The most intriguing unpredictable election process was probably that of the medieval Venetian Republic

Thursday, January 16th, 2020

The Venetians had a somewhat tedious way of combining voting and randomness, Nick Szabo explains, that reduced blackmail and pay-to-play political donations:

If would-be purchasers of political favors cannot predict who will win, or even who might win with substantial probability, they cannot purchase any favors prior to an election. A perfectly unpredictable election would be bribe-free.

We can’t make elections perfectly unpredictable, but we can get pretty close. There are historical and even contemporary precedents. For example, we choose jurors by lot from a pool much larger than the twelve jurors selected. This prevents wealthy plaintiffs, defendants, or governments from buying jurors through the selection process. (After selection, there are a number of legal and physical sequestering mechanisms that can be used to isolate a jury from contact with favor purchasers. As for political office, this article deals only with bribery during the selection process).

In ancient Athens, not only juries but many office-holders were selected by lot. But the most intriguing unpredictable election process was probably that of the medieval Venetian Republic. This republic helped turn a secure island into Europe’s wealthiest trading empire. In Venice, many political offices were selected by a repeated cycle of lottery, vote, …. lottery, vote. The final lottery and vote, at least, were held one after the other in the same room, giving favor purchasers no time or privacy to do their business.

I’ve mentioned unpredictable elections before, but sortition came up recently.

Intelligence and character aren’t the same things at all

Sunday, January 5th, 2020

The problem with meritocracy, T. Greer notes, isn’t the meritit’s the ocracy. He cites some passages from Andrew Yang’s book, of all places:

Intelligence and character aren’t the same things at all. Pretending that they are will lead us to ruin. The market is about to turn on many of us with little care for what separates us from each other. I’ve worked with and grown up alongside hundreds of very highly educated people for the past several decades, and trust me when I say that they are not uniformly awesome. People in the bubble think that the world is more orderly than it is. They overplan. They mistake smarts for judgment. They mistake smarts for character. They overvalue credentials. Head not heart. They need status and reassurance. They see risk as a bad thing. They optimize for the wrong things. They think in two years, not 20. They need other bubble people around. They get pissed off when others succeed. They think their smarts should determine their place in the world. They think ideas supersede action. They get agitated if they’re not making clear progress. They’re unhappy. They fear being wrong and looking silly. They don’t like to sell. They talk themselves out of having guts. They worship the market. They worry too much. Bubble people have their pluses and minuses like anyone else.

[...]

In coming years it’s going to be even harder to forge a sense of common identity across different walks of life. A lot of people who now live in the bubble grew up in other parts of the country. They still visit their families for holidays and special occasions. They were brought up middle-class in normal suburbs like I was and retain a deep familiarity with the experiences of different types of people. They loved the mall, too.

In another generation this will become less and less true. There will be an army of slender, highly cultivated products of Mountain View and the Upper East Side and Bethesda heading to elite schools that has been groomed since birth in the most competitive and rarefied environments with very limited exposure to the rest of the country.

When I was growing up, there was something of an inverse relationship between being smart and being good-looking. The smart kids were bookish and awkward and the social kids were attractive and popular. Rarely were the two sets of qualities found together in the same people. The nerd camps I went to looked the part.

Today, thanks to assortative mating in a handful of cities, intellect, attractiveness, education, and wealth are all converging in the same families and neighborhoods. I look at my friends’ children, and many of them resemble unicorns: brilliant, beautiful, socially precocious creatures who have gotten the best of all possible resources since the day they were born. I imagine them in 10 or 15 years traveling to other parts of the country, and I know that they are going to feel like, and be received as, strangers in a strange land. They will have thriving online lives and not even remember a car that didn’t drive itself. They may feel they have nothing in common with the people before them. Their ties to the greater national fabric will be minimal. Their empathy and desire to subsidize and address the distress of the general public will likely be lower and lower.

A strong state is distinct from a very large or tyrannical state

Thursday, January 2nd, 2020

Tyler Cowen suggests that smart classical liberals and libertarians have, as if guided by an invisible hand, evolved into State Capacity Libertarians, which he defines via these propositions:

1. Markets and capitalism are very powerful, give them their due.

2. Earlier in history, a strong state was necessary to back the formation of capitalism and also to protect individual rights (do read Koyama and Johnson on state capacity). Strong states remain necessary to maintain and extend capitalism and markets.

[...]

3. A strong state is distinct from a very large or tyrannical state. A good strong state should see the maintenance and extension of capitalism as one of its primary duties, in many cases its #1 duty.

4. Rapid increases in state capacity can be very dangerous (earlier Japan, Germany), but high levels of state capacity are not inherently tyrannical. Denmark should in fact have a smaller government, but it is still one of the freer and more secure places in the world, at least for Danish citizens albeit not for everybody.

5. Many of the failures of today’s America are failures of excess regulation, but many others are failures of state capacity. Our governments cannot address climate change, much improve K-12 education, fix traffic congestion, or improve the quality of their discretionary spending.

[...]

6. I will cite again the philosophical framework of my book Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals.

7. The fundamental growth experience of recent decades has been the rise of capitalism, markets, and high living standards in East Asia, and State Capacity Libertarianism has no problem or embarrassment in endorsing those developments.

[...]

8. The major problem areas of our time have been Africa and South Asia. They are both lacking in markets and also in state capacity.

9. State Capacity Libertarians are more likely to have positive views of infrastructure, science subsidies, nuclear power (requires state support!), and space programs than are mainstream libertarians or modern Democrats.

[...]

10. State Capacity Libertarianism has no problem endorsing higher quality government and governance, whereas traditional libertarianism is more likely to embrace or at least be wishy-washy toward small, corrupt regimes, due to some of the residual liberties they leave behind.

11. State Capacity Libertarianism is not non-interventionist in foreign policy, as it believes in strong alliances with other relatively free nations, when feasible. That said, the usual libertarian “problems of intervention because government makes a lot of mistakes” bar still should be applied to specific military actions. But the alliances can be hugely beneficial, as illustrated by much of 20th century foreign policy and today much of Asia — which still relies on Pax Americana.

A concerned citizen is largely helpless

Saturday, November 30th, 2019

In Loserthink Scott Adams cites a celebrity’s global warming climate change tweet as an example of a bright person talking about something without training in economics or business:

Now let’s say you had experience in economics and business, as I do. In those domains, anyone telling you they can predict the future in ten years with their complicated multivariate models is automatically considered a fraud.

[...]

You might be debating me in your mind right now and thinking that, unlike the field of finance, the scientific process drives out bias over time. Studies are peer reviewed, and experiments that can’t be reproduced are discarded.

Is that what is happening?

Here I draw upon my sixteen years working in corporate America. If my job involved reviewing a complicated paper from a peer, how much checking of the data and the math would I do when I am already overworked? Would I travel to the original measuring instruments all over the world and check their calibrations? Would I compare the raw data to the “adjusted” data that is used in the paper? Would I do a deep dive on the math and reasoning, or would I skim it for obvious mistakes? Unless scientists are a different kind of human being than the rest of us, they would intelligently cut corners whenever they think they could get away with it, just like everyone else. Assuming scientists are human, you would expect lots of peer-reviewed studies to be flawed. And that turns out to be the situation. As the New York Times reported in 2018, the peer review process is defective to the point of being laughable.

[...]

My point is that a concerned citizen is largely helpless in trying to understand how settled the science of climate change really is. But that doesn’t stop us from having firm opinions on the topic.

[...]

Whenever you have a lot of money in play, combined with the ability to hide misbehavior behind complexity, you should expect widespread fraud to happen. Take, for example, the 2019 Duke University settlement in which the university agreed to pay $112.5 million for repeatedly submitting research grant requests with falsified data. Duke had a lot of grant money at stake, and lots of complexity in which to hide bad behavior. Fraud was nearly guaranteed.

If you have been on this planet for a long time, as I have, and you pay attention to science, you know that the consensus of scientists on the topic of nutrition was wrong for decades.

[...]

Over time, it became painfully obvious to me that nutrition science wasn’t science at all. It was some unholy marriage of industry influence, junk science, and government. Any one of those things is bad, but when you put those three forces together, people die. That isn’t hyperbole. Bad nutrition science has probably killed a lot of people in the past few decades.

If they don’t turn up to school, it doesn’t make the slightest difference

Friday, November 15th, 2019

You often hear people lament that children should be allowed to roam free. Ed West’s radical proposal is that child labour should be reintroduced:

But it only sounds radical because we associate child labour with past times of extreme poverty and poor working conditions. For my generation it’s Rik from The Young Ones castigating an elderly woman about the “good old days” when you had “four-year-old kiddies digging coal”. And those days were indeed awful. Dan Jackson’s brilliant recent book The Northumbrians recalled the heart-breaking tragedy of the 1862 Hartley Mining Disaster where the bodies of young boys were found with their tiny arms around their brothers.

Not even an ironic reactionary like me would lament the decline of infant mortality and workplace fatalities brought about by health and safety legislation. We obviously wouldn’t allow children to do dangerous work in factories today, and many of the most horrific roles once done by kids are obsolete anyway.

[...]

But for children a bit older, the working environment allows them to interact with adults, adopt adult social norms and learn skills when their brain is rapidly absorbing information. They could also earn money at a time in life they really want it.

I suspect that a lot of teenage crime in London exists because boys reach an age when they want disposable income but there’s no way for them to legally earn it. They’re also mentally and physically under-stimulated by schoolwork they know brings them little tangible benefit. (This is arguably more acute among boys because they’re generally more goal-driven, respond when stakes are high, and easily give up when they’re not). Instead, during those crucial developmental years, they often learn negative behaviour through frustration and drift, so that by the time they’re finally allowed to enter the labour force, they’re already unsuited to it.

At the moment, almost half a million people aged 16-24 are unemployed, but many might not be, if they’d been allowed to start work a bit earlier — with a lower minimum wage. Experience would make them more attractive to employers; it would also get them in the habit of work, so they’d be more likely to adjust to working quickly and stick to it.

Prolonged education also cuts adolescents off from wider society. One of the worst aspects of British society — and where it contrasts poorly with Catholic cultures like Italy or Ireland (still, just about) — is that we have a great deal of generational separation. Young people benefit from working and socialising among those older than them, not only because they’re a calming influence but because they can subtly instruct them on how to behave.

Working young helps insulate children from one of the biggest pitfalls of modern life: extended or even permanent adolescence, which happens when people learn responsibility too late. It also helps a person form a place in a society. Not having enough money is pretty much the worst thing in the world — and reducing poverty should be the central “social justice” aim of governments — but not having a role or purpose is almost as bad.

Teenage boys like to feel needed. This really hit me a few years back when during an unexpected snowfall — there hadn’t been snow in London for well over a decade — all the cars in our area were stuck, and the drivers, many of them mothers with children, stranded. It was obvious that the boys on their way home from the nearby secondary school loved all this — for once, wider society actually needed them.

Having a job, going to an office and earning money — and with it the opportunity to work, and earn, even more — gives teenagers a role. If they don’t turn up for work, the company suffers; if they don’t turn up to school, it doesn’t make the slightest difference except for the purpose of government statistics.

Liberalism according to The Economist

Tuesday, November 12th, 2019


In Liberalism at Large Alexander Zevin explores the world according to the Economist:

He shows how its editors and contributors pioneered the revolving doors that link media, politics, business, and finance—alumni have gone on to such jobs as deputy governor of the Bank of England, Prime Minister of Britain, and President of Italy—and how such people have defined, at crucial moments in history, liberalism’s ever-changing relationship with capitalism, imperialism, democracy, and war.

A capsule version of this thesis can be found in the career of James Wilson, The Economist’s founder and first editor. Wilson, who was born in Scotland and became the owner of a struggling hatmaking business, intended his journal to develop and disseminate the doctrine of laissez-faire—“nothing but pure principles,” as he put it. He was particularly vociferous in his opposition to the Corn Laws, agricultural tariffs that were unpopular with merchants. The Corn Laws were repealed in 1846, three years after the magazine first appeared, and Wilson began to proselytize more energetically for free trade and the increasingly prominent discipline of economics. He became a Member of Parliament and held several positions in the British government. He also founded a pan-Asian bank, now known as Standard Chartered, which expanded fast on the back of the opium trade with China. In 1859, Wilson became Chancellor of the Indian Exchequer. He died in India the following year, trying to reconfigure the country’s financial system.

During his short career as a journalist-cum-crusader, Wilson briskly clarified what he meant by “pure principles.” He opposed a ban on trading with slaveholding countries on the ground that it would punish slaves as well as British consumers. In the eighteen-forties, when Ireland was struck with famine, which was largely caused by free trade—the British insisted on exporting Irish food, despite catastrophic crop failure—Wilson called for a homeopathic remedy: more free trade. With Irish intransigence becoming a nuisance, he advised the British to respond with “powerful, resolute, but just repression.” Wilson was equally stern with those suffering from rising inequality at home. In his view, the government was wrong to oblige rail companies to provide better service for working-class passengers, who were hitherto forced to travel in exposed freight cars: “Where the most profit is made, the public is best served. Limit the profit, and you limit the exertion of ingenuity in a thousand ways.” A factory bill limiting women to a twelve-hour workday was deemed equally pernicious. As for public schooling, common people should be “left to provide education as they provide food for themselves.”

Start with a big blatant neglected fact

Friday, November 8th, 2019

How does Bryan Caplan pick book topics?

How do I pick book topics? On reflection, I usually start with what appears to be a big blatant neglected fact. Then I try to discover whether anything in the universe is big enough to explain this alleged fact away. If a laborious search uncovers nothing sufficient, I am left with the seed of a book: One Big Fact that Overawes All Doubts.

Thus, my Myth of the Rational Voter starts with what appears to be a big blatant neglected fact: the typical voter seems highly irrational. He uses deeply flawed intellectual methods, and holds a wide range of absurd views. Twist and turn the issue as you please, and this big blatant neglected fact remains.

Selfish Reasons to Have More Kids, similarly, begins with a rather different big blatant neglected alleged fact: Modern parenting is obsessed with “investing” in kids’ long-run outcomes, yet twin and adoption researchers consistently conclude that the long-run effect of nurture is grossly overrated. Yes, the latter fact is only “blatant” after you read the research, but once you read it, you can’t unread it.

What’s the One Big Fact that Overawes All Doubts in The Case Against Education? This: education is highly lucrative even though the curriculum is highly irrelevant in the real world. Yes, it takes a book to investigate the many efforts to explain this One Big Fact away (“learning how to learn,” anyone?). But without One Big Fact, there’d be no book.

Finally, the big motivated fact behind Open Borders is that simply letting a foreigner move to the First World vastly multiplies his labor earnings overnight. A Haitian really can make twenty times as much money in Miami the week after he leaves Port-au-Prince – and the reason is clearly that the Haitian is vastly more productive in the U.S. Which really makes you wonder: Why would anyone want to stop another human being from escaping poverty by enriching the world? Giving this starting point, anti-immigration arguments are largely attempts to explain this big blatant neglected fact away. Given what restrictionist arguments are up against, it’s hardly surprising that they don’t measure up.

On reflection, my current book project, Poverty: Who To Blame doesn’t seem to fit this formula. The book will rest on three or four big blatant neglected facts rather than one. Yet perhaps as I write, One Big Fact that Overawes All Doubts will come into focus…

Corruption may or may not be illegal

Sunday, November 3rd, 2019

Michael Munger explains Gordon Tullock’s joyfully contrarianism thoughts on corruption:

Corruption may or may not be illegal, but it’s always a bad thing. Isn’t it?

Some think of corruption — the misuse of public trust in the powers of political office for private gain — as comparing (a) the honest services and choices of a public official with (b) actions “corrupted” by considerations that are not legitimate. Harvard law professor Lawrence Lessig has claimed that a decision is corrupt if the official is improperly, even if only subtly, influenced by the anticipation of some sort of economic gain or loss. Fordham University law professor Zephyr Teachout has claimed that if a public official acts in consideration of a private benefit outside of the standard compensation for his or her office, the action is automatically corrupt.

Suppose, though, you are an entrepreneur in a developing nation and you have a good idea for a new company. It normally takes six months to have a telephone or internet line set up, because the state monopoly utility company is notoriously inefficient. But if you pay lagay (“speed money” in Tagalog), or if you khilana para (“feed him” in Hindi), a happily willing, competent work crew will be there tomorrow. Who will actually cough up the cash? Whoever values the service most. Which means that the most economically productive firms and the best new ideas will get to jump the queue.

In a system with bad rules or limited state capacity, tacit endorsement of corruption improves the working of the system. The more inefficient the system, the greater the efficiency increase in the near term, as scarce resources are directed first to higher-value uses.

But as Tullock asks, “And then what?” In this case, two things happen. First, because the scarcity of the resources is artificial and discretionary, the state actors who formally and informally control those resources will adjust access strategically so as to increase the quantity of “rents” (i.e., undeserved benefits) they receive. In my example, the phone company might announce a mandatory two-year waiting period, increasing the value of access to the “informal” workaround of bribes. Second, those with control over the resources and thus access to the rents will start competing — very likely by offering bribes of their own — to maintain their lucrative positions.

Tullock noticed this phenomenon for himself at several points during his career. When he was briefly in private practice as an attorney in Chicago, his job as a junior associate involved paying bribes to minor officials in the Kelly-Nash political machine to ensure that his firm had fast access to records that might otherwise take weeks to secure through normal channels. Later, while working for the U.S. Foreign Service in Tientsin, China, he had the experience of being there on the ground during the Communist takeover of 1948–49.

Tullock was struck by a presentation from an academic who decried the corrupt practices of the Chiang Kai-shek regime in Taiwan but lauded the new Communist regime on the mainland. In particular, the academic pooh-poohed the supposedly “restrictive” travel policies of the Communists, noting that it was easy to bribe officials to obtain passes.

To Tullock, both regimes seemed corrupt. But he also realized that corruption, far from being an immediate problem, was the only thing that made the cumbersome Rube Goldberg governing mechanisms work at all. “While corruption usually meets with disapproval,” he wrote in Contemporary Economic Policy in 1996, “it may have some redeeming features. It may make possible smaller or no salary payments to officials who, if carefully supervised, will still carry out their functions on a fee-for-service basis. The purchase of government jobs usually is thought to be corrupt, but in some cases, it has worked out quite well.”

He filed this lesson away in the late 1940s and often came back to puzzle over it for the next 65 years. If corruption is actually a benefit — at least in countries with bad institutions or sharply limited state capacity — then what is the problem? All we need to do is suggest that developing nations cultivate corrupt systems and voilà! Problem solved.

Of course, that’s not right, and this realization is what led Tullock to his signature contribution to the study of public policy: the problem of “rent-seeking.” In China, he said, officials write laws with the explicit expectation of selling “permits” that would exempt the “customers” from having to obey the regulation. In addition, officials may purposely limit the total number of exemptions so they can auction them off to the highest bidder. In the short term, corruption is a workaround for bad government, but in the long run corruption locks in bad government and encourages abuses of state power.

Tullock used the example of an official in Fukien (now Fujian), a province from which many citizens illegally traveled to Indonesia to work, returning with substantial sums of cash and goods. Local officials set up elaborate programs under which going abroad to work was technically not allowed but in fact actively encouraged for those who could expect to earn good wages. Officials charged licensing fees that were high enough to substantially enrich the “sellers,” but they made sure the cost was not so high that it would deter workers from traveling abroad in the first place.

The problem is that the system became firmly entrenched, and the bribes came to be capitalized in the “prices” for getting a job as a local official in Fukien. In fact, the “salaries” of government officials could be rendered as negative numbers. The opportunity to collect bribes was so lucrative that the positions were essentially sold as franchises, with officials paying their superiors, who paid their superiors, and so on.

This system, once in place, is nearly impossible to root out. In open, noncorrupt systems, parents might save or borrow to pay for law school or some other training for their children. But in a corrupt system, people save or borrow to pay the bribes necessary to get the kinds of jobs where bribes from citizens provide a good living. If a new, reform-oriented government comes into office, the reaction from government officials is likely to be fierce, possibly violent. After all, they paid for their corrupt jobs fair and square, and they expect to be able to collect.

“Evidence suggests that officials tended to draw a large part of their personal income from bribes,” Tullock wrote in his 1996 paper. “Indeed, it is almost certain that once a government structure has been set up so various people make profits, changing the structure in such a way to shrink the profits will be extremely hard, regardless of whether the profits are legal or not. Firing civil servants may be even harder than firing college professors.”

A passage from a recent New York Times article on illegal “sand-mining” in India puts the situation in stark relief: “Construction is the business where criminals have the best opportunities to launder the most money, [one real estate agent] explained, and a cascade of bribes go ‘to the topmost levels in the government.’…You pay 6 percent in bribes up front. Then, after the first payment, you pay another 7 percent, half of which goes to the state’s top politicians. The development authority’s junior engineer gets 3 percent. The associate engineer gets 1.5 percent. The senior manager gets 3 percent, and so on — until the total reached an astonishing 30 percent.”

For Tullock, the really interesting question is not why so many governments are corrupt. Instead, the puzzle is how any government manages to solve this problem and avoid corruption. The benefits, to those in power, of creating arbitrary restrictions and then selling indulgences to exempt the wealthy and powerful seem irresistible. The U.S. Internal Revenue Code is replete with relatively high income tax rates, at least on paper. But as each industry or investment group pays its “bribe” to Congress by organizing voting support, making campaign contributions, and the like, the actual rates to which it is subject are reduced, often sharply, via esoteric subsidies, tax credits, or deductions.

In the early 16th century, Martin Luther recognized this kind of corruption in the Catholic Church. In his “Thesis 27,” Luther complained of priests “who say that as soon as the coin jingles into the money box, the soul flies out of purgatory.” He was referring to an actual jingle, dating to long before Mad Men — perhaps the first ever used in advertising. A little rhyme, attributed to a German monk named Johann Tetzel (1465–1519), translates to: “As soon as the money in the chest rings, a soul from purgatory to heaven springs.” The very idea of judgment had been hijacked by some members of the Church as a way to increase their revenue, selling “Get out of purgatory” cards.

A lot of work has been done since Tullock first wrote about this problem. Our understanding of the temptations of corruption, especially in developing nations — he called it “the transitional gains trap” in a famous article in 1975 — is now standard economics. But Tullock saw the problem clearly in the 1950s.

Somehow nationality is the final frontier

Friday, November 1st, 2019

Zach Weinersmith‘s Saturday Morning Breakfast Cereal comic doesn’t normally cover political topics, but his new Open Borders graphic novel — which is certainly graphic, but doesn’t appear to be a novel — with Bryan Caplan has just come out, and it does deal with a contentious topic.

“Thanks to the power of Zach Weinersmith, it’s fun to read for all ages.”

SMBC Open Borders Concerns

They discuss the book here:

Only heartless trolls worry about costs

Wednesday, October 30th, 2019

Michael Munger looks back at the joyful contrarianism of Gordon Tullock, starting with his insights into safety regulations:

Should governments mandate more safety in products? The usual terms of debate weigh reduced injuries — the “human toll” — against increased cost, with only heartless “rational choice” trolls actually worrying much about costs. The idea that perfect safety is morally undesirable, because such policies have enormous opportunity costs, is obviously, annoyingly important — and a big part of the reason economists often end up standing alone at parties, studying the wallpaper pattern.

Safety is valuable, of course. But economists pitch their arguments “at the margin,” meaning for the last increment. The first improvements in safety are cheap and uncontroversial: reliable brakes, turn signals, seat belts, safety glass in windshields. The next increment — airbags, anti-lock braking systems — comes at much greater cost and with a smaller associated reduction in injuries. Ultimately, the only way to make cars completely safe is to park them and throw away the keys. Driving is dangerous.

Tullock’s contribution was to ask, “And then what?” The problem is worse, actually much worse, than the increasing marginal cost of safety improvements. The safety of the car, after all, is just one factor; drivers and their attitudes toward danger are the key missing variable. The state can only mandate the safety of the car. Ultimately, the driver’s behavior determines the risk of driving.

This observation is now sometimes called the “Peltzman Effect,” after the University of Chicago economist Sam Peltzman, but Tullock had argued some versions of it for decades. As the University of California, Irvine economist Richard McKenzie recalls it, Tullock noticed that safer cars reduced the costs of accidents for drivers. If the government “subsidizes” accidents by mandating airbags, there will be more accidents. Worse, because of increased automobile speed and recklessness, there will be more pedestrian injuries and deaths. Safer cars mean more injuries.

Tullock’s famous counterproposal was to place a long, sharp dagger firmly in the center of the steering column. His earliest notion of this was to have the tip pointing back and locked one inch from the driver’s chest. By the time I talked to him about it, in the 1990s, the idea had evolved to work more like an airbag, so that the dagger would be hidden but would deploy with explosive force in the event of an accident.

Calling this conclusion counterintuitive is an understatement — but there is an important insight underlying Tullock’s drollery. The risk of injury is jointly determined by the behavior of all the people who are driving in a particular area. If I’m aggressive and cause a wreck, I’ve imposed additional risk on you. If safety “improvements” subsidize risk-taking, and some — not all, necessarily, just some — people drive more aggressively, then the observed reductions in injuries from safer cars will be much less than regulators expect. Worse, no individual driver can, by behaving safely, escape these bad effects. Safety regulations have negative externalities.

The most annoying thing about Tullock was that he was usually right. He was even right about car safety regulation (though maybe not about the dagger!): According to the American Automobile Association, there have been substantial increases in driver aggressiveness since 2000, with eight out of 10 drivers admitting to having intentionally tailgated another car and nearly half saying they have bumped, rammed, or gotten out of their cars to threaten the occupants of another vehicle. While the direct causal mechanism is complex, this increase in aggressiveness tracks the imposition of universal requirements for airbags and anti-lock brake systems in 1998.

This problem is borne out in the real “national sport” of America, NASCAR. Starting in 1988, the racing entity imposed “restrictor plates” as a safety measure, limiting the airflow into an engine (and therefore the horsepower, and speed, of cars). Restrictors were required in response to the horrific “going airborne” May 1987 accident of Bobby Allison at Talladega, where the car flew into the upper restraining fence and disintegrated, injuring five spectators, including one who lost his eye. But two refereed journal articles, one in the Southern Economic Journal in 2004 by J.B. O’Roark and W.C. Wood, and one in 2010 in Public Choice by A.T. Pope and R.D. Tollison, concluded that safety improvements had increased the number of crashes and multi-car pileups in the sport (though they had not affected the total number of deaths).

That is what you would expect. If speeds are suppressed and safety equipment is improved, the risks of death and serious injury are lowered. The result should be increases in risky behavior by drivers, including close drafting and “trading paint,” the euphemism NASCAR uses for high-speed bumping.

In February 2018, NASCAR switched from restrictor plates to the more precise and consistent “tapered spacers,” which have the same effect and the same “safety” rationale. The 2018 NASCAR “Cup Series” champion, Joey Logano, was clear about the likely outcome: “I totally expect to crash more cars,” the Associated Press quoted him saying. “As cars are closer and drivers are more aggressive, a mistake will create a bigger crash. We can’t get away from it.”

Of course, Tullock would ask, “And then what?” NASCAR is not stupid; it may not be an accident (sorry) that there are more crashes with the same level of driver safety. That may very well be the point: NASCAR fans come for the racin’, but they stay for the wreckin’. Using a “safety” rationale — particularly one that really does reduce injuries slightly — as a means of increasing the number of wrecks makes a lot of economic sense. If the authorities really wanted to prevent accidents, NASCAR would put big daggers in steering columns, not little tapered spacers in carburetors.

Most wealth isn’t devoted to extravagant consumption

Monday, October 28th, 2019

Everyone, regardless of their income and wealth level, would take a hit from the Democrats’ proposed wealth tax:

That’s because, contrary to what American progressives believe, most wealth isn’t devoted to extravagant consumption. Instead, it’s invested in companies; it’s used to fund research and development that will create better goods and services for consumers; it serves as the capital that innovators and producers borrow from banks to grow their businesses. In other words, most wealth is used to fuel other wealth-producing activities that improve well-being.

So whether a wealth tax will create a real disincentive to accumulate capital or force rich taxpayers to send a larger share of their money to the IRS, less capital will be available for everyone in the economy to use for their own businesses and training. That means that many Americans beyond the super wealthy will get burned by the tax.

This negative consequence is a reason why so many countries that had wealth taxes in the 1990s have since abandoned them. The cost of implementing a wealth tax and annually assessing assets often costs more than the tax actually raises in revenue. In France, for instance, the administration cost was double the revenue raised. As such, it’s not surprising that the country dropped its wealth tax in 2018.

China will spend money and endure a dirty industry

Sunday, October 20th, 2019

Coal-burning China’s embrace of electric vehicles may also be more about money than the environment:

China produces less than 5% of the world’s oil — used in combustion engines — but about 45% of the globe’s coal, used in electricity production for EVs. In much the way that the U.S. is the world’s largest user of homegrown crops for motor fuel despite widespread criticism of ethanol subsidies as costly and environmentally damaging, China will spend money and endure a dirty industry to be energy independent as well.

More than that, though, Beijing wants to dominate tomorrow’s car industry. China’s opening to the West came too late for it to be a major exporter of internal combustion engine vehicles, but it has made aggressive moves to dominate battery production, including securing sources of key metals. Through lavish subsidies it already has by far the world’s largest domestic EV market.

Doesn’t that sound laissez unfair?

Saturday, October 19th, 2019

The March of History pits Mises vs. Marx in a Hamilton-esque rap battle:

Workers of the world — ASSEMBLE!
It’s time for the ruling classes to tremble.
I’m the people’s hero, the MVP:
M – A – R – X! Yeah, you know me!

Let’s go back to when men were free.
We hunted and gathered communally.
But get ready, ’cause here comes the twist,
A villain appears, called a “capitalist”.

He puts the proletariat — that’s US — in chains,
exploits our labor, and pockets the gains.
Though slick ads he trick lads and ladies in kind,
selling fake needs he poisons our hearts and minds.

He rots our soul through alienation
pursuing limitless accumulation.
He works us into an early grave,
through debt, steals back the money we save.

Greed is the gospel! Profit? GOD.
The rich get richer through graft and fraud.
The poor get poorer, but YOU don’t care.
Doesn’t that sound laissez unfair?

200 years I’ve been singing this song,
Now my chorus is 99% strong.
The revolution’s here. It’s time to repent.
Your moment is over — your capital’s SPENT!

A Nobel-winning economist goes to Burning Man

Wednesday, October 16th, 2019

Economist Paul Romer went to Burning Man:

It was the first time that Mr. Romer, the former chief economist of the World Bank, had attended the annual bacchanal.

A week earlier, there was hardly anything here, in the remote desert of northwest Nevada. Then tens of thousands of people had just shown up, many in the middle of the night. They had formed an instant city, with a road network, and a raucous street life, and a weird make-do architecture.

[...]

To economists, cities are labor markets. And labor markets can’t function when there are no roads leading workers out of their favelas, or when would-be inventors never meet because they live in gridlock.

Mr. Romer’s answer is to do with this moment what Burning Man does every summer: Stake out the street grid; separate public from private space; and leave room for what’s to come. Then let the free market take over. No market mechanism can ever create the road network that connects everyone. The government must do that first.

[...]

Most of the structure that has been added since feels invisible to the people who come: the streets that are surveyed to be exactly 40 feet wide, the plazas that steer people together without crowding them, the 430 fire extinguishers around town, each tracked by its own QR code.

[...]

After 1996, the founders also began putting up a fence around the city, a pentagon with perfectly straight sightlines. Nominally, it is a “trash fence,” catching debris before it blows into the desert. But it also defines the edge of the city, so that it is possible to stand at the boundary line and stare out into an open desert uncluttered by tents or plywood art. The fence is an urban growth boundary. It is as much about keeping out interlopers as keeping people in.

The whole point is sacrifice

Sunday, August 18th, 2019

Is recycling useful, Michael Munger asks, or is it garbage?

And “recycling” is, after all, not just one homogeneous activity, but a whole collection of possible streams of waste or resources, each of which has to be evaluated separately. Should we recycle aluminum cans? Probably, because the price of recycling aluminum compares very favorably to using virgin materials, the mining and smelting of which are expensive in terms of energy and harmful to the environment.

Should we recycle toilet paper? We could, at some price. But it’s likely not worth it, because it can be composted, it would be awfully hard to clean and sort, and in any case paper products are actually a renewable resource, rather like wheat. You rarely hear someone saying, “Save the wheat! Give up bread!” But that kind of argument is often made for paper, even though the trees grown to produce pulp are simply a fast-growing crop grown on farms expressly for that purpose.

For recycling to be a socially commendable activity, it has to pass one of two tests: the profit test, or the net environmental-savings test. If something passes the profit test, it’s likely already being done. People are already recycling gold or other commodities from the waste stream, if the costs of doing so are less than the amount for which the resource can be sold.

Voluntary “recycling” like scrap iron or aluminum businesses will take care of that on their own. The real question arises with mandatory recycling programs — people recycle because they will be fined if they don’t, not because they expect to make money—or “voluntary” recycling programs such as those at universities or other communities where failure to recycle earns you public shaming.

For coercive or social-pressure recycling to make sense, three things have to be true.

1. Scale. You need substantial amounts of the “input,” or garbage. Hauling small amounts is wasteful. Many suburban neighborhoods in the U.S. have small amounts of recycling out by the curb, and fossil fuel–powered trucks come by spewing greenhouse gases. Part of the reason wheat and pork bellies are valuable is that the average costs of transport and handling are low, because the scale is so large. I once watched a young woman in Vitacura, Chile, wait in line in her idling auto for more than 10 minutes so she could park and put two two-liter plastic bottles into a recycle bin. That’s not economics, that’s a religious ceremony. Without scale, most recycling harms the environment.

2. Convenience. There is one resource we can’t get more of: time. Our lives pass quickly, and we have many things to do. But we are asked to donate our time to recycling, to “save” resources. We are asked to wash out and clean the stuff (I actually know people who run their garbage through the dishwasher, so it will be clean. Think of the time, coal-produced electricity, and hot water that uses.) Then we are supposed to sort the garbage and deliver it to the recycling facility.

Why isn’t this done at the recycling facility? Because the government realizes (correctly) it is too expensive, and the costs would swamp the tiny savings, if there are any, in doing recycling in the first place. But if the costs of cleaning and sorting are too great at scale, with commercial resources, why isn’t the sum of the individual costs of cleaning and sorting, in each household, even greater?

If you add up the time being wasted on recycling rituals, it’s even more expensive to ask each household to do it. The difference is that this is an implicit tax, a donation required of citizens, and doesn’t cost money from the public budget. But time is the least renewable of all resources; demanding that it be donated to a pointless or even harmful ritual such as recycling glass is government malpractice.

3. Environmental savings. For recycling to make any sense, it must cost less to dispose of recycled material than to put the stuff in a landfill. But we have plenty of landfill space, in most of the country. And much of the heaviest material we want to recycle, particularly glass, is chemically inert and will not decompose in a landfill.

Ground “recycled” glass, or “cullet,” is less useful than the virgin silica sand from which glass is made. Cullet has impurities and chemical colorings that make it difficult to use for glass without further processing. To be clear, then: landfilling glass does no environmental harm, and the glass is more expensive than the virgin material it is supposed to replace. Further, glass is heavy, and carting it to distant processing centers, in any but the most urban areas, pollutes the air.

So, is recycling useful? As I said at the outset, for some things it is. Aluminum cans and corrugated cardboard, if they can be collected clean and at scale, are highly recyclable. I myself, on finding an aluminum can in the garbage, will generally take it out and try to find a recycle bin. It seems dumb to waste the aluminum, even though the value of the aluminum in one can is less than 2 cents.

But for most other things, recycling harms the environment. I’m not (just) saying it’s costly. I’m saying recycling is harmful. If you care about the environment, you should put your bottles and other glass in the regular garbage, every time.

[...]

Once you begin to think of recycling as a symbol of religious devotion rather than a pragmatic solution to environmental problems, the whole thing makes more sense.

As in any religious ceremony, the whole point is sacrifice: Abraham was ready to slay Isaac; Catholics give up meat during Lent; Muslims fast all day during Ramadan. And a young woman in Chile with two two-liter bottles sits in her car in line, knowing she is publicly visible and that her green moral virtue is apparent to everyone.