In a recent piece in the WSJ, Elizabeth Warren criticizes the views of Larry Summers: Despite these warnings, the Fed chairman still has cheerleaders for his rate-hiking approach. Chief among them is Larry Summers. “We need five years of unemployment above 5% to contain inflation—in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment,” the former Treasury secretary recently told the London School of Economics. You read that correctly: 10% unemployment. This is the comment of someone who has never worried about where his next paycheck will come from. My views are closer to those of Summers than to Warren.  Nonetheless, I’m a bit surprised by his unemployment estimates.  If they were based on a “Phillips curve” type model, then I’d view the estimates with a great deal of caution. It’s true that unemployment often rises during periods when the rate of inflation is brought down.  But the higher unemployment is not directly caused by lower inflation (that would be reasoning from a price change.)  It depends why the inflation rate has declined.  The real problem is not lower price inflation; high unemployment is more closely linked to a decline in NGDP growth, or a decline in wage inflation, or a decline in inflation expectations. While the US CPI inflation rate recently reached 9.1%, the (5-year) expected rate of inflation has remained relatively low—mostly in the 2.5% to 3.5 % range.  And the PCE index targeted by the Fed runs about 25 basis points lower, on average. In contrast, even expected inflation rose to near double digit levels at the end of the 1970s.  Thus it should be far less costly to reduce inflation today than it was back in the 1980s. Wage inflation is also running at excessive levels (roughly 6%), but that’s also nowhere near as bad as CPI price inflation, or as bad as wage inflation in the 1970s. If you look at the fed funds futures market, investors seem to anticipate short-term rates rising to 3.4% by yearend, and then falling back to slightly below 3% in late 2023.  That sort of yield curve inversion often precedes a recession, but it also indicates that investors expect the recession to be relatively mild.  If unemployment actually were expected to average 7.5% over two years, then interest rates would almost certainly fall to zero in late 2023. Of course those are just market forecasts; reality almost never turns out exactly as expected.  So a major recession is possible.  But at the moment, investors seem to be pricing in a fairly mild recession, perhaps because inflation expectations never reached the levels of the late 1970s.  Indeed, inflation expectations are even below the levels of the late 1980s, after 8 years of Paul Volcker’s monetary restraint. All policy failures are relative. PS.  If I see one more reporter say that two falling quarters of GDP is a “technical recession” I’ll shoot myself.  The US labor market was booming in the first two quarters of this year.  The correct view is that, as a rule of thumb, two quarters of falling GDP is usually accompanied by a recession. (0 COMMENTS)

Economist John List of the University of Chicago talks about his book, The Voltage Effect, with EconTalk host Russ Roberts. He discusses what determines scalability and argues that the only good ideas that count are those that scale. Along the way, he draws on his experiences as chief economist of Uber and Lyft to peer […] The post John List on Scale, Uber, and the Voltage Effect appeared first on Econlib.

Natural gas deliveries to Europe from Russian state corporation Gasprom have already been reduced and further reductions are expected as winter approaches. It is a way for the Russian government to pressure European governments into dampening their political and military support for Ukraine. The European Union government is advancing a rationing plan to face the reduced supplies (“Brussels Asks EU States to Slash Gas Use by 15% Starting Next Month,” Financial Times, July 20, 2022): Brussels has asked EU countries to cut their gas use by 15 per cent and set out emergency plans ahead of winter when it anticipates severe disruption to gas supplies from Russia. If supply drops by 15%, the use of gas (by consumers and intermediate users) must also decrease by 15%. The question is who will bear the burden of this reduction, that is, how demand will be rationed. Some economists don’t like using the term “ration” when the process is done through market prices; it does, however, emphasize that everything in our finite world has to be rationed one way or another. But we may use the term “allocate” as a synonym. There exist basically two ways to ration something: through market prices or by diktat from some political authority—politicians or government bureaucrats in our societies. (I neglect traditional or religious rules like in primitive societies.) Political allocation can only be arbitrary, whether it is egalitarian or not, and even if it hides behind a formal rule of law. It is arbitrary for two reasons: first, the authorities are likely to favor themselves or their most useful political clienteles; second, even if the authorities are composed of perfect altruists, they don’t have the information of time and place that is dispersed among the minds of all the participants in the economy (see F.A. Hayek, “The Use of Knowledge in Society,” American Economic Review, 1945). Automatic allocation by prices is preferable because each user is thereby incited to take into account the value of gas (our illustrative case) for other users. The individuals who will finally get the gas or what is made with it (say, home heating or metal objects made with gas-produced electricity) are those who are willing to pay the most for it. If you are among those, you pay for the gas more than the value of which you are depriving others. It is true that some users may be willing to pay more because they have higher incomes, wealth, or financing capabilities. But this is not necessarily the case: when you buy a car and the steel and aluminum that goes into it, you outbid billionaires who would otherwise have ordered bigger private yachts; if no car were produced, their yachts would cost less. Mutatis mutandis when you buy a Cohiba. In a sense, the allocation of gas will remain efficient if political authorities give tradeable ration coupons or equivalent cash subsidies to some users who could not otherwise “afford” the stuff. A consumer will buy a thousand cubic feet of gas for (say) $12 only if it is worth more than what he can otherwise get for $12. (There will be of course a transfer from general taxpayers to gas consumers and some consequent deadweight loss, and this fact should not be ignored.) The EU plan seems to recognize the efficiency of some price allocation in the case of industrial users of gas. If I understand the plan correctly, after some EU allocation of the reduced supply among member countries, industrial buyers could obtain their gas through national auctions or, what amounts to the same in an opportunity-cost sense, by bidding down the subsidy they could receive from the government (presumably for having to sell the gas at lower prices than they paid for it): Market-based measures can mitigate the risks to society and the economy. For example, Member States could launch auction or tender systems to incentivise energy reduction by industry. And, from another EU document: One recommended measure consists of national or joint auctions or tender systems by which Member States incentivise a reduction of consumption by large consumers (mostly industries). Those industries best placed to reduce demand would voluntarily offer to do so. Depending on design, they could receive financial compensation in return. If some measure of rationing by market price are envisioned for industrial users, the allocation to household consumers and other “protected customers” will remain purely political. Since it is the government who will decide who are these “protected consumers” (households, hospitals, non-large consumers, and other politically preferred clienteles) to benefit from protected supplies and capped prices, political factors will determine resource allocation. Along these lines, mandates for temperature or hourly thresholds would still be possible. So-called “public” places (venues and businesses open to the public) can be subject to forced consumption cuts. As usual, much dirigisme and economic planer’s conceit mars the EU plan. The more you read it, the more you realize that. Although less inefficient than if no market mechanism at all is used, the system will still be inefficient. Consider an individual consumer who would prefer to consume a bit less gas to heat his home (he has warm duvets for the night) in order to keep some money for patronizing well-heated restaurants, bars, theaters, or concert halls. On a free market, it is easily done: he consumes less gas—by buying less or by selling his ration coupons—and uses the money to spend on these other activities he considers more important. In a government allocation system like the one envisioned by the EU government for “protected consumers,” our individual consumers’ more expensive gas consumption at home is subsidized and he may not choose to apply these subsidies to his preferred consumption activities instead. Besides being arbitrary, the “prioritization” of—that is, discrimination in—subsidies and interventions is very opaque. The rationally ignorant voter will have no idea that the rationing system decreases the supply, and jacks up the prices, of some goods he would prefer to buy instead of subsidized heating. Rationing gas among all users should be done through market prices. If there must political tampering with market allocation to protect poorer households, it should be done by tradeable ration coupons or simply and preferably by cash subsidies.  Unfortunately, this is not how politics work under a mostly unlimited democracy (“totalitarian democracy,” as Bertrand de Jouvenel would have said) where politicians must satisfy the most vocal clients and organized interests, while pretending to run the economy “from a societal perspective” (whatever that means). Expect a mess, generated jointly by the governments of Russia, the EU, and individual EU countries. (0 COMMENTS)

I got back from my cottage in Canada Friday night. Friday morning, I took a picture of a gasoline price sign in Winnipeg. The price: 1.849 per liter in Canadian dollars. This is the first time in my memory of going between California and Winnipeg over the last 36 years that the market-clearing price of gasoline in Winnipeg was less than the price in Monterey. Here’s the simple arithmetic. There are 3.7854 liters in a U.S. gallon. The Canadian $ is worth 77 U.S. cents. So $1.849 per liter translates to $1.849 * 3.7854 = $7.00 per U.S. gallon. That translates to 0.77 * $7.00 = $5.39 per U.S. gallon. Yesterday I paid $5.69 for gasoline in Pacific Grove. By contrast, I paid about $4.30 per gallon in Grand Forks, North Dakota on Friday. (0 COMMENTS)

With the idea of “consumer sovereignty,” standard economics may seem to claim or to assume that the utility of consumers is more important than the utility of producers. Notwithstanding the impossibility of scientific interpersonal comparison of utility, one objection is that this hierarchy is arbitrary, normatively if not also positively. Since any working person and any rentier is both a consumer and a producer, the utility of one is indistinguishable from the utility of the other. Moreover, many socialists and many traditional conservatives have argued (against classical liberals) that it is in his role as a producer that an individual’s life is significant. Thus, the objection goes, an economic system based on the sovereignty of the producer would be as efficient as, if not more efficient than, one mistakenly founded on consumer sovereignty. Due perhaps to the influence of Marxism (and other post-Enlightenment philosophies such as Hegelianism) during the last two centuries, these ideas have gained some intellectual respectability. Frank Fukuyama’s recent book Liberalism and Its Discontent provides an illustration. There is no reason, he explains, “why economic efficiency needs to trump all other social values.”Are human beings “consuming animals” or “producing animals”? he asks. “This a choice that has not been offered to voters under the hegemony of neoliberal ideas.” As I note in my forthcoming review of this book in the Fall issue of Regulation, the absurdity of putting such a choice before voters can be seen by imagining a referendum that would ask “the people”: “What animal do you want to be, a consuming animal or a producing animal?” After a victory of the producing-animal campaign, an injunction would probably follow from whoever believes he represents the collective: Now, get back to work! More fundamentally, I think the answer to the question of the primacy of the consumer or the producer is the following. If it is the producer who strives to satisfy the consumer, he will automatically strive to satisfy his own preferences because he gets income to the very extent that he satisfies the consumer. If it were instead the consumer who endeavored to satisfy the producer—by letting the latter have the easiest working conditions and generally deferring to him—he would not simultaneously maximize the satisfaction of his own preferences, quite the contrary: producers would have no incentives to produce as much as possible for consumers. Therefore, the individual, who is both producer and consumer, would have less to consume. Looked at from another viewpoint, an individual who, did not as a producer work for consumers, nor as a consumer try to get as much as possible from his suppliers, would not go far in maximizing his utility. (Recall that maximizing one’s utility simply means getting in one’s most preferred situation.) If we assume that an individual usually wants to maximize his utility, he will naturally adopt a commanding posture before his suppliers and a service mentality toward his customers. There is thus a good positive reason for assuming that, in a context of individual liberty, most individuals will adopt the behavior just described. And if we make the normative judgement that the welfare of individuals as natural equals (to use a classical liberal expression) is what counts, we will favor a political-economic regime of consumer sovereignty, not of producer sovereignty: only in the former, where the self-interests of consumers and producers are well coordinated without coercion, can we hope to have an equal liberty and an good chance of prosperity for all. Such is the main argument in favor of consumer sovereignty as opposed to producer sovereignty. The political word of “sovereignty” can be misleading in this context. Consumers are not sovereign over producers in a coercive sense. Every producer is also a consumer. Moreover, production often has a consumption or pleasurable (even if stressful or anguished) component: think of artistic work as the paradigmatic case. And in a free society, although we expect the typical individual to produce in order to consume and not the other way around, eccentricity is not forbidden nor is affection or charity—producing for the benefit of somebody else—banned. What is pretty clear is that a regime of generalized producer sovereignty is at best meaningless. (0 COMMENTS)

In anticipation of Bruce Caldwell’s and Hansjoerg Klausinger’s Hayek: A Life 1899 – 1950,  the first of a two volume biography of Hayek to come out this October, I decided to read Hayek on Hayek: An Autobiographical Dialogue* to refresh my memory about F.A. Hayek’s life. This book, which has been underappreciated by many Hayek fans, is a great overview of his life in his own words.  The book consists of fragments of interviews that Hayek gave to different people and they are tied together to present his life from his very early years in Austria to his later fame. There is also a radio broadcast he gave at the University of Chicago. There are two things that make this a compelling book for the reader: a) It is small- less than 200 pages which make this very quick to read, and b) It is Hayek speaking and you can see how he experienced the different events in his life. In many cases it feels like how an old relative would tell you stories about the past. The language is plain and simple and often even comical. The reader gets to know both Hayek the man and Hayek the economist. Writing my thoughts about such a book is a hard task, because I really do not know where to start. Should I write about Hayek’s life? Absolutely not, there are better biographies. David Henderson has a nice biography of Hayek in the Concise Encyclopedia of Economics here at Econlib. Should I review it like any other book and point out its strengths and weaknesses? No, it is a very good autobiography and there is really very little to object to. Instead, I would like to offer my sincere thoughts about the book.  There are two things that really drew me to read this book and pushed me to finish it quickly. The first is Hayek’s account of himself. It is very common to see people who excel in their field as individuals who were perfect their entire lives. They were born smart, were great students in school, were recognised by their professors in university for their unusual intelligence and, last, pioneered their field. I believe one aim of biographies and autobiographies should be to dispel such myths. Hayek describes himself in a very humble and down to earth manner. In school he was a terrible student and read very little outside of biology, which was a long passion of his. He inherited this love from his father August who was a botanist. He could barely pass his classes in school; he neglected homework and relied on what he could remember from class to help him. Initially, Hayek wanted to become a diplomat, but after the fall of the Austro Hungarian Empire post WW1 such a path was not available. His interest in political and economic matters was sharpened during his time in the military fighting in the Italian front. Being part of a multinational and multilingual army he said, “I served in a battle in which eleven different languages were spoken. It’s bound to draw your attention to the problems of political organization”. Hayek looks back on his life appreciating his successes and pointing out where he was wrong or should have done more, such as with his criticisms of Friedman’s methodology and Keynes’ economics.  I was also struck by how Hayek talks about his fellow economist and the intellectual atmosphere around him. It is  exciting to “listen” to such great figures as Keynes, Schumpeter, Wittgenstein (who was also Hayek’s cousin) and Schrodinger through someone who knew them first hand. Pre-WW1 and interwar Vienna was a vibrant city where some of the greatest scientists and economists of the last century lived.  Hayek’s reminiscences of the University of Vienna are probably the most interesting. The way Viennese economists and philosophers did their work was very different from how their American colleagues operated. It was very usual for economists to meet also outside of universities at the different coffee houses or in one another’s houses and discuss the matters that interested them. There was the Mises Kreis for example which included many brilliant minds like Alfred Schutz, Gottfried von Haberler, Fritz Machlup, Karl Menger( Carl Menger’s son), Felix Kaufmann and of course Mises. They, although this was not mentioned in the book, even had their own collection of songs which was published by Kaufmann. In the introduction to this collection of songs it is mentioned: The formal meetings would begin at 7:30 p.m. and last as late as 10:00 p.m. Most of the members would then gather for dinner at the restaurant Anchora Verde, where the discussion would grow lighter. Afterwards, they would continue to the Café Künstler, opposite the University of Vienna, for coffee until 1:00 a.m., when Mises usually left. Fritz Machlup reports, however, that when he left at 3:00 a.m., he usually had to say goodnight to philosopher Alfred Schütz!  This was just one of the many circles that existed in the city, the were other groups like the Austro Marxist, the Wiener Kreis, the Mathematical Colloquium and the Geist Kreis for which I sadly don’t have the space to talk about. If anyone wants to learn more about the intellectual environment of interwar Vienna and how the Austrian economists operated in it I wholeheartedly suggest the excellent book by Erwin Dekker’s The Viennese Students of Civilization. I am now even more eagerly waiting for Professor Caldwell’s next book to come out.   * I would like to thank the University of Chicago Press for a review copy of the book. Chris Loukas was born in Greece and is an economic journalist and the youngest member of the Greek team in the international Economics Olympiad for 2022. His articles have been featured by the Foundation for Economic Education, the Mises Institute and Adam Smith Works. (0 COMMENTS)

Many people mistake the organizational form of “nonprofits” as being free from economic considerations. If the organization is not run by a profit-motive, it surely will act ethically and in accordance with the mission statement of the organization. In a sense, people view nonprofits as exempt from the regular rules of life in a market economy. However, nonprofits also have a vested interest in organizational survival. The faulty belief that without profits, people will no longer act in their self-interests, drives operational inefficiencies. Many think that since the organization is not trying to obtain money beyond operating expenses (which is in itself a dubious assumption), that the actions of the people within the organization will solely focus on achieving the organization’s stated goals. However, as talked about previously, there are incentives for delaying the achievement of these goals as a result of not wanting to become unemployed or take a pay cut. This problem takes the form of a principal-agent problem because the organization’s advisors and its donors may have different interests than the employees and those administrating a nonprofit. Typically, people donate to a firm because they think it’ll achieve a goal that they care about. However, since it is hard to monitor whether those donations are used effectively, there needs to be mechanisms in place to encourage action. I want to juxtapose two methods of funding nonprofits and suggest a manner to improve their effectiveness on the margin. The two major funding mechanisms are grants and prize money. Grants are given in advance and are able to be specified. Most donations would fall into this category. Typically, grants are favored by bureaucracies because of the fact that much of them are in perpetuity and are not tied to success, which can be fleeting. Oftentimes, grants work well in situations involving repeat players. Grants seem to work better when the purpose of an organization is diversified, and staying power is important. Two types of nonprofit that seem to do well with grants are general purpose think tanks and direct aid organizations. General purpose think tanks come up with a set of ideas that mostly follows a specific ideology. It’s not necessarily clear what success is defined as, meaning that trying to tie success to a prize may result in underutilization of good ideas. Since a lot of think tanks are premised on the idea of being a reliable authority, staying power is important. Staying power is similarly important in the context of direct aid. When dealing with a problem like providing a food kitchen, some form of regularity can be important in helping the greatest number of people. Overhead, for example, is certainly something to consider; it can be expensive forming and reforming organizations to achieve the same goals. However, just because grants are preferable for some situations, doesn’t mean that they are well-equipped to deal with easily measurable success and generally efficient use of inputs. One of the best ways to encourage an efficient use of inputs is profit and loss. Prize money, in an important sense, can serve as a “commission” [read “price”] for those who are deeply interested in achieving a goal. Those trying to win the prize are unlikely to spend more than the prize money is worth in pursuit of the goal. This discourages spending that isn’t likely to make much of a difference, while giving newcomers a better shot at winning, which allows for a diversification of inputs and incorporates more local knowledge into what is likely to be successful. If one person can put together a team to achieve a goal of building a thousand houses for the homeless, then it’s more likely to get done. This prize system has worked well in trying to achieve major social goals. For instance, Robin Hanson describes how funding for results should be the best strategy when innovators have access to capital and a particular goal in mind. If science research is best done through this market process, then it should also follow those specific goals would be better served in this way. Nonprofits are often funded by individuals and donors. Using escrow or prizes may serve as a method of solving this principal-agent problem and can result in better outcomes. If nonprofits are focused on a specific measurable goal, prizes are underutilized as a method for achieving results. Focusing on good solutions, rather than on influential groups may be what’s necessary to kickstart new approaches to solving collective action problems.   Isadore Johnson is a campus free speech advocate, an economics and philosophy student, and regional coordinator for Students for Liberty. (0 COMMENTS)

In 2018, the New York Times discussed a proposed family leave policy authored by Marco Rubio: The plan backed by Mr. Rubio (and soon to be introduced in the House by Representative Ann Wagner, Republican of Missouri) is much more comprehensive. But it still makes parents trade one benefit for another. It would allow a parent to draw from Social Security benefits to take at least two months of paid time off at around 40 to 70 percent of current pay. But those parents would then have to delay retirement or reduce their Social Security benefits to cover the cost of the parental leave. The Urban Institute found that taking 12 weeks at half pay would mean forgoing 25 weeks of retirement or reducing monthly checks by 3 percent. I won’t discuss the overall merits of this plan.  But I believe that both its conservative supporters and its progressive critics are mistaken about one aspect of the proposal.  Senator Rubio likes the fact that the plan is “paid for” by future reductions in Social Security.  Progressive critics find that aspect to be punitive.  I find it completely non-credible. I suspect that the plan would be quite popular with young mothers, as a cost to be paid 30 or 40 years in the future hardly seems like something worth worrying about today.  More importantly, many people might rationally reach the conclusion that the threat would never be carried out.  After all, the government has previously played this sort of shell game with expensive new programs supposedly “paid for” out of future taxes that are likely to be unpopular and that get repealed before taking effect.  Remember the “Cadillac tax”? I suspect that in the 2060s, the population of developing countries will be declining due to low birth rates.  At that time, I doubt policymakers will want to punish mothers who opted to have children in the 2020s by giving them reduced Social Security benefits relative to those families that chose to remain childless.  (If cuts to Social Security are made at that time, I suspect they will affect affluent retirees.) Politicians care much more about their pet projects getting enacted than they do about long run budget issues.  Thus they are willing to adopt almost any sort of financing gimmick or trickery if they think it will help to get the bill through Congress. The NYT editorial writer (Bryce Covert) opposed Rubio’s plan.  I suspect that if she understood that threat to reduce future Social Security benefits would not carried out, then she might favor the plan. (0 COMMENTS)

Regular reader and frequent commenter Kevin Corcoran sent me his thoughts on the post I did on Joey Smallwood and industrial policy. We agreed that his long comment is better as a standalone post. Here it is: On the one hand, it’s easy to read about the floundering of Joey Smallwood in the article you [DRH] mentioned and have a chuckle at his fumbling ineptitude. But at the same time, this story shows one of the problems with a common response to a common criticism of industrial policy and central planning. The common criticism is that politicians necessarily intervene in areas where they do not, and cannot, have any competence. This isn’t a claim that politicians are stupid, of course: as George Will put it in The Conservative Sensibility, “The simple, indisputable truth is that everyone knows almost nothing about almost everything. Fortunately – yes, fortunately – this is getting truer by the day, the hour, the minute. As humanity’s stock of knowledge grows, so, too, does the amount that, theoretically, can be known but that, practically, cannot be known.” But, the criticism continues, legislators, whose capacity for knowledge is no different from anyone else’s, still put their fingers into pretty much everything. There’s an amusing section in P. J. O’Rourke’s Parliament of Whores where he describes about two dozen different topics Congress would be working on that week, and observes “that, one would think, is about the limit of human capacity for expertise. To be conversant with twenty-five disparate issues at once is as much as we can ask of a person. However, it is less than 10 percent of what we ask of a congressman. During the same week in 1990, 250 other items were also on the congressional calendar.” O’Rourke lists some of these varied and unrelated topics including fish hatcheries, outer space, the economy of the Caribbean, nutritional labeling, “and, of all things, paperwork reduction.” He then quips “We expect our congressman to know more about each of these things than we know about any of them. We expect him to make wiser decisions than we can make about them all. And we expect that congressman to make those wise and knowledgeable decisions without regard for his political or financial self-interest.” The common response to this criticism is to concede that of course politicians can’t be competent in all these areas, but that’s okay because politicians can consult with people who are experts in each of these areas. This will let the politicians cast votes that are informed by multiple lines of expertise, and allow their decision making to benefit from all that accumulated expertise despite their inability to gain that knowledge directly. However, this response cuts very little ice. The simple fact is that knowing who is an expert in a given area, and how well their expertise will apply to the situation at hand, is itself something that requires a significant amount of knowledge. Smallwood clearly didn’t know how to establish a fishing industry to catch herring. He instead turned that over to Icelandic herring fisherman, to less than impressive results. Maybe these were lousy fisherman, or maybe methods of fishing that are successful in Iceland are ill suited to Newfoundland. Regardless, Smallwood, lacking knowledge of fishing, also lacked knowledge on how to identify proper expertise in fishing. But rather than allow a competitive fishing industry to emerge on the open market, he picked his chosen “experts” and funded them at public expense. The results shouldn’t surprise anyone. Now, reconsider the situation of the average member of Congress. Consider the hundreds of different topics they vote on and regulate any given year. Does anyone seriously believe that each member of Congress is able to properly identify the best and brightest scholars for all these different topics, with the relevant expertise, that will be properly applied in each situation? And that these politicians will wisely absorb and understand the advice they are given and properly reflect it in their votes? Does anyone believe this is an accurate description of how various federal regulators operate when they pass thousands upon thousands of new pages of regulations every year on every topic imaginable? To crib a line from Robert Heinlein, if you believe that, I have a wonderful offer for you. No checks, please. Cash only, and in small bills. I agree with Kevin. Let me, DRH, clarify what I think is Will’s point in writing, “Fortunately – yes, fortunately – this is getting truer by the day, the hour, the minute.” The reason it’s fortunate is that it’s a necessary consequence of something that’s fortunate: namely, the constantly expanding international division of labor, which makes almost everyone better off. The greater the division of labor, the more specialized we become and, therefore, the more productive. Also, to drive home Kevin’s point, yes, Joey Smallwood made a lot of mistakes by not consulting with experts. But the whole original article from which I quoted shows how often he did consult with experts who gave bad advice. You still have to have enough expertise to choose good experts.   (0 COMMENTS)

In freer rather than less free societies, even if not truly free as Western societies stand, people get used to debates and criticism, which tend to push them in the path of truth and thus, at least in the long run, economic efficiency. This is a major advantage over less free and unfree societies. This observation must also be valid in war, at least ceteris paribus—for example, given an equal public support for a war. An information revealed by the Wall Street Journal about a classified report being prepared by the Pentagon illustrates this point. The subject matter is the military causes and circumstances of the disastrous American retreat from Afghanistan last summer (“Report on Pentagon Role in Afghanistan Is Under Review,” July 18, 2022): An initial draft of the Pentagon’s assessment, completed by authors affiliated with National Defense University, was submitted in March. … The problem with the report submitted in March wasn’t that it was too critical, [an anonymous senior defense official] said. “A draft document would not have been returned because the belief was that it was too critical; you get nothing out of an after-action analysis if it is not critical enough,” the official said [my emphasis]. Defense secretary Lloyd Austin previously declared: We want to make sure that we learn every lesson that can be learned from this experience. The information, of course, could be false or embellished, but there is a good probability that it is correct because of the general quality of fact reporting by the Wall Street Journal. The information is not surprising anyway: the freer a society, the more criticism is valued and expected; and the more officialdom has problems hiding the truth, if only because it is likely to be leaked. A free press plays an important role—and it should be noted that a free press is not one that says what you think it should say, but a set of medias not barred from Power from saying what they want). Nothing is perfect, of course, but most things are more imperfect in an unfree society. (0 COMMENTS)