You might think this article comes a little late since it’s being published after Memorial Day. But now that Memorial Day has come and gone, it’s worth thinking about what it represents and why the debate about Memorial Day is so crucial. “Debate,” you might say. “What debate?” Yes, there is a debate. On one side are those who say that the purpose of Memorial Day is, or should be, to honor soldiers who have fought, or are fighting, for our freedom. This is the view we hear a lot on and around Memorial Day. We hear it from presidents, governors, congressmen, mayors, military officers, and military analysts. On the other side are those who say that the purpose of Memorial Day is to mourn those who lost their lives in wars and to reflect on how to prevent this from happening in the future. We hear this view from antiwar activists and those who, more generally, are fairly skeptical of governments’ motives and actions. I would love not to have such a debate. And that’s why I waited. There are a lot of people in the United States whose relatives or friends died or were wounded in foreign wars. It must be hard for them to hear or read armchair analysts like me talking about the “real meaning” of Memorial Day. But the debate is important because, unfortunately, one of the main ways most Americans get their history is from what is said on national holidays, especially July 4, Memorial Day, Presidents’ Day, and Veterans’ Day. There is so much emotion around those days that various advocates can get away with historical misinformation cloaked in sentiment. I think that’s why they fight so hard for their meaning of Memorial Day: it’s a way to accomplish with sentiment what is much harder to accomplish with rational argument. Exhibit A of the tendency to cloak argument in sentiment is a recent essay for National Review Online, “Mystic Chords of Memory,” by contributing editor Mackubin Thomas Owens. “Mac” Owens, as he is known to friends and colleagues, is an associate dean of academics and professor of national security affairs at the Naval War College in Newport, Rhode Island. Before I get to my criticism, I want to note that I spent a weekend at a conference with him about two years ago, and I like and respect him. He’s a serious academic with an important viewpoint that he articulates well. It’s exactly that fact, though, that makes his article disturbing. This is from David R. Henderson, “The Fight for Memorial Day,” antiwar.com, May 27, 2008. On my Substack, I posted the whole of my 2006 piece on Memorial Day. This covers some of the same ground but also digs into Mac Owens’s argument. (0 COMMENTS)

Kevin Corcoran recently did a post discussing the distinction between being wrong in theory and wrong in fact.  Here I am interested in another situation, the case where theory matches reality quite closely, but people are reluctant to accept the implications of that fact. For instance, basic economic theory suggests that higher tax rates ought to reduce hours worked. Europe has higher tax rates than America and considerably lower hours worked each year. But many people seem reluctant to accept the straightforward implications of those facts.The Economist has a very good article on this topic: Edward Prescott, an American economist, came to a provocative conclusion, arguing that the key was taxation. Until the early 1970s tax levels were similar in America and Europe, and so were hours worked. By the early 1990s Europe’s taxes had become more burdensome and, in Prescott’s view, its employees less motivated. A substantial gap persists today: American tax revenue is 28% of GDP, compared with 40% or so in Europe. Notice that Prescott relies on two types of evidence, both cross sectional and time series.  That makes his claim much more persuasive than a simple comparison of two places at a point in time.  And yet many people remain reluctant to accept the obvious implications of these facts.   The article does present one empirical study that suggests that work disincentives from high taxes might be rather modest: A recent study by Jósef Sigurdsson of Stockholm University examined how Icelandic workers responded to a one-year income-tax holiday in 1987, when the country overhauled its tax system. Although people with more flexibility—especially younger ones in part-time jobs—did indeed put in more hours, the overall increase in work was modest relative to that implied by Prescott’s model. Again, this result is not at all surprising.  Because of the “collective-action problem” aspect of work structure, one would expect the short run elasticity of labor supply to be much lower than the long run elasticity.  Decisions on work schedule are generally made at the company level, and to some extent even at the societal level (as with things like school schedules, which must be coordinated with work schedules.) Notice that the elasticity was higher for part-time younger workers, who face less of a coordination problem. How can we explain the reluctance to accept the obvious implications of a theory?  A few more examples will help to illuminate the sources of bias: 1. Theory suggests that higher levels of CO2 should raise global temperatures due to the “greenhouse effect”. 2. Theory suggests that injecting lots of money into the economy should cause price inflation (i.e., reduce the purchasing power of a single dollar bill.) It would be quite surprising if more CO2 did not cause global warming, or if large money injections did not cause inflation.  And yet, I often meet people who disagree with these claims.  They might argue that global warming is an unproven theory, or that inflation is caused by corporate greed.  Why reject evidence that almost perfectly matches standard theory?  What’s going on here? I notice that people who believe in the corporate greed theory of inflation also tend to have left wing policy views, whereas people who are skeptical of global warming tend to have right wing policy views.  Perhaps this provides a clue as to why so many people are skeptical of the claim that high taxes discourage work effect. Suppose you are someone who favored a large welfare state, for a wide variety of reasons.  In that case, you might be resistant to accepting empirical data that suggests negative effects from high taxes.  From a purely logical perspective, this doesn’t make much sense.  It is certainly possible that a welfare state is beneficial despite leading to a reduction in per capita GDP.  Perhaps the extra leisure is worth the hit to national income. Unfortunately, when people have strongly held policy views, they became more like lawyers and less like scientists.  They seek out any evidence that seems to strengthen the case for their policy preferences and discount evidence that weakens the case for their policy preferences. Political bias is not the only factor that leads people to reject the implications of economic theory.  It is also the case that many economic theories are counterintuitive.  For instance, most elasticities tend to be higher than what one would expect if one relied on introspection, i.e., on “common sense”.  Thus even people with so-called “addictions” such as smoking or illegal drug use are often surprisingly responsive to price signals.  Many people probably have trouble visualizing how higher taxes would lead them to work fewer hours.  They might think, “With higher taxes, I’d need to work longer hours to pay my bills.”  Their mistake is in not recognizing that tax revenues don’t disappear, they are recycled back in the form of benefits to those who consume more leisure.  This is what economists mean by an “income-adjusted elasticity of labor supply”. To summarize: 1. When theory suggests that X is true. 2. And when empirical evidence tends to confirm theory. Be very careful before rejecting the claim that X is true.   PS.  Suppose you went back in time and showed David Hume the following graph for the M2 money supply: If Hume were asked what he thought happened to inflation during the early 2020s, how would he have responded?  Then suppose you told Hume that many people now blame “corporate greed” for the high inflation of the early 2020s.  How would that information impact Hume’s view of progress in the field of economics in the 270 years after he developed the Quantity Theory of Money? (1 COMMENTS)

I happened to wake up in the middle of the night last week and turned on Turner Movie Classics (TCM). Playing at the time was the 1954 movie Brigadoon. I’d heard about it but never seen it. It’s about 2 guys on a hunting trip to Scotland who discover a place in mid-18th century Scotland in which people live as if it’s the mid-18th century. But it exists in the mid 20th century. One of the characters, played by Gene Kelly, falls in love with one of the residents of the town, Brigadoon. She’s a gorgeous woman played by Cyd Charisse. I know it’s fantasy in the obvious sense. But there’s another sense in which it’s fantasy, a sense known to anyone who knows much about the last 3 centuries of economic history. I caught only the last 20 minutes but in that time, we see Cyd Charisse dressed in a beautiful dress and looking beautiful as if she’s out of a 1950 issue of Vogue. See the problem? If the village really were mid-18th century, she wouldn’t look like that. She wouldn’t have beautiful clothing and she would probably have rotten teeth, just to name two. I once wanted to write something for a think tank in which I gave prominence to the “hockey stick,” the graph that shows GDP per capita in the modern world from 1000 A.D. to today. The person at the think tank told me that the vast majority of their readers know about the hockey stick. My guess is that there’s at least a sizable minority that doesn’t. Go ahead and have your fantasy about Brigadoon, but realize that if you were the character played by Gene Kelly, the actual Brigadoon would not be attractive and you almost certainly wouldn’t be attracted to the woman he fell in love with. Here’s Don Boudreaux laying it out in more detail in a 5-minute video. The pic above is of Cyd Charisse. (0 COMMENTS)

Here’s a hot shopping tip that I suspect most readers won’t be able to take advantage of – at the moment, Apple is discounting the iPhone in China. But I don’t bring that up because I’m actually hoping to influence anyone’s shopping behavior. I find it noteworthy for other reasons.  It may seem odd that I’d find it noteworthy that a company was offering a discount on one of their products. Isn’t that something companies do all the time? Not in Apple’s case. They rarely – almost never, in fact – sell their devices at a discount. Take, for example, the “Black Friday” shopping experience in the United States, which is usually what kicks off the holiday shopping season leading up to Christmas. Many cell phone companies offer huge discounts during this event. In fact, in recent years these holiday discounted prices have been appearing well before Black Friday and lasting well past the Thanksgiving weekend. Google and Samsung will often offer their phones at significantly marked down prices, as well as offering bundle deals and enhanced trade-in values for older phones. Last year, for example, Google knocked $200 of the price of their high-end flagship phone, the Pixel 8 Pro, even though it had only been released the month prior, and took $400 off the price of their folding phone/tablet hybrid, the Pixel Fold. Meanwhile, Apple only had promos for the actual Thanksgiving weekend, and rather than discounting their products, items were sold at full price, but certain purchases would come with an Apple gift card that could be used to buy more Apple products. So, buying a new Apple TV 4K would also get you a $50 gift card to Apple.  So why is Apple now offering their top-end iPhones at discounts equal to hundreds of dollars in China, when they don’t offer anything like that kind of a discount in the United States during the quintessential holiday discount shopping event?  It’s because in China, Apple is facing steep and increasing competition from companies like Huawei – competition it doesn’t have to face in the United States market, because the United States government has banned those companies from competing in the US market on transparently thin “national security” grounds. (Although not as thin as the case pointed out by Jon Murphy, where protectionists invoked “national security” as a reason to ban not Chinese electronics, but Chinese garlic.) As a result, Chinese consumers are able to get iPhones at better prices than American consumers, because the Chinese government allows more competition in the cell phone market than the American government allows. And it seems like this move on Apple’s part has been successful, as Chinese consumers have responded positively to the price cuts. It’s just a shame American consumers don’t get the same benefits from this competition. I’ve written before about how the Department of Justice’s assertion that companies like HTC and Microsoft failed to compete with Apple in the United States because of “barriers to entry” is absurd on the face of it. To recap, my claim there was that it’s absurd to say that Microsoft, which had been selling smartphones for years and had an established user base of millions upon millions of customers well before the iPhone existed failed to compete with the iPhone because Microsoft faced “barriers to entry.” But this does not mean no barriers to entry exist in the cell phone market in any sense. However, the most important barriers that exist right now are in place because of government regulations. Before the government tries to remove the speck from the market, it should first turn its attention to the plank created by its own policies.  (0 COMMENTS)

Consequences of the War on Drugs™ Abroad In 1996, Senate Caucus on International Narcotics Control Chuck Grassley testified that a recent poll revealed that eighty percent of Americans viewed as their primary foreign policy concern the stopping of illegal drugs being trafficked into the United States. The Senator was responding to his own concerns that by elevating the importance of treatment, the Clinton Administration was not committed to the long-standing policy of aggressive interdiction as a guarantor of national security. The United States was at the time, and remains the world’s largest market for illegal drugs, with much of the supply coming from foreign nations such as Mexico, Afghanistan, Columbia, Peru, and China. As such, efforts at decreasing the supply of illicit substances have not been limited to domestic interdiction but have extended to attempts to disrupt production in other nations. While such foreign policy often enjoys broad support domestically, it has had a profound negative impact on the nations involved at the other end. Indeed, as Foldvary (2013) observes, U.S. drug policy tends to exert a destabilizing effect that creates violent cartels, emboldens extant rebellious factions, foments drug-lord imperialism, and brings into being underground shadow states. The tools often employed in these failed efforts should look familiar to even the most casual observer of contemporary American foreign policy, including foreign aid, military and police assistance and training, intelligence and counterinsurgency operations, development schemes, and nation-building efforts (Pembleton & Weimer, 2019). Too often, the goals of the nations receiving this assistance are not completely aligned with domestic drug policy, fomenting even more instability.  Plan Colombia provides an excellent snapshot of such destabilizing policy quagmires. This joint operation between Colombia and the United States had its roots in the struggle between the government and the Revolutionary Armed Forces of Colombia – People’s Army (FARC), an armed guerilla group that was one of the major factions in an internecine conflict going back to 1964. In 1998, President Andrés Pastrana, hoping to gain their trust and aid in fostering peace, granted FARC a parcel of land roughly the size of Switzerland as a demilitarized zone in which military and law enforcement personnel would not enter (Rosen, 2021). FARC rewarded Pastrana’s good faith gesture by relocating their criminal operations – including kidnapping, extortion, illegal mining, and the production and trafficking of drugs to their newly granted autonomous region.  Pastrana turned to the U.S. for help to end its internal conflict and the power that organized crime exerted over Colombia’s citizens. Unwilling to involve America in Colombia’s armed internal conflict, the Clinton Administration reoriented Pastrana’s Plan Colombia initiative to align with its own interests in ending the ability of Colombian guerillas and cartels to traffic drugs into the U.S. While Pastrana recognized the role of drug production in his nation’s instability, his initial concern was with containing FARC, which included manual destruction of their crops. In exchange for American financial aid, he eventually agreed to divert eighty percent of aid resources to strengthen police and military operations, which would subsequently play a critical role in protecting the aerial spraying of herbicides on coca crops. There are conflicting views on whether these measures were effective at reducing supply. American officials claimed Colombian coca production decreased by seventy-five percent between 2001 and 2011, while United Nations observers reported an insignificantly negligible drop.  What isn’t in question is that Colombia had to work around American interests because it needed the help, and in 2007, then Colombian President Uribe guaranteed the Bush Administration’s continued cooperation by rebranding armed factions as narco-terrorists, aligning with American desires to combat both global drug supply chains and terrorism. While Uribe had some success in disrupting larger guerilla and criminal organizations, they were replaced with smaller ones that were more difficult to identify. Moreover, drug trafficking continued unabated, and increased counternarcotics units had somewhat of a balloon effect, pushing out a portion of production to neighboring states such as Peru and Panama, while increasing the importance of Mexico as a distribution and trafficking hub, exacerbating that nation’s own destabilizing issues related to American drug policy. In a previous post, I noted that because the majority of drug production occurs outside of American borders, much of the violence seen occurs elsewhere, offshoring and hiding this very real human cost. Aligning with American interests did not work for Colombia in the 1980s, when attempts at capturing and extraditing popular drug lords were met with nationalist opposition which subsequently emboldened powerful traffickers to murder inconvenient government officials (Bagley, 1988). It is still not working today, with coca production having reached a historical peak in 2020, and the largest producers and traffickers being paramilitary groups who were trained and funded by the United States as part of the military operations against drugs. This violence and destabilization of society, and the expanding power of cartels and organized crime, is repeated throughout Central America, Mexico, Afghanistan, and other nations where the US exerts its hegemonic influence to prosecute its War on Drugs™.   Conclusion I entitled this series A Brief Look at the Social Costs of Drug Prohibition, and despite it being somewhat lengthy, in comparison to the length of the continued conversations necessary regarding this matter, it is brief. This self-justifying set of policies, which aim at disrupting supply, simply cannot succeed so long as demand exists. Absent commitment to harm reduction avenues, demand has been, and will remain, stubbornly inelastic. Meanwhile, our prison system continues to expand, a center of perverse incentives revolving around cheap labor and political clout. To fill those prisons, police have become ever more like a military occupying force, too often focusing their efforts on already disadvantaged subgroups, helping to create the cycles of poverty, criminality, and recidivism they are ostensibly meant to help end. This criminalization of a public and mental health issue has resulted in more preventable deaths, as treatment is stigmatized and often not an option, while drug potency is increased in order to maintain profit margins. Not only is violence present in our own communities, but it pales in comparison to the violence and instability that domestic drug policy causes in nations where illicit entrepreneurs arise to meet our demand. Yet, with all of these costs imposed on society, supply and demand remain constant and unabated.   Tarnell Brown is an Atlanta based economist and public policy analyst. (0 COMMENTS)

The Covid vaccine saved many lives but so many mistakes were made in how public health officials discussed it, implemented it, and assessed its effectiveness. Epidemiologist Vinay Prasad of the University of California, San Francisco talks with EconTalk’s Russ Roberts about what went wrong, the costs of the mistakes that were made, and what we […] The post The Good, the Bad, and the Ugly of the Covid Vaccine (with Vinay Prasad) appeared first on Econlib.

It has been discouraging to see that the lessons learned in the first half of the 20th century have now been forgotten, as nationalism is on the rise in many regions. And now we are seeing a repeat of the McCarthyism of the early 1950s. Here’s Foreign Policy: Not so long ago, consultancies and other information brokers could work easily with different clients in different countries. Just as they talked to competing firms, they advised competing governments. In 2015, when senior McKinsey partner Lola Woetzel hoped the think tank’s book “provides useful input for the planning and development of China’s technology enterprises and government institutions,” she likely didn’t think she was making a controversial statement.But what may have seemed banal then may now be depicted as smoking gun evidence that companies are helping the enemy. Senators Marco Rubio and Josh Hawley have suggested that McKinsey has been aiding America’s enemies and should be barred from receiving federal contracts.  This is from Marco Rubio’s website: While the report was written in the staid language of management consulting, ultimately it was an attempt to help the Chinese Communist Party (CCP) dominate the United States and other countries in cutting-edge fields, including cloud computing, the internet of things, big data, mobile internet, robotics, 3D printing, advanced materials, self-driving vehicles, artificial intelligence, nonconventional oil and gas, electric vehicles, energy storage, renewable energy, and human genomic technology. The implications go beyond economic competition. The report notes that technologies such as these “will have a great impact on future wars and the development of the national defense industry.” The logic of globalization is that international trade and investment is a win-win process—both sides benefit.  But when globalization is replaced with nationalism, economics becomes a zero sum game.  Any improvement in the Chinese economy is seen as a negative for the US, as our relative position declines in international power rankings.  Thus any company trading with “the enemy” is in danger of being viewed as treasonous. Ironically, Foreign Policy reports that the most inflammatory accusations against McKinsey relate to language suggesting that China would benefit by moving in a more communist direction: The Financial Times reported that their China branch had boasted in 2019 of its economic advice to the Chinese central government, while a McKinsey-led think tank prepared a book which advised China to “deepen cooperation between business and the military and push foreign companies out of sensitive industries.” In fact, China’s rise as a great power began when it abandoned Maoist era communism.  After 1978, China began allowing more foreign participation in its economy, and privatized many businesses.  If you are an American nationalist, you should welcome China moving back to a state directed model cut off from foreign investment. But the bigger problem with this new McCarthyism is that it inevitably leads to an increased risk of war, as states stop viewing each other as mutually benefiting from economic growth.  Back in the 2000s, Chinese growth was viewed as good news for the US economy, and American businesses rapidly expanded sales in that fast growing economy. Today, many people in America view Chinese economic growth as a threat, and anyone aiding China’s economy then becomes seen as a traitor to the US. I don’t accept the nationalist framing of international affairs.  But if the senators really believe their theory, then they might consider awarding the Congressional Medal of Honor to McKinsey executives, for encouraging China to move in a more statist direction.  Instead, they should focus their ire on people like me, who have given talks in China encouraging things like free market reforms, fiscal austerity and nominal GDP targeting.  These ideas actually would make China’s economy stronger.  If trying to improve the economy of a nation of 1.4 billion people makes one a traitor, then I’m guilty of treason. (0 COMMENTS)

  From the River to the Sea–One State by Warren Coats, Warren’s Space, May 22, 2024. Excerpt: The recent attack and counterattack were continuations of 70 years of unresolved relations between the areas [sic] Palestinian and Jewish residents. Netanyahu remains adamantly against revising the Two State Solution (Oslo Accord) future and Saudi Arabia is equally insistent on it. Ireland, Norway, and Spain will officially recognize Palestine as a state from next week and other countries are expected to follow. The so far unsurmounted challenge was not a result of the gathering of Jews in what is now Israel, but the determination to make it a democratic Jewish State. Religious states, such as Iran, are always problematic. Israel can only be a democratic Jewish state by eliminating one way or another most Palestinians. American’s founding fathers had the wisdom to prohibit that by putting the separation of church and state in our constitution. If Israel gave up being a Jewish state it could remain democratic and absorb the entire area from the River to the Sea. And every resident would receive the same protection of the law and equal rights. It should consider a federal structure in which smaller districts with local administrations might well be predominately Muslim or Jewish.  https://wcoats.blog/2024/01/19/one-state-solution-for-palestine-israel/   America’s Third Founding: May 24, 1924, the Immigration Act of 1924 By David J. Bier, Cato at Liberty, May 24, 2024. Excerpt: The third founding occurred on May 24, 1924, when President Calvin Coolidge signed the National Origins Quota Act, which imposed the first permanent cap on legal immigration. Prior to the 1924 Act, all would‐​be immigrants were presumed eligible to immigrate unless the government had evidence showing that they were ineligible. The 1924 law replaced this system with the guilty‐​until‐​proven‐​innocent, Soviet‐​style quota system that we have today. No law has so radically altered the demographics, economy, politics, and liberty of the United States and the world. It has massively reduced American population growth from immigrants and their descendants by hundreds of millions, diminishing economic growth and limiting the power and influence of this country. Post‐​1924 Americans are not free to associate, contract, and trade with people born around the world as they were before. The legal restrictions have erected a massive and nearly impenetrable bureaucracy between Americans and their relatives, spouses, children, employees, friends, business associates, customers, employers, faith leaders, artists, and other peaceful people who could contribute to our lives. It has made the world a much poorer and less free place for Americans and people globally, necessitating the construction of a massive law enforcement apparatus to enforce these restrictions. My additional thought: We often hear that if we get many more immigrants, they will vote away our system. Indeed, that had been my only major fear– before I looked at the evidence. But notice the evidence right here. The U.S. cut off most immigration in 1924. It did open it again somewhat in 1965. And when did we get our biggest expansion of the federal government? During those 40 or so years.   Putin Signs Decree Allowing Seizure of US Assets If Russian Funds Are Taken by Dave DeCamp, antiwar.com, May 23, 2024. Excerpt: Russian President Vladimir Putin signed a decree on Thursday that will allow the seizure of any US assets in Russia to compensate for any Russian assets that are taken by the US. The decree could be applied to any American individuals or companies that have assets in Russia, and it came after President Biden signed a bill into law that gave him the power to confiscate Russian assets and use them to pay for aid to Ukraine. After Russia invaded Ukraine, the US and its allies froze about $300 billion in Russian Central Bank assets. According to The Associated Press, there are about $5 billion in Russian state assets that the US could confiscate to send to Ukraine. Putin’s decree would allow the Russian central bank or any companies that lost assets in the US to apply to Russian courts “with a claim to establish the fact of unjustified deprivation of his rights to property due to a decision by a US state or judicial authority and to receive compensation for said damage.” In short, says Putin, I’ll see your collective guilt and raise you. How One Obvious Mistake Created California’s Budget Crisis by Lee Ohanian, California on Your Mind, May 21, 2024. Excerpt: California’s budget went from an assumed $98 billion surplus, in which there was so much cash in state coffers that Gov. Gavin Newsom was giving away $50,000 to randomly selected individuals to get a COVID-19 vaccine, to a projected $73 billion deficit in only about two years. Much of this could have been avoided if, in 2022, California hadn’t made obvious, enormously unrealistic revenue assumptions for future years that falsely painted far too optimistic a fiscal portrait for the state. In a nutshell, here is what happened: in fiscal year 2021‒22, state tax revenues rose around 55 percent—about $70 billion—over the previous fiscal year. This revenue windfall significantly reflected taxpayers realizing capital gains, particularly high-income taxpayers who were facing a marginal tax rate of 13.3 percent at the time. MF by David D. Friedman, daviddfriedman.substack.com, May 23, 2024. Excerpt: The attitude to his children, treating them as people who had the same intellectual status as he did, was applied more generally. He would argue with anyone. I remember one argument with the proprietor of the garage in New Hampshire where we had our car fixed, who was arguing that a big company, by spending enough on advertising, could always sell what they produced. The example he offered was a new car Ford had just brought out called the Edsel. One of my father’s projects was an experiment in economic education that involved arguing with New York City cab drivers. New York had, and still has, a taxi medallion system. It issues a fixed number of medallions, each of which entitles the owner to operate one taxicab; each cab company has to own as many medallions as it operates taxicabs. The medallions are transferable; if you own one you can sell it to someone else, after which he now has the right to legally operate a cab. The price of a medallion now is, probably then was, over a hundred thousand dollars.   I had a similar experience when I was 19. My friend Don Redekop and I were hitchhiking in the summer of 1970. We were coming back from a Sunday morning hitchhike to one of my favorite lakes, near the Manitoba/Ontario border. We were picked up by a friendly guy who was a salesman for typewriters. We had 100 miles in front of us and somehow we got talking about imports. He was arguing that Canada’s government should restrict imports of foreign typewriters. I said, naturally, that it shouldn’t. He wasn’t hostile but curious: he asked me why. So I laid out comparative advantage without using numbers. He would resist; I would explain. Resist; explain. Near the end of the 100 miles, he admitted that I was right but wanted to restrict imports to save his job. We left on friendly terms. (I don’t recall if I used the argument that if we had no restrictions on imports, there would be more, not less, demand for typewriter salesman. Given my economic understanding at the time, I probably didn’t.) (0 COMMENTS)

I once posted that I found John Rawls’ argument that it’s unjust to benefit from your natural abilities to be inferior to ideas found in J. R. R. Tolkein’s The Lord of the Rings: More than anything, this kind of attitude reminds me of what Boromir says to Frodo when attempting to take the Ring of Power for himself: It’s not yours, save by unhappy chance! It could have been mine! It should be mine! Give it to me! To Tolkien, these are the words of someone whose mind has been corrupted under the influence of a demonic evil. But to Rawls, this is merely what justice requires due to the unfairness of benefitting from your own attributes. As far as I’m concerned, Tolkien has more genuine wisdom to share with the world than Rawls. Today, I’m going to carry that theme forward, and argue that Tolkien’s fictional writings also showed greater wisdom about foreseeing what the future holds than the writings of the great science writer Isaac Asimov.  To start, Tyler Cowen recently shared a list of predictions Asimov made in 1981 about what we should expect to see in the coming decades. On that list we find the following: 1985 — World oil production will fall below world needs 1990 — North America will no longer be a reliable source for food export 1995 — The nations of the world will meet (unwillingly) in a Global Congress to tackle seriously the problems of population, food, and energy. 2000 — Under global sponsorship, the construction of solar power stations in orbit about the earth will have begun. 2005 — A mining station will be in operation on the moon. 2010 — World population will have peaked at something like 7 billion. 2015 — The dismantling of the military machines of the world will have made international war impractical. 2020– The flow of energy from solar-power space stations will have begun.  Nuclear fusion stations will be under construction. 2025 — The Global Congress will be recognized as a permanent institution.  The improvement in communications will have developed a world “lingua franca,” which will be taught in schools. 2030 — The use of microcomputers and electronic computers will have revolutionized education, produced a global village, and prepared humanity for the thorough exploration of the solar system and the plans for eventual moves toward the stars. As I’m sure you will have noticed, dear reader, most of what Asimov predicted wasn’t even close to accurate (though Cowen gives him credit for being close to the mark on two of those points). Now, I’m not writing this to dunk on Asimov because he got his predictions mostly wrong. I’m sure at the time, Asimov could have presented what would have seemed like very compelling arguments in favor of why things would have gone the way he predicted, arguments I doubt I’d have been able to compellingly counter. But as the great philosopher-poet Yogi Berra once said, prediction is hard, especially about the future. I’m not saying I could have made better predictions in his place, either. Nobody can make such grand predictions over such a long timeframe and do it well. The world is simply too complex, and unexpected developments that didn’t feature in and will thus derail your prediction will always unfold.  And this is what I think is overlooked by extremely intelligent people like Asimov. He was no dummy – in terms of pure brainpower, I doubt I’d hold a candle to him. And I suspect Asimov would also surpass Tolkien on that measure as well. If we resurrected Asimov today and had him review his predictions, I’m sure he would be able to come up with all kinds of ex-post explanations for why things didn’t unfold the way he expected. But the failure to realize in advance that this will be the case is the key failing here. As I’ve written elsewhere, the fact that you couldn’t possibly have known what outcome your actions might bring about is often itself something you could and should have known. And when making grand predictions, the fact that there will be unexpected developments you can’t possibly foresee that will affect how things unfold is also something that you could (and should) have known.  So where does Tolkien feature in all of this? Well, I think a wiser perspective was shared by Tolkien through the character of Elrond in the first book of his trilogy, The Fellowship of the Ring. When discussing how to handle the threat of Sauron and the One Ring in Rivendell, the council slowly comes to the surprising realization that the best way forward will depend not on the great feats of mighty warriors like Glorfindel or powerful wizards like Gandalf, but on the simple courage of humble Hobbits. Elrond says to Frodo (and to everyone at the council): “If I understand aright all that I have heard,” he said, “I think that this task is appointed for you, Frodo; and that if you do not find a way, no one will. This is the hour of the Shire-folk, when they arise from their quiet fields to shake the towers and counsels of the Great. Who of all the Wise could have foreseen it? Or if they are wise, why should they expect to know it, until the hour has struck? It’s that last sentence that really gets at the heart of what I’m talking about here. Elrond recognizes not only that things unfolded in ways that even the wisest could not foresee. More importantly, Elrond also says that the unforeseeability of how things would unfold is itself something that the truly wise would have already understood. And this shows the difference between raw intellect and true wisdom. In terms of sheer brainpower, I’m sure that Asimov would have outclassed Tolkien. But wisdom is about more than mere intelligence – and all too often the hubris that comes with great intelligence undermines the humility necessary for true wisdom. And just as William Buckley once said he’d rather be governed by people selected from a phone book than by the Harvard faculty, I’d rather live in a society guided by the wisdom of Tolkien than the intelligence of Asimov.  (0 COMMENTS)

Back in 2019, Minnesota’s Attorney General Keith Ellison tweeted: Haircuts for women cost more than those for men. Also health care, car repairs, etc. That’s reality for the awesome @AOC and every other woman. It’s morally wrong and it threatens the economic security of women and everyone who depends on her income. It’s the “pink tax”. What is the “Pink Tax”? Ellison’s hometown newspaper, the Star Tribune, explained recently: Women pay thousands of dollars more than men each year for necessary items, an expense known as the “pink tax.” The disparity is particularly pronounced among consumer packaged goods: More than 80% of personal care products are gendered, according to a 2023 study that found “large price differences” between men’s and women’s grocery, convenience, drugstore and mass merchandiser products from the same manufacturer. This presents something of a mystery. If, as the authors of the cited study, economists Sarah Moshary, Anna Tuchman, and Natasha Vajravelu note, “products targeted at women are more expensive than comparable products marketed toward men,” as the theory of the “pink tax” states, why do women not simply buy the “comparable” men’s products and stop paying the tax?   To solve this mystery, Moshary, Tuchman, and Vajravelu use “a national data set of grocery, convenience, drugstore, and mass merchandiser sales:” They “find that gender segmentation is ubiquitous, as more than 80% of products sold are gendered.” But crucially, they also find: …that segmentation involves product differentiation; there is little overlap in the formulations of men’s and women’s products within the same category…we demonstrate that this differentiation sustains large price differences for men’s and women’s products made by the same manufacturer. In short, the prices of men’s and women’s products differ because the products themselves differ. My wife could avoid paying the “pink tax” on haircuts by asking for a number three on top and number two on the back and sides. She does not.  Indeed:  In an apples-to-apples comparison of women’s and men’s products with similar ingredients, however, we do not find evidence of a systematic price premium for women’s goods: price differences are small, and the women’s variant is less expensive in three out of five categories. The “pink tax” is a myth.  Moshary, Tuchman, and Vajravelu conclude that: These results call into question the need for and efficacy of recently proposed and enacted pink tax legislation, which mandates price parity for substantially similar gendered products. Indeed they do. That might explain why Attorney General Ellison has been silent on the “pink tax” these last five years.  “I always tell women and nonbinary folks: Feel free to buy the cheaper products that are marketed toward men for yourself,” Kara Pérez, founder of financial education company Bravely Go, told the Star Tribune. That is sound financial advice, but Moshary, Tuchman, and Vajravelu’s research indicates that it isn’t likely to save the cost-conscious consumer an awful lot of money. If those bills really were laying on the sidewalk, women are smart enough to have picked them up by now.    John Phelan is an Economist at Center of the American Experiment. (0 COMMENTS)