How can the state of Colorado have nearly 700 sides? Why is a country’s coastline as long as you want it to be? And how is it that your UPS driver has more routes to choose from than there are stars in the universe? Listen as mathematician Paulina Rowinska talks with EconTalk’s Russ Roberts about […] The post The Deceptive Power of Maps (with Paulina Rowinska) appeared first on Econlib.

What is fascism, and what place does it occupy in political philosophy? There is more to that question than the standard identification with the extreme right, as echoed by the encyclopedia Britannica: Although fascist parties and movements differed significantly from one another, they had many characteristics in common, including extreme militaristic nationalism, contempt for electoral democracy and political and cultural liberalism, a belief in natural social hierarchy and the rule of elites, and the desire to create a Volksgemeinschaft (German: “people’s community”), in which individual interests would be subordinated to the good of the nation. This characterization doesn’t fit well on the conventional left-right axis of the political spectrum. For one thing, the mainstream left also entertains communitarian beliefs and favors “the good of the nation” against individual interests. Its devotion to democracy and liberalism, at least in the classical sense, is rather doubtful. Apart from its populist variant, the mainstream left does favor a hierarchy between elected officials and expert bureaucrats on the one side, and the populace on the other side. Finally, if we look at socialism à la Maduro or at communism, the practical difference with fascism wears thin. The favored political constituencies of the two regimes differ but often overlap. For example, the common people easily rally behind strongmen of either the extreme left or the extreme right, and even move from one side to the other over time. The kinship between the extreme right and the extreme left suggests that the conventional axis left-right is not a satisfactory model. The left and the right share more than is apparent. The proper simple model would be a circle where the extreme left and the extreme right meet on a common arc. Alternatively, an important dimension seems to be missing. This becomes rather obvious when we ask historical experts in fascism about the foundations of their ideology. Alfredo Rocco was a law professor and an adviser and friend of Benito Mussolini. In a 1925 speech, “The Political Doctrine of Fascism,” which Mussolini said he “endorse[d] throughout,” Rocco proclaimed (as reproduced in Carl Cohen, Ed., Communism, Fascism, and Democracy: The Theoretical Foundations, 1972): For Liberalism, the individual is the end and society the means; nor is it conceivable that the individual, considered in the dignity of an ultimate finality, be lowered to mere instrumentality. For Fascism, society is the end, individuals the means, and its whole life consists in using individuals as instruments for its social ends. (p. 323) Individual rights are only recognized in so far as they are implied in the rights of the state. In this preeminence of duty we find the highest ethical value of Fascism. (324) Or ask Benito Mussolini himself, the founder of fascism. In his 1932 Enciclopedia Italiana article on “The Doctrine of Fascism,” he explained (reproduced op. cit.): Against individualism, the Fascist conception is for the State. … It is opposed to classical Liberalism, which arose from the necessity of reacting against absolutism, and which brought its historical purpose to an end when the State was transformed into the conscience and will of the people. (330) The nation is created by the State, which gives to the people, conscious of its own moral unity, a will and therefore an effective existence. … The State, in fact, as the universal ethical will, is the creator of right.” (331) Fascism could be defined as an “organized, centralized, authoritarian democracy.” (336) It is to be expected that this century may be that of authority, a century of the “Right,” a Fascist century. If the nineteenth was the century of the individual (Liberalism means individualism) it may be expected that this one may be the century of “collectivism” and therefore the century of the State. (337) When one says liberalism, one says the individual; when one says Fascism, one says the State. (338) In his 1936 book published by the Dante Alighieri Society of Chicago, The Philosophy of Fascism, Mario Palmieri (perhaps a pseudonym) cited a well-known fascist motto (reproduced op. cit.): All is in the State and for the State; nothing outside the State, nothing against the State. (351) A bit farther, the author evokes the vision of Italy dreaming once more dreams of glory, dreams of greatness, dreams of empire. (357) What these quotes illustrate is that fascism and communism—and, to a different extent, the right and the left—both negate individual choices as subordinated to collective choices made through the state. Both the left and the right are collectivist and opposed to the individualism of classical liberalism and libertarianism. This distinction between collective and individual choices seems to be the main line of fracture in modern ideologies. (0 COMMENTS)

  Fossil Fuel Subsidies Are Mostly Fiction, But the Real Energy Subsidies Should Go by Adam N. Michel, Cato at Liberty, June 25, 2025 Excerpt: The US Department of Energy’s Energy Information Administration (EIA) tallies all federal energy subsidies, including direct expenditures, tax expenditures, research and development, and loan guarantees. The result? Fossil fuels received the smallest share of federal subsidies on every metric. In 2022, fossil fuels (coal, natural gas, and petroleum liquids) received $3.2 billion in federal support (11 percent of the total), compared to nearly $15.6 billion for renewables and nuclear (54 percent). Figure 1 also reports spending on conservation and end use, which make up the remaining 35 percent and are not distributed to specific energy sources. The subsidies are even smaller when scaled by the energy produced by each source. By this measure, renewables and nuclear are subsidized at a rate 19 times higher per unit of energy produced than coal, oil, and natural gas. Looking at renewables alone, the subsidy is 30 times larger than for fossil fuels. It is likely that fossil fuels received a larger share of subsidies before recent federal spending; still, when scaled by electrical consumption, average federal energy incentives for renewables were about 6 times larger than for oil, gas, and coal between 1950 and 2016.   ADAM SMITH AND THE NAVIGATION ACTS: A NEW INTERPRETATION by Caleb Petitt, Libertarianism.org, June 25, 2025. Excerpt: Smith’s discussion of the Navigation Acts has been a boon for protectionists and a thorn in the side of those who love Smith and support free trade and liberty. A deeper examination reveals that Smith was not the wholehearted supporter of the Navigation Acts that he is made out to be. He openly calls for the repeal of the colonial-​trade provisions, which was the most important part of the regulations at the time of his writing Wealth of Nations. As for the seacap provisions, the focus of this essay, Smith was consistently critical: He challenged the idea that the Navigation Acts promoted British wealth. He did not praise the Navigation Acts themselves, but rather their aims and endeavors. He did not think that they were effective at limiting Dutch trade or helping England in times of war. He highlighted the historically contingent circumstances that got the Navigation Acts passed. He argued against the idea that there was anything special about the carrying trade. He presented a nuanced relationship between defense and opulence too often overlooked. Smith did not think that the seacap provisions worked to achieve their stated goal. The totality of his writing on the seacap provisions reveals his disfavor of them. DRH note: This article is long and I haven’t digested enough to decide whether it completely convinces me, but it’s intriguing. I’ll reread it later today.   U.S. Electric Code Will Soon Ban DIY EV Charger Installs by Eric Tingwall, Motor Trend, June 20, 2025. Excerpt: So, with the 2026 edition of the National Electrical Code approved as proposed, it will become illegal in coming years for many U.S. homeowners to install their own EV chargers. The only thing that could have stopped this from happening was a last-chance motion to strike the clause from the code at the National Fire Protection Association’s annual technical meeting on Friday, June 20, 2025. The change stems from a new addition to the 2026 NEC that reads, “Permanently installed electric vehicle power transfer system equipment shall be installed by qualified persons.” As proposed and ratified, the 2026 NEC defines a qualified person in vague terms likely to be interpreted by states and code enforcement departments to mean a licensed electrician. The problem with the proposed language is that making do-it-yourself installations illegal doesn’t necessarily stop homeowners from doing their own electrical work. It does guarantee, however, that any EV chargers put in by amateurs will be installed without the appropriate permit and the accompanying safety inspection.   Did Climate Change Do That? by David Kemp, Regulation, Summer 2025. Excerpts: “Climate” describes average atmospheric conditions over an extended period, typically 30 years or more, while “weather” reflects short-term conditions. An individual weather event is the outcome of a complex interplay of variables, including thermodynamic factors (e.g., radiative forcing, which is the difference between the energy Earth receives from the sun and the energy radiated back into space) and dynamic processes (e.g., atmospheric circulation, which is the large-scale movement of air that helps distribute heat across the Earth’s surface). As greenhouse gas emissions alter the climate, weather patterns shift too. However, determining whether a specific weather event was “caused” by these emissions—rather than natural variations in other climate factors—is impossible. And: So, with the 2026 edition of the National Electrical Code approved as proposed, it will become illegal in coming years for many U.S. homeowners to install their own EV chargers. The only thing that could have stopped this from happening was a last-chance motion to strike the clause from the code at the National Fire Protection Association’s annual technical meeting on Friday, June 20, 2025. The change stems from a new addition to the 2026 NEC that reads, “Permanently installed electric vehicle power transfer system equipment shall be installed by qualified persons.” As proposed and ratified, the 2026 NEC defines a qualified person in vague terms likely to be interpreted by states and code enforcement departments to mean a licensed electrician. The problem with the proposed language is that making do-it-yourself installations illegal doesn’t necessarily stop homeowners from doing their own electrical work. It does guarantee, however, that any EV chargers put in by amateurs will be installed without the appropriate permit and the accompanying safety inspection.     (0 COMMENTS)

China recently experienced a housing crash that is comparable in size to what the US experienced during 2006-10. Before considering the impact of that housing crash, let’s review what happened in the US.Between January 2006 and April 2008, housing construction in the US plunged by more than 50%. Despite that crash the economy continued to do fairly well, as other sectors picked up the slack. Unemployment edged up from 4.7% to 5.0%, still a very strong labor market.During mid-2008, the Fed adopted one of the tightest monetary policies in US history, and NGDP began declining. Housing construction declined even further, to a level roughly 70% below the January 2006 peak. More importantly, other sectors also began declining.  Unemployment soared from 5% to 10% of the labor force. It was the worst recession since the 1930s.A fascinating new paper by Fed economists William L. Barcelona, Danilo Cascaldi-Garcia, Jasper J. Hoek, and Eva Van Leemput shows that China has recently experienced a very similar housing construction slump: In some respects, it was an even bigger shock than the US housing crash.  China’s property sector was roughly 30% of China’s GDP at its cyclical peak (including indirect effects), a far higher ratio than the US experienced during the 2005-06 housing boom.  The authors seem to have found it surprising that Chinese GDP growth has held up fairly well, despite a severe housing slump in such a key sector of the Chinese economy: While 5 percent growth is far slower than the 10 percent average growth China sustained from the 1980s to the early 2010s, it could be considered high considering that China is undergoing a years-long property market correction. Prior to this downturn, estimates suggest that the property market directly or indirectly accounted for up to 30 percent of GDP, and the official data suggest that real estate and construction activity contributed more than 1 percentage point to GDP growth (Rogoff and Yang, 2024). With the property market bubble bursting over the past few years, that boost has turned into a drag that should be weighing materially on GDP growth. 3. China Activity Data What explains the strong growth, relative to what the property sector malaise would suggest? We can get insights by looking at some of the indicators that go into the model. These indicators tell us that different parts of the Chinese economy fared very differently in the post-pandemic period. Panel (a) of Figure 3 shows that while industrial production was severely disrupted during the initial lockdowns in Wuhan, it rebounded quickly and, if anything, has exceeded its pre-pandemic trend in recent years. This is essentially what happened during the first two years of the US housing slump.  The Fed kept NGDP growing, and declines in residential construction were mostly offset by increases in manufacturing, exports, services, commercial construction, etc.   I have argued that the People’s Bank of China has been too contractionary in its monetary policy during recent years.  Nonetheless, the PBoC has been more expansionary than the Fed was during the 2008-09 period.  As a result, Chinese NGDP has kept growing and the overall Chinese economy continues to move forward. Although the authors work at the Fed, they did not mention the obvious contrast between how China’s central bank handled the housing slump and the way that the Fed mishandled our housing slump.  Vaidas Urba directed me to a recent tweet by Zach Mazlish, discussing a new paper:   The paper is by Tomás E. Caravello Alisdair McKay and Christian K. Wolf, and contains the following comments: The headline finding is that, absent any effective binding lower bound on nominal interest rates, a policy that follows the rule of minimizing (9) would have involved a very aggressive rate cut, down to around -5 per cent. Such an (infeasible) interest rate cut would have materially reduced the output gap, at the cost of moderately elevated inflation. The results are summarized in Figure 9, which shows realized (black) as well as counterfactual (blue) paths of output, inflation, and interest rates; as before, the blue areas correspond to the posterior across all four of our models, with results for all individual models very similar. Our findings are informative about the broader policy response during the Great Recession. Given constraints on nominal interest rates, policymakers attempted to substitute through other stimulative measures, most notably unconventional monetary policy as well as fiscal stimulus. If we interpret (9) as the objective for monetary policy, our counterfactual suggests that the unconventional monetary policy response was insufficient—in nominal interest rate space, additional stimulus of around 500 basis points would have been necessary. In a follow-up tweet, Mazlish anticipates one of my two reactions (although I regard late 2007 as slightly too early—I’d guess around June 2008 was appropriate for the ZLB): A second point I would make is that a better policy regime would have reduced the severity of the negative demand shock of late 2008, and thus reduced the amount of monetary stimulus that would have been necessary.  For instance, a credible policy of NGDP level targeting would have created stabilizing expectations of faster future NGDP growth after a brief slump in mid-2008, and this would have prevented the natural interest rate from falling as sharply.  And this isn’t just my view, the benefits of level targeting were demonstrated in academic research by people like Ben Bernanke and Michael Woodford, which built on the theoretical framework in Paul Krugman’s seminal 1998 paper. (0 COMMENTS)

Secretary of Transportation Sean Duffy seems intent to repeat the mistakes of the past.  While responding to an NBC Nightline interview question regarding the recent spate of aviation accidents and incidents (most recently to the interview, a private jet inadvertently entering an active runway in Chicago Midway Airport causing a Southwest flight to execute a go-around to avoid collision) Secretary Duffy stated that pilots should lose their licenses for making mistakes Look, I get it.  This new administration was barely sworn in and the worst aviation accident in nearly two decades occurred when a military helicopter struck a regional jet on approach to Washington National Airport, claiming the lives of 67 people.  Then, in short succession, a small jet crashed in Pennsylvania, a jet tumbled upon landing in Toronto, and the aforementioned near-miss in Chicago Midway.  Secretary Duffy had to appear that he was fighting to make the skies safer to a frightened public.  The problem is, he wasn’t willing to find a cause; only a scapegoat. Aviation has become an incredibly safe method of travel and is looked to as the gold standard for safety.  According to the FAA, commercial aviation fatalities have decreased by over 95% since 1998 as measured by fatalities per 100 million passengers.  Additionally, the fatality risk (percentage of an accident or loss resulting in death) decreased 83% during the same time frame.  The International Air Transport Association, an organization which represents and advocates for airlines across the globe, recently published their 2024 Safety Report finding that the all-accident rate globally improved significantly over the period 2020-2024 with almost half the accidents than the previous decade (2020-2024: 1 accident per 810,000 flights; 2011-2015, 1 accident per 456,000 flights).  These improvements in safety coincide with various FAA and global safety efforts and a shift from blame-seeking behavior to information-sharing.  I discuss these initiatives more completely in a previous blog post. Alright, Mr. DeMille, Secretary Duff is ready for his close-up.  Looking good for the cameras is all part of the political game.  But unintended consequences lurk behind every well-intentioned comment and policy.  All humans make mistakes; short of outright sabotage or negligence, we are going to do the wrong thing from time to time unintentionally.  Secretary Duffy’s intent is to hold people accountable for their (in)actions and reduce unsafe events. But by not acknowledging that there is a difference between a mistake (which is correctable by individual retraining or systemic change) and gross negligence, criminal action, or a blatant disregard for safety (which would normally be the threshold for licence revocation) instead incentivises people to not voice safety concerns and hide mistakes out of fear for retaliation.  This, invariably, leads to higher accident rates as no quarter is made to learn the actual root cause of the accident and to learn from it.  Under a punitive model, there is no incentive to be honest: either way, your livelihood is at risk.  It can take years to get your licence back, and even then, good luck finding a job.  So, if you’re honest, you risk losing your career.  If you’re able to hide the mistake, then at least you have a chance of making it through unscathed.  The net cost of dishonesty is decidedly lower than the net cost of honesty.   In the aftermath of the Chernobyl disaster, Grigori Medvedev, the deputy chief engineer, described a “conspiracy of silence” culture encouraged by Moscow to build public confidence in nuclear power. Safety concerns went unreported and those that were went unaddressed. After all, unreported incidents cannot catch the attention of the public.  In short, the intent was to show the public a face of an ultra-safe nuclear program.  The reality was that deviation from the standards and safety protocols were becoming the new normal, as long as they were kept out of the public eye. Following this disaster, the concept of “safety culture” began to arise and by the early 2000s we began to see a downward trend in accident rates in aviation; researchers such as Dr. James Reason (see Human Error, 1991) and Atul Gawande (see The Checklist Manifesto, 2009) realized we had to shift that incentive back into the favor of safety reporting and prevention.  We refer to this as a “Just Safety Culture”; a fair and transparent approach where individuals are not blamed for mistakes or errors, but held accountable for reckless or negligence.  The goal of our just safety culture is to incentivize the open and honest flow of safety related information, and allow for continuous improvement of systems.   I am concerned that we would move away from a policy that encourages a just safety culture backed by decades of empirical data for that of a retribution culture and an unintentional return to the conspiracy of silence.   Dennis Murphy is a professional airline pilot with a background in aviation safety, accident investigation, and causality. When he’s not flying 737s, he enjoys the company of his wife, their dogs, cats, and bees. (0 COMMENTS)

My winter read this year was Natsume Sōseki’s 1906 satirical novel I am a Cat (original title: Wagahai wa Neko de Aru).  The novel is told from the perspective of an unnamed cat and contains vignettes of its observations of its master Mr Sneaze (Sōseki’s conception of himself), Mrs Sneaze (his wife), and several of Mr Sneaze’s companions: Waverhouse, Coldmoon, Beauchamp, and Singleman in Meiji Era Japan.  This post is not meant to be an in-depth analysis of the themes of the novel; this is neither the time nor place for it.  Rather, I wish to highlight some elements I found intriguing and how they relate to the modern American world. But first, a little background: The Meiji Era was one of turbulence in Japan.  In February 1867, Prince Mutshito ascended to the throne and became emperor of Japan.  For more than two centuries, Japan’s emperor was a nominal title; in reality, the country was ruled by the shōgun and some 300 feudal lords known as daimyo, a period known as the Tokugawa Shogunate (1603-1868).  However, after Commodore Matthew Perry forcibly opened Japan to trade in 1853, Western influences began to enter this isolated culture, putting pressure on the shōgun to modernize.  Eventually, the pressure became too much; on November 9, 1867, shōgun Tokugawa Toshinobu resigned. A new government was formed under Emperor Mutshito (posthumously known as Emperor Meiji) on January 3, 1868.  Mutshito ushered in many reforms such as abolishing class privileges, creating an elected advisory body called the Diet (the Diet was based on British Parliament, but had little true power—the Emperor had final say in everything), further opening to international trade, and so on.  Furthermore, Japan had just won a decisive victory over Russia in the Russo-Japanese War, spurring national pride among the Japanese.  The Meiji Era had rapid social, cultural, political, and economic changes. It is during this turbulence that I Am A Cat was written.  And, among the different characters (and even the cat itself), we see anxieties, hopes, and concerns.  This is especially true in Volume III, which contains many interesting discussions.  For example, at one point in observing what we now call the “principal-agent problem,” the cat observes: Similarly, public officials are servants of the people and can reasonably be regarded as agents to whom the people have entrusted certain powers to be exercised on the people’s behalf in the running of public affairs.  But as these officials grow accustomed to their daily control of affairs, they begin to acquire delusions of grandeur, act as though the authority they exercise was in fact their own and treat the people as though the people had no say in the matter (pg 361 of the Kindle Edition). Other times, in a paragraph that sounds a lot like Adam Smith’s parable of the poor man’s son, they worry about how commercial values (what is called “modern man”) could affect people’s characters, as demonstrated by Mr. Sneaze: Modern man, even in his deepest slumber, never stops thinking about what will bring him profit, or even more worrying, loss…Modern man is jittery and sneaky.  Morning, noon, and night he sneaks and jitters and knows no peace.  Not one single moment’s peace until the cold gave takes him.  That’s the condition to which our so-called civilization has brought us.  And what a mess it is (pg 440).   (Note the loss-aversion in this concern, too.) Changing social powers (as observed by Singelman): “There, you see how times have changed.  Not so long ago the power of those in authority was unlimited.  Then came a time when there were certain things which even they could not demand.  But nowadays there are strict limits upon the power of peers and even ministers to compel the individual…Our fathers would be astonished to see how things which the authorities clearly want done, and have ordered should be done, nevertheless remain undone (pg 450).” And, again channelling Adam Smith, the duality of man to both want freedom and to dominate: Obviously, each individual grew a little stronger by reason of this new individuality.  But, of course, precisely because everyone had grown stronger, everyone had also grown weaker than their fellow-individuals…Everyone, naturally, likes to be strong, and no one, naturally, likes to be weak (pg 452). I could quote this book at length, but I have already gone on too long and not gotten to my point. The point I have is that, in reading foreign literature (and interacting with foreign culture more broadly), we see the universality of humanity.  We have the same concerns.  We have the same pleasures.  We have the same goals in life.  True, arbitrary lines and languages separate us.  Geography can influence culture and so on.  But it is not, as the nationalists frequently argue, that we are just too different to interact.  Foreign interactions help us see our common humanity.  This, in turn, helps us sympathize with foreigners and break down the so-called “friend-enemy distinction.”   (0 COMMENTS)

The newest season of the Netflix documentary America’s Sweethearts, which traces the 2024 audition, training, and performance season of the Dallas Cowboys Cheerleaders, is a lot more than just a pretty face. The philosopher Loren Lomasky has argued persuasively in Persons, Rights, and the Moral Community that one of the things that makes humans human is our devotion to projects. As a pursuer of a wide variety of projects myself, I’m a big fan of media that give me a chance to watch people pursue projects I don’t know much about, like competitive cooking, scientific explorations, glass-blowing, and dance and cheerleading.  When I started watching America’s Sweethearts last year it was out of this appreciation for people as pursuers of projects. I tuned in expecting that the series would, as it had in its first season, take me inside a highly competitive world where I could watch people work very hard at a project that I can admire from a distance, even though I have no personal stake in it. It certainly did that. But as I’m sure many economists have noted, this season of America’s Sweethearts isn’t just about the passionate pursuit of a good high kick and perfect jump splits. It’s about the importance of what Albert O. Hirschman called voice and exit. During the show’s first season, I was mildly taken aback to realize that members of the Dallas Cowboys Cheerleaders (DCC) usually hold down second or third jobs while training, cheering, and making personal appearances for the team. Squad members could make as little as $15 an hour (which is what my teenager makes taking orders out to cars at Target), with $500 bonuses for personal appearances. NewsNation reported this exchange in their coverage of the first season: Charlotte Jones, the Dallas Cowboys’ chief brand officer and daughter of owner Jerry Jones, said in the docuseries: “The facts are that they actually don’t come here for the money. They come here for something that’s actually bigger than that to them. They have a passion for dance. There are not a lot of opportunities in the field of dance, and to get to perform at an elite level … It is about being a part of something bigger than themselves. It is about a sisterhood that they were able to form, about relationships that they have for the rest of their lives,” said Jones. “Yes, it is about sisterhood and passion. Absolutely. I met my best friends,” Puryear told NewsNation in response. “However, we can still have best friends [and] I’m still paid fairly for my job in commercial leasing. Both are doable.” Anyone who has been offered payment in “exposure” or told they should be prepared to take less money because they love their job can sympathize. Passion and sisterhood should not be an excuse for lower pay. By the second, most recent season, this financial issue had become a major theme for the documentary, rather than just a passing moment that emphasised the professionalism and commitment of the DCC squad. The documentary shows us that many of the cheerleaders refused to sign their contracts for the year, and a core crew provided a perfect example of voice when they met with management to express their grievances. Some even painfully acknowledged that they were prepared to exit the squad if they were not heard. Hirschman also emphasizes the concept of loyalty, and it’s important to note that even while negotiations were at their height, the DCC team continued to fulfill their responsibilities and spoke often of their goal of leaving the organization better than they found it. Using voice and being prepared to exit do not imply disloyalty. Sometimes they are loyalty. The season came to an end without an improved contract for the DCC. Some members of the squad indicated that they would not be auditioning to rejoin the squad because they felt that management had been unresponsive to their requests, and unwilling to listen when they exercised the voice option. (Perhaps management felt that the supply of potential future DCC members is so high that they could risk losing veterans?) However, the first season of the documentary had become incredibly popular. The DCC had a growing social media presence. Reddit threads and think pieces began pointing out the shockingly low pay for the visibly hard work. All of this increased the power of the DCC members’ voices and raised the costs of allowing them to exit. And by the end of season banquet, a new contract was produced that responded to the DCC requests with an approximately 400% pay raise.  The strength of the America’s Sweethearts documentary is that it allows viewers to see the importance of voice and exit and to see a good result from using them, while also unflinchingly showing that these options are not risk-free.  Much of America’s Sweethearts is devoted to showing that the Dallas Cowboys Cheerleaders are serious and hard-working professionals—who just happen to go to work in sequins, false lashes, and booty shorts. Their determined self-advocacy and demonstration of a solid understanding of voice and exit support that. When’s the last time you negotiated a 400% raise with such grace you didn’t even smear your eyeliner?   —— Want more like this? Claudia Goldin: A Personal Appreciation (0 COMMENTS)

People occasionally ask me how my views on economics differ from those of John Cochrane. In a recent Cochrane post on Fed independence, I found a paragraph that nicely illustrates how our views differ: Congress also gave the Fed limited tools. The Fed can only buy and sell securities and set interest rates. The Fed cannot directly print money and send it to people or businesses, nor can it confiscate money. Doing so is far more powerful for controlling inflation than moving overnight interest rates, but only a politically accountable agency can tax or spend. Similarly, labor taxes, labor regulations, and the disincentives of social programs have far more effect on employment than the overnight federal funds rate, but the Fed cannot touch them. Even within its inflation and employment mandate, the Fed is forbidden the most powerful tools. There are very few economists whose opinions more closely align with my own views than John Cochrane, especially on questions of government economic policy.  But this paragraph illustrates one essential difference—we have a radically different conception of the nature of monetary policy. Cochrane makes two empirical claims, both of which I reject: “Helicopter drops” are far more inflationary than open market purchases. Regulation has a much bigger impact on employment than monetary policy.  A “helicopter drop” is the term used for a combined fiscal/monetary injection.  Thus, the Fed could create $100 billion and give the money to the public.  In contrast, a $100 billion open market purchase (OMP) involves the Fed swapping one asset (base money) for an equal value of another asset (Treasury securities.) Cochrane believes that if we “print money and send it to people” the effects are far more inflationary than a simple OMP of the same quantity of base money.  Here it will help to break down a combined fiscal/monetary injection into two separate steps.  The Fed could do a $100 billion OMP, and the Treasury could simultaneously send out $100 billion to the public in tax rebates.  Unless I’m mistaken, Cochrane is implicitly claiming that the fiscal part of that combined action is far more inflationary than the monetary portion of the policy. (This is an implication of the Fiscal Theory of the Price Level.) To make things simple, go back to the pre-2008 monetary regime, and assume a 10% exogenous, permanent increase in the monetary base, done through an open market purchase.  I claim that this would have boosted the price level by 10% more than a counterfactual policy path that did not include the 10% base increase.  If this policy were combined with an equal sized fiscal stimulus—say a tax rebate—I claim the effect would have been only slightly more inflationary.  Maybe 10.5% or 11% inflation, rather than 10% with the simple open market purchase.  Cochrane would presumably argue that the combined fiscal/monetary injection would have been far more inflationary than the simple OMP.  [By the way, I believe my argument also applies to the post-2008 abundant reserve system, but it’s easier to see my point when we consider the simpler pre-2008 system, where 98% of the monetary base was currency.  As an aside, Cochrane frames the discussion in terms of interest rates (which is the conventional view), but I don’t believe that interest rates tell us anything useful about why an exogenous and permanent 10% rise in the base causes a 10% rise in the price level.] Why is the injection of currency so inflationary?  The public mostly cares about real cash balances.  If you inject more currency into the economy, it doesn’t make the public magically wish to hold larger real cash balances.  Instead, the public tries to get rid of excess cash balances, and in doing so forces prices up by 10%.  At that point, real cash balances are back to their desired level. I also differ with Cochrane on the question of employment.  In my view, many of the biggest declines in employment have been caused by tight money policies, including 1929-32, 1981-82 and 2008-09.  This is not to suggest that labor market regulations are unimportant.  Indeed, on questions such as minimum wage laws, unemployment compensation and high implicit marginal tax rates resulting from poverty programs, my views align more with Cochrane than with mainstream economists.  So I’m not entirely unsympathetic to the point he’s trying to make here—I just think he’s underrating monetary policy. Why do most economists differ from me on monetary policy?  I suspect it is mostly related to the identification problem.  If you define monetary policy as actual movements in the money supply or actual movements in interest rates, then there is not much evidence that monetary policy plays a big role in employment fluctuations or inflation shocks.  In many cases, actual movements in money and interest rates represent endogenous responses to economic conditions.  In my view, it is more useful to think of monetary policy in terms of something like the consensus market forecast of NGDP growth.  By that metric, monetary policy is exceedingly important. Of course, my definition only makes sense if you think the Fed can control NGDP expectations through open market operations.  I believe they can, whereas Cochrane seems to be skeptical.  My two most recent books provide an explanation for how I’ve arrived at this approach to monetary economics. (0 COMMENTS)

  George Mason University economics professor Don Boudreaux gave an excellent Zoom talk last week to a group I’m part of: the Stanford Classical Liberals. One of the things I most enjoy about Don’s talks is his nailing each point with loads of relevant data. The other thing, which is rare nowadays, is the perspective he brings to issues from his vast knowledge of economic history and the history of economic thought. That shows up in a few places in his talk, especially in Q&A, which begins at about the 52:00 point. Don’s knowledge reminds me of the kernel of truth in something the late George Stigler said about his close friend Milton Friedman: “Milton is the best economist in a bad century.” Stigler’s idea, which I agree with, is that the 19th century was far more important than the 20th century for the development of economic thought. 1:50: Don’s Virginia license plate. 5:00: Industrial capacity in the United States is at an all-time high. 6:50: Industrial production is less than 1% below its all-time high. 7:35: Manufacturing output in the U.S. is 5.4% below its all-time high. 8:25: Manufacturing capacity is only slightly below its all-time high. 8:50: This one blew me away: we lost big time in apparel and leather goods, which I knew, and gained big time in computers and electronic products, which I hadn’t known the full extent of. 13:20: Manufacturing employment as a percent of total employment has plummeted since 1944, but it’s hard to find the effect of China. 16:18: Manufacturing output per worker zoomed from late 1940s on. 17:40: Pay and productivity grew. 18:30: Average real wages stagnated from early 1970s to early 1990s but then zoomed. 20:30: Assets, liabilities, and net worth. Evidence against the idea that trade deficits strip our wealth. 21:30: Average net worth zoomed. 27:40: The quiz about the China Shock. 32:40: Jobs lost due to Jonah Salk. (My father would have appreciated it if those jobs had been lost 13 years earlier; my sister, 3 years earlier.) 34:00: 1963 Buick Skylark. Makes the point that hanging on to used cars longer means fewer people are buying new cars, so you’re putting producers of new cars out of work. Slightly related thought: I had a colleague at the University of Rochester in the late 1970s who was a master economics teacher. His name was Ron Schmidt. Our mutual colleague Richard Thaler told me at the time of a great question that Ron had asked his class. They got the wrong answer and I got the wrong answer. The question was, “What is General Motors’ most important competitor?” Being aware of the approximate market shares at the time, I answered, “Ford.” Wrong answer. GM’s most important competitor is the used car market. If every used car owner figured out a way to extend his or her car’s life by a year, every major car producer would see a substantial decline in demand. 35:20: Nothing unique about job destruction due to imports. 36:00: One habit economists have that Don wishes we would stop. 40:00: No one in the U.S. today has failed to have his life vastly enriched by trade. DRH comment: I made this point in a talk at Hoover some years ago and a fellow presenter, whom I’m prohibited from naming because we were under the Chatham House rule, disagreed. She restated my argument to have me saying that people who were unemployed due to trade should be grateful because we have Walmart. I said no, that’s not it. I was saying they should be grateful because we have the benefits of over two centuries of trade, only part of which is due to Walmart. She then again insisted on her misstatement of my argument. Sigh. 41:20: Don wishes that the concept of a trade deficit had never been developed. I agree. See here for what the late Herb Stein wrote about it in my Concise Encyclopedia of Economics. 43:40: Do we save enough? 45:00: Why people like to invest here. 46:00: Ikea is Dutch-owned. Who knew? This actually makes Don’s big-picture point in another way: as I often put it, there’s nothing magic about borders. 52:00: My thought about the distorting effect of relaxation of price controls on growth of real wages. 53:50: Question about trading with a hostile power. 55:30: Are clothes pins essential for national security? 58:00: Foreign students who come here reduce our trade deficits. 1:04:20: The optimal tariff theory:exploiting monopsony power. First argued by Robert Torrens about 200 years ago. DRH note: I first learned this by reading a paper by Grant Reuber at the University of Western Ontario in early 1972. I marked up his paper and went to ask him to explain it. He explained it well. 1:06:50: Edgeworth and poison. 1:07:20: Furniture and then trade with China and Chinese treatment of its workers. 1:09:00: Do Chinese wages in manufacturing keep pace with productivity? 1:15:50: Industrial policy. 1:16:45: Is the free market a “drunk donkey,” as Oren Cass put it. 1:20:00: Most economists accept having the government subsidize R&D (stated by questioner.) So what about having government subsidize industries that have large positive externalities. Answer: (1) How would government know? (2) Alfred Marshall, after returning from the United States to Britain, said he saw that subsidizing infant industries doesn’t work. (0 COMMENTS)

This month marks 20 years since the U.S. Supreme Court ruling in Kelo v. City of New London. This 5-4 ruling upheld the Court’s rational basis deference to legislatures in determining whether economic development (jobs, tax revenue, etc.) satisfies “public use”, even when the government conveys the seized property to other private parties. Although Kelo was pretty controversial at the time, interest in it has naturally waned over the years. Under this diminishing spotlight, governments have gotten ever more creative in the ways they exercise eminent domain. In Richmond, California, for example, the city tried to seize upside down mortgages to protect residents from foreclosure. In Atlantic City, eminent domain has been used without specific plans for how the seized properties would be used. In Minnesota, when an elderly woman fell behind on her property taxes, the county seized her condo, sold it, settled the tax bill, and kept the proceeds. And in my home state of North Carolina, dozens of homes and a local church were seized to make way for a new electric vehicle assembly plant, only for the company (Vinfast, headquartered in Vietnam) to back down by delaying construction for years. These kinds of cases count as abuse of eminent domain power. Not only do these “Grasping Hand” abuses waste taxpayer dollars and valuable resources, but they needlessly violate fundamental, constitutionally protected rights to property. Yet economists have shown that eminent domain does have its legitimate uses. Namely, economic development takings can promote the public interest (economic efficiency) when used against strategic holdouts standing opportunistically in the way of development. Herein lies a classic question that Kelo raises. How can takings powers be regulated to avoid abuse, while still preserving eminent domain’s legitimate uses? Clearly leaving things up to legislative majorities is not the answer — it’s actually the reason for the abuses in the first place. Instead, better regulation of government regulators can help.  In a new paper* forthcoming at the Review of Law & Economics, co-authors Justin Pace and Jon Murphy and I dig into the long-term dynamics of how to regulate eminent domain authorities. The first thing is to recognize that government officials, even those with the best intentions, will devise ways around existing eminent domain restrictions. Following the financial regulation and campaign finance literatures, we call this loophole mining. It becomes especially powerful over time as the public spotlight on abuse wanes. Second, loophole mining necessitates ongoing adjustments to eminent domain restrictions. So, when looking at the long-term dynamics of the problem, the effectiveness of restrictions depends not only on their initial design but also on ongoing vigilance against regulators’ becoming overly creative in satisfying the rational basis test.  This makes for a complicated dynamic policy dilemma. Tighter restrictions may beget more creative forms of loophole-mining and necessitate ongoing regulatory adjustments, creating a cycle of regulation and circumvention. Much simpler, and arguably more efficient as well, would be for the Court to abandon its rational basis deference and instead close the door to takings for economic development.  Closing the Kelo loophole amounts to saying yes to holdout problems. Of course, central planners and development authorities would howl and double-down on claims that eminent domain is critical for economic development. But in fact, a large body of literature shows that developers are pretty effective at handling holdouts even without resorting to eminent domain.  Better for the law to let entrepreneurs deal with holdouts than to keep encouraging governments to hone their loophole mining skills. After 20 years, it’s past time to revisit Kelo.   * “The Long-Term Impact of Kelo v. City of New London: Comparing State Legislative and Judicial Responses” and is available for PDF download here.   Edward J. Lopez, is Professor of Economics at Western Carolina University, Executive Director of the Public Choice Society, and author of numerous articles and books including Madmen, Intellectuals, and Academic Scribblers. (0 COMMENTS)