Public Choice: The Normative Core

The economic analysis of politics goes by many names: political economy, rational choice theory, formal political theory, social choice, economics of governance, endogenous policy theory, and public choice.  Each of these labels picks out a subtly different intellectual tradition.  Each tradition expands our understanding of the world.  My favorite, though, remains public choice.

As a GMU professor, you may attribute this to home-team favoritism.  Yet before I was a professor at GMU, I was a student at UC Berkeley and Princeton, and neither school fostered the love of public choice… to say the least.  The main reason I prefer public choice, rather, is for its normative core.  All economists who study politics do cost-benefit analysis, but the public choice approach is wiser.  And heretical.

What exactly is this “normative core” of public choice?  Simple: After doing standard microeconomic analysis of government policy, public choice adamantly states:

That’s an upper-bound on how well government intervention can work.  In the real world, government intervention usually works much more poorly.  Before we claim government intervention passes a cost-benefit test, we can, should, and must use past government performance to predict future government performance.

The upshot: Public choice economists end up opposing many government interventions blessed by textbook and policy wonk alike.

Example: Most economists – even economists who study politics – are fans of Pigovian taxation to address externalities problems.  What public choice reminds us, though, is that Pigovian taxation is the best that governments can accomplish.  In the real world, however, governments are worse in dozens of ways.   Before you advocate a regime where government sets Pigovian taxes to address externalities, then, you should estimate what real-world governments will actually do when you give them that kind of power.

Another case: When I was a grad student TAing Industrial Organization, I often argued with the junior professor teaching the class.  He knew a lot of theory, but almost no economic history, so I told him about quite a few famously anti-competitive antitrust decisions.  After a while, I recall a little exchange that went roughly like this:

Junior Professor: Bryan, I don’t care about what government did in the past; I care about what government is going to do in the future.

Me: Shouldn’t we use the past behavior of government to predict the likely future behavior of government?

Junior Professor: By that standard, government should never do anything.

Me: [double-take] Not really, but OK!

For Junior Professor, the normative core of public choice was practically a reductio ad absurdum.  But that’s only because he started with a firm pro-government conclusion, and rejected even ironclad premises that undermined it.  When I applied the normative core of public choice, he saw a big bias against government.

This so-called “bias,” however, is simply well-justified pessimism.  If actual governments abuse the power to tax, subsidize, and regulate, then it makes cost-benefit sense to put the officials who set tax, subsidy, and regulatory policies in a few chains.  Or a lot of chains.  Or a solid block of concrete.

Mainstream economists tend to scoff at this mentality.  Frankly, that’s because they’re fifty years behind the research frontier.  Although textbook demonstrations that well-crafted government policies can make the world better are fun homework problems, they end up being an intellectual smokescreen for demagoguery.  The normative core of public choice shows that laissez-faire is undervalued: Even when good government is plainly able to make things better, past experience teaches us to be deeply skeptical that government will do so in practice.  Until economists judgmentally study government in action, they have no business recommending that government do much of anything.


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The Risks of Friendship: A Socratic Dialogue

The scene: Ancient Athens.  Glaucon is standing in the Parthenon, wearing a face mask.  Socrates enters without a mask.

Socrates: Greetings, Glaucon!  How do you fare during this awful pandemic?

Glaucon: [jumps 5 feet]  What the hell are you doing?  Are you trying to kill me?

Socrates: No, why would you think so?

Glaucon: We’re indoors and you’re not wearing your mask!

Socrates: I’m 20 feet away from you.  And the Parthenon is cavernous.

Glaucon: You should be wearing a mask.

Socrates: Very well. [dons mask]  Feel safe enough to talk now?

Glaucon: [unconvincingly] Sure.

Socrates: I suggest we go outside to continue the conversation with greater ease.

[One minute later, outside the Parthenon; Socrates and Glaucon are 25 feet apart.]

Socrates: I must admit, Glaucon, I’m very puzzled.

Glaucon: About what?

Socrates: About your level of fear.

Glaucon: [with trepidation] Oh, I’m not afraid.

Socrates: Well, what do you think are the odds that I’ve got the plague right now?

Glaucon: Uh, one in a thousand?

Socrates: Reasonable enough; I’m asymptomatic after all.  Now, supposing I was sick, what are the odds that I would have infected you within the Parthenon while wearing a mask?

Glaucon: One in twenty?

Socrates: Plausibly.  And what are the odds I would have infected you in the same scenario without wearing a mask?

Glaucon: One in five?

Socrates: Very well.  Now as we both know, susceptibility to the plague depends heavily on age and underlying conditions.  We’re both fifty.  Do you have any underlying conditions?

Glaucon: Thankfully, no.

Socrates: Then according to a table Plato compiled for me, your odds of death if infected are about 1 in 2000.

Glaucon: It’s not just about the risk of death, Socrates!

Socrates: It never is.  There is also the unpleasantness of the plague’s symptoms, and a small chance of long-run harm.  Still, the same goes for almost all risks.  Those who survive a fall from a horse usually suffer pain for a week or two – and a small fraction are maimed for life.  So we can still fruitfully compare your risk of death from plague to other mortality risks, never losing sight of the fact that death is only one of many possible tragic outcomes.

Glaucon: [nervously] Fine.

Socrates: Very well, let us calculate the risk I imposed on you earlier by not wearing a mask.  We multiply my risk of infection times the change in your infection risk times your mortality risk.  That comes to 1/1000 * (.2-.05)* 1/2000, which rounds to about 1-in-13 million.

Glaucon: And that seems small to you.

Socrates: Wouldn’t it seem small to any sober man?

Glaucon: Well, is it really so awful to wear a mask?

Socrates: I wouldn’t mind if the numbers were more favorable.  If I were endangering a thousand people like you, I’d happily wear the mask.  As it stands, though, your fear seems paranoid and your outrage seems unjust.

Glaucon: Look, why should I have to endure any risk for your comfort?

Socrates: You’re enduring a risk right now.  Surely you don’t imagine that your infection risk magically falls to zero as soon as you exit the Parthenon?

Glaucon: Well, why should I have to endure an unnecessary risk?

Socrates: It is “necessary” that we speak at all?  Hardly.  And we could slash our risk further by separating a hundred feet and shouting at each other.

Glaucon: Now you’re just being difficult.

Socrates: I only wish to understand you, Glaucon.  Is that your horse over there?

Glaucon: Yes, Pegasus is his name.

Socrates: A noble moniker.  Now do you know the annual risk of dying on horseback?

Glaucon: About one in ten thousand?

Socrates: Indeed.  Yet you’ve never fretted over the risk of death by horse?

Glaucon: The daily risk is 365 times lower, or hadn’t you considered that?

Socrates: Quite right.  The daily risk of death by horse is therefore about 1-in-4 million – less than one-third of the risk that terrified you inside the Parthenon.

Glaucon: As long as I’m alone, I’m not exposed to any risk of plague at all.

Socrates: And as long as you’re unhorsed, you’re not exposed to any risk of death on horseback.  Yet during the minutes you’re on horseback, you’re a model of composure.  Why then are you so fearful of plague?

Glaucon: Plague is contagious.  Death on horseback is not.

Socrates: I’ve seen you riding with your son, slightly endangering his life as well as your own.  That’s not precisely “contagion,” but you can hardly claim that you’re endangering no one but yourself when you ride Pegasus.

Glaucon: If I catch plague, though, I could be responsible for the deaths of thousands.

Socrates: Possible, I’ll grant.  If I were returning home from a plague-infested land, I’d understand your scruples.  You wouldn’t want to be the conduit for mass destruction.

Glaucon: Indeed not.

Socrates: By now, however, this plague is already well-advanced.  You’re highly unlikely to make it noticeably worse.  Indeed, by this point the average person infects less than one extra person.

Glaucon: I might not be average.

Socrates: You are right to say so.  Still, shouldn’t our knowledge of averages guide our behavior?  In any case, let us return to the key issue: Why are you so fearful of talking inside the Parthenon without masks when the risk of death is vanishinly low?

Glaucon: Perhaps we should sponsor a raging Bacchanalia, then?

Socrates: I think not.  A drunken festival of a hundred people would probably have a thousand times the plague risk of a two-person conversation.  We should avoid that until the plague subsides.

Glaucon: So you admit the danger?

Socrates: I always did.  I’m not saying that plague is harmless.  I’m saying that you’re reacting to risk qualitatively rather than quantitatively.

Glaucon: Meaning?

Socrates: You’re much more afraid of a tiny plague risk than a larger horseback risk.  Why do you think that is?

Glaucon: Have you ever seen someone die of plague?

Socrates: Have you ever seen someone die on horseback?  Both are terrible tragedies, with a long list of ugly secondary risks.

Glaucon: Look, you’re in denial.  Everyone in Athens is scared of the plague.  Your risk analysis is beside the point.

Socrates: How can risk analysis ever be “beside the point”?

Glaucon: We as a society have decided to fight the plague, and you’re going to have to do your part, like it or not.

Socrates: Glaucon, what is my profession?

Glaucon: What?

Socrates: I said, “Glaucon, what is my profession?”

Glaucon: You’re a philosopher.

Socrates: Indeed.  As as a philosopher, what is my mission?

Glaucon: To defy and aggravate others?

Socrates: Hardly.  As a philosopher, my mission is to improve the thinking of my fellow Athenians, my fellow Greeks, my fellow human beings.

Glaucon: [sarcastically] Very noble.

Socrates: I take a certain pride in my efforts.  How, though, am I supposed to improve their thinking?

Glaucon: I don’t know.

Socrates: The answer, seemingly, is: By asking questions.

Glaucon: [weary] Yes, yes.

Socrates: Now Glaucon, when you urge me to “do my part,” what do you have in mind?

Glaucon: Wear the mask, Socrates.

Socrates: I’m wearing one now, to put you at ease while we converse.  In more crowded conditions, I’ve worn a mask out of prudence and decency.  But as a philosopher, obediently wearing a mask is woefully inadequate.

Glaucon: Well, what more should we do?

Socrates: I don’t know about non-philosophers.  For we philosophers to “do our part,” however, requires us to challenge popular fallacies and innumeracy.

Glaucon: Isn’t this just an elaborate rationalization for putting your own comfort above the lives of your fellow Athenians?

Socrates: Possibly.  More likely, though, your agitation is an elaborate rationalization for putting conformity above reason.

Glaucon: Your numbers could be wrong, you know.

Socrates: Indeed, I suspect that all of my numbers are wrong.  As we learn more, each of my numbers will be revised.

Glaucon: If you don’t really know the risks, why are you lecturing me?

Socrates: Because, Glaucon, you’re approaching the uncertainty emotionally rather than analytically.  Uncertainty is a poor argument for panic.

Glaucon: I was never “panicked.”

Socrates: Very well, let us take off these masks, enter the Parthenon, and continue the conversation in comfort.

Glaucon: Are you crazy, Socrates?

Socrates: And a corruptor of the youth, from what I hear.  Do you think there will be a trial?

Glaucon: Look who’s panicking now!

Socrates: A fair point, my dear Glaucon.  A fair point.

Glaucon: Look Socrates, it all comes down to this: There’s no reason not to just go along with society’s expectations here.

Socrates: No reason?  What about friendship?

Glaucon: I don’t follow you, Socrates.

Socrates: Since this plague struck, I’ve barely seen you.  Mask or no mask, you avoid me, as you avoid almost all human contact.

Glaucon: Well, what do you expect me to do?

Socrates: Weigh the tiny risks to health against the immense value of friendship.

Glaucon: You’re making too much of this, Socrates.

Socrates: Am I?  The great Epicurus taught us that friendship is one of the highest of goods.  Friendship is essential to human happiness, and a life well-lived.

Glaucon: You speak unjustly me to, Socrates.  I am and ever have been your friend.

Socrates: I know, which is why your panic pains me so.

Glaucon: If you’re really my friend, you will share my concern for my own safety.

Socrates: I do, Glaucon.  If you were in serious danger, and I could save you by shunning you, I would grieve.  Yet shun you I would.

Glaucon: Very gracious of you.

Socrates: I know you would do the same for me.

Glaucon: Again, most gracious.

Socrates: The plain fact, however, is that you are not in serious danger.  By the numbers, you are in the kind of minor danger that you’ve always accepted in the past.

Glaucon: And?

Socrates: And so I say the time is long since past to resume our normal friendly relations.  In troubles times, minor adjustments are often wise.  But abandoning your friends out of fear of minor risks is folly, Glaucon.

Glaucon: [forced] Well, thank you for your candor, Socrates.

Socrates: [resigned] May we meet again in saner times, my friend.

Glaucon: Good day to you, Socrates.  Good day.

[Glaucon and Socrates go their separate ways.]


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Should I Start a School?

When fellow professors discover that I homeschool my children, their most common reaction is: “How do you get any work done?”  Hand to God, I’ve never found it hard.  I started homeschooling my older sons back in 2015 when they were 12.  They were already more mature than most adults will ever be, so Caplan Family School ran like clockwork.  Since the pandemic, I’ve added my younger kids to my student body.  While I don’t have Caplan Family School 2.0 running like clockwork yet, we’re well on our way.  All kids have a schedule – and the schedule includes specific time slots for feedback from me.  The rest of the time, my kids are supposed to work independently and let me do my regular work.  Compliance, though imperfect, is high.

My system works so well that I’ve been toying with the idea of opening my own school.  Legally, I would probably call it a tutoring center for homeschooling parents, but I’d use the same system for customers that I use for my own kids.  As a professor, of course, I have immense freedom to manage my time as I see fit, so I wouldn’t have to quit my existing job to explore this entrepreneurial venture.

Why bother?  Here are the positives as I see them.

1. I deeply enjoy teaching highly-motivated, mature students.  If I were running my own school, I could select such students exclusively.

2. I like fostering my intellectual sub-culture – and my pedagogical approach is so radically different from the mainstream that I could realistically reshape my students for life.

3. I cherish making new friends and enriching existing friendships, and the pandemic has made both tragically hard.  Running a school would give me much-needed human connection.

4. While I have little concrete use for extra money, earning money doing something I love is gratifying.

5. I’d like to have a viable family business to pass on to any of my children who want high autonomy.

6. I enjoy accomplishing things I haven’t done before.


The negatives, unfortunately, are weighty.

1. General rule: Almost everyone is bad at doing stuff they haven’t done before.  “I’m good at educating my own kids, so I could run a school well” may well be akin to “I’m good at cooking, so I could run a restaurant well.”

2. I do not like dealing with mundane hassles, like getting a lease, setting up wifi, or keeping business records.

3. I intensely resent bureaucracy.  I don’t want to figure out how to get a business license, file new tax forms, or learn about government regulations on running a tutoring center versus a school.  Much of the appeal of running my own school is to get more autonomy, but in practice I’d probably have less than I already do.

4. Couldn’t I hire someone else to do this unpleasant work?  Someone good enough to do the job could easily eat up my whole budget and more.  And as soon as I had a full-time employee, another pile of regulations kicks in.

5. I could probably get five or ten outstanding students during the pandemic.  Once the schools re-open, though, demand for my unconventional product could easily dry up.  Since almost every start-up has high fixed start-up costs, this is a big risk.

6. What about liability?  Part of what I would be offering is a risk-tolerant environment; I believe in erring on the side of normalcy – not the side of caution. The state of Virginia, however, is bad on waivers.  If my students get sick, I don’t want to lose my house.  Yes, I could get insurance, but that too would probably be a tangled mess.


All things considered, then, I’m in a holding pattern.  What would tip the scales?  Most directly: If GMU cancelled in-person classes again, my motivation to create a space where I could work with real students would be high.  More generally: The longer the gross social overreaction to the pandemic continues, the more eager I will be to build my own sphere of normalcy.

One other factor that would make a big difference: If I had a queue of eager would-be customers.  If you’re a parent of a highly-motivated, mature kid grades 7-12 and you’re interested, please email me!


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When to Defund

From my The Case Against Education:

When I argue education is largely wasteful signaling, most listeners yield. Popular resistance doesn’t kick in until I add, “Let’s waste less by cutting government spending on education.” You might think conceding
the wastefulness of education spending would automatically entail support for austerity, but it doesn’t. The typical reaction is to confidently state, “Education budgets should be redirected, not reduced.”

Such confidence is misplaced. The discovery of wasteful spending does not magically reveal constructive alternatives. Prudence dictates a two-step response. Step 1: Stop wasting the resources. Step 2: Save those
resources until you discover a good way to spend them. Not wasting resources is simple and speedy. Don’t just stand there; do it. Finding good ways to use resources is complex and slow. Don’t just do it; think it
through. Remember: you can apply saved resources anywhere. Time and money wasted on education could pave roads, cure cancer, cut taxes, subsidize childbearing, pay down government debt before our Fiscal
Day of Reckoning, or allow taxpayers to buy better homes, cars, meals, and vacations.

Suppose I prove your toenail fungus cream doesn’t work. I counsel, “Stop wasting money on that worthless cream.” Would you demur, “Not until we find a toenail fungus remedy that works”? No way. Finding a
real remedy could be more trouble than it’s worth. It might take forever. Continuing to waste money on quackery until a cure comes into your possession is folly. Saying, “There must be a cure!” is childish and
dogmatic. Maybe your toenails are a lost cause, and you should use the savings for a trip to Miami.


Are draconian education cuts really a good idea, especially for a society as rich as our own? Calling them “draconian” begs the question. If we’re not getting good value for our educational investments, we shouldn’t call deep cuts “draconian.” We should call the status quo “profligate.” Rich societies can afford to waste trillions. But why settle for that? Rich societies face countless opportunities. The trillions we spend boring youths might cure cancer, buy driverless cars, or end world hunger. Collective complacency seems harmless, but it kills by omission.


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Krikorian’s “Category Error”

During our last debate, an audience member asked Mark Krikorian if his arguments for restricting immigration of foreigners were also arguments for restricting the child-bearing of natives.  You might think that Mark would insist that native babies are somehow better than foreign adults.  How hard could it possibly be to craft such an argument?  However, Mark adamantly refused to compare the worths of different kinds of people.  Instead, he informed the questioner that his question was based on a “category error.”

In so doing, Mark signaled high IQ, because smart people love to announce that someone has made a “category error.”  But precisely what is a category error?  Here’s a standard definition:

To show that a category mistake has been committed one must typically show that once the phenomenon in question is properly understood, it becomes clear that the claim being made about it could not possibly be true.

Here’s a more detailed discussion:

Category mistakes are sentences such as ‘The number two is blue’, ‘The theory of relativity is eating breakfast’, or ‘Green ideas sleep furiously’. Such sentences are striking in that they are highly odd or infelicitous, and moreover infelicitous in a distinctive sort of way. For example, they seem to be infelicitous in a different way to merely trivially false sentences such as ‘2+2=5″ or obviously ungrammatical strings such as ‘The ran this’.

Which raises a big question: How could the audience member’s perfectly intelligible question possibly be a “category error”?!  If you say, “We should restrict immigration because immigrants burden taxpayers,” what on Earth is wrong with responding, “In that case, should we restrict child-bearing if babies burden taxpayers?”  The answer, of course, is: Nothing at all.  Not only is the latter question in the same “category” as the former question; it is the textbook way to check the logic of Mark’s position.  And it starkly reveals the inadequacy of Mark’s original argument.  Whatever your views on immigration, Mark definitely needs to assert something like, “We should restrict immigration because immigrants burden taxpayers and only natives are entitled to burden taxpayers.”

This in turn shifts the argument over to the fundamental question: What is morally permissible to do to foreigners but not natives – and why?  Which recalls a previous Krikorian-Caplan dialogue.  I asked Mark: “Suppose you can either save one American or x foreigners. How big does x have to be before you save the foreigners?”  And Mark responded:

Another meaningless hypothetical.

Not only is this a meaningful question; it gets to the heart of what Mark needs to formulate a coherent position on immigration.  As an avowed Christian, I’m confident that Mark thinks we have no right to murder or enslave foreigners.  As an avowed restrictionist, Mark clearly thinks we have a right to prohibit foreigners from domestic labor and residential markets – even though plenty of natives are eager to trade with them.  Why, though, does Mark draw the line there?  While it is rhetorically convenient for him to dodge the question by calling it a “category error” or “meaningless,” he intellectually doesn’t have a leg to stand on.

So why not face the question instead of stonewalling?  I stand by my previous explanation: Mark thinks like a politician, not a truth-seeker.  To make his position intellectually credible, he’d have to say, “Foreigners’ welfare is of near-zero value.”  Unfortunately for him, this sounds terrible – and like most politicians, Mark hates to utter anything that sounds terrible.  Occasionally bullet-biting is essential for truth, but it’s bad for winning popularity contests.

I’m never nervous when I debate Mark; he has good manners and reminds me of my dad.  In contrast, I would be quite nervous even to be in the same room as a white nationalist.  They seem like sociopaths.  In terms of intellectual rigor, however, leading white nationalists far exceed Mark.  I naturally think they’re deeply wrong.  Still, if you want to construct an airtight argument for immigration restriction, your best bet is to build on the twin premises that (a) almost all immigrants are inferior to natives, and (b) the well-being of these inferior people is of little worth.



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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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Oksana Boyko Interviews Henderson on RT

The interview went 28 minutes and is here.

I won’t do my usual time-stamping because I’m busy with other things.

What I will point out is that approximately the first half is on my Wall Street Journal article, co-authored with Jonathan Lipow, that analyzed the findings of the major cost/benefit analyses of lockdowns and other measures that were in response to the coronavirus. We get into an interesting discussion of the value of a statistical life. It also gave me a chance to use the main thing I took away from my debate with Justin Wolfers back in April: how the concept of least-cost avoider strengthens the case against lockdowns.

The second half is about my latest article for Hoover’s Defining Ideas, “Black Livelihoods Matter,” Defining Ideas, June 17.  We get into the minimum wage, Senator John F. Kennedy’s racist case for increasing the minimum wage, occupational licensure, how restrictions on housing supply drive up housing prices in San Francisco, Los Angeles, New York City, and other cities, and charter schools. Early in the second half, I dealt briefly with the issue of white privilege.

Also, right at the end, I get in a major criticism of mega-murderers Chairman Mao and Joseph Stalin.

Oksana Boyko did her homework and so the result was an excellent conversation.

P.S. I wanted to do a screenshot at the 1:27 point that shows both Oksana, me, and my Rocky movie poster, but with my new MacBook Pro, I couldn’t figure out how.



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The Data Are In: It’s Time for Major Reopening



Early in the Covid-19 pandemic, an influential economic analysis from the University of Chicago concluded that the likely benefits of moderate social distancing would greatly exceed the resultant costs. The New York Times and the Washington Post recently cited that study as evidence that the use of strict lockdowns to control the virus’s spread has been justified, and that current efforts to “open up” social and economic activity around the U.S. are dangerous and irresponsible. That is seriously misleading; the Chicago study is already out of date. More recent research supports the idea that the lockdowns should end.

This is the lead paragraph in an op/ed published in today’s Wall Street Journal. The op/ed is David R. Henderson and Jonathan Lipow, “The Data Are In: It’s Time for Major Reopening,” WSJ, June 15 (electronic) and June 16 (print).

Three things that delight me about it, in order:

1. It was published and I think it’s pretty important.
2. Although I haven’t seen the print version, a friend in the Eastern time zone tells me that it’s the lead op/ed. I’ve had over 50 op/eds in the Journal and this is only about the 4th or 5th time my piece has been above the fold.
3.The editor understands that the word “data” is plural.

Another paragraph:

That finding [that the benefit of the social distancing and lockdowns is only about $250 billion] casts major doubt on the value of lockdowns and even social distancing as a method of reducing the spread of Covid-19. While we can’t yet estimate a specific figure, the economic cost of social distancing and lockdowns will likely be more than $1 trillion. And that’s an understatement of the costs when you consider increased suicides and other social losses not captured in gross domestic product. For example, parents of young children have widely noted their kids’ gloomy outlook when not allowed to be with friends.

As always, I’m contractually obligated not to post the whole thing until 30 days from now. It’s on my calendar.


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What I’m Doing

1. The U.S. political system is deeply dysfunctional, especially during this crisis.  Power-hunger reigns in the name of Social Desirability Bias.  Fear of punishment aside, I don’t care what authorities say.  They should heed my words, not the other way around.

2. Few private individuals are using quantitative risk analysis to guide their personal behavior.  Fear of personally antagonizing such people aside, I don’t care what they say either.

3. I am extremely interested in listening to the rare individuals who do use quantitative risk analysis to guide personal behavior.  Keep up the good work, life-coach quants – with a special shout-out to Rob Wiblin.

4. After listening, though, I shall keep my own counsel.  As long as I maintain my normal intellectual hygiene, my betting record shows that my own counsel is highly reliable.

5. What does my own counsel say?  While I wish better information were available, I now know enough to justify my return to 90%-normal life.  The rest of my immediate family agrees.  What does this entail?  Above all, I am now happy to socialize in-person with friends.  I am happy to let my children play with other kids.  I am also willing to not only eat take-out food, but dine in restaurants.  I am pleased to accommodate nervous friends by socializing outdoors and otherwise putting them at ease.  Yet personally, I am at ease either way.

6. I will still take precautions comparable to wearing a seat belt.  I will wear a mask and gloves to shop in high-traffic places, such as grocery stores.  I will continue to keep my distance from nervous and/or high-risk strangers.  Capla-Con 2020 will be delayed until winter at the earliest.  Alas.

7. Tyler suggests that people like me “are worse at intertemporal substitution than I had thought.”  In particular:

It either will continue at that pace or it won’t.  Let’s say that pace continues (unlikely in my view, but this is simply a scenario, at least until the second wave).  That is an ongoing risk higher than other causes of death, unless you are young.  You don’t have to be 77 for it to be your major risk worry.

Death from coronavirus is plausibly my single-highest risk worry.  But it is still only a tiny share of my total risk, and the cost of strict risk reduction is high for me.  Avoiding everyone except my immediate family makes my every day much worse.  And intertemporal substitution is barely helpful.  Doubling my level of socializing in 2022 to compensate for severe isolation in 2020 won’t make me feel better.

Alternatively, let’s say the pace of those deaths will fall soon, and furthermore let’s say it will fall by a lot.  The near future will be a lot safer!  Which is all the more reason to play it very safe right now, because your per week risk currently is fairly high (in many not all parts of America).  Stay at home and wear a mask when you do go out.  If need be, make up for that behavior in the near future by indulging in excess.

Suppose Tyler found out that an accident-free car were coming in 2022.  Would he “intertemporally substitute” by ceasing driving until then?  I doubt it.  In any case, what I really expect is at least six more months of moderately elevated disease risk.  My risk is far from awful now – my best guess is that I’m choosing a 1-in-12,000 marginal increase in the risk of death from coronavirus.  But this risk won’t fall below 1-in-50,000 during the next six months, and moderate second waves are likely.  Bottom line: The risk is mild enough for me to comfortably face, and too durable for me to comfortably avoid.

8. The risk analysis is radically different for people with underlying health conditions.  Many of them are my friends.  To such friends: I fully support your decision to avoid me, but I am happy to flexibly accommodate you if you too detest the isolation.  I also urge you to take advantage of any opportunities you have to reduce your personal risk.   But I won’t nag you to your face.

9. What about high-risk strangers?  I’m happy to take reasonable measures to reduce their risk.  If you’re wearing a mask, I treat that as a request for extra distance, and I’ll honor it.  But I’m not going to isolate myself out of fear of infecting high-risk people who won’t isolate themselves.

10. Most smart people aren’t doing what I’m doing.  Shouldn’t I be worried?  Only slightly.  Even smart people are prone to herding and hysteria.  I’ve now spent three months listening to smart defenders of the conventional view.  Their herding and hysteria are hard to miss.  Granted, non-smart contrarians sound even worse.  But smart contrarians make the most sense of all.

11. Even if I’m right, wouldn’t it be more prudent me to act on my beliefs without publicizing them?  That’s probably what Dale Carnegie would advise, but if Dale were here, I’d tell him, “Candor on touchy topics is my calling and my business.  It’s worked well for me so far, and I’m going to stay the course.”

12. I’ve long believed a strong version of (a) buy-and-hold is the best investment strategy, and (b) financial market performance is only vaguely related to objective economic conditions.  Conditions in March were so bleak that I set aside both of these beliefs and moved from 100% stocks to 90% bonds.  As a result of my excessive open-mindedness, my family has lost an enormous amount of money.  The situation is so weird that I’m going to wait until January to return to my normal investment strategy.  After that, I will never again deviate from buy-and-hold.  Never!


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