Arnold Kling is understandably unimpressed with economists’ understanding of business. A slice:
Economists treat “the firm” as if it were a single, cohesive unit. In 2016, Bengt Holmstrom and Oliver Hart won a Nobel Prize for undertaking analysis of just one internal conflict—that between a manager wanting performance and a worker preferring to shirk. But in the real world, a business is a cauldron of conflicts.
John O. McGinnis reviews Ingrid Robeyns’s “case against extreme wealth.” Two slices:
Politically, she contends that the state should limit individuals to a net worth of 10 million dollars. Ethically, she claims that moral individuals should possess no more than a million dollars’ worth of assets.
Her arguments are not at all convincing, but they are clarifying. While the left’s interest in progressive taxation can be reconciled with a market society, even if it reduces economic growth, proscribing wealth would lead to a society with little or no growth. While the left’s interest in creating more equality of opportunity can be reconciled with liberalism’s priority on human autonomy, Robeyns’ contentions are deeply illiberal and depend on her own unimaginative prescriptions for human flourishing. Unfortunately, given the prevalence of the swing against the rich, friends of liberty will hear more such arguments and need to be prepared to refute them.
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Robeyns appears to think “intrinsic motivations” rather than external rewards will be enough to keep the economy humming but she provides no evidence for this. Intrinsic motivation has not permitted even small-scale socialist experiments to endure. Even the higher tax rates in Europe that are far lower than what would be necessary to eliminate the rich—depress the levels of work and innovation there compared to the United States.
Wall Street Journal columnist Mary Anastasia O’Grady writes insightfully about Brazil and Elon Musk. Two slices:
In modern liberal democracy, free speech acts as a check on absolute power. The executive has the bully pulpit, but the public’s access to contrarian points of view contributes to the vibrancy of political debate. Brazil’s constitution protects civil liberties, and free expression has been a Brazilian value since the country returned to democracy in 1985.
That is, until Lula and his Workers’ Party got caught with their hands in the cookie jar and Lula went to jail in 2017. The largest graft and bribery scandal in Western Hemisphere history exposed the criminality of the political class and its business-community friends. In 2018 Brazilians elected President Jair Bolsonaro, an outsider who promised to clean house.
Mr. Bolsonaro is a former army captain with a lowbrow style who can be crude. But that alone doesn’t explain why a good part of the country has come down with Bolsonaro Derangement Syndrome. Lula can also be vulgar.
Mr. Bolsonaro’s main transgression was his pledge to protect private property, restore law and order, and challenge identity politics. He was supported by social conservatives, libertarians, the working and middle classes, entrepreneurs and farmers, all of whom were tired of democratic socialism. Many were willing to overlook Mr. Bolsonaro’s flaws in exchange for getting rid of the Workers’ Party. The legacy media calls them “the far right.”
As president Mr. Bolsonaro was far from a champion of free markets and his language was often reckless. But his administration restored fiscal sanity, deregulated parts of the economy, and made doing business less onerous through digitization
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Brazil’s Congress has failed to pass legislation that empowers the court to ban what it subjectively brands “fake news.” But the court continues to demand that platforms block speech. On April 6 Mr. Musk rebelled, tweeting that while Twitter has “informed” accounts that it was told to block, it doesn’t “know the reasons these blocking orders have been issued.” Nor does it “know which posts are alleged to violate the law” and it’s “prohibited from saying which court or judge issued the order, or on what grounds.” Twitter is “threatened with daily fines if we fail to comply,” he said. Last week he lifted the block on some users. He also threatened to release his communication with the court, an accounting Brazilians deserve to see.
Professor Michael Way’s letter in today’s Wall Street Journal points to a real problem:
Nothing makes clearer to me the degree to which government influences and meddles with business than to learn that Intel has a “chief government affairs officer” (Letters, April 10). True capitalism may not be dead yet in the U.S., but it is on life support.
Prof. Michael H. Way
California State University, Bakersfield
Pierre Lemieux ponders incentives.
John Cochrane speaks to APEE. Two slices:
Economics is about incentives. We don’t have much to say really about transfers. Our expertise, our claim to truth that applies to everyone, is the analysis of incentives.
Politics is all about transfers. Government grabs resources from A and gives them to B, or distorts markets to benefit B. Look at any discussion of taxes. The newspapers are full of who gains or loses $100, but practically silent on incentives to work, save, invest. In many ways, managing transfers by force is the point of government.
This is all good news. In a discussion that is essentially about transfers, we can pop in, say “excuse me,” and have something genuinely different to say, rather than just jump in on the partisan scales of who gets what.
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Another weakness is that we are boring. Many politicians want a New Big Idea as a core of their propaganda racket with a new name. Make America Great Again. Bidenomics. National Conservativism. Anti-Racism. To this cage fight we bring, “Remove the Regulatory Roadblocks in Real Estate Permitting. “New” on the package is the first lesson of marketing. “Stimulus,” write everyone a check, makes great politics. But our national life is a hoarder’s nightmare. We need a patient Marie Kondo cleanup, not stimulus. First the sock drawer, then the kitchen cabinets, and maybe next month we can look inside the garage.
We should stay boring. We should not bend to the desire for power and influence, to serve as the ideological fountain for people who strive for power. That is not the way our ideas will advance. They will find us when the time is right, as Reagan found Friedman.
Our ideas also seem old, and politics demands the fresh and new. But our ideas are better because many are old and well tested. Just because force = mass times acceleration is an idea from the 1670s doesn’t make it any less applicable today. Just because Adam Smith and David Ricardo showed tariffs were dumb centuries ago doesn’t make tariffs any smarter today. Old well-tested ideas make a lot better policy. One of my greatest annoyances is economists who fly to Washington with a clever new idea for Washington to spend a few trillions of dollars; the same Washington that can’t get a the existence of a supply curve, a budget constraint, or trade balance identity (trade deficit = capital inflow) straight. Policy should get the simple tried and true right, as boring as that might be for whiz economists.
el gato malo tweets: (HT Jay Bhattacharya)
i remember in feb and march of 2020 being astonished by this lockdown idea and loudly yowling “do you have any idea what shutting down the world for 2 weeks would do to global supply chains and economic function?”
it did not even occur to me that anyone would be crazy enough to try it for months or years at the expense of small business, social fabric, and education.
it was simply such an insane idea that my mind could not compass the notion that someone would try it or that anyone would go along with it if they did.
i think a number of us suffered from a similar failure of imagination. there was a pervasive sense among us that there was just no way that the “people in charge” could be this stupid, barking mad, and hopelessly corrupt and self-absorbed or that society could be so easily panicked into a stampede of self-enforcing submission to collective delusions.
it turns out that the intersection of milgram and ash is a very dangerous place for society.
it turns out that propaganda works.
and it turns out that “the experts” are anything but.
the question that remains is “did we generate the societal antibodies to resist the next one?”
a significant part of that is resisting this historical re-write of “mistakes were made, but no one could have known.”
they could. they did. and they will again.
but alone, that does not amount to much.
you get run over.
it’s who society stands behind that decides whether or not “people knowing better” matters.
choose well.
