On Marginal Revolution, Tyler Cowen quotes from a news item in the Financial Times: There are several investment implications of Trump back in the White House,” said Jack Ablin, chief investment officer at Cresset Capital. “[Most notable would be] a higher-for-longer Fed, as monetary policymakers increase the likelihood that the corporate tax cuts will be extended next year.” Did you spot the error in the quote from Jack Ablin? Neither Tyler nor, as far as I can tell, any of his many commenters did. The corporate tax cuts, if by that you mean the drop in the corporate tax rate to 21%, don’t need to be extended next year because they don’t expire next year. They are one of the few parts of the 2017 tax cut that are permanent unless Congress explicitly changes them. And thank goodness for that because they are one of best parts of the 2017 law. (The other one is the restriction on the deduction for state and local taxes, which does expire next year.) I’ve seen a number of people claim on line that the cut in the corporate income tax rate was temporary. I corrected a Reason writer who made that claim. To his credit, he updated his post to reflect the truth. (0 COMMENTS)

In a recent interview with Dwarkesh Patel, Former UK Prime Minister Tony Blair discussed the policies of Lee Kuan Yew—the father of modern Singapore.  He suggested that Lee made three key decisions early in his administration, which led to Singapore achieving a high level of economic development: 1.  Singapore adopted English as its national language. 2. Singapore became highly open to foreign capital and talent. 3.  Singapore adopted a zero tolerance policy for corruption, combined with salaries for top government officials that were an order of magnitude higher than typical in the public sector. This made me think of the similarities between Singapore and corporations based in Switzerland.  Many corporations in Switzerland use English as their official language, despite the fact that their country’s main ethnic groups (German 62.1%, French 22.8%, and Italian 8.0%) all speak other languages.  Singapore also has a complex ethnic mix including Chinese (75.9%), Malay (15.1%) and Indian (7.4%.)   Blair noted that Lee’s decision to have Singapore adopt English was quite controversial at the time. Switzerland is a highly open economy, which welcomes foreign investment.  Approximately 30% of Switzerland’s population is foreign born, far higher than the 10% to 20% typical in Western Europe.  Singapore also welcomes foreign talent and investment, with 37% of its population foreign born.  Again, Lee’s policy was controversial at the time, as import substitution was in vogue at the time Singapore was founded (in 1965.) Like Singapore’s government, Swiss companies do not tolerate corruption, and pay relatively high salaries to top executives.  Lee’s policies regarding corruption and public sector salaries are quite unusual in the developing world. Ethnic strife is a very common problem in many parts of the world.  Switzerland has used political decentralization to reduce the danger of conflict between regions speaking different languages.  Decentralization would not be as feasible in a small city-state like Singapore, but by adopting English as a language Singapore was able to at least somewhat reduce the salience of ethnicity. I don’t know if Lee Kuan Yew had Europe’s most successful country in mind when he adopted these policies, but whatever the motive, Lee ended up creating a Singaporean model that looks uncannily like a successful Swiss multinational corporation. (0 COMMENTS)

Robert Nozick’s Anarchy, State, and Utopia was released in 1974, shortly after (and partly in response to) his Harvard colleague John Rawls’ 1971 A Theory of Justice. Anarchy, State, and Utopia included a theory of rights and a right-based account of liberalism in the classic tradition, which offered an alternative not only to Rawls’ progressive redistributionist egalitarianism but also to socialism.1 Nozick was not the first or only philosopher to make these arguments, but he was among the first, and among the most famous. His arguments were rigorous and compelling, his writing was clear, and Anarchy, State, and Utopia has become one of the books chiefly associated with the classical liberal (sometimes “libertarian”) perspective. Alongside the work of economists defending market-based economies, Nozick was instrumental in making the classical liberal tradition a viable (if not tremendously popular) alternative in the academic world. Checking in fifty years later, one observes that Nozick has had great influence, even though philosophers remain divided on the ideas he put forth. Philosophers who work in the classical liberal tradition are more plentiful now compared to when Nozick wrote, and they are taken a little more seriously. While there are non-Nozickian approaches to arguing for liberalism, the success of Nozick’s work is one reason this variety of approaches has grown and developed. His arguments may have had less traction than some liberals might have hoped—Marxism and Rawlsianism are still the predominant approaches, and there are a few more academic anarchists than there used to be (another theory targeted by Anarchy, State, and Utopia), but it’s fair to say that the book itself holds up extremely well and is rightly regarded as a major contribution to political philosophy. It also supports liberal economists’ emphases on rights of property, contract, and market entry. Let’s have a look at some of the ways in which it continues to be a significant work. The very first sentence of Anarchy, State, and Utopia says, “Individuals have rights, and there are things no person or group may do to them (without violating their rights).”2 Some of Nozick’s early critics assailed him for having merely asserted that people have rights without providing an argument, but this is plainly false. The argument is in chapter three, which makes one wonder whether these critics were quick to dismiss a book the conclusion of which contradicted their priors rather than actually looking at the argument. He specifically cautions against this on the same page, just two paragraphs down: “many persons will reject our conclusions instantly, knowing they don’t want to believe anything so apparently callous…. I know that reaction; it was mine when I first began to consider such views…. This book contains little evidence of my earlier reluctance. Instead, it contains many of the considerations and arguments….”3 So while in the first two chapters, he is working on a promissory note, he makes good on it in the third. The argument for rights is based on the “fact of our separate existences.”4 That is not to say that we do not have connections to other people or derive some component of our self-image from the various communities we inhabit, merely that we are nevertheless distinct individuals, each with his or her own life to live. This, he argues, creates moral side-constraints on how we treat each other. There are echoes here of both John Locke and Immanuel Kant: one argument for the side-constraints is that no one could by nature have a claim to own another person, so we can’t rationally understand another person’s existence solely in terms of them being a means to anyone else’s ends. Nozick is firm on this. People are ends in themselves, existing for their own sake. He uses the example of tools: tools exist in order to help people accomplish their ends; the tools don’t have ends of their own. But people do exist and have ends of their own and are not to be regarded as tools for others’ ends. Using a person as a tool for your own ends “does not sufficiently respect and take account of the fact that he is a separate person and that his is the only life he has.”5 This is what it means for there to be moral side-constraints on how we treat each other. “Moral” because of course, one can treat others as mere tools, use them only to further one’s own goals with no regard to their dignity and autonomy—but it is morally wrong to do so.6 Nozick argues that if this doesn’t hold—if there are no constraints on how we may treat others—then there’s no morality at all.7 These side-constraints on how we may treat others are what rights are: if you’re morally required not to do X to me, then I have a right not to have you do X to me.8 If we have rights in a moral sense, Nozick argues, that has legal implications for the political/economic order. Returning to the opening sentence: there are things no person or group may do without violating those rights. This means that many conceptions of what government is supposed to do may turn out to be logically incompatible with taking people’s rights seriously. We tend to recognize wrongful government action when it’s a different government more easily than we recognize it when it’s our own. Looking, for instance, at a theocratic society, most people in a liberal democracy will notice the lack of religious freedom and the imposition of a single set of values. When looking at a one-party state with strict control of all work and media, members of a liberal democracy will notice the lack of voter choice and the problems caused by suppressing economic and journalistic freedom. It’s much better, they surmise, that people have freedom of press and freedom of occupation, and can vote for a better candidate if they don’t like the ones in office. However, it’s sometimes harder to see the ways in which a liberal democracy can also violate rights. The easiest way is when checks on majoritarian democracy are weak or poorly understood. Then we can have majorities regulating what others might want; for example banning interracial marriage, or prohibiting the manufacture and sale of alcohol. More subtly, Nozick notes, conscription (still U.S. policy in the early 1970s), wage and price controls, and taxation itself also violate rights, yet we often don’t notice this, or are taught in school that that’s just the way it is. Nozick argues that governments cannot have a moral entitlement to do things that individual people may not do. That is, the reason the government would be wrong to murder me is exactly the reason anyone would be wrong to murder me: it violates my rights. But this extends to all sorts of things that, typically, only governments do; press people into service or otherwise deny them their liberty, appropriate their property, impose restrictions on their ability to publish a book or give a speech, impose restrictions on their ability to engage in commercial activity, and so on. This means that most conceptions of good government will be rights-violative and hence morally unjustifiable. In addition to (perhaps) more obvious things like massacring or enslaving disfavored populations, it also includes things we tend to take for granted, like restricting financial transactions and seizing “excess” property. Where Rawls argues for a system in which rights to free speech, religious freedom, voting rights, and the like are fully protected for all, but where commercial and financial activity can be restricted through regulation and taxation, Nozick argues that there’s no coherent rationale for distinguishing between the two (more on this momentarily). Where Karl Marx argues for the abolition of money and private property to ensure the equal distribution of all material resources, Nozick argues that not only would this be morally unjustifiable, it would also be unsustainable. Wilt Chamberlain One of Nozick’s most famous thought-experiments to illustrate the inconsistencies in Rawls and Marx is the “Wilt Chamberlain argument.”9 Briefly, with this idea Nozick asks the reader to assume that we have in fact achieved the most just distribution of material resources, according to the reader or even Rawls or Karl Marx. Whatever that just distribution is, Nozick asks us to refer to it as D1. On D1, everyone is ex hypothesi entitled to whatever they have. Nozick then says, “suppose that Wilt Chamberlain is greatly in demand by basketball teams, being a great gate attraction…. He signs the following sort of contract with a team: In each home game, twenty-five cents from the price of each ticket of admission goes to him…. The season starts, and people cheerfully attend his team’s games…. They are excited about seeing him play; it is worth the total admission price to them. Let us suppose that in one season one million persons attend his home games, and Wilt Chamberlain winds up with $250,000, a much larger sum than the average income and larger even than anyone else has.”10 Nozick asks the reader whether this new distribution, call it D2, which deviates from D1, is also just. If it is not, Nozick asks, why not? After all, each person was entitled to spend that 25 cents as they pleased, and no one was coerced or exploited by Chamberlain’s contract, but the net result is an increase in wealth inequality that “upsets the pattern.” “There is no question about whether each of the people was entitled to the control over the resources they held in D1; because that was the distribution (your favorite) that (for the purposes of argument) we assumed was acceptable. Each of these persons chose to give twenty-five cents of their money to Chamberlain…. If D1 was a just distribution, and people voluntarily moved from it to D2,… isn’t D2 also just?”11 If we’re to maintain the pattern and keep D1, Nozick concludes, it would require forbidding people like Chamberlain from entering into favorable contracts, or forbidding people from spending their money in accordance with their own choices, or both. Since in the real world, the Wilt Chamberlain situation plays out in countless ways every day, that kind of planned distribution of resources requires constant interference with people’s freedom to choose what to do with their lives. “If we are to take people’s rights as morally important, we will not be able to justify the multitude of restrictions on transactions that are required not only by socialism but also by the progressive-taxation-based regulatory-and-redistributionist state.” The Wilt Chamberlain thought experiment is meant to show that not only is a completely egalitarian distribution of material resources unsustainable without massive rights-violations, so is any sort of redistributive plan. The under-appreciated significance of this is that the distinction Rawls makes between “political rights” and “economic rights” is not really a valid distinction. My freedom to choose doesn’t amount to much if I am not free to engage in transactions that give material reality to my choices. If we are to take people’s rights as morally important, we will not be able to justify the multitude of restrictions on transactions that are required not only by socialism but also by the progressive-taxation-based regulatory-and-redistributionist state. In addition to the morally objectionable rights violations these entail, Nozick might also have mentioned the further problem that these restrictions will be made through a political process, which necessarily means influence-peddling and cronyism in the selection of which transactions are to be restricted. In assessing the continuing relevance of Anarchy, State, and Utopia fifty years on, it is also noteworthy that Nozick devotes a considerable amount of space to exploring the reality of human diversity, and to demonstrating the relevance of this for political and economic theory. Nozick notes that any conception of “the good society” will either be very minimal, or else it will exclude some people’s values and preferences while privileging others. People form associations voluntarily when there’s mutual benefit to doing so. Sometimes this benefit is as simple as facilitating the division of labor, but other times it is based on a more comprehensive set of shared values. So, left to their own devices, we can imagine people forming larger, cosmopolitan, commercial communities and also smaller, homogenous, belief-based communities. In Manhattan, for instance, people of varied beliefs and ethnicities live together because of financial or artistic benefits, while just a few hours away, in Lancaster County, Pennsylvania, the Amish live in a more homogenous society where everyone shares a common religious faith and other values. Nozick’s point is that there’s no universal and objective sense in which one of these is “good” and the other “bad”—rather, each is good for some people and bad for other people. As long as people are free to form the communities they want, and no one is forced either to join or to remain, any number of communities are possible, and consistent with respect for people’s rights and autonomy. So the “minimal state” Nozick defends is not, contrary to incautious critics, a laissez-faire capitalist society. The “minimal state” is a framework, which allows for laissez-faire commercial societies and also communes, for high-tech societies and Amish country, for secular societies and religious societies—provided only that people join these communities voluntarily and may exit should they change their mind.12 For more on these topics, see “Subversive Innovation: A Strategic Reading of Nozick’s Framework for Utopia,” by Max Borders. Library of Economics and Liberty, Apr. 4, 2022. David Schmidtz on Rawls, Nozick, and Justice. EconTalk. “Three Ways of Looking at Individualism: Freedom in Agency,” by Bill Glod. Online Library of Liberty. Ironically, some of the pushback one sees regarding economic freedom is based on alleged failure of market institutions to embrace pluralism and diversity. Nozick’s argument is that just as taking rights seriously has implications favoring the minimal state, so does respect for human diversity and pluralism. Any theory of “the ideal society” that goes beyond Nozick’s framework is necessarily neglectful of this, substituting one set of values and preferences for others in a totalizing way. Fifty years after Anarchy, State, and Utopia, the classical liberal perspective is still not the predominant one in political and economic theory, but Nozick’s insights into the nature of rights, the significance of rights, and the reality of human pluralism remain significant challenges to proponents of more heavy-handed, illiberal theories. Classical liberalism is richer for Nozick’s contributions, and he is at least partially responsible for whatever increase in numbers we have seen over the years. The book deserves its place on short-lists of important books in political philosophy, and hopefully it will continue to find readers. Footnotes [1] Robert Nozick, Anarchy, State, and Utopia (Basic Books, 1974); John Rawls, A Theory of Justice (Harvard University Press, 1971). I have a more detailed discussion of Nozick in The Essential Robert Nozick (Fraser Institute, 2020). See also https://www.essentialscholars.org/nozick. [2] Anarchy, State, and Utopia, p. ix. [3] Anarchy, State, and Utopia, p. ix. [4] Anarchy, State, and Utopia, p. 33. [5] Anarchy, State, and Utopia, p. 33. [6] The contrast would be physical side-constraints; e.g., I literally cannot go back in time or be in two places at once. Those are side-constraints on how I may act about which I have no choice. But that I shouldn’t murder or enslave someone are not physical side-constraints—one can do those things but should not. [7] Or, a denial of the reality of the uniqueness and dignity of each person. The danger of any reductio ad absurdum is that one’s interlocutor might agree with the putative absurdity, and some philosophers might reject Nozick’s account of rights, if, e.g., they thought there was no such thing as right and wrong at all. But that’s not a move Rawls can make. [8] Philosophy note: this approach is generally regarded as deontological, referring to one’s duties or obligations. There are other approaches to deriving rights of course, chiefly consequentialist approaches, which hold that a concept of rights is beneficial because it promotes better outcomes for society (e.g., in David Hume-, arguably John Stuart Mill-), and neo-Aristotelian-approaches, on which a concept of rights is seen as protecting the possibility of self-directed action, which is a necessary component of human flourishing (e.g., in Douglas B. Rasmussen and Douglas J. Den Uyl, Norms of Liberty (Penn State Press, 2005). [9] Wilt Chamberlain was a top basketball superstar in the early 1970s. If that reference isn’t helping, think Michael Jordan or LeBron James, or any superstar athlete, or any A-list movie star. [10] Anarchy, State, and Utopia, p, 161. [11] Anarchy, State, and Utopia, p. 161. [12] For further discussion of Nozick’s argument from pluralism, see my forthcoming “Reassessing Nozick on Pluralism,” The Independent Review, Vol. 29, no. 2 (Fall 2024). *Aeon J. Skoble is the Bruce and Patricia Bartlett Chair in Free Speech and Expression and Professor of Philosophy at Bridgewater State University, and author of The Essential Robert Nozick, part of the Fraser Institute’s Essential Scholars series. This article was edited by Features Editor Ed Lopez. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

A Liberty Classics Book Review of Universal Economics, by Armen Alchian and William Allen.1 What do you do when economists stop believing in economics? The “dismal science” never merited its dreary epithet, but trends in economics education at the graduate and undergraduate levels could change that. Ph.D. courses are saturated with hyper-mathematical models that are as sophisticated as they are irrelevant, as well as statistical pyrotechnics that amount to little more than brute description. Undergraduate courses trivialize the economic way of thinking and leave students incapable of intelligently discussing the complexity and richness of markets. Good economics is increasingly hard to find in the academy. But there is hope. Finicky smartphones can be rebooted to their factory settings. We can do something similar with economics. There are plenty of resources for teachers and scholars who want to recapture the power and elegance of old-school price theory.2 Foremost among them is Armen Alchian and William Allen’s Universal Economics. This remarkable book teaches foundational economic concepts without reading like a textbook. Too often, course readings in economics come across like hastily assembled instructors’ manuals. Students find them sterile and enervating. But Universal Economics grips the reader and conveys the wonder of finding the hidden order in economic life. This book should be required reading for all Bachelors and Masters students, as well as a prerequisite for doctoral study. As my colleague Bryan Cutsinger and I write in a forthcoming paper, price theory studies “how the price system coordinates the disparate plans of producers and consumers.” It is impossible to understand market economies without appreciating how the price system generates information and aligns incentives. This theme is consistent throughout Universal Economics. Alchian and Allen write from the perspective of the UCLA school of price theory, which emphasizes the importance of property rights and legal rules for shaping economic activity, as well as the surprising varieties of contractual devices producers and consumers use to overcome barriers to exchange. Too many economists treat the economy as a machine, conveniently positioning themselves as the machinists whose tinkering makes the whole thing “work.” Alchian in Allen, in contrast, treat the economy as an object of inquiry, inviting the reader on a quest of joint discovery. Their goal is social comprehension, not social control. That enables them to avoid the common pitfalls of microeconomic analysis, such as equating price-taking behavior by firms with “perfect competition” or assuming margins of adjustment other than price indicate an economic inefficiency. Universal Economics properly begins with the problem of scarcity, which makes necessary a system to determine who gets what. They immediately segue to rules and processes that can allocate resources. This puts property rights front and center. Queueing, discrimination, and violence are all schemes societies have used throughout history to allocate rights. What makes market economies unique is their reliance on “competitive cooperation by exchanges” to determine what gets produced, how it gets produced, and who gets the resulting products. Thinking about economic problems in terms of property rights helps us understand, for example, why politically free speech (“the right to communicate with your own resources to other willing listeners”) is never economically free. This is time well-spent: We cannot make good use of a market model, such as supply and demand, without understanding that market participants are exchanging rights to things, rather than things in themselves. From their discussion of choice, cost, and trade, Alchian and Allen carefully build up the laws of demand. Chapter 6, titled “The Extent of Exchange,” is one of the book’s most valuable. Using a simple trade model, they demonstrate one of the most important yet least understood principles in basic economics: supply and demand are the same thing. Depending on the terms of trade (i.e., prices), the same household or firm can be a net demander or a net supplier of a commodity. We trade with each other until prices adjust such that everybody values the next additional unit of the commodity the same, in terms of foregone resources. “Equilibrium” is not merely an x-marks-the-spot point on a graph; it is the careful explication of the logic of exchange, driven by the purposes and values of the exchangers. Universal Economics truly shines in its second part, which focuses on production and firms. Alchian and Allen distinguish between price takers and price searchers. They do not classify markets with price-taking firms as “perfectly competitive,” nor do they classify markets with price-searching firms as “imperfectly” or “monopolistically competitive.” Competition is not a function of how firms respond to market demand. It is something firms do, not something handed down on high in the form of an unalterable market structure. The authors emphasize several important points that other books miss: Marginal costs increase with the rate of production, not the volume; profit maximization results from the filters and selection processes in markets, not the intentions or knowledge of managers; extraordinary profits cannot persist indefinitely, even without the entrance of new competitors, because markets will capitalize those profits into the value of the enterprise, raising average total cost. Furthermore, Alchian and Allen distinguish between profits earned in open competition versus profits secured through political lobbying and regulation. Rent-seeking can confer to firms a de facto property right to the market itself—something not included in the common-law commercial precedents they highlight early in the book. My favorite chapters in this section focus on the theory of the firm and inter-firm dependencies. Why do firms exist in the first place? Why aren’t all producers independent contractors who spot-transact with consumers, with relative prices coordinating the whole process? Alchian and Allen defend the teamwork theory of the firm: Many production processes use team production, meaning the whole is greater than the sum of the parts. The parts (e.g., an individual employee’s contribution) are difficult to value, and hence difficult to compensate. This creates some bad incentives for team members. They would rather slack off and let other team members do the heavy lifting. But if every team member thinks this way, nothing gets produced, and nobody gets compensated. The firm, and in particular the manager, is a governance mechanism. The firm hierarchically polices production, ensuring team members contribute the right amount of effort to the group project. Dependencies exist whenever two parties to a transaction—for example, one firm selling another firm an input into the latter’s production process—become sensitive to each other’s strategies. Repeat dealings and reputational capital can make continued business more attractive than switching to the market’s next best trading partner. This creates incentives for each party to cheat. Each firm might renege on previous agreements to extract some of the extra benefits both firms enjoy due to their specialized dealings. Many fascinating contractual practices arise to solve dependency problems between firms, or between firms and customers. Airlines can merge to avoid the problem of overcharging on split or shared routes; non-compete clauses give firms an incentive to invest in their employees, because employees cannot take their firm-financed human capital to a competing enterprise; publishers of newspapers print a price on the front page to make it costly for sellers and distributors of newspapers to reduce circulation by charging too much. Other textbooks, if they discuss these practices at all, declare them “anti-competitive” or use them as examples of “market failure.” Nonsense! Alchian and Allen take great care to show the reader this is what “cooperative competition” in the market looks like. Alchian and Allen conclude their discussion of firm production by covering corporations and the stock market. They praise the corporation as “one of the great inventions during at least the past five centuries. It’s the dominant method of organizing and financing durable teams of people and resources for increased production of marketable goods—real income and wealth.” Notably, they explain the differences between firm liability structures (unlimited-liability partnerships vs. limited-liability corporations). As for the stock market, it “provides quick, low-cost salability of shares” for resale, as opposed to origination. The subsection on residual claimancy is particularly important. Any study of contemporary market economies will be incomplete unless it addresses the information-generating and incentive-aligning features of a property right to revenues in excess of costs, as the authors do. Universal Economics does a very good job of integrating topics that are normally reserved for introductory business courses (balance sheets, earnings statements, etc.) and showing their relevance for coordinating the economic system. The chapter on the market for corporate control is especially helpful. Alchian and Allen explain an apparent puzzle of corporate governance: the separation of ownership and control. If property rights and incentives are so important, why would anyone sever these functions? The key is specialization. Especially for large, complex enterprises, those with a comparative advantage at running the firm are rarely the same as those with a comparative advantage in owning the firm (bearing risk). Upper management polices lower management, the chief corporate officers police upper management, and the board of directors police the chief corporate officers. The board themselves, as representatives of the shareholders, are accountable to the market—and if they fail in their oversight duties, “takeovers, tender offers, and leveraged buyouts are means of almost complete displacement” that can restore lost profitability. Part three of Universal Economics is a crash course on wealth, interest rates, and financial markets. Students often need basic instruction in personal finance (how to budget; how compound interest works, etc.) and chapters 30-37 more than satisfy. Students will learn about optimal resource allocation over time, the determinants of capital prices, risk and insurance, competition and equalization of rates of return, and options trading. It is useful material, although probably this portion of the book is the least distinct from other books on similar topics. “A well-trained price theorist, even if he cannot say everything about something, can say something about everything.” UCLA price theory shines in the final part of the book. Alchian and Allen tackle topics usually reserved to macroeconomics courses: unemployment and inflation. They refuse to sunder economics by declaring certain topics off-limits. A well-trained price theorist, even if he cannot say everything about something, can say something about everything. For example, their discussion of unemployment—workers who want a job but don’t currently have one—incorporates information and search costs. The best job is rarely the first one to come along. Importantly, temporarily specializing in job search “can be productive, and in an important sense you are employed in wealth-maximizing activity, but the statisticians will count you as unemployed.” They extend this analysis to capital equipment not currently in use (idle resources). The analysis is a notable rebuke to narratives that rely on excessive aggregation, and hence are price-atheoretic, which unfortunately prevail among economists too busy making policy recommendations to think carefully about labor markets. Universal Economics concludes with a chapter on money, prices, and inflation. It is a treat. Alchian and Allen remind the reader of the information-generating role of the price system. In a market economy, prices reflect opportunity costs. Price changes signal that the highest-valued use of resources has changed. To maximize wealth, the economic system must adapt accordingly—and thanks to property rights, prices, and profits, it does. Yet this process depends on accurate perception of relative price changes, as dictated by alterations in the basic conditions (resource availability, technology, political and legal institutions, etc.) that underpin supply and demand. Since market prices are denominated in money, a well-functioning price system presupposes a well-functioning monetary system. What happens when, instead of monetary order, we have monetary disorder? As Alchian and Allen note, “When the standard of value—money—does not mean the same thing over time, we say there is noise or static in the pricing of goods and services. This static means the signals that are coming to decision makers from observed price changes cannot be relied upon to indicate that the use of productive resources is shifting.” Policy-induced inflation or deflation, especially when unanticipated, throws a wrench in the economy’s gears. There is a signal-extraction problem when money’s purchasing power fluctuates: consumers and producers cannot be certain which price changes are due to nominal and which due to real factors. (Of course, any observed price change could be some combination of both.) Hence, “The amount of wealth there is available to consume by an economy will be affected by an inflationary process because of the effects on relative prices. Less well recognized, the distribution of income in the economy also will be altered.” The predictable result is allocation errors and the transfer of wealth between creditors and debtors. Market participants will take steps to minimize the costs of these problems. But those resources could be put to other productive uses if the monetary system were stable. There is one final point I want to make about Universal Economics that underscores its value. Alchian and Allen never set up a “perfect” market as a standard against which real-world markets are judged and found wanting. They often employ thought experiments involving frictionless markets to ascertain why particular institutions or practices exist. But nowhere do you find the facile, efficiency-engineering approach that, even at introductory levels, permeates economics curricula. Economists are most definitely not plumbers according to Alchian and Allen. To cite just one example from early in the book, after the authors introduce market-clearing prices, they immediately discuss why such prices frequently do not prevail. Bids and asks often diverge because of transaction costs: impediments to exchange that render the hypothetical equimarginal allocation (everyone values the next additional unit of the traded resource the same) too expensive to achieve. But rather than regard this as an imperfection or failure, they immediately proceed to discuss the important role of middlemen. These specialist intermediaries have a comparative advantage at linking up buyers and sellers. Supermarkets, banks, stockbrokers—all exist and perform a useful function because of transaction costs. Middlemen earn profits because they solve a real economic problem. Markets work because of, not in spite of, their frictions. Alchian was famous for insisting upon studying “economic forces at work,” so it is not surprising (but most welcome nonetheless!) to watch him subordinate the blackboard to the real world. For more on these topics, see David Henderson on the Essential UCLA School of Economics. EconTalk. “Economics Works,” by David Henderson. Library of Economics and Liberty, May 6, 2019. Property Rights, by Armen Alchian. Concise Encyclopedia of Economics. “Why Did Armen Alchian Have to Teach Economists About Property Rights?” by Peter Boettke. Library of Economics and Liberty, Feb. 3, 2020. Universal Economics deserves to be read carefully by all students and practitioners of social science. Even those with advanced economics degrees—perhaps I should say “especially,” given the unfortunate state of graduate education—can benefit from selective rereading throughout their careers. I believe this book should be standard reading material in introductory economics courses. Depending on the program, it could also be used at the intermediate microeconomics level, as well as in master’s programs in public policy or philosophy, politics, and economics (PPE). Doctoral study in economics necessarily involves greater use of mathematics and statistics than in Universal Economics, but these tools must be used to deepen Alchian and Allen’s insights, not to avoid them. Footnotes [1] Universal Economics, by Armen Alchian and William Allen. Available from the Liberty Fund Book Catalog. [2] Alexander Salter and Bryan Cutsinger, “Price Theory Needs a Revival.” City Journal, February 15, 2024. * Alexander William Salter is the Georgie G. Snyder Associate Professor of Economics in the Rawls College of Business, the Comparative Economics Research Fellow at TTU’s Free Market Institute, a Senior Fellow with AIER’s Sound Money Project, and a State Beat Fellow with Young Voices. (0 COMMENTS)

This book is about how the world’s religions have gained such power, what they do with it, and how abuses of this power can be constrained. —Paul Seabright, The Divine Economy: How Religions Compete for Wealth, Power, and People,1 p. 6 Paul Seabright’s The Divine Economy investigates how religions gain adherents and acquire wealth and power. He finds that it can be useful to treat a religion as a business, and to view it with an economist’s eye. But his approach is broader than that, incorporating sociology, political theory, and evolutionary psychology. To understand the book, one must try to keep in mind two views of religion. The narrow view is how Seabright defines religion. The broader view is what he calls the “platform perspective.” As a definition, Seabright uses: … religion is the very large and diverse set of human activities that directly or indirectly involve interaction with invisible spirits who intervene causally in the world, and who can be influenced by appeals from human subjects. p. 36 By putting “invisible spirits” at the center of the definition, Seabright includes what we commonly think of as religions. But he excludes describing something as a religion just because people care strongly about it. You may describe someone as “worshiping the Almighty dollar,” “believing in climate change,” or “Woke,” but they are not treating the dollar, the climate, or systemic racism as spirits to which prayers can be addressed and answered. But there are people who affiliate with a religion for whom belief in invisible spirits may be unimportant, or even non-existent. Their behavior is best understood from the platform perspective. Religious movements are a special kind of business—they are platforms. Platforms are organizations that facilitate relationships that could not form, or could not function effectively, in the platforms’ absence. p. 15 Seabright claims that the platform perspective helps to explain how religions appeal to humans, how they influence behavior, and how religions compete with one another. Humans are a social species, and religions have evolved to meet our needs for belonging. The activities of religion have historically included everything from private prayer and meditation through collective spectacle to violent crusades and jihad. They have channeled such diverse emotions as awe, fear, devotion, anger, excitement, and love. They cater to needs for ritual and transcendence, needs for peace and for striving to overcome a challenge, to needs for private and selfish fulfilment as well as the need to be needed by others… … Religious platforms create communities that powerfully articulate that collective dimension to our lives. Some secular institutions can do that too—political parties, for instance. But religious platforms have access to historical traditions, and stories from those traditions, that give them a powerful edge. p. 331 Seabright argues that religions create special social bonds. They may credibly claim that their members are more trustworthy and are, on average, more worthwhile friends and colleagues than random members of the population. p. 332 He would have to acknowledge that there are secular institutions that do this to some extent. If you can say that you were in the marines, or that you went to Yale, people with similar backgrounds will be inclined to trust you. Seabright offers an extended analysis of the topic of religious competition. He writes, … anything that makes it easier for people to make lucid comparisons between the benefits of belonging to different movements will intensify religious rivalry. p. 333 He offers many insights into the way that religions evolve under the pressure of competition. This is where they face challenges that are very similar to those faced by businesses. Seabright believes that the Internet is going to force further evolution. He thinks that the Catholic Church is likely to incur another schism, comparable to what took place in the wake of the invention of the printing press. Of course, we can hope that it will not be accompanied by so much violence. Seabright also believes that tensions will arise concerning the relationship between religion and politics. Everything we have seen in this book about the platform model of religious movements suggests that religion cannot command the legitimacy of most of the population if its leaders use that legitimacy to prop up political rulers, whether or not they are authoritarian. p. 339 “As platforms, religions have an impact on the economy, on politics, and on social relations in general. Friction would seem to be inevitable, and it becomes unclear how best to apply the First Amendment.” For me, this comes back to the tension between the narrow definition of religion and Seabright’s broader platform perspective. If religion were merely the belief in certain animal spirits, then at least in the United States we would be happy to rely on the First Amendment and a tolerant attitude of, “sure, whatever floats your boat.” But as platforms, religions have an impact on the economy, on politics, and on social relations in general. Friction would seem to be inevitable, and it becomes unclear how best to apply the First Amendment. For more on these topics, see Anthony Gill on Religion. EconTalk. Competition, by Wolfgang Kasper. Concise Encyclopedia of Economics. Samuel Gregg on Christianity and Liberalism. Great Antidote Podcast, AdamSmithWorks.org. Seabright is adamant that religion is not just going to fade away. He concludes, … the religious movements…have for too long been regarded with an odd mixture of reverence by some and scorn by others. These private reactions are no way to think about religion in public life. Religious movements enjoy privileges, and they should acknowledge obligations. It’s time to treat them more pragmatically, more demandingly, not with reverence but with respect. p. 341 Footnotes [1] Paul Seabright, The Divine Economy: How Religions Compete for Wealth, Power, and People. Princeton University Press, 2024. *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)

Thomas Stearns Eliot. Photo by Lady Ottoline Morrell, 1934. Although the most illustrious honors in economics, such as the Nobel Prize, are typically awarded to specialists in the field, many of the most penetrating economic insights do not come from economists. To look exclusively to economists for economic insights would be as misguided as expecting to learn everything about movies from movie critics. For one thing, most movie critics have never made a film. More importantly, learning which movies are good or bad is usually less important than determining whether or not to go to the cinema in the first place. Likewise, economics offers insights into the economic sphere of life, but opting to think exclusively in economic terms would be as absurd as spending all one’s days gazing at the big screen. There is a difference between managing scarcity and leading a full life, just as there is a difference between watching movies and actually living. Few 20th-century critics made this point with more force and effect than the poet T.S. Eliot, who received the Nobel Prize for Literature in 1948. Born Thomas Stearns Eliot in St. Louis, Missouri in 1888, Eliot was the scion of a prominent Boston family and attended Harvard University before moving to England at the age of 25 and renouncing his American citizenship 14 years later. Among his most notable poetic works are “The Love Song of J. Alfred Prufrock” (1915), “The Wasteland” (1922), and “Four Quartets” (1943).1 Eliot was also an accomplished essayist, publisher, critic, and editor. Of special interest for present purposes are two of his prose works, Christianity and Culture (1949)2 and “The Aims of Education” (produced in 1950 and 1951 and published posthumously),3 the latter based on a series of lectures that he delivered at the University of Chicago while he was teaching in the Committee on Social Thought, from which I received a degree. In this latter work, he outlines three aims of education: preparing to earn a living, be a citizen, and pursue perfection. To say that earning a living and all the economic benefits that come with it—a degree of self-determination, a measure of security amid the vicissitudes of life, and above all, the ability to make purchasing choices among various available goods and services—is just one aim of education is to make a profound anthropological declaration—namely, that Homo economicus is at best an incomplete model of the human. To be sure, we can tell a lot about people by their spending choices. Every expense can be regarded as an act of self-declaration. In 1925’s “The Hollow Men,” Eliot writes of “The hollow men, the stuffed men, leaning together, headpiece filled with straw.” Even if we had access to the receipts for every single purchase a person made over the course of a lifetime, a substantial residuum of hopes, fears, and human identity would remain. Of course, the same would apply to earnings. Suppose we possessed every person’s lifetime financial records, including every penny they ever earned. Would we be able to tell from the total amount or the increments in which their wealth was accrued what path they had followed in life? Suppose these lifetime earnings amounted to millions of dollars—would we know whether we were dealing with lawyers, bankers, or doctors? Even in the case of someone who earned very little, would we be able to tell who had served as the homemaker of a thriving household and who had lived in penury? Most people endure poverty as an unwanted state. In “The Waste Land,” Eliot writes, “I will show you fear in a handful of dust.” Yet others, such as members of some religious orders, choose poverty voluntarily. They regard it not as a curse but a kind of blessing, in the sense that not having money frees them to focus on more significant matters in life. And of course, some people acquire vast wealth through nefarious means. A wallet biopsy provides some insight into a person, but it also leaves a great deal to the imagination. We want most people to earn a living, or at least to find an arrangement in life that renders them financially self-sufficient, but it is possible to achieve economic self-sufficiency and still lead a lamentable life. Such people might have enough money to provide for all material needs, yet nonetheless feel miserable and regard life as a burden—they might hate their jobs, because they regard their work as meaningless, degrading, or even harmful to themselves and others. Likewise, their personal circumstances might render their lives unhappy. Perhaps they are alone and lonely, or they are involved in a personal relationship that yields nothing but fear, anger, or recrimination. A few of the most economically well-off people I have known have also been among the more unhappy, partly because they were tormented by envy, an acute awareness of the fact that there were others who had still more. Eliot comes to the rescue. Most of us do not aim to educate our children and grandchildren to be mere vendors and consumers. Earning a living and spending and saving money well are good things we wish for them, but we also hope that they will be good human beings who enjoy the truly good things in life, many of which cannot be bought or sold. They should, in other words, not overly esteem money, and they should know that it cannot buy an education. To be sure, well-off young people might manage to obtain admission to elite educational institutions merely by donating large sums of money and even pass courses and receive degrees through wealth-fueled academic misconduct. Yet no matter what formal credentials they managed to acquire, they would still lack the knowledge, skill, and experience such an education can provide. We do not want to be remembered by the wind, as Eliot writes in the “Choruses from the Rock,” (1934), “Here were decent godless people: their only monument the asphalt road and a thousand lost golf balls.” Ultimately, education is not primarily a commodity, but something approaching an end in itself, in that it enables us to make the sorts of choices that characterize good citizens, neighbors, and family members. Notwithstanding speeches of countless politicians urging their fellow citizens to get off the welfare rolls and advance their nation’s capacity to compete in the global marketplace, it is simply not the case that education’s sole or even primary purpose is to advance economic security and prosperity. Sober reflection makes clear that we want more from our schools, colleges, and universities, precisely because we want more out of life. Consider the matter of legacy, what we hope to bequeath to those who come after us. Writes Eliot in “The Idea of a Christian Society,” “Was our society, which had always been so assured of its superiority and rectitude, so confident in its unexamined premises, assembled round anything more permanent than a congeries of banks, insurance companies, and industries, and had it any beliefs more essential than a belief in compound interest and the maintenance of dividends?” In other words, will we turn out to have been little more than makers and spenders of money, whose meager quality of life rises and falls with the value of our investment portfolios? If so, we would do well to heed the words of one of Eliot’s fellow poets, William Wordsworth, who wrote, “The world is too much with us; late and soon, getting and spending, we lay waste our powers.” If every bad thing in life could be avoided and every good thing in life could be won simply by making sound purchasing decisions, it might make sense to confine our attention to the world of commerce. In the making and spending of money we can destroy ourselves. To be sure, a good education can help in developing the kind of character that insulates against such misfortune, but it also has purposes that far transcend the fungible. Families, friends, and the wise are not attempting to exploit one another for financial gain, but to develop and enjoy one another in ways that supersede a person’s net worth. As Eliot himself suggests, the profit motive may propel economic progress, but it must not be allowed to “hypertrophy into a social ideal.” Consider the work of Eliot’s contemporary, Edward Bernays, nephew twice-over of psychoanalyst Sigmund Freud, who saw perhaps more clearly than his uncle the implications of a human psyche dominated by the id. The self-styled “father of public relations,” Bernays pioneered a new approach to marketing that aimed to exploit human psychological limitations for the profit of his clients. Faced with poor sales among women, for example, he rebranded cigarettes “torches of freedom,” aligning perhaps the greatest single public health scourge of the 20th century with the nascent women’s liberation movement, which eventually allowed lung cancer rates among women to catch up completely to men’s. Ironically, he was never able to convince his own wife, Doris, to kick the habit, and she pre-deceased him by a decade and a half. Bernays reconceptualized decisions on the part of his fellow citizens not to purchase a product or service as “sales resistance,” a lesson that one of his most influential acolytes, Joseph Goebbels, put into practice through the Nazi propaganda machine. Where Eliot saw in literacy the hope for intellectual and cultural flourishing, Bernays saw something quite different. In a 1927 article called “The Minority Rules,” in his book, Propaganda, he wrote: Universal literacy was supposed to educate the common mortal into control of his environment. Once he could read and write he would have a mind fit to rule. So ran the democratic doctrine. But instead of a mind, universal literacy has given him a rubber stamp, a rubber stamp inked with advertising slogans, with editorials, with published scientific data, with the trivialities of the tabloids and the profundities of history, but quite innocent of original thought. Each man’s rubber stamp is the twin of millions of others, so that when these millions are exposed to the same stimuli, all receive identical imprints. It may seem a wild exaggeration to say that the American public gets most of its ideas in this wholesale fashion. But to say so is merely to state a fact that is as real as it is unrecognized. The mechanism by which it is done is propaganda—propaganda, that is, in its broad sense of an organized effort to spread a particular belief or opinion. The written word, which Eliot cherished as a medium of human enlightenment, becomes in Bernays’ hands just another means of manipulating mass behavior. Eliot responds more or less directly to this concern, writing, “What is more insidious than any censorship is the steady influence which operates silently in any mass society organized for profit, for the depression of standards of art and culture.” Where all things are valued for their profit potential, worth becomes displaced by value, the price a product or service brings in the marketplace, and the total amount of revenue generated by its sale. If consumers purchase 100 or 1,000 times as many copies of a Harry Potter novel as Tolstoy’s Anna Karenina or Dostoevsky’s The Brothers Karamazov, then the creative forces of culture turn to producing moral bildungsromans about wizards, and if the billion-dollar ticket receipts of the Marvel cinematic universe dwarf those of films such as “Before Midnight” or “The Tree of Life,” then the culture is flooded with more superhero melodrama. Eliot wants to nurture the psyche and enrich the culture, while Bernays and his ilk are content to plant more ticket-purchasing rear-ends in seats. “Eliot asserts that while education exerts great sway, culture exerts even greater influence, and to adopt a purely consumerist culture driven entirely by sales figures is to create something that resembles a mass, swept irresistibly along by the tide of the passion of the moment.” Eliot asserts that while education exerts great sway, culture exerts even greater influence, and to adopt a purely consumerist culture driven entirely by sales figures is to create something that resembles a mass, swept irresistibly along by the tide of the passion of the moment. People are seen and esteemed not so much as free individuals capable of wise choice but in terms of what Eliot calls their capacity for “regimentation and conformity,” opinions and behaviors that can be molded through what both Bernays and Eliot call “propaganda.” Without history, a canon, and largely shared senses of the unseemly and the ideal, the tendency of “unlimited industrialism” will be to turn women and men into mere bodies “detached from the tradition, alienated from religion, and susceptible to mass suggestion; in other words, a mob.” What should be an opportunity for transcending the exigencies of merely material existence—the need for food and shelter and the like—becomes a technologically amplified opportunity to entrain human beings to base passions, the final triumph of Freud’s id over intellect, character, and culture. Consider the work of Daniel Kahneman, the first psychologist to win the Nobel Prize in Economics. In his 2011 book, Thinking, Fast and Slow, he follows Freud in dividing the human mind into parts, one of which, “system one,” he characterizes as the “reptilian brain.” This aspect of the mind fits Bernays’ purposes well—it works quicky, automatically, and on impulse, often without our conscious awareness. He introduces another part, “system two,” which is both reflective and slower. Kahneman argues that we prefer to use system one, largely because it is easier. In terms of which Bernays would no doubt approve, Kahneman regards human beings as naturally lazy, inclined to get through life with as slight an expenditure of energy as possible. It is precisely this tendency toward mere efficiency that Eliot opposes—the tendency to make choices that require as little effort as possible. We should, instead, invest our best when it comes to weighing the things that matter most. Reading “The Wasteland” or “Four Quartets” may be demanding, but the achievement is commensurate with the effort. For more on these topics, see The Opportunity Costs of J. Alfred Prufrock, by Sarah Skwire. EconLog, July 1, 2020. Dana Gioia on Learning, Poetry, and Studying with Miss Bishop. EconTalk. Roosevelt Montás on Rescuing Socrates. EconTalk. “Economics and the Art of Education,” by Richard Gunderman. Library of Economics and Liberty, Dec. 5, 2022. In the end, Eliot concludes, the lower cannot redeem the higher. What is reptilian, or profitable, or expedient cannot rescue what is humane, just, and good. To be sure, it may be “quick and simple” to organize society for ends which, being only material and worldly, “must be as ephemeral as worldly success,” but there is an alternative, and that alternative is a social organization based on truth, which refuses to ignore the essential dignity of human individuals and human culture. We must, Eliot suggests, supplant the appetite to exploit with the longing to enrich, the appetite to extract with the longing to contribute and make a salutary difference in the lives of others. To do so, we need to play our part in creating a culture that sees through the twin economic towers of materialism and efficiency. In this effort, Eliot regards art and culture, and yes, even the Christian faith, as vital resources. As he writes in “The Idea of a Christian Society,” it does not matter how “well-fed, well-clothed, well-housed, and well-disciplined” a mob may be—it is still a mob. The best education is one that lifts us above the level of a mob to a flourishing culture of free and responsible individuals. Footnotes [1] You can access much of Eliot’s oeuvre via the Poetry Foundation online: https://www.poetryfoundation.org/poets/t-s-eliot [2] T.S. Eliot, Christianity and Culture: Essays. Mariner Books, 1960. [3] T.S. Eliot, To Criticize the Critic and Other Writings. University of Nebraska Press, 1992. *Richard Gunderman is Chancellor’s Professor of Radiology, Pediatrics, Medical Education, Philosophy, Liberal Arts, Philanthropy, and Medical Humanities and Health Studies at Indiana University. He is also John A Campbell Professor of Radiology and in 2019-21 serves as Bicentennial Professor. He received his AB Summa Cum Laude from Wabash College; MD and PhD (Committee on Social Thought) with honors from the University of Chicago; and MPH from Indiana University. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

I’m glad that Geoffrey Lea expressed his misgivings about Richard Ebeling’s discussion of “the Remnant.” Even though I had read Richard’s essay carefully twice, I failed to comment on that part of his essay. But Geoffrey’s comment reminds me that I do have my own misgivings. I shouldn’t blame Richard too much. I had misgivings in the 1970s, when I first read about Albert Jay Nock’s concept of the Remnant. As Nock himself admits in his famous 1936 essay, neither the “Remnant” nor the “masses” can be defined by class or station. Someone could be a bona fide member of the elite and still be a member of the masses; similarly, one could come from a humble background and be part of the Remnant. So even if one stuck to writing only for the Remnant, that would not mean that he or she should focus on a particular well-defined audience. When he gets to his actual argument, Nock is essentially saying that we should not water down or compromise our thinking to appeal to the masses. I agree with that. Even if Nock didn’t intend it, though, thinking that one is producing ideas for the Remnant could lead one not to reach out to others. It could easily lead someone to isolate himself from all but those who already agree with him, whether they be fellow scholars or what might seem to be members of the “masses.” Fortunately, many members of the Austrian school have engaged in valuable outreach to people who might be mistaken for the “masses,” without compromising or watering down. In my view, Murray Rothbard is a case in point. I do remember, though, the case of one prominent Austrian scholar who refused to reach out to a scholar who was not a member of the Austrian school. That Austrian scholar was Israel Kirzner. This might sound surprising, given my genuine praise of Kirzner in my first essay. But I distinctly remember a story he told the audience at either the South Royalton conference of 1974 or the Hartford conference of 1975. Kirzner told of his excitement when hearing that Sir John Hicks, who had earlier won the Nobel Prize in economics, was writing an explicitly Austrian book. The 1973 book was titled Capital and Time: A Neo-Austrian Theory. Kirzner told of excitedly attending a session of the American Economic Association meetings in New York in 1973 at which Hicks was to present his “neo-Austrian” ideas. Kirzner said that after listening to Hicks present for a few minutes, he concluded that Hicks did not understand Austrian economics and he, Kirzner, got up and walked out before the session was over. When I heard Kirzner say that, I thought, “What a wasted opportunity!” It’s true that Hicks was not an Austrian. But a good-willed prominent economist, Hicks, who thinks he is doing Austrian economics is probably worth talking to. And who better to try to steer him in the right direction than the clear-thinking and normally patient Israel Kirzner. This is from my second essay in the Liberty Fund series on the South Royalton Austrian Economics Conference, which was held in June 1974. The other contributions are on line also. I’ll have comments on those in a day or two. (0 COMMENTS)

To international law expert Eugene Kontorovich of George Mason University, all the arguments that make Israel out to be an occupying force collapse under the weight of a single, simple fact: A country cannot occupy territory to which it has a legal claim. Listen as Kontorovich speaks with EconTalk’s Russ Roberts about the legal issues […] The post Is Israel Occupying the West Bank? (with Eugene Kontorovich) appeared first on Econlib.

Not everyone sees the world in the same way.  This is one reason why market economies work better than centrally planned economies.  If everyone preferred black mid-sized sedans, you could have one government-owned auto manufacturer churn out millions of copies of a standardized car, and achieve significant economies of scale.  But not everyone has the same taste. None of this is particularly controversial.  But the rest of this post will be a bit more controversial.  I claim that most people underestimate the extent to which other people see the world differently from the way that they see the world. I’ve met many people who like modern art, and many people who dislike modern art.  In the later group, I often find a disbelief that anyone truly likes abstract art.  I often hear people suggest that modern art lovers are faking their interest, in order to seem hip.  What’s going on here?  Before answering this question, let’s consider another example. During the course of my life, there’s been a significant increase in political polarization.  People no longer simply disagree with people holding differing views, they increasing regard the other side as bad people.  More and more often, people will refuse to even date someone holding different political views, something that rarely occurred when I was young.  What’s going on here?  It’s not nice to suggest that those with different artistic tastes are fakers, nor is it nice to suggest that those with different political views are evil. I don’t believe that increased political polarization is due to the issues becoming more important.  Back in the 1960s and 1970s, the world faced many very important issues, such as high inflation, the nuclear arms race and the Vietnam War.  Instead, I believe the increased polarization is due to the (mistaken) impression that others are seeing what you see. 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. Differences of opinion on economic regulation or corporate taxes don’t tend to cause political polarization.  Voters understand that the issues are complex and that other people might have a different perspective.   Polarization is most likely to occur when the issues seem more personal (trans rights, abortion, affirmative action, etc.)  Polarization also increases when political styles become more diverse.  People often gravitate toward the style they prefer, and wonder how anyone could possibly be attracted to the opposing candidate.  Over the course of my life, I’ve seen increasing divergence in political styles. At the same time, religious polarization has mostly been declining over time, except where a religion adopts an overt political stance. Hypochondria is another example.  Many doctors will assume that patients are faking an illness if the doctor is unable to diagnose the problem.  A few decades ago, a colleague of mine (in his 40s) went to (highly rated) Massachusetts General Hospital in Boston complaining of chest pains.  The hospital did a few tests and sent him home, perhaps viewing him as a hypochondriac.  A few hours later he died of a massive heart attack. 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. (0 COMMENTS)

  Here are some highlights. America’s Mayors Say the Heartland Needs Immigrants By Fiona Harrigan, Reason, June 24, 2024. Excerpt: As population and economic downturns hit many parts of the American heartland, some policy analysts and elected officials have begun to throw their support behind place-based visas that would bring high-skilled immigrants to those areas facing decline or stagnation. The idea got another nod this weekend. The U.S. Conference of Mayors—a nonpartisan organization of mayors and other elected officials who represent cities with populations of 30,000 or more—called on federal lawmakers to establish a “heartland visa” that would bring high-skilled immigrants and immigrant entrepreneurs to communities facing population and economic decline. Why Does (It At Least Appear That) Justice Barrett Applies “New,” “Heightened,” and “Elevated” Standing Rules? by Josh Blackman, Reason, June 28, 2024. Excerpt: It is a tall order! The standards she erects are so byzantine, it is unlikely that anyone could ever satisfy them. And maybe that’s the point. Justice Barrett, more than anyone else on the Court, is serving as the gatekeeper. She is extremely stingy on cert grants. She turns away all emergency petitions on the shadow docket (unless they’re from the Fifth Circuit). She no longer believes in cert before judgment. And she forces lawyers to establish standing to a degree of certitude I’ve never seen before. Critics often charge that the Roberts Court is slamming shut the courthouse doors. Justice Barrett is the embodiment of that theme. And: I’ve made this point before, and I’ll make it again. Justice Barrett spent virtually no time in private practice. During her time in academia, she engaged in zero litigation. And she had a very brief stint on the appellate court. She simply lacks the experience of a lawyer who has tried to seek expedited relief in a complex case with a fast-moving timeline. When she asserts that sophisticated litigants failed to meet a burden that is not clearly established in the case law, introspection would suggest that such a burden is not really present. I get the sense that Justice Barrett grades briefs like she would grade a seminar paper–or worse, give feedback at a faculty workshop. She has exceedingly high expectations which are borne based on her subjective sense of which cases belong in federal courts and which do not. DRH note: The way I put Josh’s point when I was explaining it to someone at pickleball yesterday is, “She seems to be grading students’ papers and insisting that they get an A+.”   The Free-Market Tories Britain Needed by Ryan Bourne, AIER, June 28, 2024. Americans who only dabble with British politics, the recent TV debate between Labour leader Keir Starmer and Conservative Prime Minister Rishi Sunak might have sounded familiar. That’s because the Tory leader’s electoral pitch on economics could have easily come from a Reaganite Republican. “Vote Labour, and your family’s taxes will go up substantially,” was Sunak’s paraphrased message. “Not just that, but your fuel bills will jump as Labour ploughs on with unnecessarily rapid plans to decarbonize the economy.” Here was Sunak sounding like Grover Norquist, warning that Britain’s progressive left would increase people’s taxes and ramp up costly environmental regulations. To which a Brit would say: “the brass neck of it!” Yes, Labour will surely do more tax and spend and regulation than the Conservatives. But Sunak’s own government has been no stranger to growing the state’s footprint and raising taxes aggressively already. Indeed, under Sunak’s chancellorship turned premiership, the UK’s total tax burden has risen a whopping 3.4 percent of GDP since 2019 to its highest level since the aftermath of World War II. The Prime Minister has frozen income tax thresholds through a high inflation environment to deliver the largest stealth tax increase in British history. All this to finance a state that has already grown to over 40 percent of GDP — its biggest since the start of the Thatcher revolution — with the Tories pushing for new regulators for digital markets and football, their own net zero target, a further state takeover of early years childcare, and plans to (in time) totally ban smoking. DRH note: I pointed out to Ryan, when considering this article, that I particularly appreciate the fact that he put the tax increases as a percent of GDP; it’s an important dose of numeracy. He replied that that is more commonly done in Britain than in the U.S. I also just noticed that Ryan put it in terms of tax burden, which isn’t quite correct. Tax burden includes the deadweight loss from taxes, which, at that level of taxation, would be quite high since the DWL from a tax is proportional to the square of the tax rate. A correct statement would be that tax revenues have risen by 3.4 percent of GDP. A Day in the Life of a California Fast-Food Manager Who Makes Up to $174,000 by Heather Haddon, Wall Street Journal, June 17, 2024. Monique Pizano has spent three years as a general manager and her six-figure earnings have helped her save for a house down payment, take a honeymoon to Japan and support her mom. The 27-year-old from Ontario, Calif., feels lucky—many of her fellow University of California, Riverside, graduates haven’t been able to find jobs or are earning low hourly wages. Pizano is one of about 850 general managers for Raising Cane’s, where her pay can reach $174,000 annually including bonuses based on her location’s sales and profit. The fast-growing chicken chain views its managers as critical partners, and the company, based in Baton Rouge, La., pays them to be perfectionists. I found this article, which is, unfortunately, gated, very inspiring. Note that there is some regulation here: Gaining less attention was the requirement for chains to boost pay for managers. Big fast-food chains are required to pay salaried managers at least $83,200 to comply with California rules, up from $66,560. If not, operators need to pay their managers an hourly wage, plus overtime if they work more than 40 hours a week. But clearly, in the case of Monique Pisano, that regulation is non-binding. By the way, Heather Haddon is becoming one of my favorite WSJ reporters on labor market issues: she calls balls and strikes fairly, something that WSJ reporters don’t always do. (0 COMMENTS)