People living in capitalist countries, even if less than perfectly free, don’t think about it. As customers, they place orders with their suppliers. As producers, they satisfy the orders of their customers. Consumers are the bosses, producers are at their service. And producers happily accept this role because they want money to, in their turn, order goods as consumers on markets. A free rather than less free economy naturally organizes itself around this principle because we produce in order to consume and not the other way around. For Christmas, you gave orders to your suppliers, not the other way around. A producer could order you to buy from him. Only public producers—governments or suppliers backed by governments—can do this. French philosopher Raymond Ruyer, in his 1969 book Éloge de la société de consommation (In Praise of the Consumer Society), described the difference between a market economy, where the consumer is sovereign, and a planned economy, where the producer runs the show (under government’s control): In a market economy, demand is imperative and supply is supplicant … In a planned economy, supply is imperative and demand is supplicant. « Dans l’économie de marché, la demande est impérieuse, et l’offre suppliante … Dans l’économie planifiée, l’offre est impérieuse, et la demande suppliante. » This is why, if you have the chance to live in a more-rather-than-less free society (and if you are not a hermit), you can have a happy Christmas. Merry Christmas! ****************************** Contrary to EconLog bloggers, Santa finds it difficult to paint letters (0 COMMENTS)

Years ago when I was in boot camp for the Marine Corps, one major focus of instruction was learning about the Uniform Code of Military Justice, or UCMJ. The UCMJ is the foundation of military law. Violations of the UCMJ could be brought up in a military trial known as a court martial. But there was a lesser, more watered-down version of a court martial we were also told about – non-judicial punishment, or an NJP. Being subject to NJP comes with certain trade-offs. On the one hand, NJPs were more limited in the amount of punishment they could dole out. For the same offense, a court martial can impose a much steeper penalty than an NJP. On the other hand, in an NJP, the commanding officer was judge and jury, and was not limited by the same kinds of procedures that might be required for trial in a court martial. For example, if the CO carried out an NJP, he could decide to accept hearsay as evidence against the accused, whereas hearsay is not admissible in a court martial. In practice, conviction at an NJP is essentially a foregone conclusion – I had witnessed or been aware of scores if not hundreds of NJPs during my time in the military, and only in one case was someone let off the hook. Being brought before an NJP essentially serves a similar role as a plea-bargain. In accepting a procedure where being found guilty is all but certain, you also reduce the scope of penalty you might face, and having an NJP on your record is not nearly as damaging as a conviction at a court martial. Particularly noteworthy was the fact that military members have the legal right to refuse an NJP. That is, if you’re brought up on charges for an NJP, you can refuse to accept it and demand to be court martialed instead. Now, why would someone make that move? Well, remember that while the consequences of a court martial are substantially steeper, the legal requirements for a court martial are also much stronger. A court martial has similar safeguards as a civilian trial – trial by jury, defendant assumed innocent by default and getting the benefit of the doubt, legal restrictions on admissibility of evidence, prosecution bearing the burden of proof, and so on. Thus, if you thought your command might not actually be able to prove your wrongdoing according to that higher standard, it might be worth refusing NJP and demanding a court martial instead. This puts people in a position of acting out Gary Becker‘s economic analysis of crime, something I’ve discussed previously. Becker modeled decisions about crime as a form of rational choice. The relevant variables were the expected benefit of the crime committed compared to a combination of the probability and severity of punishment. If a criminal considers committing a crime worthwhile if he judges the expected benefit of the crime exceeds the downside of probability and severity of punishment. In this case, instead of considering the expected benefit of a crime, one attempts compares the likelihood of conviction and the severity of punishment if convicted, and tries to take the course of action that returns the minimum expected cost. An NJP cranked the probability variable all the way up to essentially 100% while turning the severity variable down. Deciding to decline an NJP  in favor of court martial, then, was attempting to figure out how to navigate this choice. If they had you dead-to-rights, your probability of punishment in either context was very high, so the best you could hope for was to tune down the severity by accepting NJP. But if you thought their ability to actually prove a case against you was shaky, the higher standards of evidence required at court martial could turn the probability dial down enough to offset the increase in the severity dial. And in practice, that did happen sometimes. I’m aware of a few cases where someone declined NJP and demanded court martial, only to see the charges dropped because the investigators decided there just wasn’t enough of the right kind of evidence to secure a court martial conviction. The upshot? I think this shows rational choice theory is much more applicable to real-world decision-making than people realize. The late Jeffrey Friedman, in his book Power Without Knowledge: A Critique of Technocracy, was highly critical of rational choice theory, arguing that people in the real world don’t do high level mathematical calculations when making choices. As I described his position in my critique of his book: He also seems to apply much stricter standards to evaluating rival models of behavior than he does to his own. For example, when criticizing the idea of rational ignorance as described by Ilya Somin in his book Democracy and Political Ignorance, Friedman displays complicated mathematical equations calculating costs and benefits of political information and asks if we can really believe “billions of citizen-technocrats have been explicitly making calculations of the following sort to determine, respectively, whether they should vote and whether they should acquire political information…even though these formulae did not appear in print until 2013 (in Somin’s Democracy and Political Ignorance).” Friedman briefly acknowledges that writers like Somin and Jason Brennan suggest that voters need only implicitly understand the low odds of casting a tie breaking vote, without needing to do the complex math, but he rejects this idea. But in laying out his own theories, Friedman often describes them in terms of implicit understanding, tacit assumptions, and unconscious biases and thought processes, none of which require the kind of explicit attitudes he insists rival theories embody. For example, when he forms his theory of citizens holding to a simple society ontology, he says that “none of these elements would normally operate at the explicit or conscious level.” He also says people acting according to a naively realistic worldview “may not, and probably do not in most cases, understand themselves to be doing this” and may even be unaware of “subscribing to a worldview in the first place.” It seems to me that if Friedman allows for this kind of implicit, tacitly understood reasoning to operate in his models, he should be willing to grant that to other theories as well. The same can be said here. I witnessed many Marines in the kind of situation I described above. I highly doubt a single one of them were “explicitly making calculations” reflective of the highly complicated mathematical modeling in the formal work of rational choice theory. But nonetheless, they were still making these calculations. Not explicitly in highly mathematical terms, but implicitly, using more vague judgments and estimates rather than precise mathematical variables. Friedman sold rational choice theory a bit short – by taking it excessively literally (people explicitly perform complex mathematical equations about their decision-making!) he failed to take it sufficiently seriously. But rational choice theory, properly understood, deserves to be taken seriously, because its explanatory power can be found everywhere. (1 COMMENTS)

  The Cato Institute recently released its annual report on the Human Freedom Index. The index combines measures of economic freedom with measures of personal freedom. The report states: The Human Freedom Index (HFI) presents a broad measure of human freedom, understood as the absence of coercive constraint. I’m guessing that the authors, being good scholars, probably wrestled a little with distinguishing between economic freedom and personal freedom. To have effective freedom of the press, for example, you need to be able to have some economic freedom: the freedom to buy paper and printing presses or, in today’s world, the freedom to subscribe to an internet provider and, if the web publication is big enough, the freedom to hire people to write for the web site. Where does the United States stand? The title tells you: we’re number 17 in a group of 165 countries. So were just a hair short of being in the top 10 percent. The authors, Ian Vásquez, Matthew D. Mitchell, Ryan Murphy, and Guillermina Sutter Schneider, start with some bad news: freedom worldwide is lower than it was in 2019. They write: On a scale of 0 to 10, where 10 represents more freedom, the average human freedom rating for 165 jurisdictions fell from 6.98 in 2019 to 6.76 in 2020 and to 6.73 in 2021, and then increased in 2022 to 6.82. On the basis of that coverage, 87.4 percent of the world’s population saw a fall in human freedom from 2019 to 2022, with many more jurisdictions decreasing (130) than increasing (28) their ratings and 7 remaining unchanged. The sharp decline in freedom that began in 2020 comes after years of slow descent following a high point in 2007. In the third year of the pandemic, global freedom remained at a level far below what it was in 2000. Here are the top 10, in order: Switzerland, New Zealand, Denmark, Luxembourg, Ireland, and Finland (the first 6), and then Australia, Iceland, and Sweden (tied at 7), and Estonia at 10. They continue: Selected jurisdictions rank as follows: Canada (11), Japan (12), Germany (14), United Kingdom and United States (tied at 17), Taiwan (19), Chile (31), South Korea (32), France (34), Brazil (70), South Africa (73), Argentina (80), Mexico (94), India (110), Ukraine (122), Nigeria (126), Russia (139), Turkey (142), China (150), Saudi Arabia (155), Venezuela (159), and Iran (163). Out of 10 regions, those with the highest levels of freedom are North America (Canada and the United States), Western Europe, and Oceania. The lowest levels are in the Middle East and North Africa, sub-Saharan Africa, and South Asia. Women-specific freedoms, as measured by five indicators in the index, are strongest in North America, Western Europe, and East Asia and are least protected in the Middle East and North Africa, sub-Saharan Africa, and South Asia. Notice that Ukraine is pretty unfree and is only 17 countries higher than Russia. Is there a connection between human freedom and other important measures of human well-being? Yes, big-time. They write: Jurisdictions in the top quartile of freedom enjoy a significantly higher average per capita income ($56,366) than those in other quartiles; the average per capita income in the least free quartile is $15,826. The HFI also finds a strong, positive relationship between human freedom and democracy, and between human freedom and a range of human well-being indicators including tolerance, charitable giving, life expectancy, and environmental health, among other measures. The report is long. One nice thing about it is that you can choose a country and then see all of the measures for that country. Is the index perfect? Not at all. One check I did was to see how it rated freedom of speech in the UK. If you’ve followed the UK lately, you might know that police can come to your door and arrest you for posting thoughts that other people don’t like. Here’s an instance. Yet “Media and expression” gets a 10.0 (the highest possible) from Freedom House. Similarly, in Canada, where I come from, one man was hauled before a so-called “human rights tribunal” for showing hatred and contempt towards homosexuals. What the person did was write a letter to a local newspaper to complain about pro-gay groups “using taxpayer money to propagandize young children” in government schools. Yet the same Freedom House gives Canada a 10.0 rating on “Media and expression.” John Leo, in National Review Online, June 20, 2008, wrote: After nearly six years of hearings, delays, and argument about the letter, the tribunal convicted him and his group, the Concerned Christian Coalition. As punishment, Boissoin was ordered to pay a hefty fine, apologize in writing and never again make any negative remarks about homosexuality in speeches, on the Internet, or anywhere else. He refuses to comply. So, as I say, not a perfect index of freedom. (0 COMMENTS)

Jason Harrison has a post that makes the case for a specific type of consumption tax: At the heart of the blueprint was the Destination-Based Cash Flow Tax (DBCFT), a model born from years of academic work and championed by economists like David Bradford, Alan Auerbach, and Jim Hines. The DBCFT represents a synthesis of decades-long debates on optimal taxation, incorporating principles designed to raise substantial revenue to finance what the government deems worthy without throwing wrenches into business decisions. It’s a fairly long post, but it provides one of the clearest explanations of the rationale for consumption taxes that I have encountered.  The Destination-Based Cash Flow Tax has some interesting features: But unlike a VAT, the DBCFT provides relief for labor costs through a wage deduction, which effectively works like a subsidy to wages at the tax rate. This means that while a VAT taxes all consumption, the DBCFT only taxes consumption financed from non-wage sources—mainly existing wealth (wealth accumulated before the reform that has already faced the income tax) and above-normal returns to investment. In the conclusion, he explains that a DBCFT is actually a wealth tax: There’s a funny tidbit at the end of the last section, that you can view a cash flow tax as a tax on “existing wealth.” Turns out, when you dip into “consumption tax world”, you find these sort of weird equivalences and similarities. Well, they’re not as weird to me, since many become ‘obvious’ (like the payroll tax) when working through our precise definition of consumption. But what’s actually important to note is that, technically, everything is a consumption tax. On the infinite time horizon, everything must be consumed eventually, right? Wealth is just the present value of all future consumption—yours, your heirs’, or whoever you donate it to. So a consumption tax is effectively a one-time tax on wealth, measured at its present value. (Real-world wealth taxes, by contrast, impose recurring levies, making them fundamentally different in how they hit deferred versus immediate consumption.)  In popular mythology a wealth tax is good because it “hits the rich”, and a consumption tax is bad because it falls more heavily on the poor.  But this is a wealth tax that is also a consumption tax.  Harrison points out that this means a DBCFT might have some appeal to both progressives and conservatives. Harrison finds another appealing symmetry in the way a DBCFT treats border adjustments.  Imports are taxed while exports are exempt from taxes.  That sounds like a mercantilist’s dream, right?  Actually, that tax/subsidy combination is equivalent to completely free trade: When import taxes and export rebates are applied together, they interact through the exchange rate. The import tax reduces demand for foreign currencies, while the export rebate increases demand for U.S. dollars. These forces reinforce each other, leading to a stronger dollar that neutralizes the effects of both adjustments. For example, if the export rebate lowers prices abroad by 20%, and the import tax raises prices domestically by 20%, the dollar’s appreciation cancels out these changes. As a result, trade flows, consumption patterns, and production decisions remain largely unaffected.  It also eliminates many of the distortions under our current policy regime: Under a border-adjusted system, manipulating export or import prices provides no tax advantage since the border adjustment would still apply to the transaction. Furthermore, border adjustments eliminate the incentive to relocate production to low-tax jurisdictions.  Cash flow taxes are very appealing because they eliminate many of the complexities of current tax law, such as depreciation schedules.  Of course no tax regime is perfect, but the DBCFT seems to have found a sweet spot that could appeal to progressives, conservatives, mercantilists, free traders, and fans of tax simplification.  Not many other proposals have the potential to gain such wide support.  Read the whole thing. (0 COMMENTS)

In the just-published issue of Regulation (Winter 2024-2025), I consider H.L. Mencken’s aphorism: “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.” My short piece points out one problem in taking the aphorism literally: The common person does know what he wants: to improve his condition in life according to his own preferences. And he succeeds so well in his private life that, once he was left individually free, he and his fellows generated an Industrial Revolution and what economist Deirdre McCloskey calls the “Great Enrichment.” … It is when the common person is given the power to decide what his fellow humans should want that things can go very wrong. … When the common people elect a strong leader or would-be master, Mencken’s aphorism seems to take all its force. After some explanations that my readers might be interested in, I conclude by reformulating Mencken’s aphorism with more precision but albeit a bit less pithiness: Non-liberal democracy (as we know it) is the theory that the majority of voters think they know what they want and that everybody deserves to get it good and hard. I end the article with the hope that the current political situation in the United States may “serve as a bitter lesson for a better future.”   He got what he wanted good and hard (0 COMMENTS)

Destitution was a great concern in England when Charles Dickens penned A Christmas Carol (1843). Twin shocks — the industrial revolution and rapid urbanization — caused the standard of living of the lower classes temporarily and visibly to decline in the 2nd quarter of the 19th century. Reformers, Utopian Socialists, communist revolutionaries (Karl Marx and Friedrich Engels), and Dickens took notice. Historians, hampered by inadequate economic data, debate inconclusively whether real wages rose or fell. However, anthropometric evidence, which captures the impact of the total historical environment on the human body, paints a clear, bleak picture.  Consider, for example, average heights of British youths at age fifteen. Between 1820 and 1850, average height of working-class 15-year-olds decreased by two inches, while height of upper-class 15-year-olds held steady. In 1843, working-class 15-year-olds were seven inches shorter than upper-class 15-year-olds. Here is a sketch of broader impacts of “the ‘Hungry Forties’ and perhaps even hungrier thirties”: For those already malnourished by poverty […], cold, polluted water, foetid air and lack of living space must have often been intolerable; their nutritional status, as the heights of the children of the Marine Society from the slums and rookeries of London so eloquently show, was appalling. […] even if there were substantial gains in real incomes or in real wages for the working class in the 2nd quarter of the 19th century, these were more than outweighed by other features of the environment — urbanisation, disease, diet and possibly work intensity. […] such effects can be felt in the very long-term, affecting the life and death chances of the children of the 1830s and 1840s as they grew into adulthood and old age. […] it was only by the end of the 19th century that improvements in real wages, and in public health and other sanitary measures, compensated the British working class for the horrors of urban and industrial life which they had borne in the 2nd quarter of the century. —  Roderick Floud et al., Height, health, and history: Nutritional status in the United Kingdom, 1750-1980 (Cambridge U. Press, 1990), Figure 4.12 at p. 185; and pp. 300, 305, & 319. Material well-being is not the sum of happiness. Presumably many among the destitute preferred lively Dickensian urban distress and the satanic mill to more salubrious life on the farm. Nonetheless, urban poverty, so concentrated and visible, demanded remedy.   Scrooge against Charity A memorable passage in A Christmas Carol presents a sharp contrast of attitudes about seasonal charity for the poor. A gentleman makes a plea to Ebenezer Scrooge: At this festive season of the year, Mr. Scrooge,” said the gentleman, taking up a pen, “it is more than usually desirable that we should make some slight provision for the Poor and destitute, who suffer greatly at the present time. Many thousands are in want of common necessaries; hundreds of thousands are in want of common comforts, sir. Scrooge cross-examines the gentleman and invokes extant purpose-built public institutions. The exchange reveals the system’s punitive dimension, which Scrooge endorses: “Are there no prisons?” asked Scrooge. “Plenty of prisons,” said the gentleman, laying down the pen again. “And the Union workhouses?” demanded Scrooge. “Are they still in operation?” “They are. Still,” returned the gentleman, “I wish I could say they were not.” “The Treadmill and the Poor Law are in full vigour, then?” said Scrooge. “Both very busy, sir.” “Oh! I was afraid, from what you said at first, that something had occurred to stop them in their useful course,” said Scrooge. “I’m very glad to hear it.” The gentleman then amplifies the case for a season of giving:  Under the impression that they scarcely furnish Christian cheer of mind or body to the multitude,” returned the gentleman, “a few of us are endeavouring to raise a fund to buy the Poor some meat and drink, and means of warmth. We choose this time, because it is a time, of all others, when Want is keenly felt, and Abundance rejoices. What shall I put you down for? Scrooge firmly rejects the plea, avows a lack of holiday spirit, and explains that he already, so to speak, gave at the office: “Nothing!” Scrooge replied. “You wish to be anonymous?” “I wish to be left alone,” said Scrooge. “Since you ask me what I wish, gentlemen, that is my answer. I don’t make merry myself at Christmas and I can’t afford to make idle people merry. I help to support the establishments I have mentioned—they cost enough; and those who are badly off must go there.” (The system of public relief was funded by “poor rates” (taxes) on property owners.)  The gentleman then takes a different tack. He notes that the system fails because many among the destitute are either ineligible or unwilling to submit to its severity: “Many can’t go there; and many would rather die.” The system was founded on the principle of “less eligibility.” To deter individual reliance on the workhouse, conditions therein by design were worse than in the wild.  Scrooge briefly doubles down with callous, facile (and outdated) Malthusian rhetoric of surplus population:  “If they would rather die,” said Scrooge, “they had better do it, and decrease the surplus population.” However, Scrooge then ends the encounter with a deeper argument. Specialization (social division of labor) entails local knowledge and ignorance of the affairs of remote others; for example, ignorance of the inner motives of the destitute who avoid the system of public relief. Moreover, specialization (disciplined by competition) and non-interference naturally go hand in hand in minding one’s business: “Besides — excuse me — I don’t know that.” “But you might know it,” observed the gentleman. “It’s not my business,” Scrooge returned. “It’s enough for a man to understand his own business, and not to interfere with other people’s. Mine occupies me constantly. Good afternoon, gentlemen!” Dickens mistrusted political economy and the profit motive. Accordingly, here Scrooge is like a highly selective reader of Adam Smith — one who knows part of The Wealth of Nations, but none of The Theory of Moral Sentiments. Love, a Casualty of Gain The watershed moment in Scrooge’s reformation occurs in his two visions of Belle, the maiden to whom he had been engaged when a young man. Scrooge’s supernatural visions via ghosts are metaphors of a troubled mind — nightmares. In childhood, Ebenezer had been scarred by his father’s lack of sympathy. Despite this wound, he finds love with Belle. In the first vision, young Ebenezer has embarked on a career in business — and single-minded pursuit of wealth: There was an eager, greedy, restless motion in the eye, which showed the passion that had taken root, and where the shadow of the growing tree would fall. Belle, distraught, tells Ebenezer that he loves not her but money — an eclipse she can accept if wealth can grant him what her love would: “It matters little,” she said, softly. “To you, very little. Another idol has displaced me; and if it can cheer and comfort you in time to come, as I would have tried to do, I have no just cause to grieve.” “What Idol has displaced you?” he rejoined. “A golden one.” Ebenezer protests that “the world” puts him in a double bind. Social norms castigate poverty and pursuit of wealth: “This is the even-handed dealing of the world!” he said. “There is nothing on which it is so hard as poverty; and there is nothing it professes to condemn with such severity as the pursuit of wealth!” Belle ventures a psychological explanation of his love of profit: “You fear the world too much,” she answered, gently. “All your other hopes have merged into the hope of being beyond the chance of its sordid reproach. I have seen your nobler aspirations fall off one by one, until the master-passion, Gain, engrosses you. Have I not?” Ebenezer reframes his profit motive as growth in wisdom and declares his love of Belle constant: “What then?” he retorted. “Even if I have grown so much wiser, what then? I am not changed towards you.” She shook her head. “Am I?” Belle then extends her analysis of Ebenezer’s self-deception about his change of heart. Gain has seduced him. “Our contract is an old one. It was made when we were both poor and content to be so, until, in good season, we could improve our worldly fortune by our patient industry. You are changed. When it was made, you were another man.” “I was a boy,” he said impatiently. “Your own feeling tells you that you were not what you are,” she returned. “I am. That which promised happiness when we were one in heart, is fraught with misery now that we are two.” [… .] Belle introduces a counterfactual thought experiment to justify breaking off the engagement. Had they never been engaged would he pursue her now? “If this had never been between us,” said the girl, looking mildly, but with steadiness, upon him; “tell me, would you seek me out and try to win me now? Ah, no!” He seemed to yield to the justice of this supposition, in spite of himself. [… .]  “[…] can even I believe that you would choose a dowerless girl — you who, in your very confidence with her, weigh everything by Gain […]?” Belle predicts that Ebenezer, mindful of gain, will soon get over rejection, glad to have dodged a bullet:  “You may—the memory of what is past half makes me hope you will—have pain in this. A very, very brief time, and you will dismiss the recollection of it, gladly, as an unprofitable dream, from which it happened well that you awoke.” In Scrooge’s second vision, Belle has a husband and a daughter. Their modest home is alive with sundry children at play, benign chaos, love — and great merriment when Belle’s husband enters with an abundance of Christmas gifts. Scrooge winces at the thought that no child will call him father and brighten his life. Belle’s husband reports that he happened on his errands to glimpse Scrooge bereft at the office: “Belle,” said the husband, turning to his wife with a smile, “I saw an old friend of yours this afternoon.” “Who was it?” “Guess!” “How can I? Tut, don’t I know?” she added in the same breath, laughing as he laughed. “Mr. Scrooge.” “Mr. Scrooge it was. I passed his office window; and as it was not shut up, and he had a candle inside, I could scarcely help seeing him. His partner lies upon the point of death, I hear; and there he sat alone. Quite alone in the world, I do believe.” Scrooge, to his credit, feels not envy but warm sympathy, tinged with existential remorse at the vision of cheer and comfort in Belle’s family and home. The impulse of remorse is to atone. These visions, and other visions, too, move Scrooge to mend his character and, flush with enthusiasm, to enact charity and fellowship.   Charity Begins at Home The new-and-improved Scrooge embodies Smith’s Theory of Moral Sentiments. Charity begins at home and follows Smith’s social gradient of sympathy. Direct acquaintance and interaction enable charity in several ways. They help donors to discern real need and desert. (Cognition.) They heighten sympathy. (Sentiment.) They enable donors to let down their guard. (Trust.) And they provide a channel for donors to experience receipt of gratitude in return. (Reciprocity.) Dickens shows that Scrooge comes to bestow charity on individuals whose need, desert, and gratitude he can know and trust. Charity naturally has circles and gradients. A charitable soul will perforce soon go bankrupt unless she targets and calibrates her gifts. Individual philanthropy might ignore the neediest, who tend to be socially remote from prosperous potential donors. Private institutions — for example, churches and charitable foundations — might partly specialize in extending the scope of sympathy and charity, if they, too, can reliably identify true need and desert. However, A Christmas Carol focusses narrowly on the issue of individual philanthropy by businessmen. Dickens ignores the invisible hand of markets-and-competition. Given the stark fallout of rapid industrialization and urbanization, his focus is understandable. Nonetheless the focus on Scrooge’s redemption implicitly oversells the potential effectiveness of seasonal charity in business circles as a remedy to destitution. On the one hand, it would have been shallow in 1843 — and today, too — to have full confidence in any interpretation of capitalism as a rising tide that lifts all boats, or as a comprehensive institution of distributive justice. On the other hand, poverty was so widespread that only highly conditional, means-tested, very unpleasant public welfare was feasible for the polity. Whether or not one favors a universal basic income in prosperous countries today, surely it was impossible in England in 1843. Intrinsic gaps in public relief — for example, eligibility restrictions in the Poor Law in England — warrant private charity. Scrooge has a Smithian moral duty of charity in the circumstances. There is always room and need for philanthropy insofar as private actors can identify worthy recipients. Alas, Government welfare, however inadequate, partly crowds out private charity, leaving some gaps unaddressed. In the United States today, take-up of means-tested welfare (food stamps, public shelter, etc.) is low among the poorest decile of income. One reason why is Dickensian: Many among the destitute prefer less-regimented freedom on the streets. Another reason is that many among the destitute lead lives too chaotic for integration in the system. Insofar as public relief and charity are substitutes, many among the destitute fall through the cracks because charity depends on sympathy, trust, and gratitude. The somewhat rare case of anonymous gifts is a partial exception. Dickens provides a clue, apart from the meaning of Christmas, why charity finds expression in a season of giving. The novella brings to life enthusiasm, a social emotion that inspires good will to multiply by ‘contagion.’  I imagine that A Christmas Tale — despite its ungenerous depiction of the profit motive — still fosters good will and charity thanks to its vivid portrayals of sympathy, conscience, and the examined life.     Acknowledgment: I thank Liberty Fund and Renée Wilmeth for hosting a Timeless Reading Group about A Christmas Carol (December 2-8, 2024).   John Alcorn is Principal Lecturer, Shelby Cullom Davis Endowment, Trinity College, Connecticut and Visiting Scholar in Politics, Philosophy, and Economics (PPE) at Duke University. (0 COMMENTS)

Why are European cities charming and American cities often so charmless? Simple, says urbanist Alain Bertaud: most American cities are zoned for single-family housing. The result is not enough customers within walking distance of a business, and not enough parking for the customers who drive. Why American cities are zoned that way is related to culture […] The post Fixing Sick Cities (with Alain Bertaud) appeared first on Econlib.

Giovanni Pico della Mirandola, a 15th-century Italian scholar, wanted to know everything there was to know. Nobody in the 21st century could entertain such a hope, except if he really knew nothing about the world. Are we lucky enough to have an American exception under our eyes? (On Pico, see Henri de Lubac, Pic de la Mirandole, Paris, 1974.) In a social media post supporting a trade union (the International Longshoremen Association or ILA) intent on stopping automation at East Coast and Gulf Coast ports, the president-elect of the United States wrote: There has been a lot of discussion having to do with “automation” on United States docks. I’ve studied automation, and know just about everything there is to know about it. The amount of money saved is nowhere near the distress, hurt, and harm it causes for American Workers, in this case, our Longshoremen. Foreign companies have … got record profits, and I’d rather these foreign companies spend it on the great men and women on our docks, than machinery, which is expensive, and which will constantly have to be replaced. In the end, there’s no gain for them, and I hope that they will understand how important an issue this is for me. For the great privilege of accessing our markets, these foreign companies should hire our incredible American Workers, instead of laying them off, and sending those profits back to foreign countries. I think the qualification “just about” is not enough to save Mr. Trump from the claim that he is the 21st-century Pico. To know “just about everything there is to know” about automation at East Coast and Gulf Coast ports, one would need to be capable of answering, on the basis of credible theories and empirical studies, the questions that follow, and this is just a sample of classes of broad questions (hint: economics helps): How does automation affect production functions, product prices, as well as the production possibility frontier (ppf) of an economy? How does automation affect employment and real wages, both inside and outside the industry under consideration? Test your understanding by applying your conclusion to, say, American agriculture (whose proportion of the labor force decreased from 84% in 1810 to about 1.5% today). What impact did automation have on the Industrial Revolution? What would likely have happened to workers’ wages and general prosperity if the early-19th-century Luddites had won their combat? Are port operators and maritime companies willing to pay more or less for dockworkers who work with less capital and equipment and are thus less productive? How, and how long, can the companies and their shareholders be compelled to pay more? How can we compare the harm done to the shareholders’ families with “the distress, hurt, and harm it causes for American Workers, in this case, our Longshoremen”? How are such comparisons of utility scientifically possible? What is the elasticity of substitution of demand (foreign and domestic) of the services of East and Gulf Coast American ports for West Coast American ports? What is the elasticity of substitution of maritime shipping for air freight by American exporters and importers? To which extent does a relative cost and price increase at East Coast American ports translate into the substitution of shipping from the East to the West, or of maritime shipping for air shipping? How is remuneration related to productivity? How would stopping automation at East Coast and Gulf Coast ports affect the relative remuneration of the incredible American Workers at East and Gulf Coast ports compared to the no less incredible American workers of West Coast ports? Should containers and bar codes, which the ILA also unsuccessfully opposed some decades ago, have been stopped? What would have been the likely consequences? What would be the consequences of presently banning containers and barcodes (or, say, computers) on our incredible American Workers’ wages? How and for whom is a political system useful in which policies are decided according to how important an issue is for the main ruler (“for me”)? Why is the most efficient American container port at the 53rd rank of 405 such ports in the World Bank’s Container Port Performance Index (2023), preceded by a few Latin American ports and a large number of Asian ones? How can machines that “constantly have to be replaced” ever be profitable? Could this depend on the discounted difference between their productivity and cost over time? Or, to quote George Will, will America “be made great again using only machines that last forever”? Are workers themselves eternal and can they never go on strike? What would be the effect of the direct or (through trade union privileges) indirect control of the costs and prices of American ports on the efficient use of knowledge in society? How useful is F.A. Hayek’s analysis of this general issue in his 1945 American Economic Review article “The Use of Knowledge in Society”? For the keywords “economics automation American maritime ports”, Google Scholar shows 25,800 results excluding citations, of which 15,600 refer to studies published over the past two years. The titles range from “Automation in Logistics Port and Freight Transport With Blockchain Technology” (Transportation Research Procedia) to “Investment in Infrastructure and Trade: The Case of Ports” (National Bureau of Economic Research). A modern Pico would have a lot of work to do if he wants to know just about everything of even a tiny part of everything there is to know. ****************************** Unloading a ship without automation, by DALL-E (0 COMMENTS)

  Learning Fiscal Discipline: Colorado’s Success, Shortcomings, and Regulatory Ruse Excerpt: At its core, TABOR codifies limits on both taxation and spending. It has been so successful that, for the fourth straight year, the State of Colorado announced that they would be refunding taxpayers, this time to the tune of $1.7 billion. TABOR is not, however, a panacea to government overreach. While TABOR limits how much Colorado taxes and spends, it does not limit the state regulatory code, which has grown uninhibited. Defenders of a free society must take a multi-pronged approach to limiting government. by David Hebert and Thomas Savidge, The Daily Economy, December 17, 2024. DRH comment: I’ve talked to an economist friend in Colorado who tells me of some of the problems with TABOR, even as a way of limiting taxes and spending. But it’s much better than what we have in California at the state level.   How to Get Rid of a Tenured Professor by Roger Pielke, Jr., The Honest Broker, December 16, 2024. Excerpts: The resolution — reproduced above — also demanded that, “faculty, students, staff, and administrators [unite] into a powerful cohort that advocates for and takes significant action toward reducing GHG emissions – across the campus, community, state, and nation.” The entire campus was to engage in political advocacy, “[We are] urging policy makers, including the regents, system administrators, and campus leadership, to implement swift and systemic changes in order to avoid the worst impacts of extreme weather events, the devastation of human habitats, the collapse of ecosystems, and the loss of biodiversity.” This reads more like a mission statement for Greenpeace than it does anything remotely related to the mission of a flagship state university. And: In 2022, in response to faculty demands, the university hosted a climate advocacy conference – the Right Here, Right Now Climate Summit. This “summit” emphasized celebrities (below), activists, and plenty of exhortations to political action. There was no obvious connection to the university’s actual mission. And: A decision was made that all eight graduate courses that I had developed and taught as part of the graduate certificate program were no longer to be offered — This meant that all of the classes I had been recruited to Colorado to develop and teach were no longer being offered.8 I requested of the ENVS chair that I take complete responsibility for leading the continuation of the science policy center (I even found an external partner) and that I would again oversee the S&T graduate certificate program — but he told me no, absolutely not, he would not allow me to do that.   First ask what it means by David Friedman, David Friedman’s Substack, December 13, 2024. It [a living wage] sounds as though it means something — a wage sufficient to live on. That ought to mean a wage below which you would die but that is not how the term is usually used. Someone reasonably ingenious and energetic living in a warm climate might be able to keep himself alive with no income at all, given the existence of food banks, dinners for the poor, and other sources of free food; some homeless people probably do. Even for someone without those advantages, enough income to stay alive is much less than people who use the term imagine. The estimate of economic historians is that the average real income of the world was about one twentieth of the current US average through most of history, which means that a sizable fraction of all the people who ever lived did it on the equivalent of less than two thousand dollars a year. Of course, even if someone on that income could stay alive in the modern US, his life would probably be shorter than the lives most modern Americans live. As were the lives of most people in the past. If we are looking for an objective definition and abandon the idea of taking the term literally as enough income not to die of hunger or exposure, it is tempting to interpret it as enough so that your life expectancy is not reduced by your low income. That, however, is more than the US average income, since there are multiple ways in which additional income could increase life expectancy, even if only slightly, beyond the income most of us live on. A chauffeur expert in safe driving and the safest car money could buy. A week every year in an elite medical facility being tested for everything that could possibly go wrong. What people actually mean by a living wage, as best I can tell, is a wage at which they can imagine themselves living a tolerable life. That varies a lot depending both on one’s standard of tolerable and how wide a range of alternatives one considers, whether it includes lentils instead of meat, sharing a single room with four roommates, buying only used clothing. DRH comment: When I was strapped for funds in my late teens and early 20s, I sometimes bought clothing at Goodwill. I no longer need to. But a few years ago, I couldn’t find a heavy jacket to wear in 40-degree-plus weather, even though I was willing to pay up to $200. So I went to Goodwill and found one I liked–for $8.   How Many Americans Really Want Mass Deportation? by Fiona Hartigan, Reason, December 17, 2024. Excerpt: But a new survey suggests that Americans’ support for mass deportation comes with important—and overlooked—caveats. Sixty percent of Republicans believe that “immigration enforcement should prioritize violent criminals and those with final orders of removal rather than ‘all individuals without legal status,'” per a survey from the Bullfinch Group and the National Immigration Forum. Three-quarters of Republicans agreed that “family unity, respect for human dignity, and protection for the persecuted” must be “key priorities” as the government ramps up border security and immigration enforcement. Overall, “significant majorities of groups” that voted for Trump “want his administration to focus immigration enforcement on threats to public safety rather than cast an unlimited net,” the National Immigration Forum observed. The survey was conducted earlier this month among 1,200 adults, including 1,000 registered voters, and found similarly high support for that idea among Democrats, independents, liberals, and moderates.   Hidden Scars: How COVID Lockdowns Altered Teen Brains Forever by James Goodman, SciTechDaily, December 19, 2024. Excerpt: A recent study reported the somewhat alarming findings that the social disruptions of COVID-19 lockdowns caused significant changes in teenagers’ brains. Researchers at the University of Washington in Seattle used MRI scans to examine the adolescent brain’s cortex — the folded outer layer responsible for complex thinking. They discovered that the typical age-related thinning of the cortex accelerated after the lockdowns, with girls showing more pronounced changes than boys.   Woman’s right leg amputated after waiting 8 days for bed at Winnipeg’s HSC to treat open wound by Ian Froese, CBC News, December 16, 2024. Excerpt: A Manitoba woman had her right leg amputated after complications following a knee replacement surgery two months earlier. Roseanne Milburn, 61, went ahead with the scheduled amputation last Friday, after weeks of complications stemming from a post-surgery infection. In late November, a surgeon at Winnipeg’s Health Sciences Centre began removing dead tissue from her right knee, with the intention of stitching her up later that day after she was seen by an orthopedic surgeon at Concordia Hospital. She was sent to Concordia, but couldn’t be transferred back to HSC because there wasn’t a bed available for the specialist to finish the procedure. Instead, she spent eight days languishing at Concordia with a painful open wound. Once she finally got to HSC, Milburn went under the knife for another infection, but due to the long delay in stitching up the wound, she said she was told her leg wasn’t salvageable.   (0 COMMENTS)

The recent proposal by Colombian President Gustavo Petro to print money to finance reparations for the victims of the armed conflict has raised significant concerns. Amid the populist rhetoric of the president, who emphasizes settling a “deep social and historical debt,” this approach is leading Colombia down a dangerous economic path. One only needs to look at the consequences of such monetary policies in neighboring countries like Venezuela and Argentina, where uncontrolled money printing has resulted in hyperinflation and economic collapse. The Dangers of Printing Money When a government decides to print money to cover its expenses, it increases the amount of currency in circulation without a corresponding increase in economic production. This practice, known as debt monetization, might provide a short-term solution for financing government obligations. However, the long-term consequences are often disastrous. When the money supply grows faster than the supply of goods and services, inflation is the inevitable result. With more money available to purchase the same amount of goods, prices rise. If this process accelerates, it can turn into hyperinflation, a scenario where prices increase uncontrollably and the currency loses its value almost overnight. Lessons from Venezuela and Argentina Venezuela offers a clear example of the dangers associated with excessive money printing. Over the last decade, the Venezuelan government resorted to massive printing of bolívares to cover its fiscal deficits. Without a corresponding increase in economic production, the result was an inflation rate that exceeded 1,000,000% in some years. The value of the bolívar plummeted, rendering the currency practically worthless. Citizens were left struggling to obtain basic necessities as their purchasing power was devastated. Similarly, Argentina has faced repeated episodes of inflation due to the monetary policies implemented by former President Alberto Fernández. Efforts to finance government spending by printing money led to chronic inflation, severely undermining economic stability and eroding the living standards of millions of Argentines. However, with the arrival of Javier Milei as Argentina’s president, inflation has been significantly reduced, allowing the economy to recover. These cases serve as warnings for any nation considering such measures, demonstrating the catastrophic effects on both the economy and society as a whole. The Risks of Petro’s Proposal President Petro’s proposal to print money to finance reparations carries significant risks. The estimated cost to fully compensate the victims of the armed conflict in Colombia is approximately 334 trillion pesos. Petro argues that, with the current budget allocation of 2 trillion pesos per year, it would take 150 years to fulfill these reparations, which he has called a “great national hypocrisy.” To expedite this process, he suggests that the Central Bank of Colombia could print money to cover these costs. However, adopting this approach could jeopardize Colombia’s economic stability. As seen in Venezuela and Argentina, printing money without a solid economic foundation can lead to runaway inflation. In Colombia, this could erode the value of the peso, diminish savings, and disproportionately affect the poor and middle class—the very groups that reparations are intended to support. Moreover, inflation can create a vicious cycle of economic decline. As prices rise, consumer purchasing power decreases, leading to reduced aggregate demand and economic contraction. Businesses, facing higher costs and lower sales, may reduce production or shut down entirely, further exacerbating unemployment and poverty. Alternative Approaches to Reparations Instead of printing money, Colombia should explore more sustainable approaches to finance reparations. One option could be investing in economic growth initiatives, generating the additional resources needed to fund reparations over time. A thriving economy with steady growth would provide a more stable financial foundation to support reparations and other social programs. Additionally, it is crucial to generate economic stability in the country so that investors have confidence in the territory, leading to the establishment of more businesses, which would create more jobs, stimulate the economy, and generate greater wealth in the country. While the desire to address the historical injustices suffered by the victims of Colombia’s armed conflict is commendable, the method of financing these reparations must be carefully considered. Printing money, as suggested by President Petro, risks plunging Colombia into an economic crisis similar to the hyperinflationary spirals seen in Venezuela and Argentina. A more prudent approach would be to explore sustainable financial strategies that do not endanger economic stability. By learning from the experiences of other nations and prioritizing long-term economic health, Colombia can better ensure that reparations are meaningful and sustainable.   Omar Camilo Hernández Mercado is a law student at the Universidad Libre de Colombia, Senior coordinator of Students for Liberty in Colombia, and a seminarist in “The Austrian School of Economics” at the International Bases Foundation.  (0 COMMENTS)