Imagine if you were born overseas but grew up in America. After graduating from college, you start looking for a job. There’s just one problem; you do not have legal residency. As a result, the US government sends you back to your home country, a place you might not even remember. To many people, this would seem like a nightmare scenario.Reason magazine has a recent article discussing this issue: In 2008, Taroll arrived in the U.S. as a 10-year-old with his father, younger brother, and Preth, his mother, who had secured a job in the States at a tech company on an H-1B visa. He subsequently became a “Documented Dreamer”: the same moniker given to DACA recipients, except with a twist. Core to being a “Dreamer” under DACA’s purview is that they are undocumented, so Taroll didn’t qualify for the protection provided by the program—not in spite of coming to the U.S. legally, but because of it. To benefit from the “Dreamer” program it is essential that your parents arrived in the US without permission.  The children of legal immigrants do not qualify.  Some are eventually able to obtain green cards, but the line is so long that many “age out” before they are able to achieve legal residency.  At that point they must leave the country: So last month, Taroll was forced to self-deport to Taiwan, where his employer was able to secure him a spot. He does not know the language nor does he have any family ties to the country. “I grew up in my hometown of Boston as just a regular kid, never imagining that my status would define my decisions later in life,” he tells me. “And like many Documented Dreamers, we only truly understood the ramifications once we get closer to aging out and have to start planning for ways to remain in the only country that we know as home.” Immigration is a contentious political issue in America.  And yet it seems implausible that many politicians on either side of the debate would knowingly support giving Dreamer status to only those children whose parents arrived in America illegally.  One way to ascertain the views of policymakers is to look at what happened when this quirk in the law was brought to the attention of legislators.  Is this what they intended? Here’s Reason:  Some lawmakers on both sides of the aisle have tried to answer that question. In 2021, Rep. Deborah Ross (D–N.C.) introduced a bill in the House to effectively close the Documented Dreamer loophole and pave a pathway for citizenship. . . . A version of that bill passed the House as an amendment in the National Defense Authorization Act (NDAA). And then it was laid to rest in the Senate’s legislative graveyard after Sen. Charles Grassley (R–Iowa) rebuffed the proposal.    (0 COMMENTS)

I recently posted about two broad lenses one could use to analyze political activism. One form is what I called “activism as production,” which occurs when activists are motivated by a desire to help produce some form of public good – better environmental health, an improved justice system, and so on. The other form is what I called “activism as consumption,” which occurs when activists are motivated by the satisfaction they gain from activism itself – a feeling of community, social status, pride in “being part of the solution” or being “on the right side of history,” and so on. As I mentioned in that post, these are not the only two lenses by which we can view activism, nor are they mutually exclusive. Any given individual or organization can be motivated by either, or by both in varying degrees. But over the long term, we should expect to see a trend in which of these is more prominent.  This is because activism is subject to what Anthony de Jasay has called “Institutional Gresham’s Law,” which I’ve described before. In economics, Gresham’s Law describes the tendency of bad money to drive good money out of circulation, when there is a fixed exchange rate between the two that prevents the situation from moving towards an equilibrium. If exchange rates are allowed to adjust freely on the market, the effects of Gresham’s Law are prevented. Anthony de Jasay described Institutional Gresham’s Law as the tendency for bad institutions to drive out good ones over time. Institutions that prioritize their own growth and survival over being socially beneficial will drive out institutions that prioritize being socially beneficial over their own growth and survival. Unlike with money, there is nothing that serves as an exchange rate that can keep this process in check. As de Jasay phrases it, institutions are selected “for the characteristics favorable to their own survival.” The selection pressure for institutions, then, is not survival of the most socially beneficial. It is what de Jasay called the “survival-of-the-fittest-to-survive” – which means survival of institutions that prioritize their own growth and expansion over other factors like what is most socially beneficial. As this process goes on,  …the surviving [institutions] might not well be the ones most conducive to making the host civilization prosper and grow…For a variety of reasons, we should expect survival-of-the-fittest-to-survive to produce a population of institutions with many monsters and with no bias towards the benign and the instrumentally efficient. When competing for survival, the latter may well be driven out by the former. It is well in line with this expectation that there is no marked tendency in history for societies equipped with benign institutions to “prevail.”…Institutional Darwinism would work in the benign fashion ascribed to it, and “nice” civilizations would spread, if the subject being selected by the environment for its characteristics that best help it to survive were the whole symbiotic set of host society with its complementary institutions. For this to be the case, single parasitic institutions in the set should have to lose more by weakening the host society than they gain by feeding on it. Gresham’s Law would then cease to operate, for “non-nice” institutions would either not survive the adverse feedback they suffer from their own parasitic actions which weakens their host society, or they would change their spots by a process of mutation-cum-selection. There is no evidence whatever to bear out supposition of this sort. The same thing can happen over time with activism. Suppose there are two activist organizations dedicated to helping alleviate the same social problem. One is a “good” institution, as defined above, while the other is a “bad” one. Let’s say over time, the social problem both institutions are meant to address becomes substantially alleviated, and is perhaps on the verge of disappearing altogether. A “good” activist organization will acknowledge the progress, recognize there is less need for what they are doing, and reduce the scope and scale of their activism. A “bad” activist organization would deny that any progress has been made, insist that things are worse than ever, and seek to continually increase the scope and scale of their activism. Over time, the second organization would completely drown out the former – not because the second one is better, but precisely because it is worse. The bad institution would have a lot to gain by convincing people that the problem it formed to address is large and growing, even if it is actually small and shrinking. This also holds true at the individual level. As mentioned in my initial post on this topic, being motivated by “activism as consumption” is a matter of degree, not a either/or dichotomy. But for reasons of Institutional Gresham’s Law, we should expect over time to see a greater proportion of “activism as consumption” crowd out “activism as production.” In the extreme, those who are motivated by “activism as consumption” are the kind of people who find “being involved” as a great source of meaning, purpose, and satisfaction in their lives. I’ve certainly met no shortage of people who describe themselves in this way. As a social problem improves over time, we should expect to see those who see “being involved” as a means to an end being driven out by those who see “being involved” as something to be pursued for its own sake. But how plausible is it that some people engage in “activism as consumption”? Two researchers (themselves quite sympathetic to activism) looked at this very question. They start off by recounting Aristotle’s notion of “humans as political animals by nature. One implication of this idea is that when people engage in political activity, they are expressing a basic motive fundamental to being human. If this is true, then Aristotle’s logic would further suggest that the extent to which people engage in political activism might be positively associated with their well-being.” That is, political engagement is a deeply felt need that people can feel motivated to pursue for its own sake.  They sought to measure the extent to which activism provides personal psychological benefits, and in what circumstances. What they found shouldn’t be surprising – engaging in activism, in and of itself, provides people with significant personal psychological benefits. As they put it, “well-being was higher to the extent people self-identified as an activist, expressed commitment to the activist role, and reported engaging or intending to engage in activist behaviors. Results were similar across measures of hedonic well-being (e.g., life satisfaction and positive affect), eudaimonic well-being (e.g., personal growth, purpose in life, vitality), and social well-being (e.g., social integration). The results of both studies also suggest that activists are more likely to experience the satisfaction of basic psychological needs, an indicator of more frequent experiences of intrinsic motivation.” Thus, activism-as-consumption has a very fertile ground out of which to grow.  The strength of this effect depends on numerous other factors, such as how strongly people agreed with the statement “Being an activist is central to who I am” – the kind of person I had in mind when I described the more extreme case of those seeking “activism as consumption.” But even if only a tiny number of potential activists fall into that category, because of Institutional Gresham’s Law, we should expect there to be selection pressure over time for that group to dominate activist engagement. And if something like Institutional Gresham’s Law applies to political activism, it could provide an explanation for what Eric Hoffer observed about mass movements – that in time, each mass movement “ends up as a racket, a cult, or a corporation.” (0 COMMENTS)

I imagine that most readers don’t spend a great deal of time thinking about the practice of nepotism. In this post, I won’t try to convince you that nepotism is good or bad, rather I’ll try to show that nepotism provides a useful entry point to thinking about contemporary trends in the politics of many countries. Conservatives often speak of the importance of family, faith, and the flag.  But just how much weight should we place on family, religion and the nation?  Consider the following sliding scales of intensity: 1. No religion   moderate religion   intense religion 2. Cosmopolitanism moderate nationalism intense nationalism 3. Pure egalitarianism Nordic family values strong familial favoritism People often describe intense religion as “religious fanaticism”, a phrase with a negative connotation.  Although I am not religious, it’s not obvious to me why intense adherence to a set of beliefs viewed as both good and important is a bad thing.  In this post I’ll try to steer clear of value judgements. Here I am most interested in the second and third issues, attitudes toward families and nations.  A cosmopolitan might call him or herself a “citizen of the world”, and claim no favoritism toward the country of their birth.  A person with moderate nationalism might be strongly opposed to the sort of intense nationalism seen in places like Russia, and yet to some extent favor social programs aiding domestic residents over those of foreign countries. In much of the world, it is considered unethical not to exhibit a strong favoritism toward those with a blood relationship.  In contrast, family bonds are weaker in places such as Northern Europe, where nepotism in hiring is widely viewed as unethical.  Not very many people exhibit absolutely no familial favoritism, but you can imagine a person who grumbles that they get to choose their friends but not their family, and has friendly relationships with those with similar interests, not those who are close relatives.  I grew up in a culture that gravitated toward the “moderate” position on all three sliding scales, and I have no interest in supporting or criticizing that position.  Instead, I’m interested in thinking about logic behind each position, particularly on the final two sliding scales (attitudes toward one’s nation and family).  Why is it so hard to determine which attitude is appropriate?  Is the “golden mean” approach I grew up with just lazy thinking?  Recall Thomas De Quincey’s famous jest: A golden mean is certainly what every man should aim at. But it is easier talking than doing; and, my infirmity being notoriously too much milkiness of heart, I find it difficult to maintain that steady equatorial line between the two poles of too much murder on the one hand and too little on the other. Why do the cases above seem different from those where one of the extremes is obviously preferable?  Here it will be useful to think about two terms that have very different connotations: bias and solidarity. In America, bias is considered so unethical that there are all sorts of laws against showing favoritism toward one group as opposed to another.  In contrast, solidarity has a positive connotation, obviously linked to patriotism and family values, but also to labor union solidarity and even loyalty to a sports team. But bias and solidarity are two sides of the same coin. I would be hard pressed to give you any “rational” reason for my support of the Milwaukee Bucks basketball team.  I haven’t lived in Wisconsin for more than 40 years, and even when I did it was not in Milwaukee.  On the other hand, it’s pretty easy to explain why I am a Bucks fan.  That was the local team on TV when I began following the NBA in 1968, and once hooked I stayed with them.   Similarly, people usually (but not always) favor the religion, nation and family of their youth. Nepotism is a strong form of family values, or familial favoritism.  It may seem obvious to you that nepotism is unethical.  But many (most?) people around the world do not feel that way.  Indeed they might find your refusal to engage in nepotism to be deeply unethical.  Sociologists use the acronym WEIRD to describe our culture (Western, Educated, Industrialized, Rich, and Democratic.)  In my view, the tension between solidarity and bias is increasingly driving recent trends in politics.  Authoritarian nationalism tends to lean toward the center and right side of those three sliding scales, with some important exceptions.  Liberalism leans more toward the center and left side of the three scales, again with important exceptions. The concept of tradition probably plays a bigger role on the right than on the left.  In places like Russia, liberals are criticized (perhaps unfairly) for abandoning religion, family values and patriotism.  A liberal might respond that supporting the concept of gay marriage is actually consistent with family values.  When conservatives criticize things like gay rights, trans rights and abortion, I think they implicitly have in mind the idea that once you start down that road, you end up with a sort of radical individualism, which erodes the solidarity underpinning family and nation.  If there is no logical reason not to allow people to follow any particular lifestyle, then (some might argue) there’s no logical reason for me not to switch from the Bucks to the Celtics, or not to switch from rooting for the US winter olympics team to the Norwegian winter olympics team. In some cases, there is tension even within a given ideological framework.  My favorite example is the Dutch right-wing politician Pim Fortuyn, who opposed Muslim immigration because he feared that it threatened the Netherland’s “traditional values” of liberalism in areas such as gay rights.  French conservatives have complained when women from different cultures did not wear bikinis on the beach.  So there are important exceptions, cases where people don’t line up the same way on all three scales. [Recall the famous paradox: Should liberals tolerate the intolerant?] Some pundits have noted that blue collar workers are switching from the left to the right in many countries.  This can be understood as a reaction to the collapse of communism.  As the working class’s socialist dream seemed increasingly unrealistic, politics shifted to a focus on issues of identity.  Left wing labor union activism and right wing nationalism can both be seen as putting more emphasis on solidarity than bias.  From that perspective, the working class’s core ideology has not shifted, rather the issues have changed. In contrast, liberals tend to worry a lot about bias, and place less emphasis on family or national solidarity. Proposals to address global warming suffer from an “externality problem.”  Thus it’s no surprise that the very same voters that showed labor union solidarity when voting socialist in the 20th century now show national solidarity when voting for right wing parties that oppose carbon taxes. Most of the gains from carbon taxes go to foreigners, while most of the costs are borne at home. To summarize, the politics in the 20th century tended to split along the lines of socialism vs. capitalism.  In the 21st century, the fault line seems to be attitudes toward the relative importance of bias and solidarity. PS.  Elsewhere, I’ve argued that nationalism and patriotism are two very different things.  Here I’ve steered clear of that thorny topic. (0 COMMENTS)

As formalized by Mancur Olson in his seminal 1971 book The Logic of Collective Action, smaller social groups are easier to organize than larger ones. Consequently and other things equal, a small group will be more effective at lobbying governments, even if the total benefits of its members are smaller than what all the members of the large group lose. One illustration can be found in primary and secondary education, where teachers’ unions impose working conditions that are in their members’ interests but reduce the value of the product the pupils and their parents get. (See “School in Rich Countries Are Making Poor Progress,” The Economist, July 7, 2024.) Two parties to an exchange benefit from it (as judged by each party for himself), otherwise one would decline. But this basic economic principle only applies to a free exchange; it does not apply if one party coercively imposes its conditions, or if one side includes involuntary members. Since 2000, the OECD’s Programme for International Student Assessment (PISA) evaluates 15-year-old students in maths, reading, and science. The average scores showed no improvement until the early or mid 2010s, and then declined until 2022 (latest year available). Other indicators largely confirm the trend, which precedes the Covid-19 epidemic. The magazine notes: Around a quarter of 15-year-olds in OECD-member countries do not meet basic proficiency in maths, reading and science, according to standards set by PISA. That means 16m teenagers struggle with tasks involving numeracy or find it more difficult than they should to draw meaning from basic texts. One reason why the more numerous consumers (the parents of the pupils) cannot change the situation follows from Olson’s theory of collective action: Pupils and their families are rarely organised; this makes it easier for teachers’ unions to resist changes to, say, teacher training and evaluation. Some 70% of schoolteachers belong to a union, an unusually high proportion although it also includes less controlling employees’ associations. Parents whose children attend small schools may be able to organize themselves locally at low cost (in a decentralized system like that of the US). Yet, they often face state-level or national-level teachers’ unions. Trade unions benefit from special legal privileges and powers, such as the employer’s obligation to negotiate, strike disruptions or threats thereof, or the obligation of workers to be union members or to pay union dues. Depending on state law, teachers’s unions can exercise some of these powers, which facilitate their collective actions and translate into restrictive collective “agreements.” I am not arguing that this problem is the only one plaguing public schools. Other imperfections of political processes including politicians’ short-termism prevent elected officials from correcting the weaknesses of the public education system, as The Economist recognizes: Meanwhile leaders are asked to spend political capital on changes that might not bear fruit for years.   ****************************** The unionized schoolteacher, by DALL-E (under the influence of your humble blogger)   (0 COMMENTS)

There’s a thought I’ve had rolling around in my head for a while that a recent post by Scott Sumner helped bring into focus. He argued there can sometimes be a failure to understand and appreciate how people might think in fundamentally different ways from you, and how this can lead to political polarization. As he put it: The people that cannot accept that other people like modern art suffer from a failure of imagination, an inability to grasp that other people process visual information differently than they do.  People that view voters for the opposing party as evil often fail to grasp that not everyone sees political issues the way that they do. This is similar to what Jeffrey Friedman called “ideational heterogeniety” – the idea that different minds process information in different ways. As Friedman described it,  Ideational heterogeneity between my web of beliefs and yours would keep me from knowing how you will interpret your situation, and thus how you will act in response to it. Even if I know what your situation is, then – itself a difficult matter, if you are anonymous to me, as are most agents to the technocrats attempting to predict their behavior – I cannot know how you will subjectively interpret it, and thus how you will act in response to it, if you and I are ideationally heterogeneous. While Friedman was talking about differences in how we process information leading to differences of interpretation and action, the more general case I had in my mind that was clarified by Scott Sumner’s post is the unknowability of other people’s subjective experience, not merely their thought processes. If you see modern art find nothing worthwhile about the experience but don’t take into account that different people have different subjective experiences that are fundamentally inaccessible to you, you might be tempted to think anyone who claims to enjoy the experience of viewing modern art is just role-playing. Call this phenomenon “experiential heterogeneity” – paraphrasing Friedman’s description, it could be described in the following way: Experiential heterogeneity between my subjective experience and yours would keep me from knowing how you experience your situation, and thus how you will respond to it. Even if I know what your situation is, then, – itself a difficult matter, if you are anonymous to me, as are most agents to the technocrats attempting to predict their behavior – I cannot know how you will subjectively experience it, and thus how you will act in response to it, if you and I are experientially heterogeneous. Aside from modern art, here’s two other cases where experiential heterogeneity can come into play. The first is from my own experience, the second comes from someone else.  I used to be a very heavy smoker. Towards the end of my time in the Marine Corps, I worked at the rifle range, and for my last year I was the Range Safety Officer and lead Combat Marksmanship Trainer for annual rifle qualification and pre-deployment combat training. This was a job that had me outdoors all day, for obvious reasons, which in turn meant I never needed to step outside for a cigarette. I could light up at any time – and I was easily going through three packs a day at that point. Eventually I decided to quit – I knew that after leaving the Marines and becoming a college student my income would plunge, so I needed to cut back on how much I spent. (Plus, there were several other excellent reasons to quit smoking – you can probably think of a few yourself!) The difficulty of quitting smoking is well-known enough to be a cultural meme, and after being such a heavy smoker for so many years, I knew I was in for a rough transition. Except, what I “knew” turned out to not be true. I had no real difficulty in quitting – it was actually pretty easy for me. What should I take from this? Here are two possibilities: Quitting smoking actually isn’t all that difficult. Every smoker out there who has complained about the struggle of quitting is just being a big baby.  Quitting smoking is in fact really difficult, but I happen to possess such a Herculean level of willpower that I can easily accomplish things that are simply too difficult for the plebes. While both of these interpretations provide an opportunity for me to grandstand in superiority, I don’t think they are true. I know people who have struggled mightily with quitting smoking who were not simply weak-willed babies – I knew too much about the many difficult things in their own life they had accomplished to dismiss them as lacking willpower or discipline. Nor, if I’m honest, can I claim to have some uniquely strong degree of willpower. There are many things in my life I’ve found to be a struggle that probably don’t seem difficult to most other people.  So what’s a third option? My subjective experience of quitting cigarettes was simply different from most other people. Thus, it wasn’t that I had superior willpower compared to my friends who have struggled with quitting. It’s more likely that it simply required far less willpower from me than from them. While it might be tempting for me to just say “Quitting smoking isn’t that hard – I know from personal experience! You’re just being lazy!”, that wouldn’t be justified. The truth is I have no idea what the process of quitting feels like to anyone else – and neither do you.  The second case comes from Ben Carpenter, one of YouTube’s many online fitness personalities. Provided you don’t have an aversion to profanity, I’d recommend you just take a few minutes to watch his video, but the short version is this. While Ben himself is very lean (being a fitness model and a training coach), his sister has struggled with her weight through her entire life. He talks about a time when he was dieting down to absurdly low body fat levels for a photoshoot, and the insane struggle he felt with his hunger while trying to maintain that level of leanness. His sister asked about how he was feeling and he described to her in great detail about how extreme his hunger was, how nothing he ate made a dent in his hunger, and as soon as he finished eating all he could think about is when he would eat again. Her response was “You’ve basically described how I feel every single day.” Carpenter describes the realization this gave him: Dieting to this level of leanness is the single hardest fitness thing I have ever done. If you had offered me a hundred grand to maintain this for a whole year, I don’t think I would have been able to endure it, and I am not a rich person. Almost anyone who diets to six percent body fat or below without drugs will tell you how incredibly insatiable their appetite was. But I only had to fight my appetite signals for a few weeks. She had been doing it for years…My sister has to exert more effort and willpower to fight her hunger signals for her entire life, basically, than I ever have. Ben Carpenter describes his sister as an “incredibly hard working” person, so he knows her well enough to know that her struggles with controlling her weight aren’t down to her just being a lazy weak-willed glutton. But if you just assume other people’s subjective experience is the same as yours, then you might also just assume people like Emily Carpenter are lazy and weak-willed – despite the incredible work and effort she demonstrates in other aspects of her life. But you don’t know what someone else’s hunger feels like to them. You can’t know that.  So where am I going with all of this? Well, I think in cases like I described above, regarding addiction or weight management, the views of myself on the former and Ben Carpenter on the latter are usually seen as the kinder, more compassionate view, whereas the view that it’s all just down to willpower and voluntary choice is considered the more hard-hearted view. On the other hand, the views of libertarians and classical liberals to let certain issues be handled “on the market” are often seen as being the hard-hearted view. To some, it sounds callous and uncaring to say “while having a safe job is good, money is also good. Jobs that are unusually dangerous—in the contemporary United States that’s primarily fishing, logging, and trucking—pay a premium over other working-class occupations precisely because people are reluctant to risk death or maiming at work. And in a free society it’s good that different people are able to make different choices on the risk–reward spectrum.” But I think this take, far from being callous and uncaring, is actually what shows genuine respect and even compassion for people.  Libertarians and classical liberals are much more likely to be willing to accept that “it’s good that different people are able to make different choices on the risk-reward spectrum.” But modern liberals and progressives recoil at this – they view those kinds of choices as suspect, and feel an imperative to overrule them via the state. There is often an expressed disbelief that anyone might genuinely make such a choice – surely nobody would genuinely believe higher risk for higher pay was a good trade. Such choices must surely be made under duress or perhaps out of ignorance, making their choice susceptible to an external veto by third parties.  Scott Sumner closed out his post by saying “Don’t assume that you know what’s going on in the minds of other people.  You do not.  You don’t believe that your neighbor needs a painkiller?  How would you know?  We need free markets precisely because we do not know what other people see and feel and taste.” I wholeheartedly agree. Modern liberals see others making choices that seem wrong or misguided and think this shows those choices are not genuine, or not deserving of respect, and can therefore be negated. Classical liberals see the same thing and understand that though these choices might seem strange to us, they nonetheless deserve respect and should not be subject to outside interference, because we cannot truly know the other person’s thoughts or subjective experiences, and therefore we cannot truly know what value that arrangement offers them. If I see someone making a trade-off of higher risk for higher pay that seems crazy to me, that is excellent evidence that such a trade-off is not worth it for me – but precisely zero evidence that such a trade-off isn’t genuinely worth it for them. As is often the case, Adam Smith said it the best: The statesman who should attempt to direct people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. (0 COMMENTS)

I often hear people on the right suggest that the New York Times is a lousy newspaper. This is not true, as they are confusing quality and bias. The NYT is an excellent newspaper that is marred by an unfortunate bias toward left wing views.Someone once joked that they were not a libertarian because of “roads”. I suppose I might reply that I am a libertarian because of “elevators”. Or more specifically, elevators times a thousand.A recent NYT piece does an outstanding job exposing the gross inefficiency of the US elevator industry. Because of a highly complex web of counterproductive government regulations, elevators in America cost several times more than in Europe. Not surprisingly, America has far fewer elevators, even for buildings of a given type. (Thus it’s not merely due to our preference for single-family homes—even our apartment buildings have far fewer elevators.)The lesson here is not that the US is worse than Europe; it would be easy to find hundreds of examples where US efficiency was higher than in Europe. Instead, the lesson here is that elevators are merely one of thousands of examples of where government overregulation leads to inefficiency.When most people go through their daily lives, they don’t think about the ways in which government regulations are making their lives more difficult. In almost every case I come across with systematic inefficiency, the root cause is counterproductive regulations. Free market firms do screw up on occasion, but systematic problems are almost always due to bad incentives created by regulation. The inability of most Americans to understand the role of regulations leads to a widespread misunderstanding of issues such as stagnant living standards.  Ask most Americans why growth in real wages has slowed since 1973, and they’ll cite factors like “inflation”, “the decline of unions”, “neoliberalism”, “monopoly profits”, “the China shock” and numerous other factors. In fact, the impact of all of these factors is trivial compared to inefficiency caused by government regulation and subsidies. 1. Health care regulation and subsidy has pushed medical spending in the US to 18% of GDP, vs. 5% in Singapore (or perhaps 9% given US demographics). 2. Government subsidies and regulations have led to vastly bloated expenditures on education, which do not lead to any improvement in learning. 3. Regulations have dramatically boosted the cost of new homes, especially in big cities and coastal states. And yet, I doubt that one American in a hundred would cite health care regulation has a major factor reducing real wages. I could cite many other such examples, but let’s focus on housing, because it’s so important.  In manufacturing industries that are less heavily regulated, such as apparel, consumer electronics and home appliances, prices have tended to rise much more slowly than incomes.  Housing is an exception, and given its share of consumer budgets, it’s an important exception.   To its credit, the NYT piece suggests that the problems in construction go far beyond elevators: Beyond the elevator itself, you’ll find a byzantine mess of absurdities and contradictions behind the U.S. construction industry’s slowness, inefficiency and expense. For example, Americans cannot use the latest heat pumps — a critical tool for fighting climate change by electrifying heating systems — due to the same sorts of barriers imposed by U.S. regulators. Instead, Americans instead rely on obsolete heat pumps that don’t have a market abroad. And plumbing codes in America require an entire network of ventilation piping that has been deemed largely unnecessary in much of the world. They also discuss the problem of residential zoning, and then note that zoning reform is not enough.  Regulatory barriers are especially significant for the construction of larger multifamily buildings: Construction costs for detached single-family houses average about $153 per square foot. In America’s most in-demand coastal cities, multifamily construction costs have exploded. Even subsidized multifamily housing in California can cost $500 per square foot (or more). A generation of young, would-be homeowners locked out by skyrocketing housing costs has taken notice. Their first target was a century of tightening land-use regulation, in which existing homeowners enriched themselves by blocking development through restrictive zoning measures. In recent years, the rise of so-called YIMBY — or “yes in my backyard” — movement has succeeded in all but abolishing single-family zoning on the West Coast. But as zoning codes were liberalized, architects and developers soon began ringing alarm bells about the hurdles buried in the finer points of building codes and standards, and other more technical rules. Here’s what most progressives don’t understand.  Stagnant real incomes are not about incomes; they are about “real”.  Ultimately, our living standards depend on our ability to produce real output.  In the short run, you can help workers a little bit by redistributing money from capital to labor.  But in the long run this will reduce capital formation and make workers worse off.  The overwhelmingly dominant factor driving real wages is productivity.  Swiss workers don’t earn far more than Bangladeshi workers because of strong unions, they earn more due to dramatically higher productivity. What sort of things would boost the living standards of workers?  Cutting health care from 18% to 9% of GDP.  Dramatically reducing expenditures on education.  Deregulating housing to sharply reduce house prices.  And there are thousands of other small bore reforms that could boost productivity all across the economy. Elevators may seem like a small deal, but problems in the elevator industry are emblematic of why real wage growth slowed after the early 1970s. I often get frustrated by the NYT, which has a strong left wing bias.  But in fairness they have done many excellent stories over the years. I’d love to see someone dig up 30 or 40 NYT stories similar to the elevator story I linked to in this post.  Then collect the stories in book form.  Entitle the book: The New York Times Case for Libertarianism (0 COMMENTS)

It is a common misconception that competitive markets yield efficient outcomes. While competition can spur increased effort, that effort need not be directed toward anything productive. More competition has a dark side as well—the tendency to produce unnecessary duplication of efforts and waste. That competition can be problematic rather than efficient is an idea today sometimes associated with investor Peter Thiel, but the reality is this view is hardly new. In fact, the idea that competition is wasteful resurrects a critique made by economists more than a century ago. Thorstein Veblen argued in 1899 that competition is driven by base human instincts like “ferocity and cunning.”  To Veblen, “modern competition is in large part a process of self-assertion on the basis of these traits of predatory human nature.” Predatory traits may benefit the individual who wins the competitive race, but they are often not directly advancing the interests of the community as a whole. Veblen saw the competitive drive as stemming from a fear of losing self-esteem if one fails to excel in the prized endeavors of society. Thus, competition is largely fueled by seeking the esteem of one’s peers. Joseph Schumpeter also wrote in 1942, “in capitalist reality as distinguished from its textbook picture, it is not [price] competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization.” In other words, what matters for economic progress is not competition along a narrow dimension like price or number of firms, but instead it is the abundance of different organizational structures, products and innovations that should be the focus of concern. Veblen’s view may be closer to what one thinks of when one hears a phrase like “wasteful competition.” Consider two roughly equally qualified executives competing for promotion to CEO at the same company. They devote immense time and effort to outshining one another, when realistically only one can get the job. In a sense, the unsuccessful candidate’s efforts were all for naught in this winner-take-all scenario. The competition for promotions amongst employees looks a lot like firms lobbying for government favors in a zero-sum game of rent seeking. It arguably would have been better for the runner-up to apply his or her talents elsewhere, in a more specialized role that created new value. As F. A. Hayek noted, competition is helpful as a “discovery procedure” to reveal knowledge about the best candidates, products, and business models. But his argument may be overstated. Perhaps the key to unlocking knowledge about the best methods and candidates is simply having a diversity of experiments and approaches, as opposed to having multiple firms or employees imitating each other’s strategies in a crowded market space. Differentiation and specialization, therefore, may yield just as good, if not superior, “discovery procedures” as competition. Anecdotally, I’ve found I produce some of my own best work when I focus on underserved topics for which there is high demand but a low supply due to little competition. For example, I’ve found success researching regulatory reform topics in the U.S. states. Working on a niche issue like this and developing a comparative advantage in it simply follows from the principle of division of labor. If there had been a lot of competitors working on these issues, I doubt my work would have stood out to the same extent or been as effective. Hypothetically, a perfectly efficient economy might feature “perfect specialization,” whereby each person and firm is a monopoly in their own unique role. Competition still has a place to spur effort to overcome listlessness, but this role may not be as important as the one students read about in economics textbooks. Competition is downright inefficient when it encourages redundancies that come at the expense of carving out a distinctive value-add for one’s self or company. From this perspective, a monopoly isn’t so problematic if it is built on genuine uniqueness rather than barriers to entry. Another source of wasteful competition is the academic arms race to get into elite universities. Students compete on extra curriculars like SAT prep, sports, and club memberships. But taken to extremes, this becomes an unproductive signaling game of proving you jumped through more hoops than the next applicant. Again, some competition is healthy to provide a source of motivation and reveal merit. But the competitive process can quickly reach a point of diminishing returns if students pursue activities for the sake of resume padding rather than genuine value creation and human capital development. In general, competition serves a valid purpose when it incentivizes people to be productive who wouldn’t otherwise be self-motivated. But preferably, people pursue excellence because they want to, not because they have to. In an ideally-efficient economy, then, every person might be endowed with “perfect preferences” and be a self-starting monopoly, propelled by their own drive to create value for others. As Schumpeter would have wanted, competition would then be amongst the best ideas, rather than the most cut-throat tactics. So in conclusion, economists shouldn’t treat all competition as an unalloyed good. They should take seriously the potential for competition to produce waste and zero-sum jockeying for status, limiting output and innovation rather than the reverse. The sweet spot may be a minimal amount of competition to incentivize effort, combined with strong intrinsic motivations and a high degree of specialization and experimentation. All told, a world of fierce competition at every turn has significant downsides relative to one where people focus on excelling each in their own distinctive way.   James Broughel is a Senior Fellow at the Competitive Enterprise Institute with a focus on innovation and dynamism.  (0 COMMENTS)

On June 6, 2024, the Wall Street Journal published my short op/ed online (but not in print) and titled it, “How Electric Vehicles Can Make Everyone Happy.” It wasn’t an ideal title. My article was how a few major changes in EV policy could make almost everyone happier than they are likely to be with current policy. Here’s the whole op/ed:   How Electric Vehicles Can Make Everyone Happy Ending subsidies, mandates and tariffs would expand use of EVs while letting people continue driving the cars they want. By David R. Henderson June 6, 2024 at 5:48 pm ET   One of the first things you learn about in an economics course is the concept of trade-offs: You can’t have everything you want. This is relevant in the debate about electric vehicles. U.S. auto workers want to keep their jobs. Most U.S. drivers still prefer cars with internal combustion engines. Environmentalists want Americans to buy EVs. And free traders want, well, free trade. Something’s got to give. Or does it? There’s a path that would enable each party to achieve many of its objectives. First, end mandates and subsidies for EVs. Second, eliminate President Biden’s 100% tariff on EVs from China and allow duty-free imports. Free trade would give lower- and middle-income Americans the chance to buy relatively cheap imported EVs. More people driving EVs would make environmentalists happy. And ending mandates and subsidies would allow U.S. automakers to do what they do best: make cars with internal combustion engines. That in turn would keep U.S. auto workers employed and able to continue using their specific skills. If we stick to our current policy path, none of these goals is attainable. For one, environmentalists can’t achieve their aims. The Environmental Protection Agency estimates that 56% of new cars would need to be EVs by 2032 to meet the agency’s emissions goals. Even with subsidies and California-style mandates, meeting that benchmark is unrealistic. According to the Energy Department, EVs and hybrids combined made up only 9.1% of all light-duty vehicles sold last year. According to the Energy Information Administration, only 1.2% of light-duty vehicles on the road in 2022 were EVs or plug-in hybrids. There are three reasons it’s unrealistic to expect more than half of new cars sold to be EVs. First, EVs are expensive. A new EV sold in the U.S. is priced, on average, at just over $50,000, more than most drivers are willing or able to pay. Second, people are rightly worried about driving an EV a long distance and being able to reach a charging station that recharges the car quickly. Third, when temperatures fall below freezing—which happens often in much of the U.S.—it takes significantly longer to charge an EV. [DRH note: I would have challenged the editor’s insert of “or able.” The majority of drivers are able to pay $50,000; it’s just that they would have to give up so much else. But I didn’t challenge because I was focused on other parts that I wanted her to get right, which she did.] It’s unlikely that within the next 10 years EVs will make up more than 25% of all cars sold annually. But we could likely come much closer to hitting the 25% mark in a few years, with no subsidies or mandates, simply by pursuing free trade, which would lower the first of the three barriers: cost. BYD, a Chinese manufacturer, offers some EV models that cost less than $20,000—significantly cheaper than U.S.-made EVs. If the U.S. makes EVs more accessible and affordable by welcoming duty-free imports, environmentalists will be closer to achieving their goal of getting more EVs on the road, consumers who want to buy EVs will be able to do so more easily, and automakers can focus on making cars with internal combustion engines, which would support auto workers’ jobs. So let’s get rid of mandates, subsidies and tariffs. There’s no perfect trade-off, but some are better than others. Mr. Henderson is a research fellow with Stanford University’s Hoover Institution. He was senior economist for energy with President Reagan’s Council of Economic Advisers. (0 COMMENTS)

For many men, surviving the test of battle intensifies the joy of being alive. A provocative claim, perhaps, but to novelist Mark Helprin, simply a fact, and one that drives his new book about men who commit themselves fully both to service during wartime and to the women they love. Listen as Helprin tells EconTalk’s […] The post Reading, Writing, and Fighting (with Mark Helprin) appeared first on Econlib.

A recent article in The Economist made some rather ambiguous claims about baby boomers like me: Now that the generation is moving into retirement, what are they going to do with their money? The question matters for more than just suppliers of cruises and golf clubs. Boomers have deep pockets, so their spending choices will exert a huge influence on global economic growth, inflation and interest rates. And it turns out boomers are remarkably stingy—not just in America but across the rich world. They are not spending their wealth, but trying to preserve or even increase it. The big question for the economy in the 2020s and 2030s will not be why boomers are spending so much, as many had anticipated. It will be why they are spending so little. I suppose that I am one of those “stingy boomers.”  Before writing this post, I decided to check to make sure that I knew the definition of “stingy”.  Here’s a definition provided in an online dictionary: unwilling to give or spend; ungenerous. OK, now I’m totally confused.  Which is it?  Unwilling to spend?  Or ungenerous?  I regard people who spend as selfish, and people who are unwilling to spend as generous.   The Economist also uses the term “miserly”, which is every bit as ambiguous as stingy: Our analysis suggests that the wealth-decumulation puzzle is becoming still more puzzling, for boomers are more miserly than previous generations. Think of it this way.  You have X dollars of total wealth.  You can spend the money on consumer goods, in which case you benefit.  Or you can refrain from spending the money (i.e. save), in which case someone else benefits. In the article, the Economist claims that high levels of boomer saving will tend to depress interest rates (which is plausible) and will also tend to depress inflation (which is highly dubious.)  But they ignore the most important effect; it would boost economic growth and raise the living standards of millennials and zoomers. PS.  A new WSJ article has exactly the opposite view.  They claim that a surge in spending by boomers is driving the economy: ‘We’re Not Dead Yet.’ Baby Boomers’ Good Times Drive the Economy. Sky-diving, concerts, classic cars. An influx of older Americans bolsters the nation’s fastest-growing city. ‘We have more fun than our daughter.’ My conclusion?  Don’t trust a reporter’s generalization about the economy—look at the data. (0 COMMENTS)