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Published: Fri, 23 Mar 2018 00:00:00 -0400

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Mostly Weekly Series Finale: Creative Destruction

Wed, 14 Mar 2018 13:15:00 -0400

Reason's webseries "Mostly Weekly" is wrapping up–for entirely legal reasons that absolutely do not involve tax evasion. No reason to be suspicious.

The final episode of the series tackles creative destruction. In free and open markets people are able to make new technologies and business models, which displace older, established ones. That process of starting new companies and jobs destroys some professions while creating others.

It's entirely understandable that people who lose their jobs want to keep them. But industries like manufacturing, coal mining, and mall retailers aren't dying out because of competition from China, they're being outmoded by automation, cheaper fuel sources, and online sales.

Despite the uncertainty that markets bring, they also create new jobs and entirely new professions. There aren't gangs of unemployed lamplighters roaming the land; their descendants became Uber drivers, social media coordinators, and webseries producers.

In the end, it's better for everyone to look at the world as it is and to move forward than to try and halt progress through the force of law.

Mostly Weekly is hosted by Andrew Heaton with headwriter Sarah Rose Siskind. Watch past episodes here.

Script by Andrew Heaton and Sarah Rose Siskind with writing assistance from Brian Sack.
Edited by Austin Bragg and Sarah Rose Siskind.
Produced by Meredith and Austin Bragg.
Theme Song: Frozen by Surfer Blood.

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Shocker! Rent Control Makes Housing Scarcer and More Expensive

Thu, 01 Mar 2018 16:10:00 -0500

(image) A new study by some Stanford economists finds that rental housing availability has gone down and rents have gone up since San Francisco adopted rent control in 1994.

Tenants in rent-controlled apartments benefited by $2.9 billion by paying lower-than-market rents. But the owners of housing subject to rent control responded, the economists write, "by substituting to other types of real estate, in particular by converting to condos and redeveloping buildings so as to exempt them from rent control." Rent control ended up reducing the rental housing supply by 15 percent, causing a 5 percent citywide rent increase. Ultimately, rent control led to a 25 percent reduction in the number of renters living in rent-controlled units, relative to 1994 levels.

The researchers further observe that this "substitution toward owner occupied and high-end new construction rental housing likely fueled the gentrification of San Francisco, as these types of properties cater to higher income individuals. Indeed, the combination of more gentrification and helping rent controlled tenants remain in San Francisco has led to a higher level of income inequality in the city overall."

This new finding accords with a 2009 review of scores of studies of rent control, which concluded that the "literature on the whole may be fairly said to show that rent control is bad."

San Francisco's ridiculous housing policies have a significant effect on the larger economy too. As I reported in January,

By keeping workers out of high-productivity regions, local restrictions on housing have lowered U.S. GDP by 13.5 percent of what it would otherwise be, according to a 2015 study by the Berkeley economist Enrico Moretti and the University of Chicago economist Chang-Tai Hseih. In fact, they find that "most of the loss was likely caused by increased constraints to housing supply in high productivity cities like New York, San Francisco and San Jose. Lowering regulatory constraints in these cities to the level of the median city would expand their work force and increase U.S. GDP by 9.5%."

When will people learn that trying to repeal the law of supply and demand never works?

Poker Champion Annie Duke on Making Smart Bets in Life, Politics, and Football

Tue, 20 Feb 2018 14:20:00 -0500

"Life is poker, not chess," says Annie Duke, a former professional poker player and the author of a new book, Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts. Chess is a game of skill with "very little luck involved," while in poker good decisions and good outcomes often don't go together.

Duke cites Seattle Seahawks Coach Pete Carroll's decision in the 2015 Super Bowl to call for a pass play that was intercepted. Since the interception rate in situation like this is about one or two percent, it was a good decision that didn't work out. In football, like life, humans are prone to draw the wrong conclusions from situations involving bad luck.

"We go around and we change our decision making because we've evaluated the quality of a decision based on one outcome," says Duke. "Try and cordon yourself off from the outcome [and] recognize the uncertainty of the future."

Reason's Nick Gillespie sat down with Duke to discuss life, chess, poker, football, and why we can all benefit from exposure to dissenting opinions.

Cameras by Jim Epstein and Andrew Heaton. Edited by Austin Bragg.

Photo Credits: Jon Soohoo/UPI/Newscom, Rich Graessle/Icon Sportswire/Newscom, Kevin Dietsch/UPI/Newscom, John Angelillo/UPI/Newscom, Chris Coduto/Icon Sportswire/Newscom, Shane Roper/Cal Sport Media/Newscom, Chris Wattie/REUTERS/Newscom, Charles Baus/Cal Sport Media/Newscom

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Economic Impacts of Climate Change Likely Limited in This Century, Says New Study

Fri, 09 Feb 2018 09:50:00 -0500

When climatologists like James Hansen look at their models, they warn that higher temperatures and rising sea levels could make the planet "practically ungovernable." The Pennsylvania State University climatologist Michael Mann claims that unabated man-made global warming will "impose enormous costs on future generations." When economists, by contrast, peer into the entrails of their integrated assessment models, they don't forsee a climate-induced economic catastrophe—at least not in this century. Last August, for example, the Yale economist William Nordhaus and his China-based colleague Andrew Moffatt surveyed 36 different estimates (derived from 27 studies) of climate change's impact on gross world product by the year 2100. Taking their results into account, I roughly calculated that a 3°C increase in average temperature would reduce global GDP in that year from $872 trillion to $854 trillion, and income from $97,000 to $95,000 per capita. Now a new study by the University of Sussex economist Richard Tol has come up with similar results. "Current estimates indicate that climate change will likely have a limited impact on the economy and human welfare in the twenty-first century," Tol reports. To reach this conclusion, Tol took into account 27 published estimates of the total economic impact of climate change, taken from 22 studies. They suggest, he finds, that initial warming is positive on net, while further warming would lead to net damages. By 2100, the negative effects of warming predominate, with the consequence that "a global warming of 2.5ºC would make the average person feel as if she had lost 1.3 percent of her income." While most income estimates stemming from an average temperature increase of 2.5ºC by 2100 are negative, some are actually positive. Considering this range of estimates, Tol offers another way to think about how climate change by 2100 will affect incomes: "The welfare change caused by climate change is equivalent to the welfare change caused by an income change of a few percent. That is, a century of climate change is about as good/bad for welfare as a year of economic growth." Tol acknowledges that the impact of climate change on water resources, transport, migration, violent conflict, energy supply, space cooling, and tourism and recreation have not received sufficient attention. As a consequence, he rather laconically observes, "Estimates of the impact of climate change are thus incomplete." And then there is the question of risk. Perhaps the integrated assessment models that try to combine climate change and economic change over the next 80 years are sufficiently accurate to rule out unpleasant surprises, such as much faster warming or greater shifts in weather patterns. Joseph Majkut, the director of climate policy over at the Niskanen Center, once asked how high the risk of climate change has to be to prompt action. Majkut cites Bob Litterman, a hedge fund manager who argues that climate change is an undiversifiable risk that would command a higher risk premium. Litterman likens climate change risk to the systemic risk that investors face in the stock market. It is hard to hedge when unknown unknowns can cause the prices of all assets to decline at once. On the other hand, the Nordhaus and Moffatt survey of studies also found "no indication from the damage estimates of a sharp discontinuity or high convexity." In other words, the studies do not identify any systemic risk, such as threshold effects in which damages from climate change will accelerate. So the question is: How lucky do you feel?[...]

U.S. Oil Production Will Exceed Its 1971 Peak This Year

Wed, 07 Feb 2018 14:15:00 -0500

U.S. oil production will surge above its 1970 "peak" of 9.6 million barrels per day this year, according to the latest projections from the Energy Information Administration (EIA). The agency estimates that American oil production will average 10.6 million barrels per day this year and will rise to a daily average of 11.2 million barrels in 2019. Only a decade ago, the world was in the grip of one of its periodic "peak oil" panics. Dire predictions everywhere announced that humanity was on the cusp of a disastrous and accelerating decline in oil production. 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. Reaching peak oil would result in a "meltdown of society" and a "dying civilization" with a "landscape littered with the rusting hulks of SUVs." What happened? Russia and the Organization of Petroleum Exporting Countries have been trying to boost prices by cutting back on production. Political chaos has engulfed several big oil producers—Iraq, Iran, Libya, South Sudan, Venezuela. The International Energy Agency (IEA) notes with understated charm that "declines are accelerating in Venezuela, which posted the world's biggest unplanned output fall in 2017." Yet the IEA expects global production to average about 98 million barrels per day this year. Even in 2018, you can find die-hard peak oilers projecting doom. Just this week, J. David Hughes of the Post Carbon Institute questioned the EIA's projections. "There is no doubt that the U.S. can produce substantial amounts of shale gas and tight oil over the short- and medium-term," Hughes declared. "Unrealistic long-term forecasts, however, are a disservice to planning a viable long-term energy strategy. The very high to extremely optimistic EIA projections impart an unjustified level of comfort for long-term energy sustainability." Keep in mind that Hughes flirted with peak oil predictions back in 2010, forecasting that global crude production would peak in 2012. He based this conclusion on a consensus estimate (excluding the "optimistic" views of EIA and Cambridge Energy Research Associates) of more than 20 predictions. After my 2016 column "Where Have All the Peak Oilers Gone?" appeared, I received an anonymous email chastising me for daring to report on this subject. My interloctor wrote: How can you say that peak oil is dead, when oil's sell price is one third of the price needed to sustain current production level? That's silly. Many oil companies are going broke, oil exporting countries will be broke soon. You just don't understand the subject. But when you don't understand it, you shouldn't write articles about it. Peak oil happened in 2015, instead of 2005-2007 probably only because of coal boom in China. But that coal boom has now ended. Before making a fool of yourself again, please get to know the subject first. I replied: Well, I guess you told me! As the mirage of peak oil continues to recede, I await future emails from you confidently asserting that peak oil occurred in 2020, in 2025, in 2030, etc. I just can't seem to help making a fool of myself on this subject.[...]

Trump's 'America First' Plan Is Naked Special-Interest Policymaking

Sun, 28 Jan 2018 08:30:00 -0500

Donald Trump, the self-proclaimed voice of American working people, has decreed that the prices of washing machines and solar panels shall rise. So it is written. So it is done. Trump's decree, placing tariffs (taxes) on imported versions of those goods, will impose higher costs on consumers to help (in the short run) the minority of Americans who work in those industries. That's how protectionism works—a favored group of firms and workers benefits at the expense of everyone else. Trump calls this "America First" and looking out for average Americans, making him either a demagogue or an ignoramus. In fact, it's naked special-interest policymaking. Trump acted on recommendations from his U.S. trade representative (USTR), Robert Lighthizer, who invoked the law that gives the government the power to impose tariffs when, in Lighthizer's words, "increased foreign imports … are a substantial cause of serious injury to domestic manufacturers." This particular law does not require the U.S. International Trade Commission (ITC) to identify any "unfair trade practice," such as dumping or subsidies. All that is necessary is that a domestic firm (for example, in the washing-machine case, Whirlpool) or industry convinces the ITC and USTR that foreign competition has harmed it—that is, that American consumers prefer the imports to domestic alternatives. Thus the American Firster Trump is coddling wimpy, whining firms that are better at lobbying than competing in the marketplace. This he calls "draining the swamp." Not that so-called dumping and subsidies would justify tariffs. They do not. Dumping, which is roughly defined as selling below cost, amounts to nonsense when you remember that costs are subjective. And while a foreign government subsidy constitutes an offense against the taxpayers of the foreign country, it cannot be construed as an offense against American firms (which, like solar-panel firms, often have their own subsidies) or American consumers. Moreover, subsidized firms are hardly efficient firms. It's competition that keeps firms on their toes. "The President's action," Lighthizer said, "makes clear again that the Trump Administration will always defend American workers, farmers, ranchers, and businesses in this regard." Balderdash. First, note for the record that the word consumers appears nowhere in that sentence. Next, you'll see that while the word certain or favored belongs in the sentence to modify workers and businesses, it too is nowhere to be found. Trump and his protectionist team know they can get away with this bunk because most people are strangers to the economic way of thinking. Obviously, protecting people who make their living in the washing-machine and solar-panel industries from competition cannot help all workers and businesses since protectionism by design raises prices. Because consumers will now have to pay more, they'll have less money than they would have had with which to buy other products and services or to save and invest for the future. Their welfare, that is, will drop. Why don't consumers and those other workers and businesses count? Because they are invisible. Moreover, if Americans buy fewer exports, foreign citizens will have fewer dollars with which to buy American-made goods or to invest in American enterprises. And if foreign governments retaliate against American products with their own protectionist measures, Americans who work in exporting industries will suffer. This will include farmers and ranchers. Thus Lighthizer's statement, like pretty much everything about the Trump administration, is sheer flapdoodle. Trump can't open his mouth about trade without sticking his foot in it. He loves to say he favors free trade—but then adds that it must be fair and reciprocal. Is he so stupid that he doesn't know that trade is reciprocal by definition? Trade is exchange, and exchange is reciprocal. Each party gives something up to obtain somethin[...]

Trump Launches Solar Panel Trade War with China

Tue, 23 Jan 2018 17:25:00 -0500

The Trump administration is imposing a 30 percent tariff on solar panels and modules imported from China. The first 2.5 gigawatts of imported solar cells will be exempted from the tariff. The tariff will drop 5 percent per year falling to 25, 20, and 15 percent in the second, third, and fourth years respectively. Largely due to the import surge of lower-priced solar panels, 25 U.S. solar panel manufacturers have gone out of business since 2012. Last year, solar panel manufacturers Suniva and SolarWorld filed Section 201 the Trade Act of 1974 petitions at the International Trade Commission (ITC) arguing that Chinese imports constituted a "substantial cause of serious injury" to their businesses. Interestingly, a Section 201 finding does not require a finding of an unfair trade practice, as do the antidumping and countervailing duty laws; merely losing to competition is enough. The ITC subsequently determined that the increased imports of Chinese solar panels were indeed a substantial cause of serious injury to domestic producers. Under Section 201, factors supporting a finding of serious injury include idle or shuttered production facilities, layoffs and other termination of employment, and a decrease in the financial performance of domestic producers. The Trade Act also requires that any action taken by the U.S. government must facilitate a positive adjustment to import competition and provide greater economic and social benefits than costs. It is worth noting that the ITC issued a report last year that found that removing current significant import restraints, e.g., tariffs and quotas, would increase annual U.S. welfare by $3.3 billion per year by 2020. Will solar tariffs save or create American jobs? The Utility Dive industry newsletter reports: [The Solar Energy Industries Association] estimates the job losses will number 23,000 for this year, and result in "billions lost in investment." SEIA President Abigail Hopper condemned Trump's decision in a statement. "While tariffs in this case will not create adequate cell or module manufacturing to meet U.S. demand, or keep foreign-owned Suniva and SolarWorld afloat, they will create a crisis in a part of our economy that has been thriving, which will ultimately cost tens of thousands of hard-working, blue-collar Americans their jobs," she said. The majority of the current 260,000 solar jobs are in installation, with only 38,000 (or 14%) in manufacturing. Moreover, the case threatened two-thirds of future utility-scale solar installations set to come online in the next five years, which is the biggest and most vulnerable solar market. It is true that the Chinese solar panel manufacturers have received lots of subsidies, so too has the U.S. industry. Overall the U.S. solar power industry has benefited from tens of billions of dollars in subsidies, loan guarantees, tax credits, and state renewable portfolio standards that require utilities to sell a specified percentage or amount of renewable electricity to its customers. Note again that the ITC did not find that the Chinese solar panel companies are "dumping," that is, selling their products below their manufacturing costs. Analysts like Information Technology and Innovation Foundation's Stephen Ezell warn that the Chinese government is pursuing a policy of "innovation mercantilism" that aims to make China "competitive across virtually all advanced-technology industries and that the techniques it is using to become so pose a direct, even existential threat to America's high-tech industries along with foreign counterparts." Ezell further asserts that "China fundamentally rejects the notion of comparative advantage and instead seeks absolute advantage." If that's true, should we be worried? Not really. Basically, the idea of comparative advantage is that each country should specialize in producing and exporting only those goods and services which it can produce m[...]

The Case Against Education: Economist Bryan Caplan Says Government Spending of $1 Trillion a Year on Schooling Is a Waste

Mon, 22 Jan 2018 15:45:00 -0500

"It's absolutely true that school makes people show up, sit down, shut up and that these are useful skills for people to have in adulthood, " says Bryan Caplan, a professor of economics at George Mason University, who blogs at EconLog, and is the author of the new book The Case Against Education: Why the Education System Is a Waste of Time and Money. "So the real question is if all we're trying to do is prepare people for a job, why not prepare them with a job?" Caplan argues that schools are not only overpriced, but that traditional education fails to prepare students with job skills that reflect the needs of the labor market. Reason's Nick Gillespie sat down with Caplan to make the case that the government needs to spend so much on education if it isn't relevant to our success in getting a job and earning higher wages. Reason is a proud media partner of National School Choice Week, an annual event promoting the ability of parents and students to have greater options in K-12 education. Go here [] to get more information about events and data about how increasing school choice--charters, vouchers, educational savings accounts, and more—is one of the best ways to improve education for all Americans. For a constantly updated list of stories on education, go to Reason's archive page on "school choice". Interview by Nick Gillespie. Edited by Alexis Garcia. Camera by Meredith Bragg and Mark McDaniel. AM Trans by Podington Bear is licensed under a Creative Commons Attribution license ( Source: Artist: Mimas by Sounds Like An Earful is licensed under a Creative Commons Attribution license ( Source: Artist: 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: I'm Nick Gillespie for Reason and today we are talking with the author of what is almost certainly going to be the most controversial book of the year. Bryan Caplan is an economics professor at George Mason University, and his new book is The Case Against Education. Bryan, thanks for talking with Reason. Bryan Caplan: Thanks for such an exciting introduction. Gillespie: Well, let's get right to it. Early on you say flatly, you write flatly, 'This book argues that our education system is a big waste of time and money.' And now you're not simply saying that our schools are overpriced and uneven in quality, you are actually making the case that much of our traditional education system, especially higher ed, is literally a waste of time, right? Caplan: Absolutely. Gillespie: What do you mean by that? Caplan: What I mean is that people are going there to get a higher income, but they're actually not getting much in the way of job skills, which raises a big puzzle for an economist. How can they be getting a higher income if they're not getting much in the way of job skills? And my answer comes down to something called the signaling model of education that says that a lot of the reason why education pays isn't that you learn useful skills, but that you distinguish yourself. That you're getting stamped or labeled. You're getting a sticker on your forehead, Grade A worker. Gillespie: So it's kind of like you come out as a piece of steak. You're USDA prime, but you haven't been cooked yet. Well, you haven't ... Caplan: Precisely. And the the key thing about this is, selfishly speaking, it doesn't really matter why you're getting more money. But from a social point of view, from the point of view of is[...]

Sexual Politics Needs More Economics: Podcast

Mon, 22 Jan 2018 15:40:00 -0500

Does the fraught conversation around #MeToo and sexual mores need more Peter Suderman explaining that, well actually, we really should be viewing things more through the lens of long-tail economics? The question answers itself. Today's Reason Podcast, which also features Katherine Mangu-Ward, Robby Soave, and yours truly, veers headlong into such touchy subjects, including the generational divide over consent and agency, the gap between federal directives and on-the-ground adjudications of campus sexual assault, the efficacy (or lack thereof) of the Children's Health Insurance Program (CHIP), and what Education Secretary Betsy DeVos has to do with National School Choice Week. Kick the whole shebang is a round of derision and glee about the abortive government shutdown. Audio production by Ian Keyser. Relevant links from the show: "Reminder: The Parts of the Federal Government Authorized to Shoot You Are Still Functioning," by Scott Shackford "The Government Shutdown Is an Artifact of a Broken Budget Process," by Peter Suderman "Vanessa Grigoriadis on the 'Blurred Lines' of Consensual Sex and Assault on Campus," by Nick Gillespie and Justin Monticello "The Fragile Generation," by Lenore Skenazy and Jonathan Haidt "Betsy DeVos Withdraws 'Dear Colleague' Letter That Weaponized Title IX Against Due Process," by Robby Soave "The Case for School Choice Is Overwhelming From Every POV Except One," by Nick Gillespie "To Reduce Campus Rape, Legalize Pot and Alcohol," by Robby Soave "Crowding Out Private Coverage: The Cost of Expanding Children's Health Insurance," by Peter Suderman Subscribe, rate, and review the Reason Podcast at iTunes. Listen at SoundCloud below: src="" width="100%" height="300" frameborder="0"> Don't miss a single Reason podcast! (Archive here.) Subscribe at iTunes. Follow us at SoundCloud. Subscribe at YouTube. Like us on Facebook. Follow us on Twitter.[...]

Minimum Wage Hikes Inflict Maximum Pain

Tue, 16 Jan 2018 00:15:00 -0500

There's probably no more popular way of patting yourself on the back for doing good while actually harming people than advocating for hiked minimum wage laws that forbid people to accept work that pays below a legally mandated floor. When you raise the price of something above what people are willing to pay, people buy less of it, or else they pass the costs down the line, when possible. This isn't exactly a revelation; it's one of the older known economic realities. Unfortunately, there's always been a certain portion of the population that insists that labor is different and that you really can make people more prosperous by decree. But yet more recent evidence suggests that hiking the price of hiring people works just like raising the cost of everything else. This means that the recent craze for minimum wage laws has not turned out, after all, to be a genius plan for filling bank accounts. At the beginning of this year, the Subway sandwich chain announced a $5.00 foot-long promotion at its stores—well, at a lot of its stores. Not participating is David Jones, a Seattle franchisee, who posted a sign saying that he couldn't offer the much-advertised deal because "The cost of doing business in the City of Seattle is very high. We are balancing the Highest Minimum Wage in the Nation, Paid Sick Leave, ACA, Secure Scheduling, Soda Tax and much more." Instead, he offered coupons that lowered the price of sandwiches—but not to the extent of the $5.00 deal. The Secure Scheduling and Paid Sick Leave referenced in that sign are also expensive labor mandates in Seattle, in addition to the city's graduated hike to a $15.00 per hour minimum wage. In addition, the city whacks its residents with a 1.75 cent per ounce tax on sugary drinks that further raises the price of a quick meal. So a Seattle Subway franchise necessarily charges customers more for their food and drink than they'd pay elsewhere. That is, it charges more from customers willing to make the purchase. More expensive sandwiches may mean fewer buyers. That could result in fewer jobs at Subway franchises—and at other businesses affected by the same laws. In fact, employers in Seattle seem to be employing fewer people as a result of the minimum wage hike, and paying the people they hire for fewer hours worked. As a result, despite stepped increases in mandated hourly wages, "total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees' earnings by an average of $125 per month in 2016," according to University of Washington researchers. (Flustered Seattle officials responded to the study by commissioning another paper from a socialist economics professor at UC-Berkeley who always finds that minimum wage hikes are beneficial.) So the sharply increased minimum wage has resulted in slimmer paychecks for many of the people it was supposed to benefit. But slimmer paychecks can turn into no paychecks if employers decide that it's not worth hiring people at artificially inflated prices when there are other ways to get tasks done. With 18 states and 20 cities hiking minimum wages at the beginning of this year, casual-dining hamburger chain Red Robin announced last week that it's eliminating busboys at all of its 570 locations, after having already dumped its expediters. "We need to do that to address the labor increases we've seen," chief financial officer Guy Constant told attendees at a retail conference. That doesn't leave many people still employed by the chain to take orders, prepare food, plate it, serve it, and clear tables—a point some industry critics are pointing to as a potential pitfall. But if you're familiar with the mostly western chain, you know that it's one of the many casual dining restaurants that use tabletop tablets for ordering drinks, dessert, and paying your bill wit[...]

'Economists Say' a Lot of Things. Many of Them Are Wrong

Fri, 05 Jan 2018 00:30:00 -0500

"A wave of optimism has swept over American business leaders, and it is beginning to translate into the sort of investment in new plants, equipment and factory upgrades that bolsters economic growth, spurs job creation—and may finally raise wages significantly," opens a recent New York Times article surveying the state of the American economy. One imagines that readers of the esteemed paper were surprised to run across such a rosy assessment after having been bombarded with news of a homicidal Republican tax plan for so many weeks. But not to worry! Over the next few thousand words, the authors do their best to assure readers that neither deregulation nor tax cuts are really behind this new economic activity—even if business leaders keep telling them otherwise. For example, they claim that "There is little historical evidence tying regulation levels to growth." A few paragraphs later, we again learn that "The evidence is weak that regulation actually reduces economic activity or that deregulation stimulates it." A reporter without an agenda might have written that evidence was "arguable," because I bet I could corral a bunch of economists to tell you that lowering the cost of doing business spurs economic activity quite often. And though the Trump administration somewhat overstates its regulatory cutbacks, it has stopped hundreds of Obama-era regulations from being enacted. Even better, it has stopped thousands of yet-to-be-invented regulations from ever being considered. There's plenty of evidence, in the article and elsewhere, that this kind of deregulation has plenty to do with investment and job growth. There is also plenty of evidence that econ reporters at major publications have spent the past decade propping up economists who tell them what they want to hear. That is to say, they prop up economists who obsess over "inequality" rather than economic growth, who worry about the future of labor unions or climate change or whatever policy liberals happen to be plying at the moment. There are plenty of economists out there making good arguments for the free market who will never be member of the "economists say" clique. For eight years, we consistently heard about how "economists say" everything Democrats were doing was great (even when hundreds disagreed). Unsurprisingly, "economists" were wrong about a lot. The rosy predictions set by President Obama's Council of Economic Advisers regarding the "stimulus," the administration's prediction of 4.6 percent growth by 2012 and the Congressional Budget Office predictions about Obamacare were all way off base. There are thousands of unknowns that can't be quantified or computed, including human nature. But after decades of using data to help us think about goods, services, jobs, consumption and our choices, "economists say" is now used to coat liberal policy positions with a veneer of scientific certitude. And since Democrats began successfully aligning economics with social engineering, we've stopped seriously talking about the tradeoffs of regulations. A good example of this trend is the push for a $15 minimum wage—an emotionally satisfying, popular and destructive policy idea. Most cities that have passed the hike have experienced job losses. When researchers at the University of Washington studied Seattle's $15 minimum-wage hike, one of the largest in the nation, they found that thousands of fewer jobs were created and thousands of people lost hours of work, making them poorer. No doubt a lot of people were surprised. Vox, a leading light in the liberalism-masquerading-as-science genre, ran an article headlined "The Controversial Study Showing High Minimum Wages Kill Jobs, Explained." You might wonder why incessantly quoted studies from liberal "nonpartisan" groups that falsely predicted minimum [...]

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 [...]

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 t[...]

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 eventua[...]

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.

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