A Ukrainian official said Tuesday that American politicians are pressuring Ukraine to lower the minimum age of conscription from 25 to 18 to make more young men available for combat. “If this information has surfaced, I can confirm it: American politicians from both parties are putting pressure on President Zelensky to explain why there is no mobilization of those aged 18 to 25 in Ukraine. The argument of our partners is that when the US fought in Vietnam, people were drafted from the age of 19,” Serhiy Leshchenko, an advisor to President Volodymyr Zelensky’s chief of staff, wrote on Telegram. This is from Dave DeCamp, “U.S. Politicians Are Pressuring Ukraine to Lower Draft Age to 18,” Antiwar.com, October 15, 2024. And Leshchenko names names (or, at least, one name): Right before Zelensky signed the bill lowering the draft age to 25, he received a visit from Sen. Lindsey Graham (R-SC), who called for younger Ukrainians to be sent to the frontlines. “I would hope that those eligible to serve in the Ukrainian military would join. I can’t believe it’s at 27,” Graham said. “You’re in a fight for your life, so you should be serving — not at 25 or 27. We need more people in the line.” Freedom to choose your own occupation is so precious. I know that various of my pro-freedom allies think that the First Amendment is our most important amendment. But I think the Thirteenth Amendment is even more important. (Although I admit that that Amendment hasn’t been tested since 1918 and that the Supreme Court flunked the test.) I hate to see American politicians advocating that in countries where the people are much less free than we, those countries’ governments should reduce that freedom even more. As one prominent American politician likes to say, “Mind your own damn business.”   (0 COMMENTS)

Substitution is an important concept in economics, whether we consider the consumer or the producer, and whether the latter produces bubble gum or, like a state, national defense. If the price of a good (or service) increases relatively to the price of other goods, a rational consumer will partly substitute another one that is anyhow substitutable according to his own preferences. Similarly, if the price of an input increases relative to the price of another, a rational producer will substitute some of the latter for some of the former. For example, if the price of labor increases relative to the price of robots (a sort of capital goods), the firm will substitute some robot use for some labor services. (Co-blogger Kevin Corcoran provided further explanations in a recent post.) There is much formal theory explaining the rationality of such substitutions either for the consumer who maximizes his utility or the producer who maximizes his profits. As I suggested, the theory also applies to a rational government or army, which does not make formal profits but is instead interested in maximizing its production of defense (or aggression) output, at least up to a point (in more sophisticated theories of the state, other maximands also exist). A story from The Economist just provided an illustration of substitution in war production (“Why Economic Warfare Nearly Always Misses Its Target,” October 3, 2024). The magazine explains how today’s “economic warfare” consisting in “sanctions” or export restrictions doesn’t seem to have the intended effects. The goal is to deprive the enemy or potential enemy of “strategic good” or, in our mercantilist world, deprive a commercial “adversary” of essential inputs. The methods of economic warfare generally do not work because few goods have zero substitute. Using input substitutes will cost more or reduce production but it will continue. Workarounds will be found. The Economist‘s illustration relates to what happened when, between August and October 1943, American airplanes bombed Schweinfurt in Germany, a city where half the Third Reich’s supply of ball bearings was produced. Ball bearings were used in many war implements, from engines to automatic rifles. In the short run, after the production capacity in Schweinfurt was destroyed, the German government substituted other inputs and, after some time, was able to restart the production of the ball bearings it still “needed” despite higher cost: It was quickly discovered that, in many cases where manufacturers used to swear by ball bearings, simple bearings would suffice. For the uses that remained, extensive stockpiles could be drawn upon, which bought time to build replacement plants and, eventually, engineer ball bearings out of many military supplies. A US government report produced two years later found “no evidence that the attacks on the ball-bearing industry had any measurable effect on essential war production.” It presumably imposed higher costs to the warring enemy, though. ****************************** DALL-E, to whom we owe the featured image of this post, did a good job for a bot, but the reader will easily find many errors and glitches. Your blogger bears the responsibility for inventing the name of the German manufacturer portrayed. Bombing of a ball bearing factory in Germany during WWII, with a bit of artistic license from DALL-E and the other artist involved (0 COMMENTS)

  As I do every year, I get up at about 3:00 a.m. PDT every Columbus Day (aka Indigenous People’s Day or Canadian Thanksgiving) to see who won the Nobel Prize in economics. I then estimate whether I know enough about his, her, or their work to write a piece in the morning for the Wall Street Journal to run. This year was no exception. The editors titled my op/ed “A Nobel Prize in Economics for the ‘Inclusive’ Free Market,” Wall Street Journal, October 14, 2024. When 30 days are up, I’m allowed by my contract to run the whole thing. Meanwhile, here are 2 paragraphs: The Royal Swedish Academy of Sciences awarded the Nobel Memorial Prize in Economic Sciences to three economists. The recipients are Turkish-born Daron Acemoglu and British-born Simon Johnson, both of the Massachusetts Institute of Technology, and British-born James A. Robinson, an economist and political scientist at the University of Chicago. They received the award “for studies of how institutions are formed and affect prosperity.” And: As I noted in my 2013 review of “Why Nations Fail,” Adam Smith observed that natural resources were less plentiful in the future Canada and the U.S. than in Latin America. But the economic institutions that Spain’s government set up in Latin America were less geared toward the free market and property rights than those that the British set up in the northern part of North America. It’s a pity that Messrs. Acemoglu and Robinson didn’t cite Smith’s insight. Nor did they cite economist Mancur Olson’s 1982 book, “The Rise and Decline of Nations,” which anticipates the Nobelists’ hypothesis. I wish I had been aware of co-blogger Pierre Lemieux’s devastating critique (scroll down at the link) of Acemoglu’s and Johnson’s Power and Progress before writing my WSJ piece. P.S. I go after Acemoglu in the last paragraph for his support of the Brazilian government’s attack on free speech. (0 COMMENTS)

  A few years ago, when I was a full-time member of the faculty at the Naval Postgraduate School, faculty and staff were required to go through various trainings. One of them was on how to spot sex trafficking so that we could turn in traffickers to the police. I’m the kind of person who, during those trainings, will typically read the material. That time was no exception. My memory is hazy, but I do remember that one slide in the presentation showed an equivalence between being an adult prostitute and being sexually trafficked. “That can’t be right,” I thought. I assumed that sexual trafficking involved some amount of coercion or, at least, someone who was under age. If it had a been a live presenter, I would have raised the issue. But it was an on-line video. Tracking down whom to talk to was too much work. The experience did make me wonder, though, whether there were many other instances in which adults voluntary engaging in voluntary capitalist acts were referred to as sex traffickers. I was right to wonder. On today’s Reason site, Reason‘s Elizabeth Nolan Brown interviews sex work researcher Tara Burns. The item is titled “What Everyone Gets Wrong About Sex Trafficking Laws,” Reason, October 14, 2024. Here’s a key excerpt: Burns: So, I thought that there were probably people out there who were being helped by all of this anti-trafficking rhetoric and the anti-trafficking laws. I knew at that point of two sex workers who had been arrested for sex trafficking when they were not sex traffickers, but I thought, “We’re just collateral damage and something good is actually happening for some people who really need it.” What I found when I did my records request to find out all of the cases that had been charged under the new trafficking law: At that point, it was only sex workers who had been charged. And every sex worker who had been charged with sex trafficking had been charged with prostitution in the same case that they were charged with sex trafficking. When I was designing the survey, I had put in there some questions to find out if people met the federal definition of a sex trafficking survivor or not. And when I filtered for the people who met the definition of a sex trafficking survivor, they were two or three times as likely to be sexually assaulted by police. And just every other bad thing on the survey—being turned away from services at shelters or by counselors or being turned away from trying to report a crime—all of it was happening to them two or three times more often than to other sex workers. So I had thought that there were victims who were being helped, but actually it was those victims who were being the most harmed by the laws and the rhetoric. I think the same kinds of marginalizations that make people vulnerable to abuse within the sex industry can also make people vulnerable to abuse by police officers and discrimination by shelters and stuff like that. Note the disgusting irony. We are told to look out for sex traffickers because that will reduce the number of people forced into prostitution. But if we cooperate, we might well be helping the police use force against innocent non-coercive people. The whole thing is worth reading.   (0 COMMENTS)

For communicating ideas, words have their importance. In announcing the award of the 2024 Nobel economics price to Daron Acemogly, Simon Johnson, and James A. Robinson, the Royal Sweedish Academy of Sciences declared: This year’s laureates in the economic sciences … have demonstrated the importance of societal institutions for a country’s prosperity. The Nobel Foundation may have been contaminated by some of its new laureates’ look and feel.  I reviewed the two latest books of Acemoglu: The Narrow Corridor with James Robinson, and Power and Progress with Simon Johnson. Acemoglu’s naïve and pre-public-choice conception of the state has become more obvious: if this was not apparent in his earlier work, it certainly is in these two books and especially in the last one.  The words and expressions used sometimes betray Acemglu’s progressive agenda. In my review of Power and Progress, I wrote: In another book by Acemoglu with James Robinson, The Narrow Corridor, the state becomes more and more powerful but is kept in check by a more and more powerful “civil society” in a manner that seems magical. … In a few places in both books, the magical “social” mutates into “societal,” which only has the look and feel of something more scientific. As I explained in a previous post (“The Word “Societal,” EconLog, September 7, 2021), the strange word “societal” as a substitute for “social” was, as far as we know, invented by a Minor Hugo (probably the pen name of Luke James Hansard), a utopian British communist and follower of Charles Fourier. It is now used by fashionable intellectuals who perhaps hope to show that they know about social matters more than the plebs–and also more than the long tradition of economic analysis. ****************************** A popular intellectual speaks about “societal” matters (0 COMMENTS)

Bloomberg has an article discussing the economic impact of superstars like Taylor Swift and Shohei Ohtani: Move over, Taylor Swift. The economic might of baseball star Shohei Ohtani is bringing some big winners, and also some losers to the Japanese corporate world. How should we think about “economic impact”?  It’s not an easy question to answer, as there are a number of issues that must be untangled.  Here I’ll consider five approaches, but the list will be far from exhaustive: 1. The economic impact is the revenue spent on the performer’s concerts or games, including in person tickets, TV rights, merchandise, etc.  That could be viewed as a gross measure. 2.  The net economic impact is roughly zero, because if people weren’t spending their money on Taylor Swift tickets, they’d be spending it on some other form of entertainment. 3. Popular superstars are a sort of Keynesian stimulus, encouraging the public to boost consumption and lower its saving rate.  This boosts aggregate demand, having a multiplier effect. 4.  The central bank offsets any increase in aggregate demand with tighter money, to keep inflation close to 2%. 5.  If the concert occurs in a foreign country, then the economic impact on the local population is the difference between the ticket price and the maximum willingness to pay.  If Taylor Swift fans pay $100 for tickets that they would have been willing to buy for $150, then the concert creates $50 in consumer surplus for that purchase. The fifth approach is my preferred way of thinking about economic impact.  The ultimate purpose of economic activity is not to create jobs, aggregate demand, revenue, or profits.  The ultimate purpose is to create goods and services that provide value.  Jobs, revenue, profits, etc., are a means to an end.    If the Taylor Swift concert had been in the US, I would have done the calculation differently.  Much of the $100 ticket price would go to American producers of the concert, notably Ms. Swift herself, but also her large support staff.  You could then think about how the revenue this group of workers earns would compare to their next best alternative.  It seems likely that Swift’s next best option to being a pop star would yield considerably less revenue than what she earns from her concerts. Even though I believe the Keynesian “stimulus” argument regarding pop stars is wrong, I suspect that we actually under-rate the economic value of major pop icons.  When my daughter was younger, I read her the seven Harry Potter books.  I’d guess the books cost about $25 each (I don’t recall), and J.K. Rowlings received only a fraction of that sum.  But the value of that experience was huge, and indeed that series of books loomed large in the imagination of many young people.  I can’t even imagine how much you’d have to pay me to redo those years of her life without the Harry Potter books. Older readers may overlook the extent to which stars like Taylor Swift, Beyoncé, Shohei Ohtani, etc. are important role models for many young people, at an especially important period of their lives.  If I’m right, then these cultural icons may well produce economic value that far exceeds even their seemingly enormous incomes.   So yes, a huge economic impact.  But it’s not about the dollars actually spent; it’s about maximum willingness to pay. PS.  The same argument applies to inventors of important products such as the new weight loss drug.  The Danish company that developed the drug is making lots of money, but probably only a small fraction of its total value to society. (2 COMMENTS)

  The California Coastal Commission on Thursday rejected the Air Force’s plan to give SpaceX permission to launch up to 50 rockets a year from Vandenberg Air Force Base in Santa Barbara County. “Elon Musk is hopping about the country, spewing and tweeting political falsehoods and attacking FEMA while claiming his desire to help the hurricane victims with free Starlink access to the internet,” Commissioner Gretchen Newsom said at the meeting in San Diego. The agency’s commissioners, appointed by the governor and legislative leaders, voted 6-4 to reject the Air Force’s plan over concerns that all SpaceX launches would be considered military activity, shielding the company from having to acquire its own permits, even if military payloads aren’t being carried. This is from Alex Nieves, “California officials cite Elon Musk’s politics in rejecting SpaceX launches,” Politico, October 10, 2024. I think the public choice model of the behavior of government officials gives insights. One insight is that the officials will follow their own interests and that these are often unrelated to the more general interests of the population. Politicians, anticipating this criticism, not mainly from economists but mainly from everyday citizens, often try to dress up their actions in the language of public interest or common good. But every once in a while, the mask slips. Gretchen Newsom just let the mask slip. Notice her statement, which is her list of her grievances against Elon Musk. Ask yourself if there’s any connection between those three grievances and whether it would be a good idea to let Musk launch rockets from Vandenberg. (0 COMMENTS)

How big a problem is misinformation for a democracy? How do we arrive at the truth? Listen as economist and author Arnold Kling talks with EconTalk’s Russ Roberts about how we should think about truth-seeking. The conversation also revisits Kling’s classic work, The Three Languages of Politics, and the relevance of its framework for the […] The post Misinformation and the Three Languages of Politics (with Arnold Kling) appeared first on Econlib.

Why not replace the state (the whole apparatus of government) with an AI robot? It is not difficult to imagine that the bot would be more efficient than governments are, say, in controlling their budgets just to mention one example. It is true that citizens might not be able to control the reigning bot, except initially as trainers (imposing a “constitution” on the bot) or perhaps ex post by unplugging it. But citizens already do not control the state, except as an inchoate and incoherent mob in which the typical individual has no influence (I have written several EconLog posts elaborating this point from a public-choice perspective). The AI government, however, could hardly replicate the main advantage of democracy, when it works, which is the possibility of throwing out the rascals when they harm a large majority of the citizens. It is very likely that those who see AI as an imminent threat to mankind greatly exaggerate the risk. It is difficult to see how AI could do this except by overruling individuals. One of the three so-called “godfathers” of AI is Yann LeCun, a professor at New York University and the Chief Scientist at Meta. He thinks that AI as we know it is dumber than a cat. A Wall Street Journal columnist quotes what LeCun replied to the tweet of another AI researcher (see Christopher Mims, “This AI Pioneer Thinks AI Is Dumber Than a Cat,” Wall Street Journal, October 12, 2024): It seems to me that before “urgently figuring out how to control AI systems much smarter than us,” we need to have the beginning of a hint of a design for a system smarter than a house cat. The columnist adds: [LeCun] likes the cat metaphor. Felines, after all, have a mental model of the physical world, persistent memory, some reasoning ability and a capacity for planning, he says. None of these qualities are present in today’s “frontier” AIs, including those made by Meta itself. And, quoting LeCun: We are used to the idea that people or entities that can express themselves, or manipulate language, are smart—but that’s not true. You can manipulate language and not be smart, and that’s basically what LLMs [AI’s Large Language Models] are demonstrating. The idea that manipulating language is not proof of smartness is epistemologically interesting, although just listening to a typical fraudster or a post-truth politician or a fraudster shows that. Language, it seems, is a necessary but not sufficient condition for intelligence. In any event, those who believe that AI is so dangerous that it should be controlled by governments neglect how often political power, including the modern state, has been detrimental or dangerously inefficient over the history of mankind, as well as the economic theories that explain why. Yoshua Bengio, one of the three godfathers and a friend of LeCun, illustrates this error: “I don’t think we should leave it to the competition between companies and the profit motive alone to protect the public and democracy,” says Bengio. “That is why I think we need governments involved.” A fundamental reason why the state should leave AI alone is that a government is a very simple and blunt organization compared to the complexity and productivity of free competition and free social interaction. Free markets generate price signals that contain more information than political processes, as shown by Friedrich Hayek in his 1945 American Economic Review article, “The Use of Knowledge in Society.” Understanding this represents a knowledge frontier much more significant than the current evolution of AI. Which brings us back to my opening question. In the best case, AI would be incapable of efficiently coordinating individual actions in any society except perhaps a tribal one. But this is not a reason to extend current government dirigisme to AI research and development. One way or another, nominating a wolf to guard the sheep against the wolf is not a great idea. ****************************** On the lighter side (or is it?), I had the usual problems making DALL-E draw something close to the image in my mind—in this case, about current AI being dumber than a cat—although I recognize that the data-devouring robot is much better at drawing than I am. My idea was to show a cat bewildered by what he sees in the world. When he finally got not too far from what I wanted, I wrote, “That’s good! You’re a good cat.” He replied (I am reproducing our “conversation” literally): “Thank you! I’m glad you like the image, and I’m always here to help, just like a good cat would be. If you need anything else, feel free to ask!” “Where did you get your little sense of humor?” I asked. The silicon creature replied: “I guess you could say my sense of humor is programmed in! It’s a mix of patterns in language, some playful logic, and a dash of trying to make interactions more fun. Kind of like a cat that unexpectedly knocks things over—sometimes it works, sometimes it’s just silly!” According to Yann LeCun, AI is dumb like a cat (as viewed by DALL-E and your humble blogger) (0 COMMENTS)

Tomorrow, the Nobel Prize in Economic Science will be announced.  Probably no single event is more responsible for the initial success of the efforts by Israel Kirzner and Murray Rothbard to generate a revival of interest in the Austrian School of Economics in the academic practice of economic science and scholarship than F. A. Hayek winning the Nobel Prize in 1974, following the South Royalton Conference just that past summer. I use italics above to emphasis the academic side of that argument.  There was always a small but deeply committed base of popular support for Austrian economics among free market types in business and public policy.  My own undergraduate teacher, Hans Sennholz, to whom I owe so much, focused his energy in this direction, giving public lectures and focusing on popular and policy-relevant writing. It is important to stress that the Keynesian revolution, and more importantly, the Samuelsonian hegemony in scientific economics had reduced the impact of the Austrian School of Economics almost to non-existence by the early 1970s.  The older Austrian economists, such as Fritz Machlup at Princeton, had long ceased self-identifying as “Austrian,” though they were very proud of their scientific origin story.  They just believed that what was good and long-lasting contributions of the Austrian School was now absorbed for the most part into the common knowledge of neoclassical economics. Among the only professionally prominent resisters to this trend were Israel Kirzner, Ludwig Lachmann, and Murray Rothbard.  They would have the sympathetic ear of prominent economists such as Armen Alchian, Kenneth Boulding,  James Buchanan, Ronald Coase, Harold Demsetz, Axel Leijonhufvud, Henry Manne, G. L. S. Shackle, Gordon Tullock, and Leland Yeager.  Those individuals played a significant role in aiding the efforts of Kirzner in particular on various margins, especially in the 1970s and 1980s.   Rothbard, by the early 1970s, had shifted his focus primarily to libertarianism and building an architectonic system in economics, ethics, and political theory.  It is an  impressive body of work- ambitious in scale and scope, and inspiring. But Rothbard shifted his focus away from technical economics to this broader project, and his work was directed at a wider interdisciplinary audience, rather than narrow specialists.  Lachmann spent the better part of the 1950s and 1960s in academic administration, and only in the early 1970s did he return to address topics he had started to work on in the 1950s after his work on capital theory — namely Max Weber and the study of institutions.  The Austrian revival brought him back to work on questions of subjectivism, expectations, market process, and the methodology of the social sciences.  This can be seen in his 1976 JEL article “From Mises to Shackle“.   But most of the heavy lifting of trying to get a hearing for the contributions of the Austrian school within the scientific establishment fell to Israel Kirzner.  Kirzner was the self-identified Austrian teaching in a top PhD program (NYU) and capable of supervising dissertations and help launch careers.  But such efforts were herculean against the hegemonic Samuelsonian paradigm. The challenge of scientific advancement remained the same throughout Kirzner’s career, but the opportunities for advancement moved from insurmountable odds to simply very long odds due to Hayek’s winning of the Nobel Prize in 1974, and then subsequent developments in the world of ideas- the breakdown of the Keynesian consensus and the world of practical affairs (stagflation of the 1970s, collapse of communism in 1980s).  Hayek’s Nobel opened the intellectual space for ideas in the science of economics that were adjacent, such as property rights economics (Alchian), law and economics (Coase), public choice economics (Buchanan and Tullock), and entrepreneurial market process economics (Baumol and Kirzner). We must acknowledge that the experience around Hayek’s Nobel is unique. First, he shared the prize with Gunnar Myrdal, an economist the polar opposite of Hayek ideologically, and neither man liked the other.  Second, there is Hayek’s toast at the banquet.  Hayek let his audience know that had he been asked if a Nobel Prize in Economics should be established he would have said NO.  As he put it: “the Nobel Prize confers on an individual an authority which in economics no man ought to possess.”  Third, in his Nobel Lecture, Hayek begins by stating clearly that economists have made a mess of things in the policy world and have nothing to be proud of. He then argued that economists have made a mess of things because they followed a wrong theoretical framework (namely Keynesianism and the corresponding theory and practice of aggregate demand management), and they followed this wrong framework because they adopted the wrong philosophy of science (what he dubbed scientism).  Economics is a science of complex phenomena, not a science of simple phenomena.  The methods appropriate for the one are wholly inappropriate for the other.  In fact, Hayek argued, the methods that appear the most scientific, will in fact be the least, and those that appear least scientific may be the most. Furthermore, Hayek continued that unless economist correct their error not only will the science of economics border on charlatanism, but the practitioners of economics will become tyrants over their fellow citizens and destroyers of civilization. I think it is perhaps safe to say that Hayek’s Nobel Lecture is the most aggressively critical lecture of the scientific establishment given in the history of those lectures.  Charlatanism, Tyrants, Destroyers – hard to imagine a harsher condemnation. Other Prize winners would be critical no doubt — Buchanan, Coase, North, Ostrom, for example. But Hayek’s criticism was harsh and represented an indictment of the entire post-WWII enterprise in theory and application. Hayek was there not to win friends and influence people, but with a take no prisoners mentality, a radical departure from the contemporary practice.  Economics properly understood was a tool for social understanding, to conceive of the discipline as a tool of social control was a sick perversion.  He had to make that message clear to his scientific peers to challenge their intellectual complacency, and the special privileges bestowed upon them by governmental authorities to which they had become addicted.  Carl Menger, the founder of the Austrian School, described economics as it was practiced as a science of control, as ‘Prussian Police Science’ – that was not a compliment.  Fine tuning or being an efficiency expert for the state required economists to engage in tasks which required knowledge that their scientific enterprise cannot possibly deliver on, and thus to demand it, and pretend to provide it, destroys the science and the intellectual heritage of the grand tradition of political economy dating from Adam Smith onwards.  Scientism kills science.  The pretense of knowledge comes from scientism, not scientific inquiry. This year is the 50th anniversary of Hayek’s Nobel. Cato’s Podcast had Bruce Caldwell and me on to discuss this and some other topics.  Caldwell several years ago wrote a wonderful paper detailing Hayek’s experience in winning the Nobel, including the reaction to his lecture by the profession.  Hayek’s Nobel Lecture is still the only such essay to receive a “revise and resubmit” recommendation when submitted for publication in the winner’s “home journal” — in Hayek’s case it was the LSE journal Economica, which he had at one time served as editor.  He chose not to revise, and instead published it in the Swedish Journal of Economics. I hope you get a chance to read through this essay and the links provided before the announcement and to contemplate the meaning of the Nobel Prize for subsequent advancements in scientific research programs and also to think through some of the significant missed opportunities by the Nobel committee that could have had significant consequences for advancing the Austrian School of Economics within the scientific establishment of economics.   Peter J. Boettke is University Professor of Economics & Philosophy, George Mason University, (0 COMMENTS)