Most economists oppose price controls, especially those following a disaster or some other unexpected event (commonly called “anti price-gouging legislation”).  However, UMASS–Amherst economist Isabella Weber objects.  She tweets: “One of the problems with [the supply and demand diagram] is that it is missing a crucial dimension: time. When it comes to price gouging in emergencies, that’s a pretty big problem.”  This tweet has spawned numerous responses from various economists, most pointing out to her that the supply and demand model does take into account time: the x-axis is properly labeled “quantity per unit of time.” (My late, great PhD professor, Walter Williams, would deduct points from anyone who wrote the x-axis as just quantity).  Furthermore, both supply and demand become more elastic over time. These objections are correct, but I think they miss the claim that Weber is making as well as the larger, economic mistake she is making.  Weber is arguing that price controls do not have the negative effects of deadweight loss when the supply of a good is fixed and the timeline for it to become unfixed is long.  Let’s analyze her claim first on its own merits and then from a richer economic lens. Weber is approaching this problem from the perspective of Marshallian welfare economics where the performance of a market is judged by whether or not total surplus (the gains from trade to the producer plus the gains from trade to the consumer) is maximized.  Calculating these gains from trade is fairly easy: for the consumer, it is simply the difference between what a consumer is willing to pay for each unit consumed and what they have to pay for each unit consumed.  For the producer, the gains from trade are the difference between the price the seller receives for each good sold and what they are willing to sell for each good sold.  The total surplus (total gains from trade) are thus consumer surplus (consumer gains from trade) plus producer surplus (producer gains from trade).   Two very important things to note: 1) how much surplus is generated in the market depends on the quantity exchanged in the market.  If the quantity exchanged falls, total surplus will fall (and vice versa)  2) how surplus is distributed between consumers and producers depends on the price.  Generally speaking, a higher price implies lower consumer surplus and more producer surplus (all else held equal). From a strict, Marshallian welfare-economic perspective, Weber’s claim is correct.  When supply is fixed (i.e., perfectly inelastic) and there is no time to either increase supply or get the curve more elastic, then price gouging legislation will not result in deadweight loss.  Since the quantity does not change, putting a price ceiling simply shifts gains from trade from the producer to the consumer.  Total surplus in the market does not change; there is no deadweight loss since the quantity in the market does not change. However, from a broader, richer economic perspective, where we think about how people actually behave when faced with different choices, her point is incorrect.  Price controls will still lead to shortages as the quantity demanded exceeds the quantity supplied.  While there is no deadweight loss, the costs of those shortages still arise: queuing, hoarding, etc.  Furthermore, since the price being kept artificially low disincentivizes the supply curve from becoming elastic and/or growing, the costs of price ceilings persist longer than they would otherwise.  These are very real costs and, taking them into account, shows that even given fixed supply, price controls make everyone worse off. So, by comparison of these two states (price ceilings where producer surplus is transferred to the consumer but the consumer and producer bear much higher total costs over a longer period of time, or prices rise, consumer surplus is transferred to the producer, but these extra costs are not imposed), price ceilings still incur undesirable effects, especially so following a disaster. And there are many other possible objections as well.  In a conversation with me on Facebook, retired Texas Tech economist Michael Giberson pointed out that there is no particular economic justification to prefer consumers over producers in this (or any other) exchange.  Another is that there is no reason to think that the distribution of goods to the consumer will be any more “just.” Furthermore, as Kevin Corcoran recently reminded us, we want to avoid the one-stage thinking permeating Weber’s claim.  Price control legislation has long lasting effects by changing the incentives for suppliers against preparing for a disaster.  As economist Benjamin Zycher shows, price controls in wartime discourage producers from stockpiling war materiel in peacetime.  The same holds true for non-defense goods.  Stockpiling is costly; it takes away storage space from goods that can be more quickly sold.  For firms to stockpile, they need to have the expectation of higher prices in the future.  If they know they will not be able to charge higher prices in the future, then the cost of stockpiling will be higher than the benefits.  Firms will keep fewer goods on hand, so that when the disaster does strike, fewer goods will be available for the aftermath.  The best time to end price controls is before a disaster.  The second best time is now. In sum, Isabella Weber’s tweet is mathematically correct but economically incorrect.  It is internally consistent and logical, but contains no economics.  We must always look beyond just the model to the reality the model is simulating.   Jon Murphy is an assistant professor of economics at Nicholls State University. (0 COMMENTS)

Alex Tabarrok and Tyler Cowen are doing a series of podcasts on the economy of the 1970s. A few weeks back, I commented on one of their previous podcasts, which discussed the tricky problem of establishing causality for changes in inflation. Their most recent podcast discusses oil shocks and the business cycle, an area where causality is even harder to establish: TABARROK: Now, let’s talk about some puzzling economics because the price of oil goes up. War starts in October of 1973. The US goes into a recession in November of 1973. Unemployment doubles from 4.5 percent to 9 percent. Now, I think most of our listeners will say, “Well, what’s puzzling about that? Price of oil goes up and you go into a recession. That seems entirely normal.” Yet for economists, this is still quite puzzling because even though oil is obviously of relative importance, it’s not that big a feature of the economy, and there in fact are pretty sophisticated theorems, which say that if you have—this is Hulten’s theorem—if you have a shock to a sector of say 10 percent, something goes up, productivity goes down 10 percent, price goes up 10 percent or something like that, and that sector is a relatively large share of the economy, say 5 percent, then the effect on GDP should just be those two things multiplied together. Ten percent times 5 percent, which is just 0.5 percent on GDP.  COWEN: Those theorems are wrong, right?  TABARROK: Yes. The link between oil shocks and recessions seems pretty strong.  And yet, I’m not entirely sure that those theorems are wrong.  So how can we explain why recessions often follow oil shocks?  Here are two possibilities: 1. Induced monetary tightening (a nominal shock.) 2. Reallocation of resources (a real shock.) Oil shocks often occur at a time when the global economy is booming.  In many cases, this is preceded by excessively expansionary monetary policy.  In the short run, the oil shock makes the pre-existing inflation problem even worse. Monetary policymakers respond vigorously with tight money, slowing NGDP growth.  With less nominal GDP and sticky nominal wages, unemployment rises sharply.  I call this the musical chairs model of recessions. In this scenario, the actual cause of the recession is tight money, but the oil shock partly explains why policymakers make this mistake.  In a counterfactual scenario where NGDP keeps growing on trend, there is no significant recession after an oil shock. In reality, oil price shocks can have an impact beyond their indirect effect on monetary policy and NGDP growth. As Arnold Kling has emphasized, the public will respond to sharply rising oil prices by re-allocating consumption and production toward less energy intensive parts of the economy.  During the transition period, the unemployment rate may rise.  This is a real shock to the economy, which can affect employment even if monetary policy maintains steady growth in NGDP. How important is the real channel for oil price shocks?  Later in the podcast, Alex and Tyler provide some suggestive evidence provided by the Ukraine War: TABARROK: Yes. A lot of people, including German politicians, predicted that Germany would have to ration gas, that people would freeze to death, that the economy would go into a deep recession. In the end, the German economy adapted to a much lower supply of natural gas by using less and finding substitutes. The spot price of gas rose by a factor of more than eight at peak, but instead of price controls and rationing, the German government let the price rise, but they did protect German consumers with a lump sum transfer based upon the past use of natural gas. That meant everybody had an incentive to listen to the signal of the higher price of natural gas. In the end, the German economy rode out this massive decline in the quantity of natural gas. To me, this is a sign that maybe economists at least have learned some lessons. COWEN: I was shocked that went as well as it did. You may recall, I think it was Deutsche Bank forecast a major recession for Germany. I’m not sure they had a recession at all, but if they did, it was just a marginal recession, and they nailed it. Tyler’s memory is correct; Germany had only a very modest rise in unemployment, from 5% to 6%: Why were the pessimistic forecasts wrong?  Why did Germany experience such a small rise in unemployment?  Monetary policy in the Eurozone remained expansionary, allowing for a strong rise in NGDP: In contrast, large increases in unemployment such as 1980-82 are associated with tight money policies that sharply contract the rate of growth in NGDP. Non-economists tend to underestimate the extent to which free markets can find substitutes when one commodity becomes more scarce.  (Even economists may briefly forget the importance of substitutes, before coming to their senses later in a podcast.) One final point.  In previous posts, I’ve argued that the number of people with the talent to become a great artist or scientist far exceeds the number that actually achieve greatness, mostly because you must also be in the right place at the right time.  This conversation caught my eye: TABARROK: Many of these lessons, which we’ve been talking about in the 1970s, you can say the 1970s led to Milton Friedman. Milton Friedman became a much more important spokesperson, representative of Free to Choose, and so forth, but Milton Friedman’s been dead for some time. People forget. People forget Milton Friedman, and they forget what caused Milton Friedman to come into being, which is all of the mistakes which we made in the 1970s. COWEN: One of my takeaways is simply the 1970s was a great time to learn economics. The lessons were very visible. TABARROK: Yes. I would put it the following way. I think Milton Friedman was not the smartest economist ever. Maybe that’s Ken Arrow, but Milton Friedman was right on the greatest number of things. The reason he was right on the greatest number of things was that he was lucky enough to come to fruition at a time where we were doing everything wrong. COWEN: That’s right. A very astute observation.  Overall, a very insightful podcast. (0 COMMENTS)

The period from 1870 to 1910, which includes the Gilded Age and Progressive era, is depicted everywhere as one where there was rapid economic growth. This growth is commonly seen as rapidly and unevenly distributed with the poorest 90% enjoying far fewer improvements.  This popular conception is probably wrong because of the way we are using the existing data on inequality. In fact, inequality between the top 10% and bottom 90% of the income distribution in America most likely declined.  Let us look at that data. Right now, there are no actual estimates from 1871 to 1909. What there is an estimate in 1870 and another one for 1910.  The estimate for 1870 comes from the work of Peter Lindert and Jeffrey Williamson. They used what is known as a “social table.” This approach estimates income distribution by assigning average incomes to different social or occupational groups based on historical records, such as census data. It simultaneously provides total national income and income inequality.  That estimate is not disputed, and if anything, it probably understates inequality because of the problems of census underenumeration of the poor.  The estimate for 1910 is derived from the work of Thomas Piketty in his famed Capital in the 21st Century, and is not directly based on income data. Instead, he used tax records from 1917 to estimate the top 10% and data from 1913 for the top 1%, then backcasted these figures to 1910.  The problem is that the estimates that Piketty (and his co-author Emmanuel Saez) created for 1913 and 1917 are now known to massively overestimate inequality. In an article in the Economic Journal with Phil Magness, John Moore and Phillip Schlosser and in a companion article with Phil Magness in Economic Inquiry, we corrected for these errors. In fact, we showed that their entire series from 1917 to 1962 was flawed because of the way missing filers were treated, how net income was converted into adjusted gross income, and how they forgot that state and local governments (5% of the workforce with incomes well above the national average income) were not required to file federal taxes until 1938.   We also discovered that Piketty and his co-authors made an incorrect estimate of total income. They arbitrarily defined total income as 80% of personal income (as reported by national accounts) minus transfers. They justified this by claiming that “the ratio between total gross income reported on tax returns and personal income minus transfers in national accounts has been fairly stable since the late 1940s (around 75-80%).” However, according to their own datasheets, the actual average was 82.7%. While this difference may seem small, a higher proportion reduces the income shares of the rich. Using less arbitrary methods, we found a much larger denominator and, consequently, smaller income shares for the wealthiest groups. Overall, we found that the income share for the top 10% was 5 percentage points lower than that of Piketty for 1917. If one uses the exact same backcasting method as Piketty did in his book, you also get a lower share of total income going to the richest 10% of Americans. When this is then combined with the estimates of Lindert and Williamson for 1870, we see a significant decline in inequality as can be seen in the figure below.  This is rich in implications. Consider that economic growth, depending on the data series used, showed that Americans enjoyed income increases that averaged between 1.9% and 2.0% per annum between 1870 and 1910. By that point in history, never had such fast growth been observed. And when there had been growth that nearly matched that one, it was clearly marked by rising inequality.  Finding that the bottom 90% got a bigger part of the pie implies that the bottom 90% probably saw improvements that were larger than the average gains. Given the numbers I obtained, this means that the income of the poorest 90% increased between 2.0 and 2.2% every year.  This difference implies that a period often characterized as one of rising capital concentration and inequality was, in fact, not only the fastest and most sustained growth ever observed by that time but also the first in history where the poor saw their incomes grow faster than average, experiencing significant improvements in their standard of living.  Some contemporary writers of the 19th century noted that there were exceptional gains at the bottom of the income ladder. It seems we overlooked them, in part, because we relied on data that misled us, obscuring the real progress made by those at the lower end of the income  distribution which contemporaries saw with their own eyes.     Vincent Geloso is an Assistant Professor of Economics at George Mason University. (0 COMMENTS)

If culture means a set of shared rules of conduct (mores) and common exposure to certain ideas (if this second category is not superfluous), then cultures exist in many, or perhaps any, groups of individuals. If culture is nothing else than national culture, one of the two words is superfluous, just like “cultural culture” or “national nation” would be. Culture is often a black box or contains anything and everything associated with the concept of mankind or human: according to Britannica, it “includes language, ideas, beliefs, customs, codes, institutions, tools, techniques, works of art, rituals, and ceremonies, among other elements.” I am less interested here in the narrow sense of culture as “the humanities,” as opposed to its broad meanings described above. (For the distinction between culture in its narrow and wide sense, see Marc Fumaroli’s 1999 book, L’État culturel. Essai sur une religion moderne [The Cultural State: Essay on a Modern Religion].) In its broad sense, culture is difficult to identify. “You know it when you see it,” suggests Financial Times columnist Stephen Bush. The description of a culture is typically very far from a set of necessary or sufficient conditions for being, say, British or English. Bush writes (“There Is Such a Thing as British Culture,” October 8, 2024): I’m not going to pretend that this list is exhaustive, but there is a distinct set of British cultural mores, among them understatement, a commitment to scatological humour and an obsession with class, that have a heavy influence on most British cultural output. I take culture to mean the interindividual influences within a human group characterized by a geographic location, political obedience, or other criteria—“the Catholics,” “the Jews,” “the Communist Party,” “the artistic community,” the 140,000 world members of the Academy of Model Aeronautics, and so on. Some features or results of interindividual influences are what gives the group its distinctive characteristics. Culture influences the individuals, but without the individuals and their interactions, there would be no culture at all. In a sense, each individual is his own culture; extreme eccentrics are not the only case in point. At least in complex, free societies, no two individuals have exactly the same mosaic of “cultural” characteristics; everyone participates in many cultures. For a moment, the Financial Times columnist seemed to reach for universalist values with an individualistic flavor: Suggesting that understatement, crude humour or an obsession with class are important to sustaining the health of a nation is obviously ridiculous. In terms of community cohesion, national prosperity and the rest, what really matters to the UK is liberalism, religious tolerance, respect for people’s individual choices and their own bodily autonomy. So in a sense, who cares if those values lose their distinctively British accent? The columnist might have continued by reflecting on the meaning of “the health of a nation” (a naked anthropormophic concept), “community cohesion,” “liberalism,” and “individual choices,” and on whether these concepts are compatible. In any event, his question was purely rhetorical, for what really matters is what the state does to maintain a culture—with the BBC, for example: And in a globalised economy … small and medium-sized countries like the UK and South Africa are not going to be able to maintain their own distinctive cultures without a degree of public subsidy. This is what successive governments in France have recognised with their support for French language film and television. All British governments owe a great debt to the forward thinking of the Conservative administration of the 1920s in establishing the BBC licence fee. If you care about preserving a distinctive British or English culture, and not just a generic “this could be any liberal democracy” brand of liberalism, the BBC is the only game in town. … There is no obvious way to produce or sustain a shared national culture or identity that doesn’t run through the public service broadcasters in general and the BBC in particular. Is Bush saying that a British (or English?) “culture” requires taxpayer coercion for its financing and government propaganda for its content? Is culture the means to encourage obedience to the edicts of national politicians? Or is it simply a matter of financing the cultural preferences of some at the cost of others? Interestingly, and apparently unbeknownst to Bush, some related questions were raised in the 1920s when the BBC was created as a broadcasting monopoly, a monopoly that lasted until 1954 for television and 1972 for radio. The BBC is still largely financed by compulsory “annual television licensing fees, which are paid by those who own TV sets or watch live television transmissions on such devices as computers” (Britannica). Ronald Coase, the 1991 economics Nobel laureate, wrote an interesting book on these issues: British Broadcasting: A Study in Monopoly (New York: Routledge, 2013 1950 for the [original edition]). He explained how the BBC got its broadcasting monopoly stealthily, and that this monopoly became unquestionable for several decades. It was mainly a tool for the government to spread the “culture” of the state or its main clientèles. Coase wrote: Though the programme policy of the Corporation gave the lower social classes what they ought to have, it gave the educated classes what they wanted. In 1951, he also wrote in The Owl: A Quarterly Journal of International Thought: The view that public operation alone is desirable is only likely to be accepted by a Socialist: the widespread support for the present publicly-operated broadcasting system is but another instance of the acceptance of Socialist views not only in the Labour Party but also in the Conservative and Liberal Parties. The BBC is not as dangerous as when it was a monopoly but, from what I hear, it has continued doing what government intervention does best: strengthening the politically dominant “culture”—that is, the culture preferred by the most politically important constituencies. (0 COMMENTS)

It won’t take long to answer this question. Therefore most of this post will be devoted to considering why this is even an issue. Consider the following Bloomberg headline and subhead: Who Thinks China’s Not an Economic Powerhouse? China One of the hottest topics at the upcoming global climate conference is whether China should still be considered “developing.” According to the IMF, China’s per capita GDP in 2024 is estimated at $13,136 well below the $85,373 figure for the US, and even below Mexico’s $15,246.  In PPP terms, China’s GDP is $25,015, again, slightly below Mexico.  China is clearly a developing country.  So what’s going on here? In recent years, the US government has adopted an adversarial relationship with China, and most of the media has fallen in line with this agenda. This attitude colors the way the media looks at all sorts of issues.  Consider the following two examples: 1. When the Chinese government reports strong GDP growth, much of the media is immediately skeptical.  Experts are cited who claim that the official Chinese figures are inflated.  Studies using satellite data of nighttime illumination suggest that China is much poorer than it claims to be.   2.  When China is viewed as a threat to the national security of the US, or when China is expected to contribute money to the fight against global warming, then China is viewed as an advanced economy, indeed a “powerhouse” economy. There doesn’t seem to be any “fact of the matter” when it comes to China’s development status.  Rather it is regarded either as a backward developing country or an advanced developed country according to whether that status advances a particular argument being made by powerful special interests.  If the goal is to show that China has a bad government, then obviously it is inconvenient to report stellar rates of economic growth.  If your interest is convincing the public that China is a formidable competitor to the US, then obviously it is inconvenient to report that China is merely a developing country. This is how I read the Bloomberg headline and subhead.  At the moment, it is convenient for the US government to have China viewed as an economic powerhouse.  But not always.  If reports of rapid Chinese economic growth lead other developing countries to begin seeing China’s system as worth emulating, then it’s time to point out that the GDP figures are probably inflated and China’s economic system is actually quite inefficient.  China is much poorer than its government claims. I don’t hold either view, as I don’t have an agenda.  I believe that China has grown very rapidly since Maoist economic policies were replaced with market reforms.  I believe that China is every bit as rich as its government claims, probably even richer.  (Richer than Mexico.) I trust my own eyes much more than I trust satellite models of an economy.  But I do not believe that China is a fully developed economy.  It still trails the US by a very wide margin, and will continue to trail the US for the foreseeable future.  Indeed, China still trails other East Asian economies like Japan, South Korea, Taiwan, and Singapore, largely because its government remains too heavily involved in the economy. In my view, China is not a threat to America’s almost complete dominance of the 21st century global economy.  Indeed, with the rise of high tech that dominance is becoming ever more entrenched, with the US share of global stock market capitalization having recently risen to an astounding 61%.  At the same time, I understand why some people have alternative views.  China is a major player in many industries, especially manufacturing.  But whatever your view, it is important to avoid motivated reasoning.  Whether China is or is not a developed country does not depend on whether that fact advances an argument that you happen to be making at this moment in time. (0 COMMENTS)

A fair warning to the readers – this post is going to be pretty heavy handed with metaphors. So insert the usual disclaimer here about how all metaphors are imperfect, break down when extended too far, etc. With that out of the way, a metaphor recently occurred to me that helps highlight something that separates the thinking of Austrian economists from more mainstream textbook economic models – friction in the economy. For this post, I’m using a broad brush when talking about economic frictions, but in general, this word is often used to describe anything that impedes market activity. Transaction costs, imperfect information, or sticky prices are sometimes characterized as “frictions” that impede the market. Hence why in the model of perfect competition, there is a complete absence of economic frictions of any kind. Perfectly competitive, frictionless markets are thus held up as an ideal, and to the extent that real-work markets fall short of this ideal, markets have failed and are at least in principle open to government correction. But important scholars in the Austrian tradition have resisted this way of thinking. F. A. Hayek, for example, wrote, “It appears to be generally held that the so-called theory of ‘perfect competition’ provides the appropriate model for judging the effectiveness of competition in real life and that, to the extent that real competition differs from that model, it is undesirable and even harmful.” Hayek, for his part, considered the theory of perfect competition to be all but useless, and “its conclusions are of little use as guides to policy.” This problem wasn’t simply limited to the model of perfect competition in Hayek’s mind. He also argued the conceptual failings of perfect competition “not only underlie the analysis of ‘perfect’ competition but are equally assumed in the discussion of the various ‘imperfect’ or ‘monopolistic’ markets,” and thus those models, too, were of little value for understanding economic activity or for crafting policy. In one way of thinking, the kind of thinking behind the model of perfect competition, friction is something that impedes progress. But to other thinkers, the existence of these various market “imperfections” or “frictions” not only don’t hamper markets, they are crucial for markets to function. A frictionless state of affairs is thus not an ideal we should hope or strive for. The analogy that occurred to me is as follows. Suppose you’re trying to walk from point A to point B. Luckily for you, you have found yourself on a completely frictionless surface! This is the ideal environment for reaching your goal, right? Well, no. A frictionless surface can’t generate any purchase (oblique pun only slightly intended.) No matter how hard you tried to walk, you wouldn’t be able to make any progress to your goal. In order to be able to carry yourself forward, you need friction – something to grip onto or hold, something that can be used as a means of generating movement. A frictionless surface would be ideal in one circumstance. As long as you needed to go in a straight line, with no changes to your speed, no need to ever adjust course, continuing indefinitely, and you somehow had momentum generated for you ex nihilo, then in that specific situation, it would be ideal to be moving across a surface free of any friction. And this, Hayek argues, is more or less what the model of perfect competition assumes to be the case. It simply assumes into existence a specific state of affairs and calls that state “competition,” when in reality you need an ongoing competitive process to generate a given state of affairs. If you have to pick your own destination, generate your own movement, speed up or slow down from time to time, and change course as the landscape around you changes, you absolutely need friction. In this understanding, friction doesn’t impede movement – it is critical to generate movement. (If I wanted to stretch this metaphor even further, I’d add another tangent about how in this way of thinking, the real impediment isn’t friction – it’s barriers. But I’ll leave that thread un-pulled for now.)   (0 COMMENTS)

  Bryan Caplan’s latest Substack post, “Reflections on United Arab Emirates,” Bet on It, October 21, 2024, is excellent. It’s all about his experience in the UAE and how it informs his thinking on open borders. His bottom line is hard to summarize but his points #2 and #3 come close. Point #2: The key ingredient of Emirati success: 88% of UAE’s population is foreign-born. That’s the highest share of any country on Earth. Why is the share so high? Because UAE is closer to open borders than any other country on Earth. They don’t just welcome petroleum engineers and architects. They welcome drivers, maids, janitors, waiters, and clerks. They don’t just welcome Europeans and East Asians. They welcome South Asians, Pacific Islanders, North Africans, and plenty of sub-Saharan Africans, too. I chatted with workers from both Zimbabwe and Sierra Leone. Yes, would-be migrant workers face a government approval process, so the border is not 100% open. But if you want to work hard to make a better life for yourself, your prospects of landing a work visa are decent no matter how humble your credentials. Point #3: Abu Dhabi and Dubai are living proof that Michael Clemens’ “Trillion Dollar Bills on the Sidewalk” is literal truth. Both cities look like Coruscant from Star Wars. They are absolute marvels: Gleaming cities of the future where humanity gathers to produce massive wealth. And without mass immigration, almost none of this could have been built! They need foreigners to help them run the petroleum industry. They need foreigners to build their skyscrapers, malls, and mansions. And they need foreigners to run their hotels, restaurants, and stores. The article, not the title of the article, is literal truth. There aren’t actually trillion dollar bills, except in Zimbabwe. But the article by Clemens argues, successfully in my view, that allowing much more immigration would create trillions of dollars of economic output annually. The whole piece is well worth reading. It’s Bryan Caplan at his best. It’s informed, filled with data, analytically solid, and completely lacking in social desirability bias. One new thing I learned: “Homosexuality is illegal… but no one has been arrested for it since 2015.” Think about that. You couldn’t have said that in Britain in, say, 1960. (Cue Alan Turing.) You couldn’t have said in the United States in, say, 1975. (Think about Stonewall.) So that one fact is very striking. Bryan’s post has received more comments than his usual Substack post. Many of them are informed. The main thing I learned from the comments, which was missing from Bryan’s post, is that the UAE doesn’t have open borders; it has a guest worker program. Bryan wouldn’t deny this; it’s just that he didn’t mention the term “guest worker.” Here’s one thing I’m wondering about. One commenter, “Bacon Commander,” said, “If you lose your job, you go home.” Is that literally true? Wouldn’t you be given, say, 2 months, to find another job? (0 COMMENTS)

Russ Roberts and Noah Smith reflect on films and TV shows that depict the “good old days” nostalgia for the particular era of the 1950’s. They also end with an exchange about various survival shows including a Canadian show that was canceled as survival in late 1800’s farming life conditions was simply too challenging for the contestants. Why do people tend to idealize certain historical periods, and how does this affect current views on progress, technology, and economics? We hope you enjoy this exchange of ideas, descriptions and anecdotes about development. As always, your reactions are welcomed and encouraged.   Noah Smith refers to poverty as the “elemental foe.” What does this metaphor suggest about the nature of poverty and survival as compared to other foes such as nuclear war or climate change?   “Industrial modernity” is described as a “system of technological edifices” that sustain modern standards of living. How did Adam Smith foresee this in his opening of Wealth of Nations about division of labor?    The paradox of labor-saving technologies reducing jobs while increasing productivity is an age old phenomenon.  As the discussion continues to evolve about the future of AI, what potential consequences of technological unemployment appear to be underrated or overrated? Why?   Both Roberts and Smith express curiosity about why the Industrial Revolution didn’t occur sooner, despite the availability of key technologies in earlier civilizations in Rome, China and Latin America. What are some potential explanations for why industrialization took so long, and how does the extent of the market, the institutions of the time, or other economic factors contribute to this delay?   Some argue that technological advancements can reduce resource consumption without the need for degrowth, while others believe degrowth is necessary to mitigate environmental harm. Is there hope that Noah Smith’s concept of our “single team” effort in fighting for our future, a way that these two approaches can coexist effectively? (0 COMMENTS)

Housing is artificially expensive. Bryan Caplan of George Mason University and the author of Build, Baby, Build talks with EconTalk’s Russ Roberts about the causes behind high housing prices and what can be done to bring prices down. The post Why Housing Is Artificially Expensive and What Can Be Done About It (with Bryan Caplan) appeared first on Econlib.

I’ve often wonder why financial advisors need a license. Perhaps the government believes that this regulations protects the public from making bad financial decisions.  But what is a bad financial decision?  Is buying a managed stock mutual fund a bad decision for the average person?  How about an indexed fund?Perhaps the government is worried that unregulated financial advisors might offer poor advice, such as encouraging people to believe that buying lottery tickets is a good way to get rich.  On the other hand, if that were the motive then why would government officials be offering this sort of advice: Lottery officials announced Monday that it will cost $5 to play Mega Millions, beginning in April, up from the current $2 per ticket. The price increase will be one of many changes to Mega Millions that officials said will result in improved jackpot odds, more frequent giant prizes and even larger payouts.“Spending 5 bucks to become a millionaire or billionaire, that’s pretty good,” said Joshua Johnston, director of the Washington Lottery and lead director of the group that oversees Mega Millions. Is Joshua Johnston offering good investment advice?  Is he a licensed financial advisor?  On a more serious note, I suspect that the actual motive behind the licensing requirement for financial advisors is the same as the actual motive behind all other occupational licensing restrictions–the protection of incumbents against newcomers.  Some would argue that the Bernie Madoff scandal showed the need for licensing requirements.  Actually, that case showed the exact opposite; licensing requirements do not address the central problem in the financial services industry, which is moral hazard.   Based on what I’ve observed, the primary problem in the financial services industry is not unlicensed professionals recommending the wrong stocks, it is licensed professionals encouraging their clients to invest in a way that benefits the financial advisor.  Requiring financial advisors to be licensed does nothing to fix that problem.  Indeed it might lull ordinary investors into overconfidence, “If this guy is licensed, then he must be qualified.” (0 COMMENTS)