The words used in public discussions shape the outcome of debates. In political discourse, language plays a critical role in conveying ideas, shaping perceptions, and even determining public opinion. In the 21st century, despite the successes of liberalism in expanding freedom and reducing poverty, liberal ideas remain unpopular in many parts of the world. This suggests that the issue may not be with the ideas themselves, but with how they are communicated. Language is a powerful tool for shaping thought. But the rapid evolution of political debates can obscure the importance of terminology, and words that seem neutral may carry different meanings depending on the speaker and the audience. This variability in interpretation makes language an essential battleground for political ideologies, including liberalism. Problematic Concepts: ‘Freedom’, ‘Democracy’ and ‘Rights’ A prime example of the linguistic problems that liberals face is the evolving meaning of the term “freedom.” Classical liberals like John Locke and Adam Smith viewed freedom as the absence of coercion—what Isaiah Berlin called “negative freedom.” However, proponents of “positive freedom,” such as Jean-Jacques Rousseau, argue that true freedom requires collective action, sometimes at the expense of individual liberties. This shift in meaning has been exploited by those who oppose liberalism, leading to confusion over the true nature of liberty. The concept of “democracy” has also been distorted in recent decades. Originally, democracy referred to a method of majority rule designed to protect individual rights. However, collectivist movements have redefined democracy to justify government intervention in nearly all aspects of public life, leading to terms like “industrial democracy” (which Ludwig von Mises recalls in his Human Action) which imply state control over private enterprises. This redefinition has created confusion about what democracy should be, thus weakening its connection to individual freedom. Similarly, the concept of “rights” has been transformed from a negative interpretation—freedom from interference—to a positive one, where rights require the provision of goods and services by the state. For example, the Universal Declaration of Human Rights includes the “right to an adequate standard of living,” which implies that individuals are entitled to housing, food, and healthcare provided by others. This change contradicts the liberal view of rights as protections against coercion and advances one that views them as guarantees of material goods. Language manipulation is not a neutral process; it is often the result of deliberate efforts by political groups to impose their ideas on public discourse. As Hayek, Leoni and Mises have noted, collectivists have consistently distorted language to make authoritarian ideas appear compatible with freedom. Today, the same tactics are used to justify policies that restrict individual liberties in the name of democracy or social justice. So What Can Liberals Do? To counter these manipulations, liberals must develop strategies to reclaim the original meanings of key philosophical concepts and create new language that better conveys liberal ideas. One approach is to reject terms and concepts that have been co-opted by collectivists, such as “social justice” or “welfare state.” These terms must be redefined in ways that highlight the coercive nature of the policies they describe. There can be no social justice, nor any welfare states, that are not based upon an implicitly violent redistribution of material wealth. But if liberals take collectivist concepts for granted, they begin debates at a disadvantage. They must expose the true meanings of words if they are to have a chance. At the same time, liberals should work to promote positive conceptualizations of liberty. The idea of freedom must be upheld to show that true freedom is the absence of coercion, not the redistribution of wealth or the imposition of collective will. Liberals should also create new, “liberal-friendly” language to make their ideas more accessible and persuasive to the public. Concepts like the English-speaking “right to work”, for example, need to make its way into Spanish and other languages, as they frame the discussion around labor rights in a way that emphasizes individual freedom and the ability to contract freely. Reshaping Language for Liberalism The linguistic landscape is currently skewed against liberalism, but this can be changed. By rejecting collectivist language traps, vindicating classical liberal meanings of key concepts, and creating new language that accurately reflects liberal ideas, liberals can level the playing field in public debates. This effort is essential not only for the survival of liberalism but also for the preservation of individual liberty in the face of growing state intervention. The manipulation of language has long been a tool of both authoritarian regimes and interventionist administrations , and liberals must be vigilant in defending the meanings of words that are critical to their philosophy. By doing so, they can help ensure that the principles of liberty remain central to political discourse, even in a world where linguistic manipulation is increasingly common.   Marcos Falcone is the Project Manager of Fundación Libertad and a regular contributor to Forbes Argentina. His writing has also appeared in The Washington Post, National Review, and Reason, among others. He is based in Buenos Aires, Argentina. (0 COMMENTS)

Art Carden has written a terrific article this morning on the huge economic progress we have made in the last 2 centuries. It’s “Conceived in Liberty or Conceived in Sin? Exploitation and Modern Prosperity,” Econlib, November 4, 2024. One excerpt: We are R.I.C.H.: Rich, Interconnected, Civilized, and Healthy. What does this mean? First, I’m referring to those of us lucky enough to have won the geographical and historical lottery and who find ourselves in European countries or their offshoots like the United States and Canada. If you’re reading this, there’s a very good chance you’re among the richest 5% of people on earth and the richest 1% of people who have ever lived. I’ve often pointed out in talks that the most valuable asset many Americans have, even if they own few tangible assets, is their U.S. citizenship. Art also writes: Today’s leading killers are diseases of old age and affluence like cancer, not pathogens or warfare. More people die of cancer because more people live long enough to get cancer. That reminded me of what the late Aaron Wildavsky and his son Adam Wildavsky wrote in “Risk and Safety” in David R. Henderson, ed., The Concise Encyclopedia of Economics: On the other side of the ledger, cancer deaths continue to rise, though their increase has slowed, and deaths from major cardiovascular diseases remain high.Why these discrepancies? Cancer is largely a disease of old age. When people died at roughly half the present life expectancy, they died before they had an opportunity, if one may call it that, to get cancer.   Note: The pic above is of Aaron Wildavsky. (0 COMMENTS)

My appointment at Washington University was in the sociology department. During the autumn of my fourth year, I ran into a social work faculty friend of mine in the hallway of my building… she mentioned in passing that the social work school had a job opening that perhaps I might be interested in… on a whim I decided to apply… I was offered and accepted the job in March of that year. Two weeks later, the university announced that they were closing the department of sociology and that all junior faculty would be terminated… Had I not run into my friend in the hallway, had she not mentioned as an after-thought the job opening, I certainly would have found myself out of a job and searching for a comparable position somewhere… —Mark Robert Rank, The Random Factor,1 p. 133 Mark Rank has put considerable effort into studying household incomes, delving into a large panel survey that tracks households over time as well as conducting interviews to hear people tell their own stories. These experiences convinced him that we should pay more attention to the role that luck plays in people’s lives. As luck would have it, two authors with much better name recognition, Cass Sunstein and Nate Silver, also came out with new books recently related to the topic of luck and its effects. Their presence probably reduces the chances that The Random Factor (TRF) will reach a large audience. In fact, it is rare for a book to sell more than a few hundred copies. Neither authors nor publishers have much control over what makes it to the best-seller list. There is a lot of luck involved. Rank points out that history has been altered by attempts to assassinate leaders, whether the attempts fail or succeed. The classic example of the latter is the assassination of the Austrian archduke in 1914, which lit the fuse that started the First World War. As luck would have it, we had another example of the assassination phenomenon subsequent to the appearance of TRF. A young man attempted to assassinate Donald Trump at a campaign rally. Because Mr. Trump happened to be turning his head at just the right instant, he only suffered a wound to his ear. In my opinion, it is very hard to come up with a completely satisfactory definition of luck. Rank writes, … a chance event is random with respect to the individual affected. In other words, the individual encountering the event could just as easily have been someone else. p. 18 This already is problematic. It describes the person who was struck by a bullet at the campaign rally and was killed. But it does not describe Mr. Trump himself, in that one cannot say that the assassination attempt could just as easily have targeted someone else. In probability theory, there is the Law of Large Numbers, which says that if events are repeated a sufficient number of times, the average outcome becomes more predictable. Although Rank does not cite this Law, he makes the point clearly. He illustrates it using major professional sports: The more times that a team can score, the less important the role of luck. In the NBA, an individual team may score a basket 40 or 50 times during a game, whereas in professional soccer or hockey there may be only one or two times that a team scores. p. 71 Rank pays particular attention to the incidence of poverty. My life course research has shown that over the span of adulthood, 75 percent of Americans will experience at least one year in poverty or near poverty. The reason this percentage is so high is that over the course of 40 or 50 years, many unanticipated and unlucky events can happen to people. p. 137-138 The point is worth emphasizing that annual income varies a great deal relative to lifetime income. This is easily and often overlooked. For example, we regularly read that the home ownership rate in America hovers around 60 percent. However, people move back and forth between renting and owning. It was Rank and his co-authors who in an earlier book showed that close to 90 percent of Americans will have bought a home by the time they reach age 55.2 “I believe that everyone interested in public policy, including Rank, should focus more on lifetime income and less on annual income.” In terms of annual income, when I was in graduate school, I lived in poverty, but in terms of lifetime income, I was never poor. I believe that everyone interested in public policy, including Rank, should focus more on lifetime income and less on annual income. Turning to public policy, Rank points out that liberals are more likely than conservatives are to see luck as a factor determining people’s income and social status. I agree, and in fact, I have made the point that people would disagree less on politics if everyone had the same view of the relative role of effort and luck in different outcomes.3 In his chapter on public policy, Rank focuses on annual income instead of lifetime income. Perhaps the most straightforward way of providing an effective safety net is through what is known as a guaranteed minimum income (GMI)…. … for an individual or family that is earning below a certain level of income, the government would provide the necessary amount to lift them up to a minimum threshold. p. 193 Although he cites Milton Friedman, Rank misstates Friedman’s negative income tax idea. As Rank describes it, there would be zero incentive to work if all you could do was approach the minimum guaranteed income. Instead, Friedman proposes that below a minimum income level, a household would enjoy a negative income tax rate, not a full subsidy to reach a threshold. Rank asserts that America’s safety net is inadequate, but in my opinion, this case needs to be spelled out. We already have unemployment insurance, which addresses some of the risks that people face. We have Medicare, which addresses another source of potential financial stress. Above all, Rank does not take seriously the implications of looking at lifetime income. If people’s income varies over their lifetime that means they have the opportunity to self-insure by saving when times are good in order to maintain their living standards when times are bad. It strikes me that an implication of his research findings is that for most people, self-insurance would be adequate to enable them to get by when they have a bad year. For more on these topics, see “Negative Income Tax,” by Jodie Allen. Concise Encyclopedia of Economics. “Mandatory Savings Programs,” by Jeffrey A. Miron. Library of Economics and Liberty, July 16, 2001. Michael Munger on the Basic Income Guarantee. EconTalk. We should direct our compassion to people with very low lifetime income potential. For the many people who experience variation in annual incomes, we should encourage self-insurance. Government assistance might be converted to mandatory savings programs rather than programs for which eligibility is based on annual income. Rank’s policy preferences point in the direction of a more generous welfare state. But I think that his research findings concerning the variability of income year-to-year point in a different direction. Footnotes [1] Mark Robert Frank, The Random Factor: How Luck and Chance Profoundly Shape Our Lives and the World Around Us. University of California Press, 2024. [2] “The Longitude of Well-Being,” by Arnold Kling. Library of Economics and Liberty, June 2, 2014. [3] “Capitalism and Inequality,” by Arnold Kling. Library of Economics and Liberty, Nov. 7, 2016. *Arnold Kling has a Ph.D. in economics from the Massachusetts Institute of Technology. He is the author of several books, including Crisis of Abundance: Rethinking How We Pay for Health Care; Invisible Wealth: The Hidden Story of How Markets Work; Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy; and Specialization and Trade: A Re-introduction to Economics. He contributed to EconLog from January 2003 through August 2012. Read more of what Arnold Kling’s been reading. For more book reviews and articles by Arnold Kling, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

In his 2017 Nobel lecture, University of Chicago Professor Richard Thaler focused on how his native discipline, economics, lost its analytical way when economists founded their theories on methodological sand, meaning a premise of not just human rationality, but perfect rationality, in decision making. In his lecture, Thaler stressed the obvious, even to (neoclassical) economists: Perfectly rational decision makers have no counterparts among real-world human beings whose behavior economists seek to understand and predict. Thaler surmised (with a touch of sarcasm) that he was awarded his Nobel Prize because he and psychologist and prior Nobel Laureate in economics Daniel Kahneman (among other behaviorists) had “discovered the presence of human life in a place not far, far away, where my fellow economists thought it did not exist: the economy.”1 He asserted that, as a large body of behavioral research has revealed, real-world human beings fail miserably short of the mental facilities of economists’ homo economicus—hardly a surprising claim among thinking economists. Nonetheless, in his Nobel lecture and other published works, Thaler suggests that economists’ “unreal” mode of thinking about people’s economic decisions would be greatly improved if economists focused on how real people—not their methodological caricatures, dubbed Econs—make decisions in their actual work-a-day worlds. He fervently supports economists adopting behaviorists’ (supposedly) real-world analytical methods, founded on real people’s responses to the choices posed by behaviorists in laboratory and classroom experiments. The subjects’ responses are then aggregated into comparative analyses of mean responses of control and experimental groups, with detected statistical differences constituting revealed insights (with little expressed concerns for the extent of the overlap of groups’ distributions of responses). Thaler seems confident that behaviorists’ research settings, research subjects, and the questions and problems posed make for more real analytical insights than economists’ deduced and tested hypotheses, founded on their perfect rationality premise. He seems convinced that the more (descriptively) “real” a theory’s premise is, the more powerful the insights. “[T]hinking must be understood as the most fundamental of economic problems—bounded by the brain’s scarcity constraints—before economists can address all other real-world economic problems.” Thaler could not be more wrong, precisely for reasons he thinks he is so right. He doesn’t seem to think that a discipline’s methodological construction must, ultimately, adapt to the resource and process limitations of real people’s (and real economists’) own brains. And thinking itself is bound by those evolved economic constraints. Indeed, thinking must be understood as the most fundamental of economic problems—bounded by the brain’s scarcity constraints—before economists can address all other real-world economic problems. Behaviorists seem to have missed how descriptively “real theory” has never been sought by economists because it is out of reach for them, as well as behaviorists. Theory is meant to work within the confines and dictates of the human brain, not the outside real world. My goal here is ambitious. I seek to explain why economists would be well advised to reject—largely, but not totally—behaviorists’ methodological advice, mainly because their claim of their methods’ greater realness is, at best, disputable, and arguably less real and productive of durable decision insights than economists’ mental models.2 Psychology, behaviorists’ mother science, is now suffering through a major and widespread replication crisis, which is casting a cloud over psychology’s scientific credibility.3 Perfect Rationality, Behaviorists’ Abused Whipping Boy Behaviorists’ main complaint is with the presumption that people are perfectly rational, or perfect decision makers. In Thaler’s own words: Instead of humans, the world described by economists in textbooks is populated by a species referred to as Homo economicus, but I like to just call them Econs. These Econs solve problems like a supercomputer, have the willpower of saints, are free of emotion, and have little regard for their fellow Econs… Over the past 40 years,… I have been trying to figure out how to introduce humans into economic theory. We humans are absent minded, tend to be a little overweight, we procrastinate and are notoriously overconfident.4 Thaler fortifies his central points by reviewing a sample of a long list of behaviorists’ documented decision irrationalities and cognitive biases. He insists that economists can increase their prediction accuracy—”just as fancy microscopes improve the resolution of images in biochemistry.”5 (But then, to my reading of his works, he never disputes the accuracy of empirically validated economic predictions, such as, “a price increase will reduce quantity demanded” (as distinct from the implications of the perfect rationality premise—such as, “perfectly rational people will always choose the greater-valued option.”) In a fit of professional hubris, Thaler (with coauthor Cass Sunstein) makes a methodological leap, adopting the mantle of a choice architect: “Crucially, once we acknowledge that humans are fallible creatures, we can ask how to help them make better decisions,” via “nudges” that are designed by behavioral choice architects who are committed to “libertarian paternalism” (which strikes me as oxymoronic). Thaler and Sunstein are confident that, with their nudges, they will not force anyone to do anything; people will only be pointed in the right direction to achieve their welfare-enhancing ends. But how do Sunstein and Thaler know the ends of so many others when, as they have documented, they surely share the mental frailties of all other human beings? Thaler and Sunstein have, apparently, fallen victim to Frederick Hayek’s fatal conceit, or the presumption that centralized authorities can orchestrate the lives of others whom they do not know and cannot know the complex details of their lives?6 Thaler, Sunstein, and other behaviorists seem convinced that they have escaped the documented decision frailties of others and can improve the lives of others without decision problems arising on a massive scale, especially since politics will likely be at work on the design and scope of their nudges. Sunstein and Thaler seem to think that their documented decision irrationalities and biases are all welfare degrading, which is an analytical non sequitur—and misguided. They and other behaviorists don’t seem to have considered that people have limited and scarce decision-making resources and can rationally decide to improve their welfares by purposefully not making decisions or making less-than-perfect ones (through the adoption of heuristics, which can be riddled with decision mistakes but still can be, on net, welfare enhancing). Contrary to behaviorists’ convictions, people misplacing their keys or forgetting their parking places can be welfare improving because never doing so can be excessively costly, given limited mental resources and the multitudes of demands, with varying values, competing for those limited resources (as I’ve explained in some detail in The Selfish Brain).7 Milton Friedman’s Methodological Point Overlooked In critiquing economists’ premise, Thaler and his fellow behaviorists seem to have missed a major and, in my way of thinking, crucial methodological understanding of economists’ perfect-rationality premise, incisively drilled home by Milton Friedman in his 1953 methodology essay: Economic theory was never meant to be “real” (in the sense of being remotely descriptive) of the “real world,” and neither can it be. Moreover, the implications of a perfect-rationality premise were never intended to be the subject of empirical tests.8 All premises are unreal to one extent or another, Friedman understandably asserts. The perfect-rationality premise is hardly descriptive of how people make decisions. Indeed, the premise is demonstrably false on its face: With economists’ presumption of omnipresence of scarcity, perfection of anything—much less decision-making—is out of real-world reach. Moreover, perfect rationality could not have emerged from evolutionary forces, as I’ve explained at length elsewhere.9 And given the economics of thinking, (evolved rational) people would not choose to perfect the rationality of their decisions, even if they could do so. As covered in The Selfish Brain (with graphics), a rational brain is intent on maximizing its own welfare through its own allocation decisions within the constraints of its scarce resources and the conventional economic laws of diminishing marginal returns and values (which would be in full force when approaching decision perfection). This means that perfect rationality, ever approached, would involve excessive costs (meaning net welfare losses), making perfect rationality inferior in welfare terms to less-than-perfect rational decisions (accompanied by all the irrationalities and biases that behaviorists have documented but misinterpreted)—but also making for another evolutionary fitness advantage of less-than-perfect rationality in human decision making, which suggests that behaviorists have grossly misjudged their research findings. Starkly put, perfect rationality is a real-world nonstarter because evolutionary forces would simply not have allowed it to evolve because of the waste of resources that would have been required to cope with all incoming sensory information and all decision-making demands and do so fully and without error (especially when the consequences are trivial, or close). Those humans that fell short of perfect decision-making likely had fitness—meaning procreation and survival—advantages over those humans who sought perfection in decision making. Such hypothetical ancestral people seeking perfect decisions would likely have starved to death or have become prey, as they focused on perfect decision making. Modern humans’ constricted view of reality is self-evident in their limited visual, auditory, and olfactory acuity when compared to the acuity of other species (hawks and dogs, for example). If humans could see as well as, say, hawks, their perception of reality (as really is, whatever that is!) would, no doubt, be substantially different. Science—and economic—methods are incredibly valuable because they enable modern people, with substantial but still limited mental faculties, to pierce in limited ways, the veil evolution has imposed on people’s constricted view of reality as it is, not as we might like it to be or might think it is from our sensory access to it. Thinking enables us to get beyond the confines of our senses and mental resource scarcity. Thinking methods enable people to go beyond what they can perceive and deduce insights that might be missed by observation, concluding, for example, as economists Gary Becker and Kevin Murphy have deduced (counterintuitively), that all demand curves not only slope downward but addictive drugs (contrary presumption of many economists) can (very likely) have elastic long-run demands, precisely because future consumption builds on current consumption.10 The hard sciences pierce the veil by adopting a methodology that largely requires precise measurement of objective attributes of the real world (those that can be observed and measured). They avoid, for the most part, touching attributes that are unavoidably subjective (those involving individualized evaluations (both costs and benefits) of objective goods and courses of actions and individually subjectively conceived ends. Economics can be complimentary to the hard sciences, but to do so it must employ a methodology that parts ways from that of the hard sciences. And to do that, economics must presume people have purposes. If nothing else, people must be presumed to pursue their own ends and maximize their welfare with some consistency, knowing that such a premise cannot be fully met by real people but also that the premise helps them pierce the veil (at least a little and imperfectly) and develop hypotheses that can withstand repeated tests. Becker and Murphy were able to make the point they did precisely because they sterilized (made unreal by their presuming perfect rationality) their model of human decision-making. As Friedman has explained, economists have used the premise simply as a means of easing the analytics and, at the same time, generating more hypotheses that are better able to withstand empirical tests, leading to more powerful and lasting economic insights. If behaviorists want to discredit economic methodology, they should empirically test economists’ generated hypotheses, such as “hikes in the minimum wage will undercut employment in targeted labor markets.” To my reading of their literature, they’ve never even tried, and for a good economic reason: Refuting empirically the implications of perfect rationality is a far less demanding (and costly) task than refuting long-tested theoretical predictions. Conclusion Behavioral economists have heavily criticized economists’ methods, but I must acknowledge that their criticisms could be viewed as turn-about-is-fair-play. For a century or more, economists spurned the experimental methods of psychologists. In the main, they have doubted that the complexity of people’s real-world interactions in ever-changing market conditions could be replicated in psychologists’ deliberately controlled laboratory experiments. British economist Lionel Robbins (1898-1984) observed in the 1930s that some government policies might come close to being imposed in ways that approximate psychologists’ controlled experiments, but “it would be very superficial to suppose that the results of these ‘experiments’ can be held to justify a proposition of such wide applicability,” meaning that such experiments would likely constitute a “very fragile body of economic generalizations.”11 Why? Ever-changing, real-world conditions can’t be even closely replicated in laboratory experiments. If researchers ever tried, drawing valuable insights would be problematic at best, if not impossible. Conditions in the real world are, simply put, exceedingly complex (which is especially the case when subjective prevalence are allowed), with people having a multitude of motivations and facing immense combinations of affective variables. Moreover, as Robbins stressed, people’s real-world choices are “not between certainties, but rather between a range of estimated probabilities.”12 It is likely far more accurate to say that people don’t make decisions (as behaviorists suggest in their experiments), as it is to say they come to decisions with interactions with others and circumstances over time. Real-world uncertainties can be only imperfectly mimicked in labs. In the real world, people must come to imperfectly know, through interactions and experiences, their wants, as well as the relevance of the risks and uncertainties afoot in a multitude of decisions that are often interrelated. In pointing to the variety of people that economists seek to understand and to the great variety of scarce resources, there is absolutely no way the “real world” can be handled in economic theory. The problem, again, is scarcity, especially the extreme scarcity of the brain’s neurons (and energy), especially long ago, available for thinking. For more on these topics, see Richard Thaler on Libertarian Paternalism. EconTalk. “Market Competitiveness and Rationality: A Brain-Focused Perspective,” by Richard B. McKenzie. Library of Economics and Liberty, October 7, 2019. “Behavioral versus Free Market Economics,” by Leonidas Zelmanovitz. Library of Economics and Liberty, January 2, 2023. Simply put, thinking must work within the resource and process constraints of a messy and complicated biological organ as it has evolved over the eons, which means it must think in reduced, simplified forms with methods that have evolved in imperfect ways with serious limitations on what it can accomplished. Thinking must work within the confines and processes inside the brain, which is a totally different “world” than the outside world. Making theory descriptive of the real world is a behaviorist delusion. Footnotes [1] Richard H. Thaler, 2017. “From Cashews to Nudges: The Evolution of Behavioral Economics,” Nobel Prize Lecture, December 10. [2] Although I have serious criticisms of behavioral economics methods, I have sought to develop a path for a slight paradigm shift in economic, centered around what I call “brain-centric economics” and based on an altered construction of the rationality premise. My revision in neoclassical economics enables me to predict many of behaviorists’ decision irrationalities and biases and then leads to market predictions that traditional neoclassical economists have missed. (See my The Selfish Brain A Layperson’s Guide to a New Way of Economic Thinking, 2021. Athens, N.Y.: Cognitive Alley.) [3] See Staff, n.d. “Replication Crisis,” Psychology Today (as accessed September 25, 2023. See also M. Baker, 2015. “Over Half of Psychology Studies Fail Reproducibility Test,” Nature, August 27; and Brian Nosek, 2015. “Estimating the Reproducibility of Psychological Science,” Science, August 28. [4] Richard H. Thaler, 2017. “From Cashews to Nudges: The Evolution of Behavioral Economics,” Nobel Prize Lecture, December 10. [5] Richard H. Thaler, 2017. The Nobel Prize: “Banquet Speech,” December 8. [6] Richard H. Thaler and Cass R. Sunstein. 2009. Nudge: Improving Decisions about Health, Wealth, and Happiness. New York: Penguin Books. [7] Richard B. McKenzie, 2021. The Selfish Brain: A Layperson’s Guide to a New Way of Economic Thinking. Athens, N.Y.: Cognitive Alley. [8] Milton Friedman, 1953. “The Methodology of Positive Economics,” Essays in Positive Economics. Chicago: University of Chicago Press, pp. 3-46. [9] Richard B. McKenzie, 2024. Rationality Evolved! Why People Have No Choice over Having Choices. Athens, N.Y.: Cognitive Alley. [10] If addictive drugs’ demands are elastic, then taxes on them can be a more corrective for drug addiction than economists had previously thought. See Gary S. Becker and Kevin M. Murphy, 1988. “A Theory of Rational Addiction,” Journal of Political Economy 96(4):675–700. [11] Robbins 1935, pp. 74-75. [12] Robbins 1935, p. 78. *Richard McKenzie is a professor of economics (emeritus) in the Merage Business School at the University of California, Irvine. His latest books related to the topic of this article are The Selfish Brain: A Layperson’s Guide to a New Way of Economic Thinking (2021) and Rationality Evolved! Why People Have No Choice in Having No Choices (2024). For more articles by Richard B. McKenzie, see the Archive. (0 COMMENTS)

A Book Review of Over Ruled: The Human Toll of Too Much Law, by Neil Gorsuch and Janie Nitze.1 Liberties, Thomas Hobbes wrote, “depend on the silence of the law.” Nowadays the law is very chatty. Here are three examples from the new book by Supreme Court Justice Neil Gorsuch and Janie Nitze, Over Ruled: The Human Toll of Too Much Law, followed by a discussion. Three examples First example. After Hurricane Katrina wreaked havoc on a pine forest that provided timber and a source of income, the thirty-six monks of the Saint Joseph Abbey in Saint Benedict, Louisiana, had to search for other ways to support themselves. “For years, they had made simple wooden caskets in which to bury their departed colleagues.” Then they decided to make it a trade, selling a traditional casket priced at $2,000 and a “monastic,” cheaper, option for $1,500. Not long after the monks started offering caskets to the public, the Louisiana State Board of Embalmers and Funeral Directors intervened. The Louisiana State Legislature had created the Board in 1914 to regulate “the care and disposition of the deceased.” Ninety years later, eight of the nine board members were funeral industry participants who, understandably, did not like competition that much. The Board explained to the monks that, under state law, only licensed funeral homes could sell caskets to the public, and to become one you needed to comply with all sorts of requirements, including having a “full-time funeral director who had completed thirty credit hours at an accredited college, finished an apprenticeship, and passed a test administered by the International Conference of Funeral Service Examining Board.” Since the monks (who were not opening a funeral home but were trying to sell caskets to families) didn’t comply with the regulation, the Border Patrol of Embalmers issued a cease-and-desist order commanding them to stop selling caskets. It also subpoenaed two abbey officials to testify and threatened them with fines and potential time behind bars. Only “after a federal lawsuit and six years of wrangling with the Board, in 2013 the monks finally won the legal right to enter the Louisiana casket market.” What was all this ordeal for? “Between 2007 and 2010, the monks sold sixty caskets in a state that sees 40,000 annual deaths.” Sixty. Second example. In his Key West home, Ernest Hemingway had a polydactyl cat. Cats normally have five front toes and four back toes. Polydactyl cats have more toes in one or more of their paws. The descendants of that cat still live in the Ernest Hemingway Home & Museum. The Museum is very proud of them, as you can see by looking at its website, which features them prominently. In 2003, an official from the U.S. Department of Agriculture visited and explained that “the museum needed a license to keep its cats. What’s more, the agent said, the cats should be confined to cages or individual shelters for their safety.” The museum staff were perplexed. For one, “the cats have lived good lives roaming the property for more than forty years.” For another, caging uncaged animals did not sound particularly pet-friendly. This was all based on a federal law requiring animal “exhibitors” such as carnivals, circuses, and zoos, to have a license for their exhibited animals. Agency official in charge of applying the law defined “exhibitors” to include not just carnivals, circuses, and zoos, but also “animal acts” and “educational exhibits.” Hence, Hemingway’s cats. Hemingway cats at museum The federal agent came back a number of times. Several issues were raised: the museum needed to hire a night watchman for the cats. Or cut their number. Or put a hot wire to shock cats attempting to leave the property. The museum applied for a license, twice, then was threatened with confiscating the cats and fines of $200 a day for each animal on the property. “The whole ordeal dragged on for five years before the agency granted the museum a license after it made a few modifications to the property.” The museum “spent at least $200,000 dealing with agency officials and their animal regulations.” We don’t know how much the taxpayers spent but “CBS News documented fourteen trips by agents and a $17,000 cat evaluation.” For what? To control nineteen exemplars of the most uncontrollable species ever: cats. Third example. In 2007, a state wildlife agent boarded the boat of John Yates, a fisherman in Florida. The agent came for a safety inspection but then asked to open the fish hold. He wanted “to measure the fish—all two thousand pounds of them… . According to his measurement (which John disputed), 72 red grouper were under the 20-inch harvesting minimum set by then-current regulations.” A few days later, the same stock of fish was measured again. This time the agent found 69 undersized fish, not 72. Three years later, seven agents in bulletproof vests visited the Yates house. They informed Yates’s wife, Sandra, that her husband “stood accused of violating the federal Sarbanes-Oxley Act and faced a potential term of twenty years in prison.” Sarbanes-Oxley we all remember as a reaction to the Enron scandal: was Yates a disguised Gordon Gekko just pretending to fish for a living? Sadly, no: “that law is written in broad terms. The Act doesn’t just make it unlawful to destroy financial records or documents ‘with the intent to impede, obstruct, or influence’ a federal investigation. It also prohibits the destruction of any other ‘tangible object’ for the same purpose.” “The government’s theory ran this way: John or a member of his crew must have thrown overboard the undersized fish [that is, the original 72] the agent had identified while out on the water. Before retiring to port, the crew must have then replaced those fish with new (and still undersized?) substitutes… On the basis of this theory, the government argued, John had destroyed a “tangible object”—yes, fish—with the intent of impeding a federal investigation.” The Yates were eventually cleared by the Supreme Court in 2015. But meanwhile they lost everything they had; it was estimated that the taxpayers spent as much as $11 million prosecuting the case. For what? For 69 (or 72) red groupers. By the way, “when the agent boarded John’s boat in 2007, the minimum harvesting size for red grouper was 20 inches. By the time John was arrested three years later, that had changed. The new rule? Eighteen inches.” None of the contested fish would have been considered small three years later, by the same agency. Monty Python couldn’t have devised this. Discussion These three examples, with many others, are used by Gorsuch and Nitze to illustrate the consequences of the United States being “over-ruled.” Most of the stories come from Justice Gorsuch’s life on the bench, either at the Supreme Court or at the Court of Appeals for the Tenth Circuit. The inescapable lesson of all these examples is that the United States is now “a nation of laws.” Not a nation under the rule of law. Why? In part because of a House and a Senate that never sleep, in part because of the administrative state envisioned by Woodrow Wilson to put the best and the brightest at the helm of the nation, in part because judicial review became toothless. Gorsuch and Nitze provide some figures of the paper blizzard sweeping over Washington, D.C. “Less than a hundred years ago, all of the federal government’s statutes fit into a single volume. By 2018 the U.S. Code encompasses 54 volumes and approximately 60,000 pages. Over the last decade, Congress has adopted an average of 344 new pieces of legislation each session. That amounts to about 2 or 3 million words of new federal law each year.” Agencies “publish their proposals and final rules in the Federal Register; their final regulations can also be found in the Code of Federal Regulations. When the Federal Register started in 1936, it was 16 pages long. In recent years, that publication has grown by an average of more than 70,000 pages annually. Meanwhile, by 2021 the Code of Federal Regulations spanned about 200 volumes and over 188,000 pages.” And “not only have our laws grown rapidly in recent years… so have the punishments they carry.” These numbers are frightening and are of particular moment to the European reader. They incinerate the hypothesis, still dear to many, that the United States is different and inherently more liberal than European nation states. Woodrow Wilson, Gorsuch and Nitze argue, wanted to make America more European. He won, no question. “Even those among us who are most concerned with over-legislation in theory are lucky enough to have limited, direct experience of it.” Yet these figures are known to the policy wonk, who probably has already run into them reading some think tank report. What Gorsuch and Nitze add, by making cases into stories like the three examples we have seen, is evidence of what this all means to common people. Even those among us who are most concerned with over-legislation in theory are lucky enough to have limited, direct experience of it. The university professor can pontificate about the complications of building codes, but she will realize what a nightmare they are only the moment she’ll have to renovate her flat. Only experts have a precise knowledge of how regulations of this or that activity work. Experts tend to approve of regulations that they drafted or advised on. Stories like the ones Gorsuch and Nitze produce allow us to put ourselves in the shoes of those who are regulated. The number of rules is so high that even those who are charged with violations may be unaware they did anything unlawful—as in the three cases we mentioned. If they ever figure out whether they did or not will depend largely on how lucky they are. If they are rich, powerful, and can buy good legal advice, the impact on their life can be modest. Not so if they are the John Yateses of this world. Gorsuch and Nitze stress that regulation as we know it undermines a fundamental principle of the law: equal treatment of people. Legal complications impact even more heavily those who cannot pay good lawyers- and even more so those who simply focus on their daily undertakings, without identifying potential legal challenges ahead. This is in striking contrast to the rhetoric of regulation, which is supposed to be protecting the little guy against the big shots. More often than not, the lawmaker is captured by those of her constituents who regularly invite her to dinner. Gorsuch and Nitze will be accused of cherry-picking, but their choice of stories shows the ultimate disproportion between the requirements and their enforcement practices and the public good they are assumed to serve. Their reader, whatever her philosophical persuasion, may easily agree that 69 (or 72) undersized fish do not match in importance the life of a family, that a handful of caskets aren’t worth years of prosecution, and that the Hemingway cats can do without the federal government. The costs are high, the alleged social benefit turns out to be minuscule. But Gorsuch and Nitze also show that no awareness that they were over the top ever crossed the minds of federal agents who thought they were just doing their job. We did get the best and brightest in the administrative state exactly for taking care of the details, didn’t we? The Founding Fathers, or at least one of them—James Madison—thought lawmaking should be cumbersome precisely for this reason. “In governments where lawmaking is easy”, he maintains, laws can become “so voluminous that they cannot be read, or so incoherent that they cannot be understood” and they may “undergo such incessant changes that no man, who knows what the law is today, can guess what it will be tomorrow.” In his Freedom and the Law, Bruno Leoni argued that it was misleading to identify the certainty of the law by the mere verbal precision of statutes. Legislators can change written law as they wish, and in fact they do. Leoni was writing when the administrative state was just starting to grow its tentacles and focused on Parliament-made statutes. Now we have administrative agencies that can supplement legislation in the way they see fit, often being both prosecutor and judge at the same time. The fact that we have the above-mentioned Code of Federal Regulations does not mean that we have certainty; it is a book whose pages grow and change year by year. Gorsuch and Nitze have written a courageous and profound book. For one thing, in sharp contrast with a hypocrisy common in the legal profession and even more so among conservatives, they have no problem in stating explicitly that laws are a “restriction to liberty.” If we should care about the “rule of laws,” it is precisely because it implies a series of practices that should set a check on the lawmakers, not make them the rulers of our life. “Some law is surely essential to our nation’s flourishing and our well-being as individuals. But what happens to rule-of-law values when we demand ever more from the law, when we insist on national rules before considering local solutions, and when we permit unelected officials to make more of the rules that govern us?” In their embrace of the system set up by the Founding Fathers, Gorsuch and Nitze point out that the Founders had a solution, of course imperfect and fragile as any human undertaking. It is federalism. The virtue of a federal system, in which states are sovereign on all matters not explicitly delegated to the central government, is that it allows for experiments. Trying out something at the local level, on a smaller population, before making it a nation-wide requirement, is prudent. But it is also consistent with something Gorsuch and Nitze stress over and over: the limitations of our knowledge. Our knowledge is imperfect, and even the most competent of experts can only know so much. Furthermore, knowledge is dispersed in society and the kinds of information that are relevant to do something are often inaccessible to lawmakers and regulators who are not themselves part of the processes of production, boots on the ground. Gorsuch and Nitze’s book reminded me of some of the crucial insights of F.A. Hayek. Hayek did not assume socialism would collapse because it was more corrupt, or its incentives spurred bad management. He thought planners can be as honest and hard-working as private entrepreneurs. But they could not, even at the cost of great effort, assemble the same kind of information that a decentralized decision-making system such as the market seamlessly processes though the price system. Gorsuch and Nitze praise the vision of the Founders as a vaccine against the hubris of lawmakers. While Gorsuch and Nitze chastise the administrative state for much of the excessive rule-making we are living under, they do not naively believe that, were Congress to regain its role as a legislator, things will be easily fixed. They see over-legislation as having multiple layers, and ultimately being a work of society as a whole. Even experiments at the state level are nowadays run in its spirit: speaking of licensing, in Annapolis, Maryland, you can’t work as a fortune-teller without a license. One of the reasons we have too many laws in the United States and throughout the Western world is that people want them. If a society believes that any problem has a solution known to the lawmaker, it will end up with more and more laws as more problems surface. Gorsuch and Nitze point out how this attitude is jeopardizing the whole of the legal system that the Founding Fathers built on British common law. They suggest the problem may be solved through education, by teaching civics and infusing the new generations with a renovated American spirit. That may be needed, as “less than half of Americans can name the three branches of our federal government,” but it would hardly suffice. Another reason we have over-legislation, one that Gorsuch and Nitze do not explore, is that we can afford it. Whatever inefficiency the legal system can foster, the market economy so far has seemed to be able to carry it in its back pocket. At the time of the Founders, a modest increase in taxation might have bankrupted a family; hence the people were very sensitive to taxes. If regulation is taxation, the same can be said for rules. For more on these topics, see Philip Hamburger on the Threats of the Administrative State. Liberty Fund, Future of Liberty podcast, video. The Underrated Bruno Leoni (with Michael Munger). EconTalk. “Alternatives to a Burgeoning Bureaucracy: Lessons from Ludwig von Mises’s Bureaucracy,” by Stefanie Haeffele and Anne Hobson. Library of Economics and Liberty, February 1, 2021. Gorsuch and Nitze know that we delegate so much to politics because “we trust one another less and less. When a problem arises, we are no longer so inclined to rely on individual judgment, our neighbors, or our local institutions to address it.” The United States was supposed to be a high trust society, but it is no longer, and the absence of social trust paves the way for political control. How trust can be regained, other than lamenting that the “habits of the heart” of a time past are no more, is unclear. Still, a book is not expected to solve the world’s problems. But if it identifies them with great clarity and new insights, it already does more than what is expected of it. This is the case of this splendid work, a manifesto for legal common sense and limited government of the sort we haven’t seen in years. Footnotes [1] Neil Gorsuch and Janie Nitze, Over Ruled: The Human Toll of Too Much Law. Harper, 2024. *Alberto Mingardi is Director General of the Italian free-market think tank, Istituto Bruno Leoni. He is also assistant professor of the history of political thought at IULM University in Milan and a Presidential Scholar in Political Theory at Chapman University. He is also an adjunct fellow at the Cato Institute. For more articles by Alberto Mingardi, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

Economics in One Lesson author Henry Hazlitt said that good ideas must be re-learned every generation. As I tell my economic history students, we’re contending for the values of the Enlightenment—life, liberty, equality, and the resulting prosperity. Contrary to what we are often told, we owe our prosperity to liberty, not exploitation, and a flourishing future for all requires that Adam Smith’s “liberal plan of equality, liberty, and justice” be extended more broadly. People need freedom, and to the extent people have had it, they’ve made themselves—and others—very rich. The difference is hard to appreciate. Our world is very different from our ancestors’, and our lives are inconceivably good in just about every way. Sometimes we use our liberty and prosperity to live like pigs, it’s true, but for the most part, we do a good-enough job that the planet can support eight billion people at steadily rising living standards with a lot more on the way. As Deirdre McCloskey and I argue in our book Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World,1 it happened because we embraced the Bourgeois Deal: liberty and dignity for innovators and entrepreneurs who want to try new things. We started leaving them alone (sort of) and even started encouraging them (sort of), and they made us rich: as the economist William Nordhaus estimates, 98% of the value of innovation has accrued not to the innovators but to consumers. In the Beginning, Things Were Awful As Thomas Hobbes wrote, life in the state of nature was solitary, poor, nasty, brutish, and short, even though our ancient ancestors had more natural resources per capita than we do and didn’t have to deal with pollution, climate change, factory farming, and other problems of our modern industrial society. Consider this uplifting statement from 1993 Nobel Laureate Douglass C. North’s 2005 book Understanding the Process of Economic Change: Economic history is a depressing tale of miscalculation leading to famine, starvation, defeat in warfare, economic stagnation and decline, and indeed the disappearance of entire civilizations. It is a pretty apt description of all history. But something wonderful happened: beginning in the middle of the eighteenth century; our clumsy species embarked on a Great Enrichment that fundamentally changed how we live. First, there are a lot more of us. The world went from having almost nobody to having a population in the neighborhood of eight billion. Second, we live a lot longer. Third, we have much higher standards of living because we produce a lot more stuff: far, far more finished goods and services than our ancestors did, and it keeps growing yearly. Fourth, improvements on almost every margin mean we have greater human scope for lives well-lived. Now We Are R.I.C.H. We are R.I.C.H.: Rich, Interconnected, Civilized, and Healthy. What does this mean? First, I’m referring to those of us lucky enough to have won the geographical and historical lottery and who find ourselves in European countries or their offshoots like the United States and Canada. If you’re reading this, there’s a very good chance you’re among the richest 5% of people on earth and the richest 1% of people who have ever lived. We’re also Interconnected. Most of our ancestors went their whole lives without seeing someone who didn’t look, talk, or pray the way they did—and when they did, they were probably trying to kill one another at the behest of a chief, warlord, or noble. In today’s commercial society, we get to enjoy the best that every civilization has ever created, and we can do it with devices that make it possible to maintain running conversations with friends and family members (and adversaries!) around the globe. We’re Civilized. The surviving records we have suggest that a lot of our ancestors didn’t leave behind much more than a body count. Today, we’re able to guard ourselves against the elements. People today don’t slaughter each other with anything like the frequency their ancestors did. We create and enjoy art, literature, and music. We contemplate our existence, and to borrow from Johannes Kepler, we think God’s thoughts after him in the laboratory or while constructing mathematical models. We’re also Healthy. Today’s leading killers are diseases of old age and affluence like cancer, not pathogens or warfare. More people die of cancer because more people live long enough to get cancer. With every passing year, the heartbreaking spectacle of parents having to bury their own children becomes progressively less and less a part of the human experience. What was the major mover? As Deirdre McCloskey and I argue, it happened because we embraced the Bourgeois Deal rather than the Blue Blood Deal, the Bureaucratic Deal, the Bolshevik Deal, or the Bismarckian Deal. It was economic liberty and social dignity for entrepreneurs and innovators, what McCloskey has called “equality of permission.” We left them alone, and they made us rich. We’re Not R.I.C.H. Because We Did S.I.C.K. Stuff A steady stream of books and articles perhaps most notably summarized in the New York Times 1619 Project attributes modern economic growth to a S.I.C.K. legacy: Slavery, Imperialism, Colonialism, and Knavery. A growing literature on the “New History of Capitalism” argues specifically that slave-grown cotton fueled and financed the Industrial Revolution. Here’s what Karl Marx wrote in The Poverty of Philosophy2: Direct slavery is just as much the pivot of bourgeois industry as machinery, credits, etc. Without slavery you have no cotton; without cotton you have no modern industry. It is slavery that gave the colonies their value; it is the colonies that created world trade, and it is world trade that is the precondition of large-scale industry. Nineteenth-century data do not support the thesis that slavery was in any way “necessary” for U.S. cotton production, as can be seen in Figure 1. Figure 1. U.S. Cotton Production, 1790-1900 Source: Historical Statistics of the United States, Millennial Edition There was a huge dip in cotton production during the Civil War as the South actually turned its guns inward and thought it would bring the world to its knees and draw Britain and France into the war on their side by starving the world of the cotton it so desperately needed. That, it turned out, was a serious miscalculation. As it happened, there were a lot of substitutes for Southern, slave-produced cotton, namely, cotton produced in Egypt, India, and elsewhere. Britain started importing cotton from other sources, and the market solved the problem Confederate King Cottoners tried to create. Cotton production rebounded quickly after the war and emancipation, which suggests that Marx was wrong to write, “without slavery you have no cotton.” Within about half a decade after the end of the war, U.S. cotton production was where it had been before the war. Slavery, of course, is one of the oldest and most ubiquitous human institutions. If slavery per se could have caused a Great Enrichment, it would have happened a long time ago, somewhere else where slavery and long-distance slave trades thrived, as they did across the Sahara Desert and around the Indian Ocean. Furthermore, even if we restrict our attention to the Atlantic trade, the Great Enrichment would have happened in Portugal and Brazil rather than England and the United States if slavery itself could cause industrialization. Imperialism and colonialism are also popular explanations. As Niall Ferguson has argued, however, imperialism was the least-original thing Europeans did after 1492. If conquest leads to industrialization, then once again, it would have happened somewhere else long before it actually did. “Knavery and exploitation are curses, not blessings.” Knavery and exploitation are curses, not blessings. The world—even the rich world—is poorer today because of slavery, not richer. We would be better off had slavery disappeared and had the former slaves and their descendants been integrated into a free market economy. We would have saved a lot of blood and treasure had our ancestors gotten rich by producing and trading rather than taking and raiding. How People Solve Problems in Free Markets So how did the Great Enrichment happen? People got rich because we embraced innovation and unshackled what Julian Simon called The Ultimate Resource: the human mind. We would have gotten even richer had we unshackled even more minds. The marketplace is the social sphere in which strangers cooperate for mutual advantage, and when we simply leave people alone, they prove themselves remarkably adept at solving problems in ways outside observers never would have considered. We see examples in sectors too many people think are “too important to be left to the market” like food, water, health care, education, and housing. Food and Water. Few things are as important as food and water: without them, you will die. You’ve probably seen a yard sign somewhere listing the tenets of a woke catechism that includes a phrase like “water is life.” The relevant question, though, isn’t, “should we have water or not?” but, “should we have a little more water or a little less?” Another question is “what should we do with the next unit of water?” We might drink it. We might bathe with it. We might put it in a balloon and throw it at a friend. Regardless, since we don’t produce and allocate it according to market prices, we’re wasting lots of it. The economist David Zetland has a lot more to say on this: to the extent that the world has a “water problem,” it’s that water is not privately owned and traded in free markets. Since we don’t let prices rule in the market for water, we end up creating a lot of problems. We turn neighbors into enemies and effectively deputize them as spies when we make rules saying things like “even numbered houses can water on these days, and odd numbered houses can water on those days,” instead of just pricing water. Prices give people the incentives and transmit the information they need in order to choose wisely, and there are lots of easy ways we could expect people to conserve water if we got the prices right. Maybe we’d take shorter showers or have fewer water balloon flights or leave the Slip-n-Slide in the garage. There are a lot of ways people adjust. “Food is too important to be left to the market” has been used to justify all sorts of things like tariffs on foreign produce and farm subsidies. In both cases, we’re worse off. Tariffs passed in the name of “food security” or “American jobs” make us worse off. They encourage us to waste resources producing things domestically when they could be had for lower prices from abroad. They also reduce the amount of whatever is being “protected” that Americans get to enjoy. It’s a raw deal. Consider farm subsidies and price supports. Just like you get too little of something when you tax it, you get too much of something when you subsidize it. If farmers produce a lot of corn and soybeans they wouldn’t have produced without a government subsidy, they’re wasting resources. The necessary labor, capital, and other resources would produce something more valuable if they weren’t wasted growing corn and soybeans. “Too important to be left to the market?” Hardly. You’ve probably also heard that housing is a human right that is “too important to be left to the market” because greedy landlords, investors, and developers won’t build enough and will charge too much. Housing isn’t expensive because landlords and developers are unusually greedy. It’s expensive because new housing construction in places where it is most desperately needed (like San Francisco, Boston, and New York) is more expensive because of regulatory red tape. Trying to fix it with rent control makes it worse by creating shortages. In this case, the problem isn’t that we’re not doing enough to help the poor. It’s that we have a lot of policies in place that actively harm them. Healthcare. The argument for government intervention in the market for health care is a bit more plausible because diseases can be transmitted. This doesn’t mean it’s too important to be left to the market, and the bureaucratic nightmare that is the American health care system is a pretty direct result of failing to leave it to the market. Occupational licensing makes health care a lot more expensive, and third-party payer systems and layers and layers of opaque regulation make it harder for people to compare the costs and the benefits of different treatment options. People recoil at the idea of relaxing licensing requirements because it will reduce the quality of professional care. It will increase the total amount of care, however, by making it easier for people to fill the gaps in the market between “grandma’s home remedies and rubbing some dirt on it” and specialized high-quality care. Education. This is one of my favorites. Education supposedly has spillover benefits, which as most economists will tell you might make a case for government subsidies to education, but it doesn’t make a case for government provision of education. And that, of course, is to say nothing about who gets to define “education.” I’m kind of shocked at the audacity of people claiming that parents don’t have any reasonable say in what gets taught or how students are educated. It seems undemocratic. Leave People Alone, and They Will Make Us Rich People are very resourceful, and they can probably figure out food, water, housing, health care, education, and all sorts of other things without centralized control. One of the problems, of course, is that we don’t know exactly how people will adjust to their new incentives, but we have a pretty good reason to think they can as long as we embrace the Bourgeois Deal. This, of course, raises a difficult question. If the Bourgeois Deal is so great, why isn’t it more popular? Why don’t more people take the time to learn a thing or two about economics? For this, I want to turn to my favorite economist, Thomas Sowell. For more on these topics, see “Why We Don’t Need a ‘New’ History of Capitalism,” by Phillip Magness, et al. Online Library of Liberty, Liberty Matters, October 5, 2023. David Zetland on Water. EconTalk. Why Housing Is Artificially Expensive and What Can Be Done About It (with Bryan Caplan). EconTalk. I wanted to be like Thomas Sowell when I grow up. In addition to being, I believe, the clearest communicator of economic ideas on the planet, he’s a bona fide expert on Karl Marx and Marx’s intellectual legacy. Or rather, as Sowell puts it, his anti-intellectual legacy. In his book Marxism: Philosophy and Economics, Sowell writes, Much of the intellectual legacy of Marx is an anti-intellectual legacy. It has been said that you cannot refute a sneer. Marxism has taught many–inside and outside its ranks–to sneer at capitalism, at inconvenient facts or contrary interpretations, and thus to sneer at the intellectual process itself. That, unfortunately, is what we’re still up against. Fortunately, some still smile rather than sneer at the intellectual process itself. Those places are making us rich, and they give me a lot of hope for the future. Footnotes [1] Art Carden, Leave Me Alone and I’ll Make You Rich. EconLog, Liberty Fund Economics Book Club, March 24, 2022. [2] The Poverty of Philosophy: Answer to the Philosophy of Poverty, by M. Proudhon. Marxists.org. *Art Carden is Margaret Gage Bush Distinguished Professor of Economics and Medical Properties Trust Fellow at Samford University in Birmingham, AL and a Research Fellow with numerous organizations. Author’s Note: This article is adapted from a presentation titled “Conceived in Liberty or Conceived in Sin? Exploitation and Modern Prosperity” at the Club for Growth Foundation’s 2022 Fellowship Seminar in Nashville, TN, May 20, 2022. I gave a talk closely related to this one at Northwood University in April 2022, which you can watch at Art Carden–Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World–2022 on YouTube. For more articles by Art Carden, see the Archive. (0 COMMENTS)

After filmmaker Penny Lane decided to donate a kidney to a stranger, it took three years and a complex, often infuriating, sometimes terrifying process to make it happen. Along the way, being a filmmaker, she eventually decided to chronicle her experience and explore the question: How can a choice that seems so obvious to the […] The post Give Away a Kidney? Are You Crazy? (with filmmaker Penny Lane) appeared first on Econlib.

Based on the indicators that I look at, I’d expect PCE inflation to run well above 2% over the next 5 years. On the other hand, market indicators such as TIPS spreads point to roughly 2% expected inflation. Which view should I trust?I’d say both. If I put zero weight on my own (inside) view, and if others behaved that way as well, then it would be impossible to form an efficient market forecast. At the same time, the market forecast incorporates the “wisdom of crowds” and hence is likely to be superior to my own view.If I’m rational, I should put more weight on the market forecast. Thus if my inside view calls for 2.5% inflation over the next 5 years, and the market expects 2.0% inflation, then I might rationally form an “outside view” of something like 2.1% inflation. Ten years ago, Bryan Caplan did a post on the subject of whether we should obey unjust laws: Philosopher Michael Huemer’s new essay on jury nullification presents a more compelling position on civil disobedience . . . Huemer’s critique readily extends to civil disobedience more generally.  The fact that people often break just laws is a lame argument for obeying unjust laws.  The proper remedy for abuse is greater investment in moral reasoning, not blind obedience to unjust laws or masochistic submission to unwarranted legal punishment.  I don’t have any problem with people breaking unjust laws, but a note of caution.  It is very hard to know which laws are unjust.  The fact that a law has been enacted by a legislature is evidence that many people view the law as being justified.  My fear is that potential lawbreakers will give too little weight to the possibility they might be wrong, just as too many investors give too little weight to the view that their predictions may be less optimal than the market forecast. There are actually two good reasons to obey seemingly unjust laws: 1. The wisdom of crowds:  Most laws (not all) reflect majority opinion. 2.  Chesterton’s Fence:  Laws may have benefits that are not immediately apparent. When trying to determine whether a given law is unjustified, a rational person should put substantial weight on the fact that the law exists. On the other hand, this does not mean that it never makes any sense to disobey unjust laws.  The fact that the law exists is not the only information that we have.  It is also possible to learn something about why the public supports a given law.  Suppose that in discussions with people about the possibility of legalizing kidney sales, you determine that the major objection is the fear that this would create a black market. (I’ve frequently encountered this argument.)  Readers of this blog presumably understand that black markets occur when transactions are banned, not when they are legalized.  This information should at least modestly reduce your concern that there might be a “Chesterton Fence” argument against kidney sales.  Nonetheless, you’d want to learn about more than just the objections of the man or woman on the street; you’d want to learn about the views of medical ethicists.  It is easy for me to dismiss the views of people worried about a black market in kidney sales.  It is harder for me to refute objections to drug legalization.  My inside view is that there aren’t lots of people just itching to become fentanyl addicts, who are being held back by the prohibition on the use of fentanyl.  But I might be wrong, and indeed lots of smart people do have exactly that fear regarding legalization.  And the fear is not obviously irrational; there’s a good argument to be made that the legalization of sports betting has substantially increased the amount of sports betting.  On the other, other hand, while I’ve met many people who have told me they enjoy betting on sports, I’ve never met anyone who expressed a desire to become a fentanyl addict.  And for most of American history, drugs like heroin and cocaine were perfectly legal.  So the issue is uncertain.  But if it turned out that I was wrong, I might well change my view on fentanyl legalization. To summarize, I disagree with both of these claims: 1. We should always obey the law. 2. We should disobey laws that, from our own personal perspective (our inside view), seem unjust. Instead, we should only regard laws as unjust when we have given due consideration to the fact that our own knowledge is imperfect and that the consensus of society has determined that these laws make sense.  That’s not easy to do.  It’s like asking someone their own (inside) view of how talented a pop star is, and then asking them again, with the proviso that this time their answer should include the implication of the pop star’s reputation among fans and critics.  If your second answer doesn’t often change, you are not being rational.  I wish that more boomers had different inside and outside views of rap music. (0 COMMENTS)

  Rather than post on anything directly connected to the election, I’ll post on things that will be with us no matter who wins. The Fourth Industrial Revolution and the Future of Work by Timothy Taylor, Conversable Economist, October 31, 2024. Excerpt: At least to me, it isn’t obvious that the 4th Industrial Revolution is different in this way. I’ve been reading for decades that the 3rd Industrial Revolution involved “skill-based” technical change, and in this way helped to generate growing inequality of incomes since about 1980. In addition, the very limited evidence now available on effects of artificial intelligence tools in the workplace suggests that they can be especially valuable to lower-skill workers, rather than higher-skill workers. The underlying reason is that AI tools in effect can make pre-existing expertise more available to everyone, which is a bigger boost for those with less experience or lower skill. DRH comment: Tim’s reasoning, and the reasoning in the article he cites, strikes me as more reasonable than the reasoning of recent Nobel Prize winner Daron Acemoglu.   Does Austin Need an $8 Billion Light Rail Project? by Marc Joffe, Cato at Liberty, October 31,2024. Once construction starts, there is no guarantee that it will be completed in six years. Indeed, other projects provide cautionary tales. Honolulu took 12 years to build its 10.75-mile Skyline. Maryland started construction of the 16-mile Purple Line in the Washington, DC, suburbs seven years ago and is not expected to start carrying passengers for another three years. When Austin’s light rail begins operations, its impact on traffic congestion may not be that great. Project sponsors expect 28,500 daily riders by 2040, but past projections by other agencies have sometimes proved to be wildly overoptimistic. In Honolulu, for example, city officials expected 10,000 daily riders on phase one of its Skyline service, but thus far, actual ridership is only about a third of this projection. Rail projects in San Francisco and Southern California have also seen large shortfalls in actual versus expected ridership. Further many future light rail riders may switch from existing bus service. Cap Metro’s 801 Rapid bus covers much of the route to be served by the light rail project, and many passengers from this bus line could be expected to become light rail passengers. As a result, even if light rail attracted 28,500 passenger trips in 2040, only a portion of those would replace car trips. DRH comment: The late George Hilton, who taught the course on urban transportation to Ph.D. students (the two in the class were Harry Watson and I) and undergrad students at UCLA in the winter quarter of 1973, would have liked Marc Joffe’s article a lot. And Marc Joffe would have loved George’s course. I still remember George saying, of many urban mass transit projects in the 1970s (the three he highlighted were San Francisco’s BART, which had opened a few months earlier, and Washington’s Metro and Atlanta’s MARTA, which were being built), that the proponents admitted that the project would replace only one or two years of secular growth in automobile traffic. One thing I don’t recall George mentioning is that while these projects were built, they slowed traffic. And that happened for years. Any reasonable cost/benefit analysis should include the value of people’s time lost for a few years. Remember also that we discount the flow of benefits and costs using a reasonable interest rate. So those costs of time lost, which are incurred upfront, would loom large.   A Benefits Cliff in Washington, DC by Timothy Taylor, Conversable Economist, November 1, 2024. Excerpt: [B]etween $11,000 and $65,000 our hypothetical family experiences no overall financial gain from an increase in earnings. … [A]n increase in income from $11,000 to $65,000 results in a complete or partial loss of most of the public assistance programs and tax credits. Paired with an increase in tax liability, these losses fully offset income gains. … We observe that at certain levels of employment income within the $11,000 to $65,000 range the family’s net resources dip. It means that the combined loss of public assistance programs outweighs the gain in income, meaning the family faces benefits cliffs. The first dip occurs at $22,000 when the family loses access to SNAP. A second benefits cliff occurs at $27,000, where the family loses TANF. That is followed by several small benefits cliffs that occur due to the loss of school meals, WIC, federal and state EITCs, Medicaid for Adults, and Medicaid for Children/CHIP. Finally, at $61,000 the last and the largest benefits cliff occurs, which entails a loss of the CCDF childcare subsidy. The authors call this a “benefit cliff.” I have sometimes called it a “poverty trap” (for example, here and here), because of the work disincentives it provides to poor and near-poor households. There’s no simple way to address this situation. Cutting benefits to low-income households has an obvious downside for those families. Phasing out the benefits more slowly, as income rises, will mean providing benefits to more households and will cost substantially more. Ultimately, I think our society ends up relying on the fact that many low-income households would actually like to be self-supporting, to work, and to avoid or minimize their use of government assistance. But for other low-income households, the work disincentives of the poverty trap will bite. DRH note: Read that first sentence and let it sink in. For a huge swath of the population–tens of millions of households–there is little financial gain from working, at least in the above-ground economy. My late Hoover colleague Martin Anderson, in his writing on welfare, stated that there are 3 goals that people typically want from a welfare system and that you can achieve at most 2: (1) a system with good incentives to get off welfare, (2) a generous system, and (3) a relatively inexpensive system. This was why welfare reform in the mid-1990s made so much sense and actually worked until the federal government whittled away at the rules. It limited how long people could be on welfare at one time and over a lifetime. Of course, welfare in the narrow sense is only one component of the welfare state.   Doctor Fighting To Break Certificate of Need Barrier in North Carolina by Daryl James and Renee Flaherty, Reason, October 29,  2024. Excerpt: Certificate of need (CON) laws exist in various forms in 38 states and Washington, D.C. The stated goal of such laws is to keep costs down by preventing overinvestment in any single market. If regulators decide an area already has enough of any type of service, they can block new construction. As a result, nobody in North Carolina can open or expand certain medical facilities without these regulators’ permission. Even purchasing an MRI scanner without their approval can be illegal. These restrictions prohibit Singleton from using his own clinic in New Bern for most of the surgeries he performs. He must drive two miles up the road to a competitor’s office, as it is owned by a major health care player. This unnecessary red tape increases costs and decreases scheduling options, and patients suffer. DRH comment: The acronym CON is apt.   (0 COMMENTS)

What is economic history if not the chronicle of individuals trying to improve their respective conditions (maximize their utility, as economists say) by exchanging with their fellow humans and eventually developing extended commerce and markets? (See John Hicks, A Theory of Economic History.) Of course, economic history also reflects “the dark side of the force” as some individuals choose looting instead of voluntary exchange. Economic history is ongoing. We get a scent of all that in Paul Kiernan’s “Logging Is a Way of Life in Appalachia. It’s Hanging on by a Thread,” in the October 29, 2024 issue of the Wall Street Journal. Hardwoods (oak, hickory, maple, walnut, and cherry) were, with furs, among the first exports of the American colonies. They have had many uses, from flooring and cabinetry to pulpwood for manufacturing paper and airplane propellers. More efficient substitutes have been developed: aluminum for propellers, plastic for flooring, softwood or agglomerates for furniture, etc. “Efficient” means what consumers choose given their preferences, incomes, and the relative prices of substitutes. Technology also affects costs on the supply side and thus market prices. Because of online publishing, for example, the demand for paper has decreased, so the demand for smaller hardwood trees (used as pulpwood) has also gone down. Given all these factors, fewer workers are required in the lumber industry, composed of sawmill workers, loggers, and truckers. Logging as a way of life in Appalachia has been threatened for some time. There is nothing sacred about the lumber industry or any other industry, in Appalachia or elsewhere. Consumer demand and producer costs change, as the whole economic history of mankind testifies. But this does not mean that political authorities should mess with the industry. Compounding the purely economic factors—related to voluntary supply and demand on markets—the trade war launched by the US administration with its 2018 tariffs against Chinese products (and, more to the point, against their American consumers) has contributed to the decline of the Appalachian hardwood industry and its way of life. The reporter explains: As domestic demand for wood shriveled, Appalachian sawmills turned to exports. From 1999 to 2017, U.S. hardwood-lumber exports nearly doubled to $2.65 billion. China, where wood has been prized in architecture for centuries and a rising middle class fueled a housing boom, accounted for 57% of U.S. hardwood exports at the end of that period. That meant the industry was exposed when the trade war came. From 2017 to 2019, exports to China fell 50%. Output [of Eastern hardwood production] this year is on pace to be 40% lower than 2017, the year before the trade war with China dealt the industry a heavy blow. The Chinese government retaliated against the new American tariffs by imposing its own tariffs, including on lumber imports. As usual, the Chinese tariffs were most likely paid by Chinese importers, but they reduced Chinese demand for lumber, notably imported lumber. Retaliation is as absurd as the tariffs it responds to, for it duplicates the damage. The Chinese government punished “its” domestic consumers because the US government had punished “its” own consumers (including the intermediate industrial users). Tariffs and retaliation introduce a double coercive wedge in commerce: they are a form of looting. Note that even without retaliation, a tax on imports (a tariff) is also a tax on exports through the increase of the importing country’s currency after imports are restricted. Another way to look at this is that the American government’s favoring domestic production of tariffed goods such as steel and aluminum led to less hardwood production. This is not surprising: resources (labor and capital) are limited and, ceteris paribus, the production of more of one good or service means less of something else. Moreover, protectionism led to the competitive hardwood industry in Appalachia to produce less than they would otherwise have produced, and the non-competitive steel and aluminum industry to produce more. Protectionism is inefficient. The WSJ reports that Chinese tariffs on American lumber were abolished early in 2020. But this did not repair the Appalachian lumber industry. Protectionism often has long-term effects on market opportunities. More generally, when a government interferes with trade, whether domestic or international, it undermines free enterprise, consumer satisfaction, and general prosperity. (0 COMMENTS)