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Published: Fri, 15 Dec 2017 00:00:00 -0500

Last Build Date: Fri, 15 Dec 2017 17:12:13 -0500


Bitcoin Confuses Alan Greenspan

Fri, 08 Dec 2017 12:00:00 -0500

Bitcoin is valuable—its price has roughly doubled in the last month—because it's a technically superior form of money that governments and other institutions can't control. Mainstream economists, however, were trained to believe that currencies need to be managed by government-controlled central banks. So this new form of free-market money is proving...hard to grasp. Alan Greenspan hasn't bothered to learn even the basic facts about bitcoin. On Wednesday, the former Federal Reserve chairman compared it to the "Continental" currency issued at the outset of the Revolutionary War, which ultimately lost all of its value because the government kept printing more of it. "The amount of fiat currency kept rising," Greenspan said on CNBC, "and it's very difficult to tell to what extent bitcoin is fundamentally different from that, but I will say there are very considerable similarities." When asked if bitcoin will eventually be worthless, Greenspan responded, "It depends on how they handle the issue of the quantity that's being put into the market." (psst...Chairman Greenspan...the supply of bitcoins is capped at 21 million.) — Jim Epstein (@jimepstein) December 7, 2017 Wasn't there a CNBC producer on hand who could shout something into the economist's earpiece about how the supply of bitcoin is capped at 21 million, and that about 80 percent of all bitcoins that will ever exist are already in circulation? The Yale economist Stephen Roach appeared on CNBC on Tuesday to alert us to his view that bitcoin is a "toxic concept" and a "dangerous, speculative bubble." Roach asked rhetorically, "Have you yet to see anybody with a bitcoin in their pocket?" It's true that bitcoin isn't widely used as a currency (except as a way to circumvent capital controls and high import taxes). But Roach seems unaware of the reasons for that. For one thing, bitcoin is still in an early stage of development. Sending or receiving bitcoin today involves publishing the transaction to a shared public database called a blockchain, which is an extremely limited resource. (There are just 1mb of data available to record bitcoin transcactions roughly every 10 minutes.) Using this data to post a transaction means paying a significant fee, which makes it prohibitive presently to use bitcoins as pocket money. But there's a new technology in development, called the lightning network, that promises to solve this problem by letting users trade bitcoins in a peer-to-peer fashion without publishing to the blockchain. On Wednesday, lightning's developers released the first version of the protocol and did the first test transaction on the bitcoin network. Roach is right that buying bitcon is "speculation" that the technology will function as promised and gain widescale adoption. But that doesn't make it "toxic." A partial exception to the mainstream confusion over bitcoin is the Hoover Institution economist John Cochrane, who argues in a recent blog post that it has value because of its "convenience yield"—i.e., it has unique features as money. Like cash, it's hard to detect, so it provides users with a way around "aspirational laws that if enforced would bring the economy to a halt." It also "facilitates ransomware," "laundering money," and "getting money out of China." Overall, bitcoin is a tool to "avoid both the beneficial and destructive attempts of governments to control economic activity and to grab wealth." That's all true, but Cochrane doesn't mention that bitcoin also provides a way to escape hyperinflation, which is how it's currently being used in Venezuela. Even the U.S. government prints money to finance debt and pay for the welfare-warfare state without raising taxes, thus distorting the natural rate of interest and fueling a ruinous boom-and-bust cycle. Bitcoin offers refuge from these distortions. Cochrane also characterizes bitcoin as "an electronic version of gold," which is like calling the internet an electronic version of the post office. Part of bitcoin's "convenience yield" is that it's programmable money that's [...]

Bitcoin Sends Elite Economists Into Glorious Fits of Confusion

Thu, 30 Nov 2017 11:15:00 -0500

If you're looking for another reason to take the plunge and finally buy some bitcoin, check out Nobel Prize-Winning economist Joseph Stigltiz's new interview with Bloomberg, in which he says it should "be outlawed" and warns that the government "could crack down at any moment and then [bitcoin] collapses." Stiglitz is the George Costanza of economists: Every instinct he has, do the opposite. In 2002, he coauthored an infamous paper concluding that "the risk to the government from a potential default on [Fannie Mae and Freddie Mac] debt is effectively zero." And it's almost a decade to the month since he was in Caracas praising Hugo Chavez's economic policies. Speaking of Venezuela, Stiglitz also told Bloomberg that bitcoin "doesn't serve any socially useful function." While it's true that cryptocurrency's world-altering potential won't be fully realized until the technology advances quite a bit, it's already enabling the citizens of that country ravaged by socialism to obtain life-saving food and medicine. Is it that Stiglitz is an advocate of expansive government power in all contexts (he's also urging the U.S. to outlaw cash), or is it that he's too arrogant to bother trying to understand the most successful free-market money system running on the internet? I say both. (Fellow Nobel Laureate Paul The-Internet-Will-Be-About-as-Useful-as-the-Fax-Machine Krugman is also a bitcoin skeptic.) One of the great pleasures of observing bitcoin's rapid rise in price and prominence is that it's sending elite economists into fits of confusion and stoking their insecurity. ("We ought to just go back to what we always have had," Stiglitz told Bloomberg.) What Bitcoin has done for me: Taught me to take lofty titles with a grain of salt (professor, Noble Prize winner, etc). Your title doesn't make you an authority on things you don't bother to understand. — Alan Silbert (@alansilbert) November 29, 2017 In calling for bitcoin to be "outlawed," Stiglitz demonstrated that he doesn't understand that bitcoin is just code, which makes a global ban impossible. Thanks to the recently launched bitcoin satellite service, and a system in development for sending cryptocurrency transactions through radio signals, even shutting down the internet wouldn't stop bitcoin. Stiglitz is also unaware of one of cryptocurrency's most important paradigm shifts: It turned money into speech, thus affording it First Amendment protection. In the most recent episode of Forbes journalist Laura Shin's excellent Unchained podcast (published before Stiglitz' remarks), the prominent venture capitalist Naval Ravikant (arguably the most articulate thinker in the crypto space) expounded on this point: What bitcoin did is it turned code into money. So bitcoin is pure code—there's no paper, there's no guns, there's no federal government. It's just pure code. So to stop bitcoin you've got to stop code, and code is actually just speech. It's just a bunch of numbers and letters that I write down and that the computer interprets. So you have to stop me from writing those numbers or letters down in a certain sequence and conveying them to other people, [and then] to stop them from loading it on a computer somewhere in the world, [and then] to stop someone else from then turning that into money. So you can't control the way money flows unless you can stop the developers from...talking to each other, and thinking. And the regime that could do that would probably be one of the evilest regimes on the planet. Thanks to a landmark 1996 ruling by Judge Marilyn Hall Patel and later affirmed by the Ninth Circuit Court, there's strong legal precedent for the idea that code is speech. Mathematician Daniel Bernstein, with assistance from the Electronic Frontier Foundation, had sued the U.S. government in 1995 for blocking publication of an encryption program he had written. "Computer language is just that, language," Judge Patel wrote in her decision. Upholding that principle, I believe, will be the most important free speech battle [...]

Thankful for Property Rights on Thanksgiving Day

Wed, 22 Nov 2017 00:15:00 -0500

Ready for Thanksgiving? Before you eat that turkey, I hope you think about why America has turkeys for you to eat. Most people don't know. Everyone's heard about that first Thanksgiving feast—Pilgrims and Indians sharing the harvest. We like the drawings of it we saw in schoolbooks—shared bounty. Fewer people know that before that first feast, the Pilgrims nearly starved. They almost starved because they acted the way some Bernie Sanders fans want people to act. They farmed collectively. But communal farming creates what economists call "the tragedy of the commons." Think about what happens if a bunch of ranchers hold land in common. Everyone brings cattle to graze. While that sounds nice, it also means every rancher has an incentive to bring lots of cattle to the pasture. They bring cow after cow until the pasture is overgrazed -- destroyed. For this week's YouTube video, I repeated an experiment economics teachers sometimes do to demonstrate the tragedy of the commons. I assembled a group of people, put coins on the floor in front of them and said, "I'll give you a dollar for each coin you pick up. But if you leave them down there for a minute, I'll give you two bucks per coin, and then three bucks. Each minute the coins increase in value by a dollar." If the group waited, they'd make more money. Did they wait? No. As soon as I said "Go!" everyone frantically grabbed for coins. No one wanted to wait because someone else would have gotten the money. Collective action makes people more greedy and short-sighted, not less. Then I changed the rules of the game. I divided the floor into segments, so each person had his or her own property. Then we played the game again. This time there was no coin-grabbing frenzy. Now patient people anticipated the future. "I want to reap the most benefit," said one. "[On the previous test] I wanted it now, whereas this is going up, and it's mine." Exactly. When you own property, you want to preserve it, to allow it to keep producing good things. That beneficial pattern disappears under collectivism, even if the collectivists are nice people. The Pilgrims started out sharing their land. When crops were ready to harvest, they behaved like the people in my experiment. Some Pilgrims sneaked out at night and grabbed extra food. Some picked corn before it was fully ready. The result? "By the spring," Pilgrim leader William Bradford wrote in his diary, "our food stores were used up and people grew weak and thin. Some swelled with hunger." Adding to the problem, when people share the results of your work, some don't work hard. The chance to take advantage of others' joint labor is too tempting. Teenage Pilgrims were especially likely to steal the commune's crops. Had the Pilgrims continued communal farming, this Thursday might be known as "Starvation Day" instead of Thanksgiving. Fortunately, the Pilgrims were led not by Bernie Sanders fans or other commons-loving socialists, but by Bradford, who wrote that he "began to think how they might raise as much corn as they could... that they might not still thus languish in misery... After much debate [I] assigned each family a parcel of land... This had very good success, because it made every hand industrious." There's nothing like private ownership to make "every hand industrious." The Pilgrims never returned to shared planting. Owning plots of land allowed them to prosper and have feasts like the ones we'll have Thursday. Private property became the foundation for building the most prosperous nation in the history of the world, a place where people have individual rights instead of group plans forced on everyone. When an entire economy is based on collectivism, like the Soviet Union was, it eventually collapses from inefficiency and misuse of resources. So this Thanksgiving, thank private property. Every day, it protects us from the tragedy of the commons. COPYRIGHT 2017 BY JFS PRODUCTIONS INC.[...]

Tonite: Watch Debate About Free Trade with Don Boudreaux and Rick Manning

Mon, 13 Nov 2017 12:55:00 -0500

(image) Watch George Mason University economist and Cafe Hayek blogger Donald J. Boudreaux and Americans for Limited Government's Richard Manning in a live debate about free trade at tonight's The Soho Forum. The debate will be viewable on Reason's Facebook page and in the embed below.

Once the event starts at 6:45 P.M. Eastern time, submit a question in the comments, and we'll pick a couple of the best to be read aloud during the Q&A session.

You can help pick the winner by voting on the resolution now at After the closing arguments, you'll have a chance to vote again.

Tonight's resolution: "The U.S. government should unilaterally abolish all tariffs and duties on imports and all subsidies to exports, thereby making all reciprocal trade agreements with other countries unnecessary." Boudreaux will be defending the proposition and Manning will be attacking it.

Reason is proud to partner with the Soho Forum, a monthly debate series moderated and co-founded by Gene Epstein and held at the SubCulture Theater in New York City's East Village. Tickets cost between $10 and $18 and are still available for tonight's debate. Go here for details.

For audio and video of past Soho Forum debates, go here.

To get a reminder of tonight's debate, go here. To watch debate, come back to this post between 6:45 P.M. and 7:00 P.M. Eastern time and refresh the box below. Or go to Reason's Facebook page.

src="" allowfullscreen="allowfullscreen" width="476" height="476" frameborder="0">

Forget Price Gouging: Businesses React Altruistically To Disasters

Fri, 15 Sep 2017 12:12:00 -0400

With Hurricane Irma and Hurricane Harvey in the news, the country is being treated to a real-time debate over the sins of so-called price gouging, or sharp hikes in the cost of food, water, fuel, and other essential items in affected areas.

Defenders of gouging, including many libertarians, stress that price hikes force customers to prioritize their purchases while incentivizing suppliers to bring necessities to market. So if jugs of water are selling at $10 a gallon, businesses have a motivation to truck them in. And at that price, no one's going to use them to wash their cars.

Critics, however, say that it's immoral to use the price mechanism to meter out essentials in a crisis.

Both sides ignore a far more-important reality: Local and national businesses routinely give away goods and services more efficiently than public-sector responders or charities can manage.

In the immediate wake of Hurricane Harvey slamming Texas, businesses pledged over $72 million in aid, with over three dozen giving more than $1 million a piece. Airbnb used its home-sharing network to set up places for people to stay, and the crowd-sourced mapping app Waze helped the displaced find shelters. Walmart, the left's favorite corporate bogeyman, pledged more $20 million and brought water and food to the needy. A dozen years ago, during Hurricane Katrina, the world's largest retailer trucked in relief long after FEMA convoys stopped running.

Private sector aid gets less press than empty shelves and gouging accusations, but it also makes good business sense.

In some cases, price hikes during a crisis are appropriate, but most retailers know they're better off showing that they care about their customers and aren't out to take advantage of a bad situation. Successful businesses safeguard their reputations.

In The Wealth of Nations, Adam Smith wrote that he had "never known much good done by" people motivated by charitable aims, but providing aid in disasters is every bit as much a part of the free market as more obvious forms of profit seeking.

If critics and defenders of gouging are really interested in creating a better society, they'd do well to help make this part of the Invisible Hand visible to all.

Edited by Mark McDaniel. Written by Nick Gillespie. Cameras by Jim Epstein and Alexis Garcia.

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Good News: Robots Will Steal Only 9 Percent of Jobs, Not 38 Percent Says New Study

Tue, 05 Sep 2017 16:35:00 -0400

(image) Researchers with the Centre for European Economic Research, relying on job-level rather than occupation level data, estimate the number of jobs at risk to automation could be as low as nine percent.

Researchers at Oxford University surveying 702 occupations reported in 2013 that nearly half of all jobs in the United States are at risk of being automated away during the next two decades.

Another study in March 2017 by analysts at the consultancy PwC estimated that that around 38 percent of jobs in the U.S. are at potential high risk of automation.

The new study by CEER, "Revisiting the Risks of Automation," says not so fast. Earlier studies skewed their estimates of future job-stealing automation relying too heavily on occupation-level instead of job-level data with regard to the tasks that people actually perform while working.

Applying this analysis to jobs across the U.S. economy, the CEER find "that the automation risk of U.S. jobs drops from 38 percent to 9 percent when allowing for workplace heterogeneity. Occupation-level assessments of automation potentials thus are severely upward-biased."

The researchers found "the majority of jobs involve non-automatable tasks more often compared to the occupational median job, as workers of the same occupation specialize in different non-automatable tasks." In other words, workers increasingly take on other tasks that complement the aspects of their jobs that become automated.

As an example, the authors' analysis finds that there is a 74.4 percent risk of automation for ISCO-08 classified Numerical and Material Recording Clerks when looking just at median-occupation level data. However, job-level data suggests that many clerks specialize in niches that involve non-automatable tasks such as presenting, planning or problem solving.

"Taking the large and heterogeneous range of their tasks into account suggests that only 18.2 percent of them actually face a high risk of automation," the researchers conclude. "Put differently, the average worker does a job that is much less automatable than the median job automation potential in this profession."

Still, if one in ten U.S. jobs is endangered by robots, doesn't mean that we should nevertheless be worried? Probably not. As the CEER analysts note, whether or not automation leads to net job losses depends on the relative sizes of its job-creation and job-destruction effects.

My July, 2017 article, "Are Robots Going to Steal Our Jobs?," pointed out there are good reasons to think that just like previous waves of technological progress modern automation will result in the creation of more jobs, not fewer.

Hillary: I Lost Because Bernie Promised Everyone a Pony

Tue, 05 Sep 2017 12:45:00 -0400

In her forthcoming book about the 2016 election, What Happened, Hillary Clinton complains that her chief opponent in the primaries, Bernie Sanders, consistently undercut her by one-upping her "bold" and "ambitious" proposals without explaining how his policies would work. In other words, Sanders did to Clinton what Democrats have done to their critics for years: Frame any worry about the costs and unintended consequences of a program as a lack of concern for the problem the program is supposed to address. After years of cultivating economic illiteracy, the party reaped the results. In an excerpt tweeted by a supporter ahead of the book's release, Clinton compared Sanders to the deranged hitchhiker in There's Something About Mary whose get-rich-quick scheme involves cribbing the famous "eight minute abs" program with his own "seven minute abs." Ben Stiller, who picks him up, points out that nothing's stopping him from cutting it down to six-minute abs. "On issue after issue, it was like he kept proposing four-minute abs, or even no-minute abs," Clinton complained of Sanders. "Magic abs!" Clinton continued by sharing a Facebook post she said someone sent her. The post compared Sanders' various positions to a belief that "America should get a pony." When Clinton expresses skepticism about the idea, Sanders says she thinks "America doesn't deserve a pony" and his supporters declare that Clinton hates ponies. Her clarification that actually she loves ponies is then treated as a flip-flop. The reaction to the excerpt helped illustrate Clinton's point. Several Sanders supporters in the Twitter thread complained that Clinton dared to compare single-payer healthcare to ponies. "Funny that she likens no one dying or going into debt because they don't have enough money to a 'pony,'" a typical response read. Projecting the worst possible motives onto your opponents is a lot easier than explaining your own positions. On the specific case of single payer, the same process has been playing out in California this year. Supporters of single payer didn't have a plan to overcome the procedural hurdles they faced. So instead they disingenuously blamed Assembly Speaker Anthony Rendon, who had to shelf the bill, and for that was the target of mass protests and death threats. "Rather than committing to raising the millions of dollars that would be needed to overcome special interests and pass that initiative, they would, apparently, rather deceive their supporters, hiding the realities of California's woeful political structure in favor of a morality play designed to advance careers and aggrandize power," The Intercept's David Dayen explained. "That may sound harsh. It's gentle." Clinton has identified a real problem in American politics, even as she elides its roots. Both parties have promoted economic ignorance, because that makes it easier to make wild promises and then find scapegoats when the promises fall through. The consequences are all around us.[...]

Contrary To Nationalist Myths, Protectionism Is an Economic Disaster

Tue, 22 Aug 2017 15:15:00 -0400

American economic nationalism has risen in recent years, both fueling and fueled by President Donald Trump's election. With it has risen the view, perpetuated by Trump and many others, that protectionism has been an effective policy throughout the nation's history—that past U.S. government restrictions on foreign competition were manifestly successful in achieving their stated policy objectives: decreased imports, increased jobs, industrial revival, opened foreign markets, and, more broadly, American economic prosperity. These purported historical "successes" have been used to justify a new round of nationalist economic proposals. This revisionist history ignores a vast repository of academic analyses of and contemporaneous reporting on the periods and policies in question, showing the many failures of American trade protectionism. It relies on well-worn protectionist myths and the mere correlation of economic improvement with protectionist experimentation. Contrary to what appears in the news and on the campaign trail, the scholarship paints a much different picture. American protectionism—even in the periods most often cited by Trump and others as "successes"—has not only imposed immense economic costs on consumers and the broader economy, but typically failed to achieve its primary policy aims and fostered political dysfunction along the way. Mention of this scholarship is absent from the current political debate about the consequences and the future direction of U.S. trade policy. It seems not a day goes by without reading or hearing some unwitting politician, journalist or even "academic" recount past episodes of American protectionist "success"—almost always without any evidence to support such claims and despite the quiet, authoritative corrections of actual trade policy experts. My new policy analysis for the Cato Institute seeks to remedy this problem; it establishes that contrary to the fashionable rhetoric, American protectionism has repeatedly failed as an economic strategy. Examining anti-trade measures over three different periods of American trade policy history delineated by milestones in the evolution of the U.S. and multilateral trading system, I find that protectionism not only imposed large and expected costs on U.S. consumers—dwarfing any possible gains to protected industries and workers—but also (and more unexpectedly) failed to achieve even their most basic objectives. Multiple studies of U.S. import restrictions between 1950 and 1990 found that each measure analyzed imposed on average $620,000 per year (2017 dollars) in additional costs on U.S. consumers for each job supposedly saved or created in the protected industry at issue. During the same period, other studies found that in only one instance—the bicycle industry—did protectionism appear to resuscitate and help an industry flourish after import protection disappeared. The reason: the US industries didn't actually reinvest their windfall profits in cost-saving technologies that would improve their long-term competitiveness—even when those companies had the capital available to make such investments. Import quotas and "voluntary export restrictions," meanwhile, were found to disproportionately help, not hurt, protected American companies' foreign competitors. Similar studies of subsequent periods found even higher costs and the same lack of tangible benefits, particularly when U.S. exporters faced foreign retaliation. None of these studies even tried to calculate the intangible costs of protectionism, such as decreased competition or increased cronyism, on the U.S. economy. Even episodes most often cited as protectionist "successes"—post–Civil War industrialization, the revival of Harley-Davidson, the American semiconductor industry, and the 1980s era of retaliation and reciprocal market opening—are shown to be at best neutral and[...]

Tribalism and Economic Nationalism Are Cut from the Same Cloth

Sun, 20 Aug 2017 08:30:00 -0400

I have no idea what goes on in Donald Trump's head, but I can imagine a connection between his refusal to renounce the support of alt-right white identitarians and his rejection of globalism—that is, the freedom of people to trade across national boundaries and to move, consistent with individual rights, as they see fit. When Steve Bannon says he hopes the Democrats will talk about nothing but racism and let the White House get on with its program of "economic nationalism," he may be showing his clever side. Perhaps he sees the connection—and has a magician's sense of misdirection. For the record, globalism and government intervention have no necessary relationship, whatever the rest of the political universe believes. The most eloquent promoters of unencumbered world trade were Richard Cobden and John Bright, the 19th-century "Little Englander" anti-imperialists and peace advocates. No one has an excuse for conflating free worldwide commerce—including the movement of workers, that is, immigration—with either empire or elitist rule through multinational bureaucracies birthed by politicians. As Cobden said, They who propose to influence by force the traffic of the world, forget that affairs of trade, like matters of conscience, change their very nature if touched by the hand of violence; for as faith, if forced, would no longer be religion, but hypocrisy, so commerce becomes robbery if coerced by warlike armaments. Anti-globalism and anti-cosmopolitanism might flow purely from economic ignorance, but it is hard to believe that's all it is for many people. Too often these attitudes suggest what Bryan Caplan calls "anti-foreign bias" combined with "antimarket bias." Caplan defines antiforeign bias as "a tendency to underestimate the benefits of interacting with foreigners," and he defines antimarket bias as a tendency to "underrate the social benefits of markets." (His book The Myth of the Rational Voter: Why Democracies Choose Bad Policies has the details about these and other relevant, common biases.) Why would anyone underestimate the benefits of interacting with foreigners? It might be because they are, well, foreign. Combine this bias with an ignorance of Adam Smith's "invisible hand" (spontaneous order) and a suspicion that exchange is zero-sum rather than positive-sum, and you have the making of an economic nationalist. If you are already a committed economic nationalist, you will have an interest in spreading distrust of foreigners and markets to others in order to advance your program or be elected president of the United States. (Some apparent tribalists may "merely" be demagogues pandering to authentic tribalists.) While I don't think one has to embrace racism or tribalism to be an economic nationalist, an affinity exists between the two dispositions: "I can't trust those people? Why would I want to trade with them?" Moreover, the distrust of foreigners and markets could readily carry over to subgroups in the domestic population that seem foreign—that is, groups which don't quite seem to embrace the "nation's culture" with sufficient enthusiasm. Maybe some members of the suspect group have a primary language other than English, or practice a religion deemed weird, or don't trust the police. In other words, someone who starts with a bias against foreigners and the social cooperation embodied in what we call markets is a prime candidate for bigotry toward domestic "foreigners" too. And that person might well see kindred spirits in groups that exhibit more-pronounced versions of those biases, even when their members have a taste for violence. After all, danger lurks, so who could blame people for being tempted to defend their values directly? Since social and economic change is inevitable—some of it introduced by The Other—those biases could also incline a person to lament the loss of [...]

Steve Forbes on Trump, Taxes, and 100 Years of Forbes Magazine

Wed, 16 Aug 2017 09:42:00 -0400

"We don't see business as evil," says Steve Forbes, marking the 100th anniversary of Forbes magazine, the iconic business publication started by his grandfather. "We see it as a noble undertaking." And thanks to capitalism, progress in the 20th century will pale in comparison to what's coming in the 21st. "In 2117," he says, "we'll be infinitely better off." Forbes sat down with Reason's Nick Gillespie at Freedom Fest in Las Vegas to discuss the legacy and future of the magazine, his assessment of President Trump, and where the legislative agenda for Republicans is falling short. Edited by Austin Bragg. Cameras by Meredith Bragg and Justin Monticello. Subscribe to our YouTube channel. Like us on Facebook. Follow us on Twitter. Subscribe to our podcast at iTunes. This is a rush transcript. Check all quotes against the audio for accuracy Nick Gillespie: Let's talk about turning 70. How does that feel, and looking back, what are the highlights of your public career? Steve Forbes: Well, 70, glad to have made it, and at this stage of life it's nice to have a guilt-free excuse for plenty of cake, cookies, and ice cream, so not going to complain. Gillespie: In terms of your achievements over the years, talk about your forays into the Republican nomination process for the presidency, and your advocacy of the flat tax. Do you feel like that accomplished what you hoped it would accomplish? Forbes: Well, I would have liked to have won. It's more fun to get more votes than the less votes. But I do think we got some good ideas out there, even though the US has not made much progress on the tax front. Forty countries and jurisdictions around the world, like Hong Kong, have had the flat tax, and it's worked fairly well. So this is no longer laboratory stuff, this is real world stuff. The disappointment is that in the last 20 years, we haven't had a presidential candidate make that a forefront issue. A couple of them in the last election had some variations of the flat tax, but they didn't put it out there, so nobody knew. It's like, the tree falls in the forest, but if you don't hear it, did it really fall? I'm just waiting for a political entrepreneur to do it. I would have thought in 2016, when Trump rose up, that the other 16 opponents would have said, "I got to do something a little differently, or I'm going to get steamrollered." Instead, they had all the same kinds of consultants. They made all the same calculations, and they all went down for the count. Shakespeare talked about killing all the lawyers, I think they should kill all the political consultants. But that's another subject. But in terms of the flat tax, tax simplification's out there. Republicans at least have to pay lip service to it. Another thing I think we got out there, the idea of medical savings accounts. Now they call them health savings accounts. The idea of being patients should be in control, and not government, not third parties, not bureaucrats, not big companies, but we the people, individually. So we got that idea out there. I think, too, we gave some credence to the idea of a new Social Security system for younger people. When I ran in '96 in Arizona, I shocked one of my campaign colleagues when I said, "We're going to Sun City, and I'm going to talk about Social Security." "Oh, we can't do that!" But once you make it clear you're not going to take anything away from them, this is about their kids and their grandkids, they'll listen. Gillespie: Explain a little bit of what your alternative Social Security plan was, because that's also something that has not advanced, even as the economics or the finances of both Medicare and Social Security have just gotten even more in the tank. Forbes: Well, in Social Security for younger people, they'll own their own accounts. Personal accounts. That way, if anything happen[...]

How Freedom Made Us Rich

Wed, 09 Aug 2017 13:00:00 -0400

"In [1492], if you were going to bet on who was going to have a 'Great Enrichment,'" says University of Illinois at Chicago economist Deirdre McCloskey, "you would have been crazy not to bet on China because China had the most advanced commercial institutions, the most advanced ship building technology, [and] the most advanced machinery all together." But it didn't work out that way. "My claim," McCloskey says, "is that liberty was the key to modern economic growth." In her new book, Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World, the third volume in a trilogy, McCloskey argues that our vast accumulation of wealth over the past two hundred years— which she's dubbed "The Great Enrichment"—was the result of "massively better ideas in technology and institutions." Where did they arise from? &tag=reasonmagazineA"A new liberty and dignity for commoners," she argues, "expressed as the ideology of European liberalism." McCloskey sat down with Nick Gillespie at Freedom Fest, the annual convention for libertarians in Las Vegas, for a wide-ranging conversation on topics including the roots of "The Great Enrichment," why her gender reassignment surgery was an "expression of [her] libertarianism", and the importance of advocating policies that "actually help the poor" instead of just "making people feel good about helping the poor. McCloskey is also a Reason columnist. Her archive is here. Edited by Todd Krainin. Cameras by Meredith Bragg and Justin Monticello. Subscribe to our YouTube channel. Like us on Facebook. Follow us on Twitter. Subscribe to our podcast at iTunes. This is a rush transcript—check all quotes against the audio for accuracy. Nick Gillespie: Hi, I'm Nick Gillespie with Reason and today we are sitting down with Deirdre McCloskey. She's an Emeritus Professor of Economics, History, English, and Communication at the University of Illinois at Chicago and the author most recently of Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World. She's also a columnist for Reason Magazine. Deirdre, thanks so much for talking with us. Long time contributing editor to Reason as well. McCloskey: I'm extremely pleased to be here and ... Gillespie: Well, your latest column, because I think this puts us right into a lot of current discussions, is titled The Myth of Technological Unemployment. McCloskey: Yeah. Gillespie: The subhead is, if the nightmare of technological unemployment were true, it would have already happened repeatedly and massively. In it, you take issue with a lot of libertarian or free-market economists who are talking about how we've reached the end of technological innovation or productivity growth and yeah, we're going to have to find something to do for people who are replaced by robots. McCloskey: Yeah. Gillespie: What's wrong with that? McCloskey: I think it's just completely wrong. My friend, Tyler Cowen, my friends at George Mason think maybe it's time for an intervention and Tyler, we think maybe we should send him to dry out somewhere because he seems to have gone crazy on this and he's not alone. I mean, there are people like Bob Gordon wrote a book last year, which was very successful. Gillespie: Which argued that basically say goodbye to 2%, ... McCloskey: Exactly. Gillespie: ... even 2% economic growth. McCloskey: Exactly. Innovation in the United States is finished and we've invented all the window screens and drop ceilings we're ever going to invent. There are a whole bunch of things wrong with it. One is that it doesn't make a lot of quantitative sense. In Tyler's book, which is called Average is Over, he's got a chart, which he says, "Summarizes my point." It's terrible. See the falling share of labor in national income. You look closely at the chart, which is one of t[...]

Peak Oil: What Ever Happened to Hubbert's Peak?

Thu, 27 Jul 2017 10:55:00 -0400

Crude oil production in the U.S. will reach an average of 9.9 million barrels a day in 2018, the Energy Information Administration projects in its latest Short-Term Energy Outlook report. This would surpass the previous record of 9.6 million barrels per day, set in 1970. So much for Hubbert's Peak. In 1956, geologist M. King Hubbert famously predicted, in a presentation to the American Petroleum Institute, that oil production in the U.S. would peak no later than 1970. To make his estimates, Hubbert added up all the plausible extrapolations of domestic crude oil reserves. His more conservative calculation assumed the ultimate production of 150 billion barrels, in which case production would peak in 1965. But if ultimate production could rise to 200 billion barrels, the peak would be delayed until 1970. Many people thought Hubbert's predictions were vindicated when U.S. production began dropping from its 1970 peak. In fact, domestic production of crude reached a nadir of 5 million barrels per day in 2008. (Had Hubbert's calculations been right, the U.S. would have been producing only about 2.5 million barrels a day that year.) As global oil prices began rising toward their highest levels ever, peak oil doomsaying had its heyday. My 2006 article "Peak Oil Panic" detailed many of those predictions of an impending petroleum catastrophe. The Princeton geologist Ken Deffeyes suggested in 2001 that global oil production would peak on Thanksgiving Day, 2006. Petroleum geologist Colin Campbell warned in 2002 that dwindling oil supplies would soon lead to "war, starvation, economic recession, possibly even the extinction of homo sapiens." In his 2004 book Out of Gas: The End of the Age of Oil, the Caltech physicist David Goodstein asserted not just that peak production was imminent but that "we can, all too easily, envision a dying civilization, the landscape littered with the rusting hulks of SUVs." In 2007, the German Energy Watch Group declared that the world had reached peak oil, and that this could soon trigger the "meltdown of society." At the peak oil alarmist website The Oil Drum, one prominent analyst declared in 2009 that global oil production had peaked at 82 million barrels per day in 2008 and would thereafter begin declining at a rate of 2.2 million barrels per day. Had that estimate been correct, world oil production would have fallen by now to about 62 million barrels per day. Instead, the International Energy Agency reported this month that global production now averages around 97 million barrels per day. Keep in mind that this level of production is taking place despite the political and economic chaos afflicting such major oil-producing countries as Venezuela, Libya, and Iraq. Peak oilers greatly underestimated the power of markets and human ingenuity to solve problems. (Think fracking.) The Energy Information Administration reports that the U.S. has cumulatively produced more than 200 billion barrels of oil. (So much for Hubbert's "ultimate production" calculations.) During that time, proven domestic oil reserves have never fallen below 20 billion barrels; they are now estimated at 32 billion barrels. A decade ago, at the peak of peak oil hysteria, I wrote that "the peak oil doomsters are probably wrong that world oil production is about to decline forever. Most analysts believe that world petroleum supplies will meet projected demand at reasonable prices for at least another generation." That's still true.[...]

Humans of FreedomFest, Part 4: "My father used...'libertarian' as a swear word."

Sat, 22 Jul 2017 11:30:00 -0400

Editor's note: FreedomFest, held every July in Las Vegas, is the largest annual gathering of libertarians in the country. Today is the first day of the four-day long conference, which is being headlined in its 10th year by William Shatner, John Stossel, Greg Gutfeld, and others. Taking inspiration from the site Humans of New York, Reason is happy to offer Humans of FreedomFest, a series of portraits and brief interviews with various attendees. To read previous installments, go here.

Deirdre McCloskey


"My father used the word 'libertarian' as a swear word. 'Oh that's libertarian'... But I was a marxist at the time so I thought, well that's not something I should be. It took me a long time to get over that. I was an anarchist to begin with when I was 15. Then I was a socialist, kind of a Joan Baez socialist. I played the guitar... I know more socialist songs than my socialist colleagues. I wasn't a scholarly Marxist. I read half the Communist Manifesto and I figured that was enough. But the songs were terrific."

Stephen L Mandaro


"Because I'm pro-choice, among the Republicans sometimes I get into trouble. But I'm a physician. So I leave it to the patient to decide what they want. My feeling, being pro-choice, is that it's a woman's individual decision. Not mine."



"Back in England, at the London School of Economics, he was a socialist when I met him. When we first met."

So did you turn him into a libertarian?

"No. Buying private property, having rent control slammed on us, is what radicalized us."

...Who are you people?

"We can't decide."

Are those your real names?

"We're coming to a conference on privacy. It would be crazy to register in your own name!"

...Can I take your picture?

Both: "No."

This is part of a series. Read previous installments here.

We Are The Economy They Want to Regulate

Sun, 16 Jul 2017 00:30:00 -0400

Critics of the libertarian philosophy think they can score points by calling libertarians "market fundamentalists." It's supposed to conjure images of dogmatic religious fundamentalists, just like the term global warming denier is supposed to conjure images of Holocaust deniers. It's a smear, of course, and if you think the tactic discredits those who employ it, I agree. The fact is that libertarians cannot be market fundamentalists. Why not? Because in the libertarian worldview, the market is not fundamental. What's fundamental is every person's right to be free from aggressive force. So fine, I'm a freedom fundamentalist. Guilty. Strictly speaking, it's not markets that can and should be free—it's people. The term free market merely describes one political-legal context in which people conduct themselves. It's shorthand for a subset of human action—the exchange of goods and services, usually for money. (The logic of human action, the study of which Ludwig von Mises called praxeology, applies to all purposeful conduct, not just market exchange.) It follows, then, that when politicians and activists call on the government to regulate the economy, they mean to regulate us. There's no economy to regulate. It's not a machine or a vehicle. It's an unending series of purposeful activities the logic of which gives rise to a process characterized by regularities. Hence, for example, the law of supply and demand. We can talk about this orderly process—the market—as though it were a thing, but we have to keep its metaphorical nature in mind. It's still only people cooperating with each other. When market critics demand government regulation, they imply that markets are by nature unregulated. But we've just seen that this is nonsense. An unregulated market is a logical contradiction. That we call it a market indicates the regularities, or laws, just mentioned. No regularity—no market. There could no more be an unregulated market than there could be a grammarless language or a perpetually disorderly society. We would not call a population a society if it did not display a general order expressed by rules (written and unwritten), customs, and mores. Without such things, a population would be not a society but a Hobbesian state of nature. So the question is not whether the market should be regulated, but who should regulate it. And the only two choices are: 1) market participants through the exercise of their free and peaceful choices or 2) politicians and bureaucrats relying on the threat of violence to impose their will. Easy choice, I'd say. Those who doubt the market is intrinsically regulated when people are completely free need only ask themselves what would happen if someone charged $100 for an apple or offered to pay workers $1 an hour (assuming no legislation forbidding this). The answer is simple: others would offer lower prices for apples and higher wages to workers. No need for government regulation. In other words, competition would discipline the would-be gouger and miser. Competition simply means the freedom to offer better terms to consumers and workers. As I say, free markets are nothing but free persons. Those who think cooperation is preferable to competition should realize they are two sides of the same coin. Competition is what happens when we're free to choose with whom we wish to cooperate. Two shoe stores compete, each hoping to be the one that cooperates with me in my quest for new shoes. Critics really must stop reifying the market because markets don't do things or have purposes. Only people do things and have purposes. You often hear it said (unfortunately, by some economists) that markets ration goods and services. This is often the retort when cr[...]

Is It Time to Start Dismissing 'Economics Deniers'?

Wed, 12 Jul 2017 12:05:00 -0400

We're all the same person, a wise fellow once said—just on different days. He didn't know the half of it. For years, environmentalists have blasted "climate science deniers" for refusing to accept the evidence for human-caused global warming. Is it time we started talking about economic-science deniers, too? The case for anthropogenic (i.e, human-induced) global warming, or AGW, is very strong. Decades of peer-reviewed research on the question has been done, and it all seems to point in one direction. Even former doubters have been convinced on the point: See for instance physicist Richard Muller's 2012 essay, "The Conversion of a Climate Change Skeptic." He and a team of scientists tried vigorously to find credible alternative explanations for the observed increase in global temperatures, and couldn't. "I still find that much, if not most, of what is attributed to climate change is speculative, exaggerated or just plain wrong," he concluded—but on the fundamental point, he agrees: "Humans are almost entirely the cause." Muller is not unique; other skeptics gradually have come around, too. On the other hand, the reverse has not happened. Firm believers in AGW are not deciding, after careful study, that it's really just a hoax after all. And that should tell you something—because climate-change skeptics have challenged the consensus view loudly and aggressively. If they had been able to falsify the AGW hypothesis, as scientists have proven false various claims about cold fusion experiments, then at least some climate scientists would have admitted as much. Note that climate-change skeptics blithely accept bizarre but apparently true scientific claims regarding quantum indeterminacy and the curvature of space. Yet they truculently refuse to concede a point about the Earth's climate that is, intuitively, far less difficult to swallow. They will not believe the peer-reviewed research of hundreds of scientists on climate—but they will gladly believe something they read on a blog somewhere insisting the research is all wrong. Because they don't like the political implications, climate-change doubters become hyper-skeptical victims of confirmation bias: No amount of evidence is ever enough to mollify their doubts. There is always something wrong with the data sets, or the climate models, or—hey, look at this ridiculous quote from Al Gore 20 years ago! He was wrong then, ergo everyone else must be wrong now, right? Q.E.D. So what does all this have to with economics? In late June, researchers published a careful and data-rich study on Seattle's minimum-wage law. It found that the city's graduated hike in the minimum wage is costing thousands of jobs and cutting the number of hours worked by people in low-pay jobs. In the aggregate, Seattle workers are losing millions of dollars in wages thanks to the law. The study has drawn praise for its analytical rigor; one economist at MIT called it "sufficiently compelling in its design and statistical power that it can change minds." Or not. Since its publication, liberals have given the study hyper-skeptical treatment, claiming to find all sorts of shortcomings with its methodology, data set, and so on. They point to a different study, from the University of California at Berkeley, which examined the law's effects on the restaurant industry and found no statistically measurable effect. Even Seattle's political leaders are piling on, although they commissioned the research in the first place. The idea that the price of something has no effect on demand for it sounds pretty funny, coming from liberals. After all, progressives generally support raising taxes on cigarettes to discourage people from smoking[...]