simple pencil requires the voluntary cooperation of a multitude of individuals producing, without a mastermind, the zinc, the copper, the graphite, and the equipment to make pencils out of that, and all the equipment for producing that equipment, and so on. Although working under no central direction, these innumerable people who contribute to the production of pencils or UPS’s equipment and supplies are coordinated by markets (supply and demand) and the prices that signal what is needed where. Compare this to the federal government’s “centralized system to order, distribute, and track COVID-19 vaccines” in which “all vaccines will be ordered through the CDC” (see the description by Anthony Fauci’s shop: COVID-19 Vaccine Questions and Answers, accessed February 10, 2021), the price for the final consumer is zero, and providers are paid fees determined by bureaucrats. No wonder the distribution runs into problems. The contrary would be surprising. Note that the vaccine could still be free for the final customer if the federal government had simply subsidized consumers for their vaccine purchases (with vouchers, for example) and had let markets, entrepreneurship, competition, and prices distribute the stuff. And it wouldn’t take ages, luck, and some humility to put one’s hands on the thing—or one’s arm under the syringe. The consumer who wants a vaccine gets a small taste of what French philosopher Raymond Ruyer, in his 1969 book Éloge de la société de consommation (In Praise of the Consumer Society), described as the difference between a market economy, where the consumer is sovereign, and a planned economy, where the producer runs the show (under government’s control): In a market economy, demand gives orders and supply is supplicant . . . In a planned economy, supply give orders and demand is supplicant. « Dans l’économie de marché, la demande est impérieuse, et l’offre suppliante (the supply is supplying). Dans l’économie planifiée, l’offre est impérieuse, et la demande suppliante. » (0 COMMENTS)

We’ve now moved on to “War Is Peace.”  Here are my thoughts on your latest comments. LEB: I know you were speaking to the specific Huxley quote, but on the whole I wouldn’t dismiss “Brave New World” so quickly.  Americans have willingly ceded a great deal of their freedom to the government in recent decades… I agree that Americans ceded a great deal of freedom to the government over the last century.  I don’t see that there’s been a net loss of freedom in American policy from 1980 or 1990 to the present. and most people under 30 today seem fairly content to live in a numbed state of consciousness through social media, pornography, calorie-dense foods, video games and recreational drugs.  This is compatible with freedom in the “do what you will in the moment” sense of the word, but I don’t think it bodes well for the future of more essential freedoms to the elevation of human character. Anti-intellectual apathy is the norm in all human societies.  Perhaps things are marginally worse than normal for under-30s nowadays, but I haven’t seen any compelling evidence of this.  What is a non-question-begging measure? Freedom of thought, speech, association, and religion all seem to be under grave threat so long as the public endures in a state of numbed stupor occasionally punctuated by reactive frustration and outrage. “Grave threat” seems like hyperbole.  Marginal threat?  Perhaps, though again it’s not clear that things were ever noticeably better. Henri Hein: China in the first few decades after the Socialist take-over fits your bill pretty closely. It is the 4th largest country in the world, with population centers such as Chongqing, Wuhan and Beijing isolated by distance and geography. It was surrounded by other failed socialist experiments, or other dysfunctional countries: Soviet Union, North Korea, Afghanistan, Nepal, Laos, Vietnam. Only India was a somewhat functioning country, but you had to cross the largest mountain range in the world to get there, and would probably be shot at if you made it that far. Hong Kong was close, but it had a tiny border and was closely guarded. The rulers told the populace they were living in a Socialist paradise, and the people wanted to believe them. Yet despite this almost perfect setup for Mao, millions of Chinese found their way to Thailand, Malaysia, Singapore, Hong Kong, North America, Indonesia and the Philippines. Millions and millions. Do you have any source for these numbers?  Nothing readily googles, and they seem far too high.  In any case, “millions and millions of emigrants” out of hundreds of millions spread over a quarter-century of starvation and tyranny hardly sounds like a serious check on tyranny, does it? Joe Denver: This seems a bit strange for Orwell. Perhaps I’m misunderstanding him, but even as a socialist, it seems strange to strongly advocate against tyrannical Stalinism, yet also have so much faith that it works. Compare this with liberals (libertarians), who, if anything, are far too quick to predict the downfall of authoritarian institutions. Likely because they have no faith that these institutions work. Orwell thought that the Soviet system “worked” in the sense of maintaining an iron grip on power.  And he had excellent reasons to think so; he saw Stalin hold power under extraordinarily dire conditions, mostly of his own making.  Orwell’s mistake was thinking that the Soviet system would be good at perpetuating itself after the fanatical revolutionary generation died off. Jan: While TPOC-Orwell is certainly prescient and insightful in some ways here, you give him too much credit as a strategist and war planer… A two-bloc world is more seems more stable here. Why didn’t 1984-Orwell go for it? One foe should be enough now. Hard to say.  Perhaps given his experience with British colonialism, Orwell was skeptical that two European powers could permanently maintain control over Asia.  Dramatically, of course, he wanted to have three powers so he could ridicule the Molotov-Ribbentrop Pact via the famous scene where Oceania switches enemies in the middle of Hate Week. However, the point is moot, since, second, there are nukes in 1984. An even bigger arms race seems inevitable, and sooner or later one bloc will gain the upper hand (or is feared by the others to do so). Result in that world is the same: All-out war. Aren’t nukes precisely what makes Orwell’s stalemate plausible?  Nuclear weapons are the standard explanation for why the Cold War stayed cold for the major powers, no? Brian Kennedy: I don’t think two bloc worlds are more stable, and I *sorta* think that the International Relations/Historian Academics (I am neither) think so as well.  Rome/Carthage, the Central Powers/Allies, Axis/Allies, etc.   In a two power dynamic, everything is zero sum, so if you have the advantage, press it.  Which makes a war to determine everything inevitable. “Inevitable” is way too strong.  But it’s believable that two-bloc worlds are more likely to lead to total war than three-bloc worlds. In a three bloc dynamic, it is not so simple.  Yes, two powers could gang up and totally defeat the third power, but then you are in the two bloc dynamic, do you want to enter that if you are the weaker of the two victories powers?  No. So you switch sides. Plausible for most of history.  It wouldn’t have made much sense for the British to team up with the Soviets against the Americans after World War II, though. If the Cuban Missile crises had triggered WW-III, later historians would have said it was just the event that triggered the inevitable war, just as they now say that the assassination of Archduke Ferdinand triggered WW-I.   Europe had gone through multiple crises pre WW-I, which eventually triggered a war. Hindsight bias is mighty, yes. So too the Cold War, though after the Cuban Missile Crises, those crises tended more towards Kabuki Theatre.  Because nukes, I would posit. Agree. Donald Fagan: “If you’re still not convinced, noticed how easily the European powers surrendered their entire empires after World War II.  Since they never really “needed” their colonies, they swiftly let them go with minimal domestic side effects when imperial fervor waned.” I think you’re way off here. The European colonial powers were exhausted financially after the war and no longer had the juice to maintain empire in the new world of the superpowers. This is a fine explanation for why the Netherlands gave up the Dutch East Indies; they lost control during World War II and lacked the resources to reestablish control in time.  But “financial exhaustion” really doesn’t explain the British or French collapse.  With the possible exception of British India, their mighty economies largely recovered before the independence movements gained the upper hand.  And again, if the colonies were actually profitable for the colonial powers, letting them go would have made their long-run financial outlook worse, not better. How do you explain attempted British intervention in the Suez in 1957, and the diplomatic (as well as national) humiliation their failed efforts earned them? I’d call it a last gasp of nationalistic pride.  The loss was humiliating, but not impoverishing. David Henderson: Here’s one of my favorite quotes from the late Jonathan Kwitny’s book Endless Enemies: The excuse for intervention [by the U.S. government], of course, is the notion that if we don’t fight, Moscow will win by default. Yet as one travels the globe, from Indochina to Cuba to Angola, one finds that the Third World countries where the Soviets are alleged to have the strongest influence are precisely those countries where we have fought. Meanwhile, in countries that weren’t militarily threatened by the United States, where Soviet influence has had a chance to flunk on its own merits, it has. In Egypt, in Ghana, in Algeria, in Somalia, in Nigeria, in Indonesia—except in occupied countries along the Soviets’ own border, the Russians have been kicked out. I’m tempted to agree, but it’s complicated.  Maybe the U.S. was more likely to fight in arenas where the Soviets were more determined to win a lasting victory.  The Soviets were “kicked out” of the countries where they were dabbling all along.  Until 1989, what explicit Marxist-Leninist dictatorship ever lost rule of a country after securely gaining it?  The closest example is Cambodia under the Khmer Rouge, where one Marxist-Leninist dictatorship lost power to another. Henri Hein: For if leisure and security were enjoyed by all alike, the great mass of human beings who are normally stupefied by poverty would become literate and would learn to think for themselves; War is a way of shattering to pieces, or pouring into the stratosphere, or sinking in the depths of the sea, materials which might otherwise be used to make the masses too comfortable, and hence, in the long run, too intelligent. Continuing my efforts from previous posts, this time I am just going to list some geniuses that were produced by poor parents: Michael Faraday Srinivas Ramanujan Alfred Nobel Marshall Mathers Alexander Hamilton Gauss Abraham Lincoln You’re getting a little ahead in the reading, but you make a useful point.  I’m going to focus on the fact that riches fail to intellectualize most people, but it’s also worth pointing out that poverty often fails to “stupefy.” (0 COMMENTS)

In a comment on one of my recent posts, co-blogger Scott Sumner quotes my statement: But implicit in his discussion is the idea that equity is synonymous with income equality or, at least, reduced income inequality. That’s not my view. My view is that people are treated equitably when other people don’t take their stuff. Scott then writes: That’s fine as a definition, but in that case I’d just use a different term.  Even if I accepted your definition of “equity”, it would not change my views on Romney’s proposal at all.  I’d just replace “equity” with “income equality” in my post, and otherwise keep the argument the same. If he had stopped there, we wouldn’t have had a disagreement, except that we have very different views on the desirability of Romney’s proposal. But then Scott writes: I think my use of equity is consistent with how it’s used in economics textbooks when they discuss the equity/efficiency trade-off. That’s a bridge too far. It is consistent with how it’s used in some, possibly many, economics textbooks. I found words to that effect, for example, in Jack Hirshleifer’s microeconomics text. But some, maybe many, economics textbooks give a few versions of “equity.” Here are two examples, and I didn’t have to look hard in my remaining few economics textbooks to find them. In the 9th edition of their textbook Economics: Principles and Policy (2003), William J. Baumol and Alan S. Blinder consider various versions of equity. The two most directly related to this discussion are the concept of “vertical equity” and the benefits principle. The version of the vertical equity principle they discuss is the “ability-to-pay principle,” which says that “those most able to pay should pay the highest taxes.” But they then give examples of a progressive, a proportional, and a regressive income tax system, in all of which those most able to pay do pay the highest taxes. So that’s not guidance that leads you to income equality or even to reducing income inequality. The other equity principle they discuss is the “benefits principle,” which says that “those who reap the benefits from government services should pay the taxes.” They note that this principle of fair taxation “often violates commonly accepted notions of vertical equity.” You can see why. Bill Gates gains a lot from national defense, but does he gain much from U.S. foreign policy, which tends to be focused on national offense? Or even more obviously, does he gain from the existence of the SNAP (food stamp) program? In the 5th edition of N. Gregory Mankiw’s Principles of Economics (2009), there’s a similar discussion. Indeed, Mankiw uses examples of progressive, proportional, and regressive tax systems, all of which cause those with higher incomes to pay more taxes. Mankiw also discusses the benefits principle and even argues that it could be used to justify taxing higher-income people more for anti-poverty programs, on the grounds that reducing poverty is a public good. Whether or not you think this is a stretch, the point is that we still don’t get to the conclusion that high-income people should pay a larger percent of their income. And notice that neither of the two textbooks equates equity with income equality.   (0 COMMENTS)

Tyler Cowen recently linked to a study by Alina Bartscher, Moritz Kuhn, Moritz Schularick, and Paul Wachtel of the effects of “monetary policy” on racial inequality. The study focuses specifically on the effect of unanticipated monetary shocks on racial inequality: For the empirical analysis, this paper relies on the most widely used monetary policy shock series – the (extended) Romer-Romer shocks (Coibion et al., 2017) as well as different financial market surprise measures taken from Bernanke and Kuttner (2005) and Gertler and Karadi (2015). The estimations yield a consistent result. Over a five-year horizon, accommodative monetary policy leads to larger employment gains for black households, but also to larger wealth gains for white households. More precisely, the black unemployment rate falls by about 0.2 percentage points more than the white unemployment rate after an unexpected 100bp monetary policy shock. But the same shock pushes up stock prices by as much as 5%, and house prices by 2% over a five-year period, while lowering bond yields on corporate and government debt and pushing up inflation. The sustained effects on employment and stock and house prices appear to be a robust feature in the data, across different shock specifications, estimation methods, and sample periods. These empirical results seem plausible to me, but what are the policy implications? In my entire life, I’ve never met anyone who favored having the Fed go around and create a bunch of “unexpected 100bp monetary policy shocks”. You might argue that this doesn’t matter, and that the results would also hold for anticipated changes in monetary policy. But decades of macroeconomic research suggests that one cannot draw this inference; unexpected changes in monetary policy have vastly different effects from expected changes in monetary policy. For instance, an unanticipated easing of monetary policy will often boost asset prices, while an anticipated expansionary policy will often reduce asset prices, as during the 1970s. Now you might argue that asset prices didn’t do poorly during the 1970s because of easy money, they did poorly because of high inflation. Ahem . . . When economists have debates about the appropriate monetary policy, they usual agree that policy should in some sense be predictable and stable. Disagreement may occur over issues such as the optimal rate of inflation. One economist may advocate 2% trend inflation, another may advocate 4%, and a third may advocate 0% inflation. Or they might prefer a different target, such as NGDP growth. A study of the effect of monetary shocks on asset prices tells us nothing about the effect of changes in the steady state rate of inflation. Thus unexpected monetary stimulus often creates a temporary boom, boosting asset prices, while a permanent increase in inflation raises the effective tax rate on real capital income, thus depressing real capital prices. This is what happened during the 1970s. This means that a temporary switch to easier money will boost the racial wealth gap by raising asset prices, and a permanent switch to much easier money (say 10% inflation) will reduce the wealth gap—but only by making the rich poorer at a faster rate than it makes the poor even poorer. While I question the authors’ interpretation of their results, I completely agree with the final sentence of their conclusion: Clearly, this does not mean that achieving racial equity should not be a first-order objective for economic policy. We strongly think it should. But the tools available to central banks might not be the right ones, and could possibly be counter-productive. PS.  Here’s some data on the racial wealth gap: (0 COMMENTS)

In 1968, Abbie Hoffman famously wrote a book called Revolution for the Hell of It. In 1973, this negatively inspired David Friedman to write a chapter called “Revolution is the Hell of It.” Last month, I watched The Battle of Algiers, probably the most famous pro-terrorist (or at least anti-anti-terrorist) movie in history.  If you don’t know the sordid history of the “liberation” of Algeria, you should.  The whole movie is gripping, but this little speech by terrorist Ben M’Hidi stayed with me.  Though the writers probably intended the speech to be an inspiration rather than a warning, it’s a vivid vindication of Friedman over Hoffman. BEN M’HIDI: Do you know something Ali? Starting a revolution is hard, and it’s even harder to continue it. Winning is hardest of all. But only afterward, when we have won, will the real hardships begin. Which raises the obvious pacifist question: “Then why start?”  Committing evil deeds when the benefits are large and reliable might be justified.  Committing evil deeds when the benefits are deeply speculative is absurd. Am I really going to defend colonialism?  No.  As I’ve said before, both colonialism and anti-colonialism are blameworthy expressions of violent nationalism: But don’t you either have to be pro-colonial or anti-colonial?  No.  You can take the cynical view that foreign and native rule are about equally bad.  You can take the pacifist view that the difference between foreign and native rule isn’t worth a war.  Or, like me, you can merge these positions into cynical pacifism.  On this view, fighting wars to start colonial rule was one monstrous crime – and fighting wars to end colonial rule was another. In the case of Algeria, however, I should add that native rule turned out to be vastly worse. (2 COMMENTS)

The simplistic declarations about violence heard after the “insurrection” of January 6 at the Capitol invite a reflection on the economics of violence. The economist’s starting point is that an individual uses violence when it is in his personal interest to do so—when, given his circumstances and constraints (including subjective moral constraints or the lack thereof), he finds the net expected benefit of violence greater than the net expected benefit of peaceful exchange for him. This is a positive observation about what is, not a normative statement about what ought to be, an important distinction to always keep in mind. As the late UCLA professor Jack Hirshleifer argued, we must not overlook “the dark side of the force” (of the force of self-interest), which includes “crime, war, and politics.” (I am quoting from the mimeographed July 28, 1993 version of his article “The Dark Side of the Force.”) Cooperation (such as trade) happens but “with a few obvious exceptions, occurs in the shadow of conflict.” Hirshleifer wrote. In positive economics, violence is important: All aspects of human life are responses not to conflict alone, but to the interaction of the two great life-strategy options: on the one hand production and exchange, on the other hand appropriation and defense against appropriation. Which strategy one individual chooses depends on his preferences, his abilities in voluntary cooperation, the defensive or offensive production technologies available to him and to others, and his evaluation of the future. But how should we think about political violence? Open violence—“the war of all against all”—has dire consequences for prosperity. Virtually all individuals have good reasons to want it minimized. Thomas Hobbes formalized the idea that such minimization is what gives legitimacy to the state. Populations accepted the burden of the Roman Empire or the medieval lords or the king or the modern democratic state because these governments were deemed not as bad as attacks from the “roving bandits,” private or governmental, who would have otherwise proliferated and attacked them. The “roving bandit” concept belongs to the theory of economist Mancur Olson, notably in his article “Dictatorship, Democracy, and Development” (American Political Science Review 87:3 [September 1993], 567-576). Governments do not abolish violence as its threat underlies their injunctions and bans. But the most useful governments prevent violence from degenerating into open violence. They replace the latter with a more subdued, formal, and at least partly constrained form of violence. This does not mean that revolution is never in the interest of some or many or even—under the worst governments—a majority of the ruled. The collective action necessary to organize a revolution, however, faces daunting problems. Which individuals will start the revolution and pay the necessary personal costs, often with their lives? (On the theory of collective action, a milestone in economics, see Olson’s book The Logic of Collective Action: Public Goods and the Theory of Groups, 1966].) Revolutions do occasionally happen, though. At some tipping point, the National Guard or other praetorians do not shoot on demonstrators or on the mob attacking the “City of Command,” as political theorist Bertrand de Jouvenel called the center of government power (in his book On Power [1945 for the original French edition]). Bodyguards decamp where the signs become unmistakable that the regime is crumbling, because it is in the private interest of each of them to not be on the losing side. In Romania, Nicolae Ceausescu had no more praetorians when he was arrested by revolutionaries and executed with his wife. In different circumstances, Saddam Hussein was found in a rabbit hole, alone. Syrian ruler Bashar al-Assad did crush the revolution by shooting on the crowds but, perhaps most importantly, by becoming a vassal of the Russian government. The threat of revolution or revolt can lead some governments to rule by terror, but it can also exert a restraint on state power. The factors at play include the technology (guns and such), the propensity to violence on both sides, and the existing political institutions. Olson provides a historical example of how the threat of revolution can be useful: In Venice, after a doge who attempted to make himself autocrat was beheaded for his offense, subsequent doges were followed in official processions by a sword-bearing symbolic executioner as a reminder of the punishment intended for any leader who attempted to assume dictatorial power. Thomas Jefferson would have agreed. He famously wrote: I hold it that a little rebellion now and then is a good thing. Interestingly, once he was president, he did not even support ordinary smugglers. One problem with revolutions, illustrated by the 1789 French revolution and the 1917 revolution in Russia, is that they can strengthen power instead of limiting it. In America, the jury may still be deliberating. Many thinkers, including most economists of the public choice school as well as Anthony de Jasay, have argued that the state as an institution has a logic that leads to growing power. Even a liberal social contract as Nobel economist James Buchanan theorized it is ultimately based on threats of violence. When some individuals think that the contract is not in their best individual interests and that they would fare better in anarchy, they will want to renegotiate the deal or walk out of it. Only new rules and/or some bribes can prevent a civil war or a revolution. As Hirshleifer said, the option of violence is always lurking in the background. Classical liberalism claims that individual liberty under the rule law and the prosperity that follows are the best set of institutions to minimize violence—a potent argument. However, Anthony de Jasay, a liberal anarchist (or perhaps a conservative anarchist), has dampened the liberal enthusiasm by emphasizing the need for an effective balance of power between the ruler and the ruled: Self-imposed limits on sovereign power can disarm mistrust, but provide no guarantee of liberty and property beyond those afforded by the balance between state and private force. (0 COMMENTS)

Co-blogger Scott Sumner argues for, without quite endorsing, Senator Mitt Romney’s proposal for a large child allowance. I won’t lay out the specifics of Romney’s proposal in detail because Scott has already done it and the Tax Foundation has provided even more details. I will point out that the budget cost of the plan, all else equal, is estimated to be about $229.5 billion annually. While that might not sound like a lot in this time of trillion-dollar spending programs, it is a lot. Of course, not all else is equal. If Romney got his way, the child care tax credit would be eliminated, which would save $117 billion annually, leaving $112.5 billion as the net cost. He would also reform the Earned Income Tax Credit, saving $46.5 billion annually, driving the net expenditure for his plan down to $66 billion. He would come up with the $66 billion by increasing taxes in three ways and cutting two other spending programs. While the Tax Foundation did an excellent job of analyzing the provisions of the Romney plan, it did make one error. The analysts, Erica York and Garrett Watson, state: Romney estimates eliminating the SALT deduction would result in $25.2 billion in annual savings through 2025. But eliminating the SALT deduction doesn’t save money: it costs money. It costs taxpayers who will lose the deduction. Of course, York and Watson may be quoting Romney and so it may be Romney’s mistake. But it is a mistake. Note also that the child allowance starts phasing out for single taxpayers with income about $200,000 and for married, filing jointly taxpayers with income above $400,000, at a rate of $50 per $1,000 in income. That implies that very high-income people, virtually all of whom are already in a fairly high federal tax bracket, will see their marginal tax rates increase by 5 percentage points. That’s if they have 1 child. And if they have 2 children, their marginal tax rates will be 5 percentage points higher over an even larger range of income than the Tax Foundation’s graph shows. Most of these high-income people will be in a 35 percent tax bracket. This phase-out increases their marginal tax rate by 14.3 percent (5 is 14.3 percent of 35). The efficiency loss, also called deadweight loss (DWL), from taxes is proportional to the square of the tax rate. So the 14.3 percent increase in the marginal tax rate doesn’t increase DWL by 14.3 percent. It increases it by 30.6 percent. (Take 0.4 squared divided by 0.35 squared and you get 1.306.) That’s a large increase. And why all this? Why does it make sense to subsidize people having children? Two other points. First, although Scott Sumner says that the proposal will increase equity, he doesn’t define equity. But implicit in his discussion is the idea that equity is synonymous with income equality or, at least, reduced income inequality. That’s not my view. My view is that people are treated equitably when other people don’t take their stuff. Romney would tax people more when they live in high-tax states and thus lose their deduction of state and local taxes. That’s not fair. (I think, along with Scott, that the SALT deduction should be zero, but in return, marginal tax rates for high-income people should be cut.) Second, what happened to Romney’s fear, which he once had, of the deficit. The budget deficit is huge this year and, although it will likely be lower next year, it is set to be at least $1 trillion annually for a long, long time. We should be looking at paring down “entitlements” such as Social Security, Medicare, and Medicaid, not adding new ones. (0 COMMENTS)

Why do we help strangers? Is there a genetic basis for compassion? Or does evolutionary biology tell us a just-so story about why we care for others? These questions lie at the heart of this conversation between EconTalk Russ Roberts and Michael McCullough, who joined Russ to talk about his new book, The Kindness of Strangers. McCullough, a psychologist, tries to find answers to these questions in a lab setting, with many parallels to what we see in experimental economics. What did you take away from this episode? We’d like to know. Use the prompts below to help us continue the conversation.       1- How does McCullough explain the origins of the Golden Rule? What is the significance of its coincidence with the rise of religions? Is it really just “self-interest rewritten” as many economists might have us believe?   2- How do we internalize moral principles, and why do we believe certain things right or wrong (even when we can’t explain why? (Think about McCullough’s example of Roe v Wade. Can you come up with other similar examples?)   3- What can we learn from Adam Smith about how we behave with regard to others? Where do our other-regarding preferences come from? Why, for example, do people tend to share money in the Dictator Game?   4-  What does McCullough mean when he talks about a behavior continuum from highly externalized to highly internalized behavior? Which do you think has the greatest influence on our behavior? What role does superstition, for example, play in our motivation to help others?   5- Roberts and McCullough discuss the growth in humanitarian aid since 1500s, and Roberts asks why we don’t talk more about how futile it is? What would constitute effective humanitarian aid? Should we be more macro- or micro focused in our approach? (Roberts, for example, suggests visiting the sik might have a much greater impact on the world than large-scale foreign aid.) (0 COMMENTS)

Now our ongoing Book Club turns to Chapter 3 of Orwell’s book-within-a-book, famously entitled “War is Peace.”  I continue to refer to Orwell as the author of the book even though he’s playing a role and may not have fully agreed with his own words. Please leave your thoughts and questions in the comments and I’ll do an omnibus reply later this week. The splitting up of the world into three great super-states was an event which could be and indeed was foreseen before the middle of the twentieth century. With the absorption of Europe by Russia and of the British Empire by the United States, two of the three existing powers, Eurasia and Oceania, were already effectively in being. The third, Eastasia, only emerged as a distinct unit after another decade of confused fighting. The frontiers between the three super-states are in some places arbitrary, and in others they fluctuate according to the fortunes of war, but in general they follow geographical lines. Eurasia comprises the whole of the northern part of the European and Asiatic land-mass, from Portugal to the Bering Strait. Oceania comprises the Americas, the Atlantic islands including the British Isles, Australasia, and the southern portion of Africa. Eastasia, smaller than the others and with a less definite western frontier, comprises China and the countries to the south of it, the Japanese islands and a large but fluctuating portion of Manchuria, Mongolia, and Tibet. Orwell was writing in 1948, so his geopolitical scenario is rather credible.  If Anglo-American forces had suddenly withdrawn from Western Europe, we can easily imagine a full takeover by the Soviet Union.  The Chinese Communist victory was still a year away, but Orwell seems to foretell its rise as the third great global power – not to mention the Sino-Soviet split.  Still, Orwell’s trilateral scenario is a far cry from the bilateral conflict that actually prevailed throughout the Cold War. In one combination or another, these three super-states are permanently at war, and have been so for the past twenty-five years. War, however, is no longer the desperate, annihilating struggle that it was in the early decades of the twentieth century. It is a warfare of limited aims between combatants who are unable to destroy one another, have no material cause for fighting and are not divided by any genuine ideological difference. On first glance, Orwell correctly predicts the conduct of the Cold War.  In his scenario, however, there’s a major nuclear war first, followed by a three-way Cold War, so don’t give him too much credit.  Furthermore, while the ideological difference between the Soviet Union and Maoist China was indeed minimal despite their angry split, the divide between the West and these Stalinist offshoots remained strong.  Of course, the West’s claims to champion “democracy” or “the free world” were absurd; look at contemporary Taiwan, South Korea, Indochina, Indonesia, Africa, or Latin America.  The main divide was between the Soviet Union, which heavily pushed revolutionary totalitarian rule, and the U.S., which supported the traditional authoritarian regimes that Soviet proxies hoped to supplant. This is not to say that either the conduct of war, or the prevailing attitude towards it, has become less bloodthirsty or more chivalrous. On the contrary, war hysteria is continuous and universal in all countries, and such acts as raping, looting, the slaughter of children, the reduction of whole populations to slavery, and reprisals against prisoners which extend even to boiling and burying alive, are looked upon as normal, and, when they are committed by one’s own side and not by the enemy, meritorious. After World War II, this was a quite reasonable prediction.  All of the major powers embraced indiscriminate murder of civilians.  And the Korean War seemed to affirm this new disdain for long-standing Just War Theory.  Amazingly, however, Western countries quietly backed away from this moral abyss.  While the U.S. military obviously continues to kill innocents, there has been a marked return to more civilized standards.  In particular, Western leaders rarely advocate the deliberate targeting of civilians.  A low bar, but still a big improvement from the low of World War II. But in a physical sense war involves very small numbers of people, mostly highly-trained specialists, and causes comparatively few casualties. The fighting, when there is any, takes place on the vague frontiers whose whereabouts the average man can only guess at, or round the Floating Fortresses which guard strategic spots on the sea lanes. In the centres of civilization war means no more than a continuous shortage of consumption goods, and the occasional crash of a rocket bomb which may cause a few scores of deaths. War has in fact changed its character. Fairly prescient, if you change one detail.  Since World War II, the small number of conflict deaths in Western countries have come via terrorist attacks rather than country-to-country rocket bombs.  And depending on how “state-sponsored” you think these terrorist attacks have been, you might consider this superficial detail. More exactly, the reasons for which war is waged have changed in their order of importance. Motives which were already present to some small extent in the great wars of the early twentieth century have now become dominant and are consciously recognized and acted upon. To understand the nature of the present war—for in spite of the regrouping which occurs every few years, it is always the same war—one must realize in the first place that it is impossible for it to be decisive. None of the three super-states could be definitively conquered even by the other two in combination. They are too evenly matched, and their natural defences are too formidable. Eurasia is protected by its vast land spaces. Oceania by the width of the Atlantic and the Pacific, Eastasia by the fecundity and industriousness of its inhabitants. Plausible. Secondly, there is no longer, in a material sense, anything to fight about. With the establishment of self-contained economies, in which production and consumption are geared to one another, the scramble for markets which was a main cause of previous wars has come to an end, while the competition for raw materials is no longer a matter of life and death. Orwell remained a self-identified socialist until his death, and his embrace of this Leninist theory of international conflict was probably sincere.  Yet the Leninist theory never made much sense.  Simply by the gravity model, intra-European trade was almost always far greater than trade between imperial powers and their colonies.  And the non-imperial nations of Europe seemed to be at least as prosperous as the imperial nations; it wasn’t like Sweden or Switzerland’s lack of colonies were serious economic handicaps.  While imperial rivalry was indeed an important cause of European conflict, the reason was clearly nationalism, not national economic self-interest.  If you’re still not convinced, noticed how easily the European powers surrendered their entire empires after World War II.  Since they never really “needed” their colonies, they swiftly let them go with minimal domestic side effects when imperial fervor waned. True, the world’s leading nations did worry about their access to strategic resources.  But by itself, this is a circular theory of conflict.  Why are you fighting?  To secure strategic resources.  Why do you need strategic resources?  Because we’re fighting.  Once again, the ideology of militaristic nationalism comes first. In any case each of the three super-states is so vast that it can obtain almost all the materials that it needs within its own boundaries. In so far as the war has a direct economic purpose, it is a war for labour power. Between the frontiers of the super- states, and not permanently in the possession of any of them, there lies a rough quadrilateral with its corners at Tangier, Brazzaville, Darwin, and Hong Kong, containing within it about a fifth of the population of the earth. This quadrilateral remained economic unimportant throughout the Cold War.  How is that possible?  Because despite its high population, the region remained very low-skilled.  While the number of people was high, the total human capital of the region was modest. It is for the possession of these thickly-populated regions, and of the northern ice-cap, that the three powers are constantly struggling. In practice no one power ever controls the whole of the disputed area. Portions of it are constantly changing hands, and it is the chance of seizing this or that fragment by a sudden stroke of treachery that dictates the endless changes of alignment. The Cold War was a “constant struggle,” but had a clear direction.  The Soviet bloc enjoyed substantial growth throughout, flipping about twenty five countries from 1945-1989.  So while conflict largely stayed in the world’s economic periphery, the Soviets’ long-run advance was impressive.  Indeed, their only great defeat was the defection of China from the Soviet bloc.  This split the world Communist movement, but the only Communist country China pulled into its own orbit was Cambodia under the Khmer Rouge.  And Vietnam’s subsequent invasion of Cambodia soon reversed that small victory.  Once 1989 came, however, the Soviet bloc shattered beyond repair.  And in historical perspective, current talk of a “new Cold War” with China is mere hyperbole. (0 COMMENTS)

Lamorna Ash talks about her book Dark, Salt, Clear with EconTalk host Russ Roberts. Ash leaves London and moves to the small fishing village of Newlyn, near where her mother grew up on the Cornish coast. In Newlyn, everything revolves around fishing. Ash gets herself a bunk on a trawler and quickly learns how to […] The post Lamorna Ash on Dark, Salt, Clear appeared first on Econlib.