Matt Yglesias has an interesting tweet: Last May, I said the following: Occam’s Razor also applies to the lab release theory. We know that dozens of epidemics have come from viruses jumping from animals to humans without any “lab” being involved. Why construct an entirely new theory for this epidemic? . . . Actually, the CCP would look far better (in a ethical sense) if the virus accidentally escaped from a lab doing valid and useful scientific research, rather than from disgusting “wet markets” that the CCP refused to shutdown. . . . Of course it’s certainly possible the virus did escape from a lab during research on bat coronaviruses. I really don’t care. In retrospect, that wasn’t my finest moment. I meant that I don’t care in an ethical sense, and I still hold that view. But Yglesias’s tweet raises an interesting issue. If it was a lab escape, then what are the public policy implications, if any? And I don’t know how to answer that question. Over the years, I’ve argued that things like accidental nuclear war and bioterrorism were much bigger threats than global warming. (And I view global warming as a fairly big threat.) But I don’t know enough about science to know how policymakers should respond to the risk of bioterrorism. However, I do know more about science than I did two years ago. As an analogy, before 2009 I thought Western policymakers knew how to handle the zero lower bound problem for interest rates. In 2009, I discovered that they did not, or at least there wasn’t a critical mass that knew what to do. Similarly, last year I found out that we were far less prepared for a pandemic than I had thought. Indeed, my perception of our preparedness seems to fall almost by the day, as I recently discovered our inability to deliver a vaccine to the public that has already been invented, tested, manufactured and distributed to states. In the past, people who know more than I do told me not to worry about bioterrorism. But their arguments were not persuasive. Now I have zero trust in the public health establishment. I see no reason at all not to fear a “mad scientist” creating a virus 50 times more deadly than Covid-19, and letting it loose. So to answer Yglesias’s question, it seems to me that if the virus escaped from a lab, then we should conclude that a future scientist with the same sort of psychological problem as that rogue Malaysian Airline pilot might someday unleash another Black Death. Say something as deadly as HIV, where symptoms show up with a long delay (as with HIV), and as easily transmitted as the flu. If you think I am wrong and are able to explain why this cannot happen, I’d love to be reassured on this point. One thing I know for sure; if something bad can happen, at some point it almost certainly will happen. (1 COMMENTS)

Where do ideas come from, and how are they disseminated amongst economists? One of the great ironies in the history of economic thought has been the development of particular concepts, the theoretical importance of which is misattributed to another economist. For example, the concept of a Giffen Good, attributed to Robert Giffen, was first coined by Alfred Marshall in Principles of Economics (1890 [1920]). The Coase Theorem first appeared in the 3rd Edition of George Stigler’s The Theory of Price (1946 [1966]: 113). Moreover, what is known as the “Alchian Thesis” was first coined by Mark Blaug (1980: 117), which is “the notion that all motivational assumptions in economics,” such as assumption of profit-maximization among firms, “may be construed as as-if statements.” At first blush, it makes sense for an economist to first develop a concept, to be named only later for its recognized importance. For example, the concept of rent-seeking, developed by Gordon Tullock (1967), was only later coined as “rent-seeking” by economist Anne Krueger (1974), who also was foundational in developing the concept.  However, it is oftentimes questionable whether or not each concept should be directly attributed to its namesake. For my purposes here, I will focus on the Alchian Thesis, its interpretation, and its applicability, but before doing so, I will briefly illustrate how my argument runs parallel to the reception of another myth in economics, such as alleged existence of Giffen Goods. I realize that this is a strong claim to make, but let us consider how this concept has been applied, and if indeed its application has distorted our understanding of historical facts.   Dwyer and Lindsay (1984) challenged the notion that Giffen goods violate the law of demand by appealing to the very historical example used to exemplify their existence, namely the Irish Potato Famine. They raise two important points, which I’m paraphrasing. First, Giffen himself never wrote directly about this alleged exception to the law of demand (see also Stigler 1947). Second, and more importantly for my point here, if indeed there was an upward sloping demand curve for potatoes during the Irish Potato Famine, and if indeed (as we would expect during famine) the supply of potatoes contracted, then this would imply that the Irish ate less (not more!) potatoes as the price for potatoes fell. Could it really be the case that, as people are starving, they would eat less of a staple food as its price fell? In spite of the absurdity of this conclusion, this example is still utilized to demonstrate an alleged violation of the law of demand, to the expense of understanding how individuals are acting, given the particular circumstances of time and place. A more plausible explanation, given the expectation that potatoes would become more scarce in the future, is an outward shift, or increase, in the downward sloping demand curve for potatoes, not a change along an allegedly upward sloping demand curve. Now let us turn to the alleged “Alchian Thesis,” the notion, presumably originated by Armen Alchian (1950) himself, that firms act as if they are profit maximizing. Not only is the claim absolutely false, but importantly, this interpretation of Alchian’s argument regarding firm behavior undermines its explanatory power. But before illustrating how misleading this interpretation is for understanding market processes, it’s important to ask how this interpretation first originated. As Neil Kay (1995) has argued, the influence of Milton Friedman’s “The Methodology of Positive Economics” (1953) on economic methodology had been instrumental in presenting this interpretation of Alchian’s argument. Though Friedman himself is careful to restate Alchian’s point that, as “a result of uncertainty,” profits “cannot be deliberately maximized in advance” by firms (Friedman 1953, p. 21, fn. 16) – not to mention the fact that it was Friedman who encouraged its publication at the Journal of Political Economy – Alchian’s argument has nonetheless been interpreted through Friedman’s broader methodological claim, namely that it’s not the realism of assumptions that matter for economic theory per se, “but whether they are sufficiently good approximations for the purpose in hand,” namely the accuracy of predictions (Friedman 1953, p. 15). Alchian is very clear, however, that in “an economic system the realization of profits is the criterion according to which successful and surviving firms are selected” (1950, p. 213). “Realized positive profits, not maximum profits, are the mark of success and viability” (ibid., emphasis original). He goes further to argue that the “crucial element is one’s aggregate position relative to actual competitors, not some hypothetically perfect competitors…Even in a world of stupid men there would still be profits” (ibid., emphasis added). Therefore, contrary to the traditional interpretation of the Alchian Thesis, “[t]here are no implications of “profit maximization,” and this difference is important” (Alchian 1950, p. 217), because “[t]he pursuit of profits, and not some hypothetical undefinable perfect situation, is the relevant objective whose fulfilment is rewarded with survival” (Alchian 1950, p. 218). None of this implies that firm owners are unpurposive or irrational, but it does imply that the postulate of profit-maximization is neither a necessary nor a sufficient condition for understanding firm behavior. One may object here and claim that I (or Alchian) am splitting hairs, and the point here is purely one of semantics. Perhaps so, but to conflate “profit-maximization” with “realized positive profits” across particular circumstances of time and place renders the term into a tautology, and therefore meaningless for explaining the particular manifestation of firm behavior adapting to at a particular time and place, specifically through adaptive variation and selection (see also Manne and Zywicki 2014). If the Alchian Thesis is correct, then why do we observe “golden parachutes,” or severance packages paid to the CEOs of corporations, even when that CEO has been responsible for huge corporate losses? For example, in 2018, after a 14-month tenure as CEO of General Electric (GE), John Flannery was paid a severance package worth more than $10 million, even after GE’s stock plummeted under his watch, falling roughly 50 percent.   The objection that could be raised here is that, consistent with the Alchian Thesis, GE was approximating the conditions of profit maximization, given the constraints it was facing. This may be the case, but approximating compared to what? The conditions of perfect competition? Given this benchmark, GE would have known to pick another CEO, or for that matter anticipate the mistakes made by Flannery’s predecessors, Jack Welch and Jeff Immelt. The point here is not to argue who should be blamed for the GE’s tragic decline. Rather, it is precisely because firms cannot approximate the conditions of profit maximization ex-post by picking a profit-maximizing CEO that explains why they will adopt golden parachutes to insure against potential losses ex-ante. Under conditions of perfect competition, and hence perfect foresight, there would be no transaction costs associated with potential post-contractual litigation. Analogous to the purpose it serves for a marriage, the golden parachute serves like a prenuptial agreement for firms, which allows the firm to terminate its relationship with its CEO in a quick and cost-effective manner.  Without a golden parachute, Flannery may have found it worthwhile to sue GE for wrongful termination, attributing the failures to the firm to the situation he inherited from his predecessors or other economic circumstances outside of his control. The expectation of this fact, and the additional costs of legal fees and continued losses under a bad CEO, is what incentivizes firm to adopt golden parachutes, specifically as a contractual arrangement to reduce transaction costs. To simply assume that firms “profit maximize” independent of the subsidiary propositions of time and place does not explain why particular contractual and organizational arrangements emerge, namely the realization of positive profits through the reduction of transaction costs in an open-ended world of uncertainty. To conclude, the purpose of theory is to abstract from reality, and therefore it is impossible to adopt assumptions that are perfectly realistic. However, this does not imply that attributing realism of assumptions to economic theory is a trivial point. The implication of ignoring the realism of assumptions is to render theoretical concepts, at best, irrelevant to understanding historical facts, or at worst, create a distortion of the interpretation of such facts. Nothing I am arguing here is new, but given the foothold of potentially misleading interpretations of particular concepts in economic theory, their applicability requires constant reassessment by economic educators.   Rosolino Candela is a Senior Fellow in the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics, and Associate Director of Academic and Student Programs  at the Mercatus Center at George Mason University (0 COMMENTS)

The Marie Antoinette edition. This was sent to me by a friend last month in response to California governor Gavin Newsom’s order to shut down salons and even outdoor restaurants. I talked to my wife last night and she said that she has 3 close friends in the personal care service business (2 hairstylists and 1 esthetician). Only 1 of them kept working underground during the first shutdown in March. My wife said that all 3 are planning to defy the order since they won’t be able to make it financially this time around. Also, my wife talked to one of them this week and she said that she had called the county health office to discuss various options on how to stay afloat. This is how the conversation went: Friend: Is there anything we could do to stay open (additional safety measures, operating outside, etc.)? County health office: I’m sorry, no. Friend: We are on our last legs and don’t have the funds to stay afloat any longer. In fact, we will have to close down permanently if this goes into effect. What should we do? County health office: You’ll have to apply for food stamps. End of conversation. (0 COMMENTS)

Have you been dreaming of driverless cars like EconTalk host Russ Roberts? Well, author Matthew Crawford might turn your dreams into nightmares. Crawford joins Roberts in this episode to discuss his book, Why We Drive: Toward a Philosophy of the Open Road. Crawford is a devotee of serendipity, and finds the open road- (NO Waze or Google maps, thank you very much) an ideal place to find it.   It turns out Crawford’s book is about more than just driving cars. A lot more. So let’s hear what you have to say. Use the prompts below to continue to conversation- either on or offline. Just not while you’re driving, please.     1- What does Crawford mean when he suggests that technology such as driverless cars will likely undermine our capacity for self-governance à la Tocqueville and lead to “a supervisory technocratic regime?”   2- Are children fundamentally conservative, as Roberts suggests? Would you call Crawford a conservative? (He mentions an Oakeshott “brand” of conservatism.) How about Roberts? What about you?   3- Roberts presses Crawford on our apparent need to push ourselves against our physical limits. How does Crawford defend that level of risk-taking? To what extent do you agree? Consider his contention (based on the work of Johan Huizinga) that we’ve eliminated too much “play” (and thereby competition) from the human experience? Is this true? If so, what should we do about it?   4- What are the bases of Crawford’s concerns about Big Tech? How does he suggest Big Tech is utilizing “choice architecture,” and why is this necessarily political? Is a “full-blown technocratic paternalism” as imminent as Crawford seems to believe?   5- Roberts describes the happiness he experiences when he lands in a new city, powers up his phone, and gets a notification about the best coffee shops in the area. Crawford retorts that while this example is relatively benign, it is “still a fundamentally different way of inhabiting the world.” How so? Again, to what extent should this worry you?     (0 COMMENTS)

Convenience has a massive effect on your behavior.  You rarely shop in your favorite store, eat in your favorite restaurant, or visit your favorite place.  Why not?  Because doing so is typically inconvenient.  They’re too far away, or not open at the right hours, so you settle for second-best or third-best or tenth-best.  You usually don’t switch your cell phone company, your streaming service, or your credit card just because a better option comes along.  Why not?  Because switching is not convenient.  Students even pass up financial aid because they don’t feel like filling out the paperwork.  Why not?  Because paperwork is inconvenient. In politics, however, almost no one talks about convenience.  When governments mandate extra privacy or safety or consumer protection, crowds cheer and pundits sing.  From now on, you’ll be clicking a few extra boxes a day.  From now on, you’ll have to stand ten feet away from the next person at the pharmacy.  From now on, you’ll have to sign your name and initials twenty times on a mortgage contract.  Privately, almost everyone thinks each of these is a pain in the neck.  Yet almost no one goes on TV and self-righteously objects, “These high-minded ideals are going to be awfully inconvenient.” What’s going on?  The Panglossian explanation is that there’s almost no political resistance to the inconvenience of extra privacy, safety, and consumer protection because these benefits are clearly worth the loss of convenience.  Yet that’s hard to reconcile with the enormous effect of convenience on our actual behavior.  Furthermore, we routinely complain about inconvenience one-on-one, or with trusted friends.  When people are speaking off the record, I’ve heard at least a hundred times as many complains about inconvenience as I’ve heard about lack of privacy, safety, or consumer protection. How can we explain this chasm between daily life and political rhetoric?  By appealing to Social Desirability Bias.  Quick version: When the truth sounds bad, people respond with lip service – especially where there’s a sizable audience.  People occasionally voice ugly truths one-on-one, or with trusted friends.  Normally, however, they sugarcoat.  If “what sounds good” conflicts with “what works well,” we usually respond with hypocrisy; we say what sounds good, then do what works well. In politics, alas, words rule.  From the viewpoint of any individual voter, elections are surveys.  As a result, demagogues run the world.  They gain power by swearing fealty to lofty ideals, not weighing costs and benefits.  And when lofty ideals imply serious inconvenience – as they sadly do – the demagogues impose serious inconvenience. Why doesn’t a rival politician gain power by promising to make convenience great again?  Because “convenience” sounds petty and ignoble.  People love convenience.  They happily sacrifice other values for convenience.  But they don’t want to acknowledge this fact – or affiliate with those who do. My favorite Dead Kennedys album is called “Give Me Convenience or Give Me Death.”  The music is great, but the message is not.  The band heaps scorn on our wicked First World society for placing immense weight on the superficial value of convenience. The reality, however, is more complicated.  Yes, we long for a convenient world.  A little inconvenience can ruin your entire day.  No one, however, will ever go to the barricades for convenience.  In fact, we’re ashamed to admit how much convenience matters for our quality of life.  The market mercifully sells us the convenience we want without judging us.  Government, in contrast, takes us at our word – and robs us of precious convenience bit by bit, day by day. (0 COMMENTS)

Tyler Cowen has posted an outstanding interview of Noubar Afeyan, co-founder of Moderna, which produces one of the two COVID-19 vaccines approved so far by the Food and Drug Administration. Tyler is at the top of his game, asking really good questions, and you can just see the respect that that creates in Afeyan. Some highlights follow. On individualized medicine We have a program in cancer vaccines. You might say, “What does a cancer vaccine have to do with coronavirus?” The answer is the way we work with cancer vaccines is that we take a patient’s tumor, sequence it, obtain the information around all the different mutations in that tumor, then design de novo — completely nonexistent before — a set of peptides that contain those mutations, make the mRNA for them, and stick them into a lipid nanoparticle, and give it back to that patient in a matter of weeks. That has been an ongoing — for a couple of years — clinical trial that we’re doing. Well, guess what? For every one of those patients, we’re doing what we did for the virus, over and over and over again. We get DNA sequence. We convert it into the antigenic part. We make it into an RNA. We put it in a particle. In an interesting way, we had interesting precedents that allowed us to move pretty quickly. Big question I wish Tyler had asked as a follow-on: Do you think the FDA will loosen its reins enough that Moderna and others can deal that way with individual patients without getting permission and doing large-scale tests? The Academic Scientific Community vs. the Business Scientific Community Look, the scientific method, the scientific community — it works on advances that are predicated on current and prior advances. Incremental advances are the coin of the realm. It’s not that they’re conservative. It’s just that the process, the communal process of accepting truth as that which can’t be negated, causes you to therefore be, in every which way, questioning everything. I learned long ago the expression organized skepticism. That’s what science is predicated on. As a result, if you come forward with something that is not fully supported by and connected to the current reality, people don’t know what to do with it. What many academic scientists do is to spend the next 5, 10 years putting the connections in place to make what’s being proposed a natural extension of what existed before. In industry, we don’t have that need, and the reason Moderna was able to really be the pioneer in the space of establishing a therapeutic platform, even before a vaccine platform, is because for us, the lack of connection between what we were able to do and what had been done before was marginally interesting, but we weren’t trying to publish it. When you patent something, you don’t have to show that it’s a natural extension of what people did. You just have to describe something that is novel, that is unobvious. In fact, the less connected, the more unobvious, and/or the less connectible. Note this sentence: “What many academic scientists do is to spend the next 5, 10 years putting the connections in place to make what’s being proposed a natural extension of what existed before.” It reminds me of the old joke about the academic who, observing that a TV works in practice, wants to understand whether it works in theory. On Immigration and the American Dream This next is my absolute favorite of the interview. I also would say that as a country, there’s so many people who have the experience of coming here, that that experience can also be transmitted to people who are born here, for whom the same mindset of being willing to imagine a better . . . If you look, every single person who comes to this country imagines a better future for themselves. That’s my belief. Maybe not every single person — 99 percent. Imagine if all of us were also born imagining a better future for ourselves. Well, we should be, but we’ve got to work to get that. An immigrant who comes here understands that they’ve got to work to get that. They have to adapt. The problem is, if you’re born here, you may not actually think that you’ve got to work to get that. You might think you’re born into it. This will be a funny thing to say, and I apologize to anybody that I offend. If we were all Americans by choice, we’d have a better America because Americans by choice, of which I’m one, actually have a stronger commitment to whatever it takes to make America be the place I chose to be, versus not thinking about that as a core responsibility. That brings up two memories, one old, one relatively recent. The old memory is that when I came to this country in 1972, at age 21, I had the American dream in mind and I noticed right away that a large swath of the people I ran into in Los Angeles, whether at UCLA or in the city generally, who had grown up in the United States, didn’t. The more-recent memory is of an interaction I had with a man who was considering running for the Republican nomination for president in 2016. I think the conversation happened in 2015, and it was at a Hoover Institution roundtable I had been invited to. I can’t name the person without violating the confidentiality rules. He made a statement about immigrants that surprised me. He said (and I think I’m getting his words almost word for word), “So many immigrants come here and act right away as if they just arrived at home base after hitting a home run.” When it was my turn to talk, I said, “Person X, I’m an immigrant and I thought when I got my green card I’d arrived at home base or at least at third base. I was given a list of crimes that, if I committed them, would get me booted out of the country and none of these crimes were ones I planned to commit.” Then I made the mistake of asking about his record in a previous office he had held. He answered about his record but didn’t address my point about immigration. This man had the attitude that Afeyan attributes to many Americans: Simply by being born here, he seems to think that he’s made the rounds to home base. I really don’t know what some politicians and some Americans expect out of us immigrants.   (0 COMMENTS)

I’m reading Tom Stoppard’s biography by Hermione Lee. I never thought I could read 900 pages on a subject previously  unimportant to me with such delight. It is a marvelous book. Stoppard’s life is interesting and eventful, it provides a good glimpse into the world of culture and entertainment in the last quarter of the 20th century. Plus, Lee’s analyses of Stoppard’s plays are masterful. One thing that comes out of Lee’s biography of Stoppard is how independent-minded he was, and how—as opposed to many of his colleagues—he never conceived of himself as a guru, nor a “joiner” of good causes. For example, when some of his fellow playwrights signed a letter to endorse a ban on all performances to segregated audiences, so as to signal their support for the anti-apartheid fight, he chose not to. “His instinct was against ‘isolationism’. He preferred to give his royalties to an anti-apartheid organization” but allow people to see his work. Lee reports this comment from Stoppard to the campaigner who wanted him to join: “Of course the idea of a segregated audience is abhorrent. So too is the idea of a playwright being imprisoned or otherwise victimized for his work—but did any of your signatories, I wonder, ban productions of their plays in this time last year in Czechoslovakia, or in Poland?”. Stoppard was shocked at the hypocrisy at the invasion of Prague in 1968 and was critical of the simultaneous disdain for Western institutions and total blindness to what was happening behind the Iron curtain so common in those years among intellectuals in the “free world”. Stoppard is hardly an “unphilosophical” writer. His work is filled with profound philosophical riddles. I never saw a performance of “Jumpers”, perhaps his most philosophical play, but after reading Lee’s book I know that, as soon as theaters come to life again, I’ll search for it. Nor did Stoppard stay away from political engagement. Quite the opposite. But his politics were quite different than many others’. See this intriguing piece by the late Norman Barry. On politics, he had a great line, used more than once in his plays: political opinions are often, and perhaps entirely, a function of temperament. Moreover, Stoppard was not convinced that good theatre is only an occasion for a writer to show off as a good person – or an erudite one. He maintained that “a theatre’s job is to prevent people from leaving their seats before the entertainment is over”. My acquaintance with Stoppard’s work is limited (I am not much of a theatre-goer), but the book leaves you thirsty for more. So I ended up watching and re-watching a few films to which he contributed his writing (though he preferred theatre to the cinema). I was struck by Shakespeare in Love, which I watched as a kid and found amusing, and found amusing again today. It is a constant stream of wit and jokes and deals lightly with some very important subjects, beginning with: can theatre, and art more generally, show us the nature of love? Lee points out that “the most joyous parts of the film are the challenges of getting a play funded, cast, written into rehearsal and onto the stage. It’s a loving, comic tribute to the theatre”. There is an element in the plot that I think can be considered as subtly McCloskeyan. It hasn’t to do with Shakespeare per se, but rather with “the challenges of getting a play funded”. Most of the works of the bard “sing of honorable aristocrats or comical peasants or sweet shepherds” in spite of the fact “his audience included a big promotion of the merchants and apprentices of businesslike London” (McCloskey, Bourgeois Dignity). In “Shakespeare in Love”, impresario Philip Henslowe is in debt to the ruthless moneylender Fennyman. At the beginning of the movie, the latter is hardly a commendable person. But he is struck by the magic of theatre. He profoundly connects with the beauty of Romeo and Juliet, perhaps more than Henslowe, for whom the theatre is routine. Fennyman becomes a committed investor, a friend of actors, and, for a brief and hardly memorable moment, an actor himself. I suppose some people may consider his story a sort of redemption via art. I consider it quite differently. I think it is great for Shakespeare in Love to show us that business people are not blind to art and can actually grasp it better than others. It emphasizes their humanity. On the contrary, the most dislikable character in Shakespeare in Love is Lord Wessex, who marries for money, is both aristocratic and quite dishonorable in his actions, and is totally oblivious to artistic expression. In the movie, Stoppard of course celebrates those who understand art and beauty whatever class they belong to, as if they were members of a fraternity that includes usurers, apprentices, nurses, and Queen Elizabeth herself. A great celebration for art but also an indirect appreciation of the profound humanity of those who work with money and yet can be sensitive souls too. (0 COMMENTS)

My Open Borders neglects two major worries about immigration. The first is contagious disease; I did not see that one coming, though I try to remedy my oversight here. The second omission is less excusable.  Somehow I neglected to address immigration’s environmental effects.  Here’s what I should have said – and what I will say if there’s ever a second edition. 1. The obvious environmental objection to immigration is that it raises population and therefore leads to more pollution and other negative environmental effects. 2. The naive reply is that immigration merely redistributes environmental harm from one country to another rather than actually increasing environmental harm overall. 3. The wise reply to this naive reply is that precisely because immigration drastically increases wealth creation, it also ipso facto increases the negative environmental byproducts of wealth creation.  Immigration’s “trillion-dollar bills on the sidewalk” sits inside a gargantuan wallet of harm to Mother Earth. 4. Note: If you buy this argument, you should be similarly afraid of economic development in the Third World.  So rather than opposing immigration, you should oppose economic progress in general. 5. In any case, there is a big complication: the Environmental Kuznets Curve.  Quick summary of the empirics: Moving from low to middle income increases environmental harm, but moving from middle to high income reduces environmental harm.  So environmentally speaking, the best thing for the environment is to move from low to high income as quickly as possible.  And liberalizing immigration does precisely that!  Indeed, immigration lets people leapfrog straight from low to high income without even passing through middle income along the way. 6. Caveat: Standard measures probably overstate environmental quality in low-income countries by ignoring noxious low-tech pollutants like animal and human waste.  So leapfrogging straight to high income is even better than it looks. 7. The Environmental Kuznets Curve works through multiple channels: consumer demand (richer people want greener stuff), norms (richer people care more about the planet), and regulation (richer countries can better afford the economic burden) being the most obvious.  But we can safely liberalize immigration without pinning down the precise mechanism. P.S. Any related topics you think I should address?         (0 COMMENTS)

A year ago, Tyler Cowen claimed that President Trump won round one of the trade war with China: I’m not entirely convinced we won even the first round of the trade war, although the claim might be true.  The stated goal of President Trump and his advisers was to reduce the US trade deficit with China.  A secondary goal may have been to slow the growth of China’s economy.  A third goal might have been to weaken the position of Xi Jinping, who has been moving China in a more repressive and nationalistic direction. Today, we know that the US failed spectacularly on all three counts.  Indeed the last year has been an unmitigated disaster for Trump administration protectionists.  Today’s Bloomberg has an article arguing (correctly) that China ended up winning the trade war: The trade deficit has risen to record levels in 2020:     The goal of slowing the rise of the Chinese economy has also failed.  The Chinese economy (in dollar terms) is now expected to overtake the US in 2028, five years earlier than estimated just a year ago.  (In PPP terms they overtook us years ago.) And the prestige of Xi Jinping has risen dramatically relative to the prestige of President Trump, even before the recent fiasco on Capitol Hill.  In China there’s a widespread view that our botched handling of Covid-19 shows the superiority of an authoritarian system, at least on questions of public health.  (That’s not my view, as Taiwan did better than China.)  The prestige of America has never been lower. Here’s what Tyler said a year ago: A third set of possible benefits relates to the internal power dynamics in the Chinese Communist Party. For all the talk of his growing power, Chinese President Xi Jinping has not been having a good year. The situation in Hong Kong remains volatile, the election in Taiwan did not go the way the Chinese leadership had hoped, and now the trade war with America has ended, or perhaps more accurately paused, in ways that could limit China’s future expansion and international leverage. This trade deal takes Xi down a notch, not only because it imposes a lot of requirements on China, such as buying American goods, but because it shows China is susceptible to foreign threats. . . . It is too soon to judge the current trade deal a success from an American point of view. Nevertheless, its potential benefits remain underappreciated, and there is a good chance they will pay off. It’s no longer too soon to judge.  Perhaps without Covid-19 the outcome would have been more favorable to the US, but as of today the trade war looks like an own goal for the US.  The correct policy would have been to join the TPP back in 2017.  And increase high skilled immigration from China (including Hong Kong.) Let’s hope the Biden Administration learns the right lessons. (2 COMMENTS)

Here’s the plan for my new Book Club.  After each segment, place your thoughts and questions in the comments and I’ll post an omnibus response later in the week. On January 18, I’ll cover Chapter 1: “Ignorance Is Strength” up to the sentence “The possibility of enforcing not only complete obedience to the will of the State, but complete uniformity of opinion on all subjects, now existed for the first time.” On January 25, I’ll cover the rest of Chapter 1. On February 1, I’ll cover Chapter 3: “War Is Peace” up to the sentence “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.” On February 8, I’ll cover the rest of Chapter 3. Happy dystopian reading! (0 COMMENTS)