Wall Street Journal editorial writer Barton Swaim writes that mainstream Democrats have lost their hot and divisive rhetoric to criticize Trump’s firehose of pronouncements and actions since his election. The subtitle is revealing: “Democrats still attack him, but they’ve reverted from catastrophizing to ordinary partisan rhetoric” (“Trump Somehow Lowers the Temperature in Washington,” February 14, 2025). The puzzle needs to be examined. Let’s recast the issue in terms of “the Left” and “the Right,” as many do, assuming that these two collectives roughly coincide with the Democrat and Republican parties, each of which is not itself unanimous. That the Left has problems in fundamentally criticizing the Right is, in fact, not surprising. Both ideologies rest on an axiomatic primacy of collective choices over individual choices. This is a crucial point. Individual or private choices are choices made independently by individuals or their voluntary organizations. Collective choices are decisions reached by a mechanism of political decision-making—from an ideal continuous referendum to a ruler or group of rulers embodying “the people” or “my people.” Another way to see this is that the Left and the Right are both looking for some “social good” through the tea leaves of collective choices. The Left pursues something like social welfare, the Right something like the national interest. (On individual choices against collective choices, a go-to reference is William Riker’s 1982 book Liberalism Against Populism.) Mr. Swaim comes close to this analysis when he writes, but too furtively: [Mr. Trump] has also chosen to begin his second term by addressing a set of topics that don’t lend themselves to easy left-right divides: tariffs and trade, cuts to foreign aid, curtailing of waste. Some of these topics are novel: retaking the Panama Canal, buying Greenland, statehood for Canada, evacuating Gaza. The savvy Democratic response to any one of these issues isn’t obvious. In reality, most if not all political topics “don’t lend themselves to easy left-right divides” if the criterion lies in the distinction between individual choices and collective choices. Taking over the Panama Canal, occupying Greenland, absorbing Canada, or evacuating Gaza could be proven “good” through the collective choices reached by “the people” of respectively America-cum-Columbia, America-cum-Greenland, America-cum-Canada, America-cum-Gaza. The potentially conquered are only a small minority compared to their conquerors. One objection is that individual and collective choices are a matter of degrees along a continuum. That is correct. The liberal-individualist principle is that the closer to the individual-choice extreme, the better (at least up to a certain point). This principle may account for how some leftist causes being validated by individualist analysis. Robert Nozick justified some compulsory insurance by undue risk individuals may impose on their neighbors; more generally, he justified the minimal state by the risk to individuals of independent enforcement of justice (see his Anarchy, State, and Utopia). James Buchanan justified income insurance and public schools (and perhaps some public health insurance) by plausible unanimous agreements at an abstract constitutional stage (see The Limits of Liberty). More standard classical liberals such as Milton Friedman and Friedrich Hayek agreed on some minimum guaranteed income. Anthony de Jasay, the liberal anarchist, viewed spontaneous conventions as nearly as imperious as state laws. On the border of liberalism, John Stuart Mill accepted some intentional redistribution of income. All these ideas, however, carry, at least theoretically, built-in limits in something analogous to individual consent and supporting institutions. In that, the individualist-liberal or libertarian approach radically differs from the collectivist approach of both the Left and the Right. The systemic results of the two approaches for society and human flourishing are vastly different. One crucial difference is that in a state limited by the primacy of individual choices, the character of the ruler and even his level of ignorance do not matter much; under a state representing the primacy of collective choices, the ruler’s features matter critically. It is true that certain subgroups of the Left (say, “market socialism”) and certain trends in the American Right (say, the Reaganites) were critical of the supremacy of collective choices. The Economist points out a fascinating fact: Bob Dylan’s favorite politician in the early 1960s was Barry Goldwater (“How Bob Dylan Broke Free,” February 13, 2025). But the Left and the Right that we know today and as they stood in 19th- or 18th-century Europe are very different. Logically and normatively, the Left and the Right are both wrong together against classical liberalism and libertarianism. Therein lies the reason why mainstream libertarians have alternatively fought the Left and the Right depending on which represented the most imminent danger, as Matt Zwolinski and John Tomassi emphasize in their recent book The Individualists). To solve the conundrum of the Left falling relatively silent after the virulently criticized Right won an electoral victory with about half the vote (that is, about one-third of the electorate), Mr. Swaim seems to conclude that the losing party realized that the winning party must not be Satan himself. I have suggested that we need to go a bit farther. From the vantage point of the distinction between individual and collective choices, the Left and the Right are, in reality, very similar monsters: they just want to impose different collective choices. ****************************** The Left and the Right   (0 COMMENTS)

Alex Tabarrok, over at Marginal Revolution, had a good post on February 14 about how little people know about how things work. He quoted from an essay by Charles Mann, who has a new series titled “How the System Works.” Here’s a quote from Mann, a quote that Alex didn’t use but that I like: At the rehearsal dinner I began thinking about Thomas Jefferson’s ink. My wife and I were at a fancy destination wedding on a faraway island in the Pacific Northwest. Around us were musicians, catered food, a full bar, and chandeliers, all set against a superb ocean sunset. Not for the first time, I was thinking about how amazing it is that relatively ordinary middle-class Americans could afford such events — on special occasions, at least. My wife and I were at a tableful of smart, well-educated twenty-somethings — friends of the bride and groom. The wedding, with all its hope and aspiration, had put them in mind of the future. As young people should, they wanted to help make that future bright. There was so much to do! They wanted the hungry to be fed, the thirsty to have water, the poor to have light, the sick to be well. But when I mentioned how remarkable it was that a hundred-plus people could parachute into a remote, unfamiliar place and eat a gourmet meal untroubled by fears for their health and comfort, they were surprised. The heroic systems required to bring all the elements of their dinner to these tables by the sea were invisible to them. Despite their fine education, they knew little about the mechanisms of today’s food, water, energy, and public-health systems. They wanted a better world, but they didn’t know how this one worked. Both the part that Alex quoted and the part that I quote above reminded me of a troubling conversation at Washington University in St. Louis between Douglass North and his Ph.D. students. In the fall of 1994, I was on leave at Wash U, where I was with Murray Weidenbaum’s Center for the Study of American Business. Nobel Prize winner Doug North was on the faculty and so I decided to sit in on a class he was teaching. One day in class, he mentioned some U.S. mortality statistics. I don’t remember many details but he was talking about how during some period in the late 19th or early 20th century, the U.S. mortality rate had risen somewhat. (No, it wasn’t the Spanish flu; it happened before World War I.) Doug asked the students if they had any thoughts about why. One student, who was one of the brightest in class, suggested that it was due to the introduction of canned food. His hypothesis was that that somehow made food more dangerous. I was stunned; if anything, canning had to make food safer. Think of the fact that food would have spoiled if not canned and so you were taking a bigger chance of food poisoning before canning. I looked around and saw some of the students nodding in agreement with this student. I was a non-paying guest in the class and so I didn’t feel right challenging the student. But Doug did, and made the point that I made above. I was hoping to see the lightbulb go on in a number of students’ eyes, but I didn’t. I think they had picked up an anti-technology, those-were-the-good-old-days attitude. Ever since, I’ve seen many, many instances in which people show the same kind of ignorance that Charles Mann writes about. I remember thinking that, just as Leonard Read came up with the idea of “I, Pencil,” someone could write something similar titled “I, Can.”   P.S. One reason I enjoyed teaching U.S. military officers is that hey were way more grounded in reality than those Wash U Ph.D. students. (1 COMMENTS)

Over the past decade, China has drifted away from its previous policy of free market reforms, toward a more statist economic model. Statism almost never works, and the recent Chinese experience is no exception. Now Bloomberg reports that China may be willing to move back toward a somewhat more market-oriented economic policy regime: Chinese President Xi Jinping presided over a meeting with Alibaba co-founder Jack Ma and other prominent entrepreneurs on Monday, signaling Beijing’s endorsement for a long-marginalized private sector now considered key to reviving the world’s No. 2 economy. . . .  He promised to abolish unreasonable fees or fines against private firms and level the competitive playing field — a common complaint of entrepreneurs in a state-dominated system. On Monday, China’s parliament said it would review laws centered on promoting the private economy. “It is necessary to resolutely remove all kinds of obstacles to the equal use of production factors and fair participation in market competition,” Xi told the entrepreneurs, according to Xinhua. Beijing should “continue to promote the fair opening of the competitive field of infrastructure to all kinds of business entities, and continue to make great efforts to solve the problem of difficult and expensive financing for private enterprises,” Xi said. China’s stock market has responded to this policy shift with a significant rally: This is not just good news for China’s investors; it’s also good for the broader Chinese public, and indeed for the entire world. China’s move toward statist economic policies coincided with a more aggressively nationalistic foreign policy.  Let’s hope this correlation works in the other direction as well.   On average, countries that embrace free markets tend to have a more internationalist outlook on foreign affairs.  This is not always the case, but the correlation is quite strong.  Compare North and South Korea, or the UAE and Iran, or Venezuela and Colombia.  Again and again, we see the most statist countries being the ones that are most likely to try to antagonize their neighbors. (0 COMMENTS)

For more than a century, some economists have insisted that central planning can outperform markets. Economists like Mises, Hayek, and Friedman disagreed. Who won this debate? Is it over? Does AI change how we should think about the power of planning? Listen as economist Peter Boettke of George Mason University discusses what is known as the […] The post Who Won the Socialist Calculation Debate (with Peter Boettke) appeared first on Econlib.

  California’s Terrible Wildfires Exposed a Variety of State Policy Failures by Steven Greenhut, Reason, February 14, 2025. Excerpts: Regarding brush clearance, the governor has agreed that we need to step up the process. The California Environmental Quality Act, or CEQA, and other laws require Environmental Impact Reports (EIRs) for clearance projects and two to three approvals for controlled burns. The state prioritizes such boutique “climate” projects over its fundamental responsibilities, and even those projects are plagued by cost overruns and delayed timelines. The wildfires have also highlighted California’s counterproductive insurance regulations. It can take many months for insurers to wade through the process of hearings, rate reviews, and opposition to such hikes by consumer-attorney “intervenors” who earn large fees for their efforts. This process is so cumbersome that it reduces competition, leading to too few insurers. The problem goes back to Proposition 103, the 1988 ballot initiative that made the state insurance commissioner an elected position, instituted the prior-approval system for rate increases, and rolled back rates. It created a price-control system. Unable to easily adjust rates to reflect risk, insurers quietly—and then not so quietly—began exiting. And: We’ve seen criticisms about an inadequate number of firefighters. Public databases show an abundance of LA firefighters earning total compensation packages above $500,000 a year, with one captain earning more than $900,000. If pay reflected market rates, California governments could afford to hire more of them rather than relying on underpaid prison labor. DRH comments: In a talk I gave last month to the local Libertarian Party chapter, I highlighted the role of CEQA and commented that it was one of Ronald Reagan’s worst legacies as governor. Also, those pay figures are amazing. Just think how much we could save if the union weren’t so protectionist and if governments could hire former prisoners.   Is There a Constitutional Crisis? by Editorial Board, Wall Street Journal, February 11, 2025. (February 12 print edition.) Excerpt: Well, that was fast. The same people who predicted Donald Trump would be a dictator now say a “constitutional crisis” has already arrived, barely three weeks into his Presidency. They’re overwrought as usual, and readers may appreciate a less apocalyptic breakdown about Mr. Trump’s actions and whether they do or don’t breach the normal checks and balances. Mr. Trump’s domestic-policy decisions so far strike us as falling into three categories. Most rest on strong legal ground. Some are legally debatable and could go either way in court. In still others Mr. Trump appears to be breaking current law deliberately to tee up cases that will go to the Supreme Court to restore what he considers to be constitutional norms. None of these is a constitutional crisis. DRH comment: You know what I like best about this editorial, besides the substance? It’s good grammar in the last sentence. “None of these is,” not “None of these are.”   Elizabeth Warren’s Hubris Allowed Trump To Defund the CFPB by Eric Boehm, Reason, February 13, 2025. Excerpt: For a long time after the CFPB was created in 2010, there were serious questions about the constitutionality of that structure. That finally got resolved last year, when the Supreme Court ruled that Congress was within its powers to hand off the purse strings. So, funding the CFPB via the Federal Reserve is not unconstitutional—it’s just unorthodox and foolish. Here’s where the hubris enters the story. When Warren and Obama created the CFPB, they designed that unorthodox funding structure specifically to prevent a future Republican-led Congress from trying to defund the bureau. Remember, this was in the age when Republicans were running around the country telling voters they intended to repeal Obamacare too. By isolating the CFPB from Congress’ budgetary powers, Warren was trying to make it invulnerable to attack. Instead, she simply gave it a fatal flaw. Earlier this week, the Trump administration submitted its CFPB funding request to the Federal Reserve. It asked for…$0. DRH comment: I LOVE this. But I would have loved even more for the Supreme Court to have made a decision the other way. If Congress has certain powers, it can’t give them up. The Constitution doesn’t say, “Congress has these powers but if it decides it doesn’t want them, it can give them away.”   The 5 Worst Things About the Consumer Financial Protection Bureau by Veronique de Rugy, Reason, February 14, 2025. Excerpt: It’s not as if financial fraud was legal before the CFPB swooped in to save the day. There were already plenty of agencies “policing” financial misconduct. The Securities and Exchange Commission, for example, has long been responsible for protecting investors, big and small, from fraud. The Federal Reserve has a security function. Then there is the Federal Deposit Insurance Corporation, which supervises financial institutions to prevent reckless banking practices. The Commodity Futures Trading Commission oversees the futures, options, and swaps markets; it’s supposed to make sure that trading in commodities like oil, wheat, gold, and financial derivatives isn’t rigged by bad actors or overly destabilized by excessive speculation. The Federal Housing Administration enforces fair lending practices in the mortgage market, while agencies like the Federal Trade Commission and the Office of the Comptroller of the Currency have historically handled deceptive financial practices. And so many more are also on the beat, including common-law actions against fraud. Yet the CFPB was created under the premise that these agencies and the law were somehow asleep at the wheel as evidenced by the financial crisis, and only a new, unaccountable bureaucracy could finally rescue consumers from their own financial decisions. The reality is that no new protection was created for consumers by the CFPB. Creating the CFPB was merely replication, duplication, centralization, and the employment of thousands of people. What we got was simply more officious harassment of financial actors, all of which raised costs to consumers.   (0 COMMENTS)

In a recent interview, Eugene Fama predicted that the price of Bitcoin will fall to zero: This newfound mainstream adoption has given Bitcoin an illusion of legitimacy, but Fama argues that it doesn’t change the fundamental issue: Bitcoin still has no intrinsic value. “If demand for Bitcoin disappears, so does its pricing,” Fama emphasized.When pressed by podcast hosts about whether Bitcoin’s price could eventually crash to zero, Fama delivered a chilling response: “I would say it’s close to one.”He went even further, stating that he hopes Bitcoin collapses because if it doesn’t, you have to start all over with monetary theory.” “I’m hoping it will bust, because if it doesn’t, you have to start all over with monetary theory.” Before responding to this, I should mention that I am not a Bitcoin investor and have no opinion on where the price is headed.  Instead, I’d like to respond to Fama’s claim that Bitcoin presents challenges for monetary theory.  This is false, because Bitcoin is not money.  For an asset to be money, it must be a medium of account.  Bitcoin is not a medium of account, as the prices of goods, services, labor and financial assets are rarely denominated in Bitcoin.  The success of Bitcoin presents no challenges at all for monetary theory. I think of Bitcoin as sort of like electronic gold.  Gold is a store of value for the boomer generation, and Bitcoin is store of value for the zoomer generation—for people brought up in the era of iPhones and computers. Gold has a few industrial uses, but most of its value comes from its use as a store of value.  People value gold primarily because they believe that in the future other people will value gold. Bitcoin is occasionally used in transactions, but most of its value comes from its use as a store of value.  People value Bitcoin primarily because they believe that in the future other people will value Bitcoin. (1 COMMENTS)

I caught a little snippet on Fox News Channel in the last day or two of RFK, Jr. in the White House after he was confirmed as secretary of the Department of Health and Human Services (HHS.) I was already nervous about him. When I hear someone who is used to advocating government coercion say that he wants to “make America health again,” I worry that he wants to regulate what various food producers can put in our food. When I saw that recent snippet, I got nervous for another reason. In those few seconds he spoke, he said he would go after conflicts of interest at the FDA (Food and Drug Administration), the CDC (Centers for Disease Control), and the NIH (National Institutes of Health.) As someone who believes that incentives matter, you might think that I would favor going after conflicts of interest. I don’t know enough about the CDC and the NIH, but in the case of the FDA, I don’t favor doing so. I start with the assumption that incentives matter, but I also believe in looking at the evidence. Co-author Charley Hooper, who follows the FDA closely, and I wrote a piece over 15 years ago in which we wrote about the problems with excluding from the FDA’s drug panels people who had conflicts of interest. The basic problem is that you might not get enough people who know much about the drug being considered. I reposted our article at my Substack. It’s titled “Swing Vote at the FDA.” We lead as follows: In Kevin Costner’s new comedy Swing Vote, the presidential election comes down to a single voter. The premise is absurd. But we don’t need to go to the movies to see absurd plots in which big decisions hinge on one voter. The U.S. Congress, via the Food and Drug Administration, has created its own. Except this time, it’s a tragedy. Congress requires the FDA to severely limit independent experts from participating in FDA advisory committees if they have ties to industry. But the FDA has run into an intriguing problem with one rare disease, infantile spasm—a devastating form of epilepsy that strikes about 8,500 U.S. infants in the first year of life. When the FDA excluded all those with a “conflict of interest,” it ended up with only one available committee member. Later in the piece, we give our evidence and, surprisingly, it comes from a Naderite organization. We write: Thankfully, the hypothesis that having worked for a drug company makes an expert corrupt can be tested. In fact, this hypothesis has been tested—and rejected. Moreover, it was rejected by a study done by five researchers, four of whom were employees of the Naderite Public Citizen’s Health Research Group. In 2006, Sidney Wolfe and three of his fellow employees, along with one other author, published an article in the Journal of the American Medical Association that draws on 221 meetings of FDA advisory committees, including 76 product-specific meetings that involved yes or no votes on individual drugs. Their findings? None of the 76 voting outcomes would have changed had voters with conflicts of interest been excluded. [italics added] The authors also found that those with conflicts were no more likely to vote for “their” company’s drug than those without conflicts. Indeed, those with a conflict were actually more likely than those without to vote for drugs that would compete with “their” company’s product. That didn’t stop Wolfe and his co-authors from concluding, “Ideally, all panels of scientific experts advising a federal decision-making body would be free to financial conflicts of interest with the affected companies.” Their own findings, though, belie that conclusion. Read the whole thing, which is not long. (0 COMMENTS)

Under what conditions does technology improve prosperity? Mass unemployment and deepening inequality are not new concerns, but the emergence of artificial intelligence has prompted great thinkers like Daron Acemoglu to suggest norms of engagement to optimize and equalize the benefits from technological change. On the other hand, Russ Roberts questions whether these conditions are necessary for innovation to result in prosperity, instead urging emphasis on competition, power of labor markets to protect individuals, and the ability of technological progress to spread benefits outside of its immediate industry. Daron Acemoglu is an Institute Professor of Economics at MIT, the author or co-author of six books including Why Nations Fail, The Narrow Corridor, and Power and Progress. Acemoglu was awarded the Nobel Prize in Economic Sciences in 2024 alongside Simon Johnson and James A. Robinson for their work on how institutions affect differences in prosperity across nations. This spirited conversation between Acemoglu and Roberts revolves primarily around Acemoglu’s more cautious stance on technology’s ability to improve living standards and wages. He acknowledges that technology has made life better off. Since the Industrial Revolution, people have been healthier, are more educated, and the world is far more prosperous, but there is nothing automatic about this process. Acemoglu finds that humanity only benefits from technology given the optimal institutional structure. Roberts argues Acemoglu’s take is half-right. Humanity is better off due to technology, but it is not because of Acemoglu’s conditions. Roberts believes the power of innovation is maximized without shepherding. Acemoglu cites three ingredients he sees as necessary for technology to have a positive effect. One is competition, with which Roberts agrees; however they differ on the other two. He challenges Acemoglu to prove that technology has been shepherded as opposed to being allowed to flourish through competition and innovation. The second is coercion in labor markets. Acemoglu agrees that technology can increase the marginal productivity of labor, but if there’s coercion that might not  result in higher wages, as the benefits from innovation would largely be distributed towards employers. He argues that the improvements in labor conditions and the redistribution of benefits to workers from the Industrial Revolution were not automatic,; they had to be advocated for. He points out the proliferation of trade unions as far more in line with improvements in working conditions than the Industrial Revolution itself. And one important factor there is, you know, worker voice. Trade union activity was very harshly suppressed in Britain. Any kind of democratic movement was super-strongly discouraged…So, that is what I mean that there was nothing automatic about that process. And when Trade Unions start, you know, organizing after the Master and Servant Acts–which completely disempowered workers against their bosses, and Trade Unions were legalized–that is when you see conditions in factories improved quite a bit. Roberts doubts that unionization contributes much at all to a rise in the standard of living. He argues unions raise wages by reducing employment. They do not equalize income; they just rearrange it. Even large corporations still have to compete for labor, and they do that by raising wages, therefore big companies, by virtue of their size do not necessarily have more bargaining power. Acemoglu’s third condition is how automation affects workers’ earnings. He asserts automation may increase capital’s productivity, but not necessarily labor’s, because it reduces labor’s contribution to output.  And if you want to think about it that way–we discuss this as an illustration in the book as well– the factory of the future will have two employees, a man, and a dog. The dog is there to make sure that the man does not touch the equipment, and the man is there to feed the dog… But the reason why this is such a good example is that it clearly highlights why that man–or many people who may be working in these companies–don’t really contribute to average productivity in that huge way. You can eliminate this person and the dog, and the factory would still work fine. When that is the case, the labor market–the competitive process–shouldn’t pay this person a high wage. That is automation. Roberts says Acemoglu is missing how automation increases real wages by circulating benefits throughout the population, with a chicken farm as an example. He argues automation reduces prices, a claim which Acemoglu agrees with, and that opportunities are created for other industries through those reduced prices, hence creating a higher standard of living. The money mainly goes to the people who bought the machines, installed them, the people who made the machines and created them. However, the net result is an enormous drop in the price of eggs. And that means that the workers who work elsewhere have a much higher standard of living, including the ones that work in that plant. And that is happening all over the economy. And so, what is happening is–here’s the irony–as the innovation is stripping out labor from many different manufacturing processes, that’s creating opportunities for new employers to find things that those low-skill workers could do, and they have. Historically, there is not mass unemployment in the face of innovation. And the whole 20th century in the United States, is that story, to me. Finally, Roberts asks Acemoglu for his solutions to minimize the destructive impact of creative destruction. He mentions shifting the balance in taxation on labor/capital to incentivize investment in labor rather than in capital, along with optimizing the rent-shifting ability of automation in order to ensure workers remain necessary and will be entitled to sharing quasi-rents. Acemoglu’s over-arching idea is to encourage rapid technological advancement in ways that are compatible with labor productivity and broader human well-being. …we should have more sort of government competitions and programs to encourage human-complementary uses of AI and digital technology. The government, as I said, should not be at the driving seat, but the U.S. government through the Department of Defense, NIH [National Institutes of Health], NSF [National Science Foundation] in the past has had a very positive role in encouraging exploration of new areas. And I think this is something that we should consider. Definitely not automation taxes, definitely not slow down automation. We do not want to slow down automation. We want automation to be rapid, but at the same time find other things that we can do for workers, so that worker productivity is also central.   Related EconTalk Episodes: Daron Acemoglu on Shared Prosperity and Good Jobs Daron Acemoglu on Inequality, Institutions, and Piketty Elizabeth Anderson on Worker Rights and Private Government Tyler Cowen on the Risks and Impact of Artificial Intelligence Living with Exponential Change (with Azeem Azhar)   Related LF Network Content: Innovation in a Regulatory Labyrinth, by Shoshana Weissmann, at Law and Liberty Is Technology Bad? By David P. Goldman, at Law and Liberty Technological Unemployment and Work, by Bryan Caplan, at Econlib Adam Thierer on Permissionless Innovation, The Great Antidote Podcast   (0 COMMENTS)

Recently here at EconLog Scott Sumner and Janet Bufton have had an interesting discussion on liberalism as an anecdote against authoritarianism (see Sumner here, Bufton’s comments here, and Sumner’s continuation here).  The central theme has been how liberalism, properly understood and consistently applied, helps inoculate one against a descent into authoritarianism, even if one likes what the authoritarian is doing.  They’re great posts and you should read them (even if you have already).  But I think there is a gap in the conversation that I wish to fill: what unique aspect of liberalism makes it an effective vaccine?  The liberal understanding of justice makes it an effective vaccine. To be clear, I am sure both Sumner and Bufton are both aware that the liberal understanding of justice makes liberalism effective.  Justice is implicit throughout their posts.  I am just bringing it to the fore. In this man’s opinion, the best development of liberal justice comes in Adam Smith’s Theory of Moral Sentiments.  In TMS, Smith discusses three understandings of justice.  The first he calls “commutative justice,” or “mere justice.”  Commutative justice has very precise rules about how to treat one another and they basically boil down to “don’t harm people and don’t take their stuff.”  Like the rules of grammar, these rules of justice are foundational.  Under very rare circumstances (and even then most judiciously) they can be broken, but for the most part, they must be upheld.  The other two understandings are what he calls “distributive justice,” (which is using one’s talents and resources to the best of their ability), and estimative justice (which is giving a person or thing its proper due).  This development can be found on pages 269-270 of the Liberty Fund edition.  For my purposes here, I will be discussing exclusively commutative justice. Justice is foundational.  No society can survive without justice.  Any society where different individuals are treated unjustly, where their person or property is under constant threat, will tend to extinguish itself, if not through in-fighting then through conquest or dissolution by more robust societies.  But justice itself is not sufficient to make a good society or a good person.  We need other virtues, like love, beneficence and benevolence.  A society that is simply just would not be a pleasant place to live. But, as Smith points out, we are limited in our capacity to give love, beneficence, and benevolence.  We are limited by our own resources; it would be quite impossible to love everyone equally.  Such a burden is limited to God (or some other “all-wise Being.”)  Any attempt to love anyone and everyone the same would result in a person being immensely unhappy (see Part VI, Section II, Chapter III).  Consequently, humanity’s lot is far more simple: “the care of his own happiness, of that of his family, his friends, his country” (pg 237).  We love ourselves.  We love our family more than our friends.  Our neighbors more than our country.  And so on.  Our social circles determine who we love and how (for more on this, see Adam Smith and the Circles of Sympathy by Fonna Forman).   So far, so good.  Even nationalists will tend to agree with this point.  What differentiates the liberal from the nationalist or authoritarian is the question, “What do we owe to each other?”  How do we treat people socially furthest from us?  This is where the matter of justice comes in.   To the liberal, we do not owe many people love, benevolence, and the other virtues.  I am sure you, dear reader, are a lovely person, but I will simply never love you as much as I love my brother, mother, and father.  If my brother needs a ride to the airport, I’ll pick him up.  If you ask me, I’m charging a fee.   But what we do owe to everyone, globally, is justice.  To not cause harm to their person or their property.  Smith’s famous “Chinese Earthquake” thought experiment (pages 136-137) demonstrates this point.  If an earthquake were to hit China tomorrow and a thousand people die, few people would lose much sleep over it.  Yes, we would sympathize with their loss, but our feelings would be only the smallest fraction of what those affected by the quake would feel.  One would lose more sleep over the loss of a pinky than the loss of those thousand lives.  But if the loss of a pinky could stop the earthquake from ever happening, then there becomes a strong feeling to lose one’s pinky and save the thousand lives. The fact that everyone, whether they are in our social circles or not, is deserving of the bare minimum of justice is what separates liberalism from authoritarianism.  Liberal justice is not much, but it is powerful.  Authoritarians tend to divide up the world into categories.  Certain categories are deserving of justice.  Others are not.  Consequently, authoritarians conduct horrific and evil acts.  Liberalism, though its reminder that what we owe to everyone is merely justice, acts as an effective inoculation against a descent into authoritarianism.  Injustice, when recognized, is a powerful repulsive feeling.  We seek to stop injustice.  Liberalism helps us see those injustices being done. (0 COMMENTS)

Many believe that the January increase of the Consumer Price Index portends a revival of the inflation that accelerated in 2021, reached a peak in mid-2022, and followed a downward trend until very recently. The CPI, however, is simply a cost-of-living index based on a typical basket of consumer goods. It catches both the change in the general level of prices and changes in relative prices. A similar problem, due to the nature of price indexes, mars the Personal Consumption Expenditures (PCE) index. Quoting or paraphrasing an economic consultant without quotation marks about the rise in the CPI growth, a Wall Street Journal reporter echoed the general confusion between inflation and relative price changes, and about the nature of price indexes (“Inflation Heated Up in January, Freezing the Fed,” February 12, 2024, update of 9:41 am ET): The bigger-than-expected increase in prices last month largely reflected higher prices for used cars and auto insurance, said Omair Sharif, founder of research firm Inflation Insights. If an acceleration of inflation is really happening, it would not largely reflect the higher used car prices, it would be the other way around: these specific prices would partly reflect the higher inflation. A recorded price change is made of its relative change (relative to other prices) and the impact of inflation. (On that topic, see my post “Does a Price Decrease Fuel Deflation?” as well as my chapter “A Rising Product Price Doesn’t Cause Inflation,” in Ryan Bourne, editor, The War on Prices.) The increase in used car prices could be simply a change in relative prices—the consequence of car buyers realizing that the American tariffs threatened or announced on automobiles manufactured in Mexico and Canada as well as on steel and aluminum will increase the price of new automobiles on the American market. An estimate of a $3,000 increase in the price of the average new car looks realistic, if not on the low side. Consequently, we would expect many buyers to shift to used cars, arbitraging the price difference between the two substitutes. Prices would start changing as soon as the tariffs are expected. The increase in car values would also lead to higher automobile insurance prices because of the higher accident costs. Such price increases would reveal no inflation in the sense of a self-sustained increase in the general price level. (On used car prices, see my 2021 post “No Mystery in the Current Used-Car Market” and my 2022 follow-up “Do Used Car Prices Vindicate Adam Smith?”) Through inflation or relative changes, prices do change. And inflation can happen. How will the state react and what can be the consequences? Here is, under the form of a simple model, a possible scenario—until, in my last paragraph, the fog of the future becomes too opaque and the causal strands too numerous. Imagine a country—call it “Syldavia” if you will—ruled by an ignorant bully. (My model is a wink to behavioral economics, but note that the ignorant bully still behaves rationally given his character and circumstances.) His policies cause a rise in some relative prices that are politically touchy. Unbeknownst to him and hidden by his flattering sycophants, some of his policies such as a series of high customs tariffs can also cause a supply shock, that is, a broad downward shift in the economy’s production possibility frontier. This would cause a one-time jump in the general level of prices and a fear of stagflation. The ruler will be tempted to counter the problem with an increase in the money supply by pushing down interest rates or other interventions to the same effect. (Viktor Orban, the Hungarian ruler, tried that.) Undoubtedly, this will start or increase inflation, a politically self-sustained increase in the general level of all prices. As the incipit of Anthony de Jasay’s The State asks, “What would you do if you were the state?” How will the ruler of Syldavia reacts when inflation and economic stagnation have started? He may try to hide the inconvenient numbers by stealthily ordering the deep state’s statistical agencies to cook the books. (“I have a good intuition of what the numbers are.”) Some high-level statisticians will resign or be fired; under Mussolini, they were quite malleable. The more the chief ruler lies, the more his minions will. The real economic trends will still be reported by private economists and, as long as a free press exists, through “fake news.” Prices on financial markets won’t lie, if these markets remain more or less free. What would do then if you were the ruler of Syldavia? You would impose some price controls, perhaps starting with prices that are visible, politically sensitive, and easier to control. Shortages will soon appear. To quell popular discontent as the situation worsens, you will likely follow by decreeing general wage and price controls. (Richard Nixon could not resist the temptation in the early 1970s, which did not prevent the stagflation from dominating the rest of the decade.) After all, if the ruler doesn’t like a price, he only has to forbid people to quote it or to pay it, at least on legal markets. The police or the army can take care of that problem (if they are not part of the corruption). From then on, different scenarios are possible in Syldavia, a country with unlimited democracy. A very detrimental scenario, although not at the extreme of the catastrophe spectrum, is the Argentinization of Syldavia. Perhaps, in a century or so, after many Peron-like rulers, a Javier Milei will appear to restore the old-time prosperity. But perhaps not. ****************************** “The Baby King Breaks His Subjects’ Toys,” by DALL-E inspired by your humble blogger (0 COMMENTS)