EconLog
Bryan Caplan and David Henderson

The late Ludwig von Mises famously argued that when governments intervene in the economy, they often create new problems. Then, to address these problems, they impose new regulations that themselves to new problems, etc.

I thought of that when reading this Wall Street Journal article from Thursday, July 24, 2014. The title of the print version, by Russell Gold, Betsy Morris, and Bob Tita, is "U.S. Puts Brakes on Oil Trains." The dec line is "Proposed Rules Would Limit Speeds Until Tank Cars Are Upgraded, Replaced." Here's a segment from the article:

The federal government's sweeping proposals come after a string of explosive derailments involving trains filled with oil from the Bakken Shale and will change how flammable liquids are transported in North America. But they aren't as stringent as some in the rail and energy industry feared.

Crude-carrying tank cars would need to upgraded by 2017. The proposed regulations would also give the ethanol industry until 2018 to improve or replace tank cars that carry that fuel. The deadline for cars used to transport other flammable liquids that typically pose less of a hazard than oil or ethanol would extend to 2020.

Other new requirements proposed include a 40-mile-per-hour speed limit until sturdier tank cars can be built or existing railcars can be strengthened, as well as other rules that cover tank-car design, routing, brakes and testing of hazardous liquids.


Shipping oil by train is much more dangerous than shipping by pipeline. But the federal government has a number of regulations that slow or even prevent building of pipelines. One intervention--preventing the construction of pipelines--leads oil to be carried in more hazardous ways. In response, the government does not reduce the regulation that slows the building of pipelines. Instead it regulates shipping by train.

Mises strikes again.


   


I've been a non-conformist for as long as I can remember.  "All the other kids love sports" never seemed like a good reason why I should feel - or pretend to feel - the same way.  "None of the other adults are wearing shorts and flip-flops" never seemed like a good reason why I should make myself uncomfortable.  It wasn't mere elitism on my part.  "All the other Princeton economists take general equilibrium models seriously" was no more compelling to me than "All the other teens want their own car."

Non-conformism at my intensity rarely allows real-world success.  Doing well almost always has a big social element; going solo gets you nowhere.  Yet by conventional standards, I've succeeded.  I have a dream job for life and enough money that I don't think about money.  How did I pull it off?

Some of it's luck - especially the luck of being in the right place at the right time to meet the right people.  (Thank you, Tyler Cowen).  But in hindsight, I also played my cards fairly well.  If you're a non-conformist who hopes to succeed in our conformist world, my favorite strategies will probably work well for you, too.  In no particular order:

1. Don't be an absolutist non-conformist.  Conforming in small ways often gives you the opportunity to non-conform in big ways.  Being deferential to your boss, for example, opens up a world of possibilities.

2. Don't proselytize the conformists.  Most of them will leave you alone if you leave them alone.  Monitor your behavior: Are you trying to change them more often than they try to change you?  Then stop.  Saving time is much more helpful than making enemies.

3. In modern societies, most demands for conformity are based on empty threats.  But not all.  So pay close attention to societal sanctions for others' deviant behavior.  Let the impulsive non-conformists be your guinea pigs.

4. During childhood, educational institutions' threats are by far the most real.  While "This is going on your permanent record" is usually an empty threat, "Do as we say or you will suffer at the next educational level" is not.  Vivid anecdotes about billionaire dropouts aside, the modern labor market remains extremely credentialist, and there's no reason to think this will change anytime soon.

5. A non-conformist attitude toward education is dangerous because academic status is painfully linear and cumulative.  To go to college, you must finish high school; to finish high school, you have to finish all the 12th-grade requirements; to finish the 12th-grade requirements, you have to finish all the 11th-grade requirements; and so on. 

6. Fortunately, the content of modern education is neither linear nor cumulative.  You can safely forget most of what you didn't feel like learning right after the final exam

7. Although teachers and students urge you to conform across the board, good grades in hard classes are virtually the only thing with long-run consequences.  You can live with C's in P.E.  Or ugly nicknames.  Or exclusion from the cool kids' clique.

8. Educational success hardly guarantees career success.  But educational credentials open a lot of doors - including most of the doors to non-conformist-friendly careers in academia, science, and yes, bureaucracies.

9. Most bureaucrats are deeply conformist, but bureaucratic (lack of) incentives are great for non-conformists.  Think job security.

10. Social intelligence can be improved.  For non-conformists, the marginal benefit of doing so is especially big.

11. Treat your family fairly, but remember that relatives - especially older relatives - are the lords of empty threats.  Despite all their criticism, they probably love you too much to do more than nag you.

12. When faced with demands for conformity, silently ask, "What will happen to me if I refuse?"  Train yourself to ponder subtle and indirect repercussions, but learn to dismiss most such ponderings as paranoia.  Modern societies are huge, anonymous, and forgetful.

13. Most workplaces are not democracies.  This is very good news, because as a non-conformist you'll probably never be popular.  You can however make yourself invaluable to key superiors, who will in turn protect and promote you.

14. Spend the first year of any job convincing your employer he was right to hire you, and he'll spend your remaining years on the job convincing you not to leave.  This advice is almost equally useful for conformists, by the way.

15. Despite everything, the world has more greatness than you can savor in a lifetime.  And in the modern world, finding greatness is remarkably easy.  Stop complaining, stop feeling sorry for yourself, and suck the marrow out of life.

16. Hiring your non-conformist friends is a great way to make your life better... but only if they follow these rules, too!


   


Bryan Caplan asks me for a defense of utilitarianism, and specifically a reason for rejecting other strongly held moral intuitions.

Like many poorly educated people, I know little about philosophy other than that Descartes said "I think therefore I am." When people feel pain in their own bodies they instinctively think it is bad. There is no "why?" The real question is why do utilitarians think public policy should maximize aggregate utility. Before answering that question, let's consider a more basic problem. Why should I care about anyone else's pain?

Little boys famously respond to answers of "why" questions with another "but why is that," until the adult becomes exasperated. Richard Rorty said that philosophy cannot provide an ultimate justification for liberalism. He suggested that (paraphrasing Judith Shklar) all we can say is that liberals are people who believe "cruelty is the worst thing we do." Rorty did have views on where that belief comes from---he said it's the narrative arts. Think about the novels of Dickens, or Uncle Tom's Cabin, or a pro-gay film like Philadelphia. These put us in the mind of others---they make us sympathize with "the other." Milan Kundera calls Europeans "the children of the novel." The narrative arts (especially TV and film) are the principle reason why young people today are far more pro-gay rights than their parents. I'm 58, and I don't recall any gay characters on TV when I was growing up.

What Rorty called 'liberalism' I call 'utilitarianism,' a term that includes all the various forms of liberalism (classical, neo-, social democratic, etc.) But how do you get from the narrative arts and sympathy for others to utilitarianism? By adding math and logic. If you become a liberal through the narrative arts, and are also a social scientist, you think about a rigorous model for your moral intuition that pain is bad and happiness is good. And what better model than "maximize aggregate utility?"

Yes, we have lots of other moral intuitions, but they seem contingent. We once thought buying life insurance for a family member was disgusting---imagine gambling on the death of one's spouse! We thought wearing a bikini was immoral (still do in Arabia.) We thought the idea of gay marriage was preposterous. But we gave these issues a second thought, and realized "who does it really hurt if gays get married?" And "gays are people too, with their own minds and preferences, we should also care about their happiness." And who does it really hurt if a girl wears a bikini? Our hatred for pain is eternal, but our other moral intuitions are contingent on complex social factors, level of education, etc.

In a previous post I speculated that some of our bogus moral intuitions might have evolved for Darwinian reasons. I should add that they also might be cultural adaptations to one type of living environment, and inappropriate in another. Bryan Caplan correctly notes that one can make the same argument about utilitarianism:

If you aren't convinced that life is better than death, or that happiness is better than suffering, you swiftly drop out of the gene pool. And since human beings are social animals, we're evolved to value the lives and happiness of the people around us as well as our own. Should we therefore dismiss our anti-death, anti-suffering views as "illogical moral intuitions that have evolved for Darwinian reasons"?

The moral nihilist, who bites even more bullets than the utilitarian, can enthusiastically agree. Everyone else, however, has to say, "Yes, it's logically possible that we're evolved to falsely believe that life and happiness are better than death and suffering. But after calm reflection on this potential bias, I remain convinced of the merits of life and happiness." And if you use this approach for life and happiness, why not try it for murdering innocent fat guys?


His last comment is a reference to the famous trolley problem in philosophy, where most people are reluctant to push a fat man onto the tracks to stop a trolley, even if it will definitely save 5 lives further down the track. Let me take up the challenge.

I said the narrative arts put us in the minds of other people. So does standing right next to another human being. But let's say that instead I had been spending the past hour chatting with the 5 people who were chained to the track and endangered by an oncoming trolley. They've told me all about their spouses and children, their goals in life. I look to the distance and see a platform where one guy is contemplating pushing a fat man to save the 5 people I've just been speaking with. What is my moral intuition then?

PS. I'm tall and thin, and always feel guilty discussing this example. So apologies to my pleasantly plump readers. If you like, substitute an example where only by sacrificing a tall man can 5 lives be saved.

PPS. I'm not convinced that life is better than death (I view it as a plausible hypothesis), and I didn't drop out of the gene pool.

PPPS. This paper has my views on the relationship between utilitarianism and liberalism.

CATEGORIES: moral reasoning

   


In a powerful post 2.5 years ago, "Eureka! Economic Illiteracy as Mental Substitution," co-blogger Bryan Caplan takes one of Daniel Kahneman's most-powerful insights in his Thinking, Fast and Slow and applies it to the economic illiteracy that we see in students. Of course, it applies much more generally than to students.

Kahneman's point is that when asked a tough question, most people will substitute a question that they find easier to answer. The problem is that they think they answered the question asked--and they didn't. One of Bryan's examples, when he applies Kahneman's insight to economics, is the minimum wage. Here is a question that economists often ask:

Does the minimum wage help low-skill workers?

And here's the question that people often substitute:
Would I be happy if employers gave low-skilled workers a raise?

I thought of that while watching this Mary Poppins video that makes the case for a so-called "living wage," that is, a government-enforced wage of over $10 an hour. In the video, Mary Poppins quits because she's having trouble making ends meet at the current minimum wage of $7.25 an hour. If she were to get just a $3 an hour increase, she says--actually she sings--she would be happy, or happier, on that job. The children whom she's taking care of look forlorn when they realize that they will not have their beloved Mary Poppins taking care of them.

What question is this video answering? It purports to be answering the question: "Should the minimum wage be raised by $3 an hour?"

But the actual question being asked and answered is a very different one: "Would Mary Poppins be happier and stay on the job, and would the kids she's taking care of be happier, if their parents paid Mary Poppins an extra $3 an hour?"

The second question is much easier for most people to answer. If the kids' parents paid Mary Poppins an extra $3 an hour, Mary Poppins would be happier and stay on the job, and, therefore, the kids would be happier.

I often see a similar substitution in discussions of the minimum wage. In 2006, when the federal minimum wage was $5.15 an hour, I wrote an op/ed here or here in the Wall Street Journal making the case against the minimum wage. One letter writer to the Wall Street Journal, Robert A. Steinberg responded:

As a small businessman, my costs were very adversely affected when I lost an employee and had to train a new employee. Any person hired at $5.15 an hour is not apt to stay very long. The employee that earns more than the minimum wage will stay longer and be more productive.

Notice that he was answering the question: "Should I pay more than the current minimum wage of $5.15 an hour?" and his answer was yes. But Mr. Steinberg thought he was answering the question, "Should the minimum wage be raised?"

Here was my answer:
In his response to my criticism ("If Only Most Americans Understood," August 1) of the minimum wage, Robert A. Steinberg (August 16) literally made up three quotes that he claimed were from my article--and then went on to attack his fabricated quotes. He then states that when he faced with a minimum wage as a teenager, "there was no shortage of jobs at the minimum wage for myself and my friends." His statement would be relevant only if I had claimed that the minimum wage would put all youths out of work. I made no such claim.

Finally, Mr. Steinberg argues that increasing the minimum wage will help businesses by reducing turnover. He cites his own experience as an employer. But employers are free to raise wages and they have the right incentive to make the tradeoff between wages and turnover. Is Mr. Steinberg really saying that he was so careless than he never considered raising wages to reduce turnover until the federal government made him do so?

CATEGORIES: Labor Market

   


In a post titled, "Are the Rich Coldhearted?," Mark Thoma writes:

Why are so many of the rich and powerful so callous and indifferent to the struggles of those who aren't so fortunate?

He then goes on to quote from an op/ed in the New York Times:
Are the Rich Coldhearted?, by Michael Inzlicht and Sukhvinder Obhi, NY Times: ... Can people in high positions of power -- presidents, bosses, celebrities, even dominant spouses -- easily empathize with those beneath them?
Psychological research suggests the answer is no. ...
Why does power leave people seemingly coldhearted? Some, like the Princeton psychologist Susan Fiske, have suggested that powerful people don't attend well to others around them because they don't need them in order to access important resources; as powerful people, they already have plentiful access to those.

I wondered what the original op/ed said. I was surprised. It wasn't titled "Are the Rich Coldhearted?" It was titled "Powerful and Coldhearted." Here are the first three paragraphs:
I FEEL your pain.

These words are famously associated with Bill Clinton, who as a politician seemed to ooze empathy. A skeptic might wonder, though, whether he truly was personally distressed by the suffering of average Americans. Can people in high positions of power -- presidents, bosses, celebrities, even dominant spouses -- easily empathize with those beneath them?

Psychological research suggests the answer is no. Studies have repeatedly shown that participants who are in high positions of power (or who are temporarily induced to feel powerful) are less able to adopt the visual, cognitive or emotional perspective of other people, compared to participants who are powerless (or are made to feel so).

CATEGORIES: Public Choice Theory

   


I wrote my earlier post this morning when I woke up in the middle of the night. I finally got back to sleep and woke up with another thought.

Here would be a test of Scott Sumner's claim. You would apply it to people who you think have shown bad faith in the current Halbig debate. In Scott's view, that is intellectuals, by which he seems to mean virtually all intellectuals.

The test is this:

Take some policy issue in which a proponent wants a particular outcome, say, tort reform. Someone proposes a piece of legislation that does everything the proponent wants. It's a beautiful piece of legislation. This same proponent, though, thinks that the U.S. Constitution does not give the federal government any power to legislate in the area of tort reform. A Supreme Court, with at least 5 justices hostile to tort reform, overturns the federal legislation. Does the proponent congratulate or castigate the Supreme Court's ruling? I'm not asking whether the proponent congratulates or castigates the Court's reasoning: you can get to a good conclusion with bad reasoning.

P.S. I should add, in case it wasn't clear, that I argue about this with Scott Sumner because I do think of him as someone who argues in good faith. It was the fact that Scott made the claim he did that I found so disturbing. There are people in the blogosphere, who, if they made the charge Scott made, I would feel much less inclined to argue with.


   


Co-blogger Scott Sumner, on his own blog, has written a stinging critique of intellectuals. You can read it for yourself, but here's the part I want to highlight and respond to:

It's an embarrassment that the two sides of the debate [on ObamaCare] line up so predictably on a narrow technical issue. It says that intellectuals cannot be trusted to argue in good faith.

Notice that Scott does not say "some intellectuals" or even "most intellectuals." No. He makes a categorical statement.

I'm one of those intellectuals who was so predictable. When the Halbig decision on ObamaCare, the decision that Scott discusses in his post, came out, I celebrated with this post. And yet, somehow, I still think of myself as someone who can be trusted to argue in good faith.

So let's consider why I celebrated the Halbig decision. Was I happy that it could overturn a substantial part of ObamaCare, aka the Patient Protection and Affordable Care Act? Absolutely. Was I happy that two of the three judges insisted that if the legislation didn't give the IRS the power to set up regulations in states that did not have exchanges, then the IRS couldn't do so? Yes, I was. I don't see how, so far, this implies any bad faith on my part.

What would imply bad faith on my part? It would be if I wanted a court to come to a particular conclusion because I like the conclusion even if I think the court's reasoning is bad. But, as I've said, I think the court's reasoning--at least that of the majority--was good.

So where else would you look for bad faith on my part? How about other evidence? I've written almost 1900 blog posts. Maybe you could judge whether I have bad faith by seeing how I respond to criticism or by seeing whether I admit mistakes.

Or taking the issue beyond me, because, of course, Scott's critique was not of me per se but of intellectuals, there are a number ways to judge whether someone has bad faith. You watch them in debates. You see how whether they answer questions directly or evade. You see whether they ever say "good point" or "touché" in a debate. Singling out one court case and not paying attention to the other ways in which one could judge strikes me as not a good way, not when there is so much other available evidence around.


   


Red Mountain Theatre Company here in Birmingham is running Les Miserables through August 3. We saw it last night. It's the fourth time I've seen Les Mis, and it was worth every bit of what we paid for the tickets. Les Miserables is an incredible story of redemption, and the musical (while long) is paced in such a way as to make a serious emotional impact on the viewer.

An ad in the program for The Women's Fund exhorted viewers to "Help Women like Fantine [one of the main characters] in Birmingham" and noted that "The median income for a single mother with two children is $29,390."

To what degree is the median single mother of two children in Birmingham "like Fantine," at least income-wise? Fortunately, Angus Maddison gathered data and provided (very rough) estimates that help us answer that question. In 1990 dollars, per capita income in 1820 France, roughly when the show is set and roughly when Fantine [SPOILER ALERT] dies, was $1135 (it rose to $1191 in 1830 and $1312 in 1832). That's roughly $3 a day, the historical norm Deirdre McCloskey emphasizes in her series of books on The Bourgeois Era and which she discusses in a 2008 EconTalk podcast.

How does the daily bread available to the average French person of the 1820s compare to the daily bread available to a member of the median single mother-with-two-children household? Converting $29,390 into 1990 dollars with the CPI gives us $16,500. Dividing by 3 gives us $5,500. Dividing by 365 gives us $15 per day.

In the 1990 dollars used by Maddison, the average French person of 1820 enjoyed $3 per day worth of goods and services. A member of the median single-mother-with-two children household today enjoys $15 worth of goods and services, or five times as much as the average person in 1820s France. As Fantine was almost certainly pulling the average down, a five-fold difference in single mothers' standards of living in 2014 Birmingham compared to 1820 France is probably conservative.

What caused it? It certainly wasn't redistribution, though I agree with McCloskey, Friedman, Hayek, and a lot of other lions of the free market that there is a case to be made for a guaranteed minimum income and that such a guarantee would be preferable to the current crazy-quilt of anti-poverty programs that make up the welfare state. The median single mother in 2014 Birmingham is at least five times richer than Fantine because we loosed the fetters on free markets and began to esteem men like post-transformation Jean Valjean, men who run "a business of repute."

So let them eat cake, right? Hardly. As Steven Corbett and Brian Fikkert discuss in When Helping Hurts, there are aspects of poverty that aren't merely material. People experience, to paraphrase them, poverty of being, poverty of dignity, and poverty of community. These are much tougher nuts to crack.

Materially, there are very few in rich countries like the United States who face the kind of desperation Fantine faced. Socially and spiritually, though, the poor are still with us. Organizations like The Women's Fund are doing good and important work. Given the importance of just having a job to things like mental health, self-image, and the like, freeing the markets would, I expect, not just allow people to earn higher incomes. It would have the additional effect of allowing them the dignity and sense of purpose that comes with being a producer.

Where should we start? Here's Daniel Smith's article "Reforming Occupational Licensing in Alabama." I think a good first step is to remove rules making it so that single mothers have to ask the government's permission to provide for their families.

CATEGORIES: Economic History

   


Though I'm no fan of The Economist's editorials, their science coverage remains outstanding.  Check out their latest piece on overparenting.  You could say I'm biased because the piece draws so heavily on my work, but as a pedantic professor, you'd expect me to find fault with any third party's popularization.  Happily, there's no fault to find:
Bryan Caplan, an economist at George Mason University, says it does not. In "Selfish Reasons To Have More Kids", he points to evidence that genes matter far more than parenting. A Minnesota study found that identical twins grow up to be similarly clever regardless of whether they are raised in the same household or in separate ones. Studies in Texas and Colorado found that children adopted by high-IQ families were no smarter than those adopted by average families. A Dutch study found that if you are smarter than 80% of the population, you should expect your identical twin raised in another home to be smarter than 76% but your adopted sibling to be average. Other twin and adopted studies find that genes have a huge influence on academic and financial success, while parenting has only a modest effect.
The Economist, unlike many of my critics, gets the limits of my position:
The crucial caveat is that adoptive parents have to pass stringent tests. So adoption studies typically compare nice middle-class homes with other nice middle-class homes; they tell you little about the effect of growing up in a poor or dysfunctional household.
The piece even manages to swiftly connect the dots between parental irrelevantism and natalism:
The moral, for Mr Caplan, is that middle-class parents should relax a bit, cancel a violin class or two and let their kids play outside. "If your parenting style passes the laugh test, your kids will be fine," he writes. He adds that if parents fretted less about each child, they might find it less daunting to have three instead of two. And that might make them happier in the long run. No 60-year-old ever wished for fewer grandchildren.
P.S. Hope to see you at the Open Borders Meet-Up on August 3.  Email me for details.

CATEGORIES: Family Economics

   


Keynesians often say that it's "obvious" that more government spending will boost GDP. I love this reply by Nick Rowe:

The average reader of the New York Times probably thinks he knows about fiscal policy. "We know that Y=C+I+G+NX, so we can see that higher G increases Y. And monetary policy works because lower interest rates increase I, if we can cut interest rates. And Nick Rowe is just obfuscating, no doubt for political reasons, by ignoring that simple obvious mechanism."

We also know that Y=C+S+T. And we can equally well "see" that higher taxes will increase Y. And higher interest rates, if it encourages more saving, will work too.

We also know that Y=gG, where G is goats sacrificed, and g is real output per goat sacrificed. That will work too.

Those are all just accounting identities; all three are equally true, and equally useless.


I see that I am getting increasingly far behind in my responses to Bryan Caplan, so let me make a few comments on immigration:

1. I'm not at all certain that open borders would make the average American worse off. I think the policy would have been desirable 100 years ago, and will probably be desirable 100 years from now. But right now I think it fairly likely that the average American would be made worse off by completely open borders, for three reasons; crowding, rapid cultural change, and (in some cases) labor market effects.

I'd rather explain this problem using Switzerland, as it will be easier to make my point. Switzerland has 8 million people living in a small mountainous country. The built up environment is very neat and tidy, and indeed often quite beautiful. It's safe. I once accidentally left a wallet with lots of cash clearly visible on a ledge in a Geneva train station. When I came back later it was still there, with the cash. That doesn't happen in lots of other countries. With open borders Switzerland might attract tens of millions of immigrants. It would no longer be a "land of the Swiss." It would be much more crowded, much poorer, less well-educated, more crime-ridden, etc. Culturally it might become more like Kyrgyzstan, another small mountainous country. The Swiss greatly value the neat and orderly characteristics of their country. I find it quite plausible that they would feel worse off.

There are some counterarguments. Perhaps the Swiss would require all immigrants to first have a place to live. In other words, not allow immigrants to be homeless, living on the streets. Zoning rules could prevent shantytowns. Maybe they could make it work. A counterargument for the US is that it's already quite diverse--we could handle the cultural change more easily. It's much bigger. Many of the immigrants would move into places like California's Inland Empire, where they would not be an obvious presence for affluent whites and Asians on the West Side of LA, or average Americans in cities in Iowa. In conclusion, the Swiss thought experiment makes me think that open immigration might be bad for domestic residents, but I am less certain that this applies to the US.

Of course there are also some difficult economic issues. Would it lead the US to cut back sharply on the welfare state? And if so, doesn't that hurt the poor in America? What about the impact on the low-skilled labor market?

2. Then Bryan asks this question:

What's noteworthy, rather, is that for once, Scott is vocally forgiving of non-utilitarians. Instead of ridiculing opponents of open borders for their cognitive illusions, Scott suggests that utilitarianism asks too much.

My question for Scott: Why is open borders the one issue where you seem to opt for moral leniency? (Perhaps this reflects a change of heart?)


First of all, I shouldn't be "ridiculing" people for cognitive illusions. I should be criticizing them. In every single case, I have the exact same cognitive illusion; it's just that I am also aware of alternative perspectives that I believe are more valid.

Bryan is asking why open borders is the one area where I don't insist on the utilitarian position. This may well be a case where I suffer from cognitive illusion, as I discussed on the post he links to. I am generally tough on policymakers because I feel their gains for adopting the wrong policy are trivial compared to the social cost. Now I suppose one could argue that's also true in the hypothetical Swiss case, the pain of a somewhat messier Switzerland is trivial compared to the gains to desperately poor migrants. But in the policy questions I look at the disproportion is an order of magnitude greater. A policymaker might hurt millions of people in exchange for a campaign contribution, or a slightly greater chance of winning an election. That's morally unacceptable. Perhaps the aversion of average people to open borders is also morally unacceptable, but the case seems less outrageous.

And I refuse to accept deterministic political models based on self-interest that cannot account for the difference between Iraq and Denmark. I expect all politicians to behave at least as well as Danish politicians, i.e. to be at least as utilitarian.

I'd vote for open borders. Perhaps Bryan is right and I should expect more from average citizens. I'll keep an open mind on the issue. The earlier post of mine that he links to is slightly more pro-immigration than this one, and also better.


   


Earlier today, I blogged about Adam Thierer's Permissionless Innovation. Over the last few months, I've been struck by how frequently I hear public policy questions expressed in terms of granting permission: should we allow people to earn such high incomes, should we permit people to use certain kinds of drugs, should [companies] be allowed to [thing I find objectionable]?

I find it particularly interesting given that framing effects are almost certainly important here. Consider the ongoing debate over the sharing economy that Roberts & Munger discussed on EconTalk. "Should we allow people to rent out rooms in their houses to travelers" and "should we allow anyone who wants to to drive a cab" sounds a lot nicer than "should we punish people with fines and jail time for renting out rooms in their houses to travelers" and "should we punish people with fines and jail time for accepting money in exchange for rides?"

What are some examples you've come across?


   


This morning, I read Adam Thierer's Permissionless Innovation, which you can get as a $0 PDF.

From a few discussions in which I've been involved regarding Uber's attempt to enter the Birmingham market, it's clear that the idea of a free market is pretty foreign to people: they assume the government is there and should be there to protect us from a world that is out to take advantage of us.

Alas, as computing power falls and new technologies continue to emerge, regulation won't be able to keep up. That's what I've meant in conversations when I've said that the regulatory framework firms like Uber, Lyft, Airbnb, and others in the "Sharing Economy" encounter is obsolete. Paraphrasing Thierer, technology changes exponentially while regulation changes incrementally. By the time new regulations are written to accommodate Uber, Lyft, and other firms, they will almost certainly be inappropriate for the next thing that's coming down the pipe. The most recent Michael Munger/Russ Roberts podcast on "The Sharing Economy" is worth a(nother) listen.

It's fashionable in higher ed to tell people to "question their assumptions." Thierer's book is a step toward helping people question their assumptions about the need for permission from governments when they wish to innovate.

Note: an early version of this post began as a Reddit comment.

CATEGORIES: Regulation

   


When backed into a corner, most hard-line utilitarians concede that the standard counter-examples seem extremely persuasive.  They know they're supposed to think that pushing one fat man in front of a trolley to save five skinny kids is morally obligatory.  But the opposite moral intuition in their heads refuses to shut up.

Why can't even utilitarians fully embrace their own theory?  The smart utilitarian answer blames evolution.  Scott Sumner:
Other "counterexamples" take advantage of illogical moral intuitions that have evolved for Darwinian reasons, like discomfort at pushing a fat man in front of a trolley car to prevent even more deaths.
I'm the first to concede that human beings haven't evolved to be perfect truth-seekers.  But what's the epistemically sound response to the specter of evolved bias?  "Be agnostic about every belief that, regardless of its truth, helps your genes," is tempting.  But it's also absurd. 

How so?  Virtually every moral philosophy - including utilitarianism - agrees that a happy life is better than (a) death, or (b) suffering.  But evolutionary heavily favors these value judgments!

If you aren't convinced that life is better than death, or that happiness is better than suffering, you swiftly drop out of the gene pool.  And since human beings are social animals, we're evolved to value the lives and happiness of the people around us as well as our own.  Should we therefore dismiss our anti-death, anti-suffering views as "illogical moral intuitions that have evolved for Darwinian reasons"?

The moral nihilist, who bites even more bullets than the utilitarian, can enthusiastically agree.  Everyone else, however, has to say, "Yes, it's logically possible that we're evolved to falsely believe that life and happiness are better than death and suffering.  But after calm reflection on this potential bias, I remain convinced of the merits of life and happiness."  And if you use this approach for life and happiness, why not try it for murdering innocent fat guys?

None of this means that moral intuition is infallible.  Serious intuitionists question their moral intuitions all the time.  The reasonable response to evolved biases, though, is to calmly review suspect beliefs - not dismiss the obvious. 


   


Amazon selling $9.99 monthly subscriptions for "all-you-can-read" on Kindle is exciting news.

Some have argued that this will change completely our relationship with the book as an object. Indeed, many people who invest lots of their time in reading tend to develop an obsession not just for reading books but for owning, touching, treasuring them. I belong to this club. Besides spending far too much money out of my pocket on Abebooks, I still frequently visit bouquinistes here and there. Sometimes I feel like a philanthropist at an orphanage in some old Disney cartoon movie: I would like to save them all from the odds of being acquired by a cold and not-so-really-appreciative new owner. This isn't rational, nor it is an attitude I would recommend to anybody. And yet sometimes it has served me well.

For example, in one of my last "rescue missions", I found a spotless copy of the 1958 Italian translation of "Atlas Shrugged." I am very fond of this edition, not least because I find the dust cover truly beautiful. I already had one copy of the same edition, plus of course "Atlas Shrugged" in English, and a more recent (and I hope more successful: that 1958 edition didn't sell much, in Italy) translation. However, I couldn't resist the impulse to buy it, as I found the price rather convenient. I was happy to have rescued a little baby, and even more so when the bookseller told me (no way to check whether this was true) that the copy originally belong to the library of the Italian singer Franco Corelli (listen to him here singing Nessun dorma from Puccini's Turandot - and read the comments as well).

This is just to say that I do understand why laudatores temporis actii may react with a sense of scandal to this new offer by Amazon, which seems to be a rather effective move towards the de-materalization of books.

Not that Amazon got there first, this time. Scribd and Oyster have been already offering a similar service, and they do so at a lower price.

However, I think once more Amazon's initiative is interesting because what all these providers are doing is basically updating to the digital age something that has been around for quite a while: i.e., the idea of a public library. It is not true that we aren't used to the idea of "renting" rather than "buying" a book. I would argue that public libraries have been an important part of almost any "heavy reader's" life, and something people are passionate about preserving. Amazon is renewing the concept and, yes, adding a charge. But is the fact that we pay for a library's membership enough to endanger the validity of the concept of a library?

"Kindle unlimited" will shock publishers and force them to revise their business model (something they'd rather not do). And will they be able to come out with a new one?
Virginia Postrel asks:

If Amazon manages to do away with (or perhaps limit) the agency model, it will then face the problem of how to compensate authors in an all-you-can-read rental model. Given the value of variety, a book can make a bundle more valuable even without selling a single copy. Should authors be compensated by how many copies they sell? Or should they get some kind of flat fee just for joining up? And will authors themselves, rather than publishers, have any say in the matter?

CATEGORIES: Economics and Culture

   


John Blundell, RIP

David Henderson

Last night, I saw on Facebook that John Blundell died yesterday. He was only 61 years old. Less than two months ago, I had posted on his personal reminiscences of the three Austrian economics conferences in the mid-1970s, two of which I had attended. As I did then, I recommend his article for those who are interested in Austrian economics and/or the various personalities involved.

I should have noted, when I posted, my high regard for John's integrity. In his article, John told of one instance that he remembered positively. When he sent me a draft, I wrote back my recollections of that same incident. My recollections were completely negative. And my memory is crystal clear because I thought my own bad behavior and subsequent recovery were an important part of my becoming a real adult. I had not expected John to quote me, but was delighted that he did. [See footnote 7.] I hate "official histories" that airbrush the negative.

Sadly, this is how he ends his article:

In case the reader is wondering, Phase II [of the Austrian economics revival] came to an end in 1982 when IHS ran out of money. I will write elsewhere of Phases III, IV and today's V.

My condolences to his family.

CATEGORIES: Obituaries

   


There has been an explosion of commentary on regulations in Birmingham regarding Uber and its services; I streamed part of yesterday's City Council meeting at which they voted to delay a decision until next week. I wrote an open letter to the Council for Forbes.com and shared it in the r/Birmingham subreddit. A few people asked about the taxi drivers' side of the argument, namely, that they be allowed to compete on a level playing field. People have invoked "safety" as a reason why UberX in particular should face the same regulations as area taxicabs. I think these are interesting issues, but I don't think they make the case for regulation.

If people are really willing to pay a premium for the quality regulation ensures, then unregulated UberX shouldn't threaten regulated and presumably-higher-quality, lower-risk taxis. Riders who want the assurance that they are getting a quality ride will forsake Uber and go with the regulated taxis.

If people aren't willing to pay extra for high quality--if they are willing to accept a bit of additional risk for lower prices--or if Uber's ratings system isn't an effective way to maintain quality, then regulation is at best superfluous and at worst an unnecessary barrier to entry.

At The Skeptical Libertarian, Marc Scribner cautions people to be skeptical of Uber's political strategy, and with good reason. That said, regulators seeking to avoid the error of permitting something that is too dangerous are almost certainly going to make the mistake of forbidding something that is safe.


   


Beyond left and right

Scott Sumner

Is British public policy more left wing or right wing, compared to Scandinavian countries like Sweden and Denmark? The Heritage rankings suggest they are about the same, with Denmark coming in at number 10 in the world (at 76.1), Britain number 14 (at 74.9), and Sweden number 20 (at 73.1).

And yet the two models differ in many respects. Most informed observers would probably argue that the Nordics have more "socialist" economies, perhaps much more socialist. On the other hand in many respects the Nordics are much more free market than even the US. Sweden has a 100% voucherized school system. Their Social Security is party privatized. Denmark has for-profit fire fighters. Several Nordic countries have privatized industries that are publicly owned in the US (airports, air traffic control, passenger rail, water companies, mail delivery, etc.)

Consider this recent comparison of Sweden and Britain:

The Swedes are far ahead in two areas. One is their use of hospital registries, showing how well each part of their system treats different ailments. The other is a small fee every hospital charges each time you visit it: A small fee helps stop the buffet welfare state that Lee Kuan Yew identified.

For some purists on the Left, that is a denial of the great promise of institutions like the National Health Service: that they would always be free at the point of delivery. The Swedes are far more practical. Those promises were made when health care was far more basic. It is not in society's interest that hospitals be overused. By changing the benefit slightly, they can keep it more open to all.


In some respects Sweden is more left wing than Britain; for instance it has higher top marginal income tax rates, and more income redistribution. In other respects Sweden is more right wing, it has a freer market in education, and a fee for use of health services. Is there any common theme here?

I believe the common theme is utilitarianism. Policy in the Nordic countries is motivated by utilitarian considerations to a greater extent than anywhere else on Earth. The right wing in Britain feels it isn't "fair" for people to have to pay more than 50% of their earnings to the government. The left wing in Britain believes it isn't "fair" that people have to pay for health care; it's a basic "right" that should be free. Utilitarians tend to avoid concepts like "fair" and "rights", and instead focus on maximizing aggregate happiness.

Does it work? Well there are a number of studies that suggest Denmark is the happiest country in the world.

Now for a curve ball. Although I am a utilitarian, I prefer a small government model like Hong Kong or Singapore to a big government model like Sweden or Denmark. Before explaining why, it's important to note that these 4 countries are not as different as they seem. The conservative Heritage Foundation ranks Hong Kong and Singapore number one and two in the world in "economic freedom." However if you restrict your analysis to the 8 categories out of 10 that exclude size of government (i.e. exclude the tax and spending categories) then Denmark is number one in the world in economic freedom.

The two Asian city-states are also quite utilitarian in their governance, reflecting the accident of history (an idealistic dictator in Singapore, and a non-socialist British administrator for Hong Kong.) But the Nordics are the most democratic of the utilitarian governments. So if I share their values, why don't I share their preference for big government?

I believe that economics is full of "cognitive illusions." Common sense suggests that government ought to be able to fix all sorts of problems like financial turmoil and inequality, through government programs like regulation and redistribution. I don't deny that there are some possibilities for progressive governance, in a few areas. But overall I think intellectuals tend to greatly exaggerate how much good can come from big government. Economics (and especially University of Chicago economics) teaches us about all the unintended consequences of seemingly well-intentioned government programs. Even the Danes seem to have realized that truth in 8 of the 10 categories studied by Heritage. And both Denmark and Sweden have been moving in the direction of more economic freedom in recent decades.

So I am what Krugman calls a "homeless" person. I'm a utilitarian who ended up on the right, due to the fact that I think most people vastly underestimate the importance of incentive effects, and the negative side effects of regulation and redistribution. Most people with similar views get there from a different direction, from a "natural rights" approach. For instance, Greg Mankiw thinks very high taxes on the rich are unjust because people deserve the fruits of their labor.

Although my utilitarian moral system tends to align with intellectuals on the left, people like Paul Krugman and Noah Smith want nothing to do with the likes of me. They shudder with horror at the mere thought of libertarianism. Thus I'm grateful to Econlog for giving me a home.

PS. The quote was taken from a new book by John Micklethwait and Adrian Wooldridge. It's not a heavy academic book like Thomas Piketty's recent magnum opus, rather a breezy journalistic style overview of current best practices in governance. But it's well worth reading. (Of course I'd say that, they also appear to be right-wing utilitarians.)

PPS. Britain is still more utilitarian than most other countries.

PPPS. I'm still planning reply to Caplan on immigration--hopefully soon.


   


I recently re-read J.D.Salinger's 1951 classic, The Catcher in the Rye, prompting Tyler to do the same.  My top reactions:

1. Other than losing his brother Allie, Holden has no external problems.  He is a rich kid living in the most amazing city in the world.  Rather than appreciating his good fortune or trying to make the most of his bountiful opportunities, Holden seeks out fruitless conflict.  If you still doubt that happiness fundamentally reflects personality, not circumstances, CITR can teach you something.

2. Nothing on Holden's Five Factor personality googles.  I say he's high in Opennness, low in Conscientiousness, high in Extroversion, low in Agreeableness, and high in Neuroticism.

3. Although I was a teen-age misanthrope, anti-hero Holden Caulfield is more dysfunctional than I ever was.  My dream was for everyone I disliked to leave me alone.  Holden, in contrast, habitually seeks out the company of people he dislikes, then quarrels with them when they act as expected.

4. Even if Holden's enduring antipathy for "phonies" were justified, it's hard to see why the epithet applies to most of its targets.  Consider this passage:
One of the biggest reasons I left Elkton Hills was because I was surrounded by phonies. That's all. They were coming in the goddam window. For instance, they had this headmaster, Mr. Haas, that was the phoniest bastard I ever met in my life. Ten times worse than old Thurmer. On Sundays, for instance, old Haas went around shaking hands with everybody's parents when they drove up to school. He'd be charming as hell and all. Except if some boy had little old funny-looking parents. You should've seen the way he did with my roommate's parents. I mean if a boy's mother was sort of fat or corny-looking or something, and if somebody's father was one of those guys that wear those suits with very big shoulders and corny black-and-white shoes, then old Haas would just shake hands with them and give them a phony smile and then he'd go talk, for maybe a half an hour, with somebody else's parents.
Translation: Haas is cordial to everyone, but likes some people more than others.  What precisely is "phony" about that?  For Holden, the main symptom of phoniness is that someone appears to like something Holden doesn't.  But he never wonders, "Is it possible that other people sincerely like stuff I don't?"

5. If phonies are your biggest problem, your problems are none too serious.

6. You might think that only a navel-gazing New York intellectual could write CITR, but Salinger experienced far worse things than phonies.  He fought in the D-Day invasion and the Battle of the Bulge.  He entered a liberated concentration camp in April, 1945.  Yet strangely, the moral of CITR isn't that Holden's self-pity is shameful.

7. I doubt Salinger was being Straussian.  Like most of CITR's fans, he thought Holden has important things to teach us.  Yet the book's deepest and most important lesson is that Holden's thoughts are profoundly shallow and unimportant.  The Holdens of the world should stop talking and start listening, for they have little to teach and much to learn.


   


This is HUGE!

David Henderson
We reach this conclusion, frankly, with reluctance. At least until states that wish to can set up Exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly. But, high as those stakes are, the principle of legislative supremacy that guides us is higher still. Within constitutional limits, Congress is supreme in matters of policy, and the consequence of that supremacy is that our duty when interpreting a statute is to ascertain the meaning of the words of the statute duly enacted through the formal legislative process. This limited role serves democratic interests by ensuring that policy is made by elected, politically accountable representatives, not by appointed, life-tenured judges.

Thus, although our decision has major consequences, our role is quite limited: deciding whether the IRS Rule is a permissible reading of the ACA. Having concluded it is not, we reverse the district court and remand with instructions to grant summary judgment to appellants and vacate the IRS Rule.


This is from Jacqueline Halbig, et al vs. Appellants, decided today by the United States Court of Appeals by a 2-1 vote.

More on it here.

Whatever you think of ObamaCare, it's a huge triumph when a Court tells the IRS that, no, you can't just ignore the legislation when you develop your regulations.

Congratulations to Jonathan Adler and Michael Cannon.


   



   


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