A Twitter follower of mine just praised president Trump for saving money by donating his salary back to government departments (I didn’t bother to add  the many justified “sic”): “He takes a ZERO salary from the american people. How much did americans paid for Obama, Biden, Pelosi, Schumer, etc?” Is this a significant saving for “the American people,” that is, American taxpayers? To check that, the voter must do some simple calculations. But even among those voters who can easily find the data sources and do the calculations, “rational ignorance” (as public choice economists say) will prevent most from doing it. Rational ignorance is the fact that the voter remains rationally ignorant of politics because he or she, individually, has no impact. It’s not as when he buys a car: he pays the money and gets the car he ordered. Politics and voting are very different: Why take the trouble and cost of finding information when your vote is not going to change the result of the election anyway? You’ll get the same political car anyway. Add partisanship to the mixture, and a perfect anti-Enlightenment storm is forming. So let’s calculate if we should be grateful to the president for being so thrifty with public money. The annual salary of the president is $400,000—which means at most $300,000 after tax. This corresponds to 1/16,000,00o (one sixteen-millionth) of the annual expenditures of the federal government, which were roughly $4.8 trillion ($4,800,000,000,000) in 2019, before the pandemic struck. It can be easily calculated that in 2019 (note again: before the pandemic), the amount by which Trump increased the annual expenditures of the federal government was a bit more than $600 billion ($600,000,000,000) compared to the last year of Obama’s presidency (see https://fred.stlouisfed.org/graph/?g=vzfE). Thus, by foregoing his presidential salary, Trump saved the American taxpayer $300,000 a year and, by the end of 2019, was spending $600,000,000,000 more of their money on an annual basis. This means that what Trump saved the taxpayers is 1/2,000,000 (one two-millionth) of what he ended up spending over and above what Obama spent during his last year. (It is of course much worse since the beginning of 2020.) Many taxpayers, if they knew, would have preferred that Trump ran with his $300,000 and showed frugality with the trillions of dollars of federal expenditures. According to USA Today, two previous presidents, also very wealthy, John Kennedy and Herbert Hoover, also donated their salaries. But they did not increase annual federal expenditures by half a trillion dollars. PS: Thanks to Jon Murphy for his comments on a draft of this post. (0 COMMENTS)

Headlines are typically not written by the same person that pens the article. Nonetheless, the headline should at least match the content of the article. Bloomberg failed with this headline: Treasury Traders Are Doubtful Powell Can Drive Inflation Higher I was surprised by this headline, as the Fed obviously can drive inflation higher.  Perhaps they meant that Powell cannot convince the FOMC to drive inflation higher, but that would be an odd way of phrasing that claim. The article itself is excellent: The Treasury market has set a high bar for the Federal Reserve to jump in order to recharge inflation expectations and upend a bullish tone that has surfaced since Chair Jerome Powell laid out a new plan to allow consumer prices to run hot. Bond-market gauges of inflation expectations have declined for the past two weeks, signaling traders are demanding that Fed policy makers deliver more information about how they will engender a rise in inflation. Benchmark 10-year yields have fallen to below 0.70%, helped also by haven demand as lofty U.S. stock prices turned lower. Many economists predict Federal Open Market Committee members won’t take any new actions when they wrap up a two-day gathering on Wednesday, an outcome likely to embolden bond bulls and further crimp inflation expectations. . . . “The market definitely needs more from the Fed now,” Aneta Markowska, chief U.S. financial economist at Jefferies, said by phone. “The Fed will be undershooting on inflation for the better part of four years, so why wait to do more? And inflation expectations have already been fading.” Markowska’s absolutely right; the Fed should adopt a more expansionary monetary policy.  A dramatic boost in QE would be a good start, although other tools are also available.  So why don’t they? The headline should have read: Treasury Traders Are Doubtful Powell Will Drive Inflation Higher If the Fed fails to adopt a more expansionary monetary policy in the near future, it will be a tacit admission that the average inflation targeting policy is not serious. The Fed is facing the possibility of a very serious policy failure—I hope they understand that fact. PS.  Of course it’s theoretically possible (albeit exceedingly unlikely) that the Fed cannot raise inflation.  But that hypothesis is not even worth entertaining until they’ve done all they could and failed.  In all of human history, no (fiat money) central bank has ever exhausted its ability to inflate.  The Fed is not about to do so. (0 COMMENTS)

As soon as children discover that the world isn’t nice, they want to make it nicer. And wouldn’t a world where everybody shares everything be nice? Aw … kids are so tender-hearted. But kids are broke — so they want to make the world nicer with your money. And kids don’t have much control over things — so they want to make the world nicer through your effort. And kids are very busy being young — so it’s your time that has to be spent making the world nicer. This is from P.J. O’Rourke, “This is why millennials adore socialism,” New York Post, September 12, 2020. Lots of good stuff here. I do want to address one error, an error that P.J. seems to agree with “progressives” about. He writes: That would have been in the 19th century — during America’s first “Progressive Era” — when mechanization liberated kids from onerous farm chores and child labor laws let them escape from child labor. Actually, it wasn’t child labor laws that let them escape from child labor: it was economic growth. As people grew wealthier, parents no longer needed their children to be productive. Instead, they could support the family without their children’s income and so instead could send their kids to school. And incidentally, as E.G. West showed in Education and the State, the state in Britain was not a major funder of education and yet schooling was widespread. It is true that child labor laws reduced child labor around the edges. But they’re an instance of what is almost a general law in economic policy. I’m using “general law” in the sense of regularity. The laws that pick up enough support are usually ones that require people to do what the majority are doing already. I believe for example, although I can’t find the source immediately, that the legislated 40-hour work week came about only after it had become standard practice. Another good excerpt: Intellectuals like Marxism because Marx makes economics simple — the rich get their money from the poor. (How the rich manage this, since the poor by definition don’t have any money, is beyond me. But never mind.) This excerpt reminds me of a great paragraph from Paul Krugman’s 1990 book The Age of Diminished Expectations that I used in the first edition of The Concise Encyclopedia of Economics, in a sidebar on the article “Distribution of Income” by Frank Levy: One reason that action to limit growing income inequality in the United States is difficult is that the growth in inequality is not a simple picture. Old-line leftists, if there are any left, would like to make it a single story—the rich becoming richer by exploiting the poor. But that’s just not a reasonable picture of America in the 1980s. For one thing, most of our very poor don’t work, which makes it hard to exploit them. For another, the poor had so little to start with that the dollar value of the gains of the rich dwarfs that of the losses of the poor. (In constant dollars, the increase in per family income among the top tenth of the population in the 1980s was about a dozen times as large as the decline among the bottom tenth.) The O’Rourke piece is excerpted from P.J. O’Rourke, A Cry from the Far Middle, 2020. (0 COMMENTS)

There’s one more problem with solar power: peak electricity use in California occurs in the late afternoon and early evening, when solar power is small or zero. When I taught an energy economics course at the Naval Postgraduate School in 2015, I made that point. One student responded, “Ah, yes, the duck curve.” In response to my quizzical look, he pointed the rest of the class and me to an image like this one. The line showing the supply of electrical power from “dispatchable sources,” which, as a rough approximation, means fossil fuels, traces what looks like the tail, back, neck, and head of a duck viewed from the side. In the early morning, there’s not much power from solar so electricity production from fossil fuels is high: that’s the tail of the duck. During the day, electricity from solar is high and so electricity production from fossil fuels is low: that’s the duck’s back. Then in the late afternoon and early evening, electricity from solar falls to zero but electricity use rises a lot and so we get the high neck and head of the duck. If you ever wonder about the problems with solar, think of the duck and you’ll quickly see the problem. This is from David R. Henderson, “The California Brownout Disaster is Manmade,” Defining Ideas, September 11, 2020. Notice that I also use the dreaded 7-letter n-word: nuclear. Read the whole thing. (0 COMMENTS)

A few weeks back I did a post that discussed the first of Philippe Lemoine’s four essays on China’s response to the Covid-19 epidemic. Now I’ve had a chance to read all four of what will likely become the definitive account of China’s role in the pandemic. I cannot recommend them highly enough.  Over at MoneyIllusion I discuss the second essay, and here I’d like to discuss the concluding paragraphs of the fourth essay: I have examined in detail the accusations made against China in connection with the COVID-19 pandemic. I have concluded that there is a grain of truth to some of them—mistakes were certainly made in the early days of the crisis and the Chinese authorities have not always been forthcoming with information about the epidemic. Nevertheless, a careful review of the evidence suggests that most of the allegations are either exaggerated, unsubstantiated, or nonsensical, and sometimes they are all three. In particular, the claim that China is somehow responsible for the botched response to the pandemic in most Western countries doesn’t withstand even cursory scrutiny. Yet this claim continues to be made—not only by government officials eager to scapegoat China for their own lamentable failures, but also by journalists and citizens who ought to be more concerned about how badly their own countries have been misgoverned during this public health emergency. I have highlighted several instances in which Western officials and journalists have misrepresented or distorted evidence. This may be a consequence of confirmation bias, fear of being accused of helping China or a tacit assumption that, since the Chinese regime is evil and hated, there’s nothing particularly wrong with dissembling to make it look bad. But, whatever the reason, this disregard for accuracy is dangerous, particularly on the part of journalists, who ought to at least strive to pursue truth irrespective of their personal ideological leanings. And it has contributed to a feedback loop I have observed over the past few months—people blame China for the pandemic because they adopt low evidentiary standards when it comes to accusations against China, which makes them hysterical about China, which in turn leads them to further lower their evidentiary standards, which makes them believe even more nonsensical accusations against China, etc. If people would only pause to consider whether or not the accusations against China make sense, they might realise that many of them do not. As I wrote in the introduction to this series, there are many reasons to dislike and distrust the Chinese regime. But when dislike and distrust disable the ability to parse evidence and think clearly, they disfigure our understanding of reality. Hatred of the Chinese regime has become so strong and pervasive in the West—especially in the US, where China is seen as its main geopolitical foe—that it creates incentives that allow unsubstantiated allegations to spread largely unchecked. Indeed, not only does this prejudice mean that people adopt a lower evidentiary standard to examine such allegations, but anyone who points out they are unsubstantiated risks being accused of being China’s dupe. As the rivalry between the US and China grows, we should expect disinformation about China to become increasingly common. This is especially true since, as we have seen repeatedly in these essays, China hawks in the US administration are clearly trying to influence public opinion about China by leaking misleading information. China’s regime is appalling in many ways, and it’s understandable that people feel no sympathy toward it, but this fact should not make us accept dubious claims just because they fit our preconceptions. On the contrary, knowing that we feel that way and that it will unconsciously make us less cautious when evaluating claims that cast China in a dark light, we should be extra careful before we accept such claims. When we look back at history, there are numerous examples of a sort of spiral of misinformation, where actual flaws in a foreign regime lead us to become too credulous about further accusations made against that regime.  For instance, if Saddam Hussein is known to have tortured people and to have repeatedly lied about his military activities, who wants to go out on a limb and defend him from the specific accusation that he is developing WMDs?  A few people (including some of my fellow Econlog bloggers) might have the courage to ask for proof of charges made against highly unpopular regimes, but not many.  History shows that if we base our foreign policy decisions on false accusations against unpopular governments, it usually does not end well. Here’s The Economist: Thanks to its high quality and low prices, Huawei’s telecoms gear is popular around the world. Not in America, where the Chinese giant is banished over (unsubstantiated) fears that it could be used by spies in Beijing to eavesdrop on Americans. But expelling Huawei from the United States—and pressing allies like Australia and Britain to do the same—was not enough for the Trump administration. It seems to want Huawei dead. It’s certainly possible that Huawei is spying on the US, but given Lemoine’s documentation of how the US government has repeatedly lied about China’s role in the Covid-19 pandemic, promoting completely unsubstantiated rumors that the virus escaped from a Chinese lab, why should we accept on faith that Huawei is a national security threat to the US? And what are we to make of the fact that the US government has seemed willing to use Huawei as a stick to achieve its trade negotiation demands?  What does it suggest if the US government is willing to do something that they claim would hurt our national security in exchange for a few more soybean exports? (1 COMMENTS)

On the (almost) 10-year anniversary of 9/11, I gave a speech at Western Kentucky University. The speech was titled “Lessons Not Learned from 9/11: An Economic, Numerate, and Constitutional Perspective.” Here are the opening lines: It’s altogether fitting and proper that we should take time to remember the innocent people whose lives were lost on September 11. Fortunately, I didn’t lose anyone on that horrible day. But some friends of mine did lose people they knew and cared for; one friend lost two of his friends: one in the airplane that flew into the Pentagon and one in the World Trade Center in New York. And anyone in this audience who has ever watched a rerun of Cheers or Frasier has some connection to someone murdered on 9/11: TV producer David Angell, who, with his wife, Lynn, was on American Airlines #11, the first plane to hit the World Trade Center. Before I go on, let me ask: is there anyone here who lost any of the 2,977 victims of 9/11? PAUSE But if all we do is remember and mourn the dead, we will lose an important opportunity to learn from what happened on 9/11. That’s why I’m here: to tell you what we can learn.   (0 COMMENTS)

Once upon a time, Newt Gingrich could say that Boris Johnson was “Margaret Thatcher with wild hair”. Now that would be difficult to argue. Matthew Lesh, Head of Research at the Adam Smith Institute, reports on CapX that “the UK could sacrifice a deal with the EU — which would in the short run seriously disrupt trade in goods and services, undermine security service data sharing, and raise serious legal issues around the Northern Ireland Protocol — for the worst possible reason: an interventionist economic agenda.” Lesh adds: “For a supposedly conservative Government that just vanquished Corbynite socialism, that would be quite something.” Lesh’s article is well worth reading. As an outsider, I can see that a “No Deal” path would energize Brexiters and thus strengthen the government’s position in the country. It is an expensive way of making your supporters happy: nasty divorces often are. But it may well be that Johnson and his cabinet think the price is worth paying. Yet in politics, you can hardly do stuff claiming that you are doing it only for the sake of pleasing your voters: that would defy their very purpose, as voters themselves want high motives and nice sounding reasons, for you to do stuff which actually pleases them. The high motive and nice sounding reason the British government worked out is that it should be able to support- with taxpayer money- all the companies it cares for. The Guardian (which is not Reason magazine) perfidiously reminds us that “Margaret Thatcher thought Europe allowed too much of it [state aid], Jeremy Corbyn believed there was not enough”. On the one hand, then, the fact that the British government thinks the state aid issue is palatable to its voters as an excuse for a “No Deal” Brexit tells us something. Namely, that perhaps our vignette of the Tory voter as by and large more free-market oriented than others does no longer resemble reality. Sure, these voters detest the EU more than anything else, but their leaders’ vocabulary used to imply that the EU ought to be detested because it is bureaucratic and protectionist (do you remember “Global Britain”?), a petty organization that regulates anything which moves. Now should it be detested because it puts a brake on government subsidies…? On the other hand, it may well be that conservative politicians, on top of believing a “No Deal” Brexit will be good for their popularity, actually believe that England needs more latitude in spending taxpayers money to the benefit of businesses of government’s choosing. On that, I have little to add to the point Lesh makes: Forsyth claims the Government is concerned that without subsidies the UK risks becoming “a technological vassal — reliant on either the United States or China, both of whom are unafraid to use the state to shape these markets”. This is crazy technological isolationism. No single country can or should develop every single technology and keep it for themselves. We are much richer because of technologies developed and produced in other countries. Imagine how awful everything would be if we only used British-made goods no iPhones, no Zoom, no Samsung TVs, no Amazon, no Microsoft Windows. The list is endless. Remember too that the great tech success stories in the US, and even in communist China, are led by the private sector, not the state. According to [ITV’s journalist Robert] Peston, Dominic Cummings [the main adviser to Boris Johnson] believes that the key to British success in the first industrial revolution was being the first mover in many key industries. Again, though this had little to do with state intervention. In fact, quite the opposite. The reason Britain was successful during the industrial revolution was a combination of freedom to disrupt existing modes of production and a strong emphasis on entrepreneurship, underpinned by property rights. We should take the same approach today by getting rid of cumbersome red tape and taxes that hold businesses back. Among contemporary ruling classes, the “technological isolationism” Lesh underlines is going strong. Everybody wants “his” science and “his” technology to be on top of everyone else’s. This is quite bizarre because one would think that if there is one area in which the benefits of international cooperation are clearly apparent is science and research. When a safe and effective vaccine about Covid-19 is happily produced, will you be refusing it, if it does not come out of your national labs? (0 COMMENTS)

“Populism” has received many definitions and historical interpretations. Some analysts take it simply as a more active form or stretch of democracy, but this may underplay the existence of very different theories and practices of democracy. One analytically useful definition of populism was given by political scientist William Riker in his 1982 book Liberalism Against Democracy. He defines the essence of populism as a political ideal in which the will of the people ought to be public policy: “what the people, as a corporate entity, want ought to be social policy.” “The people” and “the will of the people” have long been invoked by populists of the right and populists of the left. Carlos de la Torre (University of Florida) summarizes the history of populism in Latin America (see his article of the Oxford Handbook of Populism, 2017): I understand populism as a Manichaean discourse that divides politics and society as the struggle between two irreconcilable and antagonistic camps: the people and the oligarchy or the power block. Under populism a leader claims to embody the unitary will of the people in their struggle for liberation. The idea of the will of the people being incarnated in a popular leader was strongly expressed by Hugo Chávez, whom de la Torre quotes as saying: This is not about Hugo Chávez, this about a people. … I am not an individual, I am the people. Closer to us, both Donald Trump and Elizabeth Warren have invoked the will of the people, in a less flamboyant manner: Elizabeth Warren (quoted by David Frum in The Atlantic, December 2019): “We have to … have leadership from the inside, and make this Congress reflect the will of the people.”   Donald Trump at the 74th session of the United Nations General Assembly, on September 25, 2019: “A permanent political class is openly disdainful, dismissive, and defiant of the will of the people.” Jack Holmes, politics editor at Esquire, who believed that Alexandria Ocasio-Cortez’s primaries platform was reasonable, wrote (“The President’s War on Democracy Is a War on the American People,” August 14, 2020), speaking of president Donald Trump: Since democracy is our mechanism for communicating the will of the people into the laws and policies that govern our lives, this does not merely make the president an enemy of democracy. It makes him an enemy of the people. He ought to recognize the phrase. Populists of the left and populists on the right invoke the same will of the people against each other. Populism is the people against the people. Which brings us back to William Riker, who explained, on the basis of Arrow’s Impossibility Theorem and social choice theory, that the “will of the people” simply does not exist. It does not exist because there is no “the people” to have a will like an individual has. The “will of the people” is a rhetorical device to exploit a large proportion of the individuals who are the only reality under “the people.” The people’s preferences cannot be aggregated into a sort of social superindividual without being either dictatorial or incoherent, which is the essence of Arrow’s theorem. Those who pretend to represent the will of the people, from the French Revolution until 20th-century populist experiments, can only be authoritarian rulers, with or without the legal forms of democracy. (See also my Econlog post “Missing Something About Populism?“) The tyrannical strand of the French Revolution—there was also a classical-liberal strand, rapidly overcome—was anchored in the thought of Jean-Jacques Rousseau, who made “the people” and “the will of the people” the foundation of his political philosophy (see his The Social Contract, 1762; see also Graeme Garrard’s short piece, “The Prophet of National Populism“). Rousseau may be the father of modern populism of the left and of the right. Perhaps this illustrates what John Maynard Keynes wrote at the end of the General Theory: The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. (0 COMMENTS)

“Populism” has received many definitions and historical interpretations. Some analysts take it simply as a more active form or stretch of democracy, but this may underplay the existence of very different theories and practices of democracy. One analytically useful definition of populism was given by political scientist William Riker in his 1982 book Liberalism Against Democracy. He defines the essence of populism as a political ideal in which the will of the people ought to be public policy: “what the people, as a corporate entity, want ought to be social policy.” “The people” and “the will of the people” have long been invoked by populists of the right and populists of the left. Carlos de la Torre (University of Florida) summarizes the history of populism in Latin America (see his article of the Oxford Handbook of Populism, 2017): I understand populism as a Manichaean discourse that divides politics and society as the struggle between two irreconcilable and antagonistic camps: the people and the oligarchy or the power block. Under populism a leader claims to embody the unitary will of the people in their struggle for liberation. The idea of the will of the people being incarnated in a popular leader was strongly expressed by Hugo Chávez, whom de la Torre quotes as saying: This is not about Hugo Chávez, this about a people. … I am not an individual, I am the people. Closer to us, both Donald Trump and Elizabeth Warren have invoked the will of the people, in a less flamboyant manner: Elizabeth Warren (quoted by David Frum in The Atlantic, December 2019): “We have to … have leadership from the inside, and make this Congress reflect the will of the people.”   Donald Trump at the 74th session of the United Nations General Assembly, on September 25, 2019: “A permanent political class is openly disdainful, dismissive, and defiant of the will of the people.” Jack Holmes, politics editor at Esquire, who believed that Alexandria Ocasio-Cortez’s primaries platform was reasonable, wrote (“The President’s War on Democracy Is a War on the American People,” August 14, 2020), speaking of president Donald Trump: Since democracy is our mechanism for communicating the will of the people into the laws and policies that govern our lives, this does not merely make the president an enemy of democracy. It makes him an enemy of the people. He ought to recognize the phrase. Populists of the left and populists of the right invoke the same will of the people against each other. Populism is the people against the people. Which brings us back to William Riker, who explained, on the basis of Arrow’s Impossibility Theorem and social choice theory, that the “will of the people” simply does not exist. It does not exist because there is no “the people” to have a will like an individual has. The “will of the people” is a rhetorical device to exploit a large proportion of the individuals who are the only reality under “the people.” The people’s preferences cannot be aggregated into a sort of social superindividual without being either dictatorial or incoherent, which is the essence of Arrow’s theorem. Those who pretend to represent the will of the people, from the French Revolution until 20th-century populist experiments, can only be authoritarian rulers, with or without the legal forms of democracy. (See also my Econlog post “Missing Something About Populism?“) The tyrannical strand of the French Revolution—there was also a classical-liberal strand, rapidly overcome—was anchored in the thought of Jean-Jacques Rousseau, who made “the people” and “the will of the people” the foundation of his political philosophy (see his The Social Contract, 1762; see also Graeme Garrard’s short piece, “The Prophet of National Populism“). Rousseau may be the father of modern populism of the left and of the right. Perhaps this illustrates what John Maynard Keynes wrote at the end of the General Theory: The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. (3 COMMENTS)

  I found this video by Ivor Cummins quite informative. Of course, I’m open to being told why he might be, or even is, wrong. The data on Sweden and “dry tinder” are particularly interesting. Economists Dan Klein, Joakim Book, and Christian Bjornskov have written about this and he quotes it. One thing I think Cummins brushed by unconvincingly is the difference between the USA Midwest and the USA Northeast, at about the 23:40 point. He says the shape is similar. He and I have a different view of the word “similar.” One of the most upsetting parts is about how the lockdowns during the summer lengthened the time to herd immunity and therefore might themselves create an increase in the deaths in the fall and winter.       (0 COMMENTS)