Economic Affairs on COVID19

In the new issue of Economic Affairs there is a section on Coronavirus. Besides an article by Nicola Rossi and me on the Italian predicament (we are not very optimistic), it includes articles by Steve Davies, Julian Jessop (on the costs and benefits of the UK lockdown), and Brian Williamson. For a social science scholarly journal, to publish papers on the matter is quite a challenge, as the pandemic is unfolding before our very eyes. But it is a challenge worth taking on, particularly for those of us of a classical liberal persuasion, whose views are regularly questioned as impracticable in times of such an emergency or, even worse, as somewhat “responsible” for it, due to our support and defense of globalization.

In his essay, Steve Davies does an admirable job in highlighting the exceptionality of COVID9 vis-à-vis the previous 20 pandemics which happened in the modern era and helped in shaping the modern state. An epidemic is a complex biological phenomenon and governments and health authorities operate with limited visibility and limited knowledge, though our world is faster in producing and spreading information than it ever was. This in part explains a response to COVID19 that, though not equally effective everywhere, is certainly extraordinary by historical standards:

In 1918–19 local controls,often sweeping, were imposed, but there were nothing like the national responses seen in 2020. Policies of lockdown initially and testing, tracing and isolating (TTI) subsequently may smother the smouldering phase and prevent a second wave or third phase this time, holding the line until a vaccine is developed. (Countries that were able to put a programme of TTI in place early on, such as South Korea, have avoided the need for a strict lockdown.)

In his article, Steve emphasizes risks specifically related with globalization and economic interconnection, including our dependence on long and complex supply chains that are fantastic at delivering goods in normal times but can be jeopardized by non-pharmaceutical measures to contain the pandemic. My – perhaps wishful – thinking is that adaptation may prove to be faster and swifter than we think. Insofar as politics is concerned, this is Davies’s forecast:

It seems likely that the coronavirus pandemic will therefore lead to a reassessment of the extent, power, and functions of government. In some areas this will result in a growth or extension of powers but in others there will likely be a pulling back or withdrawal as public administration is found to be lacking or self-defeating. A lot of regulations, particularly ones to do with medicines and drugs but also things such as occupational licensure (in the United States in particular) are likely to be cut back or abolished. In contrast, surveillance powers are probably going to become more extensive. One likely change is in the area of health services: in most countries (East Asian ones and Germany are the big exceptions) these have come to be dominated by hospitals and therapeutic medicine at the expense of health maintenance and public health (….) This has been revealed as brittle and highly vulnerable to shocks such as a major epidemic (in 2020 it was panic about the pressure on hospital systems that led to the decision to impose a lockdown, in most cases). One area where there will be much debate is over the relative performance and effectiveness of decentralised and localised systems as compared to centralised or national ones: this is actually an area where the evidence can support both sides, with the correct answer differing according to local circumstances.

I am not so sure about the last point. Healthcare systems are an awfully complex matter that seldom enter the political debate and when it does, it does so in a rather surreal manner, with politicians oversimplifying and never quite dealing with the real issues. When it comes to Italy, I am amazed at how little discussion we had about how to mend the hospital network. Sure, ICU beds were provided for in the emergency and the role of GPs vis-à-vis treatment in hospital was discussed. But that was pretty much it. In some sense, this is a good thing. The jury is still out when it comes to understanding what did and what did not work in the pandemic: decisions taken in a rush, based upon the limited evidence we could draw on for the first phase of the pandemic, may be mistaken. When it comes to centralization vs decentralization, I suspect our assumptions are so ingrained that our reading of the evidence will depend on them rather than the other way around. Generally speaking, I see little evidence to support those who push for more centralization – for instance in public procurement. But my bias certainly inclines in the other direction.

Brian Williamson’s essay is another fascinating piece of writing. He suggests that a “‘Coasean’ social contract could be forged to protect older people and other at-risk groups coupled with freedom from lockdown for everyone else. The social contract could involve a period of support and extra payments to older age groups to commit to home quarantine, but with the possibility of opting out”. He maintains that we should have “an age-specific policy response to COVID-19” but that should involve incentives and not mandates “given large variations in individual trade-offs and private information about such trade-offs”. The hypothesis of an age-targeted response was ruled out in a country like Italy I think because it was at the same time politically expensive (with an aging population, how do you tell the bulk of your prospective voters that you are selectively reducing their liberty vis-à-vis their children’?) and very difficult to organize in a meaningful way (what do we do with nursing homes? How do we transform them?). Williamson’s is an interesting intellectual exercise on the matter.


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The Invention of Government, starring Mariana Mazzucato

In an op-ed in the New York Times, Mariana Mazzucato offers a summary of her last book, The Value of Everything. The book is both a polemic against marginalism, which she considers a cover-up for laissez-faire (as if Jevons, Marshall, Walras, or Menger were champions of unfettered competition), and a plea for more government intervention in the economy.

Mazzucato does not argue: she tells a story, sometimes very effectively. Here’s the story in a nutshell:

When the economy is in crisis, whom do we turn to for help? Not corporations — it’s governments. But when the economy is flourishing, we ignore governments and let corporations soak up the rewards. This was the story of the 2008 financial crisis. A similar story is unfolding today. Governments have spent trillions on stimulus packages without creating structures — like a citizens’ dividend, which would reward public investment — that turn short-term remedies into the means for an inclusive, sustainable economy. This gets to the heart of what fuels inequality: We socialize risks but privatize rewards. In this view, only businesses create value; governments merely facilitate the process and fix “market failures.”

If only there were a mechanism by which these corporations were taxed!

I don’t know if you have seen The Invention of Lying. In the movie Ricky Gervais lives in a world where nobody ever lied; he is the first who come up with the idea and builds his success on it. It seems to me that Mazzucato may star in a similar movie, The Invention of Government. Her narrative that we socialize risk but never properly compensate governments fits very well a world where taxation does not exist. Sadly, that is not the world we live in.


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Happy Birthday, Thomas Sowell

The one constant on display through all these topics is an irrepressible mind digging through the data in order to understand the complex reality underneath. His intellectual process, plus his ability to write quickly, have resulted in dozens of books and hundreds upon hundreds of newspaper columns that have helped many of us learn. When I handed out my biography to students the first day of the class I taught at the Naval Postgraduate School (from 1984 to 2017)—with my Hoover Institution affiliation on it—a question I got from many was, “Do you know Thomas Sowell?” They mispronounced his last name, evidence that they knew about him from reading him rather than hearing about him.

This is from David R. Henderson, “Thomas Sowell, An Intellectual Giant,” Defining Ideas, July 1, my encomium to Tom, published on the day after his 90th birthday. The editor chose the title and it’s better than the one I gave it. Just choosing great punchy quotes from his work could easily made the piece 50% longer.

Another excerpt:

In The Economics and Politics of Race: An International Perspective, published in 1983, Sowell took the next step, looking at race, ethnicity, and culture across the world. He wasted no time in getting to the issues. On the first page of the first chapter, titled “The Role of Race,” he wrote, “The most ghastly example of racial fanaticism in history was the Nazi extermination of millions of defenseless men, women, and children who were so similar to themselves in appearance that insignia, tattoos, or documents had to be used to tell the victims from their murderers.” In that one sentence can be seen the passion, power, and clarity of Sowell’s writing.

And one of the important economic geography insights I learned while researching for the article:

“Geography is not egalitarian,” he wrote and then went on to show how true that is. The Sahara, the largest desert in the world, has isolated black people in sub-Saharan Africa. That makes economic growth harder to achieve than otherwise. He also pointed out that Africa, with twice the area of Europe, has a shorter coastline than Europe. It lacks the nooks and crannies that make for good harbors. Incidentally, that’s probably why my uncle and aunt, on their way to the Belgian Congo in 1941 to be medical missionaries, had to travel to to Cape Town first, rather than directly to the Congo. (They were captured by the German Navy, but that’s another story.)

Read the whole thing.



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The Opportunity Costs of J. Alfred Prufock

Steve Horwitz and I have been teaching an online class about economics and literature, pairing core economic concepts with literary works that demonstrate those concepts. This past week, we talked with the students about opportunity cost (see Steve’s thoughts on Buchanan’s Cost and Choice here), using Thomas Grey’s “Ode on the Death of a Favorite Cat, Drowned in a Tub of Goldfishes” and T.S. Eliot’s “Love Song of J. Alfred Prufrock” as our literary texts.

Using poetry, I told the students, helps us think about opportunity costs in ways that travel alongside, but are not the same, as the ways that economists think about them. For economists, the important thing is that a choice is made. In the most reductive version of this, the moment of choice, the moment where opportunity costs are weighed, disappears into something called “revealed preference.” A choice is made. Results follow. The economist moves on. For poets, particularly for Eliot, and particularly in “Prufrock,” the moment of choice, the weighing of opportunity cost, is everything.


“The Love Song of J. Alfred Prufrock” is five pages of glorious poetry about the moment when we decide that a choice must be made, but we are caught on the tenterhooks of opportunity cost. The poem begins with the speaker inviting himself and us to walk out into the evening with him as he contemplates a life-altering decision. Although the nature of the decision is never directly stated, most readers agree that he is debating whether or not to ask someone to marry him. He decides not to, and the poem ends. The most reductive economic reading of the poem would be to say “Revealed preference. He never wanted to propose marriage anyway. He obviously got what he wanted, because otherwise he would have chosen something different. End of story.”

Horwitz describes James Buchanan as seeing, not “homo economicus” but “richly understood humans who experience that agony of choice and face uncertainty about the future.” This is certainly true when one contrasts Buchanan to the simple predictive choice economics models. But when one has the expansive playing field poetry offers for thought and exploration, there can be even more to the story than Buchanan gives us.

With “Prufrock,” we are invited to travel “you and I” alongside one particular human as he grapples with one particular decision. While Prufock is absolutely considering opportunity costs, his decision process is no sterile totting up of pros and cons followed by a simple choice of the least costly option. 

There will be time, there will be time

To prepare a face to meet the faces that you meet;

There will be time to murder and create,

And time for all the works and days of hands

That lift and drop a question on your plate;

Time for you and time for me,

And time yet for a hundred indecisions,

And for a hundred visions and revisions,

Before the taking of a toast and tea.


Opportunity cost, for Prufrock, means a torturous understanding that choices define who we are. Every choice requires that we remake ourselves and “prepare a face” that goes with whatever choice we make. Choices “murder and create” different selves we might be and different lives we might lead. With all that hanging in the balance, no wonder Prufrock finds time “for a hundred indecisions/ And for a hundred visions and revisions.” 

The unrelenting “should I/shall I” constructions of Eliot’s verse help us feel each of those individual moments that make up this thing we call a “choice.” And for Prufock, the actual choice passes almost unnoticed amidst all this debate. “I have seen the moment of my greatness flicker…in short, I was afraid.”

But while most economists would say “That’s the end of the story. Choice made. Preference revealed, moving on,” and while even Buchanan would say “A choice has been made and that experience will carry forward into Prufrock’s future choices,” Eliot shows us that–despite the fact that a choice has been made–the moment of choice is not over for Prufrock. Prufrock, human that he is, cannot stop thinking about it. Indeed, he still seems to be living in that moment of choice.

The poem’s “should I/ shall I” constructions transform into the phrase “would it have been worth it” as Prufrock returns obsessively to the moment of choice, thinking over what he could have done, might have done, did not do. The choice is made, but Prufrock is still endlessly, obsessively making it. The pain of Eliot’s poem comes not only from his obsessive titivating, but from his final realization that he has trapped himself in a world of unending “decisions and revisions,” growing ever older, but never wiser, and cutting himself off from the wonder and beauty he might have found through other choices.

Economists aren’t wrong to shrink the moment of choice to near invisibility. Poets aren’t wrong to expand it until it is so large it might “disturb the universe.” They are using different sets of tools to explore the same questions. We are wrong to think that using only one set–whichever set it is–gives us the real story. 



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Rothbard’s Conceived in Liberty: The New Republic

I’ve been waiting to read the fifth volume of Murray Rothbard’s Conceived in Liberty for over 30 years.  Now my former student Patrick Newman, professor at Florida Southern College, has miraculously undeleted this “lost work.”  Patrick’s quasi-archaeological efforts are nothing short of amazing, but how does the actual book hold up?

In the first four volumes of Conceived in Liberty, Rothbard tells the story of the American colonies’ rise, rebellion, and victory over the British.  In this final volume, he tells the story of America’s brief time under the Articles of the Confederation – abruptly  (and illegally!) ended by the revolution/coup/counterrevolution that we now know as the United States Constitution.  Rothbard, a vociferous detractor of the Constitution, could easily have subtitled this last book in his series “The Revolution Betrayed.”

Under the Articles of the Confederation, government was much more decentralized – and therefore much better:

Overall, it should be evident that the Constitution was a counterrevolutionary reaction to the libertarianism and decentralization embodied in the American Revolution. Th e Antifederalists, supporting states’ rights and critical of a strong national government, were decisively beaten by the Federalists, who wanted such a polity under
the guise of democracy in order to enhance their own interests and institute a British-style mercantilism over the country.

Rothbard’s main focus, however, is not in persuading the reader that the Articles were superior, but simply chronicling the details of their demise.  As a result, the book is disappointing.  I expected to watch Rothbard debunk the standard civics case for the Constitution – to insist that the Articles fostered rapid economic growth, high individual liberty, and peace both between the U.S. states and between the U.S. and the world.  I expected him to enthusiastically defend the repudiation of war debt.  And I expected him to at least consider reconsidering his earlier support for the American Revolution and its many slave-holding philosophers of freedom.  Instead, Rothbard glosses over the Big Questions in favor of detailed multi-stage Constitutional vote analysis.

Admittedly, quantitatively comparing growth, freedom, and peace under the two colonial regimes would be difficult due to data limitations.  But there’s no excuse for ignoring the implications for revolution change.  In his engaging introduction, Newman depicts Rothbard as a dedicated supporter of the American Revolution:

Although the Revolution was enormously costly and resulted in the near destruction of the economy (through hyperinflation, military confiscation of goods, British pillaging of infrastructure and supplies, and the flight of British loyalists), the war was worth it since it led to the achievement of highly libertarian goals of inestimable value. Rothbard explains that the American Revolution was radical and led to the restriction of slavery in many areas, the end of feudalism, the emergence of religious freedom, democratic constitutions with increased suffrage, and revolutions in European nations.

Here’s the rub: How can the war (including the “near destruction of the economy”!) be “worth it” if the libertarian revolution gets cancelled a few short years later?  This is an astronomical price to pay for such a transient gain.  Sure, you could reply, “Well, the war would have been worth it if the Articles had endured.”  But that immediately raises a deeper question: Was the American Revolution even a prudent gamble?  The probability of victory aside, what is the probability of winning the war but losing the peace?  If your answer isn’t, “Very high,” I question your knowledge of the history of violent revolution.

Perhaps Rothbard would insist, “The Constitution was only a partial counterrevolution.  Many of the libertarian gains of the American Revolution endured.”  Then he could point to all the items in the preceding list: “the restriction of slavery in many areas, the end of feudalism, the emergence of religious freedom, democratic constitutions with increased suffrage, and revolutions in European nations.”  Given the hellish history of the French Revolution and the Napoleonic era, I’d say the latter “achievement” outweighs all the others.  In any case, Rothbard barely grapples with the counterfactuals.  How do we know slavery wouldn’t have been restricted anyway?  What’s the probability that the British would have restricted slavery earlier and more peacefully?  Inquiring minds want to know.

Rothbard also fails to grapple with the complex interaction between decentralization and mobility.  As I’ve explained before:

[D]oes decentralization alone really promote liberty or prosperity?  The mechanism is elusive at best. Imagine a world with a thousand sovereign countries of equal size.  This is far more decentralized than the status quo, right?  Suppose further, however, that there is zero mobility between these countries.  Labor can’t move; capital can’t move.  In this scenario, each country seems perfectly able to pursue its policies free of competitive pressure.  Why should we expect such policies to promote liberty, prosperity, or anything else?

The story would change, of course, if you combine decentralization with resource mobility.  In that case, each country’s government has to compete to retain labor and capital at home.  If you don’t make the customer happy, somebody else proverbially will.  But without this “universalist” mobility rule, decentralization leaves everyone under the rule of a preordained local monopolist.

Standard civics classes claim that under the Articles of the Confederation, interstate tariffs were a serious problem; they offered decentralized politics without free trade.  Rothbard only response is to downplay the severity of the regulation:

While Connecticut taxed imports from Massachusetts, and New York in 1787 moved to tax foreign goods imported from neighboring states, the specter of disunity and disrupting interstate tariff s was more of a bogey to sell the idea of a powerful national government than a real factor in the economy of the day.

Perhaps Rothbard’s right, but remember: interstate tariffs only had a few years to get online.  What would have happened to interstate tariffs in the long run if the Articles endured?  And doesn’t the question illustrate the critical insight that decentralization without resource mobility is no recipe for liberty?

To be clear, I enjoyed reading the final volume of Conceived in Liberty.  And to be fair, Rothbard probably would have greatly improved it before publication.  As it stands, though, Rothbard’s lost book dodges the fundamental questions that Mr. Libertarian famously relished.  If you want to read one of his posthumous works, you’d be better off with The Progressive Era – also beautifully edited and annotated by Patrick Newman.


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Cost and the Agony of Choice

I recently had cause to re-read part of James Buchanan’s Cost and Choice, which remains one of the most important treatments of the idea of cost in the history of economics. Chapter 3 of the book is the core of his argument and it lays out an important distinction that is often overlooked in other treatments of cost.


Buchanan starts with a methodological distinction between what he calls the “predictive theory” of orthodox economics and the “more general theory of choice.” In a move that can be found elsewhere in his work, Buchanan understands the predictive theory to be the equilibrium models that populate much of formal economics. Those are based on two key assumptions. First, humans are homo economicus, concerned with maximizing utility or profits. Second, they have all of the relevant knowledge necessary to engage in that maximization process. That is, meaningful uncertainty is absent.

If all of the conditions of the predictive theory hold, we can, indeed, predict what people will do facing a particular set of data. As Buchanan notes, in this world, “Individuals do not choose; they behave predictably in response to objectively measurable changes in their environment.” Another way to put this is that if an actor is assumed to maximize utility and that person knows all that is necessary to fill in their utility function, what they will “do” is not a choice. It is simply implied by the maximization assumption combined with those particular data. As we teach in intro, when you know your cost curves and your revenue curves, and are assumed to maximize profits, you don’t “choose” the price and output combination in any meaningful sense of the word. That combination is the logical implication of the location of those curves. Utility and profit maximizers in the predictive theory stand there and can do no other.

The simplest way to see the distinction between the predictive theory and the more general theory of choice is a bit of introspection. When real humans actually make choices, we feel the “agony of choice” that is utterly absent from the predictive theory. Which entrée should I order at the restaurant? Which college should I attend? Which medical treatment should I adopt? All of these choices involve an internal struggle over assessing the costs and benefits and thinking through alternatives, and imagining future regret. The discomfort we experience when facing genuine choice is the result of conflicting goals we might have and the structural uncertainty that is the human condition. Those are all absent in the predictive theory where there are no alternatives to the outcome implied by the data given the maximization and knowledge assumptions.

In the more general theory of choice, human actors are not assumed to only care about pecuniary concerns and they face genuine uncertainty about the future. As Buchanan puts it, in the predictive theory, “cost is reckoned in a commodity dimension” while in the theory of choice it is “reckoned in a utility dimension.” The assumptions of orthodox theory allow us to attach a financial or physical dimension to our understanding of cost, as represented by the marginal cost curves of basic microeconomics. But once we put those assumptions aside, we can only understand cost in utility terms.

This is where Buchanan’s core contribution comes in. What does cost look like in a world where people have multiple goals and are dealing with true uncertainty? Cost in such a world is the actor’s “own evaluation of the enjoyment or utility that he anticipates having to forego as a result of selection among alternative courses of action.” (I would note that it would be more precise to say “want satisfaction” rather than “enjoyment or utility,” especially if “utility” is understood in hedonic terms.) He lays out six implications of what he calls the “choice-bound conception of cost:”

  1. Most importantly, cost must be borne exclusively by the decision-maker; it is not possible for cost to be shifted to or imposed on others.
  2. Cost is subjective; it exists in the mind of the decision-maker and nowhere else.
  3. Cost is based on anticipations; it is necessarily a forward-looking or ex ante concept.
  4. Cost can never be realized because of the fact of choice itself: that which is given up cannot be enjoyed.
  5. Cost cannot be measured by someone other than the decision-maker because there is no way that subjective experience can be directly observed.
  6. Finally, cost can be dated at the moment of decision or choice.


I don’t want to walk through each of these, as I’ve covered many of them in a previous contribution. What I do want to note is that all of these implications derive from the absence of homo economicus and the presence of real uncertainty. This combination makes cost subjective and anticipation-driven. We don’t know for sure whether the steak will be better than the salmon, or whether standard drugs will be better than chemotherapy. Cost is the hurdle we must get over in order to choose. We have to decide that the want we anticipate satisfying by one option is more valuable than what we anticipate from the next best option. That process of weighing those anticipated outcomes is the agony of choice, and it is what is absent from the predictive theory and the standard neoclassical models that emerge from it.

Standard theory might allow us to make predictions about behavior, given its assumptions, but it fails us as a way to understand choice.

Another way to see Buchanan’s contribution is to think in terms of the Austrian idea of discovery and markets as processes of social learning. In the predictive model, there is nothing to discover and there can be no regret. Behavior is implied by the assumptions and the data, and the maximizing combination is always chosen. There is nothing to learn. In the theory of choice, we are always in a process of discovering whether or not the various options in front of us can satisfy our wants in the ways we anticipate. If we choose the steak and it’s not very good, we have learned something for next time we eat at that restaurant. We can experience regret and it can inform future decision making. We learn from our choices and we improve ourselves in the process.

The relationship between cost and real choice Buchanan outlines in his description of the general theory of choice depicts humans who are much closer to the kind of people who inhabit the world of the humanities, and especially the creative arts. They are richly understood humans who experience that agony of choice and face uncertainty about the future. And they are humans who are capable of regret, learning, and improvement. In his essay “Natural and Artifactual Man,” Buchanan writes that “Man wants liberty to become the man he wants to become.” This is a description of the choosing person who inhabits the general theory of choice. The automaton in the predictive theory cannot be understood in those terms.

Whatever the value of the predictive theory, and it certainly has value as a preliminary exercise for understanding economic relationships, it cannot help us to understand genuine choice in a world of uncertainty. And it therefore cannot help us understand the very human experience of the agony of choice, the regret of error, and the joy of learning.



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Sowell on Writing

Today is Thomas Sowell’s 90th birthday. I am sure many celebrations of Sowell will be published. Not in Europe, I am afraid: in spite of his renown in America, Sowell is virtually unknown in Europe. I suspect this is at least partially due to his choice to concentrate on writing and to eschew conferences and public gatherings. He never got on the conference circuit, so to say.

It is a pity. Sowell is admirable for a number of reasons. His courage. His productivity. His work.

Knowledge and Decisions is my favorite book of his. F. A. Hayek’s insights on the role of knowledge in society are developed splendidly and presented in a scintillating and clear style.

Style is another thing to admire Sowell for. He strove for it and told his experience with writings in a little essay, a few years ago. Here are a few passages:

Learning to write by trial and error not only calls for patience on the writer’s part, it also taxes the patience of wives, landlords, and creditors. Whenever someone, especially a young person, tells me of an ambition to become a writer, my heart goes out to him or her immediately—and my spirits sink. There is seldom a pot of gold at the end of the rainbow, even for those who become established writers eventually—and a lot can happen between now and eventually, like broken marriages, eviction for non-payment of rent, and the like.

Even the mechanics or logistics of writing can be a challenge to figure out. Some of the most productive writers have followed the disciplined practice of sitting down at fixed times each day and turning out the words. Anthony Trollope followed this regimen in the nineteenth century and Paul Johnson with equal (or greater) success in the twentieth century. Alas, however, human beings differ and some of us are never going to be Anthony Trollope or Paul Johnson, in this respect or any other.

Instead of trying to be someone that you are not, be the best at what you are. My own writing practices are the direct opposite of that followed by these prolific and renowned writers. I write only when I have something to say. The big disadvantage of this is that it can mean a lot of down time. There are manuscripts of mine that sat around gathering dust for years without a word being added to them. …

The big advantage of this off-beat way of working is that what I write is written when I am full of ideas and enthusiasm about the subject—even if these periods occur only at intervals, with months or even years in between for a given book. Some of my favorite books came from manuscripts that I thought would never get finished.

Now, I do not think that Sowell’s essay on writing – particularly his rant at copy-editors – will do particularly well for younger writers. But I read it as delivering three key messages: (a) writing is work, not a gift. This is clear to most people who somehow write for a living, but is typically unclear to everybody else. People tend to believe you are “good” at writing, as it is some sort of natural magic.

Yet, as virtually everything else in life, it needs exercises and constant practice. Sowell’s way of working is different than Ian Fleming, who purportedly wrote every day between 9 am and noon, in his Jamaican villa. Sowell’s way of practicing is certainly different than the one which may suit most of us, far less talented than he is: but even somebody as obviously talented need to practice and to work a modus operandi out; (b) finding your own voice is not easy. It may take years to finish a manuscript as you wanted or envisioned it. It may take more rewriting than writing. Your voice does not simply “come out;” (c) it is painful. Success in writing is a very relative thing (success for economic/political bloggers is different than success for novelists) but, with the exception of a few superstars (John Le Carré, J.K. Rowling, Paul Krugman…), you hardly find the golden pot at the end of the rainbow. If you really want to make writing (part of) your profession, start by forgetting that writing is easy.


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Keynes, Friedman and champagne

Zachary Carter has written a biography of John Maynard Keynes that has been widely reviewed.

He is not – as opposed to Robert Skidelsky, Keynes’s master biographer – an economist and a scholar- but a journalist (a senior reporter at HuffPost). His work has received positive reviews. In the Wall Street Journal, Benn Steil pointed out that Carter’s book is at the same time a biography of Keynes (and he liked it as such) and a rant against neoliberalism (with few if any original ideas). He writes: “Mr. Carter seems to believe that Keynes, were he alive today, would be advising Sen. Bernie Sanders.”

Carter has an interview in the Washington Post. The interview is dense and interesting, but I was particularly struck by this passage:

I think we lose track of the fact that Friedman and Keynes had different social visions. They weren’t just arguing across the generations about which policies would best create the same desired result. They were arguing about what kind of world they wanted to live in. And the mathematicization of economics in the 20th century really obscures this deeper ideological conflict, often by design. Keynes wanted everyone to live in the Bloomsbury of 1913, having their hair cut by Virginia Woolf while drinking champagne and debating post-impressionism with Lytton Strachey. Friedman wanted to preserve these activities as the exclusive domain of the wealthy. Why be rich if you can’t live a better life than the masses? To which Keynes would counter: Who cares about the masses when you are drinking champagne with Virginia Woolf?

Carter is spot on on Keynes, but not so much on Friedman. For one thing, from what I know about Milton Friedman (David Henderson can certainly correct me if I’m wrong), I cannot see him particularly enjoying debating post-impressionism with Lytton Strachey. The more important point is that under Milton Friedman’s social vision you do not have a *right* way to live, to which people should aim to adhere. Keynes thought that a life worth living was a life spent having champagne with Virginia Woolf; Friedman thought that some people simply prefer fish and chips and there’s no problem with that.
This does not mean that Friedman wanted to keep something “the exclusive domain of the wealthy” nor that he was indifferent to education as a means to climb the social ladder. He was not. Actually Friedman wanted the poor to get the best education they could and, precisely for that reason, he wanted market-like mechanisms in education too (the school voucher). But Friedman did not assume that people want to enroll in universities to read Catullus, Shakespeare, or for that matter Keynes or Friedman. Some of us appreciate and value these things, but others do not. Most people indeed care for a degree in order to be able to find a better paid job.

I suppose Friedman would defend basic literacy and numeracy also as part of a healthier democratic life (“people who can read the daily paper are less likely to be fooled by government” is a standard classical liberal argument, though I am afraid a more dubious one than our forerunners thought). But he would not like to turn everybody into an intellectual because, guess what, most people do not want to become one.
I think this is a clear cut difference between the sort of attitude Friedman personifies and the sort of attitude Keynes personifies. One is happy with human beings as they are; the other is not. This pre-political understanding of people can explain lots of differences in the nuts and bolts of public policy.


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Five Books: The Butcher’s Bill of the Soviet Experience

Communism kills. 100 million lost souls in the 20th century, not from war or natural causes, but from state execution.  Let that sink in – 100 MILLION.


OK, now back to scholarly recommendations for books to learn about and understand this experience.  Obviously, the classic work in this regard is Aleksandr Solzhenitsyn’s The Gulag Archipelago (originally published in 1973). The impact of this work cannot be overstated. And, it should be read by every student of civilization in the 20th century.

In addition to the official prison system that the Soviet system utilized for repression, there existed the day-to-day repression of everyday life and social interaction outside of the prison walls. But it was still a prison culture of the mind.  The best book I know of to explore this is Orlando Figes’s The Whisperers: Private Life in Stalin’s Russia (originally published in 2008). The book demonstrates how daily life revolved around having to whisper to your close confidantes to hide from the prying eyes and ears of state surveillance. There were also those who you believed would be your confidantes who themselves would strategically whisper behind your back.

In one of my books on post-communism, I relay the story of Vera Wollenberger, who was a leader of the dissident group “The Church from Below” in East Germany. After the collapse of communism and German re-unification, she agitated for the Stasi to open their files as part of the reconciliation process. When her file was opened, it turned out her own husband – Knud Wollenberger – continually filed reports on her activities with the Stasi.


Think through the logic of attempting to live under such a regime.


The most comprehensive study of the archives and the death toll under communism in the 20th century is The Black Book of Communism edited by Stéphane Courtois (originally published in 1997). This is the book that establishes in excruciating detail from the archives the 90 to 100 million deaths by communist governments in the 20th century through political repression, execution, labor camps, and orchestrated famines.  As I said to start this section – COMMUNISM KILLS.


Another gruesome tour through the crimes against humanity committed in the name of communism is Steven Rosefielde’s Red Holocaust (originally published in 2010), which argues that the most accurate number is 60 million. Still Rosefielde admits that there are most likely tens of millions more that we just cannot corroborate with the archival data and never will because they are lost.


Let me end this section referencing a book by Alain Besancon, that ties together the ideology, the institutional manifestations, and the terror of the Soviet experience.  There are other great sweeping books in this genre, such as Mikhail Heller and Aleksandr Nekrich’s Utopia in Power (1988), but if you had to read one book to make sense of the economic deprivation and political repression of the Soviet Union, and why those in the west misunderstood for so long it would be Alain Besancon’s The Origins of the Gulag (originally published 1981).



I used to kid around with my students about “nonsense speak” in writing papers, and I would give as the example someone starting a paper with the phrase, “The history of the Soviet Union is very, very, very interesting.”  Of course it is, but lots of things are very, very, very interesting. But that sort of opening phrase  says nothing. Do not do it. Claims in social science papers should have a bite, they should be bold, and they should be potentially wrong. Science and scholarship should “hurt” if we are wrong. “The history of the Soviet Union demonstrates the intellectual bankruptcy of communism as an ideal.”  Now we can begin a contested conversation over a claim. We must offer conjectures subject to refutation in the dialogue with our peers.


Key to understanding Soviet Socialism is coming to grips with the claim that communism is not an ideal that humanity failed to live up to, but that communism is an ideology that is simply incompatible with humanity and human betterment.  It is an ideology, as Oscar Wilde warned, that robs the soul of man, and it is an ideology, as Ludwig von Mises warned, that destroys the means of our material progress.  The greatest large-scale social experiment of the 20th century was also the greatest large-scale social failure of the 20th century.


Hopefully, this reading guide will get you started on your own course of study to see what the lessons learned from this experiment are, and why we must never forget them.



Peter J. Boettke is University Professor of Economics & Philosophy, George Mason University, Fairfax, VA 22030.

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Will COVID-19 kill Europe’s state aid discipline?

My colleague Carlo Stagnaro and I reviewed Thomas Philippon’s The Great Reversal for Law & Liberty.

Philippon’s book is ingenious and thought-provoking. The main thesis is that the EU became, as it were, more pro-competitive than the US. One of the pieces of evidence Philippon produces is the European discipline on state aid. National government subsidies to businesses are disciplined by Brussels and that helped in fostering a more competitive environment European-wide.

Yet is that going to last? Carlo and I are skeptical. COVID-19 is jeopardizing the genuine pro-market elements in European competition policy.

It is not a surprise—and perhaps it may warrant a new chapter in the next edition of The Great Reversal—that member states seized the opportunity of the coronavirus crisis to call for a de facto suspension of the state aid discipline. While the new, more permissive framework is deemed to be “temporary,” only time will tell how long “temporary” measures will last.


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