Some Reflections on Reparations for Slavery

In any liberal-libertarian conception of justice, there is no doubt that a liberated slave had a moral right to compensation from his master. From an economic viewpoint (what is possible and at what cost), the problem is more complex, especially across generations. In response to an article in The Economist, I would propose two arguments against reparation payments to today’s descendants of the slaves of several generations ago. These arguments suggest a new approach for effective and moral reparation.

The first argument is an economic argument: measuring the compensation due to the slaves’ descendants is impossible. Academic estimates of the harm done to American slaves range from 0.7% to 37% of today’s GDP (that is, of what American residents produce and earn in one year). But the problem is more serious than this range suggests.

Assuming we know for sure that a certain individual is a descendant of an American slave, we still face radical uncertainty as to whether or not the descendant himself was actually harmed. What is the counterfactual? His first slave ancestor brought to America would likely not have come here otherwise. There is a good chance that today’s slave descendant would have been born in Africa if he had been born at all. As late as 1950, life expectancy at birth in Africa was 37 years, compared to 68 (at that time) in the United States. We don’t know and have no way to know if today’s slave descendant would be alive and better off if his first ancestor had not been kidnapped and brought to America as a slave.

I sidestep the difficult philosophical question of whether an individual counterfactually born elsewhere—or even conceived in slightly different circumstances in the same bed—can be said to be the same individual. From a purely naturalistic viewpoint, it would seem that the answer is negative, which would refute my counterfactual argument. But we would still don’t know how to calculate meaningful figures for the reparations—nor, by the way, whether they should be paid in some sort of affirmative-action services or in cash.

The second argument is a moral argument, which is not surprising as welfare economics has shown that any government policy must ultimately rely on a value judgment about distribution. The argument is that there is no moral justification for forcing an individual living today to pay for his ancestors’ crimes. Collective guilt is indefensible. A cogent moral argument could be made for reparations from an identifiable individual of today only if it could be proven that he owes part of his wealth to an identifiable ancestor who exploited an identifiable slave whose current descendant will be the recipient of the reparation payment. Such a calculation is impossible.

The moral case would of course have been different when slaves were liberated in 1865 as their masters could be immediately identified. As time passes, the claims become unprovable and moot.

This being said, one may argue that some of the slaves’ descendants are currently being exploited by some of the descendants of slave owners (and perhaps by some slave descendants too). From a moral viewpoint, this current injustice by current perpetrators should of course be corrected. This leads to an indirect reparation path very different and more practical than what is currently being proposed.

It is possible that the slavery heritage of black Americans has helped keep them in (relative) poverty, if only because of the legal discrimination they have suffered until just a few generations ago. It is quite clear that the individuals responsible for maintaining laws that continue restraining economic opportunities for Blacks should cease doing so. There are at least four regulatory areas where the poor, including descendants of former slaves, are being continuously exploited by currently living Americans.

1) Zoning regulations.—Zoning regulation started in NYC in 1916 to prevent Blacks and immigrants from moving into white neighborhoods as the free market allowed them to do with their dollars and the beneficial greed of property owners. In his recent book A Republic of Equals (Princeton University Press, 2019, p. 196), Jonathan Rothwell illustrates “the tension between market forces and racism” with a quote from a New York real estate agent, found in the New York Times of August 4, 1898:

I assure you there is no sentiment about the property owners bringing colored people here. It is purely a matter of dollars and cents and self-interest. The negroes pay their rent regularly, and many of the white people do not.

Although zoning regulations are not explicitly racist anymore, they have a similar effect by artificially increasing house prices and apartment rents. (See my Regulation review of Rothwell’s book.) Terminating zoning bylaws would substitute partly for impossible and unethical reparation payments.

2) Licensure laws.—Occupational licensure now forces one-fourth of Americans to obtain a costly (in time or money) licenses before they can offer their services. They curb the ability of the poorest individuals to compete on the market—not to mention the increased prices they have to pay for the services of licensed professionals. Terminating licensure laws would indirectly provide compensation to individuals, including descendants of former slaves, who are victims of a kind of government discrimination on the entrepreneurial market.

3) Minimum wage laws.—Minimum wage laws prevent the employment of those whose productivity is lower than the fixed minimum. These people pushed out of employment include the poorest and, no doubt within them, many slave descendants. (The unemployment rate of Blacks is typically above that of Whites, Asians, and Hispanic.)

4) Drug prohibitions for adults and other victimless crimes.—Laws that create victimless crimes—such as those banning some drugs—have two effects for our purposes: first, they create underground markets that are tempting for the poorest workers; second, they give police more opportunities to discriminate against some minorities.

Since most of these discriminatory laws exist at the local or state level, the reforms would be difficult, slow, and perhaps always incomplete. But instead of confiscating money from current taxpayers as a punishment for something they never did themselves, the federal government could play a useful role in promoting these economically and morally justifiable policies.


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Flesh & Soul, Economics & Liberal Arts

On our sister website Law & Liberty, Jennifer Frey (U. of South Carolina) has a remarkable review of what seems to be a remarkable book by Zena Hitz. With Hitz, Frey defends the “monkish virtues”—and liberal arts—that David Hume attacked in the name of utility and economics. Monks, however, should also learn some economics.

The reviewed book (which I have not read) is Zena Hitz’s Lost in Thought: The Hidden Pleasures of an Intellectual Life (Princeton University Press, 2020). Every economist should read Frey’s article, a vibrant defense of the “solitude of contemplative life.” A couple of excerpts from her review:

… the compelling case that the cultivation of our inner lives, which requires many of the monkish virtues that Hume dismissed, is fundamental to authentic human flourishing.

Hitz found herself increasingly alienated from academic life, which had trained her to fear rejection and prize prestige and status far more than it had cultivated her thrill for learning or her love for truth.

It is central to Hitz’s argument that love of learning is intrinsically, rather than instrumentally, valuable.

But leisure and contemplation are not, on Hitz’s vision, reserved for an elite, leisured class with a special kind of elite training or pedigree.

[Hitz] writes of Malcolm X, who discovered a love of learning while imprisoned as a young man.

We can either stay skimming along the surfaces of our lives, lost in the thrall of spectacles, the ambitious drive for status and prestige, and the satisfactions of the flesh, or we can choose to be serious and plunge ourselves into the depths of reality, an activity which calls us out of ourselves and demands a kind of faithful obedience to the task of understanding it more completely.

Her discussion of Dorothy Day—one of the highlights of the book—underscores the deep and important connections between solitude, silence, and solidarity.

I would argue that the flesh should be celebrated too and reconciled with monkish virtues, although I am not totally sure how the reconciliation can be done.

I would also challenge Dorothy Day‘s simplistic social and political thought—like Catholic “social” teaching in general—which would strongly benefit from some economics. Individuals have different preferences, resources are scarce relative to human desires, incentives matter, the “common good” is not easy to define, the philosophers’ “highest good” is even more ambiguous, the “we” is a collection of “I”‘s, and Day’s anarchist ideal cannot abolish these realities.


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Happy Birthday, Thomas Sowell

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

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

Another excerpt:

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

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

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

Read the whole thing.



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Closing or Reopening the Economy

That the expressions “closing the economy” or “reopening the economy” are widely and unthinkingly used suggests a deep problem: the state—governments at all level—has become so incredibly powerful that it can open or close large parts the complex and multifaceted network of exchanges between millions of individuals. It’s like if the government were a store owner and we were its store employees.

As I pointed out in an earlier post on this blog, even the Wall Street Journal writes unblinkingly that “countries,” by which it means national governments, can “reopen their societies.” If the state is so powerful as to open and close “its” society, perhaps it’s time for society to close its government—or, certainly, big chunks of it?

This language acknowledging Leviathan- or Hydra-like power of the state should worry even those who think that there was some justification for government measures to combat an epidemic such as Covid-19.


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Discrimination and State Power

Reading a column by Karen Attiah in the Washington Post (“Monuments of White Supremacy Obscure the History of Colonial Crimes. That’s Why They Must Come Down,” June 13, 2020), I remembered the guy who defended the state by asking, “If the state did not exist, who would have abolished slavery?” The real question is, of course, “If the state did not exist, who would have protected slave owners with overwhelming monopolistic force?” The guy should have known Article IV, Section 2 of the US Constitution about fugitive slaves, which remained in force until the 13th Amendment in 1865:

No Person held to Service or Labour in one State, under the Laws thereof, escaping into another, shall, in Consequence of any Law or Regulation therein, be discharged from such Service or Labour, but shall be delivered up on Claim of the Party to whom such Service or Labour may be due.

Most of Ms. Attiah’s column can be read as a justified attack on the governments who financed and enforced racial discrimination, not only by erecting statues but in more direct ways. She mentions Belgian king Léopold II, a “brutal colonial ruler” whose

claim to genocidal fame was his orchestration of mass violence against the people in the Congo, a large portion of which he considered his personal territory for cultivating and exporting rubber and ivory.

She also writes:

Powerful governments erased the contributions of black people, the customs and traditions of native populations during colonization—and then whitewashed the evidence of the great harm done to these communities.

She ignores many things, though, such as zoning laws, which were originally adopted to prevent black Americans from using their economic freedom to move into white neighborhoods and which continue incognito to play that function today. (See my Regulation review of Jonathan Rothwell’s recent book, A Republic of Equals: “The One-Percenter State,” Regulation, Spring 2020; and my Econlog post “Rothwell Si, Piketty No!”  But, to be fair to Ms. Attiah, one can’t talk about everything in one column.

Still, I suspect Ms. Attiah is not a closet anarcho-capitalist, because such people are rather rare at the Washington Post. But if what she wants to defend is individual liberty instead of group identity, she might want to reflect on the following classical-liberal principle and apply it also to other issues than race: Grant to the state only powers that would not be dangerous if the worst racist (or hater of any minority) came to its helm. Who knows, you might not always be in a group preferred by the government.


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AEA Hides Its Racist Past


I posted on Thursday about the fact that the officers and governance committees of the American Economic Association don’t know much about the literature on the economics and discrimination. In their statement, they wrote:

We recognize that we have only begun to understand racism and its impact on our profession and our discipline.

I had thought at the time that they were simply ignorant of the literature. But it may be worse.

Commenter Richard Ebeling pointed out something I had missed: the AEA’s statement linked to literature on the “History of race and racism.” Take a look. Some of the items are excellent. The Richard Rothstein book, The Color of Law, is an example. I reviewed it positively here. Also, they recommend the movie Just Mercy, which my wife and I saw last month, and which is excellent. But the fact that they came up with a list would suggest that they did some kind of search. Where is the mention of work by Gary Becker or Thomas Sowell? Or how about work by Kenneth Arrow or Thomas Schelling?

And, most important, given that the list is presented by the AEA, where is the literature on Richard Ely, one of the founders, and the first secretary, of the American Economic Association, and a renowned racist? It’s not as if he hasn’t been studied. Princeton University economist Thomas C. Leonard wrote an excellent book, Illiberal Reformers, in which he documents the views of Ely and other Progressives. Ely called blacks people who “are for the most part grownup children, and should be treated as such.”

The straightforward way to deal with the AEA’s racist past would be to acknowledge it. There’s lots to choose from. How about, for example, the time (1888) when the AEA “offered a prize for the best essay on the evils of unrestricted immigration?” (The quote is from Leonard’s book on p. 143.) A lot of the anti-immigrant sentiment at the time, Leonard notes, was based on race.

Or how about Ely’s hostility to Chinese immigrants? He wrote:

[T]he fullest unfolding of our national faculties requires the exclusion of discordant elements—like, for example, the Chinese. (1894, “Thoughts on Immigration, No. I”) [quoted in Clifford F. This and Ryan Daza, “Richard T. Ely: The Confederate Flag of the AEA?Econ Journal Watch, Vol. 8, No. 2, May 2011, pp: 147-156.]

Or how about the fact that from 1962 to 2020, a prestigious lecture held every year at the annual AEA meetings was the Richard T. Ely lecture? To its credit, the AEA has suddenly deleted Ely’s name in the last few days. To its discredit, it says nothing about why.

Are we to believe that the AEA officers are ignorant of all this? One tell is that, as noted, they deleted the “Richard T. Ely” identifier from the annual lecture. Why do that suddenly if not for the fact that they do know something about the AEA’s racist past?

Of course, it’s possible that some of the AEA officers are ignorant. If so, I would recommend that they start with Thomas C. Leonard’s Illiberal Reformers. And if are unwilling to take the time to read it, at least they should put in on their own reading list.

Here’s Russ Roberts’ interview of Leonard.

Here’s Arnold Kling’s review of Leonard’s book.



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Why Don’t People Speak Up?

I posted on Facebook a few days ago about the bullying that Justin Wolfers and other economists are doing to try to get an editor of the Journal of Political Economy fired. I start by saying that I don’t know if he should be fired. I don’t know enough about how good an editor he is, which, in my view, is the only thing that should matter. Justin hasn’t made a case that he’s a bad editor. Rather, Justin doesn’t like what the editor, Harald Uhlig, said about Black Lives Matter(ing). (Disclosure: I had a very civil debate with Justin about lockdowns. He seemed to be a nice guy. He is not nice on Twitter.)

At Cornell University Law School, a number of people are trying to bully the Dean into firing law professor William Jacobson over 2 of his criticisms of Black Lives Matter. (Disclosure: I read Professor Jacobson’s posts at least once a week because I find them informative.) The Dean, to his credit, defended Jacobson’s academic freedom, but to his discredit, made a nasty attack on Jacobson’s posts, managing to badly misstate the posts in the process. It’s interesting how easy it is to win an argument when you badly misstate what the person you’re arguing against says. Dean Eduardo M. Peñalver will not soon be winning any ideological Turing test awards.

Professor Jacobson appears to have received little public support from his colleagues. He writes:

None of the 21 signatories [of a public letter denouncing him], some of whom I’d worked closely with for over a decade and who I considered friends, had the common decency to approach me with any concerns. Instead they ran to the Cornell Sun while virtue signaling to students behind the scenes that this was a denunciation of me. Such is the political environment we live in now at CLS.

I’m not surprised. The reason has to do with an “aha” moment I had in the summer of 1979. I was leaving the University of Rochester’s Graduate School of Management even before my tenure clock was up. I had become friends with W. Allen Wallis, the Chancellor of the university, and he invited me to lunch in the nicer section (the part that served booze) of the faculty club, housed in the Frederick Douglass building. Early in the lunch, I realized that this wasn’t just a warm good-bye, although it was that too, but also an exit interview. So I ordered a whisky sour and loosened my tongue.

Allen wanted to know what I thought of the management school. I said that it had a lot going for it. The Dean, William H. Meckling, was great and there were a lot of strong faculty, especially in finance. But, I said, it could be so much better, even with existing faculty if there were a more open discussion and not so much kowtowing to Michael Jensen, the most prominent member of the faculty. Everyone had figured out that Michael was Bill’s buddy and so the majority were hesitant to challenge him in workshops or faculty discussions about policy issues. I said that I was one of the few willing to do this. (I didn’t name Richard Thaler, who was also one of the few, because he had left and it looked as if he wasn’t returning.)

Then I said, “My view is that in a faculty of 40 people, you should have 40 independent minds.”

Allen started laughing and I felt hurt. “Why are you laughing at me?” he asked.

He answered, “My view is that if in a faculty of 40 people you have 2 or 3 independent minds, you’re doing well.”

His insight has served me well.

So my answer to the question that’s the title of this post, “Why Don’t People Speak Up?”, is because they don’t have the courage to do so.

By the way, Wallis was a major figure in the move to abolish the draft. We had become friendly early in my time there and the friendship had strengthened after I called him up in December 1976. Incoming president Jimmy Carter had said he would grant amnesty to draft dodgers. Because Allen was the highest-ranking Republican I knew, I called him to make a pitch to his buddies in the Ford administration to steal a march on Carter by granting amnesty first. Allen didn’t agree with me but we had an interesting discussion.

In case you’re wondering about the pic at the top, it wasn’t so much to advertising co-blogger Bryan Caplan’s book, excellent as it was, as to show a picture of sheep.


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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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