Some Links

by Don Boudreaux on May 6, 2013

in Data, Debt and Deficits, Economics, Hubris and humility, Law, Monetary Policy, Scientism, State of Macro, Terrorism

Gary Becker is correct: “The 40 year-old American ‘war on drugs’ has been a colossal failure.”  I would add that even if this “war on drugs” had indeed resulted in the complete inability of any American ever again to get his or her hands (and noses or lungs or mouths or veins) on a single molecule of substances declared by Uncle Sam to be “illegal,” the war would still have been a failure insofar as both its means and ends are judged according to how well they are consistent with individual liberty and responsibility.  A society whose government succeeds at preventing its citizens from engaging in peaceful activities is, to that extent, a failed society: that society has failed to protect its liberties from the uncivilized and dangerous intrusions uncorked by mob manias.

The always-wise Steve Chapman warns against a too-ready embrace of surveillance cameras.  I love his concluding paragraph:

Enthusiasts for electronic surveillance may say: If you have nothing to hide, you have nothing to fear. But there’s a reason people don’t live in glass houses.

Here’s Reason’s Ron Bailey on money and happiness.

Where are Cass Sunstein and his fellow enthusiasts for behavioral economics when we need them?  George Will reports on an appalling interference by government with free speech – an interference that behavioral economists should be the first to condemn.

Lawrence Summers shares his sensible thoughts about the controversy over the Reinhart-Rogoff coding error.

Marty Mazorra reacts to watching the recent debate – featuring Russ – over the minimum-wage.

Bryan Caplan reflects on the state of macroeconomics.  The image isn’t pretty.

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Bad week for psychology

by Russ Roberts on May 5, 2013

in Data

I have argued for a long time that the experimental psychology literature has problems with replication. I explored this topic on EconTalk with Brian Nosek.

This has been a bad week for the credibility of that literature.

Last week, the New York Times Sunday magazine did a profile of Diederik Stapel whose work turns out to be a fraud. Now Scientific American reports that so-called priming results can’t be replicated:

Thinking about a professor just before you take an intelligence test makes you perform better than if you think about football hooligans. Or does it? An influential theory that certain behavior can be modified by unconscious cues is under serious attack.

A paper published in PLoS ONE last week reports that nine different experiments failed to replicate this example of ‘intelligence priming’, first described in 1998 by Ap Dijksterhuis, a social psychologist at Radboud University Nijmegen in the Netherlands, and now included in textbooks.

Interested readers may also enjoy this essay by Ariel Rubinstein (see the discussion of experiments) as well as this EconTalk episode with Rubinstein.

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Video from the minimum wage debate

by Russ Roberts on May 5, 2013

in Work

Here’s the video from the debate I (Russ) did recently with Intelligence Squared on the minimum wage. My opening statement is the first one and goes for six minutes, the length we were given. Then the other three participants (Jared Bernstein, Jim Dorn, and Karen Kornbluh) make their statements. That is followed by a lively back-and-forth plus audience questions then two minute closing statements.

My follow-up post to the debate (with links to a Bernstein follow-up) is here.

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Quotation of the Day…

by Don Boudreaux on May 5, 2013

in Civil Society, Complexity & Emergence, History, Housing, Myths and Fallacies

… is from page 102 of Government Failure and Over-Government, which is volume 5 in the 2004 Liberty Fund series The Collected Works of Arthur Seldon; specifically, it’s from Seldon’s 1998 monograph, The Dilemma of Democracy:

The historical evidence shows that by the 1860s most working-class children [in England] were at schools paid for by parents with the aid sometimes of the Church or lay charity.  By the 1870s some working-class families, especially in the industrial North where wages were higher than in the rural South around London, were beginning to buy their homes with the aid of building societies.  By the early 1910s most working-class heads of families were insuring against unemployment, sickness, and ageing.  The notion that the working classes of England neglected their families until the state compelled them by law is historical fiction.

Unfortunately, ignorance of history remains a curse as it fuels fact-free theorizing and policy prescriptions (as Deirdre McCloskey pointed out last year in the greatest blog post ever written).  And here’s a reminder of one specific instance of historical ignorance – this one committed by Paul Krugman – relevant to Seldon’s point above.

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I Do Not Care About Income or Wealth Inequality

by Don Boudreaux on May 4, 2013

in Civil Society, Inequality

Richard Ammerman, a registered nurse in Rhode Island, challenges me by e-mail to answer “yes or no” to the question: Do I care about income inequality?

No.

I do not in the least care about income (or wealth) inequality.

…………

I suspect that some of my bleeding-heart-libertarian friends will berate me for being insensitive, so it is chiefly to them that I address the following explanation of my one-word answer.

I care – very deeply – whether the process for pursuing one’s life’s goals is fair or not.  I want everyone to have as fair a chance in the economy as is humanly possible.  I despise special privileges that stack the deck either in favor of Jones or against Smith.  (We can have a debate about what the details of “fair process” and “special privileges” look like, but this post is not the place for such a debate.)  But I do not care about differences in monetary income or wealth as such.

If (by whatever criteria) the process is fair, then the outcomes are fair.  If the process is not fair, then at least some outcomes are lamentable.  If those lamentable outcomes involve too little income for Smith and too much for Jones, then this income difference is evidence of the unfair or skewed or crony-fied process.  But the object of my concern in such situations isn’t the income difference as such; rather, it’s the unfair or skewed or crony-fied process that gave rise to it.

I’m all for correcting the process, and would be no less in favor of correcting the process if I were told that such a correction will increase income inequality as I would be in favor of correcting the process if I were told that such a correction will decrease income inequality.  Again, income differences can at best serve as evidence of a problem; the differences themselves – the income inequalities themselves – are not the core problem.

Worrying about income (or wealth) differences as such has always for me smacked of childishness.  It’s envy elevated into public policy.  I’m sure that it has something to do with how I was raised, but the very thought of fretting about how much money other people make relative to what I make has always seemed to me to be grossly impolite, anti-social, pointless, corrosive of one’s character, and in horribly bad taste.  This was so for me for as long as I can remember, even when my income was very low by American standards.

My economic training has only reinforced my gut-level antipathy toward envying other people’s material or financial possessions.  This training assures me that in a market economy the stock (or flow) of wealth isn’t fixed.  This training assures me also that attempts to ‘correct’ the results of ethically appropriate processes too often have too many undesirable unintended consequences.  This training assures me that income or wealth is not a glob of stuff that can be taken from Smith and transferred to Jones as easily and as meaningfully as too many people suppose.  This training assures me that to become wealthy in the material dimension often requires relative impoverishment in other, often less-visible dimensions (for example, being relatively poor in leisure).

Because I know that most people in market-oriented economies who are materially wealthier than I am produced their wealth – they made the valuable contributions at the margin that generated their wealth – their wealth is in no way anything that I or anyone else has an economic or an ethical claim to.  I understand that, were it not for the efforts at the margin of those ‘rich’ people, the wealth that they have was not taken from me or from anyone else; it was produced by them and would not exist were it not for their efforts.  (That the likes of Sen. Elizabeth Warren are led by ignorance of the importance of thinking at the margin to a failure to understand this truth does nothing to make it less true.)  So for me to envy their possession of their fine car or luxury mansion or private jet or whatever would be evidence in me of smallness of mind and spirit – a smallness that I hope never marks my character.

I could list other reasons for why I believe that envy concern with income difference is not worthy of civilized people, but I’ll content myself to end by saying again, very simply, that such a concern is immature and it corrodes the character of both the larger society and of the individuals who suffer the terrible misfortune to be gripped by such a concern.

UPDATE: Here, in full, is an e-mail sent to me just now from my Bleeding Heart Libertarian buddy Steve Horwitz; it is an e-mail with which I am in full agreement:

This bleeding heart libertarian mostly agrees with you about inequality.
 
What I DO care about is how well collections of social institutions do for the least well off among us.  That markets continually raise the standard of living of the poor is what matters, not how rich the rich are in absolute or relative terms.  Give me the society that is far more unequal but where the poor live better over the one that is more equal but where the poor don’t do as well.  Please.
 
It just so happens… I think we’re more or less in it.
 
SH

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Maximally Mysterious

by Don Boudreaux on May 4, 2013

in Reality Is Not Optional, Seen and Unseen, Work

Here’s a letter to the Florida Times-Union:

Supporters of the minimum wage assume that the only response people have to higher costs imposed by government is to pay those higher costs (“Readers debate the merits of the minimum wage,” May 4).

Let’s test this assumption’s robustness.  Suppose that instead of legislating a minimum wage, government legislates a “minimum customer contribution.”  Each consumer would be forced to deposit $2.50 into a bin every time he or she walks into a Wal-Mart, Safeway, McDonald’s or other retail store.  At the end of the day the bins would be emptied and their contents distributed in equal shares to each retailer’s non-managerial employees.  Customers using drive-up windows and on-line retailing sites would be exempt from this mandate.

Does anyone suppose that such a mandate would not prompt consumers (even many with high disposable incomes) to reduce their frequency of entering retail stores?  Would anyone fantasize that the good intentions of the supporters of this minimum-customer-contribution legislation – or the asserted “need” of every worker to earn a “living wage” – are sufficient to prevent consumers from shifting their activities away from shopping in brick-and-mortar stores and toward greater use of drive-up windows and on-line retailing?

I’m guessing not.  So why do so few people see that minimum-wage legislation prompts employers to use fewer low-skilled workers?  Why do minimum-wage proponents overlook (among other facts) the artificially increased incentives that such legislation gives to employers to replace many low-skilled workers with machines – such as self-checkout lanes, and robotic floor cleaners – whose employment is exempt from minimum-wage legislation?

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

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Quotation of the Day…

by Don Boudreaux on May 4, 2013

in Hayek, Myths and Fallacies, Other People's Money, Politics

… is from page 7 of of volume III (“The Political Order of a Free People,” 1979) of Hayek’s Law, Legislation, and Liberty:

Civilization largely rests on the fact that the individuals have learnt to restrain their desires for particular objects and to submit to generally recognized rules of just conduct.  Majorities, however, have not yet been civilized in this manner because they do not have to obey rules.  What would we not all do if we were genuinely convinced that our desire for a particular action proves that it is just?  The result is not different if people are persuaded that the agreement of the majority on the advantage of a particular measure proves that it is just.  When people are taught to believe that what they agree is necessarily just, they will indeed soon cease to ask if it is so.  Yet the belief that all on which a majority can agree is by definition just has for several generations been impressed upon popular opinion.

In short, majoritarian government brings out the kid in all of us.

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Some Links

by Don Boudreaux on May 3, 2013

in Books, Economics, Energy, Environment, Growth, Health, Hubris and humility, Monetary Policy, Seen and Unseen, Taxes, War

George Will is right that Barack Obama is right (if duplicitously so) on the question of whether or not Uncle Sam should intervene in Syria.  Here’s his conclusion:

Then-Secretary of State Hillary Clinton said “it is in our DNA” to believe “there are no limits on what is possible or what can be achieved.” Obama seems to know better. Certainly his confused — or perhaps calculatedly confusing — words about red lines serve his policy of sensible caution.

George Selgin writes about Dick Timberlake’s new book, Constitutional Money.

Bob Murphy calls Paul Krugman out on the latter’s (in Bob’s apt words) “botched inflation call.”

Advocates of deploying behavioral-economics to inform government policies should agree with Jonah Goldberg that income-tax-withholding is a scheme that – because it psychologically misleads taxpayers into thinking that the burden they bear from income taxation is lighter than it really is – we can and should do without.

Art Carden – now guest blogging at EconLog (yes!) – reflects on May Day, economics, and Deirdre McCloskey’s research on bourgeois dignity.

Mark Perry explains why a gas tax on mileage is a very bad idea.

Tyler Cowen reflects on some reflections on the Oregon Medicaid study.

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Michael Cox on Middle-Class Progress

by Don Boudreaux on May 3, 2013

in Growth, Standard of Living, Video

A marvelous success story – brought to us by open, entrepreneurial, bourgeois-values-driven markets.  (Thanks to the great people at TFAS for producing this video.)

UPDATE: 1993 and 2013 (HT Fred Dent)

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Quotation of the Day…

by Don Boudreaux on May 3, 2013

in Crony Capitalism, Trade

… is from page 70 of Henry Simons’s posthumous 1948 collection, Economic Policy for a Free Society; specifically, it’s from Simons’s famous 1934 pamphlet, A Positive Program for Laissez Faire:

A nation which wishes to preserve democratic institutions cannot afford to allow its legislatures to become engaged on a large scale in the promiscuous distribution of special subsidies and special favors.  Once this occurs, there is no protecting the interests of the community at large, and, what is more important, there is no protecting the political institutions themselves.  Tariff legislation is politically the first step in the degeneration of popular government into the warfare of each group against all.

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