When I was young, we were all taught that people should not be convicted and sent to prison unless they were “guilty beyond a reasonable doubt”. Unfortunately, Americans love sending people to prison, and they violate this maxim every single day. I’m not one of those people who romanticize prisoners. America does have a lot of crime, and people should go to prison for serious offenses such as rape, robbery, burglary, arson and murder. But they certainly should not be imprisoned for doing things that might not even be serious crimes. In the US, activities that are illegal in one state might be perfectly legal in another. That’s OK. Federalism makes a lot of sense. It’s not 100% clear whether marijuana should be legal or illegal. It’s not 100% clear whether the age of consent should be 16 or 18. Different states have reached different conclusions, and that’s fine. What’s not OK is sending people to prison for activities that would be perfectly legal in many other states. Remember, I’m not talking about entirely different cultures such as New Guinea or Turkmenistan, where people have vastly different values. I’m talking about moving from Chicago to Milwaukee, two industrial cities fronting Lake Michigan that are 90 miles apart. Selling pot is legal in Chicago, whereas you could be sent to prison for selling pot in Milwaukee. In most states the age of consent is 16. But some states have 17 or 18. I have no idea who’s right, but it’s obvious that there is “reasonable doubt” as to where to draw the line; unless you think the US contains many states where lawmakers make obviously wrong decisions. But if you have that little faith in lawmakers, should we really be sending 2 million people to prison? There’s no getting around the fact that if lots of states view an activity as perfectly legal, then there is reasonable doubt as to whether people deserve to be sent to prison for engaging in that activity, in any state. It’s not enough that juries find a person to have done some activity “beyond a reasonable doubt”, it’s also essential that juries conclude that the thing they did is a serious crime beyond a reasonable doubt. So does that mean we must end federalism? Not at all. Rather it means that when there is doubt as to whether an activity is a crime, it should be punishable with a fine. We already do that for speeding, and many other activities where states disagree as to exactly where to draw the line. People often make the argument that switching from prison to fines would favor the rich. Rich people could easily pay the fine for smoking pot, while the poor would struggle to do so. (Note that many people who make this argument also favor high taxes on cigarettes, which completely contradicts their argument.) This is a bad argument for two reasons. First, in our system the rich have an easier time purchasing yachts, BMWs, vacations in St. Bart, and fancy French dinners, which is as it should be. They have an easier time paying parking tickets and speeding tickets, which is as it should be. We use fines for all sorts of offenses that are not serious enough to justify prison. Fines should reflect both the damage done by the offense, and the probability of being caught.  That’s a feature, not a bug. Second, prison is nowhere near as egalitarian as it seems. While in theory a rich and poor drug user are equally likely to go to prison, the system has intentionally been set up to make it vastly more likely that a poor drug user will go to prison. In some cases this bias is so obvious as to be embarrassing, as back when the punishment for crack cocaine (used by the poor) was much higher than for powder cocaine. I believe that issue was recently fixed, but that was never the primary inequity. Low-income people are much more likely to sell a small amount of drugs on the side, to get some money to support their habit. Rich people don’t need to do this. When lawmakers discovered this difference, they made the penalty for selling drugs vastly higher than the penalty for consuming drugs. This was to ensure that the upper middle class and rich people were not accidentally ensnared in a drug war aimed at the poor.  No prison for “Karen”. From a logical perspective, the penalty for use should be higher than for selling drugs. Obviously the drug industry cannot exist without both buyers and sellers, so in that sense the two activities are equally culpable. But sellers are arguably more blameless as they are motivated by money, whereas buyers are motivated by consumption. And the typical person is more addicted to money than to drugs. That’s why professionals often give up drugs as they get older. If it’s a choice between giving up cocaine and losing a cushy Wall Street job, most people will choose to go straight.  The lure of drugs is strong for some; the lure of money is even stronger for almost everyone. If I drive by a pot store in Orange County it all looks so “normal”.  But I always force myself to think about people locked up in some prison in Mississippi for doing the exact same thing—selling pot.  Maybe a young single mom that was pressured by her boyfriend to sell some pot, or to help with a delivery.  Can we say beyond a reasonable doubt that she is deserving of spending years in prison? PS. Some people argue that the people in jail for drug offenses would do other bad things if drugs were legalized.  If so, it’s odd that the murder rate in America doubled after Prohibition was enacted and then fell in half after Prohibition was repealed. (0 COMMENTS)

A reader of a recent post of mine blamed me for using the R word: “redneck.” (His comment was not published because he was a new commenter and we could not confirm his email address.) What I call “redneck” is close to Merriam-Webster’s definition, minus the pejorative connotation: 1. sometimes disparaging: a white member of the Southern rural laboring class 2. often disparaging: a person whose behavior and opinions are similar to those attributed to rednecks I use “redneckitude” as a much-needed neologism for the typical redneck’s behavior, opinions, character, and preferences (to use an economic term). Jim Bovard tells me that the neologism “might be tolerable” until a better one is found. On the model of “wokeness,” perhaps “redneckess” would be better? The featured image of this post represents how redneckitude is seen by the intellectual establishment and part of popular and political culture. Jim Goad’s The Redneck Manifesto: How Hillbillies, Hicks, and White Trash Became America’s Scapegoats (Simon & Schuster, 1997) helps understand how the redneck concept now extends to any lower-class, white, gun-toting, God-loving but sin-committing, flag-waving but often non-voting, rural individual. Rednecks exist in Vermont and Maine too. The redneck is also self-reliant, although this may have changed in the mounting socialist culture. He is certainly not a standard-bearer for the 18th-century Enlightenment. The major point of the economics of redneckitude is that, as a social scientist, the economist is not morally judgmental. Rednecks have preferences and make choices according to these preferences. These choices have social consequences (including “economic” consequences in the narrow sense) that are of scientific interest for the understanding of society. And note that, like in other sciences, words used in economics are just labels that may carry historical meaning but are mainly useful for analytical purposes. This methodological approach explains the historical tolerance of economists for eccentric preferences and lifestyles. For this reason, I don’t consider the R word as pejorative. I even share some preferences with rednecks. I might have titled the present post “In Defense of Redneckitude.” In New York Times article (“A Profession With an Egalitarian Core”, March 16, 2013), Tyler Cowen pointed out many historical instances of the economists’ tolerance, including: In 1829, all 15 economists who held seats in the British Parliament voted to allow Roman Catholics as members. In 1858, the 13 economists in Parliament voted unanimously to extend full civil rights to Jews. (While both measures were approved, they were controversial among many non-economist members.) For many years leading up to the various abolitions of slavery, economists were generally critics of slavery and advocates of people’s natural equality. … Professors Levy and Peart coined the phrase “analytical egalitarianism” to describe the underpinnings of this tradition. For example, Adam Smith cited birth and fortune, as opposed to intrinsically different capabilities, as the primary reasons for differences in social rank. And the classical economists Jeremy Bentham and John Stuart Mill promoted equal legal and institutional rights for women long before such views were fashionable. This tolerance has limits that, in the classical-liberal or libertarian perspective, correspond to the point where some individuals coercively ban the preferences of other individuals. In this perspective, all forms of apartheid or government discrimination are beyond the pale of tolerance. There is a significant difference between harboring esthetic or lifestyle beliefs on the one hand and, on the other hand, wanting to impose those on others. For example, many rednecks may have had or perhaps still have racist personal preferences, which would be as acceptable (although not commendable) as the contemporary wokes’ anti-white opinions are (although not commendable); but the desire to impose such preferences through the coercive power of the state is antithetical to tolerance and thus unacceptable. No surprise that economists have generally been opposed to slavery and, as shown by David Levy and Sandra Peart, this opposition earned economics the pejorative label of “dismal science” by conservative Thomas Carlyle (see Levy and Peart’s “The Secret History of the Dismal Science. Part 1. Economics, Religion and Race in the 19th Century,” Econlib, January 22, 2001). Another sort of limit to most economist’s tolerance relates to the development of children. Considering children as future sovereign individuals who should not be robbed of their future choices and opportunities may suggest more complex classical-liberal values (James Buchanan’s, for example) but such reflections would take us too far from this short post. (0 COMMENTS)

Economist Paul Romer tweeted today: Doesn’t sound like China is going to sign up for the “Great Barrington” plan for surrendering to the virus. Wouldn’t it be refreshing to live in a country where everybody understands that it is the government’s job to do whatever it takes to protect public health? He was referencing the following Associated Press item: ASIA TODAY: Chinese health authorities will test all 9 million people in the eastern city of Qingdao for the coronavirus this week after nine cases linked to a hospital were found, the government announces. I think Paul is correct to say that an authoritarian government such as China’s is unlikely to show as much tolerance for people’s freedom as the authors of the Great Barrington Declaration advocate. It is disturbing, though, to see Romer write that it is government’s job to do whatever it takes to protect public health. His authoritarianism lives loudly within him. In an email discussion, George Mason University Jon Murphy made a further relevant point: Paul Romer is missing the far more obvious question: Why can China test 9 million people on a whim but the United States does not? What’s been missing from this whole nonsense is randomized testing so that we can determine the actual spread of the disease (and subsequently how it spreads, how deadly it is, etc). We don’t even know the N in this pandemic because there isn’t the testing going on. I have an answer to the question (I think).  It has nothing to do with state capacity or political will or anything like that. Simple expert failure (Roger Koppl) and dynamics of interventionism (Sanford Ikeda). Trump invoked the Defense Production Act with testing kits.  The predictable shortages of testing resulted in more being allocated to higher-valued uses: testing the people who are sick in the hospital.  Thus, we didn’t have enough to do the lower-valued uses: randomly testing the population. Isn’t it interesting how doing “whatever it takes to protect public health” can sometimes hurt public health. Unintended consequences anyone? (1 COMMENTS)

  Last night on his show on Fox News Channel, host Tucker Carlson interviewed Colorado Congressman Ken Buck. Buck was critical of high-tech companies, as is Carlson, and was pushing for new antitrust legislation. But that’s not what this post is about. Twice in a 3.5 minute interview, Buck claimed that high-tech companies cheat and steal. (At the 1:00 point and again at the 2:28 point.) Buck didn’t specify how. A journalist worth his salt would have asked how. But Tucker didn’t. Here’s my question to commenters. Do any of you know how big tech cheats and steals? Please give details. (2 COMMENTS)

Friends of freedom routinely defend the right to do wrong.  “If you’re only free to do good things, what freedom do you really have?”  Yet on reflection, this sorely underrates the value of freedom.  Yes, the freedom to do bad things is important.  Much more important, though, is the freedom to do good things that sound bad. Why is this so important?  Because Social Desirability Bias is ubiquitous; that’s why.   Long psych story short: When the truth sounds bad, human beings deceive and self-deceive.  This deceit in turn routinely rationalizes bad policies.  Example: Convenience and fun are often better than health and safety.  That’s what your actions declare whenever you drive to a restaurant instead of hunkering down in your home.  But almost no one wants to give a public speech where they say, “Convenience and fun are often better than health and safety.”  Policymakers, in turn, largely ignore the value of convenience and fun.  Abandoning your dysfunctional country is often better than “staying to fix it.” But no one wants to openly declare, “I decided my country was a lost cause, so I got out of Dodge.”  Policymakers, in turn, vigorously spurn mere “economic migrants.”  Breaking inconvenient laws is often the best move, but few scofflaws will ever call a press conference to defend their behavior.  Policymakers, in turn, enforce phonebooks’ worth of inane rules.  Working hard to get rich yields wonderful social benefits, but hardly anyone on Earth will even admit to being rich.  Policymakers, in turn, treat the rich as cattle or leeches. The rhetoric of “freedom” is a great way to neutralize this poison of Social Desirability Bias.  Indeed, there is probably no better antidote in the universe.  When busybodies try to use government to force everyone to sacrifice tons of convenience and fun for vestigial doses of health and safety, shouting, “I spurn safety for convenience” will get you nowhere.  But shouting, “Freedom!” like you’re in Braveheart just might foil the busybodies’ nefarious efforts.  People won’t welcome an immigrant who says he hated his country of birth.  But they will smile upon an immigrant who earnestly avows that he came for “freedom.“ If you’re caught breaking a stupid law, you won’t escape a guilty verdict by conclusively showing that the law is stupid.  You might, though, if you stand up for your “freedom.” A rich man who wants to keep what he’s earned won’t win much sympathy by lecturing the world about economics.  His better bet, rather, is to raise the banner of “Freedom!” None of this means that appeals to freedom are – or should be – insincere.  Pursuit of convenience and fun, fleeing your hellhole of birth, breaking stupid laws, and working your way to wealth are all bona fide expressions of freedom.  My point, rather, is about marketing.  Directly defying Social Desirability Bias is ever-tempting, but usually fruitless.  If you want to defend good things that sound bad, your best bet is to reframe the debate.  Want to stand up for business and the rich?  Your best bet is to change the subject.  What were we talking about again?  Oh, that’s right: Freedom! Isn’t this precisely what critics accuse libertarians of doing all the time?  Pretty much.  What I’m saying is that their accusations are unfair, but we should strive to make them true.  Mainstream political thinkers are too wrapped up in their own irrational demagoguery to even acknowledge the existence of Social Desirability Bias.  Once you fully absorb the distinction between what sounds good and what is good, however, the implied political danger will weigh upon your mind.  What can rational human beings do in the face of such mindless emotionalism?  Wave the flag of freedom.  Wave it habitually.  Wave it proudly.  Even then, you’ll probably lose the war of words, but at least you’ll have a fighting chance. (0 COMMENTS)

Congratulations to Paul Milgram and Robert Wilson for their recent award. Tyler Cowen noted that Milgram was a coauthor of this essay: That’s an impressive group of economists.  And here’s the abstract: The ability of groups of people to make predictions is a potent research tool that should be freed of unnecessary government restrictions. Unfortunately, it’s unlikely that this will happen, despite that powerhouse line-up of expert opinion.  Nor is it likely that the government will remove rent controls, or allow the sale of kidneys, or legalize drugs, or eliminate tax loopholes, or impose a “Cadillac tax” on health insurance, or enact a carbon tax, or eliminate tariffs on imports, or open up the aviation market to foreign competition, or let car companies sell directly to customers, or eliminate most occupational licenses, or get rid of taxi medallions, or eliminate farm subsidies, or eliminate multifamily zoning restrictions in residential areas, or do hundreds of other things that economists recommend. That’s not to say that governments always oppose the recommendations of economists.  If they are already favorably inclined toward a policy, then they will listen to economists.  But I shake my head whenever I read articles suggesting that the economic problems we face “show that orthodox economics is wrong”.  When was orthodox economics ever tried? (0 COMMENTS)

Tyler Cowen, over at Marginal Revolution, quite rightly laments the death of British economic journalist, the aptly named Samuel Brittan. Like Tyler, I first heard of Brittan’s Capitalism and the Permissive Society from the late Roy A. Childs, Jr. You might think that “Permissive” in the title is used negatively. No. One of the things Brittan liked about capitalism was that it is permissive. I’m going from memory here; my copy was destroyed in my 2007 office fire. It was either in that book or in something else that Roy Childs told me from another Samuel Brittan writing that Brittan told the story about how Milton Friedman, with one view on one issue, got him respecting free market views more: it was that Friedman was such an outspoken advocate of a free market in military labor–that is, Friedman opposed the draft. Here’s another Brittan/Friedman story, from Wikipedia, that I hadn’t known: [Friedman] mentioned to me a letter he had received from Arthur Burns saying that Eisenhower was turning out well as President. I expressed surprise, to which Friedman responded: “First, Burns has much better knowledge of Eisenhower. Second, given equal knowledge I would prefer his opinion to yours.” Against The Flow (2005)         (0 COMMENTS)

In its technical paper justifying the awards, the Nobel Committee points out a major problem with using taxes to fund government programs: taxation distorts. The term economists use is “deadweight loss,” a loss that is not offset by a gain to anyone. Economists have estimated that raising $1 in taxes doesn’t cost society only $1; it costs somewhere between $1.17 and $1.56. The extra 17 to 56 cents is deadweight loss. The committee notes that by auctioning off major electromagnetic assets, the federal government avoided having to tax as much. This isn’t to say that the ideal auction is one that maximizes government revenue. One way to maximize auction revenue is for the FCC to act like a monopolist and hold spectrum off the market. But what matters most is that spectrum gets into the hands of the most-productive users. As former FCC chief economist Thomas Hazlett, now at Clemson University, and his co-author Roberto E. Muñoz of the Universidad Técnica Federico Santa María have pointed out, the gains from efficient allocation swamp the gains in government revenue. The 2017 wireless spectrum auction, for example, redirected spectrum from broadcast television to cellphone companies. If you’re reading this on a cellphone, you can thank Messrs. Milgrom and Wilson. This is from David R. Henderson, “Thank These Nobel Laureates for Your Cellphone,” Wall Street Journal, October 12, 2020 (October 13 print edition.) Under my contract, I’m allowed to quote 2 paragraphs from my article.  I’ll post the whole thing in 30 days. By the way, as an economist friend pointed out on Facebook, I was one of the few to note the potential conflict of interest in Milgrom both helping design the auction and consulting to a company that bid in the auction. I responded that I wouldn’t be a good card-carrying economist if I hadn’t noted that. Economics is all about incentives. As I wrote in “Hooked on Economics,” Chapter 2 of The Joy of Freedom: An Economist’s Odyssey, I noted in all my reading of economics while a math major and then in all of my reading post-Bachelor of Science and pre-UCLA graduate school that the unifying theme was incentives.   Here’s the article on “Auctions” in David R. Henderson, ed., The Concise Encyclopedia of Economics. HT to Alex Tabarrok and Lynne Kiesling for giving a quick read to my draft before I sent it to the Wall Street Journal. Also to my wife, Rena Henderson, for a quick edit. All of them turned it around in less than 25 minutes. Also thanks to Tom Hazlett for checking the paragraph on his findings. He did so while waiting to board a flight. (0 COMMENTS)

I’ve missed this article by Martin Wolf, hosted by Pro Market in the context of the debate over the 50th anniversary of Milton Friedman’s New York Times piece on corporate social responsibility. Wolf starts by saying that he “used to think Milton Friedman was right. But I have changed my mind.” That he changed his mind is no big surprise, as he moved from being a free trader in the early 2000s to being a staunch proponent of whatever kind of government interventionism in recent years. What is interesting, however, is Wolf’s argument. He changed his mind, he writes, because he doesn’t “believe in the contractarian view of the firm” any more. Corporations, writes Wolf, “are powerful entities able to exercise immense influence within society. Since corporations have been told that their only responsibility is to make profits and this has been internalized within their operations, the result is that society, including in particular its notionally democratic politics, is dominated by feral institutions.” For the British journalist, Friedman’s point that corporations should play within the rules of the game is naive, as they contribute to writing the rules of the game and they do so by lobbying governments and their regulators so that they act in their interest. This is why, Wolf maintains, “there is a direct line from Milton Friedman to Donald Trump.” Here comes this astonishing way of reasoning: Why is this? Consider how one goes about persuading people to accept Milton Friedman’s libertarian economic ideas when, in practice, they shift economic rents upwards and desperation downwards. In a universal-suffrage democracy, it is impossible. Such libertarians are a minority. To win, they have to embrace ancillary causes such as culture wars, racism, misogyny, nativism, xenophobia, and that good old standby: nationalism. Much of this has of course been sotto voce and so plausibly deniable: “No, we are not in favor of discrimination, but your precious freedom does indeed include the right to discriminate.” The financial crisis and bailout of those whose behavior caused it made selling the deregulated free-market even harder, as Mitt Romney’s 2012 failure showed. Afterward, it became politically necessary for libertarians embedded within the Republican Party to double down on those ancillary causes. Trump was simply the political entrepreneur best suited to do this. A natural demagogue, he was perfectly comfortable saying out loud what his predecessors had said quietly or let others say for them. This is why his supporters claim that “he says it like it is.” Those desperately-needed voters loved him for it because he respects their rage. Of course, his nativism, nationalism, protectionism, demagoguery, lying and now open assault on the notion of a fair election is a bit uncomfortable for corporate elites. But, if he gives them lower taxes and sweeping de-regulation, how many really care? If the result is to poison democratic politics forever, again, who cares? So, to return to my main point: one cannot get away with stating that corporations should play by the rules when they create the rules they play by. The system for creating the rules of the game is corrupt. When Friedman was referring to the “rules of the game,” he was likely thinking of the broader and more general principles of a liberal polity and of free competition: don’t hurt people and don’t steal their stuff, to quote the effective title of a book by Matt Kibbe. He was certainly not thinking of legislation à la cart and special privileges, that Friedman vehemently opposed. Moreover, in Capitalism and Freedom, where Friedman further elaborates his argument against the notion that corporations ought to have any “social responsibility” duty, he argues clearly that “if economic power is joined to political power, concentration seems almost inevitable. On the other hand, if economic power is kept in separate hands from political power, it can serve as a check and a counter to political power.” Friedman, and libertarians at large, argue for a separation of government and business as clear as the separation between the church and the state. I’d like to have the reaction of some American friends, but I find the description of libertarians jumping on the Trump bandwagon quite laughable. If anything, perhaps the opposite has happened: that libertarians have emphasized their differences with the current US administration, focusing on matters that alienated them Republican support. Think about Cato’s top-notch work on immigration. Protectionism is a red flag for libertarians and that brought them to strongly distance themselves from the Trump camp. If you google Donald Trump and Milton Friedman, other than Wolf’s piece you’ll see things like this popping up. In short, Wolf accuses Friedman of being blind to the issue of crony capitalism and to have a following which includes people eager to compromise for the sake of immediate political goals. The second claim would be an interesting matter of investigation. The first is plainly wrong. (0 COMMENTS)

The vast majority of people, including your humble blogger, have never done any serious research on the Holocaust. In this case, our main reason to believe it happened is that, in most relatively free countries, anybody who had the opposite opinion has been free to defend it and that, obviously, it did not survive the shock of free debates. For the same reason, most of us non-physicists believe in quantum entanglement. What will be the consequence of the legal bans on Holocaust denialism (often through so-called “hate laws”) that have spread in so-called free countries (but not in America)? And what will be the results of Facebook’s decision not to allow the discussion of this topic (“Facebook Bans Content Denying the Holocaust on Its Platforms,” Wall Street Journal, October 12, 2020)? These two sorts of ban are very different because Facebook is a private entity that, like any other, (still) has the right to decide which opinion it will allow to be expressed on its property. But, given the importance of Facebook (and Twitter) in public debates, the two sorts of restraints may well have similar consequences. It is true that a lot of snake oil is peddled in popular opinions and on social networks. But we find ignoramuses in the intellectual establishment too. And it is not possible to protect “vulnerable” people against these dangers if only because the habit of not being confronted with contrarian ideas may make one more, not less, gullible. The most serious reason to oppose speech bans was expressed by economist and philosopher John Stuart Mill in his book On Liberty (1859): Complete liberty of contradicting and disproving our opinion, is the very condition which justifies us in assuming its truth for purposes of action; and on no other terms can a being with human faculties have any rational assurance of being right. Imagine what will happen after several decades of legal and practical bans on denying the Holocaust. There will be few discussions on the topic. Its deniers will be silent, except in private, in samizdats, or in violent groups. Its defenders’ research may have become rare because less apparently useful (and not without risk: suppose the researcher finds something that does not exactly fit the official wisdom?). The historical existence of the Holocaust will have become a sort of official mythology prone to jokes—think of the political slogans in the late Soviet Union—that most people will have no reason to believe. (0 COMMENTS)