Is Modern Democracy So Modern and How?

The Decline and Rise of Democracy, a new book by David Stasavage, a political scientist at New York University, reviews the history of democracy, from “early democracy” to “modern democracy.” I review the book in the just-out Fall issue of Regulation. One short quote of my review about the plight of modern democracy in America:

[Stasavage] notes the “tremendous expansion of the ability of presidents to rule by executive order.” Presidential powers, he explains, “have sometimes been expanded by presidents who cannot be accused of having authoritarian tendencies, such as Barack Obama, only to have this expanded power then used by Donald Trump.” We could, or course, as well say that the new powers grabbed by Trump will likely be used by a future Democratic president “who cannot be accused of authoritarian tendencies,” or perhaps who might legitimately be so accused.

The book is a book of history and political theory, not a partisan book. But the history of democracy has implications for today. An interesting one is how bureaucracy typically helped rulers prevent the development of democracy. Another quote from  my review—Stasavage deals with imperial China and I compare with today’s America:

At the apogee of the Han dynasty, at the beginning of the first millennium CE, there was one bureaucrat for every 440 subjects in the empire. … In the United States, which is at the low end of government bureaucracies in the rich world, public employees at all levels of government translate into one bureaucrat for 15 residents (about one for 79 at the federal level only).

If you read my review in the paper version of Regulation, beware. I made an error in my estimate for the federal bureaucracy and the printed version says “37” instead of “79”. It is corrected in the electronic version. Mea culpa.


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All Hail Lars Christensen!

We are in the midst of a real business cycle. So this should be a feather in the cap for real business cycle theory, right? Actually, it’s looking more like the death knell of RBC theory. That’s because when we finally have an honest to God real business cycle, it looks utterly unlike anything we’ve ever seen before.

For example, consider the unemployment rate, which increased from 3.5% in February to 14.7% in April. The entire 2020 recession lasted for only two months, far less than any previous recession in US history. But the weirdness doesn’t stop there. In the next 4 months the unemployment rate fell by 6.3 percentage points, down to 8.4%.

For comparison, during the recovery from the 2008-09 recession it took an entire decade for the unemployment rate to fall 6.5 points, from a peak of 10% in 2009 to 3.5% in 2019. That means that during the recovery from the 2020 recession, unemployment fell roughly 30 times as fast as during the recovery from the 2009 recession. Read that again. I didn’t say 30% faster, I said 30 times faster.

And before anyone says this is no surprise, let me assure you that when Lars Christensen predicted that unemployment would fall below 6% by November, almost everyone thought he was being wildly optimistic.  At the time, the most recent data showed 14.7% unemployment, and many people were throwing out figures like 20% unemployment for the summer months.   (Christensen’s May 11 post is excellent, well worth reading.)

I suspect we may end up falling a bit short of Lars’s optimistic forecast (although it’s still very possible he will be correct.)  But what is even more amazing is that this striking fall in the unemployment rate occurred against very strong and unexpected headwinds.  As of June, Covid–19 deaths in the US were falling very rapidly (down 75% from April), following the previous pattern seen in Europe.  Many people anticipated that there would eventually be a second wave, but it was expected to occur when the weather got colder.  Instead, in the hottest part of summer the US got hit by a huge second wave, while deaths in Europe and Canada continued at a very slow pace.  Many states that had been re-opening their economy reversed course, and started restricting certain business sectors.  Here in California, significant parts of the economy were shut down once again.

And yet, despite that backdrop of a severe and unexpected second wave of Covid-19 cases in the US, and renewed shutdowns in many southern states, we saw unemployment fall 30 times faster than during the recovery from the 2009 recession.  Imagine our recovery if the pandemic here had followed the European/Canadian pattern!  Real recessions look absolutely nothing like normal US business cycles.  They are radically different phenomena with radically different causes.

[In fairness, the total employment data is somewhat less impressive than the unemployment rate data, but even total employment has increased at an explosive and unprecedented rate in recent months.]

When market monetarists like me argued that the problem in 2009 was too little NGDP, i.e. tight money, we got lots of pushback on two grounds.  One group argued that the real problem was real.  The financial crisis was a real shock, and recoveries from financial crises tend to be slow.  These pundits were not well informed on US economic history.  The US has had lots of recessions associated with financial crises, and economic growth was typically quite rapid after the crisis ended.  And when you asked people why a financial crisis would cause RGDP to fall, the explanations tended to center around consumer loss of wealth and a lack of access to credit.  But why would a loss of wealth make people want to work less?  Why would less access to credit make people want to work less?  Ultimately, the answer was that the loss of wealth and access to credit reduced consumer spending and investment spending.

So the problem wasn’t too little NGDP, it was too little consumption and investment spending?  Okay . . .

On the left, economists were more sympathetic to the view that a shortfall of NGDP was the problem, but suggested that there was nothing more the Fed could do.  (As if the Fed had run out of paper and green ink.)  Actually, we now know there were lots more things the Fed could have done:

1.  Don’t pay interest on bank reserves.

2.  Do much, much, much more QE, buying unconventional assets if necessary to hit the target.

3.  Switch to price level targeting, which would raise inflation expectations and lower long-term real interest rates.  This policy would have meant the Fed would not have tapered in 2014, or raised interest rates in 2015.  Indeed they never would have stopped QE1 or QE2.

The Fed’s recent move toward average inflation targeting is a tacit admission that they blew it in the 2010s with an inappropriately tight monetary policy that caused NGDP to grow too slowly, delaying recovery from the recession.

I’m not sure the recovery in the unemployment rate during the 2010s could have been 30 times faster, but it surely could have been 4 times faster.  Indeed in the 18 months after December 1982, unemployment fell by 3.6 percentage points, which is 4 times faster than the 0.9 percentage point reduction in unemployment in the 18 months after the October 2009 peak.  Money was clearly much too tight in 2009.

The market monetarist view of the Great Recession is looking increasingly persuasive, and if unemployment falls to 6% by November then Lars Christensen will be crowned king of the market monetarists.

PS.  Because Lars made such an extreme contrarian prediction, let’s be generous and assume he meant the actual unemployment rate in November (announced in early December) would be below 6%, not the announced unemployment rate in November, which refers to October.


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Rethinking the Great Recession

When I studied history, I was perplexed as to how the US could have done things like the internment of Japanese-Americans in WWII or the Joe McCarthy witch hunts of the early 1950s. Today, as I observe the growing anti-Chinese hysteria, these events are becoming easier to understand.

When I studied economic history, I was perplexed as to why economists of that period were blind to the costs of an extremely tight monetary policy that drove NGDP sharply lower during the early 1930s. Today, having seen a similar blindness in regard to the Great Recession, I’m no longer so perplexed.

The Economist has a very good (but also very depressing) article discussing how the field of macroeconomics has changed during the past decade. I take no pleasure in being right 10 years ago when I warned that misdiagnosis of the Great Recession could lead to the same sort of “dark ages” of economics as developed during the 1930s (and we escaped from in the latter 20th century).

Kevin Erdmann recently wrote a book pushing back against many of the myths regarding the housing bubble and bust, and I have a book coming out next April (University of Chicago Press) on market monetarism and the Great Recession.  Until then, you might be interested in our joint Mercatus working paper, which presents some of the key ideas in both books.

PS.  The Economist article is excellent, but does have one mistake:

Several factors might yet make the economy more hospitable to negative rates, however. Cash is in decline—another trend the pandemic has accelerated.

Actually, use of cash (mostly as a store of value) has increased sharply under Covid-19.  That makes the economy slightly less hospitable to negative rates.  Cash is a substitute for negative rate bank deposits.


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Economic Voices: A Reading List


A little while ago, I mentioned on Econlog that I have a history of fascination with economic thinking as expressed in non economic works–and particularly with the economic thinking of people who are in the daily grit of working blue collar jobs and doing household work. I think their diaries and letters and interviews and books of advice tell us at least as much about the economic circumstances under which they were written as do articles by economists–probably more. 


If you’re looking for this kind of material, you can’t go wrong by haunting used bookstores and poking through their collections of advice books, home economics texts, and collections of tattered old magazines. Economics is everywhere, and while an increasing amount of attention has been paid to texts like these by historians and scholars of literature, I don’t think that economic historians have given them as much attention as they merit. 

Here’s a reading list of texts I really like (in no particular order)  to get you started:


‘Round About a Pound a Week, by Maud Pember Reeves (1913)

This is the book that began my fascination. Maud Pember Reeves, a Fabian Socialist, undertook her groundbreaking demographic study in the early years of the 20th century to try to understand why poor families are poor. To answer the question, Pember Reeves and her colleagues asked mothers in a working poor neighborhood of London (where the average income was “‘round about a pound a week) to record their expenses. Their findings are fascinating as an early example of this kind of social science and as historic economic data, but they are perhaps most valuable for their continuing importance to our discussions about poverty today. 


All Our Kin, by Carol Stack (1974)

After I made Steve Horwitz read ‘Round About a Pound a Week, he pointed me to Carol Stack’s similar study of networks of exchange and support among Black families in the late 1960’s.  Her analysis of swapping will be fascinating for economists, but her larger observation that families find ways to function even in the worst of circumstances is a vital contribution and, again, one that is still relevant to discussions today.


Working, by Studs Terkel (1974)

This collection of interviews with working people of every age and in every profession is a great read and a gripping way to understand the meaning of work to the people who do it. From grocery store checkout clerks, to gravediggers, to lawyers and doctors, Studs Terkel spoke to everyone, and the conversations he recorded provide us with a remarkable way to humanize the work that makes the market possible.


How to Run Your Home Without Help, Kay Smallshaw (1949)

After WWII, the job market in England changed, and it suddenly became all but impossible for anyone but the very wealthy to have daily in-home help. Smallshaw’s book of advice to English housewives who are suddenly having to make do without a “daily” captures this moment of transition, and provides readers with a fascinating picture of household production from a time that’s not that long ago historically, but is almost unimaginably far-removed technologically. The chapter on laundry alone is worth the price of the book.


The Bachelor Girl’s Guide to Everything, by Agnes M. Miall (1916)

Live Alone and Like It, Marjorie Hillis (1936)

These advice books about managing money and maintaining homes were written specifically for single working women living away from their families–a relatively new population in 1916, and a rapidly growing one in 1936. Aside from the data the books contain about salaries for a variety of jobs and prices for household and personal goods from corsets to carpeting, they capture the best and most up to date financial advice being given to women in the first half of the 20th century. 



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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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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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Fontana on Emergency COVID Measures

One day, hopefully, we’ll calmly reason about what our experiences with COVID-19 have brought us. Or maybe not: history’s lessons are sometimes very difficult to learn.

Biancamaria Fontana has a learned and insightful piece on the blog of the Centre Walras Pareto at the University of Lausanne. Fontana, an accomplished historian of ideas, writes on the French Decree of 1793 known as “loi des suspects” which she describes as a “forerunner of the contemporary Patriot Acts”.

She focuses on Merlin de Douai and Cambacérès, two French jurists who had the distinction of working to shape the Revolutionary Tribunal. They were moderate, and yet collaborated with the Jacobins, including in preparing the legal framework of the Terror regime. Was that only a matter of opportunism?

For them the Revolution meant that France should become not a playground for the display of civic virtues, but “the reign of justice”; it must be framed by constitutional rules and governed by well-conceived, just laws, efficiently applied by a well-oiled institutional machine. After Thermidor, when the worst of the Terror phase was over, this is the objective they continued to pursue, as magistrates, ministers, directors or consuls, donning whatever official garments the subsequent regimes would offer them. The regimes would pass, but the solid edifice of codes, rules, procedures and offices they had almost surreptitiously built would remain.’

This technocratic wishful thinking has relevance when it comes to emergency acts.

Writes Fontana:

Emergency legislation is generally the response to a situation of fear and confusion. It is introduced to address some impending threat, but also (and above all) to convince the public that something radical is done to protect them and to secure their acquiescence. The grounds for fear can be real enough, though they are often magnified by propaganda and popular imagination. There were actually hostile agents and counter-revolutionary conspiracies in France in 1793, as there are secret terrorist cells around the world today. The bellicose language adopted by some politicians in response to the pandemics (fighting an invisible enemy, we are at war, together we can win etc.) seemed better suited to an invasion from outer space than to a health crisis, but the risks for the population did exist. But precisely because they are a response to panic, emergency measures must be unaffected by it. They should be clearly formulated (possibly worked out in advance), specific, limited in time and especially placed under transparent political responsibility; otherwise, they might easily become the instruments of arbitrary power, rather than the means to secure collective safety.

What we have seen lately is basically the opposite: measures conceived under pressure, suited to one particular case, defended in the name of pragmatism and, as such, a sure conduit to decreased political accountability. Fontana’s point is that the law should be credible and clear and predictable in its effects, even though it is dealing with an emergency situation.

We’re reaching a point, as the pandemic progresses, in which we should try to coolly assess what happened. Too often, those who fear government intrusions in their life end up denying that a real danger was ever there. Not only does that undermine the credibility of their cause, but is it also a serious intellectual mistake: the fact that a danger exists, that a genuine emergency is happening, cannot mean that anything could be done. Rules and individual rights are not necessarily to be done away with just because we are confronting a serious risk. If they were, the free society would be a very poor thing indeed.


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