Liberty Fund

Justice Scalia and How Originalism Fits into the Fabric of the Law

In my last post, I explored whether Justice Scalia was an old or a new originalist, concluding that he was a new originalist in one way, but an old originalist in another way.  In this post, I want to

…

Diderot argues that the laws must be based upon natural rights and be made for all and not for one (1755)

Don't change the forecast; change the policy, by Scott Sumner

Today the Fed abandoned its previous forecast, which called for 2% inflation in 2018. Now they forecast that inflation will run below 2% in 2018, as it has for most of the past decade.

I agree that it is likely that inflation will run below 2% in 2018. Nonetheless, I believe the Fed made a mistake by forecasting sub-2% inflation in 2018. Instead, the Fed should have changed its policy, so that it could continue to forecast inflation at 2% in 2018. This is what Lars Svensson means by "targeting the forecast."

The Fed is like a ship captain that intends the ship to arrive in New York, forecasts the ship will arrive in Boston, and then refuses to turn the steering wheel enough to equate the geographic goal with the geographic forecast.

Democrats Are Gifting the Median Voter to Republicans

The party in control of the presidency typically loses seats in the House and Senate in midterm elections. Since Jimmy Carter, the presidential party has on average lost just over 20 seats in the House and just under four seats

…

Feldstein's Insight on Standards of Living, by David Henderson

In a recent op/ed in the Wall Street Journal, my former boss at the Council of Economic Advisers and Harvard economist Martin Feldstein points out that the data on real incomes in the United States systematically understate its growth. The article is titled "We're Richer Than We Realize," WSJ, September 8 (September 9-10 in the print edition.)

An excerpt:

Consider how the government handles manufactured products when their quality improves. Statisticians track a large number of products. For each, they ask the manufacturer two questions: Has the product changed since last year? If so, how much more does it cost to make this year's model than it would now cost to make last year's model?

If there is no increase in the cost of production, the government concludes that there has been no increase in quality. And if the manufacturer reports an increase in the cost of production, the government assumes that the value of the product to consumers has increased in the same proportion.
That's amazing! I knew, and have written about, the fact that the government understates improvements in quality. I had not known how naively the government did that.

It reminds me of something I did know and reported on in "The Digital Economic Revolution," Red Herring, September 1, 1997. I wrote:

Which brings us back to the government data. To compute labor productivity in an industry, the federal government's Bureau of Economic Analysis divides the output of an industry by the number of people employed. Not bad for, say, copper mining, where tons of copper mined is a pretty decent measure of output. But how do you think the federal government, with all its high-powered analysts and its multimillion-dollar budgets for gathering data, measures productivity in the banking industry? The number of transactions per employee? Or maybe the per-employee value of deposits and loans, adjusted for inflation?

Neither. The Commerce Department's august Bureau of Economic Analysis measures output of banking by the number of people employed in banking. This means that if the number of banking employees rises by 10 percent, then the government's data crunchers simply assume that output rises by 10 percent. Therefore, the banking industry's productivity growth is zero, not by observation, but by definition.

Of course, productivity in banking is growing. According to surveys by the Bank Administration Institute, the number of checks processed per hour, a measure of bank workers' productivity, rose from 265 items in 1971 to 825 in 1986, a rate of increase of 7.6 percent annually. Presumably computers were a factor in this productivity growth. And as noted by Martin Baily, an economist at the Brookings Institution, and Robert J. Gordon, an economist at Northwestern University, the per-check processing costs for electronic funds transfers (EFTs), which were made possible by the information technology revolution, are a fraction of the cost of conventional check processing. EFTs still constitute only a small percentage of transactions, but as this segment grows, productivity will increase.
Marty points out another factor that understates growth:
There are other problems that cause the official statistics to underestimate the true growth of real income. A basic government rule of GDP measurement is to count only goods and services that are sold in the market. Services like Google and Facebook are therefore excluded from GDP even though they are of substantial value to households. The increasing importance of such free services implies a further understatement of real income growth.
Sadly, a number of commenters on the Journal's site failed to get his point. I'll quote three and, rather than tell you what's wrong with the commenters' statements, leave that as an exercise for the reader. Remember that these statements are made by people who, it is clear from tone, think they're challenging Marty's argument.

matthew kimball writes:

Another example is food has gone up and quality hasn't, gas has gone up, home price have gone up, clothing has gone up. All the essentials have gone up.
Gregory Weinman writes:
Telling me the LG G6 I bought to replace my LG G4 is far better is immaterial because both cost the same.
John Callahan writes:
Mr. Feldstein sounds much like New York Fed President William Dudley did half a decade ago--out of touch with the average American. Mr. Dudley was in Queens touting improvements in technology in regards to the cost of living- "Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful.... You have to look at the prices of all things." The residents of Queens were far more concerned about rapidly rising grocery and gasoline prices and rightfully so. As one resident noted, "You can't eat an iPad."
HT@ Francois Melese. (4 COMMENTS)

The Society of Tomorrow (Gustave de Molinari)

The Society of Tomorrow: A Forecast of its Political and Economic Organization, ed. Hodgson Pratt and Frederic Passy, trans. P.H. Lee Warner (New York: G.P. Putnam’s Sons, 1904).

Can the Sugary Beverage Tax!

I live in Cook County—one of the worst governed jurisdictions in the United States.   To close a budget deficit it has passed a law imposing a tax of one penny an ounce on drinks that added either sugar or artificial

…

A Sturdier Side to the Seventies

For many people, the 1970s were a time when things began to fall apart—the era of Jimmy Carter, earth tones, the oil embargo, drugs. Yet as a new book reveals, “the Me Decade” was also, at least in certain safe

…

Economic Development, Mobility, and Political Discontent: An Experimental Test of Tocqueville’s Thesis in Pakistan

ANDREW HEALY, KATRINA KOSEC and CECILIA HYUNJUNG MO AMERICAN POLITICAL SCIENCE REVIEW, Volume 111, Issue 3 Abstract: We consider the thesis of Alexis de Tocqueville (1856) that economic development and increased mobility may generate political discontent not present in more stagnant economies. For many citizens, as they become aware of the potential for improved living standards, their aspirations may […]

Mises on cosmopolitan cooperation and peace (1927)

Peter Boettke, "Hayek's Epistemic Liberalism" (September, 2017)

Peter J. Boettke, Professor of Economics and Philosophy at George Mason University, argues that is a common trope to claim that F. A. Hayek experienced a crushing defeat in technical economics during the 1930s.  At the beginning of the decade, Hayek emerged in the British scientific community as a leading economic theorist. Yet by the end of the decade Hayek was supposedly defeated in his debate both with Keynes and with Oskar Lange and Abba Lerner over market socialism. However, this narrative reflects a fundamental misunderstanding of the teachings of economics from the classical to the early neoclassical economists.  Economic life from Adam Smith to J. S. Mill never was treated as taking place in an institutional vacuum.  Instead, law, politics, and social mores all constituted the institutional background against which economic life played out. As Boettke argues in the Lead Essay, Hayek’s epistemic institutionalism, as articulated in the 1930s and 1940s, provided the foundation for his own reconstruction and restatement of liberal political economy as evidenced in The Constitution of Liberty (1960) and Law, Legislation and Liberty (1973-79). Recognizing this aspect of Hayek’s thought is a first step to recognizing his broader contributions to economic science and the art of political economy. Boettke is joined in this discussion by Steven Horwitz, the John H. Schnatter Distinguished Professor of Free Enterprise in the department of economics at Ball State University, Roger Koppl, professor of finance in the Whitman School of Management of Syracuse University, and Adam Martin is a Political Economy Research Fellow at the Free Market Institute and an assistant professor in the department of Agricultural and Applied Economics at Texas Tech University.

Liquidation and the Problem of Constitutional Settlement

Gordon Lloyd and Steve Ealy make a compelling case for liquidation, what they call “Originalism for the Living Generation,” as the most Madisonian means of settling constitutional meaning. Grounded as it is in Madisonian text and example, from The Federalist …

The Rich Get Richer...

But is that a bad thing? That may be the central question explored in this week's EconTalk episode with UC Berkeley's Gabriel Zucman. Working with Thomas Piketty and Emmanuel Saez, Zucman explored national income accounts to look for trends in income inequality in the United States since 1980.Their results suggest that the bottom 50% of Americans have seen no growth in income, while a disproportionate share of growth has accrued to the top 1%. How robust are these results, and what policy implications might be suggested? And how does income inequality in America compare to that in other nations? Do you feel richer than you did in the 80s? Share your thoughts with us today... We always love to hear from you.

1. In terms of income inequality, how are average growth rates misleading about the real state of the economy, according to Zucman?

2. How does Zucman's analysis differ from previous attempts to measure income inequality? What are the weaknesses of using tax data for such purpose? How might a cross-sectional approach yield different results regarding income inequality?

Diderot on the nature of political authority (1751)

The Soliloquies (Saint Augustine)

The Soliloquies of St. Augustine, translated into English by Rose Elizabeth Cleveland. With Notes and Introduction by the Translator (Boston: Little, Brown, and Co., 1910).

Encyclopedic Liberty: Political Articles in the Dictionary of Diderot and D’Alembert (Denis Diderot)

This anthology is the first endeavor to bring together the most significant political writing from the entire twenty-million-word compendium known as The Encyclopedia. It includes eighty-one of the most original, controversial and representative articles on political ideas, practices, and institutions, many translated into English for the first time. The articles cover such topics as the foundations of political order, the relationship between natural and civil liberty, the different types of constitutional regimes, the role of the state in economic and religious affairs, and the boundaries between manners, morals, and laws.

Spooner on the "knaves," the "dupes," and "do-nothings" among government supporters (1870)

Max Scheler and Adam Smith on Sympathy

ADRIANA ALFARO ALTAMIRANO THE REVIEW OF POLITICS, Volume 79, Issue 3 ABSTRACT: Recent efforts to theorize the role of emotions in political life have stressed the importance of sympathy, and have often recurred to Adam Smith to articulate their claims. In the early twentieth-century, Max Scheler disputed the salutary character of sympathy, dismissing it as an […]

Ken Burns’ Vietnam

Journalists often claim to write the first draft of history, but that statement raises the question when a story turns from current events into history.  The Vietnam War now stands closer to World War II than 2017.  A formative experience

…

The Wonder of International Adoption: High School Grades in Sweden, by Bryan Caplan

Moving young children from the Third World to Sweden wipes out about half of their national IQ deficit.  What about performance in high school?  Vinnerljung et al.'s "School Performance at Age 16 Among International Adoptees" (International Social Work, 2010)  compiles the numbers, once again breaking them down by regular Swedes, Korean adoptees, and non-Korean adoptees.  Since these are high school students rather than conscripts, the data include women, yielding a much larger sample.  But otherwise, the national origin of the adoptees is basically the same as in Dalen et al. (2008) and Odenstad et al. (2008).  India, Thailand, Chile, Sri Lanka, Colombia, Ethiopia, and Ecuador top the list.

To start, imagine growing up in Sweden had zero effect on high school performance.  How would the non-Korean adoptees do?  As discussed earlier, if the non-Koreans had average IQ for their home countries, their mean IQ would be 84.  On the international PISA tests of science, reading, and math, countries with IQs around 84 score about one standard deviation below Sweden.*

Gabriel Zucman on Inequality, Growth, and Distributional National Accounts

Gabriel Zucman of the University of California, Berkeley talks with EconTalk host Russ Roberts about his research on inequality and the distribution of income in the United States over the last 35 years. Zucman finds that there has been no change in income for the bottom half of the income distribution over this time period with large gains going to the top 1%. The conversation explores the robustness of this result to various assumptions and possible explanations for the findings.

Play

Time: 1:12:35

Democracy and Unfreedom: Revisiting Tocqueville and Beaumont in America

SARA M. BENSON SAGE JOURNALS, Volume 45, Issue 4 Abstract: This essay reexamines the famous 1831 prison tours of Alexis de Tocqueville and Gustave de Beaumont. It reads the three texts that emerged from their collective research practice as a trilogy, one conventionally read in different disciplinary homes (Democracy in America in political science, On the Penitentiary in criminology, […]

Encyclopedic Liberty and Industry

This illustrated essay explores some images of "liberty" and "industry" from Diderot’s Encyclopédie, ou Dictionnaire raisonné des sciences, des arts et des métiers (Encyclopaedia, or a Systematic Dictionary of the Sciences, Arts, and Crafts) (1751-1772). They have been taken from Liberty Fund’s anthology of articles, Encyclopedic Liberty: Political Articles in the Dictionary of Diderot and D'Alembert (2016) and the supplementary volumes of illustrations from the original 18th century edition.

Das National System der politischen Oekonomie (Friedrich List)

Das National System der politischen Oekonomie von Friedrich List. Mit einer historischen und kritischen Einleitung von K. Th. Eheberg (Stuttgart: Cotta, 1925).

Bach asks God "when will I die"? (1700)

Does Prosperity Make Us Utilitarian?, by Bryan Caplan

Scott Sumner has some thought-provoking reactions to my critique of Scott Alexander's Thrive/Survive Theory of left and right.  Here's my reaction, point-by-point.  Scott's in blockquotes; I'm not.

Liberalism is what happens when you are optimizing for a safe environment, and illiberalism is what happens when you optimize for thriving in an unsafe environment.

Now of course this raises a whole new set of issues. What do I mean by 'liberalism' and 'illiberalism'? When I say liberalism, I am including classical liberalism, social democratic liberalism and neoliberalism. I'm basically referring to utilitarianism. When I say illiberal, I am referring to a wide variety of non-utilitarian views, including class warfare (Mao), fascism (Hitler), white nationalism (Bannon), racism (KKK), reverse racism (SJWs), tribalism (Afghanistan), religious fanaticism, militarism, etc.

This is deeply puzzling. 

First, if "Liberalism is what happens when you are optimizing for a safe environment, and illiberalism is what happens when you optimize for thriving in an unsafe environment," are we talking about selfish optimization or social optimization?  If the former, then how does being rich make caring about outsiders "selfishly optimal"?  If the latter, then it sounds like utilitarianism requires illiberalism in unsafe environments.

...

Liu Xiaobo’s Fight for Freedom

It was the Czech writer Milan Kundera who said: “The struggle of man against power is the struggle of memory against forgetting.” His fellow writer Liu Xiaobo, who died this summer under police guard while serving an 11-year prison sentence,

…