March 7, 2019


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See exactly how the statement from Fed policy makers changed.

See exactly how the statement from Fed policy makers changed.

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This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. More Output, Fewer Workers U.S. factory output continued to grow in August, but the picture for employment was mixed, a possible sign of lingering uncertainty about the coronavirus pandemic among American manufacturers. A survey of […]

Your daily economics newsletter from The Wall Street Journal.

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Your daily economics newsletter from The Wall Street Journal.

Your daily economics newsletter from The Wall Street Journal.

Your daily economics newsletter from The Wall Street Journal.

Your daily economics newsletter from The Wall Street Journal.

Your daily economics newsletter from The Wall Street Journal.

Your daily economics newsletter from The Wall Street Journal.

Your daily economics newsletter from The Wall Street Journal.

Your daily economics newsletter from The Wall Street Journal.

Your daily economics newsletter from The Wall Street Journal.

Alternative indicators give an early picture of how the global economy is faring in the face of headwinds from new restrictions as case counts climb

Expectations that the ECB will expand its emergency asset purchase programme drives debt rally up

China supplies 98% of the bloc’s rare earths, and has exploited that bottleneck

Your daily briefing on the news

The chancellor could have done more to dispel worries about public finances

Democratic countries should co-ordinate responses to pressure from Beijing

Fashion retailer appoints retired judge after allegations over its treatment of workers

Finance ministers need to overcome longstanding concerns from northern hawks about reforming the bloc’s bailout fund

Lessons from Japan: early experience of ultra-low rates now relevant to investors around world

As the fateful day looms, London’s finance sector prepares for a stalemate

Approach to likes of Blackstone and Carlyle a big test of investor appetite after reforms

Trump administration grants further extension as future of video app in the country hangs in balance

OBR fiscal watchdog flags tough choices facing Sunak on stabilising public finances

Despite cuts, Britain will fund fight against disease and climate change and help get girls into school

Former Fed chair knows how to get other economists to think the way she does

Our Covid19 predicament has been compared to many historical episodes: some consider it on the same order as a war, others a crisis of the magnitude of the Great Depression. I think these comparisons are fitting in the sense that the lasting legacy of Covid19 has been the dominant narrative that will emerge, once the pandemic is (happily) over. So far the dominant narrative has been that an orderless, too economically integrated, and therefore reckless world has been rescued from the wreckage by almighty governments.

This might have worked, rhetorically, earlier on. Now, in so many places, the government is failing in mitigating the pandemic. Bureaucracies act on the presumption of knowing things, and there are still many things that scientists, let alone government officials, do not understand about this virus. Plus, with unprecedented success, the private sector is coming to the rescue with new vaccines.

Of course, the success of a narrative is not necessarily based on it fitting the facts better. It could just be that it is a nicer story, that it sounds better to people that it is better crafted by politicians and their spin doctors.

But here’s an interesting article. On the Guardian, John Harris remarks that in England communities have been self-organizing in the last few months:

…droves of volunteers who were gripped by community spirit coming together to help deliver food and medicines to their vulnerable neighbours, check on the welfare of people experiencing poverty and loneliness, and much more besides. From a diverse range of places all over the country, the same essential message came through: the state was either absent or unreliable, so people were having to do things for themselves.

Rather predictably, Harris thinks that if “the key story of the Covid crisis has been that of town and parish councils enabling people to participate in community self-help”, now “the next chapter is about moving in the opposite direction, and trying to get people who have been involved in mutual aid to start running the places where they live.” You get the gist of it: it is a Tory government, and years of austerity, which let communities down (forget the fact that David Cameron’s “welfare society” was all about community empowerment and that neither Theresa May nor Boris Johnson have been very austere).

Now, this begs the question. Are local communities self-organizing because politics is being unduly constrained, limited in its spending capacity, and disempowered, or are they self-organizing because, in spite of consuming more than a third of GDP (in England), governments are simply lacking the flexibility and the responsiveness to deal with people’s demands, particularly when they are new and when they are changing?

In the short term, I think it is Harris’s view that is going to stick: people will try to move on from activism and that will be justified because they ought to reclaim their government for themselves. Could it be that in the longer run they’ll realize that the public administration is simply governed by different incentives and rules, than the ones which allowed them, as privatize citizens, to work together for a shared purpose?



Jeremy Arkes, one of my friends and Navy School colleagues, who is also a friend and colleague of Judith Hermis, submitted the letter he would have sent to Governor Newsom. I did some edits, all of which he accepted, and here is the result.

Dear Governor Newsom,

I would like to offer a counterpoint to the letter that my good friend Judith Hermis sent you regarding your private-gatherings restrictions. As with Judith, I hope you and your family are well, and additionally I hope that you have learned now to avoid large gatherings yourself in order to continue to keep your family and others safe.

One factor that Judith cited was that our “unalienable rights to life, liberty, and the pursuit of happiness” should prevent the government from telling us what we can do in our own private homes. But there are well-known limits to these rights. People might gain happiness from, in their own homes, sacrificing Sagittarians who watch Gary Busey movies. But they are not allowed to do so because that infringes on others’ right to life. This, of course, is one example of many restrictions on what we can do in our pursuit of life, liberty, and happiness. That said, such a restrictive measure as you are imposing does infringe on liberty and, thus, needs some justification.

Such justification might come from the basic economic concept of an externality, which is a case in which decisions by private parties impose costs on (or create benefits for) third parties not engaged in the transaction. And basic economics states that, in the presence of a “negative externality” (where decisions impose costs on others), the free market (consisting of the private decisions of people) leads to a higher quantity of transactions than the quantity that would maximize efficiency.

And so a party that brings multiple households together has the potential to have negative externalities, as there can be huge costs imposed on people not involved in the party (from the party-goers infecting others, who in turn infect others, etc.). The costs are not just deaths and health-care costs, but also the costs associated with being sick and having the long-term complications that some experience from COVID.

The theory behind negative externalities is that a more efficient outcome would occur if the parties involved in the transaction/decision have to bear those costs imposed on others. If the costs imposed on third parties had to be paid for by the party guests, then a more efficient outcome would ensue.  In the textbook theoretical case of a negative externality, with quantifiable costs imposed on third parties, the efficient outcome could come in the form of a tax on the good or service that causes the market participants to bear those costs imposed on others. The size of the tax would be the monetary equivalent of the costs imposed on others. Imposing that tax would cause the number of parties to decrease to the most-efficient quantity. For those for whom the tax would be just a rounding error (e.g., a party at the French Laundry restaurant), the party would go on.  But for others, the tax would dissuade them from their private gatherings.

Unfortunately, the probabilistic nature of COVID infections and deaths, the imprecision of contact-tracing, and the uncertain monetary-equivalent costs of deaths and illnesses make it impossible to fully internalize the costs. And so this health measure you favor could be justified as a method to correct for an externality when no tax-based solution is available. It could actually bring us to a more efficient outcome.

So if anyone opposes your policy, Governor, a good question to ask that person is: At what point would restrictions be okay? If you had a private party and you knew that it would lead to 1,000 people infected and 100 deaths among people not attending the party, would it be okay to have restrictions on such parties? If not, then it seems that society has no safeguards for something that can destroy us. If so, then the problem isn’t that such a measure is antithetical to economic liberty but rather we have different preferences for the level of safety vs. freedom and perhaps different preferences for the certainty of harm that is required before any preventative measures are taken—and, the elected leaders have the right to impose laws that they believe draw the best balance.

I believe that we need to do our best to protect the brave and dedicated doctors, nurses, and elderly-care providers who are risking their health and mental well-being to do their job—a job that the population has made more difficult by the private decisions they have made (e.g., not wearing a mask and congregating in larger-than-advised groups) that has led to the situation we are in today. And the situation today is that it is much more dangerous to engage in the economy than it was at any other point in this pandemic so far. Basically, we need to think the way our military-service members do and make sacrifices to serve people beyond ourselves.

Another important point is that, paradoxically, restrictions on economic activity in the short run could actually lead to greater economic growth in the medium and long term. In my view, most of the economic decline is due to personal decisions of people to be safe rather than the social-distancing and shut-down policies. For example, people are allowed to take flights, and so the ~75% reduction in air travel is due almost entirely to people’s personal decisions not to travel. The bottom line is that the economy can’t return to normal until COVID is reduced to a level at which people feel safe.  (Supporting this point is that Europe, which had COVID under control at the beginning of the summer, had a much more normal summer of economic activity than we had in the U.S., where we never had the virus under control.)

Finally, let me offer a different characterization of those who are okay with the limitations. Judith considered them “the most frightened,” but that seems to be too much of a generalization. (I’ll admit to being one of the “frightened,” as I have mountains to climb and books to write, and I do not want to be thwarted.)  But there are other reasons than being frightened for why people would support such restrictive measures:

(1) They may have a loved one (who depends on them or whom they hope to visit) who is at risk due to being old or immuno-suppressed.

(2) They might (for religious or other reasons) not want to participate in any activity that has the potential to harm other people (whom they know or don’t know).

(3) They may share my view that taking the strong measures and making personal sacrifices to get COVID under control in the short run is what would return the economy back to normal the fastest.

Good luck,

Jeremy Arkes Another private citizen (some might argue)




I hope it’s the former.

The Wall Street Journal has 6 crossword puzzles a week and I clip them and fill them out when I have spare time or at night when I’m trying to get to sleep.

The one I did last night was “Short Stories” by Alex Eaton-Salners.  It was very clever and enjoyable.

Which made the one discordant note all the more disturbing. The clue was “October Revolution target.” The answer: tsar. Do you see a problem? Alexander Kerensky would have. That’s his picture above.

In a section in Ayn Rand’s The Fountainhead Rand explains Ellsworth Toohey’s strategy. It’s to undercut people’s beliefs in freedom and individualism with the “softer” parts of a newspaper. When reading those parts, readers don’t engage their critical faculties as much, so someone trying to communicate a subversive message can get further. The crossword puzzle would be such an instrument.

It’s quite possible that Eaton-Salners is uninformed. I hope he is. I don’t like the alternative.


In a recent post I raised two objections to the MMT description of “net saving”, which is the following for a closed economy:

(GNP – C – T) – I  ≡  (G – T)

This equation basically says that the government budget deficit equals the government budget deficit.  But on the left side of the equation the budget deficit is redefined as “net saving”.

Let me try to present a case in favor of this approach, before criticizing it.  Suppose I said total wealth minus non-monetary wealth equals the money supply:

Wt – Wnm ≡ M

Obviously, the left side of the equation is also the money stock, but does describing it this way help?  You could argue that this identity shows that a rush for liquidity at a given income level (i.e. a desire to hold more of one’s wealth in the form of money), is potentially destabilizing.  If there is an increased demand for money, then the government should boost the money supply (right side of the equation) to prevent the identity from being maintained by a fall in national income.  When there’s a rush for liquidity, printing more money would meet the extra demand for money at full employment.

As far as I can tell from the commenters, MMTers are making a sort of analogous claim for the budget deficit.  Thus, if at current interest rates and the full employment level of GDP there is more desire to (privately) save than to invest, then the government should accommodate that increased desire to save by running a budget deficit, which represents negative saving for the government sector.

Lurking in the background is the simple Keynesian cross model, with no role for monetary policy.  (The “paradox of thrift” is another way of describing this concept.)  This model is sometimes called “vulgar Keynesianism”, because it is considered less sophisticated than New Keynesian (IS-LM) models where monetary policy determines national income at positive interest rates, and fiscal policy is only needed at the zero lower bound for interest rates.

If I’m correct in my interpretation, then I still have the same two complaints about the model:

1. It’s confusing to students to call the left side of the equation “net saving”.  Some other term should be used.

2. I don’t believe the identity is useful, because the underlying model that it’s being used to illustrate is wrong.  I’ll illustrate this objection by discussing recent trends in the US budget deficit.

Everyone agrees that the 2020 spike in the budget deficit is a response to Covid, but there are other recent changes in the deficit that seem more “exogenous” in some sense.  For instance, in calendar 2013 the deficit plunged from $1,060 billion to $560 billion, reflecting the desire for austerity among Republican members of Congress.  After staying low for a few years, the deficit soared to more than a trillion dollars between 2016 and 2019, despite a booming economy.  This reflected both increased spending and the Trump tax cuts.

Neither change was in response to a public “wanting” more or less “net saving”.  Neither change was aimed at stabilizing aggregate demand.  Instead, both changes reflected the political situation.  In the Keynesian model, the 2013 austerity should have had a contractionary effect, but it did not due to offsetting monetary stimulus.  The more recent increase in the deficit might have had a mild expansionary effect, but the Fed tried to offset that effect by raising interest rates multiple times.  At the very least, this offsetting action by the Fed prevented inflation from rising to even their 2% target in 2019.

I can’t imagine how it could be useful to consider these fiscal policy changes from the perspective of how much net saving the public “wants” to do.  Congress acts, interest rates move, and the public willingly buys up the newly issued Treasury debt at the new interest rate. The same thing occurs when IBM issues bonds.  If the fiscal policy is seen (correctly or not) as threatening to destabilize the economy, as in 2013 and 2017-18, then the Fed acts to offset the effect.  Keynesian economists predicted a slowdown when austerity was announced in late 2012, but by the fourth quarter of 2013 the year-over-year growth rate was considerably higher than 12 months earlier.

The budget deficit is one among many factors that the Fed needs to offset when targeting inflation at 2%, much like housing, exports, business investment, and other volatile sectors that might impact aggregate demand.  If the budget deficit did determine aggregate demand, then we would have given Congress the duty to target inflation at 2%.  Thank God we did not!  As the 2013 and 2019 examples demonstrate, our fiscal policy is recklessly procyclical, and if Congress were determining inflation then we’d be back in the 1970s (or 1917-51) with inflation rates gyrating wildly up and down.

And it’s not just the US; other developed countries also give their central banks the responsibility for targeting inflation.  There is no plausible alternative.  A model that suggests that the budget deficit determines aggregate demand, even at positive interest rates, is simply wrong.


Television’s finest half-hour reminded America of the values of classical liberalism.

This fall, LIFE magazine has published a special issue commemorating the 50th anniversary of the movie M*A*S*H. Despite the hook, the issue focuses on the ensuing TV series, which ran from 1972 to 1983. Though the show has often been characterized as being politically left-wing, it actually is heavily classically liberal, celebrating the individual, civil liberties, and the market, and harshly criticizing anti-individualism, government compulsion, and government decision-making. In a series of essays, I examine the classical liberalism of M*A*S*H

The TV series M*A*S*H premiered on September 17, 1972 — a bad time to debut an anti-war, anti-establishment dark comedy. America’s mood was on the rebound from the social upheaval of the late-1960s: Operation Linebacker was pushing back the North Vietnamese forces with few U.S. casualties, easing public frustration over the Vietnam War. The nation’s economy was booming, growing 5.25 percent in 1972 and would grow 5.6 percent in 1973. Prosperity and military success produced strong approval numbers for President Richard Nixon, who would be reelected in November with more than 60 percent of the popular vote and winning 49 states.

All that good news was bad for the early weeks of the impertinent if not subversive M*A*S*H. The pilot finished 45th in the week’s ratings, a miserable showing in the three-network era. Subsequent episodes fell into the 50s, raising the specter of cancellation.

But national moods can change quickly when the news changes. Three months before M*A*S*H debuted, the Washington Post reported that five men had been arrested in connection with a break-in at the Democratic National Committee headquarters. As the show’s first season played out, Watergate mushroomed from an offbeat news item into a full-blown scandal. Halfway through the TV season, a humbled United States signed the Paris Peace Accords, ending America’s involvement in Vietnam; the last U.S. troops left the country on March 29, 1973, four days after M*A*S*H’s first-season finale. That fall, with the show’s second season underway, the OPEC oil cartel cut production in retaliation for western nations’ support of Israel. The resulting energy crisis sent the U.S. stock market reeling and the economy into recession. With inflation already surging, the United States got its first dose of “stagflation.” Finally, on August 9, 1974 — a month before M*A*S*H’s season-three premiere — a disgraced Nixon resigned the presidency.

Those events may have helped Americans embrace the sitcom that treated the inhumanity of war and the inanity of government with a cathartic mix of laughter and tugged heartstrings. M*A*S*H’s ratings rose in the final weeks of its first season, as more viewers began following the goings-on at the fictional 4077th Mobile Army Surgical Hospital, located near the front lines of the Korean War. That prefaced regular top-10 finishes for the rest of the show’s 11-year run. M*A*S*H’s cast, crew, and writers would carry off a slew of Emmys and Golden Globes over the next decade. The series finale is television legend; even current Super Bowls struggle to top the nearly 106 million viewers who watched “Goodbye, Farewell and Amen” on February 28, 1983. Following the program’s end, its decommissioned sets, costumes, and props became wildly popular exhibit at the Smithsonian Institution. Today, M*A*S*H continues to draw audiences in syndication, nearly a half-century after it debuted.

What made it so successful? Public reaction to Vietnam and Watergate may explain its first few years, but M*A*S*H was a TV juggernaut for the rest of its run, despite the departure of most of its original cast, change in show runners, and turnover of writers. Even the series’ shift in tenor from situation comedy to dramedy (sometimes heavy on drama) did not weaken its audience.

An academic thesis has argued that the show’s success came in part from its following changing public values and outlooks as the United States moved from leftish libertinism of the early 1970s, to malaise-induced cynicism of the late ‘70s, to the conservative Reagan Revolution of the early 1980s. Yet, libertarians and other classical liberals — who often find political similarities where others see left–right differences — may perceive something else: that throughout its run, M*A*S*H consistently promoted the ideals of classical liberalism.

People unfamiliar with classical liberalism may be unsurprised by the idea that M*A*S*H was a “liberal” show. Several of its cast members are vocal supporters of political causes on the left side of the U.S. political spectrum, and critics (and even some fans) of the series criticize it for being too “lefty” in its later seasons. But this is not the liberalism I mean. The philosophy of classical liberalism acknowledged that government has an important role to play in addressing truly public problems, but that individual liberty and private, consensual relationships are of paramount importance. Classical liberalism is skeptical of government power, appreciates the incentives and benefits of the marketplace, and defends civil liberties. As such, classical liberalism encompassed a broad swath of the American political spectrum as it existed in the latter part of the 20th century, from ACLU civil libertarians, to Jimmy Carter/Bill Clinton centrists, to Ronald Reagan’s small-government conservatives.

To be clear, M*A*S*H’s chief protagonist, surgeon Benjamin Franklin “Hawkeye” Pierce (played by Alan Alda), may not have been an avowed libertarian who leafed through The Road to Serfdom along with his beloved nudie magazines. But he and his comrades embraced and advocated principles and institutions that acknowledged classical liberals hold dear, as did many Americans (including both Democrats and Republicans) of that era. And today, amidst a surge in illiberalism in both the United States and abroad, the show continues to offer classical liberals both comic relief and hope.

The TV series evolved from a fictionalized war memoir, MASH: A Novel about Three Army Doctors, written by Korean War Army surgeon H. Richard Hornberger Jr., with help from sportswriter and one-time war correspondent W.C. Heinz, and published under the pen name “Richard Hooker” in 1968. The book inspired a 1970 movie, M*A*S*H, directed by Robert Altman and starring Donald Sutherland, Elliott Gould, and Robert Duvall. Hornberger was a conservative Republican with hawkish, nationalist leanings, and his book is frat-boy crude, funny, and largely untainted by the ugliness of war, though honest about the grim nature of “meatball surgery” at a field hospital. The 1970 movie is just as crude and even funnier, and it captures the grisliness of war and the madness of those who love it. Hornberger liked the movie despite its lefty politics, a testament to a time when personal judgments were not always made through a red–blue political lens. Altman wasn’t a fan of the book, though not for political reasons. Both Hornberger and Altman despised the TV series.

One theme common to all three versions of M*A*S*H was the comedic skewering of authority. Hornberger’s book makes clear his opinion that his conscripted, jokester doctors are superior to the military figures and protocols that try to control them. Altman’s movie luxuriates in contempt for authority. The TV series pokes plenty of fun at overpuffed authority figures, from hypocritical flag-waver Maj. Frank Burns (Larry Linville), to unhinged Maj. Gen. Bartford Hamilton Steele (Harry Morgan, who was later recast as the very-different Col. Sherman Potter), to sadistic Col. Sam Flagg (Edward Winter), to a parade of officers willing to trade troops’ lives for ground, glory, and promotion.

But where Hornberger’s skewering is limited to the career military and Altman’s to the military generally, TV’s M*A*S*H has plenty of skepticism for government broadly. The show is not outright anti-government — and neither are proper classical liberals, because government is important for accomplishing certain public goals. But classical liberals know, and M*A*S*H regularly shows, that there is plenty to criticize in what government does — or, more specifically, what the politicians and bureaucrats who animate it do.

Many government failures happen when it extends its reach beyond truly public problems, meddling in people’s private decisions and interactions. But failures also happen when government limits itself to its proper sphere, such as the conduct of foreign and war policy. From the crooked U.S. senators mentioned in “For the Good of the Outfit” (season 2) and “The Winchester Tapes” (s. 6), to the Congressional investigator for the House Un-American Activities Committee in “Are You Now, Margaret?” (s. 8), to Hawkeye’s irreverent letters and telegrams to President Harry Truman (and wife Bess) in such episodes as “Dr. Pierce and Mr. Hyde” (s. 2), “The Interview” (s. 3), and “Give ‘Em Hell, Hawkeye (s. 10), the show depicts how foolish, hubristic, dangerous, hypocritical, uncaring, and dishonest government officials can be.

For instance, in “Depressing News” (s. 9), the unit receives an erroneous, enormous shipment of tongue depressors. Hawkeye realizes the shipment reflects the U.S. government’s blithe preparation for the war to continue for years, bitterly concluding, “We wouldn’t have this supply if [the Army] didn’t think there’d be a demand.” So, he embarks on a symbolic crafting project, getting the attention of company clerk Max Klinger (Jamie Farr):


Excuse my impertinence, but if all these sticks were laid end to end — and they are — what would they be?


They would be, and are, the foundation for the Washington Monument.


Don’t they already have one of those someplace?


It’s completely different.

That one commemorates Washington the man, who crossed the Delaware and gave us wooden teeth.

This one commemorates Washington the place, which sent us across the Pacific and gives us wooden legs.


Excuse me. My nose for news thinks it smells a story here.


They sent us half a million of these things, which is monumental stupidity.

So I’m building a monument to stupidity, made out of tongue depressors and dedicated to all the wounded who have passed through here.

Klinger writes about Hawkeye’s project for the camp newspaper, a copy of which finds its way to Army headquarters. Not understanding the meaning of the “monument,” HQ dispatches a public relations officer to the 4077, believing Hawkeye’s creation would be “great for enlistment.” But as the officer snaps a picture of the monument, Hawkeye and Klinger explode it. When the befuddled information officer asks why, Hawkeye explains: “Senseless destruction—that’s what it’s all about. Get the picture?”

Though Hornberger’s book avoids judgment on war, both the film and TV series are unapologetically anti-war. The series regularly portrays war’s miseries, tugging at the heartstrings but not breaking them, respecting viewers instead of putting them off.

The greatest horror of war, death, was central to one of the series’ first ratings successes, the episode “Sometimes You Hear the Bullet” (s. 1). Hawkeye is visited by childhood friend Tommy Gillis, who has volunteered for service in order to write a book on his experiences. Later in the episode, a wounded Gillis is brought to the 4077, where he dies on Hawkeye’s operating table. Afterward, a tearful Hawkeye is consoled by the unit’s bumbling but kind-hearted first commander, Lt. Col. Henry Blake (McLean Stevenson):


I’ve watched guys die almost every day. Why didn’t I ever cry for them?


Because you’re a doctor.


What the hell does that mean?


I don’t know.

If I had the answer, I’d be at the Mayo Clinic. Does this place look like the Mayo Clinic?

All I know is what they taught me at command school. There are certain rules about a war.

And rule number one is: young men die.

And rule number two is: doctors can’t change rule number one.


The series’ pivotal episode, “Abyssinia, Henry” (s. 3), concluded with news that Blake, on his way home after an honorable discharge, was killed when his plane was shot down over the Sea of Japan. The story shocked viewers, prompting an avalanche of angry letters to the network. But as show co-runner Gene Reynolds explained, “We didn’t want Henry Blake going back to Bloomington, IL and going back to the country club and the brown and white shoes, because a lot of guys didn’t get back to Bloomington.”


Death-centered episodes are among the series’ best. In “Old Soldiers” (s. 8), the 4077’s subsequent commander, the venerable Colonel Potter, reminisces tenderly about his now-deceased comrades from World War I. “Follies of the Living — Concerns of the Dead” (s. 10) depicts a deceased soldier’s soul lingering at the 4077, observing the big and small tribulations of the staff. In “Give and Take” (s. 11), an American G.I. and a North Korean soldier whom the G.I. wounded are both treated at the 4077 and become friendly, only for the North Korean to succumb to his wounds. “Who Knew?” (s. 11) shows Hawkeye, sobered by the tragic death of a unit nurse, finding the courage to express his love for his unit colleagues. And in “Death Takes a Holiday” (s. 9), Hawkeye, fellow surgeon B.J. Hunnicutt (Mike Farrell), and head nurse Margaret Houlihan (Loretta Swit) try to extend the life of a brain-dead soldier brought in on Christmas Day, hoping to not ruin future Christmases for his children. When the G.I. dies before the day is out, Margaret reflects: “Never fails to astonish me: you’re alive, you’re dead. No drums. No flashing lights. No fanfare. You’re just dead.” And in “The Life You Save” (s. 9), a philosophical surgeon Charles Emerson Winchester III (David Ogden Stiers) compares his profession’s limited abilities to those of the 4077’s company mechanic, Sgt. Luther Rizzo (G.W. Bailey):

Don’t you understand the power you have here?

You can take a Jeep apart and reduce it to an inert pile of junk.

And then, whenever you want to, at whim, you can fit it together again, and it will roar back to life.

If only we could do that with human beings.

They — they wouldn’t die.

Also among the series’ best episodes are several portraying the war’s devastating effects on the Korean people, few of whom cared—or even knew—about the ideologies and geopolitics of the Cold War. In “In Love and War” (s. 6), Hawkeye falls for a cultured, upper-class Korean woman who sells her possessions and uses her wealth to care for villagers dislocated by the war. The relationship ends when the woman decides to take the people in her care further south, away from the war zone. In “B.J. Papa San” (s. 7), B.J. devotes himself to a Korean family impoverished by the war. Just as he is about to reunite them with a long-missing son, he discovers they have disappeared, also fleeing south. And in “The Interview” (s. 4), “Radar” O’Reilly (Gary Burghoff), Klinger’s predecessor as company clerk, is asked by war correspondent Clete Roberts about the plight of Korean peasants:


Do you get to meet the South Koreans? Do you know them?


Yeah, they’re nice people. I worry about ’em though.

We got a girl here that was, you know, pregnant. She doesn’t have any money or anything.

I don’t know how these kids live. I mean, some of ‘em don’t. That’s the God’s honest truth. Some of ‘em don’t even live over here.


Do you help them?


We do the best we can, but we haven’t got— I mean, we got just— Sometimes we got just enough for ourself. Penicillin and stuff like that.

I mean, I really wish somebody would tell these people back home this.

When you have to look these kids in the face, that’s where it’s really at. I mean, that’s what the ball game really is. Is looking these kids in the face here.

Several episodes focus on war-orphaned children. In “The Kids” (s. 4) and “Old Soldiers,” orphans visit the 4077 for checkups, touching hearts and boosting morale. “Yessir, That’s Our Baby” (s. 8) has Hawkeye, B.J., and Charles finding an abandoned Amerasian baby and battling the xenophobia of Korean society and the nativism of America to secure the girl’s future. And in “Death Takes a Holiday,” an initially incensed Charles learns just how desperate the lives of the orphans are after he confronts orphanage master Choi Sung Ho (Keye Luke) for selling the gourmet chocolates that Winchester had left the children as a gift, in accordance with a Winchester family tradition:


Go on. Deny it. Deny it, if you can.

You took the Christmas candy I gave you, and you sold it on the black market.

Have you no shame?


May I explain?


No! What you may do is retrieve that candy immediately and have it in the children’s stockings by morning.

Otherwise, they’re gonna find you hanging by the chimney without care!


Major, I cannot. The money is gone.


You parasite!


Please. Your generous gift and insistence that it remain anonymous touched me deeply.

The candy would’ve brought great joy to the children for a few moments. But on the black market, it was worth enough rice and cabbage to feed them for a month.


Rice and cabbage?


I know. I have failed to carry out your family tradition, and I am very sorry.


On the contrary, it is I who should be sorry. It is sadly inappropriate to give dessert to a child who’s had no meal.

Just as moving are episodes in which members of the 4077 deal with their own terror in war. In “The Interview,” Hawkeye describes how sometimes, when he’s lying on his cot at night, he finds it shaking — not because of falling artillery, but because his heart is racing. “Heal Thyself” (s. 8) tells of visiting surgeon Steve Newsome (Edward Hermann) who had performed valiantly under fire on the Pusan Perimeter during the desperate early months of the war, succumbing to post-traumatic stress and fleeing the 4077’s operating room. In “Dreams” (s. 8), members of the principal cast suffer nightmares of how the war has changed their lives. The same device is used in “Hawk’s Nightmare” (s. 5): Hawkeye experiences sleepwalking and nightmares of childhood friends suffering horrific deaths. Exhausted and worried about his sanity, he turns to recurring character Sidney Freedman (Allan Arbus), a psychiatrist, for help:


I keep having these dreams about these kids I grew up with. And the dreams start out OK. The kids are fine. And then they end in disaster.


Like those kids who roll past you on that bloody assembly line. You dream to escape, but the war invades your dream, and you wake up screaming. The dream is peaceful. Reality is the nightmare.


Am I crazy, Sidney?


[Chuckling] No. A bit confused, a little fershimmeled is all. Actually, Hawkeye, you’re probably the sanest person I’ve ever known. The fact is, if you were crazy, you’d sleep like a baby.


So when do my nightmares end?


When this big one ends, most of the others should go away. But there’s a lot of suffering going on here, Hawkeye, and you can’t avoid it. You can’t even dream it away.

When M*A*S*H debuted, the U.S. armed forces still used conscription to fill out its ranks. The peacetime draft began in 1948, following the expiration of World War II conscription, and included a special “doctor’s draft” for medical personnel. Selective service was vital to staffing up the U.S. military for both the Korean and Vietnam wars and was particularly despised by Vietnam protesters. Partway through M*A*S*H’s first season, the Pentagon announced that it would shift to an all-volunteer force, with the last inductions occurring before the TV season ended.

Among government institutions, conscription is one of the most disturbing. People of a particular demographic group — young men — are taken from their private lives and forced to work and live under strict government direction, at great risk to life and limb. The draft is regularly derided on M*A*S*H; as Hawkeye explains about his draft board in “Yankee Doodle Doctor” (s. 1), “When they came for me, I was hiding, trying to puncture my eardrum with an ice pick.”

No element of the show better represents opposition to the draft than the character Klinger. The show’s first seven seasons depict his many schemes to get discharged from the Army: trying to hang-glide out of Korea (“The Trial of Henry Blake,” s. 2), preparing to raft across the Pacific to California (“Dear Peggy,” s. 4), threatening to immolate himself (“The Most Unforgettable Characters,” s. 5), attempting to eat a jeep (“38 Across,” s. 5), pretending to believe he’s back home in Toledo (“The Young and the Restless,” s. 7). In “Mail Call” (s. 2), he claims his father is near death, hoping for a hardship discharge. Blake then flips through Klinger’s file:


Father dying last year.

Mother dying last year.

Mother and father dying.

Mother, father and older sister dying.

Mother dying and older sister pregnant.

Older sister dying and mother pregnant.

Younger sister pregnant and older sister dying.

Here’s an oldie but a goody: half of the family dying, other half pregnant.

Klinger, aren’t you ashamed of yourself?


Yes, sir. I don’t deserve to be in the Army.

Klinger’s longest-running scheme is pretending to be a transvestite in the hope of earning a “Section 8” psychiatric discharge. Among the outfits from 20th Century Fox’s wardrobe shop that Farr wore (sometimes while puffing on a stogie) were Ginger Rogers’ Cleopatra costume (“April Fools,” s. 8) and a woolen coat of Betty Grable’s (“Major Ego,” s. 7), as well as reproductions of Dorothy’s pinafore dress from the Wizard of Oz and a Scarlett O’Hara gown from Gone With the Wind (“Major Ego,” s. 7), and a flare-torched Statue of Liberty get-up (“Big Mac,” s. 3).

Klinger usually provides comic relief, but in “War of Nerves” (s. 6) he delivers a serious condemnation of the draft. Confiding in Sidney, who previously knocked down several of Klinger’s Section 8 schemes, he says he really does fear he’s going crazy because of his attempts to get out of the Army. Sidney asks Klinger why he wants out:


Why? Well, there’s — there’s lots of reasons.

I guess death tops the list. I don’t want to die.

And I don’t want to look at other people while they do it.

And I don’t want to be told where to stand while it happens to me.

And I don’t want to be told how to do it to somebody else.

And I ain’t gonna. Period. That’s it. I’m gettin’ out.


You don’t like death.


Overall, I’d rather lay in a hammock with a couple of girls than be dead — yes.


Listen, Klinger. You’re not crazy.


I’m not? Really?


You’re a tribute to man’s endurance. A monument to hope in size-12 pumps.

I hope you do get out someday. There would be a battalion of men in hoopskirts right behind you.

Conscription not only steals young men from their private lives and puts them in harm’s way; it also steals their labor. Though M*A*S*H’s draftees receive Army pay, their wages are far below what they would earn back home — let alone what they would demand for performing  medical duties in a combat zone for months on end. That stolen labor features in two episodes, “Payday” (s. 3) and “Back Pay” (s. 8), in which Hawkeye tries to get the Army to compensate him fairly for his work. The Army does no such thing, of course, but Hawkeye gets a measure of justice.

Labor is not the only good in which M*A*S*H depicts the virtues of voluntary exchange. Many episodes show Radar and Klinger making back-channel deals (often in violation of “the regulations”) to get the unit much-needed supplies and unit members much-wanted personal items. Hawkeye and others swing similar deals for items they want, even going so far as to trade on the black market.

Those voluntary exchanges are often explicitly contrasted with the bizarre — and sometimes miserable — results of the command-and-control “Army way.” For instance, in “The Incubator” (s. 2), Hawkeye and fellow surgeon “Trapper” John McIntyre (Wayne Rogers) follow procedure to order an incubator for diagnosing infections. Quartermaster rejects their request, informing them such a device would be “a luxury” — but they could have a pizza oven for unit movie nights. (“Just use the standard S-1798 and write in ‘pizza’ where it says ‘machine gun.’”) As they continue trying to work the system for the needed hardware, their experiences offers a fine example of public choice theory, the idea that government officials and employees are as self-interested as private-sector workers: Hawkeye and Trapper repeatedly encounter supply officers who want to know what they would get in exchange for the unit. As the two explain to a general who asks if they’ve followed proper procedure for their request:


Sir, we started with a captain, went on to a major, then to a colonel.


On the way, we’ve encountered oral compulsiveness, raging paranoia and a colonel who’s shipping Korea to Switzerland one dollar at a time.


Which makes you the next contestant, general.


[In a Groucho Marx voice] And the subject you’ve chosen is incubators.

Ultimately, Radar ignores regulation and wheels-and-deals for a unit.

There are other examples of exchange “the Army way.” In “Give ’Em Hell, Hawkeye” (s. 10), the 4077 is informed it can have a much-needed hot water heater — if its members first “beautify” the camp to impress visiting dignitaries. In “The Life You Save,” unit chaplain Fr. Francis Mulcahy (William Christopher) explains Army thinking to Hawkeye after Hawkeye takes over for Mulcahy as mess officer and discovers the unit is missing food trays for which Hawkeye is now responsible:


Look, I was just as upset as you were when I took over the mess tent.

Here’s how it was explained to me.

The Army doesn’t do things the way real human beings do them.

Now, then, you’re minus 75 trays.




But they’re not good for anything except putting under Army food. So, some mess tent somewhere is plus 75 trays.

When this war is over, a few generals will get together, and add up all the pluses and all the minuses, and it’ll all come out even.

Besides which, long before that happens, you’ll already have stuck somebody else for them.

At the end of the episode, Hawkeye indeed sticks Margaret with mess duty — and he and Klinger trick her into thinking that all trays are present and accounted for.

M*A*S*H shows considerable respect for entrepreneurship. As noted above, Radar and Klinger swing clever deals for desired goods. They both also try their hands at get-rich schemes, some of which are hare-brained, but others are clever — such as Klinger’s toying with selling early versions of the Hula-hoop and Frisbee (“Who Knew?”). Hawkeye and B.J. invent a vascular clamp and contract to have it produced (“Patent 4077,” s. 6). Koreans are portrayed as virtuous entrepreneurs, from craftsmen who sell their wares at the 4077 (“Dear Mildred” [s. 4], “Patent 4077”), to domestic workers providing laundry and housekeeping services, to the recurring character Rosie (usually played by Eileen Saki), the proprietress of the off-base saloon.

Private property is also respected. Though the series regularly promotes an ethic of sharing (and features comic retribution for those who violate the ethic), property is not commandeered by the unit’s commander. Potter relies on moral suasion to have Klinger give his dresses to a group of prostitutes in exchange for using their brothel as an operating room (“Bug Out,” s. 5). Charles agrees to share his newspapers from home with the camp — after he finishes reading them (“Communication Breakdown,” s. 10). And, of course, the most famous property on the show is the surgeons’ still — and woe comes to those who violate it. The only instance I can think of where property rights are infringed by command is when Colonel Potter orders Hawkeye and B.J. to get rid of their trouble-causing portable bathtub — and they then trade it for strawberry ice cream (“None Like It Hot,” s. 7).

It should be noted that though economic freedom is respected in the show, there is often “persuasion” — sometimes heavy-handed — against some economic activities. In “Souvenirs” (s. 5), a chopper pilot is pushed to stop buying dangerous war souvenirs from Korean children. In “Change Day” (s. 6), Hawkeye and B.J. refuse to help Charles profit from a shady arbitrage scheme when the Army changes military script. And in “Private Finance” (s. 8), Charles and B.J. use a false diagnosis to temporarily stop a patient from pressure-selling investment products to other patients. But in each of those cases, transactions are obstructed out of an ethic of caring (about children, Korean peasants, and convalescing patients) and are blocked through private arm-twisting, rather than by order.

Likewise, acts of charity are strongly encouraged, but are not ordered. For instance, in “Dear Sis” (s. 7), Charles is free to decline to donate to the unit’s Christmastime orphans fund. However, after Father Mulcahy secretly arranges for Charles’ family to send him a beloved childhood item as a comfort for homesickness, Charles has a Scrooge-like change of heart:


Uh, Father? Is there still time to, uh, contribute to your orphanage fund?




Good. Here. [Hands over a wad of money.] Buy them whatever they need.

Oh. Oh. Here. [Hands over more money.] Buy them whatever they don’t need.


Major? Are you all right?


[Laughing.] You saved me, Father. You lowered a bucket into the well of my despair, and you raised me up to the light of day. I thank you for that.


In this way, M*A*S*H offers a resolution to an age-old dilemma for classical liberals: how to balance an ethic of caring for others with respect for peoples’ property, values, and choices. The solution is to do so through persuasion and example, not force. For a show about a military base in a war zone during the draft era, that is a classical liberal solution.

M*A*S*H’s respect for civil liberties goes beyond people’s right to property and exchange. Freedom of speech and the press are lionized for protecting against government abuse (“For the Good of the Outfit,” “Are You Now, Margaret,” “Tell It to the Marines” [s. 9]); censorship is condemned and lampooned (“For the Good of the Outfit,” “The Moon Is Not Blue” [s. 11]); and religious freedom is revered (“Ping Pong” [s. 5], “A Holy Mess” [s. 10]).

Throughout the show’s run, bigotry is condemned. Racism is ridiculed (“L.I.P.” [s. 2],” “The General Flipped at Dawn,” “Yessir, That’s Our Baby,” “Bottle Fatigue” [s. 8], “The Tooth Shall Set You Free” [ s. 10]) and immigration is championed (“L.I.P.,” “Tell It to the Marines”). In “Dear Dad … Three” (s. 2), a wounded white soldier, Sgt. Condon (Mills Watson), warns the doctors to make sure he gets the “right color” blood. Hawkeye and Trapper decide to teach him a lesson, sneaking into the recovery room at night to dab the sleeping soldier’s skin with tincture of iodine. Worried that his darkening complexion indicates he has indeed been given the wrong blood, Condon confronts the doctors:


What are you guys tryin’ to do to me? Did you give me the wrong color blood?


All blood is the same.


You ever hear of Dr. Charles Drew?


Who’s that?


Dr. Drew invented the process of separating blood so it can be stored.




He died last April in a car accident.


He bled to death. The hospital wouldn’t let him in.


It was for whites only.


See ya, fella.


At the end of the episode, a wiser Condon thanks the surgeons “for giving me a lot to think about” and respectfully salutes nurse Ginger Bayliss (Odessa Cleveland), an African-American.

Sexism and sexual harassment are likewise treated with derision (“What’s Up, Doc?” “Hot Lips Is Back in Town” [s. 7], “Nurse Doctor” [s. 8]). In “Inga” (s. 7), Hawkeye —a notorious womanizer in the series’ early seasons — is agog over a visiting woman surgeon (Mariette Hartley) — until she shows him up in the operating room. Later, Margaret takes him to task for having a limited view of women:


You think a woman is dead until she lives for you. Well, let me tell you something, Benjamin Franklin: We actually survive without you.

We live, we breathe, we dream, we do our work, we earn our pay. Sometimes we even have our little failures, and then we pull ourselves together, all without benefit of your fabulous electric lips!

And let me tell you something else, buster! I can walk into that kitchen any time I want and replace those fabulous lips of yours with a soggy piece of liver!

M*A*S*H also respects the rights of homosexuals (“George,” s. 2) and the disabled (“Dear Uncle Abdul” [s. 8], “Run for the Money” [s. 11]). In “Morale Victory” (s. 8), Charles — a lover of chamber music — tries to help an injured soldier, David Sheridan (James Stephens), accept a permanent loss of dexterity in one hand even though Sheridan is a concert pianist. Charles introduces him to compositions written for one hand, explaining that the injury does not diminish who he is or his talent (and illustrates comparative advantage):


Your hand may be stilled, but your gift cannot be silenced if you refuse to let it be.


Gift? You keep talking about this damn gift.

I had a gift, and I exchanged it for some mortar fragments, remember?


Wrong. Because the gift does not lie in your hands.

I have hands, David. Hands that can make a scalpel sing.

More than anything in my life, I wanted to play, but I do not have the gift.

I can play the notes, but I cannot make the music.

You’ve performed Liszt, Rachmaninoff, Chopin.

Even if you never do so again, you’ve already known a joy that I will never know as long as I live.

Because the true gift is in your head, and in your heart, and in your soul.

Now, you can shut it off forever, or you can find new ways to share your gift with the world — through the baton, the classroom, the pen.

As to these works, they’re for you, because you and the piano will always be as one.


Classical liberals respect civil liberties because they appreciate the value — and even marvel at the wonder — of the individual. (In contrast, the non–classical liberal Frank Burns believes that “individuality’s fine, as long as we all do it together” [“George”].) This wonder is expressed in “Hawkeye” (s. 4), in which Hawkeye suffers a concussion while away from the unit and seeks help from a Korean family. Despite the language barrier, he keeps talking to stay awake, often falling into philosophizing:


Don’t you sometimes wonder about babies? I mean, how do they know what to do in there? They start out looking like little hairless mice, and they wind up looking like us.

How’s it all work?

I’ve held a beating heart in my hand. I’ve poked into kidneys and crocheted them together again. I’ve pushed air into collapsed lungs like beat-up old pump organs. I’ve squeezed and probed and prodded my way through hundreds of miles of gut and goo, and I don’t know what makes us live.

I mean, what keeps us in motion? What keeps the heart beating without anybody rewinding it? Why do the cells reproduce and re-re-reproduce with such gay abandon?

Did you ever see Ann Corio or Margie Hart? Strippers. … I remember Polly O’Day. She worked with a parrot. He didn’t help her strip or anything; while she got undressed, he stood on the side and talked dirty. It was an exciting act. What a body. She was built great, too.

But what I don’t understand is how she got that way, any more than how we did.

Look at your hand. It’s one of the most incredible instruments in the universe. Of all the bones in the body, one fourth are in the hand.

Forget the hand; look at your thumb, that wondrous mechanism that separates us from the other animals. The world-famous opposable thumb, that amazing device that has transported more students to college than the Boston Post Road. Ideal for sucking, especially as a baby. And lauded in song and story as the perfect instrument for pulling out a plum. Or, in the case of the Caesars, for holding it down for the gladiator to die, or holding it up, which means, “See you later at the orgy.”

My friends, for getting up and down the pike, in your pie, in your eye, I give you the thumb.

Have you any idea, Farmer Brown, of the incredible complexity of this piece of human apparatus?

You have no idea of the balletic interplay of parts that make up the human thumb. The flexor ossis metacarpi pollicis flexes the metacarpal bone. That is, draws it inward over the palm, thus producing the movement of opposition — and the Boy Scout salute.

Because of this magical engineering, we can do this. [Grasping a utensil.] And this. [Grasping a cup.] And this. [Making a fist.]

But our greatest triumph comes not from flexing the metacarpal bone and making a fist, which always seems to be thirsting to be clenched. No, no, no, no, no.

Our greatest moment is when we open our hand: cradling a glass of wine, cupping a loved one’s chin. And the best, the most expert of all, keeping all the objects of our life in the air at the same time. [Picking up three pieces of fruit.]

My friends, for your amusement and bemusement, I give you the human person. [Begins juggling the fruit.] Thumb and fingers flexing madly, straining to keep aloft the leaden realities of life: ignorance, death, and madness. Thus, we create for ourselves the illusion that we have power, that we are in control, that we are loved.


Weary Determination

Sadly, M*A*S*H seems out of step with today’s politics. In the America of the 1970s and ’80s and on through the end of the century, both the Democratic and Republican parties were liberal in the classical sense, believing in the value of the individual, the importance of civil liberties, and the benefits of the market. The parties did differ — vigorously — on where to draw certain lines: how big should the welfare state be and what should be required of beneficiaries, how muscular should foreign policy be, what tax rates should be. But those differences fit within a classical liberal philosophy. It’s no wonder that M*A*S*H found plenty of fans on both sides of that era’s red–blue divide.

Today, the show might not find a similar audience. Both ends of the American political spectrum have embraced illiberalism, demanding that speech and the press be constrained, denigrating religious differences, reanimating old bigotries, obstructing immigration, and clamping down on markets and private exchange.

For classical liberals, today’s politics are disturbing and exhausting. We feel a bit like the members of the 4077, who were tired of war, troubled by the horrors they witnessed, and desired the peaceful lives they led before Korea. But they rallied when they needed to. When the choppers and ambulances arrived laden with casualties, the 4077 determinedly carried out their medical duties. And when morale sagged, they found ways to boost it, often with a gag at the expense of some hypocrite, fool, or sadist who sorely deserved it.

And so, maybe classical liberals in the 21st century can rally in the face of today’s grim times — and at the expense of illiberals who deserve it. And, concerning this so-far-illiberal century, maybe we can be reassured by Colonel Potter’s words to an orphan boy in “Old Soldiers”: “You’re off to a kind of a rough start, but I bet you’ve got some glorious times ahead of you.”


Are you a crafter? If you weren’t before, maybe the pandemic has started you on a “maker” kick. I have lots of friends who’ve taken up knitting, woodworking, gardening, and a variety of other hobbies. Maybe you’re not crafty at all, but interested in exploring the human condition throughout history. Or maybe you’re just an avid aficionado of markets. No matter which, this episode with Virginia Postrel is sure to contain conversation of interest to you.


EconTalk host Russ Roberts welcomes Postrel back to the show to discuss her most recent book, The Fabric of Civilization. They discussed the evolution of spinning thread, fabric dying, and textile manufacturing. (Did you know that it takes more than SIX MILES of thread to make a pair of jeans???) What most surprised you in listening to this episode? Do you have a new appreciation for your own closet? For human innovation and ingenuity?

Please help us keep this fascinating conversation going, and use the prompts below to explore with others.




1- What does Postrel mean when she says the Industrial Revolution was started by thread?


2- What is the origin of the term “Luddite,” and why is its common usage today ironic, according to Postrel?


3- Postrel points to two great technological advances in the history of textiles- spinning and fabric dying. The latter, she says, led to the chemical industry, which “changed everything.” What does she mean? To what extent should we consider this a net positive evolution? What does Postrel have to say about externalities, for example?


4- Postrel and Roberts have an interesting discussion on sumptuary laws. How did the purpose of these laws, and the incentive structures they created, compare in Confucian China, Renaissance Italy and Edo Japan? Can you think of any analgous laws that exit today? How would they compare?


5- When asked about the effect writing this book had on her, Postrel said it has made her appreciate mass production more, not less. How about you? Has this episode changed the way you feel?



How about this: instead of forgiving everybody’s college debt, we force all the colleges who scammed millions of Americans into degrees in Useless Theory Masquerading As Valuable Life Skills to grant refunds. That would end the grift right quick.

This is a November 16 tweet by Ben Shapiro. I’ve heard this idea repeated a number of times, with slight variations. Tucker Carlson argued for it last week on his show.

Last week I posted about a bad way to handle existing student debt. I noted that University of Michigan economist Justin Wolfers agreed with my bottom line and also that we agreed  on some of the reasons for that bottom line.

Ben Shapiro’s proposal above is also bad and is arguably worse. It’s much more of a violation of property rights than the Joe Biden-type proposal is.

Here are the problems.

1. How would he identify those colleges that actually engaged in scams? Presumably he would need evidence that the college promised X and didn’t deliver X. That’s possible but my guess is that most colleges were far more circumspect and didn’t promise X. If they did, then the former students would have a justification for suing the college, but this justification would be independent of the amount of student debt. Student A who went into no debt or who paid off all his debt, but who got scammed, would have just as strong a case as Student B who owes $30,000.

2. If Shapiro is saying that we don’t need to find actual evidence of a scam, then he is advocating a taking: the fact that a student has debt but has a fairly useless degree would be enough in this case for Shapiro’s remedy. That’s a problem. It would amount to the government taking forcibly from college D to give to student B.

3. It could even be worse. When Tucker Carlson discussed this kind of remedy on his show last week, he almost licked his lips as he discussed Harvard’s $40 billion endowment. He seemed to be saying that this amount should be distributed to students who had debt. Was it all students or just students who went to Harvard? And if the latter, how many of them are struggling with massive debt and low-paying jobs? I bet it’s under 10%. If it’s the former, then what distinguishes this proposal in principle from Stalin’s grab of land and food from the kulaks? I understand that the Stalin move was way more extreme: Stalin murdered millions of innocent people. I’m talking about the principle here, not the consequences.

4. Establishing the precedent that a student who doesn’t get what he wants from a college can sue to get a refund would, I admit, have some salutary effects. Colleges would substantially raise their standards and might even, gasp, quit discriminating against Asians. (If you follow the link, you’ll see that Harvard dodged a bullet and a federal court found that it did not discriminate. The data I saw caused me to think otherwise.) But it would be better to establish that principle going forward than to penalize colleges that, along with students, thought they were operating under different rules.


I often argue that current NGDP depends heavily on future expected NGDP. That’s also a prediction of modern New Keynesian macro models. However, this generalization is less true during the current Covid pandemic, as current output is artificially depressed by social distancing.

But even social distancing cannot stop asset markets from looking ahead. The current price of assets such as houses is roughly equal to the 12-month future expected price (a bit lower due to trend inflation.)

Consider the recent boom in house prices, occurring despite a severe recession with 10 million fewer jobs than a year ago:

Home prices surged the most on the record in the third quarter, according to a report Tuesday from the Federal Housing Finance Agency.

With record-low mortgage rates fueling demand for housing, prices jumped 3.1% compared to the prior quarter. That was the biggest gain in records dating to 1991, according to FHFA.

Compared to 2019, prices were up 7.8% in the three months through September, the biggest jump since 2006.

What’s going on here?  I’d point to three factors:

1.  An expectation that the Covid pandemic will be over within 12 months, probably even sooner, due to the many vaccines being developed.

2.  A long run downward trend in interest rates that began in the early 1980s and shows no sign of ending.

3.  Increasingly strict land use rules, motivated by “NIMBY” attitudes among the public.

Because the first point is fairly obvious, let me focus on the other two.  We don’t know all the reasons why interest rates are trending lower, although demographics are probably one factor.  Population growth in slowing, and interest rates fell first in places like Japan, where population growth slowed earlier than in the US.

(I suspect that our economy’s shift in emphasis from building things to creating ideas also plays a role.)

But the second reason (lower interest rates) would not normally be enough, for “never reason from a price change” reasons. In a well functioning economy, higher housing prices should lead to more new construction.  Anticipation of these increases in production would limit the price increase.  That used to happen in the mid-20th century, when it was fairly easy to build houses in America.  In recent decades, however, it’s become harder and harder to build new homes, in more and more cities.  Thus we will increasingly resemble places like the UK, Hong Kong, Canada, Australia and New Zealand, where house prices have reached a permanently high plateau (in real terms) due to strict building limits.

There are also lessons for monetary policy.  Just as expectations of high post-pandemic house prices create high house prices today, expansionary monetary policy that boosts expected future NGDP can boost NGDP right now.  Indeed this is basically the argument for average inflation targeting–create future inflation expectations to raise current inflation.  Bullish expectations can’t work miracles (for output) when a real shock like Covid causes people to hunker down, but in a normal recession the expectations channels is by far the most important part of stabilization policy–Nick Rowe likes to say it’s about 99% of monetary policy.


A few weeks ago, the NYT reported that “The Coronavirus Has Claimed 2.5 Million Years of Potential Life.” If you read the original study, you’ll discover one crucial caveat: The authors’s calculations assume that COVID victims would have had the standard life expectancy for Americans of their age.  They freely admit that this is unrealistic and inflates their estimate:

The SARS-CoV-2 virus is known to infect and replicate in many different tissues and exacerbates problems in several organ systems including the kidney, liver, heart, lungs and brain (Lu et al., 2020; Chandrashekar et al., 2020). Any individual with problems in these systems or the immune system is likely to be more vulnerable to SARS-CoV-2 infection and suffer more severe outcomes as has been demonstrated for immune deficiencies (Bastard et al., 2020). In addition, other health states qualifying as pre-existing conditions, such as obesity, hypertension, chronic kidney disease and diabetes are known comorbidity factors for COVID-19 (see CDC co-morbidity tables and references therein; and these cohorts of individuals have a shorter than average predicted life span. Deaths due to complications with pre-existing comorbid conditions would artificially increase the person-years lost in these calculations but are difficult to quantitate in this current analysis.

The authors argue that fixing this problem would only modestly cut their estimates.  I’m not convinced, but I’d rather focus on a much bigger issue: Taking quality of life into account, how many life-years has the reaction to COVID destroyed?  To see what I’m getting at, ask yourself: “Suppose you could either live a year of life in the COVID era, or X months under normal conditions.  What’s the value of X?”  Given the enormous social disruption and dire social isolation that most people have endured, X=10 months seems like a conservative estimate.  For what it’s worth, this Twitter poll agrees*:

Suppose you could either live a year of life in the COVID era, or X months under normal conditions.

What's the value of X that makes the AVERAGE AMERICAN indifferent?

— Bryan Caplan (@bryan_caplan) November 9, 2020

So what?  Well, we’ve now endured 8 months of COVID life.  If that’s worth only 5/6ths as much as normal time, the average American has now lost 4/3rds of a month.  Multiplying that by the total American population of 330M, the total loss comes to about 37 million years of life.  That’s about 15 times the reported estimate of the direct cost of COVID.

Casual readers will be tempted to declare that the cure has been much worse than the disease.  The right cost-benefit comparison, however, is not to weigh the cost of prevention against the harm endured.  The right cost-benefit comparison is to weigh the cost of prevention against the harm prevented.  You have to ask yourself: If normal life had continued unabated since March, how many additional life-years would have been lost?  I can believe that the number would have been double what we observed, even though no country on Earth has done so poorly.  With effort, I can imagine that the number would have been triple what we observed.  There’s a tiny chance it could have been five times worse.  But fifteen times?  No way.

Upshot: The total cost of all COVID prevention has very likely exceeded the total benefit of all COVID prevention.

Before you panic, note these key caveats:

1. This does not imply that zero COVID prevention was optimal.  The lesson is merely that we went much too far.

2. Prevention includes both private and government efforts.  The main lesson of the data is not merely that government overreacted, but that people overreacted.

3. As I’ve argued before, the initial costs of government action were moderate, because private individuals reacted strongly on their own.  Over time, however, government’s share of the burden has increased because private individuals’ have a strong tendency to lose patience and return to normalcy.

4. If a vaccine suddenly became available today, my calculations for the story so far would still hold.  Behavioral changes prevent deaths day-by-day.  They also drain life of much of its meaning day-by-day.


At this point, you could protest, “Hey Bryan, I thought you weren’t a utilitarian.”  So what if the cost of COVID prevention greatly exceeds the value of life saved?  My answer, to repeat, is that I have a strong moral presumption in favor of human liberty.  So while I respect individuals’ rights to overreact to moderate risks, I oppose any act of government that does not pass a cost-benefit test with flying colors.

And no, I don’t think that an asymptomatic person who walks down the street unmasked is “aggressing” against passersby in any meaningful way.

* You could object that my Twitter followers are self-selected to regard COVID prevention costs as high.  In point of fact, they consider the personal costs markedly less serious than the average costs:

Suppose you could either live a year of life in the COVID era, or X months under normal conditions. 

What's the value of X that makes YOU indifferent?

— Bryan Caplan (@bryan_caplan) November 9, 2020


Hong Kong will give $645 dollars to all those who accept to be tested for Covid19 and are positive. The number of cases, and deaths, are on the rise in Hong Kong but everything seems under control, given the fact Hong Kong’s population is 7.4 million. Lombardy, where I live, is the home of 10 million people and since the start of the pandemic we have had more than 180.000 cases and some 20.000 deaths.

Yet this is understandably an outcome the Hong Kong authorities want to avoid, and so they are putting in place a system that incentivizes testing in this way. We will see how it goes. Income per capita in Hong Kong is around $ 50,000. I suspect that, everywhere, higher-income people, as they tend to be more exposed to the media, are eager to test no matter what. If there is a certain reluctance in lower-income people to test, perhaps because they fear the consequences of quarantine in terms of their work and their social life, perhaps subsidies such as Hong Kong’s might well counteract this wariness (I suppose it was designed with that goal in mind).

One wonders why Western democracies didn’t try to do the same. After all, they have all distributed a staggering amount of money in the last few months. Linking some of it to testing would not have hurt – though of course if the subsidy was too high you could imagine some opportunistic behavior (including attempts to playing with the test’s results to score positive, to the extent that’s possible). I fear that’s because the testing capacity wasn’t there. Now it seems a similar approach might be enacted in Italy, too. Perhaps in the hope of saving the upcoming skiing season, the province of Bozen, in South Tyrol (a German-speaking region of Italy), has tested 70% of its population (over 350.000 people) in just a few days, with antigenic tests. People there are notoriously very law-abiding, but that’s not the same everywhere. Why should we rule out the idea that a monetary incentive could help?


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