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Last Build Date: Sun, 26 Feb 2017 10:30:44 -0500

Copyright: Copyright 2017

Again on Cowen's techno-pessimism, by Alberto Mingardi

Sun, 26 Feb 2017 10:30:44 -0500

I find it kind of amusing that in a very short time the public discussion of the dangers lying ahead has moved from the great stagnation to excessive automation. That is, we stopped talking of productivity stalling, to start worrying about productivity growing too much. Whither the debate, pessimists tend to outnumber optimists - but that's no news. Few pessimists are as articulate as Tyler Cowen. David has already written an excellent critique of Cowen's last piece for Bloomberg. David is clearly pointing out some of the weaknesses of the piece, but doesn't comment much on a point raised by Cowen which I found quite bizarre. Writes Cowen: Industrialization, and the decline of the older jobs in agriculture and the crafts economy, also had some pernicious effects on social ideas. The early to mid-19th century saw the rise of socialist ideologies, largely as a response to economic disruptions. Whatever mistakes Karl Marx made, he was a keen observer of the Industrial Revolution, and there is a reason he became so influential. He failed to see the long-run ability of capitalism to raise living standards significantly, but he understood and vividly described the transition costs and the economic volatility. David's reply is that there are alternative explanations for the rise of socialism, one of them being Schumpeter's. Joseph Schumpeter maintained that by allowing for mass education, bourgeois capitalism has actually nurtured a class of people that opposed it deeply. For one thing, socialist intellectuals are an outcome of the same critical reasoning that before brought people to question feudal institutions and so helped in the formation of the liberal order, which made capitalism possible. But, at the same time, the problem with mass education is that it ends up with an oversupply of intellectuals, who in turn became enraged at not being properly appreciated by the market and thus start despising it. Hayek instead pointed out the importance of flawed intellectual history in bringing millions to socialism. Think about a text as influential as Engels's "The Condition of the Working Class in England". That work shaped the understanding of the Industrial Revolution of many: not only professional historians, but the general public, too. And yet, with the benefit of hindsight, one can't but smile today when he reads Engels arguing that the introduction of machineries has killed upward social mobility, making the proletariat for the first time a "permanent class of the population, whereas it had formerly often been merely a transition leading to the bourgeoisie". David already pointed out that the Industrial Revolution should be compared with what happened before (centuries in which private per capita consumption didn't grow much at all). I would add that if Marx and Engels were perceived by contemporaries as keen observers of the industrial revolution, this doesn't necessarily mean they "got" it - and they certainly got its long term consequences wrong. This is hardly a trivial mistake, as Marx was engaged in nothing less than deciphering the direction of history. On the top of that, Cowen's point seems to be that we should be very wary of the transition costs of innovation because they got us socialism. OK. But now we already had socialism: it can perhaps find new acolytes but it will hardly be a novelty. Some good news is that Douglas Rushkoff doesn't seem to be as compelling as Karl Marx was. More good news is that we have experience, let alone historical knowledge, that may allow us to put some arguments in perspective. For one thing, we can't buy into prophecies that are built on assumptions which imply that the past could not have been. "This time is different!" - or maybe not. I guess Tyler fears not so much socialism in new clothes, but some, new dark ideologies on the rise. It seems to me that even socialism in a way was just a new dress for a deep rooted attitude: nostalgia. Human beings tend to share a strong "anti-present bias". We systematically long for an unattainable return to the past, or a glorious fu[...]

How to Run a Drug Cartel, by Amy Willis

Sat, 25 Feb 2017 16:41:02 -0500

If you missed this week's EconTalk episode with Tom Wainwright of The Economist, you're missing out...whether or not you have any drug-running aspirations. Wainwright's new book, Narconomics, host Russ Roberts calls "a tribute to economics." In his book, Wainwright looks at drug dealers "as a business facing the same incentives competition, and constraints facing legal businesses." Indeed, the business drug cartels most resemble to Wainwright is WalMart. While Roberts and Wainwright don't quite agree whether WalMart (or most Latin American drug cartels) squeeze their suppliers or motivate them to innovate, the parallels between the legitimate and illegitimate worlds of commerce are fascinating. Perhaps the biggest point of the conversation (and Wainwright's book) is that governments' attempts at attacking the drug problem by focusing on limiting their supply is mistaken. Rather, argues Wainwright, they would be better served by focusing their efforts on the demand side of the market. Wainwright offers evidence that efforts at dissuading people from taking drugs in the first place has the effect of reducing the amount of drugs on the street far more than similarly priced efforts at eradicating supply. As you might expect, Roberts pushes back, asking the larger question whether we want the state involved in trying to stop people from doing something they want to do in the first place, even it is bad for them. He seems to fear a slippery slope...Most things, Roberts pushes, are bad for you in excess, so where would the state draw the line? Cocaine? Chocolate? Soda pop? Wainwright's description of the cat-and-mouse regulation race for "legal highs" in New Zealand is illustrative on this point. To me one of the most interesting parts of the conversation was the discussion of "corporate social responsibility," which Wainwright says is deeply ingrained in cartel leaders. Even the outcomes of cartel-style CSR might look much the same as in the legitimate business sector. Cartels must count on a "reasonable level of support" from their local community, says Wainwright. Cartel leaders may invest in such things as sports facilities, public housing, and pensions. Of course, they may also use threats of (and sometimes actual) violence. And there are other more "blunt" ways cartels try to curry favor with the locals and the local journalists, which often involve trying to defame rival cartels. The penultimate part of the conversation focuses on cartels' more recent efforts at 'diversifying' their enterprises, particularly into "people smuggling." The US Border Patrol, chides Wainwright, has unwittingly created a tremendous profit opportunity for cartels by raising the price of border crossings. In some ways, people crossing borders are a lot like drugs crossing. Wainwright thinks it implausible that the American government will ever be able to secure the border as the amount of illegal crossing (of people and/or drugs) is such a minute proportion of the total legal crossings, it's like looking for a needle in a haystack. The conclusion of the conversation focuses on the effects of the recent wave of marijuana legalization on Latin American drug cartels. I'll leave it to you to decide whether these recent efforts are net positive or negative. Perhaps you'll share your thoughts with us in the Comments! (2 COMMENTS)[...]

Getting the Facts, by David Henderson

Sat, 25 Feb 2017 15:14:33 -0500

In the late 1990s and early 2000s, in one standard part of an optimistic speech I gave about the modern economy and the effect of the Internet, I told a story from a 1977 Woody Allen movie, Annie Hall, that I could reasonably assume about half of my audience had seen. It's the scene in which Woody Allen gets in an argument in a movie line about what Marshall McCluhan believed. Woody cinches the argument. Here's the dialogue: Woody: I happen to have Mr. McCluhan right here. So here, let me, come over here for a second (pulling the real Marshall McCluhan out from behind a poster.) Tell him. McCluhan (to guy Woody is arguing with): I heard what you're saying. You know nothing of my work. You mean my whole fallacy is wrong. How you ever got to teach a course in anything is totally amazing. Woody (staring at the camera): Boy, if life were only like this. I told the story briefly and then pointed out that, indeed, the Internet means that life is like this. You sometimes have to dig a little but you can find facts quickly. We all, I said, can bring into the discussion our own version of Marshall McCluhan. Sometimes you might have to email someone who knows, but emailing is so much faster than sending a letter, both in the sending and in the work the other person has to do to respond. I should have added, in my talk, that life is like this if you want it to be. What I have found, unfortunately, is that people typically go with their priors and aren't willing to ask tough questions when the apparent facts support their priors. Which brings me to something that happened yesterday. A "friend" on Facebook (I put "friend" in quotation marks because it's someone I don't know who friended me--if we met, he might indeed be a friend) had a link to this video of something that happened on the floor of the California State Senate. In the video, State Senator Janet Nguyen, a Republican from Orange County went after the late Senator Tom Hayden for his support of the North Vietnamese during the Vietnam war. After she switched from speaking Vietnamese to speaking English, two of the Democratic Senators tried to shut her down and she ended up being forcefully removed from the Senate floor. This was awful, I thought. How could they justify making her stop when all she was doing was expressing her opinion about somebody? One of the two Senators who tried to shut her down was my Senator, Bill Monning, who is also Majority Leader of the Senate. Bill and I first met when we were on a panel at Robert Louis Stevenson school in which the topic was the Iraq War. The U.S. government had invaded Iraq the previous month and RLS held a forum. Morning, then a professor at the Monterey (now Middlebury) Institute of International Studies, Richard Hoffman, a military faculty member and an Army officer from the Naval Postgraduate School, Kip Hawley, a local Republican who later became head of the TSA, and I were invited. I don't think Bill or I surprised anyone because our antiwar views were well-known locally. The big surprise was Richard Hoffman, who was very critical of the war. Hawley was the only supporter. A few years later, Bill and I both spoke at an antiwar rally during the Bush administration. In both cases we hit it off. I had one run-in with him in a restaurant around that time in which he made a false accusation. But when I persisted in challenging him, he apologized. So my bottom line was that he was a fair-minded man. So I thought I would write him about this latest incident. Here's my letter that I wrote to him late Friday afternoon: Dear Bill, It has been a long time since we've spoken. I hope this finds you well. I saw a segment on line today in which you, on the Senate floor, objected to the state senator from Orange County criticizing Tom Hayden. I'm not familiar with Senate rules. Is it not allowed for someone on the Senate floor to criticize a fellow Senator even if that Senator is no longer a Senator? Best, David P.S. My best to your wife and daughter. Less than 4 ho[...]

Monetary offset in the UK?, by Scott Sumner

Sat, 25 Feb 2017 09:59:59 -0500

James Alexander has a new post discussing recent trends in NGDP growth in the UK:

UK RGDP saved by accelerating NGDP
(image) Unfortunately, the headline is a bit misleading. NGDP (left scale) grew at a 5.0% rate in the first half of 20172016, and a 4.6% annual rate in the 2nd half of the year.

James makes a mistake that I see quite often, using data before an "event" in an event study. He uses year over year data, which includes a 6 month period before the Brexit vote. It doesn't seem likely that the Brexit vote in late June caused rapid NGDP growth in the first half of 2016!

Nonetheless, even a 4.6% NGDP growth rate is reasonably impressive---above the average NGDP growth rate of the last 5 years. Thus James is right that the BoE policy of monetary offset was effective. We'll need another 6 months before the YoY data will consist of only data collected after the Brexit vote.

He's also right that many critics of Brexit predicted a collapse in aggregate demand after the vote:

Anti-Brexiteers were all forecasting a collapse in AD following the vote. It was never clear if this was going to come from shocked consumers spending less, from dramatic falls in business investment, or maybe both. Nothing of the sort happened, as we now know. All those top economists and other experts were completely wrong.
But not all anti-Brexiteers expected a collapse in AD. The steady growth in AD (so far) is consistent with the market monetarist model. (9 COMMENTS)

Quinones versus Eberstadt, by David Henderson

Fri, 24 Feb 2017 19:50:06 -0500

We have demonized government and laughed at government and called it incompetent, not paid taxes to support it. And we have a situation now, in my opinion, where--having done all that, having exalted the private sector, demonized government, what we now have is a story that the private sector has visited upon the United States of America and its people the most devastating threat to personal liberty that we know today, which is opiate addiction. And for a long time the only ones who were fighting that were government officials--coroners, jailers, cops, public health nurses, etc. This is a statement by Sam Quinones, author of Dreamland: The True Tale of America's Opiate Epidemic. It's at the tail end of the January 23 EconTalk interview of Quinones by Russ Roberts. Yet elsewhere in the interview, Russ, drawing on Quinones's own book, said: But you don't have $1000. You do have a Medicaid card. And the co-pay for Medicaid is $3. Which seems like a very nice, thoughtful thing. But what it means is that the taxpayer is going to cover $997 of this. The addict is going to cover $3. And then the punchline--that's interesting by itself and as an economist who has often talked about the value of cash, I can't help but note the irony that we give people Medicaid because we don't want them to have cash as a way to use it on drugs and alcohol. So there's an incredible tragedy here. So, they take the $3 co-pay; they $1000 worth of drugs; and it's worth $10,000 on the street. I found it interesting--as Russ appeared to also--that after pointing out the huge role of government in creating or exacerbating this opioid problem, Quinones said that we demonize the government and call it incompetent. But surely this absurd policy--having taxpayers pay for people to get addicted--deserves demonization and possibly the "incompetent" label. I haven't had time to read Quinones's book but elsewhere I did find confirmation of the point he's making. It comes from a chilling article by Nicholas Eberstadt of the American Enterprise Institute (HT2 John Cochrane). The article is titled "Our Miserable 21st Century" Eberstadt quotes the section of Quinones's book that Russ drew on and then adds: You may now wish to ask: What share of prime-working-age men these days are enrolled in Medicaid? According to the Census Bureau's SIPP survey (Survey of Income and Program Participation), as of 2013, over one-fifth (21 percent) of all civilian men between 25 and 55 years of age were Medicaid beneficiaries. For prime-age people not in the labor force, the share was over half (53 percent). And for un-working Anglos (non-Hispanic white men not in the labor force) of prime working age, the share enrolled in Medicaid was 48 percent. (italics in original) Eberstadt adds: By the way: Of the entire un-working prime-age male Anglo population in 2013, nearly three-fifths (57 percent) were reportedly collecting disability benefits from one or more government disability program in 2013. Disability checks and means-tested benefits cannot support a lavish lifestyle. But they can offer a permanent alternative to paid employment, and for growing numbers of American men, they do. The rise of these programs has coincided with the death of work for larger and larger numbers of American men not yet of retirement age. We cannot say that these programs caused the death of work for millions upon millions of younger men: What is incontrovertible, however, is that they have financed it--just as Medicaid inadvertently helped finance America's immense and increasing appetite for opioids in our new century. (italics in original) So those of us who demonize government and think it's incompetent still have a solid basis for those views. I agree with Quinones on one thing, though: this is not a laughing matter. Also, unlike Quinones, I don't see how opiate addiction threatens people's liberty or how jailers and cops in the drug war apparently don't. (9 COMMENTS)[...]

What has Syria ever done for us?, by Scott Sumner

Thu, 23 Feb 2017 18:58:58 -0500

The Detroit area is a magnet for Muslim immigrants, who are helping to revitalize the city. Here is The Economist: For [Detroit] Mayor Duggan, even a slowdown in his city's depopulation is good news; and he owes it entirely to immigrants. From 2010 to 2014, Detroit lost 36,000 residents who had been born in America. It gained 4,400 new immigrants--not enough to offset the population loss, but a significant increase in the share of immigrants in the city's population. . . . Immigrants create businesses at triple the rate of American-born residents. Between 2011 and 2015, 63% of adult immigrants to Michigan had a college degree. Immigrants still represent only 6% of the state's population, but 33% of high-tech firms created there between 1990 and 2005 have at least one immigrant founder. Many of them set up shop in newly trendy downtown Detroit. Signs abound that Detroit has turned the corner, at least in the downtown and midtown neighbourhoods. Opposite Cadillac Place are the offices and workshop of Shinola, a trendy maker of expensive watches and bikes, which Tom Kartsotis started with ten employees five years ago and now employs more than 350 in Detroit. In January the last of the city's 65,000 new streetlights was switched on. A light-rail line is being built, and the city has put 80 new buses on the roads. Some 10,800 blighted houses have been torn down since 2014; another 2,500 will be removed soon. The rate of payment of property taxes has increased from just 68% during the city's bankruptcy to 82%, in part thanks to a fairer assessment of the tax burden. How do Michiganders feel about President Donald Trump's effort to ban travellers from seven countries with predominantly Muslim populations? Mr Snyder says, diplomatically, that it opens a debate. But in several Michigan cities, especially Detroit, protests erupted. After hesitating, the chairman and chief executive of Ford released a statement saying they did not support it. But the ban, combined with newly stringent raids by Immigration and Customs Enforcement, the agency charged with deporting undocumented workers, is sowing fear among immigrants, says Mr Tobocman. Such fear is the last thing Detroit needs, as it tries to lure them in. And Syrians play a big role in healthcare: Two weeks ago, a group of physicians at Massachusetts General wrote an opinion piece in the New England Journal of Medicine (NEJM), denouncing President Trump's initial immigration ban from seven majority-Muslim countries . . . The nation relies heavily on foreign-born doctors, who make up 42 percent of office visits in rural America, according to the American Academy of Family Physicians. And currently, nearly 3,500 doctors from Syria are working in the U.S., according to Medicus Firm, a physician-staffing service. And I heard that this guy's son made a contribution to America's economy: Steve Jobs's biological father, Abdulfattah "John" Jandali (b. 1931), was born into a Muslim household and grew up in Homs, Syria. We hear so much about terrorism (a danger right up there with lightning and slippery bathtubs), so it's useful to occasionally take time to consider the benefits of immigration from Syria. (14 COMMENTS)[...]

Who's the Real "Deporter in Chief"?, by Bryan Caplan

Thu, 23 Feb 2017 13:55:40 -0500

Immigration activists repeated named Obama the "Deporter in Chief."  Were they right?  Strictly speaking, yes: More human beings were deported under Obama than any other presidency in history.  Substantively, however, the critics were very wrong.  Key fact: U.S. immigration law - and U.S. immigration statistics - makes a big distinction between full-blown deportations ("Removals") and "voluntarily" returning home under the threat of full-blown deportation ("Returns").  The distinction is not entirely cosmetic.  If you re-enter after Removal, you face a serious risk of federal jail time if you're caught.  If you re-enter after a mere Return, you generally don't.  But Return is still almost as bad as Removal, since both exile you from the country where you prefer to reside.  Since I've previously suggested that we should count each Return as 85% of a Removal, I've constructed a "Deportation Index" equal to Removals + .85*Returns to capture the substance of U.S. immigration policy.  Check out the numbers: Year Removals Returns Deportation Index 1977 31,263 867,015 768,226 1978 29,277 975,515 858,465 1979 26,825 966,137 848,041 1980 18,013 719,211 629,342 1981 17,379 823,875 717,673 1982 15,216 812,572 705,902 1983 19,211 931,600 811,071 1984 18,696 909,833 792,054 1985 23,105 1,041,296 908,207 1986 24,592 1,586,320 1,372,964 1987 24,336 1,091,203 951,859 1988 25,829 911,790 800,851 1989 34,427 830,890 740,684 1990 30,039 1,022,533 899,192 1991 33,189 1,061,105 935,128 1992 43,671 1,105,829 983,626 1993 42,542 1,243,410 1,099,441 1994 45,674 1,029,107 920,415 1995 50,924 1,313,764 1,167,623 1996 69,680 1,573,428 1,407,094 1997 114,432 1,440,684 1,339,013 1998 174,813 1,570,127 1,509,421 1999 183,114 1,574,863 1,521,748 2000 188,467 1,675,876 1,612,962 2001 189,026 1,349,371 1,335,991 2002 165,168 1,012,116 1,025,467 2003 211,098 945,294 1,014,598 2004 240,665 1,166,576 1,232,255 2005 246,431 1,096,920 1,178,813 2006 280,974 1,043,381 1,167,848 2007 319,382 891,390 1,077,064 2008 359,795 811,263 1,049,369 2009 391,341 582,596 886,548 2010 381,738 474,195 784,804 2011 386,020 322,098 659,803 2012 416,324 230,360 612,130 2013 434,015 178,691 585,902 2014 407,075 163,245 545,833 2015 333,341 129,122 443,095 Notice: Despite the rise in Removals under Obama, Returns crashed.  Obama's Deportation Index therefore falls as soon as he takes office - and then declines further every single year!  By 2015, Obama's D.I. is half its 2009 value, and about one-third of its previous peak under Bush II.Does this mean Democrats are the genuine friend of the immigrant?  Not exactly.  Here are the average D.I.s for every president from Carter to Obama.  The last column adjusts for population in millions, which, as you can see, makes the pattern even more extreme. President Average D.I. Average D.I./Pop/10^6 Carter 776,019 3,471 Reagan 882,572 3,718 Bush I 889,657 3,534 Clinton 1,322,215 4,861 Bush II 1,135,175 3,861 Obama 645,445 2,068 Yes, while Obama has the lowest D.I. of any president over the last four decades, the real Deporter in Chief was none other than fellow Democrat Bill Clinton. Adjusting for population, no one else even comes close.  Indeed, while I'm very confident that Trump's D.I. will exceed Obama's, it's far from clear that Trump will manage[...]

Kenneth Arrow, RIP, by David Henderson

Wed, 22 Feb 2017 20:41:18 -0500

Yesterday, Nobel Prize winning economist Kenneth Arrow died. Many first-rate appreciations of him have been published and I won't try to duplicate what they have said. Rather, I'll give my own recollections of Arrow. And I'll lead with one joke told my someone on Facebook. I won't quote him by name because I don't have permission. To get the joke, you need to read the first paragraph of my bio of Arrow in The Concise Encyclopedia of Economics and know that Duncan Black covered some of the same ground Arrow did. Joke Arrow is better than Black. Black is better than Condorcet. Condorcet is better than Arrow. Unearthing an Old Arrow Memo from the 1960s Here's a story I tell briefly here: I learned something from this research, and it's a lesson I also learned much earlier in my life but seem to have to relearn. Actually, two lessons. The first, which I first learned from reading Pride and Prejudice three times in high school, was not to assume but to pay attention and weigh evidence. The second, which I learned when I was a summer intern at the Council of Economic Advisers under Herb Stein in the Nixon White House, was how much agreement there is among economists about not restricting competition, not regulating prices, etc. One afternoon that summer of '73, when I was caught up on all my projects, I found some old files from the mid-1960s when Kenneth Arrow was a senior economist at the Council. In one of his memos, he made the case for deregulating natural gas prices. My first time around Arrow In December 1973, I had just ended the fall quarter of my second year in the Ph.D. program at UCLA and flew to Boston to visit my friend Larry Siskind, who was a senior at Harvard. I hung out for a big part of the week and decided to sit in on Arrow's class. The weather was cold out and he came in just before class time and hung his coat on a hanger at the back of the room. This stood out in my memory because it made me realize that after only 15 months in southern California, after my having left Canada, the world of cold weather, coats, and hangers seemed foreign. But my important memory is about content. Arrow was explaining a pretty basic point to this graduate econ class. He was saying that one reason many economists had concluded that average cost curves slope up past some point, even though there may still be unexploited economies of scale in production, is that the managerial function is stretched. One of the students raised his hand and Arrow called on him. "So you're saying," said the student, "that this militates against economies of scale." What an awkward way of saying that for an economics Ph.D. student, I thought to myself. Armen Alchian, who had taught me price theory the year before, would never let that pass. Arrow wrinkled his nose and said, impatiently, "It raises cost." Armen would have smiled. November 5, 1980 On November 4, 1980, Ronald Reagan had crushed Jimmy Carter in the presidential election, carrying 44 states and beating Carter by almost 10 percentage points in the popular vote. The Republicans also, for the first time since the early 1950s, carried the U.S. Senate. I was teaching at Santa Clara University and living in San Francisco, where almost everyone around me was in shock. It just so happened that on my schedule for Wednesday after the election was to drive down to Hoover and have lunch with Marty Anderson. It's kind of amazing to me now that that was possible given Marty's prominent role in Reagan's campaign. I'm pretty sure Marty must have been with him in L.A. the evening before. Maybe he'd flown home that evening or the next morning. In any case, we had lunch at the Stanford Faculty Club. From where we sat, I looked over about 30 feet and saw Ken Arrow at lunch with some colleagues. I'll never forget the stunned look on his face. It was priceless. "Uncertainty and the Welfare Economics o[...]

A few predictions (Nothing will change), by Scott Sumner

Wed, 22 Feb 2017 15:25:13 -0500

A year from today everything will be much clearer. I'm not sure what will happen, and I'm not much of a forecaster, but I'll take a shot. I think the safest prediction one can make is that nothing will happen, or at least the things people expect to change, won't change very much. I'll focus on three issues, monetary policy, nationalism and neoliberalism. 1. I predict that monetary policy will become a hot issue at some time in the latter part of 2017. I base this on two factors; Janet Yellen's term will end in January 2018, and it's likely that some sort of economic policy will be put in place by then (perhaps corporate tax reform plus deregulation.) Attention will then turn to the Fed, and it's role in helping or hindering Trump from reaching his growth target. My prediction is that Fed policy will not change. Trump may prefer a more dovish Fed, but I don't think he knows how to get it. "Fedborg" (i.e. the Fed establishment) will maintain the 2% inflation target, regardless of whether Trump reappoints Yellen or not. 2. Nationalism seems to be on the rise throughout the world. But I don't expect it to take hold in America. There are two possible types of American nationalism. One type, dubbed "white nationalism" is associated with alt-right figures such as Steven Bannon. A second type might be called "patriotic nationalism" or "rainbow nationalism" depending on whether you are on the right or the left. It includes all Americans. I don't think that white nationalism can succeed in America because the concept of racism is too discredited. The millennials are particularly opposed to discrimination and open to engaging with people of different races. Patriotic nationalism is probably the sort of nationalism that Trump would claim to believe in (his actual statements are all over the map.) In this vision, the relevant "tribe" or "nation" is not white Americans, but rather all Americans---the whole rainbow coalition. This nationalism is about putting America's interests ahead of the rest of the world. I see two problems with this sort of nationalism gaining much traction. First, people in America don't feel a strong tribal connection with others of different races and backgrounds. A white farmer or factory worker in Ohio probably feels more affinity for a white farmer or factory worker in Ontario, than for a black in Mississippi, or a Asian in Silicon Valley, or a Cuban-American in Miami. Strong nationalism is more likely to occur in countries where the "nation" and the "state" more closely coincide, such as Japan. The second problem with patriotic nationalism is that to a much greater extent than Trump understands, America's interests coincide with the world's interests. Getting growth up to the 4% that Trump is looking for is more likely to occur with freer trade and an increased rate of immigration, especially highly skilled immigrants. We also benefit from NATO and the EU not falling apart. Yes, at the margin there are conflicts---we'd like NATO members to up military spending to 2% of GDP. But this is green eyeshades stuff, nothing to build a powerful nationalistic movement around. 3. As nationalism is on the rise throughout the world, neoliberalism seems to be on the decline. My prediction is that this decline will eventually be seen as a myth. Neoliberalism is not going anywhere. As an analogy, some thought the conservative wave that brought Reagan and Thatcher to power would "end welfare as we know it." There really was a conservative wave in the 1980s, but today the world's major economies spend just as much on social programs, if not even more than in 1980. People often say that Trump is an unprecedented figure in American politics, at least since the days of Andrew Jackson. But of course if you look overseas you see that Trump is a very common type of politic[...]

Do Middle-Class College Kids Already Have a UBI?, by Bryan Caplan

Wed, 22 Feb 2017 14:05:26 -0500

In our Universal Basic Income debate, Will Wilkinson had one fun argument I didn't have time to answer.  His claim: Middle-class college kids (like stereotypical Students for Liberty attendees) already get a UBI from their parents.  Thanks to this UBI, Will argued, middle-class kids have the buffer they need to explore their interests and hone their skills - and the disincentive effects are barely noticeable.  Wouldn't it be great if everyone enjoyed the same privilege at taxpayer expense?

My reply: While middle-class parents do commonly provide ample financial support for their children, it's nothing like a UBI.  Instead, it's heavily means-tested: We'll keep supporting you as long as you pursue a responsible path.  "Either stay in school and get passing grades, or get a job and pay rent" is perhaps the typical deal.  Many parents add further micromanagement: To receive support, you need high grades, a realistic major, sobriety, and a suitable boyfriend.  Only a minority agree to let their children live as they please at their parents' expense.  When they do, the results seem pretty bleak.  I know of no systematic data on never-employed single 30-year-olds living in their parents' basements, but the anecdotal evidence is chilling.  Even parents who provide "unconditional" support ultimately tend to lose patience and angrily switch to old-school "sink-or-swim."  And who could blame them?

Will might decry this as "paternalism," but a subtler analysis is in order.  For starters, the heart of paternalism is treating adults like children.  But parents' obvious reply is, "We're treating our kids like children because they're acting like children."  Until you are self-supporting, demanding full autonomy is just chutzpah.  In any case, pure self-interest also urges us to impose conditions on our dependents' behavior.  "If you want to sleep on my couch, you'd better get to your job interview on time" need not be motivated by my desire to give you a "happy life full of hard work."  Maybe I just want my couch back.

To circle back to my broader theme, if people who love you have good reason to impose conditions on their voluntary assistance, people who've never even met you have overwhelming reason to impose conditions on their involuntary assistance.  And involuntary assistance is the heart of the welfare state.