March 7, 2019

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Maybe it’s capitulation, maybe it’s time for tin hats
Asian nations sign infrastructure investment deals worth $4.2bn
Treasuries and Wall Street shares on course for worst month of 2023
Also in this newsletter: Trump troubles, HS2 hullabaloo, flying taxis
Also in today’s newsletter, Amazon sued by the FTC and an exclusive interview with Twitter’s new CEO
Also in this newsletter: why Bosnia should get rid of its Serb separatist leader before joining the EU
Mehmet Şimşek claims Erdoğan has thrown ‘support and commitment’ behind recent interest rate increases
With 2bn litres in storage the industry hopes tariff resolution with China will boost trade
Manufacturers could fall behind rivals if they fail to invest to secure supplies, says resources minister
Valdis Dombrovskis claims ‘sufficient prima facie evidence’ to examine foreign electric-vehicle makers’ operations
Also in today’s newsletter, oligarch expresses ‘surprise’ at Russia’s resilience and US companies pile into convertible bonds
Shipments via third countries obscure Europe’s true reliance on Russian commodities
Metals oligarch tells FT of his ‘surprise’ at performance of economy in wake of invasion of Ukraine
Berlin and carmakers back UK call for three-year pause on requirement for batteries to be produced locally
Also in this newsletter: Nissan chief on the end of the combustion engine, Hollywood hopes, robot security guards
Background for Tonight’s Republican Debate

You don’t have to study federal budget data closely to know that the only way to reduce the huge budget deficits over the next 10 years, while avoiding tax increases, is to cut the growth rate of spending. The Congressional Budget Office estimates that federal spending in 2023 will come in at a whopping 24.2 percent of GDP, up from an average of 21.0 percent between 1993 and 2022. So a good way to judge various Republican and Democratic candidates for the presidential nomination, if they were governors, is to examine their record on state government spending.

Doing so leads to two interesting conclusions. First, there are important differences among the Republicans who were or are governors. Second, although the old saying is that there’s not a dime’s worth of difference between Republicans and Democrats, on spending there sometimes are billions of dollars of difference. In fact, all the Republican governors or former governors performed better than the Democratic governors.

These are the opening two paragraphs of David R. Henderson, “How to Judge Governors Running for President,” Institute for Policy Innovation, TaxBytes, September 27, 2023.

The ranking, measured by average annual growth in state government spending and average annual per capita growth in government spending is, from best to worst:

Mike Pence

Asa Hutchinson

Doug Burghum

Chris Christie

Ron DeSantis

Nikki Haley

Gretchen Whitmer

Gavin Newsom

The data are from my fellow Canuck Chris Edwards, “Governors Running for President,” Cato at Liberty, July 20, 2023.

One thing to note that I didn’t note because of my word constraint: the top 4 are fairly tightly clustered. DeSantis and Haley are outliers.

One positive surprise is Chris Christie. He was governor in a “blue” state and probably had to fight a legislature more than did the 3 governors above him. The biggest negative surprise, to me, at least, was Ron DeSantis. He had a legislature that should have been easy to work with on spending.

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The Agency to Act

In the original version of a now classic thought experiment, five people are about to be killed by a runaway trolley. Would you divert the trolley knowing that your choice will kill a single innocent bystander? That thought experiment is the seed for this conversation between EconTalk host Russ Roberts and fan fav Mike Munger. It gets even more interesting when Munger claims that Adam Smith had an elegant solution for this problem- a problem not articulated until the 20th century!

Part of the challenge of the trolley problem is the question of using cost-benefit analysis to make life or death decisions. As Roberts expresses the challenge of the trolley problem, it’s the difference between killing and allowing to die. Phillipa Foot, the mid 20th century philosopher who formally posed the trolley problem, it’s the doctrine of double effect- when you’re faced with a choice between two alternatives which you did not create. I’ll not ask how you would solve the trolley problem, but I will ask how you feel abut some of the permutations Roberts and Munger discuss. We hope you’ll share your responses to the prompts below in the comments; we love to hear from you.

 

 

1- Roberts suggests we’re so uncomfortable with thought experiments like the trolley problem is because they pose a moral dilemma. That is, if we operates by a strictly utilitarian calculus, the “answer” would be obvious (assuming the original trolley problem- not a baby on the tracks, etc.). Why do we feel there’s a difference between the two options in terms of moral agency?

 

2- The trolley problem is, of course, a hypothetical puzzle. Munger describes his class discussions on the movie Oppenheimer, emphasizing that the United States’ decision to drop the atomic bomb was NOT a hypothetical. After listening to the conversation, do you think the US was morally justified in using atomic weapons? Why or why not? How does your answer take into account the distinction between killing and “not allowing to die?” (And if you’ve still got some ethical muscle left, why do you think the firebombing of Tokyo was treated differently than the atomic bomb, as Roberts asks?)

 

3- Roberts and Munger discuss Adam Smith’s famous example of the Chinese earthquake, which Munger points to as Smith’s version of the trolley problem. How is the earthquake example analogous to the trolley problem? What is Smith’s “solution,” according to Munger? What’s the “second part of the story” that commentators often leave out, and why is this important to Smith’s solution? Does his solution depend  on this second part? Explain.

 

4- I pose this next question with great trepidation… And that’s because I think Russ is wrong on the point he makes about externalities (53:27). He says, in response to Munger’s reading from the Book of Smith:

If Smith were literally right in that passage–if that passage was accurate–we would not worry about externalities in economics. We would just say, ‘Well, they’re not important, because people internalize them because of the man in the breast.’ They would never pollute or litter, or do things that harmed other people, because they would be aware that they were putting themselves forward.

Why do you think that I think Russ is wrong? Would there really be no externalities if Smith’s impartial spectator always worked? Why or why not?

 

5- Roberts closes by asking Munger, “Do you think capitalism and the commercial society encourage us to put ourselves before others? Do you believe that we are coarsened by the competitive nature of capitalism and tend to frequently ask, ‘What’s in it for me’?” How does Munger respond? How would you respond? In what ways does your response differ from Munger’s, and why?

 

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We Can’t Collect Economic Information

It turns out that economists who have stressed the significance of the knowledge problem and the importance of information had it all wrong. At least, that’s the case if the socialist writer Nathan Robinson is to be believe. On Twitter (yes, I refuse to call the platform X, and you can’t make me), Robinson explains his solution:

Who knew the answer could be so simple? Unfortunately, while there is some virtue to be found in simplicity, this goes too far and ends up being woefully simplistic. 

The first mistake here is similar to the one made by Daron Acemoglu when he suggested that the knowledge problem Hayek was focused on could be solved with a sufficiently powerful supercomputer. Both treat information as a static thing that just exists out there somewhere, perhaps in people’s heads, and all you need to do is collect that existing information and properly compute or aggregate it. But economic information isn’t something with its own independently active existence, just waiting to be collected and computed in the right way. Economic information exists only as part of the process that generates it. You can’t simply collect information and then use it to decide how to carry out economic activity, because the information itself doesn’t exist until after economic activity has generated it.

This is also true of the “information” that is in people’s heads. One reason is that simply asking people for information about what they want (perhaps through polls or when casting a vote) will often result in them giving you an expressive preference, rather than an instrumental preference. The “information” you get by “asking people is often contradicted by the information you would get by observing what people actually choose – and as the old saw goes, actions speak louder than words.

A deeper problem is that the information isn’t clearly available in pre-existing form even in our own heads, not even to ourselves. As James Buchanan put it in his book The Logical Foundations of Constitutional Liberty, “Individuals do not act so as to maximize utilities, described in independently-existing functions. They confront genuine choices, and the sequence of decisions taken may be conceptualized, ex post, (after the choices), in terms of ‘as if’ functions that are maximized. But those ‘as if’ functions are, themselves, generated in the choosing process, not separately from such process.” As a consequence, Buchanan goes on to explain, “The potential participants do not know until they enter the process what their own choices will be.” 

Here’s a straightforward example of what Buchanan is describing in practice, taken from my own personal experience. You would think that I could easily answer the question of “Do I want a PlayStation 5 console?” For a while, the answer to that seemed like an obvious yes to me. If asked, I would have certainly said yes – indeed, I was known to mention it from time to time without anyone needing to ask me at all! But in the first few years after the console was released, it was all but impossible to get without a combination of good luck and good timing. But some retailers would let you sign up on a waiting list, and once they got some in stock, a random selection of people on the waiting list would receive an invite to buy the console. One day, I actually got such an email. I immediately clicked on the link to buy the console.

But then I stopped. I waited. Did I actually want one? I wasn’t so sure all of a sudden. I could certainly afford it – money wasn’t my constraint. But I started to consider another variable – time. When would I actually have time to play any games? I started thinking about what the opportunity costs were. Spending less time with my kids in order to make time for video games was a nonstarter for me. Cutting into my reading time was also off the table as far as I was concerned. I do weight training five days a week along with six days of cardio exercise – but especially as middle age sets in, keeping up on my fitness has only become more important to me, so I wasn’t willing to cut back on my exercise time. As I thought about it, I realized that there would only be small, intermittent pockets of time where I would ever be able to play any games – and as this thought process was carried out, new “information in my head” was generated, and I decided that I didn’t actually want a new video game console. But you couldn’t have gotten that information out of my head by simply asking me for it, as Robinson’s simplistic take would suggest. Even I didn’t have that information in my head, until the actual act of choosing was carried out to generate it.

Now, it might have worked out differently. Suppose when the time came, I immediately bought the console and never regretted it. Would that mean that in this case, the information really was there “in my head” and could have been accurately collected by asking me? No. What it means is that the answer you would have gotten by asking me was an accurate prediction of what the information would turn out to be. But it doesn’t always work out that way. What people say they want and what they actually choose when the time comes are very often different from each other. And I’m sure, dear reader, if you introspect a bit, you can come up with examples from your own life where you were surprised by your own choices when the time came to decide. 

For his part, Karl Marx very much insisted on seeing the world as a series of ongoing processes, rather than collection of static things. Marx’s theory and analysis of those processes was irreparably deficient, but he deserves some credit for at least being ahead of many of his modern-day followers, who see the world in terms of snapshots and outcomes, rather than ongoing processes, or who make the mistake of treating information as nothing more than merely collectable data points. 

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Trustbusters in Wonderland

When you think about it, the story is even more fantastic than Lewis Carroll’s Alice in Wonderland.

A government—politicians and bureaucrats—which, among other problems, is mired in deficit and debt is suing two companies, Google and Amazon, with which nobody is forced to do business, while the same government is, just to take an example, forcing future taxpayers to finance its vote purchases with trillions of dollars of expenditures, not to mention its continuous misleading advertising.

Each of these companies has to supply free and voluntary consumers with services, often free of charge, lest it be dethroned by competitors. Add that each (and perhaps especially Amazon) deserves a Medal of Freedom for arguably contributing to culture and knowledge more than any government has done.

There is another irony difficult to reproduce in any rabbit hole one can imagine. It is probably true that both companies are owned and managed if not manned by fans of state power who probably thought all along that “progressive” politicos were on their side. Any serious economist or student of Leviathan, I think, could have told them. Whether the lesson is learned or not is an interesting question.

Google has been sued by the Department of Justice’s Antitrust Division, supervised by Assistant Attorney General Jonathan Kanter, while Amazon is sued by the Federal Trade Commission, chaired by Lina Khan.

In my Regulation article on “Bidenomics,” I note:

Biden’s nomination of Lina Kahn, a 32‐year‐old Harvard Law School professor, as head of the Federal Trade Commission marked an attempt at expanding government antitrust action. Confirmed with the help of 21 Republican votes in the Senate, Khan has embarked on a crusade to extend the reach of existing law by developing new legal theories and filing more lawsuits. Mere “bigness” and high technology seem to be her chief concerns, rather than the longstanding consumer‐welfare standard. The antitrust division of the Department of Justice has moved in the same direction. Large corporations are seen as the problem simply because of their size, though there appears to be no parallel concerns about big trade unions and big government. …

The international news magazine The Economist, despite being generally favorable to antitrust laws, has argued that the new crusade against bigness and high tech is unproductive. It threatens American research and development, of which one‐fourth is done by the five largest high‐tech firms. With nearly Schumpeterian accents, the venerable magazine defended the idea that “dealmaking, even involving big firms, is a vital part of healthy capitalism,” which the new antitrust warriors in D.C. do not seem to understand.

Let’s hope that the courts will stop the comedy.

(18 COMMENTS)
Who Won the Caplan/Brook Debate?

When I read that my friend and former co-blogger Bryan Caplan would be debating Yaron Brook on anarcho-capitalism (Bryan is an anarchist; Yaron is not), I wanted Bryan to win. It’s not because I’m an anarchist; I’m not. But Bryan has brought me way closer to his position on many big issues, including open borders. So I hoped that he would make a good argument that would bring me closer to his position on anarchism.

Then, when I read the actual proposition being debated, I was sure Bryan would win. The proposition is:

Anarcho-capitalism would definitely be a complete disaster for humanity.

With both “definitely” and “complete” in there, that’s a particularly strong statement. Before the debate, I said on Facebook that with that formulation, Bryan was almost sure to win. What if you could show that anarcho-capitalism would be only a 50% disaster? Bryan would win.

Bryan explained that it was Yaron who chose the wording. I said that I wasn’t surprised because Yaron likes to state things boldly; I think that reflects the influence of Ayn Rand, although maybe Yaron was that way before he had ever heard of Ayn Rand.

Bryan’s opening argument is very good and he did bring me closer to anarchism.

But then Bryan said this:

If you claim that anarcho-capitalism would be a complete disaster for humanity if were tried today, I agree.

My friend and co-author Charley Hooper and I were talking about this yesterday and we both agreed that this one statement cinches the win for–Yaron Brook. If even the person debating the issue admits the other side’s point, it’s game over. And Bryan admitted Yaron’s point.

That doesn’t mean you shouldn’t read Bryan’s opening statement and/or watch the whole debate. You can lose a debate but still bring people closer to your viewpoint. And that’s what Bryan did with me.

By the way, the traditional way of judging who won is to say who moved more people to his side. By that measure, for example, I won big-time in my debate on lockdowns with Justin Wolfers in April 2020. But I don’t know how the numbers went on Caplan/Brook.

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James Broughel calls on libertarians to reevaluate the influence of James Buchanan, arguing several of his ideas have led them astray. An undercurrent of his argument is that libertarians have gravitated toward Buchanan because he confirms their generally negative views of government. But Broughel’s claims are based on mere assertions, deep misunderstandings of social choice theory, lack of familiarity with the public finance literature, and factual mistakes.

 

Confused about Cost

Broughel argues that Buchanan’s radical subjectivism about choice is fundamentally misguided:

Despite Buchanan’s somewhat nuanced stance in the book, his disciples have often interpreted his writings to mean that costs are a psychological phenomenon and “not measurable in monetary terms.” This leads to the ironic situation whereby libertarians misunderstand the idea of opportunity cost and overlook the substantial opportunity costs that governments inflict daily through their inefficient policies. Costs, by their nature, are objective and quantifiable magnitudes in the real world, even if psychological factors shape the market prices used to measure them.

The linked article that purports to show the dangers of thinking in terms of subjective costs is by Murray Rothbard. It does not cite or even mention Buchanan. Moreover, to call Rothbard a disciple of Buchanan is an simply incorrect. Rothbard is as much a disciple of Buchanan as Buchanan is a disciple of John C. Calhoun. The most charitable interpretation that can be given to citing Rothbard here is that Broughel picked an article that takes a radically subjectivist stance to try to illustrate his point. Admittedly, one has to get all the way to the very first volume of Buchanan’s collected works to find Buchanan’s actual critique of Ronald Coase (“Rights, Efficiency, and Exchange: The Irrelevance of Transaction Costs”).

Buchanan’s own use of radical subjectivism is very distinct from Rothbard’s. Rothbard wants to discredit a social cost approach to make way for his normative theory of property rights. Buchanan uses subjectivism to emphasize the importance of agreement in both markets and politics. He objects to Pigovian analysis because such analysis confuses preferences that are inferred by the analyst with the actual agreement of others. Standard welfare economics, for Buchanan, confuses the map for the terrain.

Moving on to the second claim above, it is hard to know which libertarians Broughel is referring to since he does not cite any. The idea that radical subjectivism commits one to a rosy view of government policies is silly. Yes, the radical subjectivist—if consistent—would take umbrage at using the term opportunity cost to refer to the consequences of policies. Opportunity costs are what individuals forego when they make a choice. No choice, no opportunity cost. But this does not stop a subjectivist from recognizing that policies can impose losses in terms of real income or wealth. Gains and losses are perfectly comprehensible without tying them to the act of choice. Hailstorms and taxes both impose losses on individuals.

Even if one dislikes radical subjectivism, Buchanan is the strangest target to go after in the subjectivist camp. Buchanan in Cost and Choice is careful to distinguish “cost in the predictive theory” vs. “cost in a theory of choice” (pp. 40-41). Cost in a theory of choice is radically subjective, which how Buchanan thinks the world really is. But at most, such a theory can only offer generalized explanations of social phenomena, or what I have called elsewhere “origin stories.” To do the predictive work of economic science, one must abstract from human subjectivity and creativity and treat humans as reacted to objectively measurable costs. 

Buchanan thinks it is vital that economists pursue both of these projects, a point he reemphasizes in “The Domain of Subjective Economics” (again, in Volume 1 of the collected works). Of all the major radical subjectivist authors, he is the friendliest to the sort of work that Broughel seems to think economists should do. Buchanan recognizes the distinct contribution of subjectivist economics but counsels against staring too long into the Shackelian abyss.

 

Zombie Welfare Functions

Broughel also wants to raise the zombie idea of social welfare functions, both in his critique of Buchanan and in an earlier Econlib piece. I’ll consider where these arguments go awry in a follow-up post.

 

Adam Martin is Political Economy Research Fellow at the Free Market Institute and an assistant professor of agricultural and applied economics in the College of Agricultural Sciences and Natural Resources at Texas Tech University.

For more articles by Adam Martin, see the Archive.

(4 COMMENTS)

In the just-published issue of Regulation, I have a feature on Bidenology (also called “Bidenomics”) and its cousin “Trumpology.” The two assemblages of policies share a basic ideology of collective decision-making as opposed to private choices—which explains, or is explained by, the convergence between the Democrats and the Republicans (see “Is ‘Bidenomics’ Just ‘Bidenology’ or ‘Trumpology’?Regulation, Fall 2023; pp. 30-36 in the Gutenberg version).

What I want to emphasize here is how the Democratic version of populism is based on a false evaluation of material equality. In my article, I cite the fascinating book by Phil Gramm, Robert Ekelund, and John Early, The Myth of American Inequality. I will review this book in the Winter issue of Regulation (out in late December), but my current Regulation article provides a peek:

People in the ambit of the Democratic Party show a concern for inequality and poverty in American society. This concern, however, is not well grounded in economic reality, and sometimes not in logic either. …

In reality, the actual degree of inequality and poverty in the United States is greatly exaggerated, as shown by the calculations of economists Phil Gramm, Robert Ekelund, and John Early in their recent book The Myth of American Inequality. Correcting the official poverty rate with other government data (such as transfer payments like food stamps and refundable tax credits, which are not counted by the Census Bureau as income received), they calculate that the poverty rate was down to 1.1 percent in 2017, less than a tenth of the Census Bureau published rate of 12.3 percent. (The latest Census Bureau figure is 11.6 percent.)

The poorest Americans are not as poor as they are assumed to be, nor the richest as filthy rich as rumored. The 1 percent of households on top of the income ladder starts at about $600,000 in pretax annual income. On average, those households pay 39.8 percent of their income in taxes, according to unpublished numbers provided by Early. By comparison, the average tax rates for the first four quintiles of income are 7.5, 14.1, 22.7 and 28.4 percent, respectively.

Reliable measures of inequality are, even among most of the 1‑percenters, a reflection of entrepreneurship, work effort, educational achievements, and individual freedoms such as marriage choices. The data presented by Gramm et al. suggest a quite reasonable degree of inequality in American society, even before the large government redistribution through transfer payments (essentially to the bottom and second quintile) and taxes (more than 80 percent of which are paid by the top two quintiles).

You’ll find more in my forthcoming review of the Gramm et al. book. This is just a trailer. And my current article on Bidenology covers much more than this topic: I lead you in the bowels of Bidenomics and Trumponomics.

(14 COMMENTS)
Why Is Sound Money in the Economic Freedom Index?

In 1999, because of an op/ed opposing capital controls that I wrote in the Wall Street Journal in 1998, I was invited to give a paper on the subject to a small gathering in Tokyo. I don’t remember all the participants but two that I do remember were Jagdish Bhagwati and David Weinstein, both of Columbia University.

During one of the sessions, the Economic Freedom of the World index came up. Jagdish said that he didn’t think it was justified to list the inflation rate as a component of economic freedom because inflation had nothing to do with economic freedom. I had an answer to that but I wanted to follow the rules and so I never got to give my answer.

These are the four components of the sound money measure: (1) money growth, (2) standard deviation of inflation, (3) inflation in the most recent year, and (4) the ability to have foreign currency bank accounts. Notice that the first one is connected to inflation and the second and third are directly about inflation.

Here’s the answer that the authors of the report give in their latest report (p. 5):

Sound Money focuses on the importance of money and general price stability in the exchange process. Sound money—money with relatively stable pur- chasing power across time—reduces transaction costs and facilitates exchange, thereby promoting economic freedom. The four components of this area provide a measure of the extent to which people in different countries have access to sound money. In order to earn a high rating in Area 3, a country must follow policies and adopt institutions that lead to low (and stable) rates of inflation and avoid regulations that limit the ability to use alternative currencies.

That’s not a bad answer. The one I wanted to give Jagdish was a little different. It’s this. The point of the index, recall, is to measure economic freedom. But because we have a government-produced money, and virtually every other country does too, how do we measure economic freedom in the provision of money? The way to do so is to ask what we would have if the government stayed out of money and we had private provision of money. There are strong reasons to think that the inflation rate would be low and fairly steady. So that relates to (2) and (3). There are also strong reasons to think that money supply growth would be low, thus satisfying (1). Of course, the freedom to hold a bank account containing foreign currency is an obvious aspect of freedom, although that doesn’t directly relate to Jagdish’s objection.

Thus my justification for including money supply growth, variability of inflation, and the most recent inflation in the measure of economic freedom.

By the way, notice where the U.S. is on this measure: #31.

Note: The above pic is of Jagdish Bhagwati’s 1969 book, Trade, Tariffs and Growth. It was the main text of my Ph.D. course in international trade at UCLA in 1973-74. I learned more about international trade and tariffs from this book than from any other. It was taught by Robert E. B. Lucas, who is now a professor at Boston University. I thought Bhagwati should have co-won the Nobel Prize in economics with Paul Krugman in 2008. He didn’t. But come on guys, grow up and do the right thing. Jagdish is 89. It can’t be given posthumously. Give it to him this year.

(11 COMMENTS)
Out-of-Sample Failures

In the comment section of my previous post, a number of people were dismissive of the model because it failed to do well in out-of-sample tests. Here are some examples:

It’s literally fit to the data through 2017. There’s nothing to explain.

And

The model quickly fails as soon as it encounters out of sample data, wouldn’t read into it too much.

I don’t agree.  To illustrate my objection, I’ll review an example from previous research I did on the Great Depression.  

Irving Fisher first developed the idea of the Phillips Curve in a 1923 paper that contained this graph (from a later 1925 version):

The variable P is a distributed lag of inflation, whereas T is a crude measure of real output.  I then applied Fisher’s model to the period from 1923 through 1935:

Fisher’s model worked very well during 1915 to 1922, and continued to do OK from 1923-33. Then the model completely broke down after July 1933. It’s important to know why.

Instead of assuming “there’s nothing to see here”, I decided to investigate why the Phillips Curve model failed after July 1933.  It turns out that in July 1933 the federal government mandated a 20% across-the-board nominal wage increase, which caused prices and output to move in the opposite direction.

The failure of the Phillips Curve model after July 1933 suggests a need to replace this simple model with a more fundamental model, such as the AS/AD framework, which allows for both positive and negative correlations between prices and output. 

I am reminded of this exchange in a recent David Beckworth podcast with George Selgin:

Beckworth: But don’t we, as people who like to look through maybe an aggregate demand or nominal GDP perspective, aren’t we also invoking something similar to the Phillips curve? We invoke a short run aggregate supply curve that gets really steep going up. How different is that?

Selgin: I think it’s very different. I think that the Phillips curve takes too many shortcuts or tries to do too many things at once. That’s what a reduced form relationship basically is. I think that thinking in terms of aggregate supply and aggregate demand shifting around is closer to grasping the true structural relationships. Even though it’s not particularly complicated, it isn’t much more complicated, but it is somewhat more complicated. You have two schedules instead of one, for starters, and I think that it matters.

The model of economic sentiment discussed in my previous post continued to do well between 2016 and 2020, and then failed spectacularly.  It’s interesting to think about why this happened.  The Economist attributed the failure to Covid, whereas I cited increased political polarization.

Out-of-sample failures do point to a flaw in the model.  But they can also provide hints as to how the model can be improved.

(5 COMMENTS)
Nozick: Democracy as Collective Liberty

The problem of collective liberty as opposed to individual liberty can be illustrated with a parable from Robert Nozick, a Harvard philosopher whose 1974 book Anarchy, State and Utopia has had much influence on libertarian thought.

You are a slave at the mercy of a brutal master. At some point, the master becomes nicer toward you, stops beating you for no reason, and even gives you some free time. He also has 10,000 other slaves and nicely takes their needs, merit, and other such factors into account when assigning their tasks. He reduces their workweek to three days. He later allows them to go and work on the open market provided they give him three-sevenths of their wages. However, he keeps the power to call them back to the plantation in case of emergency and to restrict their rights to engage in certain personal activities (mountain climbing or cigarette smoking, for example) that could reduce their productive capacities.

The next step is that he allows his 10,000 other slaves to discuss among themselves and vote on all the decisions he previously made, including what proportion of all slaves’ earnings, including yours, will go in the common and how the money will be used. The 10,000 then benevolently decide that you can vote, but only in case their votes are tied 5,000 to 5,000 (which never happens). Finally, the 10,000 decide to let you throw your ballot with theirs before they count them (which will of course produces the same outcome as the previous procedure). Thus, all the 10,001 democratically make all the decisions they want regarding the lives of everybody including you. Nozick’s question: Where in that sequence did you stop being a slave? (See pp. 290-292 of Anarchy, State and Utopia for the more detailed story.)

For a libertarian or a classical liberal, the answer is “nowhere.” Your master has become kinder and more understanding; and, from being one person, became a group of 10,000 persons. You and your 10,000 colleagues have collective liberty, compared to when you all had one individual master, but none of you has individual liberty. If your collective master becomes nasty toward you, you may try to persuade him to be nicer just like you could do with your individual master before, but you have no more control on your life.

There are a few objections to this conclusion, but none is valid if the majority is omnipotent (“sovereign”). As long as that is the case, you are still a slave, albeit an equal slave. Numerical democracy is incompatible with the idea of individual liberty. (Some months ago, I had a “conversation” with ChatGPT, in which the poor thing tried to “argue” both for individual rights and for the obligation to submit to the majority!)

(37 COMMENTS)

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