Every so often, there is renewed interest in buying Greenland. I suspect that this is not likely to occur, as Greenland is currently not for sale. In any case, I have a better idea; sell Alaska to Canada, where it clearly belongs.In grammar school, we were taught that “Seward’s folly” actually turned out to be a great deal for the US, as Alaska ended up being worth far more than the $7.2 million we paid to Russia back in 1867. I’m not so sure. According to the Rockefeller Institute of Government, the most profitable state on a per capita basis is Massachusetts, followed by New Jersey.  That’s because affluent highly educated urban states pay far more in taxes than they receive federal spending.  In contrast, many poor and remote rural states are a drain on the Treasury.  Alaska is the 4th worse offender: Unfortunately, this data is not very accurate, as it mixes up true drains on the Treasury with states that just happen to have a lot of federal offices (such as Maryland and Virginia.)  Nonetheless, I am fairly confident that even a more accurate accounting would show Alaska to be a net drain on the Treasury.  Another source that seems more accurate has Alaska as the third worst offender.  It certainly pays less federal taxes than average on a per capita basis.  It really was Seward’s folly. Greenland looks impressive on the map.  Even if you account for the major distortion of the Mercator projection, it’s a big place.  But national greatness does not come from having a large land mass.  If it did, Ukraine would have quickly lost its war with Russia. The US does derive some benefit from Alaskan oil production, but I feel confident that the Canadians would exploit those resources more aggressively, reducing global oil prices and benefiting American motorists.  The taxes paid by Alaskan oil producers are not enough to cover the burden of carrying that remote and thinly populated state.  Just imagine the federal subsidy involved in delivering a first class letter to Nome, Alaska! Obviously, I understand that the US is not about to sell Alaska, and there are probably good reasons not to.  But think about this from the perspective of Denmark.  If this decision were made purely on a cash flow basis, they might wish to sell.  But when various intangible considerations are taken into account, that prospect becomes much less attractive.  The other purpose of this post is to remind people that things aren’t always as they seem.  For average people, it’s easy to visualize national wealth in terms of natural resources.  But in practice, the richest areas of the world are often rather poor in national resources–consider Singapore, Switzerland and Silicon Valley, and many resource rich places are relatively undeveloped (Siberia, Africa, Venezuela, etc.)  In the modern world, success is not about accumulating more frozen wasteland in the north; if it were then Canada would be a great power.  Rather success comes from using your existing land more effectively. It’s also worth recalling that the US is broke.  People in bankruptcy typically don’t look to make major purchases. PS.  Baffin Island is the same size as Japan and England combined, and shares Greenland’s balmy climate.  With Baffin Island you’d get Mt. Thor—one of the world’s coolest mountains, with the largest vertical drop. Why not ask Canada if they are interested in selling? Perhaps because average American voters have heard of Greenland, and recall seeing its impressive size on school maps in grammar school, whereas average Americans would be baffled if asked about Baffin Island.   (0 COMMENTS)

Most central banks around the world have a price stability mandate, and since the international monetary system regained its footing on a fiat basis after the inflations of the 1970s, that is mostly understood to mean a low inflation target. Over the past couple decades though, a growing number of economists have suggested instead an NGDP target. In George Selgin’s classic formulation, just like we expect prices of particular goods to fall if that industry becomes more productive, the price level should track changes in aggregate productivity, because this minimizes the total number of prices that have to change. What I want to argue here is that, not only is the price level the wrong target for monetary policy, it’s also a needlessly fuzzy target compared to feasible alternatives like NGDP.   Price, Quantity, and Quality Since Covid, we’ve all become familiar with the two ways firms can deal with rising nominal costs: the usual way – raising the price on the same container of yogurt – or “shrinkflation” – reducing the quantity of yogurt at a given price. The same is true in reverse, when nominal costs fall. Firms can cut the price of a given item. Or they can improve the item. If it’s not clear that product improvements are just shrinkflation in reverse, think of the “quantity” of something, not as the number of units that get bought, but as the satisfaction you get from the services it provides. I paid more for my current OnePlus phone than I did for my first smartphone, a Nexus 5, back in 2013. But while they both might be thought of as “one” phone, the OnePlus provides much higher quantities of things I actually care about: communication services, entertainment services, emergency services, and so on. Even though the price of a phone has risen since 2013, the quantity of services packaged inside it has plausibly risen even more, meaning that the price of these things I care about has fallen, not risen, even in nominal terms. A price index, which measures inflation, should track the price over time of meeting these needs, not the price of discrete goods, which may or may not be comparable over time in terms of the needs they meet. So any inflation index that looks at the latter instead of the former, will severely overstate inflation. But the argument here is broader than just a productivity norm. Think about what you’re looking for when buying the latest summer fashions. It’s not just fabric to cover your body. It’s stylishness services. And last year’s fashions provide a lower quantity than they did last year, despite being the exact same item physically. Productivity is just a special case of the point that similar goods might package different bundles of services over time. And this makes it tricky to decompose price changes of particular goods into quality changes (that is, changes in the quantity of the services it provides), versus actual changes in the price of those services. Given that we can only observe things like “the price of phones” and “the price of shirts”, and not things like “the price of communication services” and “the price of stylishness services”, the Consumer Price Index Handbook suggests a few different ways of dealing with this problem: Ignore it and just track item prices, which is equivalent to attributing all price increases to inflation, and none to quality changes. This approach is specifically not recommended, and leads to dramatically higher estimates of inflation. Pick a benchmark industry and attribute higher prices up to the benchmark to inflation, and the rest to quality improvements. This of course depends on appropriate choice of benchmark, which should be some industry with no quality or productivity changes. Find overlapping goods. If a new and an old model sell at the same time, the difference in price can be assumed to reflect quality differences. But this does not account for considerations like future-proofing or the value of newness as such. Explicitly adjust for quality based on expert opinion. This comes with all the obvious downsides of attributing expert preferences to actual consumers.   Actual price indices turn out to be very sensitive to the particular methods used here. Index and aggregation theory are, on the whole, well-developed and rigorous in thinking through how to interpret actual data in terms of subjective meaning. I’m on record defending imputed rental equivalence, one of the more misunderstood and controversial aspects of price index calculations. But the fact is, there is simply no satisfying way to account for quality differences over time in a price index.    Inflation Targeting in a Progressive Economy While most statistical agencies are savvy enough not to ignore quality change entirely, in practice, each of these methods is employed conservatively enough that we can be confident reported inflation is systematically overstated. One might even think of a 2% inflation target as, implicitly, just compensating for the systematic mismeasurement of inflation. But can we do better? George Selgin, Scott Sumner, David Beckworth, and many others have made convincing cases that NGDP targeting is better for financial and macroeconomic stability than inflation targeting. But in addition to that, it also has the advantage of sidestepping the issue of decomposing the price changes of goods into changes in the quantity of the services they provide, or changes in the price of those services themselves. No doubt there is still a place for price indices, imperfect as they are, in important policy questions like keeping the purchasing power of benefit payments roughly stable, or in macroeconomic questions like growth accounting (how much of NGDP growth represents real growth versus inflation?). But for monetary policy, relying on indicators that correspond more directly to something economically meaningful – indicators like nominal GDP, that simply tally up nominal spending, rather than price levels, that demand complicated hedonic adjustments to be economically meaningful – has a number of benefits in addition to financial stability: An NGDP target provides clearer information to the Fed itself when monetary policy is on the right or wrong track to achieve its long-term goals. An NGDP target improves accountability. Fuzzy as the price level is, the success of monetary policy cannot be evaluated solely on the behavior of the price level, even ex post. A single, clearer benchmark reduces the scope for excuses for monetary policy failure (and, by the same token, makes it clearer when monetary policy is not at fault). A clearer target reduces the incentive to issue cart-before-the-horse regulations with a view to improving the clarity of the target. Pricing regulations in the EU mandating per-kilogram rather than per-item prices, for example, are justified in part by their effect on statistical collection, and the collection itself can entail significant overhead in many industries.  This argument doesn’t uniquely suggest NGDP as a target. Indeed, the money supply might work just as well, provided we measure it correctly. But it does suggest that, in an economy where tastes and technology change from year to year, inflation in particular is much too fuzzy to be an appropriate target for monetary policy.   Cameron Harwick is a monetary economist and Associate Professor of Economics at SUNY Brockport. Follow him on Twitter at @C_Harwick. (0 COMMENTS)

  Many of you have probably read about the famous bet in 1980 between Julian Simon and Paul Ehrlich. I wrote about it here. The bet was based on their underlying views of the world. Ehrlich, the pessimist, thought population growth would run up against resource constraints, driving the prices of various materials higher. Simon, the optimist, thought that humans would advance technology so that more goods could be produced without increasing prices and maybe even dropping them. Simon, by the way, always admitted that it was a bet he could lose. The bet was about the movement of prices of 5 materials between 1980 and 1990. He won. I’m writing a biography of Julian Simon for my Concise Encyclopedia of Economics because I think more people should know about him and that he was more important than some Nobel Prize winners. As I’ve been writing, I’ve been paying more attention to the literature on the bet. It turns out that there’s a new article and the article is illuminating. It’s Hannah Ritchie, “Who would have won the Simon-Ehrlich bet over different decades, and what do long-term prices tell us about resource scarcity?” Our World in Data, January 5, 2024. Ritchie goes decade by decade, pointing out that within a decade there were often big swings in prices so that in some decades Simon would have won a similar bet and in other decades Ehrlich would have won. But, she points out, Simon especially and Ehrlich somewhat were concerned about the long run and 10 years is hardly the long run. The problem, of course, is that it’s hard to make bets about the long run because at least one of the bettors might not be around to pay up or receive the winnings. Keynes had something to say about that. So Ritchie looks at prices from 1900 to 2022 and concludes: The key takeaway for me is that, over the long run, prices didn’t change dramatically. A lot has changed since 1900, but the prices of the five metals are, surprisingly, not much different from what they were in 1900. Chromium is, perhaps, the one exception where average prices in the last few decades have been higher than they were in the early 20th century (although prices in 2020 were exactly the same as they were in 1900). She then writes: Crucially, this is despite the fact that the world produces much more of these materials. The chart below shows the change in global production of each of the five materials since 1900. Today, the world produces 40 times as much copper annually and 250 times as much nickel as it did in 1900. The fact that we produce far more materials than we did in the past, yet prices have barely changed, suggests that contrary to Ehrlich’s prediction, we’re not close to running out of these materials any time soon. That is what brings me closer to Simon’s worldview. By the way, I offered Paul Krugman a version of the Simon/Ehrlich bet in 1997. He didn’t respond.   The pic is of Julian Simon. (0 COMMENTS)

Here’s a personal tidbit about me – I’m a bit of a true crime buff. I often listen to true crime podcasts and audio essays while unwinding at the end of the day, or during my time in the gym. (My wife finds the idea of listening to podcasts talking about horrific crimes to be an incomprehensible method of winding down, nor does she understand how I can possibly enjoy horror films.) One thing I’ve noticed is that in many of the cases I’ve heard, the criminal drastically overestimates their odds of getting away with the crime. One of my favorite shows in the genre is called The Casual Criminalist. In this show the host, Simon Whistler, is provided with a script from one of his writers that he’s never seen or read before recording. He then reads it off for the first time on the show, frequently breaking from the script to add in some of his own side commentary. Very often, this takes the form of him absolutely roasting the criminal featured in the episode for their ineptitude both in committing their crime and their attempts to cover up what they did, such as this case involving a young man. More famously (or infamously), there is the case of Leopold and Leob, two young men convinced they were capable of masterminding the perfect crime, but whose actual performance was didn’t exactly rise to the level of Professor Moriarty. In a recent post I once again touched on Gary Becker‘s model of criminal behavior. To briefly recap, Becker modeled choices about committing crimes as a form of rational behavior. Criminals consider the expected payoff of their crime, and compare it the expected cost of committing the crime. The expected cost is a function of the probability and severity of punishment. A severe punishment might provide little deterrence if the odds of being punished are minuscule. And near-certain punishment might also provide little deterrence if the punishment itself is trivial. To put more specific numbers to it, a 0.1% chance of a $1,000 penalty provides as much deterrence as a guaranteed $1 penalty – not much. In the case of Leopold and Leob, even though their crime carried the possibility of a death penalty or a life sentence, their (false) certainty that they could evade detection nullified any deterrence. This highlights an important point. When speaking of criminals behaving rationally accounting for the probability of punishment, what’s relevant is the criminal’s own subjective estimation of the probability of being caught and punished. When economists talk about people making “rational” decisions, that does not mean their decisions can’t be mistaken or ill-informed. If a criminal drastically underestimates their likelihood of being caught, their estimation of the expected costs of the crime will be lower than the actual costs. As a result, they might end up carrying out a crime that is “not worth it” by their own lights. This does not show that the criminal was behaving “irrationally” as economists use the term. But if criminals systematically underestimate their likelihood of being caught and punished for a crime, that would lead to criminals overproducing their crimes – criminal acts that might have been deterred if they had a better understanding of the likely outcome will fail to be deterred. This provides one argument in favor of stringent punishment for crimes. If criminals underestimate the expected costs of their behavior because they systematically underestimate the odds of punishment, the only way to raise the expected cost is to increase the severity of punishment. But sometimes, criminals are able to more accurately assess their odds of getting caught. Consider the case of Joseph DeAngelo, known by many monikers, most famously as the Golden State Killer. His criminal activities carried on from 1974 to 1986. He was finally apprehended in 2018, 40 years after his spree ended. DeAngelo, it turned out, was a police officer. As a result, he knew far better than most how to avoid detection and how investigations would be carried out. He was very careful, for example, to never leave fingerprints behind. But there’s something particularly unusual about DeAngelo – the 40 year gap between when his crime spree ended and him being caught. In those 40 years, he didn’t strike again. This is noteworthy – serial killers almost never stop. A serial killer who stops killing is so unusual that it’s usually taken as a sign that the killer has themselves died or perhaps been arrested for some other crime. So why did DeAngelo stop? Well, shortly after his final act as the Golden State Killer, something happened that made waves in the law enforcement world. The first court case where DNA evidence was used to secure a murder conviction occurred. This put DNA evidence on the radar for law enforcement officers everywhere – including DeAngelo. And he realized what this meant. While he had taken great care to avoid leaving evidence that police investigators could link to him up until that point, he also knew his DNA would be present at previous crime scenes and very likely new ones as well. Suddenly, the “probability of punishment” variable for him shot up drastically, and combined with the quite high severity of punishment that would await him for his acts, carrying out further crimes was suddenly “not worth it” anymore. And thus a very brutal and pathological serial killer whose criminal acts had been intensifying and escalating for over a decade suddenly stopped. This makes perfect sense under Becker’s theory of crime. And while rational choice theory isn’t a perfect model to describe all human behavior in all circumstances, I think this shows that it explains a much larger scope than most give it credit for. (0 COMMENTS)

Many Americans are increasingly disillusioned with the ability of the free market to bring down skyrocketing housing prices. More Americans believe housing prices to be inflated by the greed of landlords and lobbyists, combined with the inability of policymakers to effectively regulate housing costs. Proof of this is that rent control has returned to the mainstream. In 2024, 22 rent control/stabilization statewide bills were enacted, and the Biden administration proposed capping rent increases across the country at 5-percent annually. Proponents of rent control agree with Bryan Caplan on one thing: housing prices are artificially high. In his latest appearance on EconTalk, Caplan and Russ Roberts discuss why housing regulations are the disease, not the cure to rent increases. Roberts and Caplan both dispel myths from both sides of the debate over why housing is so expensive. They mention that anti-regulation proponents often argue that high housing prices are purely caused by supply and demand, people are just willing to pay more to live in cities like New York, Los Angeles, and San Francisco. While the other side believes that corporate greed is responsible for the 21 million rent burdened households in America. Both sides are missing the point that housing regulations themselves increase the cost of housing. Caplan outlines how local governments often make it exceedingly difficult to build new housing, particularly high-density housing, due to aesthetic, environmental, and urban planning concerns. This causes the cost to produce housing to increase, which is passed on to the consumer through rent increases, for instance. Additionally, pushing down supply causes an artificial shortage of housing, leading consumers to bid up the price. Caplan’s solution is the title of his book, Build, Baby, Build; eliminate regulations choking supply, and unleash the power of the market which incentivizes developers to produce affordable housing. Caplan  adds nuance the public choice viewpoint that inefficient regulations exist because interest groups and self-interested politicians benefit from them, despite their larger dispersed costs to the community. Caplan disagrees. He argues that people 1.) do not believe deregulation will cause prices to decrease, and 2.) favor regulation due to risk aversion. People want to ensure that all concerns, even trivial concerns, are addressed. Because it is so difficult to completely avoid risk, very few projects will meet that threshold. There’s a common view in public choice that interest groups, and not public opinion drive policy. One of the main things that I’ve been saying in my career is, actually democracies pay a lot of attention to public opinion, it’s just that public opinion is so different from what economists assume it would be…It really is normal for tenants in the United States to oppose new construction… people are very focused on everything that can go wrong, and the government needs to protect us from that long list. If we build more stuff there could be parking problems, it could harm the character of the neighborhood, there could be birds displaced. Economists might think these are just lame excuses, but they strike a chord with most of the population. But why would people want regulation given its negative effect on supply? Roberts and Caplan acknowledge that deregulation has costs, one of many touched on during the podcast is aesthetic concerns. As Roberts states, it is possible that allowing more high-density housing to be built in San Francisco would reduce neighborhood character. Caplan responds that developers want to provide an aesthetic product, not out of the goodness of their heart, but out of self-interest, as they can then charge higher prices for individuals to live in better looking buildings. To Caplan, a world with less regulation would provide more housing, and more aesthetic housing. This is creative destruction in action, as historical buildings are demolished and replaced by aesthetically and technologically improved buildings.  In the book I have a time machine, Ed Glaeser and I go back to 1931 to see the original Waldorf Astoria Hotel, which was just gorgeous, so it is just a crime to have torn it down, right? Well, guess what came up two years later: The Empire State Building, maybe the most beloved building ever made. You should always be thinking about the future. Anytime you see something you really like, normally there was something there before that was torn down that somebody previously thought was wonderful. I say at least be open-minded the possibility that developers want to make things better. Roberts points out that restrictive housing directives were not always prevalent, so what is behind the shift in regulatory appetite? Caplan attributes a sizable degree of the pile of red tape to local governments being more attentive to activists, and better organization from concentrated interest groups. Many of these activists are motivated by environmental concerns, revolving around population density and new construction. However, cities have lower carbon emissions per person than more sparsely populated areas, and new construction is more carbon efficient. To Caplan, preventing new housing from being built has a high environmental opportunity cost, and true environmentalist activists would value the harm reduction that new construction provides. However,  …You cannot protect the planet in California because if you prevent people from getting affordable housing in California they are going to move to another place in the country where emissions will be much higher. I you are worried about global warming, what matters is not which part of the country the emissions come from, but instead what the total emissions are. A real green would want give a massive green light to tons of construction in California. Roberts asserts that proponents of both regulation and deregulation function as if there is a dial of regulation that can be perfectly placed on the optimal level. The problem with the dial is that it is too vague, people focus on the amount of regulation rather than the laws on the books themselves. But this tells us little about what optimal housing policy is. Roberts challenges Caplan on which specific policies he favors, as just cutting half the regulations is too simple. Caplan proposes by-right development, under which if compliance with zoning regulations is met, approval for a project must be granted. This would slash the ability of city councils to discretionarily shut down development. Caplan suggests a blueprint for success is Houston: a city with lower housing prices, and a population boom. Caplan makes sure to mention that Houston is not an unregulated Kallipolis, but what the city has done is diminish the public will to regulate through contractually internalizing the preferences of particular neighborhoods. …Houston successfully reduces popular pressure for regulation by respecting not only homeowner associations, but also restrictive covenants. In neighborhoods where people want to regulate, the government lets them do it contractually, which means that if the people have an intense demand for regulation, they can. Meanwhile, neighborhoods where people are more apathetic stay open. You just have a lot more variety, which is crucial, if every major city were half strictly regulated and half wild west, which would probably solve 80% of the problem. The consequences of over-restriction extend beyond the housing market. As Roberts touches on, housing regulations reducing supply make it more difficult for low socioeconomic status people to live in areas of high economic productivity. But there are reasons for current renters and homeowners to support deregulation. Housing prices would decline, and it would be easier for homeowners to sell their home to a developer, or upgrade from a starter home. Housing regulations are popular even though their costs are high because they are largely unseen. This is why Caplan authored his book, to make the copious benefits of the invisible hand visible.   Related EconTalk Episodes: Jenny Schuetz on Land Regulation and the Housing Market Judge Glock on Zoning and Local Government Katherine Levine Einstein on Neighborhood Defenders Charles Marohn on Strong Towns, Urban Development, and the Future of American Cities Alain Bertaud on Cities, Planning, and Order Without Design   Related Liberty Fund Content: Emily Hamilton on Housing Deregulation, The Great Antidote Podcast How to Fix the Broken Housing Market, by Jason Jewell, at Law and Liberty Solving the Housing Crisis, by Mark Pulliam, at Law and Liberty Not enough housing? Let the market in, by John Phelan, at Econlib Is Californian Housing Policy a Form of Central Planning? by David Henderson, at Econlib (0 COMMENTS)

Two American-born citizens with military experience, one a veteran, the other a current soldier, committed public mayhem at the beginning of the new year: veteran Shamsud-Din Jabbar in New Orleans and decorated Green Beret Matthew Livelsberger in Las Vegas—the former case being much more destructive and lethal. Both events raise troubling questions about what caused these individuals to act as they did (from what we know). The causes are likely complex. There may be, in each case, a cause that can be called the major one, but it is doubtful that we can ever isolate a single sine-qua-non cause. This is not how politics (the process by which people are governed on a day-to-day basis) typically approaches the issue. Consider the following as alternative major causes: Military experience; Access to motor vehicles; Haitians eating pets; The southern border; The supply chain; Sagitarius A*, the black hole at the center of our galaxy. The president-elect of the United States chose the fourth explanation—see “Trump Doubles Down on Border Security Amid Domestic Terror Unease,” Wall Street Journal, January 2, 2025: On Thursday, even after it was shown that 42-year old Shamsud-Din Jabbar wasn’t in the rented truck when it crossed the border, Trump still blamed the current administration. “With the Biden ‘Open Border’s Policy’ I said, many times during Rallies, and elsewhere, that Radical Islamic Terrorism, and other forms of violent crime, will become so bad in America that it will become hard to even imagine or believe,” Trump wrote Thursday. “That time has come, only worse than ever imagined.” An ancient philosopher would struggle to identify this declaration with a state pursuing the “social good.” What I have called “simplistic public policy” seems to be a standard output of politics, when it’s not simply arbitrary nonsense as William Riker might have said. Public choice theory tries to explain why. James Buchanan, one of the main conceptors of this strand of analysis, also developed a model of the state in which there is a stage (the “constitutional stage”) where politics can be rational and beneficial as a multiparty exchange where each and every individual holds a veto on the rules constraining day-to-day politics. Whether one agrees or not with this justification of the state, it is an impressive attempt to reconcile politics and liberty. Of the possible major causes I listed above, No. 1 seems the most rational. A quite remarkable Wall Street Journal report just raised the issue of military men or veterans involved in acts of public violence (Vera Bergengruen, Nancy A. Youssef, and Tawnell D. Hobbs, “‘I Only Knew How to Do One Thing’: New Year’s Violence Resurrects the Dark Side of Military Life,” January 6, 2025: “Transitioning out of the service is probably one of the most challenging things an individual could do,” said retired Army Lt. Col. Sam Andrews, who is on the board of directors for Bravo Zulu House, a transitional living facility for veterans with post-traumatic stress disorder and addiction. “We lose our sense of purpose, we lose our sense of tribe, we lose our sense of meaning.” … According to the National Consortium for the Study of Terrorism and Responses to Terrorism, or Start, almost 16% of extremists who have committed criminal offenses in the U.S. since 1990 had military backgrounds. As argued by Hayek, the “sense of tribe,” to which collectivism (and nationalism) is the modern form, is a mortal enemy of the free society. The military defenders of a free society should instead be instilled with a sense of individualism, a difficult task if that sentiment has become shunned in society. And how is this compatible with what is required from soldiers facing individual death? Certainly, the defenders of a free society should not be trained as “killing machines,” notwithstanding what Mr. Trump wrote in a 2019 tweet. These considerations raise a Gordian knot of related problems, which include “forever wars,” the need to defend liberty by force against international thugs, and perhaps the unavoidability of some militarily powerful and freedom-oriented state capable of informally playing a role of international gendarme given the extreme danger if not the impossibility of a world state. An alliance of states representing free or hopefully mostly-free individuals like NATO may be another part of the puzzle’s solution (see my libertarian fable on that). Raw political utterances are not the solution. ****************************** Sagitarius A*, the black hole in the middle of our galaxy, photographed by the Event Horizon Telescope (0 COMMENTS)

Two American-born citizens with military experience, one a veteran, the other a current soldier, committed public mayhem at the beginning of the new year: veteran Shamsud-Din Jabbar in New Orleans and decorated Green Beret Matthew Livelsberger in Las Vegas—the former case being much more destructive and lethal. Both events raise troubling questions about what caused these individuals to act as they did (from what we know). The causes are likely complex. There may be, in each case, a cause that can be called the major one, but it is doubtful that we can ever isolate a single sine-qua-non cause. This is not how politics (the process by which people are governed on a day-to-day basis) typically approaches the issue. Consider the following as alternative major causes: Military experience; Access to motor vehicles; Haitians eating pets; The southern border; The supply chain; Sagittarius A*, the black hole at the center of our galaxy. The president-elect of the United States chose the fourth explanation—see “Trump Doubles Down on Border Security Amid Domestic Terror Unease,” Wall Street Journal, January 2, 2025: On Thursday, even after it was shown that 42-year old Shamsud-Din Jabbar wasn’t in the rented truck when it crossed the border, Trump still blamed the current administration. “With the Biden ‘Open Border’s Policy’ I said, many times during Rallies, and elsewhere, that Radical Islamic Terrorism, and other forms of violent crime, will become so bad in America that it will become hard to even imagine or believe,” Trump wrote Thursday. “That time has come, only worse than ever imagined.” An ancient philosopher would struggle to identify this declaration with a state pursuing the “social good.” What I have called “simplistic public policy” seems to be a standard output of politics, when it’s not simply arbitrary nonsense as William Riker might have said. Public choice theory tries to explain why. James Buchanan, one of the main conceptors of this strand of analysis, also developed a model of the state in which there is a stage (the “constitutional stage”) where politics can be rational and beneficial as a multiparty exchange where each and every individual holds a veto on the rules constraining day-to-day politics. Whether one agrees or not with this justification of the state, it is an impressive attempt to reconcile politics and liberty. Of the possible major causes I listed above, No. 1 seems the most rational. A quite remarkable Wall Street Journal report just raised the issue of military men or veterans involved in acts of public violence (Vera Bergengruen, Nancy A. Youssef, and Tawnell D. Hobbs, “‘I Only Knew How to Do One Thing’: New Year’s Violence Resurrects the Dark Side of Military Life,” January 6, 2025: “Transitioning out of the service is probably one of the most challenging things an individual could do,” said retired Army Lt. Col. Sam Andrews, who is on the board of directors for Bravo Zulu House, a transitional living facility for veterans with post-traumatic stress disorder and addiction. “We lose our sense of purpose, we lose our sense of tribe, we lose our sense of meaning.” … According to the National Consortium for the Study of Terrorism and Responses to Terrorism, or Start, almost 16% of extremists who have committed criminal offenses in the U.S. since 1990 had military backgrounds. As argued by Hayek, the “sense of tribe,” to which collectivism (and nationalism) represents the modern form, is a mortal enemy of the free society. The military defenders of a free society should instead be instilled with a sense of individualism, a difficult task if that sentiment has become shunned in society. And how is this compatible with what is required from soldiers facing individual death? Certainly, the defenders of a free society should not be trained as “killing machines,” notwithstanding what Mr. Trump wrote in a 2019 tweet. These considerations raise a Gordian knot of related problems, which include “forever wars,” the need to defend liberty by force against international thugs, and perhaps the unavoidability of some militarily powerful and freedom-oriented state capable of informally playing a role of international gendarme given the extreme danger if not the impossibility of a world state. An alliance of states representing free or hopefully mostly-free individuals like NATO may be another part of the puzzle’s solution (see my libertarian fable on that). Raw political utterances are not the solution. ****************************** Sagittarius A*, the black hole in the middle of our galaxy, photographed by the Event Horizon Telescope (1 COMMENTS)

As I get older, I increasingly feel like this isn’t the country I grew up in. The most dramatic recent changes have been in the area of politics, where the system is becoming almost unrecognizable to those of us who were born in the mid-20th century. Here’s Bloomberg: The coalition between Clegg and Zuckerberg, the founder of Meta Platforms Inc., proved far more successful, though it, too, is coming to an end, Clegg announced on Thursday. Nevertheless, Clegg’s role has outlived its purpose as Meta contends with a new political landscape, one in which the company must instead turn to its highest-ranking Republican executive, Joel Kaplan, who joined Meta in 2011 and will succeed Clegg as president of global affairs. . . . The motivations, both personal and business, are obvious. Less than a year has passed since the president-elect threatened to throw Zuckerberg in prison for “the rest of his life.” . . . It would be unfair to single out Zuckerberg. Several other Silicon Valley contemporaries have flown to Florida to kiss the ring and empty their wallets. It’s not unusual for the giant tech companies to find safety in numbers and march in lockstep. For the second Trump term, the consensus is that it’s better to try to butter up the commander-in-chief, to treat him with reverence rather than opposition. So what has changed?  In the past, the power of the president was limited.  For instance, Congress set tariff rates.  Over time, however, the power of the presidency has steadily expanded.  So-called “industrial policies” often favor one firm over another.  Regulators increasingly use vague “national security” justifications for a wide range of discretionary decisions.  Elon Musk’s recent move toward the GOP may have been partly motivated by a perception that the Biden administration was biased against his companies. You might argue that big business has always been somewhat political.  That’s true.  But I cannot recall ever seeing a period with such intense focus on the political affiliation of top corporate executives.  For most of my life, it was assumed that the majority of CEOs were Republicans, regardless of which party controlled the White House.  Increasingly, you see business people changing parties as the political winds shift. I think it’s a mistake to view all of this in left-right terms, which is the most common framing in the US media.  Our neighbor to the south has been going through a similar transformation, under a regime generally regarded as being on the left. Andrés Manuel López Obrador moved Mexico toward nationalistic economic policies, opposition to clean energy policies, and increased authoritarianism.  He is viewed as being on the left, but what do terms like left and right even mean in today’s world? (0 COMMENTS)

Inclusion and openness In Part 1, I wrote about Don Lavoie’s argument that robust liberalism requires open (democratic) politics that can make useful the tacit, dispersed knowledge of voters’ “interests, concerns, and demands to provide governance structures that people will use to resolve political disagreements peacefully.” Liberalism requires open democracy just as it requires open markets, for many of the same reasons. It would be hard to find a better place to go next than Kevin J. Elliott’s Democracy for Busy People. Elliott, a political scientist at Yale, riffs twice on the late political theorist Judith Shklar to make a case for “putting inclusion first”—making inclusion the first (but not the only) consideration when thinking about democratic theory. His argument complements Lavoie’s concerns about “openness.” Democratic inclusion matters to Elliott because of his commitment to political equality. He also argues that externalities and associated injustice result from political apathy. By apathy, Elliott does not mean indifference or ignorance but complete inattentiveness to politics—not even being aware of the actions, good or bad, of the government or the challenges facing people in a government’s jurisdiction.  Inclusion matters more than equality because equal but exclusive politics, such as in Athenian democracy or an “epistocratic” system, creates a whole category of unrepresented people. Unrepresented people depend on politically empowered people to a) know best what the disenfranchised want and need and b) actually pursue those things on behalf of the disempowered. In other situations, classical liberals may point out that no one knows better than individuals what they want and need.  Adam Smith warns how feeble is the spark of benevolence when expected to counter the force of self-love. The value of control over political institutions creates a political “rent” that can be used to secure economic rents. This creates an incentive for those with representation to restrict access to it. Straightforward rent-seeking arguments lead us to expect the enfranchised to preserve their special access. Special political power allows those who hold it to extract politically what would be harder to secure economically from (and at the expense of) the disenfranchised.  In an inclusive political system, people can advocate for themselves. Even when there is inequality, so long as people are allowed to represent themselves, there is a path toward representation through sheer numbers that simply does not exist without inclusion.  Demanding democracy Lavoie was an anarchist, and so he proposed expanding the openness of democracy by doing away with its reliance on government elections. Lavoie worried about the meaning of elections and observed that the mere presence of something called an election is insufficient for democracy without openness and publicness.  Instead, Lavoie suggested a radical expansion of our conception of democratic politics beyond voting to encompass an ongoing public discourse about rights and responsibilities across public life.  In Lavoie’s conception, the appropriate grounds for democratic participation include: all conversations about rights and responsibilities and public contestations (advocacy and protest efforts) that form public opinion/political culture, and  all open institutions that incorporate the revealed preferences of citizens (the common law, market outcomes).  Political institutions can make inclusive democracy easier or harder to achieve. If it’s true that wider participation is better for democracy, and that democracy is crucial to liberalism, then Lavoie falls short when he fails to anticipate problems with such a demanding model of democracy.  Elections might be both insufficient and essential for democratic inclusion. Representative government has a key benefit over Lavoie’s model: it dramatically lowers the demands of politics on ordinary people. The demandingness of Lavoie’s conception of democratic institutions would make those institutions an effective barrier to entry into democratic politics. Such a demanding democracy should be expected not to encourage but to frustrate openness. People are political, yes, and politics are important. But people are not only political, and politics is not all there is.  Kevin J. Elliott to the rescue.  Real-life barriers to political inclusion One of the most valuable insights from Democracy for Busy People is Elliott’s discussion of busyness and what he calls the paradox of empowerment. These are simple, important ideas. Busyness is unavoidable: people have to go to and from work; children have to be tended to; emotional exhaustion—from poverty, discrimination, tragedy, or trauma, or even something as banal as difficult neighbours—also takes up time. Elliott doesn’t put it this way, but busyness follows directly from opportunity costs. People have—and have a right to have—non-political demands on their time, and the demandingness of politics gives citizens a claim against a too-demanding democratic system. Busy people are a fact of life, so a democratic system that is too demanding to include busy people will fail to prioritize inclusion and openness.  The paradox of empowerment is more complicated, but obvious once it’s explained. A democratic system cannot increase the participation of busy people by adding more ways to participate. Someone who can’t make time to vote in regular elections won’t become more involved if they also have the opportunity to attend meetings or vote on more issues directly. They don’t even have time to vote! The people looking for more ways to spend time and resources on politics become more disproportionately influential. No matter what their intention, democratic innovations that add more ways to participate without reducing the demandingness of politics continue to exclude those who are already underrepresented. More demandingness from politics further empowers those who already have the time, expertise, money, and inclination to participate.  Lavoie’s vision of radically expanded democracy suffers badly from its lack of consideration for busyness and the paradox of empowerment. A system in which everyone constantly participates in conversations contesting and establishing our rights and responsibilities might be “open” in an ideal world. But in this world, busyness and the importance of our lives beyond politics means that Lavoie’s proposed system would produce exclusive politics and empower those who are already over-represented while neglecting normal people with more demands on their time.  Lavoie’s vision of democracy therefore can’t solve the problem of balancing interests and values to secure the buy-in and legitimacy that allow democracy to deliver political peace. In contrast, Elliott proposes a model he calls “stand-by citizenship.” Stand-by citizenship has three requirements: habitual attention to politics, knowledge of how to participate, and the ability to ramp-up involvement when needed. Awareness of politics ensures that citizens monitor their government and hold elected officials accountable. It also allows citizens to determine whether they consider political participation worthwhile.  With habitual attention, government accountability becomes a small part of day-to-day life rather than a demand for in-depth resources and attention. Habitual attention is a common feature in Lavoie’s and Elliott’s democratic visions, but in Elliott’s conception, the division of democratic labour and the specialization that follows from it relieves ordinary people of much of the burden of democratic governance. For example, some people become elected representatives, others learn about and advocate in the policy areas they consider most important, still others specialize in civic education more broadly.  Nuts-and-bolts knowledge of the political system gives political awareness teeth. Civic knowledge ensures that citizens understand what is politically possible and that their dissatisfaction can be backed by political action. People without civic knowledge are also more vulnerable to demagoguery—they are less able to gauge whether the often vague political aspirations encouraged by charismatic leaders are realistic.  Knowledge of political systems allows every citizen to represent themselves and their political groups, making self-interest an important force supporting political representation.  Finally, the ability to ramp up political involvement, rather than a demand for unceasing, intensive political engagement, limits the demands democracy puts on most citizens most of the time.  This much less demanding model for democratic citizenship prioritizes openness. And it recognizes the problem that democracy solves. It provides a firmer foundation for liberals committed to democratic openness in a world that seems ready to step back from democracy, markets, and liberalism.  Read more:  Socialist Fantasies by Sarah Skwire Why Libertarians Distrust Political Power by Steve Horwitz Intellectual Portrait Series: An Interview with James M. Buchanan     Janet Bufton is an educational consultant and copy editor in Ottawa, Ontario, working primarily on projects involving Adam Smith, trade and regulatory policy, and Indigenous and labour market economics. (0 COMMENTS)

The person who says it cannot be done should not interrupt the person doing it. ~ Chinese Proverb “That will be thirteen ninety-nine plus a dollar and one cent for tax,” said the clerk at Orchard Supply Hardware. I handed him my Visa card. After leaving the store with my wife on a beautiful Saturday morning in Monterey, the world looked suddenly rosier. I felt a profound sense of freedom. The reason was that I had paid $1.01 in tax, rather than the $1.04 I would have paid had the tax rate been 7.75% instead of 7.25%. The word for what I felt was eudamonia, a word I remember from my college study of Aristotle for a feeling of well-being. I felt a love for my fellow Monterey County residents, or at least 38% of them. I felt that in the politicians’ rush to take away our freedom, my allies and I had slowed it down and surprised the hell out of a ruthless, well-funded juggernaut. In the process, I discovered how even a fairly badly organized small group that is willing to make a moral case, take the offensive, and not back down when attacked can beat a much bigger group that thought it had the moral high ground and didn’t. Why, you might ask, would I get this excited about paying an outrageous tax instead of an even more outrageous tax? Had I, a man who believes that taxes should be close to zero, gone off my rocker? Maybe, but that’s not how I see it. Let me explain. Four days earlier, Tuesday, December 2, 2003, the votes on the all-mail election had been counted. The issue on the ballot: should the sales tax rate be raised from 7.25% to 7.75% to fund Natividad hospital, a government-run, mismanaged (but I repeat myself) hospital? That wasn’t the ballot language, of course. The government officials who put the sales tax proposal on the ballot would never try to sway voters. No. Instead, the “Impartial Analysis by County Counsel” stated that the tax would “avoid life-threatening reductions in Natividad Medical Center’s healthcare delivery system.” No bias there. Just the facts, ma’am. These are the opening 3 paragraphs of an article I wrote in January 2004 titled “The Reluctant Activist, or Not Only Can You Fight City Hall, You Can Actually Win.” It’s one of the articles I promised to post in response to Janet Bufton’s post titled “The Other Kind of Romance in Politics,” EconLog, December 12, 2024. She had pointed out that it’s important to work for change when you’re in a democracy and not just give up on it. At least that’s what I got from her post. This is one of my stories of committing a lot of time to working against a tax increase. Another excerpt: This was new territory for both the pro-tax and anti-tax sides. The anti-tax side had to ask itself: how do we spend our $4,000, all in voluntary contributions, and our time, through November? The pro-tax side had to ask itself: how do we spend our $450,000, much of it collected from union members who had no say in how their money was used, on signs, incessant scare advertising on TV, and massive get-out-the-vote phone banks. And apparently some on the pro-tax side asked themselves, “How much time should we spend stealing the anti-tax side’s signs every night.” Almost 1,000 of our “No on Q” signs were stolen during the campaign, a fact we were to state often on talk-radio interviews. I had come to this fight reluctantly. Not that I favored the tax, but rather, that I, like you, have a life. I have a wife I’m deeply in love with, and a daughter about to go off to college. I’ve been working on an academic article and a second edition of The Concise Encyclopedia of Economics. And there’s a certain amount of time in the week that I want to use to goof off – surf the TV, surf the web, take walks through the neighborhood. Was I willing to commit to thinking about this issue, writing letters, and talking to people for about five hours a week? And, hearing from the “silent minority.” When I had first joined the campaign, I had wondered what, if any, response I would get from my colleagues at the Naval Postgraduate School and from people generally in the community. A number of my colleagues have commented in the past, generally favorably, when I have an article in Fortune or the Wall Street Journal. But local politics is different for two reasons. First, a much higher percent of my colleagues and of my neighbors read or listen to local media than read Fortune or the Wall Street Journal. Second, local issues tend to generate more passion, I think because people feel more in control of local issues and feel hopeless about their ability to control national issues. I’m known somewhat in my town of Pacific Grove for my 10 years of coaching young girls in basketball, which began when my daughter started in 3rd grade and continued long past her participation because I enjoyed it so much. But, other than that, I’m somewhat anonymous in my community. So would people’s attitudes to me change?, I wondered. I’m happy to report that they did. I noticed it first at a Navy school retirement party for a colleague. I went up to say hi to a senior economist colleague, one whom I’ve always liked and respected as an economist, but who, partly because he’s in a different department, I have not talked to at length for more than a decade. “I want to thank you for all you’re doing for us taxpayers. You’re performing a real public service,” he said. In the community generally, I received an even more positive response. I ran into people in my everyday life who volunteered to me that they liked what I was doing and thanked me for it. After the campaign ended, a number of people volunteered that they and their spouse had voted “No.” One woman who had a daughter attending the same high school as my daughter wrote me a nice note thanking me and when I called her to acknowledge her note, we talked for half an hour. When I called a neighbor about a completely unrelated matter, she told me she had voted No and that she had been an employee at Natividad for 20 years and it was so badly run that it was beyond hope. So one of the most positive unintended consequences was that I felt like more a member of my community and more like a respected community leader. Read the whole thing, which is long. (0 COMMENTS)