Hardly a day goes by without further evidence that the world is moving toward Viktor Orban-style authoritarian nationalism. Here’s the latest piece of evidence, from the WSJ: A small group of the former president’s allies—whose work is so secretive that even some prominent former Trump economic aides weren’t aware of it—has produced a roughly 10-page document outlining a policy vision for the central bank, according to people familiar with the matter. . . .  Several people who have spoken with Trump about the Fed said he appears to want someone in charge of the institution who will, in effect, treat the president as an ex officio member of the central bank’s rate-setting committee. Under such an approach, the chair would regularly seek Trump’s views on interest-rate policy and then negotiate with the committee to steer policy on the president’s behalf. Some of the former president’s advisers have discussed requiring that candidates for Fed chair privately agree to consult informally with Trump on the central bank’s decisions, the people familiar with the matter said.  These things don’t tend to end well.  (Recall the Nixon/Burns Fed of the early 1970s.) Here’s Patrick Horan (who was my colleague at the Mercatus Center) in the National Review: Some of Donald Trump’s economic advisers are reportedly discussing ways to devalue the U.S. dollar should the former president be elected again this year. Chief among these advisers is Robert Lighthizer, who spearheaded the Trump administration’s trade war with China and could be Treasury secretary in a second administration. Proponents of the idea argue that making the dollar weaker against other currencies would make U.S. exports relatively cheaper, which would lead to a reduction in the trade deficit. They might wish to check with some Latin American economists to see how the “devalue your way to prosperity” approach worked in that region of the world. Reporters often engage in reasoning from a price change, but Horan does a nice job of avoiding that mistake.  He points out that any analysis of the impact of devaluation must begin with the question of how it is to be achieved: To start, let’s consider a critical concept in international economics: the “impossible trinity.” According to this principle, a country cannot have all three of the following at the same time: a fixed exchange rate, free movement of capital or investment, and monetary sovereignty (the ability to conduct monetary policy independently). It can only pick a maximum of two. Since 1971, the United States has chosen free capital flows and monetary sovereignty while letting exchange rates float based on market fundamentals. This choice is the norm among large, developed economies. To weaken the dollar to some desired rate vis-à-vis other currencies means fixing the exchange rate. That means either free movement of capital or monetary sovereignty will have to go. He then discusses the implications of the various ways in which the dollar might be devalued.  Read the whole thing.   PS.  In the long run, the only really effective way of devaluing the real exchange rate is with higher domestic saving.  And yet populists are allergic to almost any public policy proposal that would boost national saving rates, such as deficit reduction.  Populism aims at making people feel better today, whereas higher savings rates imply sacrificing today for more growth in the future.  Big current account surpluses tend to occur in thrifty countries like Singapore, Japan and Germany.   (0 COMMENTS)

“Follow the money” is a phrase used in many detective shows and political thrillers. Look for how the villain spent money on or received money from, and there is your culprit. The same is true when examining economic and political decision-making. In today’s world, it is common to talk about rent seeking behavior on the part of businesses. That is, it is economically rational for firms to spend their next dollar to gain profit (rents) from political privilege rather than a risky R&D project with an uncertain return. The interest group theory is pervasive in the study of modern economics and politics. We are quick to accuse “Big Business” of all the world’s troubles by cozying up to the government. However, for all of its understanding of behavioral symmetry, public choice theory often fails to overlook an obvious interest group, the government itself. Economists Robert Tollison and Robert McCormick wrote a volume in 1981 to examine this issue in detail. We understand politicians are willing to accept votes and contributions to their campaigns in exchange for some political privilege. At the same time, what if we start by considering the government as an interest group itself? Extracting rents from businesses, constituents, and other policymakers to provide political benefits happens more often than we think.  Fred McChesney wrote about what he referred to as “milker bills.” When proposed legislation would be to the disadvantage of the constituents in a political district, the political official explains to the constituent or interest group that will bear the greatest costs that their opponents want to pass this bill. Still, maybe they can prevent it from being passed. Contributions then flow to the political official; the bill does not see the light of day. The issue is not that the interest group contributions made the legislation go away, although that is an essential part of the story. We can also ask how the legislation creates the need for these contributions. The legislators can “milk” the special interests with the threat of legislation passing.  Why focus on this? I have been thinking about my research agenda recently and realize I have a very broad one. I have claimed that I am a public choice economist, and that is true, but that is just an area of study. I also claim that much of my research attempts to bring the public choice or political economy lens to various economic issues. Again, this is true, but it is not a robust research agenda. As I look closer at my work, I realize the influence of Robert Tollison on my work and remind myself to ask how the politician or government benefits. I often examine fiscal policy issues and think about the political benefit of expanding the deficit at the federal or state level. Yes, special interest groups lobby for political privilege, but politicians create the institutions and incentives that elicit rent seeking. They are exploring ways to extract rents from interest groups in a mutually beneficial way that imposes significant external costs on the public.  One example that is a common thread in my research is the impact of state economic development incentives. The subsidies and tax abatements that state and local governments usually provide large firms to locate in their area to “create jobs.” Most citizens, at least in the relevant region, see this as a massive benefit to them and their state. However, the economics literature has shown over and over that the economic gains do not materialize. What is realized is that the politicians have created a war of all against all in which each locale competes to get the business. If there is no economic benefit, what’s in it for them? Sure, they could be economically naïve and believe they are doing some good, and there is no doubt that some people will benefit. The chosen businesses clearly benefit from the incentive package and are willing to invest real resources to acquire it. But I have always thought about the political benefits of these incentives. Politicians have created this game, hanging out a sign to businesses that reads “privilege for sale.” And yet the politicians become the story’s hero, cutting ribbons and claiming they “created jobs.” Incumbent politicians receive contributions and votes from businesses. With what goal in mind? These policies only move pieces around the chess board without necessarily creating real wealth.  We should follow the money, but when we ask what special interest group will benefit from the proposed legislation, we should consider government officials in the mix. Government officials can find ways to promote the need for rent seeking behavior. We should ask if government officials are the special interest group driving the process, not just providing rents but finding ways to extract rents.   Peter Calcagno is a Professor of Economics at the College of Charleston and director of the Center for Public Choice & Market Process, Public Choice and Public Policy Project Fellow with AIER. He is the Treasurer of the Public Choice Society, a Voting Member of AIER, a Board Member of the Classical Liberals in the Carolinas, and has served on the board of APEE. His areas of research are applied microeconomics, public choice, and political economy. He is the author of dozens of journal articles and book chapters, and the editor of Unleashing Capitalism: A Prescription for Economic Prosperity in South Carolina. (0 COMMENTS)

In recent years, there has been increasing pressure to isolate the US from any sort of contact with the Chinese economy. The latest sector to be affected is healthcare, where there is a proposal to ban US drugmakers from contracting out various tasks to Chinese firms. Here’s The Economist: The knock-on effects for the Chinese firms’ American customers are also likely to be profound. Start with the contract manufacturer-researchers. WuXi is to big pharma what Foxconn, the Taiwanese assembler of iPhones, is to Apple—a high-quality supplier entrusted with sensitive ip. It says its clients include the world’s 20 biggest drugmakers. Dozens of American pharma firms have notified investors that, should the BIOSECURE bill pass, they may be unable to meet demand for their products or to complete clinical trials on schedule. . . .  Jefferies, an investment bank, reckons that replacing Chinese capacity would take big Western drug firms at least five years and almost certainly end up costing more. For biotech startups, which tend to rely on Chinese partners with proven records to save time and money on research and manufacturing, the BIOSECURE bill could be an existential threat. According to a survey conducted in March by BioCentury, a consultancy, biotech bosses and their investors expect a slowdown in drug development in the event of its passage. It is difficult to evaluate “national security” arguments because almost anything might conceivably have some sort of indirect link to that amorphous concept.  Thus does weakening China make war less likely, because our adversary is less powerful?  Or does it make war more likely because rich countries have more to lose from fighting?   One thing seems clear.  The track record of nationalism is much less promising than the track record of internationalism.   (0 COMMENTS)

One of the ideas that economists are most sure of is that when the price of something rises, other than due to something that shifts the whole demand curve, the quantity demanded falls. Conversely, when the price of something falls, the quantity demanded increases. This is not controversial in economics. Moreover, it’s so clear that it is part of our mutual understanding, even for non-economists. When you hear that Macy’s is having a sale, you don’t say, “Oh, I’d better not shop at Macy’s during the sale because the prices are temporarily higher.” No. You understand that Macy’s is having a sale in order to sell more and that the way to sell more is to lower their prices. Or consider what we all know to be true when strawberries are out of season: their price will be higher than when they’re in season. In other words, a reduction in supply, all else equal, will lead to a higher price; the way to sell the lower amount and have all demanders satisfied is to increase the price. This is the opening paragraph of my latest Hoover article, “High Minimum Wage Laws Hurt Many Workers,” Defining Ideas, April 25, 2024. In it, I discuss the effects, some of which have happened already, of the April 1 increase in the minimum wage for fast-food workers in California to $20 an hour. After quoting a news writer named Jack Birle suggesting that the higher minimum wage will make it harder for school cafeterias to compete for labor, I write: Give Birle a little credit. As least he understood that school districts are competing with fast-food employers. But then he forgot to follow through on what the minimum wage increase is doing to job opportunities in the fast-food industry: it’s reducing them. So the minimum wage increase will make it easier, not harder, for school districts to find employees. There will be a reshuffling of workers. Higher-productivity workers will find it more attractive to work in the fast-food industry. They will displace some less-productive workers who are not producing enough to make it worthwhile for fast-food employers to hire them. But the overall net effect will be fewer jobs in the fast-food industry and, therefore, more workers looking for work in other industries. I excerpted different parts of my article on my Substack. But if you want to read the whole thing, which is only about 1,800 words, go here.   (0 COMMENTS)

There have been some interesting developments with NPR recently. A long time veteran of the organization, Uri Berliner, wrote an essay lamenting that the organization has gone from and admittingly left-leaning but still rigorous and fair journalistic enterprise to a politically driven monoculture that lets ideology drive its reporting. NPR, he says, no longer facilitates viewpoint diversity or permits any dissenting voices – leading NPR in turn to suspend Berliner after he voiced his dissent. Berliner resigned shortly thereafter.  Naturally this got a lot of attention, and people have recently started highlighting a TED talk given by Katherine Maher, NPR’s new CEO and former CEO of the WikiMedia Foundation – the parent organization for Wikipedia. In her TED talk Maher made the following comment: For our most tricky disagreements, seeking the truth and seeking to convince others of the truth might not be the right place to start. In fact, our reverence for the truth might be a distraction that’s getting in the way of finding common ground and getting things done. Now, there’s obviously reason to be concerned when someone heading a major journalistic organization is worried that holding an excessive respect for what’s true is an obstacle to getting things done. But that aside, I think she’s got things exactly wrong here. Seeking the truth, and holding a reverence for truth, is the best chance we have to find common ground. Indeed, it may be the only way to do so.  An opposite worldview to the one she espouses was described in a fun video on the Veritasium YouTube channel, outlining the history of how mathematicians calculated values for pi and how Issac Newton revolutionized this process. (Well, I think it’s a fun video anyway – your mileage may vary!) At one point, the discussion turns to Pascal’s Triangle and Derek Muller, the host of the channel, mentions how Pascal’s Triangle was independently discovered by multiple mathematicians at different times and from very disparate locations. Discussing this with math professor Alex Kontorovich led to the following exchange at the six minute and twenty-five second mark: Muller: The thing that fascinated me when I started looking at those old documents was how even though I don’t speak those languages and I don’t know those number systems it is obvious, it is clear as day, that they are all writing down the same thing, which today in the Western world we call Pascal’s Triangle.  Kontorovich: That’s the beauty of mathematics! It transcends culture, it transcends time, it transcends humanity. It’s going to be around well after we’re gone, and ancient civilizations and alien civilizations will all know Pascal’s Triangle.  All these mathematicians were able to converge on common ground despite different cultures and being separated by thousands of miles and centuries of time because they were all dedicated to working out what was true. Now, admittedly I’ve made things easy on myself by using an example from mathematics. Things are much harder when moving to more ideologically and emotionally charged issues such as religion or political ideology. But I agree with G.E. Moore that the difference is merely a matter of difficulty and not a matter of kind. Comparing errors in moral reasoning to errors of mathematical reasoning, Moore wrote: If we find a gross and palpable error in the calculations, we are not surprised or troubled that the person who made this mistake has reached a different result from ours. We think that he will admit that his result is wrong, if his mistake is pointed out to him. For instance, if a man has to add up 5 + 7 + 9, we should not wonder that he has made the result to be 34, if he started by making 5 + 7 = 25. And so in Ethics, if we find, as we did, that “desirable” is confused with “desired”, or that “end” is confused with “means”, we need not be disconcerted that those who have committed these mistakes do not agree with us. The only difference is that in Ethics, owing to the intricacy of its subject-matter, it is far more difficult to persuade anyone either that he has made a mistake or that that mistake affects his result. But this additional difficulty does not mean that we ought to abandon our attempts to seek the truth, or that reverence for the truth is a counterproductive distraction. It means we need to heavily emphasize a reverence for the truth as a necessary counterweight to our personal flaws and biases in these matters. To see examples of this in the real world, consider the idea of adversarial collaborations. The idea has been promoted by Scott Alexander, such as his description of one particular instance of it working: Let’s go back to that Nyhan & Reifler study which found that fact-checking backfired. As I mentioned above, a replication attempt by Porter & Wood found the opposite. This could have been the setup for a nasty conflict, with both groups trying to convince academia and the public that they were right, or even accusing the other of scientific malpractice. Instead, something great happened. All four researchers decided to work together on an “adversarial collaboration” – a bigger, better study where they all had input into the methodology and they all checked the results independently. The collaboration found that fact-checking generally didn’t backfire in most cases. All four of them used their scientific clout to publicize the new result and launch further investigations into the role of different contexts and situations. Instead of treating disagreement as demonstrating a need to transmit their own opinion more effectively, they viewed it as demonstrating a need to collaborate to investigate the question together. And yeah, part of it was that they were all decent scientists who respected each other. But they didn’t have to be. If one team had been total morons, and the other team was secretly laughing at them the whole time, the collaboration still would have worked. All it required was an assumption of good faith. These researchers were able to find common ground precisely because of their desire to seek the truth and because of their reverence for the truth. And if combatting disinformation is among the things you want to get done, doing so effectively requires knowing things like whether fact-checking has a backfire effect. So, on both counts, Maher is wrong. Truth-seeking is what we all ought to be engaging in – journalists or otherwise.  (0 COMMENTS)

California has some of the strictest insurance regulations in the country. It is the only state where insurers are not allowed to base their rate hikes on catastrophe models — forward-looking calculations of risk — or the rising cost of reinsurance premiums, according to both Zimmerman and the Department of Insurance. Under current regulations, insurers are only allowed to use catastrophe models to calculate rates for earthquake insurance. One proposed change under the Sustainable Insurance Strategy would expand that to wildfire risk, as well as the risk of post-earthquake fires and terrorism. Another proposed regulation yet to be released would also allow insurers to incorporate reinsurance costs into rate hikes, the department previously announced. The above quote is from Megan Fan Munce, “Major California home insurer could resume writing new policies. Here’s what it would take,” San Francisco Chronicle, April 24, 2024. In case you haven’t heard, price controls on home insurance are causing a number of insurers not to write new homeowners’ insurance policies and, in some cases, to quit the business in California. The two paragraphs above lay out one important way in which prices are controlled. Insurers are not allowed to base rates on expected risks. While my wife and I are lucky because State Farm has said it will renew our policy, I’m not so lucky in another role. I’m a limited partner who owns approximately 1% of a large apartment complex in Bakersfield. Our insurer has told the general partner that it will not renew our insurance and he has been unable to find any insurer that will. (0 COMMENTS)

Serious arguments, economic and moral, exist to justify the state (the central and sovereign apparatus of government). Serious objections to these arguments also exist. It is interesting to note that most people, including most economists, ignore both kinds. I thought about this when I read the funny factoid reported by the Wall Street Journal about the king’s horses running amok in London this morning (“King’s Horses Run Amok in London, Escaping Monarch’s Birthday-Parade Practice,” April 24, 2024): Several of the king’s horses and a few of his men sparked chaos on this capital’s streets Wednesday when members of the Household Cavalry lost their mounts, allowing the animals to gallop through rush-hour traffic, careering into cabs and double-decker buses while being pursued by police over several miles. … The news that equine members of the Household Cavalry—which styles itself as the “trusted guardians of the monarch”—had gone rogue soon lit up social media. “How could we have the king’s horses without the state?” would not be a serious argument, except perhaps as a recognition of the importance of traditions. It would certainly not be a decisive argument in favor of the monstrous states we now have. The king’s horses weigh little compared to, say, the strong arguments against the state developed by Anthony de Jasay—who was also a strong supporter of conventions and traditions. On de Jasay, see my post of this morning as well as my Econlib review of his Against Politics. ******************************* DALL-E has no information of the king’s horses galloping in London this morning. I thus asked ze to imagine such an event. I use one of zir responses as the featured image of this post. DALL-E imagines the king’s horses running amok in London (0 COMMENTS)

Wisconsin comedian Charlie Berens has a great routine about 4-way stops in the Midwest. Midwest drivers are so nice and obsequious that they’ll endlessly wave the other guy on at the stop sign, even when they were there first and have the right-of-way. Like all good comedy, it’s funny because it’s at least a little bit true. As a small-town Midwesterner, I can vouch for the authenticity of the joke. In the past month I have had three separate Midwest stop sign incidents, in which the other driver, having the right-of-way, attempts to yield and wave me on, out of turn. Now I’m a proud Midwesterner, but maybe I’m just not that nice, or maybe something just really bothers me about people not following the rules. When this happens to me, I like to point at the stop sign, trying to let the other driver know there’s an established set of rules and I, having aced driver’s education, expect you to follow them. Indeed, one time I actually rolled the window down and shouted “I have a stop sign!” and insisted the other driver proceed (she didn’t even have a stop sign in this case—it’s worse than Berens knows!) The last time this happened I got so agitated that I had to pause and reflect on why this form of rule-breaking bothers me so much. After all, the other person is just trying to be nice- “Midwest nice.” Doesn’t that reflect well on the folks in my part of the country? I had an epiphany in the car, though—I realized that the attempted “niceness” was actually irritating because it disrupted my strongly-founded expectations about what should happen based on a very clear and well-known set of rules. I felt like Walter Sobchak from The Big Lebowski: “Am I the only one around here who gives a (expletive) about the rules?!” (Don’t worry, I did not come close to threatening the other driver). Simply speaking, the other driver’s action, though well-intentioned, was not nice in its outcome. It was irritating, it led to confusion and delay which, though minor, were nonetheless irritating. Rules are meant to be followed, not arbitrarily set aside on a whim for the perceived benefit of a stranger. We could have a good-faith argument about whether a particular rule is just and proper, but in cases where the rules are obviously fair and designed to generate smooth social interactions among strangers—like stop signs—not following the rules is an anti-social act.  Then the larger revelation struck me: we are living in an age of excessive “niceness” and attempts by well-meaning people to just be nice are increasingly leading to rule-breaking and societal decay. The stop sign thing is emblematic of a larger problem. True, stop sign yielders are generally harmless, so maybe I should calm down about it. But in other cases, when people choose to not follow the rules in an attempt to be nice, the consequences can be more than merely annoying, they can be downright dangerous. Examples of excessive niceness are all around us and range from mundane and mildly annoying, to potentially deadly. Here’s a brief list, I’m sure you can think of some yourself: parents want to be nice to their kids, so they withhold harsh discipline and their kids become unruly brats teachers try to be nice to students so they don’t give low grades or critical feedback efforts to “stop the stigma” associated with bad behaviors like drug, alcohol, or porn addiction, because stigmatizing people (literally, marking them with disgrace) is perceived as mean waiving the “rules” of family life, for instance expecting parents to marry and fully commit to raising their children, because it’s judgmental suspending meritocracy to help the “disadvantaged” have access to better jobs or careers This last example is most worrisome, and is cropping up in DEI-inspired programs that water down or eliminate competency requirements for the sake of increasing representation of disadvantaged groups. Many commentators on the right are raising alarm about such efforts afoot in the airline industry to “diversify” their pilot corps. If the easing of competency standards is happening, and there’s ample evidence to back up the stories, we could be looking at deadly consequences when under-trained, under-qualified “diversity hires” make fatal errors at the controls of a passenger jet.  So yeah, maybe we should rethink “niceness.” Don’t get me wrong—I’m not against niceness, I’m just against taking a good thing too far. In statistics there’s a categorization of errors that may be helpful in explaining the “too nice” problem. A Type I error is a false positive—establishing causal effect when it’s not true, for example assigning effectiveness to a drug when it really had none, and the clinical trial results were just random chance. A Type II error is a false negative—finding that the drug was not effective when it actually is, but perhaps the clinical trial was improperly calibrated to capture its true impact.  Being needlessly mean—acting the jerk—is a Type I error.  You lash out at your wife or kids for a harmless mistake. The bad attitude and angry outburst is not warranted, you should not have ruled in favor of your anger. This problem is usually easy to spot and remediation is seldom controversial—no one likes a jerk, and we all know one when we see him. Being too nice, though, is tricky—it’s a Type II error. You are in the right to yell, or maybe just use harsh language, because the other person misbehaved and deserved a social sanction. But most of us don’t like confrontation, and it’s often easier to just put on the nice face, not call out the other guy’s bad behavior, and just slink away. This is the path of least resistance. I’ll admit that I’m guilty—I am non-confrontational and probably have let too many bad actions slide.   So what’s to be done about the excessive niceness epidemic? I’m thinking about setting up seminars on optimal anger: “Hi, I’m Tyler and my love language is tough love. Don’t like it? Get over it!” Kidding aside, it’s tricky. There are no easy answers, and as the greatest living economist Thomas Sowell has so eloquently stated, “There are no solutions, only tradeoffs.” All I can ask as an economist is that people acknowledge the problem—it’s just as possible to be too nice, as it is to be too mean. To paraphrase Martin Luther, you can fall off both sides of the horse. It can be bad to be not nice; it can be bad to be too nice. The trick is to find an optimum, to balance the tradeoffs between the problems. Too mean (Type I error) is usually obvious, so the key is to critically assess all our actions and strive to recognize when we might be sliding into the “too nice” Type II error. Sternness has its place. If insisting on following the rules makes me appear jerky to my Midwest cohorts, so be it. If that’s the price of living in a world where the rules work to the benefit of all, I’m willing to pay it.     Tyler Watts is a professor of economics and management at Ferris State University. (0 COMMENTS)

The Financial Times has an interesting interview with Esther Duflo, who was awarded the Nobel Prize in Economics in 2019. She argues that developed nations have a moral duty to compensate poor countries for the damage done by carbon emissions: If you combine these three numbers, you get basically the money value of the cost of carbon in the air. [University of Chicago economist] Michael Greenstone and his team estimated it to be $37 a tonne. So, take $37 a tonne, multiply by 14bn tonnes a year of carbon emissions — that’s the total footprint, including consumption, of Europe and the US. And you get about a little over $500bn a year. That’s the damage that we impose on poor countries, just the mortality damage. Just from the rich part of the world to the poor part of the world.So that’s what I call a moral debt. This is not what it would cost to adapt; this is not what it would cost to mitigate. This is what we owe. She advocates raising these funds by taxing the rich: The minimum tax on corporations has been fixed at 15 per cent [under an international agreement]. But originally, the number that was proposed was 25. So I’m thinking, well, there is maybe a bit of margin. And if you went from 15 to 18 per cent, you could raise about $200bn a year. And then, in February, the G20 discussed the proposal of Gabriel Zucman and the EU Tax Observatory of a tax on the super-rich — a tax of 2 per cent yearly on the wealth of the 3,000 richest billionaires. That would raise $300bn. So if you combine these two, you get to your $500bn. I am sympathetic to her claim that Western carbon emissions have hurt poor countries, although as a utilitarian I don’t think in terms of “moral debts”.  What does that phrase actually mean?  Does it mean that transferring $500 billion from the rich world to the poor world would make the world a better place?  If so, then why not say so?  Why speak in terms of moral debts? By now I may have antagonized both sides, supporters of Duflo’s proposal and conservatives that are skeptical of utilitarianism.  So let’s examine some specific flaws in Duflo’s approach to public policy. Duflo is correct that rich countries have imposed large negative externalities on poor countries, by warming the Earth’s climate.  But she overlooks the fact that rich countries have also imposed large positive externalities on poor countries, or that these positive externalities are an order of magnitude larger than the negative externalities.  Here are three obvious examples: 1.  Western technology has caused the population of poor countries to be vastly larger than it would have been without contact with the West. 2. Western technology has caused life expectancy in poor countries to be much longer than it was before being exposed to this technology. 3.  Western technology has caused per capita GDP in poor countries to be far higher than it would have been without this technology. So if we were to take seriously the idea that externalities cause moral debt, then we would be forced to conclude that the poor world should pay vast reparations to the rich world.  To me, this idea seems absurd.  To be sure, many people I speak with favor forcing China to pay far more for technology they have taken from Western firms. But these people are often silent on the West’s “moral debt” for paper, the compass, gunpowder, the printing press, and all the other Chinese inventions that helped to shape the modern world.  History is almost infinitely complex, and thus any attempt to develop a ledger of net moral debits and credits based on positive and negative externalities will end up foundering on a host of arbitrary judgments. A second problem is that Duflo’s proposed tax makes no sense if the underlying problem is externalities.  Economic theory suggests the optimal remedy for negative externalities is to impose a tax equal to the external cost—in this case a carbon tax.  (This is assuming that transactions costs prevent a voluntary solution.)  Instead, Duflo proposes a tax on the rich, which would do little or nothing to address the problem of global warming. In my view, Duflo’s proposal is an illustration of what can go wrong when you replace utilitarian reasoning with deontological reasoning.  When it comes to public policy, it is not useful to think in terms of “moral debts”.  Rather there are policies that boost aggregate global utility and policies that reduce aggregate global utility.  A policy that slows capital accumulation while doing nothing to address global warming is not likely to boost global utility. PS.  I am not arguing that victims should never be compensated for damages they receive.  Rather I am suggesting that compensation schemes should be judged on utilitarian grounds.  Thus our legal system is based on the premise that people and companies are generally liable for specific damages imposed on others. PPS.  I suppose a wealth tax on billionaires sounds “progressive”, especially if the money is given to “poor countries”.  But people like Bill Gates donate a larger share of their wealth to poor countries than do rich governments, and it’s likely that (dollar for dollar) his donations are more effective than those of governments.  In fairness, Duflo suggests donating the money directly to the people in poor countries (which is much better than the approach used in many government run foreign aid programs), but I suspect that once governments become involved the money will end up moving from one government to another. (0 COMMENTS)

It seems obvious that moral artificial intelligence would be better than the alternative. Can we make AI’s values align with ours, and would we want to? This is the question underlying this conversation between EconTalk host Russ Roberts and psychologist Paul Bloom. Setting aside (at least for now) the question of whether AI will become smarter, what benefits would a moral AI provide? Would those benefits be outweighed by the potential costs? Let’s hear what you have to say! Please share your reactions to the prompts below in the comments. As Russ says, we’d love to hear from you.     1- How would you describe the relationship between morality and intelligence? Does more intelligent necessarily imply more moral- either in humans or AI? Can more intelligence offer a greater chance at morality? What would AI have to learn to develop a human-like morality? How much of (human) intelligence comes from education? How much of morality?   2- Where does (human) cruelty come from? Bloom suggests that intelligence is largely inborn, though continually influenced later, while morality is largely bound in culture. To what extent would AI need to be acculturated for it to acquire some semblance of morality? Bloom reminds us that, “… most of the things that we look at and we’re totally appalled and shocked by, are done my people who don’t see themselves as villains.” To what extent might acculturation create cruel AI?   4- Roberts asks, since humans don’t really earn high marks for morality, why not use AI’s superintelligence to solve moral problems- a sort of data-driven morality? (A useful corollary question he poses is why don’t we make cars that can’t go over the speed limit?) Bloom notes that obvious tension between morality and autonomy. How might AI help mitigate this tension? How might it make such tension worse? Continuing with the theme of morality versus autonomy,  where does the authoritarian impulse come from? Why the [utopian] human urge to impose moral rules/tools on others? Roberts says,  “I’m not convinced that the nanny state is merely motivated by the fact that, I want you not to smoke because I know what’s best for you. I think some of it is: I want you not to smoke because I want you to do what I want.” Is this a uniquely human trait? Might it be a trait transferable to AI?   5- Roberts says, “The country I used to live in and love, the United States, seems to be pulling itself apart, as is much of the West. That doesn’t seem good. I see a lot of dysfunctional aspects of life in the modern world. Am I being too pessimistic?” How would you respond to Russ?   Bonus Question: In response to the Roberts’ question above, Bloom responds, “I have no problem conceding that economic freedom writ large has helped change the standard of living of humanity by the billions. That’s a good thing. I don’t have any problem with the idea that there’s cultural evolution, and that’s a good thing, that much of it’s been productive and means people lead more pleasant lives. I think the question is whether the so-called Enlightenment Project in and of itself is the source of all that.” To what extent do you agree with Bloom? This question also recently arose in this episode of the Great Antidote with David Boaz, who insist that not only is the Enlightenment responsible for such positive change, it is a project that is ongoing. Again, to what extent do you agree?   (0 COMMENTS)