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Last Build Date: Sun, 26 Mar 2017 17:21:42 -0500

Copyright: Copyright 2017

Best Two Paragraphs of My Weekend Reading, by David Henderson

Sun, 26 Mar 2017 17:21:42 -0500

The turning point came in 1758. The Philadelphia Yearly Meeting [of Quakers] recorded a "unanimous concern" against "the practice of importing, buying, selling, or keeping slaves for term of life." This was the first success for the cause of abolition anywhere in the Western world. "The history of the early abolitionist movement," writes historian Arthur Zilversmit, "is essentially the record of Quaker antislavery activities."

Quakers also took an active interest in the welfare of former slaves. Many masters helped to support their slaves after manumitting them. Others compensated them for their labor during slavery. When Abner Woolman (the brother of John Woodman) in 1767 freed two slaves his wife had inherited, he decided to pay them a sum equal to the amount that the estate had been increased by their labor, and asked the Haddonfield (New Jersey) meeting to help him compute a just sum.

This is from David Hackett Fischer, Albion's Seed: Four British Folkways in America, p. 602. I'm reading excerpts from Fischer's book for a forthcoming Liberty Fund colloquium on "Liberty and Diversity in the United States."

I had known that the Quakers were key in the abolitionist movement in the United States. I hadn't realized how key.

What's interesting also is that they, not surprisingly given their anti-slavery views, seemed to be the most libertarian group in the 18th century in what was to become the United States. This showed in their views on religious freedom. Many groups in the United States wanted the "freedom" to practice their own religion but not the freedom for others. But here's another quote from Fischer:

The most important of these differences [that Quakers had with other groups in British North America] had to do with religious freedom--"liberty of conscience," William Penn called it. This was not the conventional Protestant idea of liberty to do only that which is right. The Quakers believed. that liberty of conscience extended even to ideas that they believed to be wrong. Their idea of "soul freedom" protected every Christian conscience. (p. 597)

It's interesting to see how hard it was, though, even for such freedom-oriented people as the Quakers, to be completely tolerant of others' peaceful differences. Check this quote from Fischer:
Many Quaker immigrants to Pennsylvania had experienced this religious persecution; they shared a determination to prevent its growth in their own province. The first fundamental law passed in Pennsylvania guaranteed liberty of conscience for all who believed in "one Almighty God," and established complete freedom of worship. It also provided penalties for those who "derided the religion of others." (p. 599)


Conservatives better hope that wages and prices are sticky, by Scott Sumner

Sat, 25 Mar 2017 16:06:54 -0500

Macroeconomists are often lousy political philosophers. In previous posts I've discussed how macroeconomic views that are considered "liberal" or "conservative" actually have no obvious relationship to those political stances. For instance there's no obvious reason why "using monetary policy" (as Milton Friedman preferred) is less interventionist that a countercyclical budget deficit (as Keynes preferred.) One of the most amusing examples of this phenomenon is the critical reaction to Friedman and Schwartz's Monetary History of the United States. When the book first came out the message was viewed as being "conservative". Thus the Great Depression (in their view) was not caused by the inherent instability of capitalism, but rather by bad monetary policy. All of the statist interventions of FDR were not needed, and indeed were often counterproductive. (That's still my view.) By the 1990s, however, it was liberal economists who defended the book against conservative critics. By the 1990s, many of the right had moved past monetarism to flexible price "equilibrium models' of the business cycle, AKA, real business cycles. Keynesians kept insisting that because of sticky wages and prices, aggregate demand shocks still matter---and pointed to the Monetary History as supporting evidence. If you survey the field of macroeconomics, circa 2017, you see economists on the left almost unanimously acknowledging that wages and prices are sticky and that demand shocks have real effects on output. On the right side of the spectrum, there are people like Greg Mankiw, John Taylor and I who believe that wages and prices are sticky, but also a large group who are skeptical about whether wage and price stickiness is a key issue in the business cycle. In fairness, the stickiness skeptics hold views are often fairly nuanced, with some acknowledging price stickiness as a factor, but doubting its importance. Still, it's clear that on average the skepticism over sticky wage/price models of the business cycle is far more pronounced on the right than on the left. An outsider might naively assume that this political dichotomy occurs because wage and price stickiness is what Al Gore would call an "inconvenient truth" for those on the right. Nothing could be further from the truth. I am mostly on "the right" in my economic philosophy, but that's only because I believe wages and prices are sticky. If someone convinced me that they are actually flexible, I might be inclined to become more of a socialist. I believe that a combination of sticky wages and monetary shocks produce most of America's economic slumps, including the Great Contraction of 1929-33, as well as other big recessions like 1920-21, 1937-38, 1981-82 and 2008-09. I do not believe the capitalist system is "inherently unstable" and that big government is needed to stabilize it, rather I believe that it is naturally stable, as long as bad monetary policy doesn't interact with wage stickiness to produce business cycles. But suppose it were shown that I am wrong, and that wage/price stickiness is not an issue---what then? That would be very bad news for my laissez-faire ideology. Now I'd have to concede that events like the Great Contraction of 1929-33 showed that capitalism is indeed inherently unstable, and that this problem could not be fixed with good monetary policy. Now I'd have to entertain other solutions, such as big government and or comprehensive economic planning. To be fair, the real business cycle view that "technology shocks" cause business cycles is not necessarily identical to the left wing view that capitalism is inherently unstable. What RBC economists call 'technology shocks' could simply be bad economic policies by the government. And in my view they sometimes are bad policies. The NIRA caused the recovery to stall from July 1933 to May 1935, while Nixon's wage price controls led to an artificial boom in1972, and then a deep recession after they were removed and workers sought catch up pay increases. But my reading[...]

Restless Judge Posner, by David Henderson

Sat, 25 Mar 2017 14:48:08 -0500

Probably the best-known current federal judge who is not a Supreme Court justice is Richard Posner. He has been a judge on the 7th Circuit since 1981. Posner is known for his judicial decisions, his crystal-clear writing style in those decisions, and his prodigious output: over 40 books and hundreds of articles in law reviews, economics journals, and popular publications. Given his importance in both academia and the federal courts, we have been due for a book that tells us more about the man. In most of the important ways, William Domnarski's Richard Posner is that book. This is the opening paragraph from "The Restless Judge," my review of the book. Another excerpt: We see Posner call out various judges for intellectual laziness. He tangles with the late Supreme Court Justice and his former University of Chicago colleague, Antonin Scalia. He acerbically dresses down some police officers who have violated a defendant's Miranda rights. He confidently reaches conclusions about public policy based on his largely self-taught economic understanding. Posner on Scalia Posner is a harsh critic of federal judges, arguing that many of them are lazy and that they should write their own decisions rather than have their clerks write them. Two famous judges whom he takes on are current Chief Justice John Roberts and the late Justice Antonin Scalia. In a 2012 article in Slate, after Scalia had dissented from parts of the majority opinion that invalidated some provisions of an Arizona law on immigration, Posner raked Scalia over the coals. Scalia had written, "[Arizona's] citizens feel themselves under siege by large numbers of illegal immigrants who invade their property, strain their social services, and even place their lives in jeopardy." Wrote Posner, "But the suggestion that illegal immigrants in Arizona are invading Americans' property, straining their social services, and even placing their lives in jeopardy is sufficiently inflammatory to call for a citation to some reputable source of such hyperbole. Justice Scalia cites nothing to support it." Aside from his question-begging use of "hyperbole"--if it were hyperbole, one would be hard put to find a "reputable source" to support it--Posner made a good point. Posner on Miranda Warning and Cops In my view, Posner was at his finest in his 2014 United States v. Slaight opinion reversing the conviction of Michael Slaight for receipt and possession of child pornography. The police had clearly denied Slaight his Miranda warning, and Posner saw through it. Dismissing the police argument that they wanted to interview Slaight at the police station rather than at his home because his windows were covered with trash bags, blocking the sunlight, Posner wrote sardonically that "the officers gave no reason why an interview, unlike painting a landscape, requires natural rather than artificial light." As to their argument that the house "had a strong smell of cats," Posner, who to his credit is pro-cat throughout the book, wrote that "police smell much worse things in the line of duty." The final two sentences of Posner's decision are terse and beautiful: "These facts are incontrovertible and show that the average person in Slaight's position would have thought himself in custody. Any other conclusion would leave Miranda in tatters." I do end, however, by pointing out that Posner seems to have undue confidence in the willingness of powerful government officials to do the right thing even when they have little incentive to do so. (7 COMMENTS)[...]

DeLong on Gains from International Trade, by David Henderson

Fri, 24 Mar 2017 13:46:54 -0500

UC Berkeley economist Brad DeLong has written one of the best short pieces on the gains from international trade. His post is titled "Are There Benefits from Free Trade?: DeLong FAQ."

He writes:

Well, typically and roughly, the average import we buy from other countries we get for 30% off--we use foreign currency that costs us $1.40 to purchase goods and services made abroad that would cost us $2.00 worth of time, energy, resources and cash to make at home.

But there's more.

Typically and roughly, we sell the typical export to foreigners for about 40% more than we would get if we had to find a market for it at home: it costs us $1.00 worth of time, energy, resources and cash to make stuff that we can sell to foreigners for $1.40 worth of foreign currency. Thus for the country as a whole our foreign trade sector--exports and imports--is a way to get $2.00 worth of value for $1.00 worth of work. That's a very good deal. Our foreign trade sector takes advantage of this good deal on a mammoth scale: in the fourth quarter of 2016 we were trading goods and services at a rate of $2.8 trillion a year--17.5% of national income. That means that in a typical year we sell exports that we could get $2 trillion for if we had to sell them here at home and get imports that would cost us $4 trillion. That makes us $2 trillion per year--$25,000 per family each year--richer and more prosperous.

That is a big deal.

Indeed. I do wonder where he gets the 30% and 40% estimates. They strike me (I admit this is gut feel) as about double the right numbers. But even if the right numbers are half of his estimates, there are huge gains from trade.

The whole thing, which is not long, is worth reading.


Henderson on the John Batchelor Show, by David Henderson

Thu, 23 Mar 2017 18:22:14 -0500

Here's the audio from my interview yesterday.

The interview was prompted by this blog post.


Good Manners vs. Political Correctness, by Bryan Caplan

Thu, 23 Mar 2017 14:04:06 -0500

My first face-to-face encounter with political correctness came in 1989.  All undergrads in my dorm at UC Berkeley were strongly urged to attend the all-important DARE meeting.  Not DARE as in "Drug Abuse Resistance Education" but DARE as in "Diversity Awareness through Resources and Education."  I had disdain for this simple-minded leftist propaganda then, and the recent return of political correctness seems even worse.

These days, however, I'm also often appalled by the opponents of political correctness.  I'm appalled by their innumeracy.  In a vast world, daily "newsworthy" outrages show next to nothing about the severity of a problem.  I'm appalled by their self-pity.  Political correctness is annoying, but the world is packed with far more serious ills.  Most of all, though, I'm appalled by their antinomianism, better known as "trolling."  Loudly saying disgusting things you probably don't even believe in order to enrage "Social Justice Warriors" further impedes the search for truth - and makes your targets look decent by comparison. 

Against both political correctness and the trolling it inspires, I propose an old-fashioned remedy: good manners.  Everyone should feel comfortable speaking their minds - as long as they're polite.  In slogan form: It's not what you say; it's how you say it. 

Every child knows the basics of politeness.  Talk nicely.  Don't yell.  Don't call names.  Listen and respond to what people literally say.  Don't personally insult people.  Don't take generalizations personally.  If someone's meaning is unclear, don't put words his mouth; ask him to clarify.  And of course, don't escalate.  If someone's impolite, the polite response is to end the conversation, not respond in kind. 

Isn't this just "tone policing"?  Sure.  People can and should comport themselves like ladies and gentlemen.  You can fairly criticize Social Justice Warriors for one-sided tone policing - their failure to police their own tone.  And you can fairly criticize them for acting as if there's no polite way to reject their views.  But proper tone policing is what makes conversation productive and pleasant.  (And of course, the more pleasant conversation is, the more we're likely to constructively converse).

Aren't some positions inherently impolite?  Maybe, but they're so rare we needn't worry about them.  If someone says, "Your whole family should be murdered," they almost always say so impolitely.  To put it mildly.  But there are clear exceptions.  It's not impolite to simply be a utilitarian, and in the right kind of trolley problem, utilitarianism implies murderous answers.  While I'm not a Peter Singer fan, he seems polite to me. 

But isn't trolling fun?  For some people, it obviously is.  But trolling is still very bad.  If someone trolls you, you should just politely end the conversation and find someone worth talking to.


Robert Frost and liberalism, by Scott Sumner

Thu, 23 Mar 2017 14:02:59 -0500

Robert Frost once said: A liberal is a man too broadminded to take his own side in a quarrel. This seems very clever to me---I wonder what other people think. 1. He may not be using the term "liberal" to refer to left-wingers, but rather seems to be referring back to the original meaning of the term. In that case, I would consider myself to be a liberal. 2. Most of these sorts of pithy definitions are going to be unacceptable to one side of the political spectrum or the other. But I wonder if this is an exception. To me, Frost's definition seems like a compliment. I'd guess that non-liberals like Donald Trump might view it as an insult. Over at TheMoneyIllusion, I recently suggested that if I were a Supreme Court justice, I would not take the "libertarian" position on cases. I would not rule various laws "unconstitutional" just because I thought they were unwise examples of government interventionism. Indeed judges should never let their personal political views color their legal decisions. Some commenters thought I was being naive. Actually, I understand that very few people, indeed very few sitting judges, are able to completely put aside their personal biases. I was describing an ideal. In the very rare cases where someone does have the proper judicial temperament, political views don't matter. It's unfortunate that we must talk about liberal judges and conservative judges; we should be talking about good and bad judges. After all, we don't talk about liberal plumbers and conservative plumbers. Let me also use this definition to explain what I see as the difference between being liberal and being left wing. On a wide range of issues, including foreign policy, trade, entitlements and infrastructure spending, Trump's views might be characterized as being to the left of George W. Bush's views. But if we use Frost's definition of "liberal", then I'd claim that Bush was more liberal than Trump. Indeed Trump might be the least liberal major American politician in my lifetime. I've never seen another politician put so much emphasis on "our side" winning. President Bush was passionately devoted to the cause of treating AIDS in Africa. Trump's probably not opposed to the goal, but it certainly doesn't fit neatly into his real passion---making America great again. (Indeed Bush may have done more for Africa than any other President, including Obama.) Frost's comment seems to me to have two important implications: 1. The welfare of each and every person is just as important as your own welfare. Maybe not as important to you (in an emotional sense), but you should be aware that it is just as important in the general scheme of things. 2. Process is important. People (including judges) should not cheat on the process in order to achieve the result that they personally prefer. It seems to me that the first implication leads to utilitarianism, whereas the second implication leads to a specific version of utilitarianism called "rules utilitarianism". Society should use a rules-based approach to resolving issues (courts, elections, contracts, property rights, etc.) Voters should cast their ballot with an eye toward maximizing the welfare of society as a whole, not just the welfare of themselves and their families. It does no good to point out that this is all very utopian. Of course the real world always falls far short of perfection. The more interesting question is whether progress is possible. Is Denmark more liberal than Sicily? Is Denmark in 2017 more liberal than Denmark in 1317? I believe the answer to both questions is yes, which means that I believe human progress is possible. PS. In a fight between the faculty and the administration over abolishing tenure, I would have sided with the administration, even as a tenured faculty member. PPS. When I was growing up, I often helped my dad on construction, but I was pretty k[...]

Social Science, Statistics, and the Garden of the Forking Paths, by Amy Willis

Thu, 23 Mar 2017 09:44:44 -0500

(image) EconTalk host Russ Roberts has made no secret of his misgivings about high-level statistical analysis. So it's no surprise that his skepticism is brought to bear in his interview this week with Columbia University's Andrew Gelman. However, Roberts magnanimously starts the conversation by wondering aloud whether he's gone too far in his skepticism. Maybe there are indeed things we can learn, and that we could not learn otherwise, via data analysis.

Gelman, a statistician, suggests that reliance on statistical significance is answering the wrong question...There is an extended discussion on the extent to which "p-hacking" is a problem in statistical research, as well as a fascinating thread on the prevalence of "priming." (At the end of the conversation, Roberts refers to Brian Nosek's replication project as "God's work.")

The real point of the conversation to me, though, are the big questions raised. Roberts, about half-way through, genuinely asks, "So, now what?" Are we to discard all data analyses and resort once again to pure theory? Can statistical analyses ever avoid becoming ideological cudgels employed to beat down one's opponents? Should we reconsider the place of social science in policy altogether? What about what we consider to be social science? Is it enough to rely on your "gut" and be honest about it, as Roberts suggests?

These are just some of the questions I'm left thinking about after this week's conversation. I'm not really comforted by Gelman's contention that things would be better if only people had a better understanding of what statistical significance does (and does not) convey. I'm even less optimistic that more social scientists will go Gelman's route and endeavor to better integrate theory into their data modeling. But I always aspire to be proven wrong...


Tyler Cowen is a Semi-Persuasive Futurist, by David Henderson

Wed, 22 Mar 2017 18:31:27 -0500

My review of Tyler Cowen's latest book, The Complacent Class, is now out in the pages of Regulation. It's titled "Tyler Cowen: Semi-Persuasive Futurist." This excerpt gives a flavor of what I liked and disliked: Cowen nails the causes and effects of high housing costs. He points out that restrictions on building have driven housing prices sky high in many major cities, especially in coastal California and the Northeast. Somewhat disappointingly, although Cowen's claims are generally well-cited, he doesn't mention the path-breaking work by Harvard economist Edward Glaeser and Wharton economist Joseph Gyourko, which shows the high prices are indeed due to a scarcity of building permits rather than a scarcity of land. (See "Zoning's Steep Price," Regulation, Fall 2002.) However, Cowen goes beyond that fact to make another important point: those high housing costs have discouraged movement by workers to those cities and have kept them in lower-productivity jobs elsewhere. The overall negative effect on productivity and output is huge. He cites a 2015 National Bureau of Economic Research paper by University of Chicago economist Chang-Tai Hsieh and University of California, Berkeley economist Enrico Moretti, who find that lowering regulatory constraints in those cities to the level of regulation in the median-regulated city in the United States "would expand [these high-cost cities'] work force and increase U.S. GDP by 9.5%." On traffic, Cowen writes, "Traffic gets worse each year and plane travel is if anything slower than before." True. But why does traffic get worse each year? One's knee-jerk response would be to say that it's because more people are driving. But more people are going to Starbuck's each year, too. Has the wait at Starbuck's increased? Not that I can see. What accounts for slow traffic on roads but not "slow traffic" at Starbucks? Starbucks is private and for-profit, and it has the right incentive to expand and manage traffic, whereas roads are generally provided by government and government has little incentive to manage traffic well. That's why so few roads are toll roads with congestion pricing. One little-known fact is that state governments were starting to move in the direction of toll roads in the 1940s and early 1950s. But President Eisenhower put a stop to it with his interstate highway system, 90 percent of which was funded by gasoline taxes. It's hard to compete with highly subsidized roads. Disappointingly, in light of the problems caused by lack of tolls, Cowen cites that highway system as a big success. Less successful are other modes of transportation; he laments the fact that the number of bus routes has decreased, that "America has done little to build up its train network," and that American cities "haven't built many new subway systems in the last thirty-five years." That last lament was shocking because subways, except in high-density cities such as New York, are notoriously costly and inefficient. I was surprised by how lukewarm he was on gains from outsourcing. Here's that segment: Economists, caring as they do about overall economic well-being, tend to applaud free trade even when firms reduce labor costs by outsourcing. But Cowen is amazingly lukewarm on the gains from outsourcing. Cost-cutting developments, he writes, "build America's productive future less than coming up with neat and new ways of doing things, such as harnessing electricity, developing antibiotics, or inventing automobiles." But whether that's true depends on the degree of cost cutting. And what if American firms developed antibiotics by outsourcing to lower-cost outfits in, say, India? He sees outsourcing as "a way of keeping the status quo in place--for some, that is--at lower cost to owners of capital and privileged workers who have kept their incumbent status." Actually, that's not true. By de[...]

Is Immigration a Basic Human Right? Full Video, by Bryan Caplan

Wed, 22 Mar 2017 14:20:37 -0500

Here's my debate with Christopher Wellman.  Since the audience was admonished to vote on the literal resolution prior to voting, I'm now slightly less confident in my "metaphorical voting" theory of my Intelligence Squared debate outcome.  Either way, enjoy.

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