My Top 12 Blog Posts of 2020


I went through all my blog posts for 2020; there were approximately 250 of them and I singled out 24 for my top posts. That’s too many and so I whittled it down to 12.

Here they are from earliest to latest:

Tales of Socialism, February 6.

Winners, Losers, and Interesting Aspects of the Dem Debate, February 20.

Cost Benefit Analysis of Flattening the Curve, March 24.

Why the Stimulus Bill As Written Will Keep Unemployment High, March 25.

The VSL Quandary, April 12.

Zingales on the Rule of Economists, May 17.

Commissar Komisar, May 21.

Benjamin Boyce Interviews Adrian Lee Oliver, July 15.

What’s the Moral Case for Capitalism?, August 20.

A Partial Defense of Milton Friedman’s 1970 NYT Essay, September 21.

Is Cowen Right about the Great Barrington Declaration? Part 1, October 16.

Vaccines’ Last Hurdle: Central Planners, December 4.

I’m curious what some of your favorites are.


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It’s Not Just Christmas Today, but EVERYDAY!

Christmas is not only a time for rejoicing and celebration, but also a time of gratitude for what we have. In times such as these, in which all of us have been affected by the circumstances related to COVID-19, this is all the more important. It’s for this reason I would like to point out that it’s not only Christmas today, but every day. What do I mean by this? To answer this question, I’ll provide a lesson from my mother.

My mother was born in a town called Carini, in the Province of Palermo, Sicily. She was born and grew up in a home with no car, no television, and no air conditioning. After she migrated to the United States in 1971, see never thought of returning to her hometown, and always reminded us how wonderful life in America is.

It was 30 years today that she imparted on me a lesson, one that I will never forget and that I only fully appreciate now. It was an important lesson of economic development and the blessings of a free society that she taught me, even though my mom never made it to high school. She would reflect on her own childhood, telling us that the smell of oranges would remind her of Christmas.

What’s baffling about this story is that, even before my mom was born and to the present day, Sicily remains the largest producer of oranges in Italy, and a major producer of oranges and other citrus fruits worldwide. You’d think, in spite of the poverty within which she was raised, she would enjoy oranges on a more regular basis. Yet, today, most us enjoy (or can enjoy at little cost) and take for granted what had been a luxury that was consumed during Christmas, even amongst those residing in a part of the world where they were grown in relative abundance.

My intention here is neither to secularize nor undermine how special and joyous the Christmas season is. Rather, it is to express gratitude and place in perspective what the beneficial consequences of economic development are, and not to take for granted how new in the history of humankind our way of life is, even during times as hard as this. The point here is that one of the fruits of economic development, and the institutional preconditions that facilitate it, namely private property and freedom of contract under the rule of law, not only provide the framework to practice religious freedom, but also allows the masses of the population to get just not a smell, but a taste of Christmas every day.


Rosolino Candela is a Senior Fellow in the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics, and Associate Director of Academic and Student Programs at the Mercatus Center at George Mason University






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Open Borders: Pegg’s Essay Questions

IUPUI‘s Scott Pegg assigned Open Borders this semester, and kindly gave me permission to post the following essay questions on the book.  Enjoy!

Please answer one of the following four questions. Because this is an open book, open time assignment, I expect to see some detail and specificity in your answers. References to Caplan and Weinersmith’s book Open Borders: The Science and Ethics of Immigration should be made whichever question you choose. Your answers should be somewhere in the vicinity of 3-5 pages double-spaced typed in Times New Roman 12 point font. Take as much time as you need to answer the question. This is not a timed exam.

1) Explain why Caplan and Weinersmith believe that “open borders has jaw-dropping potential to enrich migrants and natives alike” and “is a shortcut to global prosperity.” Upon what causal logic or what empirical findings do they base these claims? How does open borders compare in this regard to other potentially enriching policy changes like freer trade or greater global financial integration that we could pursue? Indicate whether you find Caplan and Weinersmith’s arguments that open borders potentially offers the prospect of “trillion-dollar bills on the sidewalk” convincing or not.

2) In 2016, Americans elected Donald Trump as their president. One of his central campaign promises was to restrict immigration into the United States and build a wall to keep immigrants out. In 2020, President Trump faces a tough re-election battle but will likely carry the state of Indiana where we live easily. Given that, it’s probably not unreasonable to assume that give or take a majority of students in this class share views on immigration that are closer to President Trump’s than they are to the views expressed by Caplan and Weinersmith in Open Borders. Highlight which arguments put forward in Open Borders you most disagree with or find the most problematic and explain why. Make, develop, and support the best critique of the ideas put forward in this book that you can.

3) In attempting to make their case for a more open and less restrictive system of immigration, Caplan and Weinersmith consider several objections to open borders including immigrants threats to low-wage workers, freedom, our government’s fiscal position, our culture or way of life and even lowering our average national intelligence (IQ) score. Give specific examples of how Caplan and Weinersmith undermine these critiques or sources of opposition to their ideas or what they suggest as solutions to overcome these fears. Indicate which criticisms, if any, you think they effectively address and which criticisms, if any, are still strong or effective arguments against open borders.

4) Open Borders is premised upon the idea that “we live in a world of global apartheid. An apartheid based not on the race of your parents but on the nation of your parents.” Caplan and Weinersmith go on to argue that “It’s wrong to tell people where they can live or work because they are black… or women… or Jews. Why isn’t it equally wrong to tell people where they can live or work because they were born in Mexico, Haiti or India?” While these sentiments appeal to our better angels, they are completely unrealistic at a time when the US doesn’t even have open borders with Canada. Explain why Caplan and Weinersmith believe that “even if open borders never wins, the ideal can still serve as our moral compass.” What kind of progress can we or should we make short of fully opening borders?


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Yucatan and U Texas


1. I’m visiting the Yucatan after Thanksgiving.  I’ll be staying in Cancun, Chichen Itza, Merida, and Playa del Carmen.

2. To all my friends in Mexico: If you want to meet up, let me know. ¡Y si solo hablas español, mis hijos pueden traducir!

3. I’m going to be a Visiting Scholar at the University of Texas during most of December and January.

4. I will be on-campus at UT almost all weekdays, and would be delighted to meet friends old and new for lunch during my time in Austin.

5. My house in Austin has a big outdoor TV, so I also plan to do at least one karaoke night, as well as a sing-along of Emo: The Musical.  If you haven’t seen it, you must!

6. No joke!


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How should we teach monetary policy?

A new paper by Jane Ihrig and Scott Wolla makes some recommendations for changing the way we teach monetary policy in intro economics courses. These include:

1. Dropping coverage of the money multiplier.
2. De-emphasizing open market operations (OMOs), and focusing most heavily on the Fed’s interest on reserves (IOR) policy tool.

I have long favored dropping coverage of the money multiplier, but I’d be opposed to de-emphasizing OMOs. Control of the monetary base has been an important part of Fed policy over the past 100 years, and is likely to remain so for the foreseeable future.

It is not even clear that IOR will be the Fed’s primary policy tool going forward.  During periods of zero interest rates, the Fed uses open market operations to control the size of the monetary base and influence the price level.  Interest rates have been near zero for most of the past decade, and are likely to remain there for years to come.  OMOs will remain an important policy tool, perhaps the dominant tool.

But even if we operated in a positive rate environment I’d still be opposed to de-emphasizing OMOs, for several reasons.

First, Peter Ireland has shown that open market operations continue to have a long run impact on the price level, even when the Fed pays IOR.

Second, students need to understand the process of inflation in many different contexts.  It’s important to cover IOR, but that won’t explain why inflation rose dramatically when the US switched from a gold standard to fiat money, nor does it explain why inflation rates in some countries are much higher than in other countries.

When we teach a topic to students, we need to provide a framework that will remain useful in a wide variety of settings.  During the 1980s, my students probably thought I was wasting their time with coverage of episodes of deflation and zero interest rates.  They probably thought, “We’ll never see that again!”  I hope that years later at least a few of them remembered what I had taught them, after they got out and started working on Wall Street.

We should also try to use a framework with which they are already somewhat familiar, such as supply and demand.

And the framework should also directly connect with the goals of monetary policy, such as 2% inflation.

The most general and robust framework for discussing monetary policy is a supply and demand diagram for base money, with the value of money (1/price level) on the vertical axis.  In this framework, monetary policy can either shift the supply of base money (OMOs) or the demand for base money (IOR).

We can then explain to students that the Fed adjusts both the supply of money (OMOs, aka “QE”) and the demand for money (IOR) with the goal of keeping inflation near 2%.

The danger of focusing mostly on IOR is that students might begin to engage in the fallacy of reasoning from a price change, assuming that a low interest rate policy is a easy money policy and a high interest rate policy is a tight money policy.  The NeoFisherians are not correct in arguing the exact opposite, but they are surely correct in criticizing the naive view that holding nominal interest rates at zero for many decades is an expansionary monetary policy.

One of the most important goals of teaching supply and demand is to stop students from reasoning from a price change.  If we start equating interest rates and monetary policy, then students might also assume that a change in the exchange rate will have a predictable effect on the trade balance, or that a change in oil prices will have a predictable effect on oil output.  In fact, the impact of high oil prices on oil output depends on whether high oil prices are caused by less supply or more demand, and the impact of a strong currency on the trade balance depends on whether a strong currency is caused by more demand for our exports or more demand for our financial assets.  Similarly, the impact of higher interest rates depends on whether the interest rate increase is caused by an expansionary monetary policy or a contractionary monetary policy.

Whenever I present this argument for using the supply and demand for base money, someone will invariably say, “But look, we did all this QE and inflation barely rose.”  I could just as well retort, “Look, we cut interest rates to zero and inflation hardly rose.”  Or I could respond “Look, we ran trillions of dollars in budget deficits and inflation hardly rose.”

Yes, policy changes are often partly endogenous, responding to shifts in the demand for money, credit and other variables.  In that case they seem to have little effect. But that doesn’t mean that a permanent and exogenous change in the monetary base will not increase the price level by the same proportion in the long run, even in a world with IOR.


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J.B. Say on Gains from Exchange

Say what you want; I think he’s great.

I’m the discussion leader next week of a colloquium on the writings of late 18th and early 19th-century French economist Jean-Baptiste Say. I hadn’t read much by or about him since 1992, when I researched and wrote his bio for the then Fortune Encyclopedia of Economics (and later Concise Encyclopedia of Economics.) Even then I read only little snippets of his work.

So it has been a real treat to work my way through over 200 pages of his writing.

Here’s a highlight where Say takes on the view that exchange is a zero-sum game:

The English writer, Stewart, who may be looked up as the leading advocate of the exclusive system, the system founded on the maxim, that the wealth of one set of men is derived from the impoverishment of another, is himself no less mistaken in asserting, that, “when one a stop is put to external commerce, the stock of internal wealth cannot be augmented.” Wealth, it seems, can come only from abroad; but abroad, where does it come from? from abroad also. So that in tracing it from abroad to abroad, we must necessarily, in the end, exhaust every source, till at last we are compelled to look for it beyond the limits of our own planet, which is absurd.

Forbonnais, too, builds his prohibitory system on this glaring fallacy; and to speak freely, on this fallacy are founded the exclusive systems of all the short-sighted merchants, and all the governments of Europe and of the world. They all take it for granted, that what one individual gains must needs be lost to another; that what is gained by one country is inevitably lost to another: as if the possessions of abundance of individuals and of communities could not be multiplied, without the robbery of somebody or other. If one man or set of men, could only be enriched at others’ expense, how could the whole number of individuals, of whom a state is composed, be richer at one period than at another, as they now confessedly are in France, England, Holland, and Germany, compared with what they were formerly? How is it, that nations are in our days more opulent, and their wants more supplied in every respect, than they were in the seventeenth century? Whence can they have derived that portion of their present wealth, which then had no existence? Is it from the mines of the new continent? They had already advanced in wealth before the discovery of America.



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My Texas Tour

Next week, I’m touring Texas with my sons.  I’m speaking for Texas Tech’s Free Market Institute in Lubbock on October 5, and at San Angelo State’s Free Market Institute on October 6.

Both events are in-person, and the Texas Tech event is, amazingly, open to the public!  (Though you do have to register).  If you come, please say hi.  And you can livestream from anywhere on Earth.

My route takes me on a swath from Amarillo, the Palo Duro Canyon, Lubbock, San Angelo, Texas German country, San Antonio, and Austin.  Email me if you’d like to meet up, and maybe we can make something happen.


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O’Rourke on the Millennials and Socialism

As soon as children discover that the world isn’t nice, they want to make it nicer. And wouldn’t a world where everybody shares everything be nice? Aw … kids are so tender-hearted.

But kids are broke — so they want to make the world nicer with your money. And kids don’t have much control over things — so they want to make the world nicer through your effort. And kids are very busy being young — so it’s your time that has to be spent making the world nicer.

This is from P.J. O’Rourke, “This is why millennials adore socialism,” New York Post, September 12, 2020.

Lots of good stuff here. I do want to address one error, an error that P.J. seems to agree with “progressives” about. He writes:

That would have been in the 19th century — during America’s first “Progressive Era” — when mechanization liberated kids from onerous farm chores and child labor laws let them escape from child labor.

Actually, it wasn’t child labor laws that let them escape from child labor: it was economic growth. As people grew wealthier, parents no longer needed their children to be productive. Instead, they could support the family without their children’s income and so instead could send their kids to school. And incidentally, as E.G. West showed in Education and the State, the state in Britain was not a major funder of education and yet schooling was widespread.

It is true that child labor laws reduced child labor around the edges. But they’re an instance of what is almost a general law in economic policy. I’m using “general law” in the sense of regularity. The laws that pick up enough support are usually ones that require people to do what the majority are doing already. I believe for example, although I can’t find the source immediately, that the legislated 40-hour work week came about only after it had become standard practice.

Another good excerpt:

Intellectuals like Marxism because Marx makes economics simple — the rich get their money from the poor. (How the rich manage this, since the poor by definition don’t have any money, is beyond me. But never mind.)

This excerpt reminds me of a great paragraph from Paul Krugman’s 1990 book The Age of Diminished Expectations that I used in the first edition of The Concise Encyclopedia of Economics, in a sidebar on the article “Distribution of Income” by Frank Levy:

One reason that action to limit growing income inequality in the United States is difficult is that the growth in inequality is not a simple picture. Old-line leftists, if there are any left, would like to make it a single story—the rich becoming richer by exploiting the poor. But that’s just not a reasonable picture of America in the 1980s. For one thing, most of our very poor don’t work, which makes it hard to exploit them. For another, the poor had so little to start with that the dollar value of the gains of the rich dwarfs that of the losses of the poor. (In constant dollars, the increase in per family income among the top tenth of the population in the 1980s was about a dozen times as large as the decline among the bottom tenth.)

The O’Rourke piece is excerpted from P.J. O’Rourke, A Cry from the Far Middle, 2020.


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Five Books on Macroeconomics

Recently, Raffaele Rossi offered his recommendations for the best macroeconomics textbooks at Five Books. Here, Arnold Kling offers his recommendations:



Macroeconomic Patterns and Stories, by Edward Leamer.  This provides an excellent introduction to the data that are central to macroeconomics—how they are collected and what they mean.  Although it is framed as an introductory textbook for business school students, it is valuable for economists at all levels.  Leamer wisely steers the reader away from thinking in terms of systems of equations and instead looks for patterns in the data and stories that could explain those patterns.   Note that I recently suggested that Leamer deserves a Nobel Prize for his insights into empirical methods in economics.


Manias, Panics, and Crashes, by Charles P. Kindleberger and Robert Z. Aliber.  The late Charles Kindleberger was an economic historian, and I believe a historian’s perspective is crucial for looking at macroeconomics.  After all, there are no repeatable experiments in macroeconomics, only historical episodes.  Kindleberger looks at the most dramatic episodes in history, using the framework of financial instability developed by Hyman Minsky.  Kindleberger is a better expositor than Minsky.  Also,  Kindleberger emphasizes the phenomenon of “displacement,” in which a sudden change in world conditions, brought about by a major new discovery or the outcome of a war, triggers a dangerous mania.  My own thinking about macroeconomics is a combination of Kindleberger-Minsky and Fischer Black (below).


The Midas Paradox, by Scott Sumner.  Sumner tells the story of the Great Depression, probably the most important episode in macroeconomic history.  Sumner believes in a monetarist interpretation of the Depression.  Although I personally do not subscribe to this framework, his book provides an outstanding exposition of this important macroeconomic theory.


Exploring General Equilibrium, by Fischer Black.  If Kindleberger-Minsky macroeconomics is heterodox, Black’s macro was even more so.  Black does away with conventional aggregate demand and aggregate supply altogether, and instead constructs a theory of economic fluctuations based on general equilibrium, with physical and human capital sometimes suffering from rapid obsolescence.  Black even denies the relationship between money and inflation!  Tyler Cowen wrote, “It’s not an easy book for most people to read, as Black just comes out and states what he thinks, without much in the way of trappings or preliminaries or traditional narrative structure. There are also no models, just strings of statements about models.That said, virtually every sentence has substance.It is one of my favorite books in economics and it still contains many unmined insights.“


Macroeconomics, by J. Bradford Delong and Martha L. Olney.  I see this as a textbook that presents what I call the “academic” approach to macro, treating the economy as a system of equations.  This is not an approach that I share, but it is certainly important in the history of economic thought.  When I read the first edition of this book, I was impressed by its coverage of the topics of economic growth and international macro.  A more recent textbook that also emphasizes economic growth is Modern Principles of Macroeconomics, by Tyler Cowen and Alex Tabarrok.

Arnold Kling is the author of Specialization and Trade, which includes chapters that spell out his views of macroeconomics.



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