Education is not a pure public good. The marginal cost of educating an additional child is far from zero; indeed, the marginal and average costs are (at least for large school districts) approximately the same. And there is no difficulty in charging an individual for use of this service. Those who seek to justify public education in terms of market failure focus on the importance of externalities; it is often claimed, for instance, that there are important externalities associated with having an educated citizenry. A society in which everyone can read can function more smoothly than a society in which few can read. But there is a large private return to being able to read, and even in the absence of government support, almost all individuals would learn this and other basic skills. Indeed, most individuals would go far beyond that. The question is, given the level of education that individuals would privately choose to undertake were there no government subsidy, would further increases in education generate significant externalities? There is no agreement concerning the answer, but the case for government support based on these kinds of externalities seems, at best, unproved. This was written by a very prominent American economist back in the late 1980s. He’s still alive and productive. Who is he?   (4 COMMENTS)

It is not always understood how governments and the public sector more inclined to bow to popular discriminatory bigotry than private businesses, because of the incentives of their respective actors. As Gary Becker argued, private businesses have to pay the cost of their discrimination. Only if their owners, or perhaps a large number of their customers, have a “taste for discrimination” will they engage in it—but competitors will then rush in, with higher prices if necessary, to satisfy the unfulfilled demand of the victims of discrimination. Starting around 1880 Jim Crow laws prevented this discrimination in the South. Historian Leon Litwack writes: Although blacks had previously experienced segregation in various forms, the thoroughness of Jim Crow laws made it strikingly different. What the white South did was to segregate the races by law and enforced custom in practically every conceivable situation in which whites and blacks might come into social contact. (Trouble in Mind: Black Southerners in the Age of Jim Crow, Alfred A. Knopf, 1998, p. 233) Jim Crow laws established apartheid, that is, legally enforced segregation. Railroad companies provide an interesting historical example of business incentives. These private companies were often willing, against the political correctness of the times, to sell tickets to both blacks and whites and to not segregate their customers in different cars or compartments. Poor whites and poor blacks purchased second-class tickets, while rich whites and occasionally rich blacks rode in first-class cars. The situation was far from perfect, and violence sometimes erupted, but it was better than the segregationist state-enforced laws that followed. A historian of populism observes: More than any other institution, train cars and railroad stations exemplified the modern dilemma of the racial order. They were places where mobile, unsupervised, anonymous travelers met in close quarters. Making the situation more explosive, those whites, including most farmers, who could not afford a first-class ticket met blacks on equal terms. In contrast to the workplace where blacks served white employers, or in the supply store where blacks owed debts to white merchants, in a railroad car blacks and whites paid the same fare for the same right to a seat. Accordingly, whites made the railroads a primary target of the new segregation laws. Reform-minded southerners considered these laws a mark of modern and progressive race relations. (Charles Postel, The Populist Vision, Oxford University Press, 2007, p. 178) The railroad companies resisted proposals for laws mandating segregation between or within cars, as explained by another historian: The railroad companies did not want to be bothered with policing Southern race relations and considered the division of coaches into black and white compartments an irksome and unnecessary expense. Despite the railroad companies’ resistance, though, growing tensions about race and gender, anger at the railroads, and political maneuvering pushed toward the separation of the races. In the late 1880s and early 1890s, the railroads became the scenes of the first state-wide segregation laws throughout the South. (Edward Ayers, The Promise of the New South: Life after Reconstruction, Oxford University Press, 1992, pp. 17-18) In the South, there was much “taste for discrimination” and thus private discrimination, but as businesses had to pay the cost of their discrimination in terms of lost customers and higher expenses, they were often reluctant to discriminate. It is virtually certain that laissez-faire would have gradually extinguished racism or at least much attenuated it. But the atmosphere was not one of laissez-faire and railroad companies were blamed for putting their profits ahead of the community values—“putting profits before people,” as we would confusedly say today. Ayers writes: It was clear that white Southerners could not count on the railroads to take matters in hand. Some whites came to blame the railroads for the problem, for it seemed to them that the corporations as usual were putting profits ahead of the welfare of the region. (Ayers, p. 143) Postel explains that ordinary white people, notably members of the populist Farmers’ Alliance, used the non-discriminatory or not-sufficiently-discriminatory behavior of the railroads as another argument for public control or even nationalization: “When it comes to making a separate car for negroes to ride in,” explained a young Texas woman and member of the Farmers’ Alliance, the demand for public control of the railroads would ensure that white farmers “would have our own way” in segregating them. Starting in 1980, white farm reformers would have their way as Alliance-backed “farmers’ legislatures” in Georgia, Louisiana, and other states initiated “separate accommodation” laws on the railroads. (Postel, p. 178) These railroads acted as if they had no social responsibility, as socialists and most intellectuals, as well as confused capitalists, would say today. (See my Econlog post on “The Political Firm.”) Contrary to private businesses, public institutions had no restraints against discrimination because they did not to have to pay a price in reduced profits. The taxpayer would pay, often unknowingly. Litwack writes: It was not uncommon to find a sign at the entrance to a public park reading “Negroes and Dogs Not Allowed.” … With few exceptions, municipal libraries were reserved for the exclusive use of whites. … While some communities limited access of black motorists to the public streets, others placed restrictions on where they might park. … In the town and cities, segregated residential patterns were now legally sanctioned, making it difficult for blacks of any class to move into a white block and accelerating the appearance or growth of a distinct district designated as “darktown” or “niggertown.” … New Orleans went so far as to adopt an ordinance segregating black and white prostitutes. (pp. 234-236) What is surprising is how many people still want government to impose by force whatever value or emotion is in vogue—whether populism, wokeness, or corporate social responsibility, for example—not thinking that the mob will not always be on their side; and how many people think that economic freedom is bad because it often allows an escape from the tyranny of the majority. I suspect that many of today’s Social Justice Warriors would have been on the side of the mob at the time of Jim Crow. (0 COMMENTS)

I told you so. I thought from the getgo that having the federal government, under Operation Warp Speed, monopsonize the COVID-19 vaccine and then use central planning to distribute it at a zero price, was a bad idea. I criticized the central planning way to distribute it in “Vaccines’ Last Hurdle: Central Planners,” Defining Ideas, December 4, 2020. I wrote: If Walmart or Amazon put out a plan to allocate vaccines, I wouldn’t be so concerned. The reason is that they would have incentives for every step of the process. They would fire people for doing it badly and would pay bonuses to, or promote, people who do it well. But this is government. Will any government worker lose his or her job by knocking off at 5 p.m. on Friday instead of staying an extra three hours to get out ten more shipments of the drug? The question answers itself. Well, guess what? The federal government is taking its sweet time. Here’s Ronald Bailey on the issue: In a statement, Pfizer rebuts rumors that there is a shortfall in doses for its vaccine due to production delays. “Pfizer is not having any production issues with our COVID-19 vaccine, and no shipments containing the vaccine are on hold or delayed,” notes the company. “This week, we successfully shipped all 2.9 million doses that we were asked to ship by the U.S. Government to the locations specified by them. We have millions more doses sitting in our warehouse but, as of now, we have not received any shipment instructions for additional doses.” Adds Bailey: Sadly, the federal government appears to be dawdling again while the toll of COVID-19 deaths, hospitalizations, and new diagnoses continues to rise ever higher. It’s not like there’s a pandemic or anything going on. The belief in central planning lives loudly in so many of the people messing this up. (0 COMMENTS)

The earliest Moderna probably would have sold the mRNA-1273 vaccine would have been after it began scaling up manufacturing. A company doesn’t begin manufacturing until it believes in a product. In the timeline above, that’s March 23. But manufacturing takes some time to get going. Let’s assume that by April 1, five weeks from the date the first batch was shipped, Moderna begins offering mRNA-1273 for sale. Sales start slowly. Supplies are limited. Only the bold and brave get inoculated. The rest of us, and Moderna, get some early, albeit messy, safety and efficacy data. This data helps Moderna improve the vaccine, dose, and dosing schedule. Having a ready market and a steady source of revenue, Moderna scales up production faster than in the timeline above. In this scenario, inoculations could have begun at least 8.5 months earlier and, perhaps, the pandemic would have ended 240 days and 240,000 lives earlier. There’s little talk of lockdowns and the economy remains resilient. This is from Charles L. Hooper and David R. Henderson, “The FDA’s Deadly Caution,” AIER, December 16, 2020. In it, we consider various scenarios for what would have happened had we had a truly free market in pharmaceuticals. The one above is the most optimistic. Read the whole thing.   (0 COMMENTS)

Here’s a neat new piece in Social Science Quarterly by Richard Hanania.  The set-up: I conducted a preregistered study with a representative sample of white Americans. The survey asked them how open they would be to accepting certain refugees into the United States. The characteristics of the refugees were changed along the following three dimensions: Race: Refugees were either from the white country of Ukraine, or the predominately non-white country of Venezuela. Although one might suspect that this treatment would invoke stereotypes about Venezuela and Ukraine instead on non-white and white people as such, American ignorance about most of the rest of the world makes this unlikely. Luckily, the study was carried out before Ukraine jolted to the top of the headlines due to Trump’s impeachment. Voting behavior: Respondents were told that the new migrants would settle in Florida, a swing state, and either vote Democrat, like most immigrant groups, or vote Republican, due to previous experience with socialism. Both these stories seem plausible enough. Skill level: Refugees were said to be either high- or low-skilled, that is able to pull their own weight economically or likely to rely on government assistance. Hanania’s punchline: Race had no statistically significant effect on any group. Both conservatives and liberals, however, changed their views based on how they would vote. Only conservatives were affected by whether the refugees were said to be high-skilled and therefore presumably beneficial to the economy, or low-skilled and likely to rely on government assistance. Figure 1 below shows how partisanship, but not necessarily race, matters. The gap between the groups “very liberal” and “very conservative” in support for immigration is cut by around two-thirds when refugees are said to support Republicans instead of Democrats! More striking to me, though, is this graph. Notice: Not only do very liberal respondents like white migrants more than the very conservative do; very liberal respondents like Republican migrants more than very conservative ones do!  To my mind this is strong evidence that Republicans’ core prejudice is not racism but xenophobia.  They’re even relatively hostile to immigrants on their own side of the aisle. No wonder Asians are so Democratic.  Given their traditional values and high income, you’d expect them to be Republicans.  But Asians correctly sense that Democrats respect them more. Years ago, I proposed a simple voting model that I call the Respect Motive.  Long story short: “People vote for whoever respects them more.”  As long as liberals care more about Republican migrants than conservatives, expect migrant Republicans to be few and far between. (0 COMMENTS)

Tyler Cowen’s latest “Conversations with Tyler” is an interview of former CIA Director John Brennan. If you read the whole interview, you see that Tyler has done due diligence by reading background material on Brennan. Unfortunately, Tyler doesn’t ask him a thing about Brennan’s lying to Congress about the fact that his CIA staff, at his behest, spied on Senator Feinstein and other employees of her Senate Intelligence Committee. Conor Friedersdorf lays it out in “A Brief History of the CIA’s Unpunished Spying on the Senate,” The Atlantic, December 23, 2014. A key paragraph from Friedersdorf’s 2014 article: CIA Director John Brennan denied the charge. “Nothing could be further from the truth,” he said. “We wouldn’t do that. That’s just beyond the scope of reason in terms of what we’d do.” It would be months before his denial was publicly proved false. “An internal investigation by the C.I.A. has found that its officers penetrated a computer network used by the Senate Intelligence Committee in preparing its damning report on the C.I.A.’s detention and interrogation program,” The New York Times reported. “The report by the agency’s inspector general also found that C.I.A. officers read the emails of the Senate investigators and sent a criminal referral to the Justice Department based on false information.” Tyler Cowen has written a lot about what he calls “state capacity libertarianism,” which he favors. In this post, he lists 11 propositions about state capacity libertarianism. None of the 11 seems to involve holding government officials accountable for mistakes and lies. But I would think that a state capacity libertarian would see that as important. Apparently not, at least from its main proponent. (0 COMMENTS)

At least that’s the claim of the US government. Today, the US government accused Switzerland of artificially depressing the value of its currency in the foreign exchange market. This is rather odd, as Switzerland is generally considered to be the country with the strongest currency in the entire world. Since 1971, the value of the Swiss franc has soared from 23 cents to $1.12: The US government might argue that this is the nominal exchange rate, and what matters is the real exchange rate.  I agree. But most measures of the real exchange rate (such as The Economist’s’ Big Mac index”), also show the Swiss franc to be the strongest currency in the world.  The “real exchange rate” is just a fancy term for the relative cost of living.  So to put this claim in terms that average people can understand, the US government is claiming that the cost of living in Switzerland is being held too low.  Have you ever taken a vacation is Switzerland? If you want to understand the US claim in graphical terms, look at the Economist’s Big Mac index graph.  The Swiss franc is the blue dot on the far right, 21% “overvalued” versus the dollar.  The US is essentially claiming that the Swiss have manipulated that dot too far to the left.  No, I’m not joking. The US government might argue that while Switzerland has the strongest currency in the world, it should be even stronger.  But what evidence do we have for this claim?  The Treasury department would cite Switzerland’s large current account surplus.  But a current account surplus does not mean a currency is overvalued.  Many American states run current account surpluses with other states.  Does that mean the Massachusetts dollar is undervalued relative to the Texas dollar?  Switzerland’s current account (CA) surplus is merely an indication that the Swiss save more than they invest. The US government might argue that the Swiss CA surplus is unusually and unjustifiably large.  But most northern European countries run CA surpluses. Switzerland is significantly richer than other European countries, and the Swiss are also unusually thrifty.  It’s exactly the sort of country one would expect to run an especially large current account surplus, even if there were no manipulation. The US government might argue that the Swiss saving rate is artificially inflated by government intervention in the foreign exchange market.  But the Swiss purchase of foreign assets is motivated by a huge rise in the demand for Swiss francs, which has caused the Swiss National Bank’s balance sheet to balloon to well over 100% of GDP.  There are not enough Swiss government bonds for the SNB to purchase.  A failure to meet that demand for francs would result in deflation and depression. In fairness, you could argue that the Swiss should set a higher inflation target, and/or engage in price level targeting.  But that’s true of the EU and Japan as well.  And it’s also true of the US.  Or the government might argue that Switzerland should run massive budget deficits.  In other words, the Swiss should abandon the economic system that produced arguably the most successful small country in human history, and throw in their lot with the MMTers. I’m guessing that the Swiss will say, “No thanks, we are doing just fine without your advice.” PS.  Keep in mind that the US government is currently run by a team that launched a trade war because its economists told them that trade barriers would reduce the US trade deficit.  The deficit actually increased, just as most sensible economists predicted. PPS.  The report actually named two countries as currency manipulators, Switzerland and Vietnam.  When we put tariffs on China it caused some low wage industries to move to Vietnam.  The game of trade “whack-a-mole” continues. (0 COMMENTS)

I got my Ph.D. in economics from Princeton in 1997.  Twenty-three years after graduation, I remain a professor at a mid-ranked school.  The odds that I’ll ever get a job at a top-20 department look awfully low.  How do I feel about this situation? The socially approved response, at least within social science, is to feel and express deep admiration for the plainly superior researchers at top schools.  I’m supposed to defer to their judgment on not only (a) which research methods are kosher, but also (b) what research topics are worthwhile.  If I apply myself, perhaps I can usefully, if humbly, extend their work. The more common responses of lower-status academics, of course, are jealousy and laziness.  Jealousy, because faculty at higher-ranked schools so out-shine the rest of us.  Laziness, because deep-down faculty at lower-ranked schools know they lack the skills to do real research.  Most aren’t even good enough to usefully, if humbly, extend the work of their betters. Call it sour grapes, but I don’t respond to my situation in any of these ways.  With rare exceptions, I don’t admire researchers at top schools – or try to humbly build on their work.  At the same time, I’m not lazy.  And in all sincerity, I am not jealous. Why not?  To be blunt, I deny the value of almost all of the social science research going on at top schools.  My reaction to 95% of the articles published in top economics journals isn’t so much “That’s wrong!” as “So what?”  I recognize that getting accepted by these journals requires enormous intelligence, training, and effort.  Unless you believe in the Labor Theory of Value, however, the cost of creating top publications implies nothing about the value of creating top publications.  And in my considered judgment, the value of top publications is low.  When I was in grad school, economists won big for pure – and utterly irrelevant – mathematical theory.  These days, economists win big for running bullet-proof randomized controlled trials on trivial topics.  Yes, there are exceptions.  Phil Tetlock, Ed Glaeser, Lant Pritchett, and Richard Thaler leap to mind.  Yet the rule remains: The intellectual value of top publications is low. Does anything better exist?  Definitely.  What is it?  The kind of research I do, of course.  Plenty of scholars do what I consider “my kind of work,” but let’s focus on me.  False modesty aside, I judge my work better than most of the work done by researchers at top schools.  Indeed, I judge my work to be vastly superior.  That’s why I do it. How so?  At minimum, books like The Myth of the Rational Voter and The Case Against Education attempt to answer social questions of great significance.  Why do democracies choose bad polices?  Why is there a gulf between learning and earning?  I say struggling with a great question is better than definitely answering a trivial one.  And since I predictably think my books actually deliver high-quality answers to these great questions, my sense of self-satisfaction with my intellectual output is through the roof. In fact, I’d go further.  Call me a megalomaniac, but in my heart of hearts I deem dozens of my blog posts to be more valuable intellectual contributions than the typical article published in top social science journals.  Consider my “The Public Goods Model vs. Social Desirability Bias.” This wee article shows that the so-called tell-tale signs of public goods – people collectively voting for goods they don’t individually purchase – could just as easily reflect Social Desirability Bias.  A simple point?  Yes.  But I don’t think I’ve ever heard another economist clearly acknowledge this observational equivalence.  So what?  This simple point calls into question the efficiency of many trillions of dollars of government spending all around the world.  Few economists at top schools have written anything to rival this solitary blog post. You could retort, “OK, then why aren’t you seething with jealousy?”  Simple: I’m not jealous of researchers at top schools because I would hate to trade places with most of them.  I would rather do what I do at George Mason than do what Harvard researchers do at Harvard.  Indeed, it’s not even close.  Yes, I would prefer a world where Harvard placed supreme value on my kind of work.  After all, I am a chronic daydreamer.  Yet long ago, I hedonically adapted to society’s wretched priorities.  Instead of feeling mad at the world, I rejoice that I get paid to do the work that means the world to me. P.S. If you have tenure at a top school, none of my negativity should depress you.  Today is the first day of the rest of your career.  Why not chuck conventional standards and start doing research that really matters to you and the world?  If you want to chat about how to get started, just email me. (0 COMMENTS)

250 years ago today Ludwig van Beethoven was born. Beethoven’s greatness is quite too obvious to comment on it. The great composer had liberal sentiments; he had great hope in the French Revolution and in Bonaparte as a liberator, yet he was disappointed by the Napoleon crowning himself and came to resent him. Jim Powell had an amusing profile of Beethoven for the liberty-minded, here. Sometimes people remark that Beethoven “wrote only one opera” and could not really play with the human voice as well as he did with music. True, Beethoven wrote only one opera, but it is “Fidelio”. “Fidelio” is first and foremost about marital love, something Beethoven did not enjoy himself. It is the story of the absolute commitment of a wife, Leonore (hence the title of the first version), a noblewoman of Seville who disguises herself as a boy to find her husband, Florestan, a political prisoner. This sort of story, set in a prison, was actually not uncommon during the French Revolution. Jailing opponents happened during the ancien regime and likewise in revolutionary times. Fidelio adapts “Léonore ou l’amour conjugal”, a work by Jean-Nicolas Bouilly, who worked as a prosecutor in the city of Tours during the Reign of Terror. Leonore/Fidelio wasn’t the luckiest, commercially speaking, of Beethoven’s works. It premiered right after the French army occupied Vienna. The local aristocracy had fled the Austrian capital and the mainly French audience was not particularly receptive to the story. Beethoven kept writing and rewriting it, so we have four magnificent overtures. But to many, the highlight is the chorus of the prisoners. Fidelio/Leonore convinces the jailer, Rocco, to allow the other prisoners a few moments of fresh air in the courtyard. The chorus movingly conveys the emotion brought up by this fleeting glimpse of freedom. It is hardly original to comment that 2020 was a sad year for most of us. For music fans, it was also sad that we could not enjoy the many beautiful concerts that the Beethoven anniversary had in store for us. To remember Beethoven, my Institute has published (alas, only in Italian) a short piece written in 1953 by Epicarmo Corbino, an Italian liberal economist (and, briefly, Finance Minister after WWII) who fancied writing something on Beethoven. It is a short essay that proves that a social scientist may have some thoughts on music, too. We have also put together a playlist of Beethoven pieces, highlihgting those in which you can better sense his love and passion for liberty. It is accessible here. (0 COMMENTS)

To a large extent, people do what is generally expected from them, simply because it simplifies their lives in society. This is how and why rules develop that facilitate social coexistence. The danger is that these rules turn out to be stifling and economically inefficient, which means that they impede trade, innovation, and prosperity. Primitive tribes provide an extreme example. The opportunity is that some social rules–and institutions, which are sets of rules–may allow a large measure of both individual liberty and social regularity. A long tradition of (classical) liberal thinkers, often economists, from David Hume to Friedrich Hayek, has emphasized the benefit of evolved social conventions, as opposed to diktats from political authority. Such conventional rules, in large part based on trade and trust, have been responsible for the development of individual liberty, the Industrial Revolution, and the escape from poverty of a large share of mankind. I was reminded of the importance and perhaps fragility of good institutions by a piece by Steven Greenhut reproduced in Reason Magazine. Greenhut asks: What can you say when a major political movement (Trumpism) finds it easier to believe that every major American institution is potentially corrupt than it is to think that a president with a history of telling whoppers is being dishonest again? What we have seen in the 2020 presidential election and its aftermath is, as far as we can tell, a defeated president (by about seven million votes) trying to stay in power by claiming, on the basis of absurd conspiracy theories, not much better than those of Alex Jones, that he actually won a majority of the votes. But note how election officials (probably nearly all of them, from the lowest to the highest), judges including some nominated by Mr. Trump, state officials including Republican ones, and even some officials of the Trump administration, honestly did what was expected of them and, at each stage of the long post-election process, contributed by words or deeds to ensure that the election was free of fraud and to defend it against unsubstantiated and self-serving accusations. This, of course, is not to deny that the state is dangerous and far too powerful. It must be continually held in check, both by private institutions and by its own institutions. The hope of classical liberalism is that this is not impossible. An optimist may hope that the 70 million Americans (or perhaps half of them if we exclude those who just voted against the Democratic party) who voted for Trump after having been officially and openly lied to by him and his sycophants during four years, will wake up to the danger of Leviathan. (0 COMMENTS)