Did Trump Foment a Violent Assault?

“Today’s violent assault on our Capitol, an effort to subjugate American democracy by mob rule, was fomented by Mr. Trump,” Mattis wrote. “His use of the Presidency to destroy trust in our election and to poison our respect for fellow citizens has been enabled by pseudo political leaders whose names will live in infamy as profiles in cowardice.”

This is from Lara Seligman, “Mattis blames Trump for inciting ‘mob rule’“, Politico, January 6, 2020.

I was playing pickleball Wednesday morning Pacific time and so I didn’t see Trump’s speech. I think I had my priorities right.

As a result, I made a mistake I make too often: I took people’s word for what Trump said.

I wonder if my Hoover colleague Jim Mattis did too.

What I’ve always liked about Ann Althouse, an emerita professor at the University of Wisconsin Law School, is that she’s independent: she thinks for herself.

Professor Althouse read the whole transcript, looking for where Trump incited the crowd. She listed the 7 most violence-inciting statements in Trump’s speech. Check the list of 7 and see if you can see “incitement” or “fomenting.” Or possibly she missed something. So go to the transcript and see if you can see something important she missed.

 

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My Work Continuage: A Confession

I have a confession: I continued working even though I was told not to.

I was reminded of this by this article by Mckenna Dallmeyer, Texas Senior Campus Correspondent for Campus Reform. It’s titled “State auditor demands nearly $2k from Ole Miss prof who went on ‘illegal’ strike,” Campus Reform, December 14, 2020.

Here’s what happened. I was a visiting assistant professor at Santa Clara University from September 1980 to December 1981. In the spring quarter of 1981, there was a racial incident on campus. I don’t remember what it was, but I think it was someone writing something negative about black people in a place that was visible.

The powers that be decided to cancel classes for one day so that people could go to various “teach-ins” about racial discrimination or at least contemplate racial discrimination. I was sympathetic to the cause but I thought that cancelling classes was way too big an overreaction. Of course, that wasn’t my call to make: it was my employer’s. Which is why I’m calling this a confession. Am I proud of what I did? Yes. But it was a breach of a contract and I take contracts seriously. You’ll see below that I didn’t.

I was teaching 2 classes. One was an intermediate microeconomics class with over 30 students in it. The other was an elective: a Law and Economics class with about 13 or 14 students.

I wasn’t badly behind in the intermediate micro class. But in the Law and Economics class I was behind but for a good reason. The textbook for the class was Richard Posner’s An Economic Analysis of Law. I was a fan after a very quick and somewhat cursory reading and the person who had taught the class the previous year, Henry Demmert, had used it and liked it. (He was on leave in D.C., which is why I had been hired for a year.)

So what was the good reason we were behind? It was that in working our way through the chapters, the students (all undergrads, some not even econ majors) and I were finding lots of bad economics. (And no, I can’t tell you what the mistakes were: my marked up copy was destroyed in my 2007 fire.) What started as an upset early in the course, both to the students and me, turned out to be a crusade. It was exciting each day to see if the students had found the mistake in a particular chapter–and they often had. (I’m not saying there were mistakes in every chapter: I don’t recall.)

Parenthetically, I later found Jim Buchanan’s review of Posner’s book. The review was titled “Good Economics, Bad Law.” I didn’t feel qualified to judge the law but I was quite qualified to judge the economics. I would have titled my review “Occasionally Brilliant Economics with Occasional Errors that a Good Economics Undergrad Could Have Spotted.”

Anyway, when you start working your way carefully through each chapter, you go more slowly. Halfway through the course, I had already given up on covering the whole book, but I wanted to cover at least 80% of it. The class met twice a week and so taking a whole day off–and we were told explicitly not to do makeups–would lose a half week.

So I decided to take a risk. I went into the class, which I was running around a rectangular table, and announced that I was required to cancel the next class. The announcement had created a buzz on campus and so everyone knew why.

Then I said, “Here’s my problem. We’re so far behind and I don’t want to get further behind. I’m inclined to show up for the next class.”

Then I stopped. I looked around to see if anyone would initiate. One of my students who was really enthused about the class was Charley Hooper. He was an engineering major but he had taken my intro micro and was so enthused, and got an A, that I let him into the Law Econ class without his having taken the requisite Intermediate Micro class.

Charley said, “I’ll be here.” Then the person next to him said “I’m coming.” Then “I’ll be here.” Every single person in the room said he or she would make the next class.

It was like a story I had heard in high school from one of my teachers (I think it was my 9th grade English teacher, Harvey Rosen) about a military officer who asks for volunteers for a particularly dangerous mission. He has them in a long line and tells the men that he won’t put them on the spot and so he will turn his back and whoever wants to volunteer can step forward. He gives it a minute and turns back and sees that they’re all still in a long line, with no appearance that anyone had stepped forward. Crestfallen, he asks “None of you volunteered?” One of the men answers, “No, sir. We all volunteered.”

After the students had all volunteered to come, I said, “Ok, because the issue leading to this is a racial incident, and I’m against racism, I’ll spend the last 20 minutes of the next class laying out what economists have to say about the economics of discrimination.”

We had a great discussion at the end of the next class about how free markets give employers an incentive not to discriminate on racial grounds. I gave them a verbal version of Gary Becker’s model. And we were probably the only class that met that one day at Santa Clara University.

 

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RBG and the “Waypavers”

There have already been an extraordinary number of remembrances, celebrations, and criticisms written of Ruth Bader Ginsburg’s life and work in the days since her passing. I’m grateful for her contributions to advancing gender equality in law, but I have no assessment of her overall judicial legacy to add to the outpouring. Instead, I’ll offer just a few thoughts about her success and why it means so much to so many people.

One question that fascinates me when I think about RBG is: what made her decide she could do it? When RBG started law school in 1956, women accounted for less than 3% of the legal profession (preface; this and all other page numbers refer to Ginsburg’s collection of writings, My Own Words). Further, she was a mother. At the time, being a woman in a demanding profession was unlikely enough, but being a mother and a professional was truly exceptional. Until the early 1950s, the majority of local school boards and clerical firms had “marriage bar” policies in place against the hiring and retention of married women, so heading off to law school with a family in tow was truly a venture into uncharted waters. This is around the same time when Elinor Ostrom—future Nobel Prize winner in economics—would have been splitting up with her first husband because he saw graduate coursework as incompatible with their life together (Tarko, p. 4).

She also credits two of her undergraduate professors, novelist Vladimir Nabokov, and constitutional scholar Robert Cushman, with teaching her the value of choosing words carefully and taking a principled stance (p. 20-1).The latter was deeply concerned about the impact McCarthyism was having on civil liberties. RBG’s engagement with this cause was her first experience with the idea of the lawyer as a defender of constitutional rights, an influence which would carry through into her work with the ACLU’s Women’s Rights Project. The first brief RBG filed with the U.S. Supreme Court as a lawyer was in the 1971 case of Reed v. Reed, in which a mother had sued to be able to administer the estate of her deceased son. Idaho law had given explicit preference to the father since he was male, but the Supreme Court decided in favor of RBG’s argument that the Fourteenth Amendment did protect against gender discrimination in law (p. 115).Ginsburg credits her mother and her undergraduate teachers with enabling her “to take part in the effort to free our daughters and sons to achieve whatever their talents equipped them to accomplish, with no artificial barriers blocking their way” (preface). She credits her mother with encouraging her to be a lady, meaning, to always be civil; to be independent; and to love libraries and books. Ginsburg mentions the ambitious, literary “Jo” from Louisa May Alcott’s Little Women as a favorite find from those early days in the library (p. 4). I suspect if you took a poll of women in academics today, you’d find an awful lot of “Jo”s.

LOUISA M. ALCOTT / Public domain

RBG saw this work to advance equality as the “constitutional legacy” of our founding ideals: “The founding fathers rebelled against the patriarchal power of kings and the idea that political authority may legitimately rest on birth status. Their culture held them back from fully perceiving or acting upon ideals of human equality and dignity” (p. 231). Those interested in comparative economic systems may be interested to find Don Lavoie expressing a similar sentiment in his conclusion to National Economic Planning: What is Left?, in which he argues that it was the incompleteness of the founding father’s vision of a non-hierarchical liberal democracy that blinded them to the harm that slavery, inequality in rights, protectionism, and monopoly privileges would wind up causing to their government and their principles.

Metaphors like “breaking a glass ceiling” don’t really fit lives like RBGs. They suggest that there was an obvious way up and out, and it was only a matter of time before someone broke through. RBG herself used the term “waypaver” when talking about the women who had broken down earlier legal and professional barriers. It doesn’t roll off the tongue as smoothly as other descriptors, but it fits reality well. History didn’t have to move the direction that it did. Waypavers are willing to be first in line to take chances that others around them are either not willing or not able to. In so doing, they forever alter the expectations of those who come after them. By deciding the path of professional constitutional law was possible for her, Ginsburg made it easier for others to decide they were capable as well.

RBG was well aware of those who paved the way for her as well. For instance, she spoke on multiple occasions about Belva Lockwood, the first woman to gain admission to the U.S Supreme Court Bar, and the many obstacles she had overcome. Lockwood’s 1869 application to study law was rejected because she “would…distract the attention of the young men,” and then her degree was denied even after she successfully completed all coursework because it would “lessen the value of the men’s diplomas” (p. 66). Lockwood would go on to be the first woman to argue in front of the U.S. Supreme Court and the first woman to run for President. Without Lockwood, would RBG have been able to be RBG? Without RBG, what future leaps would not be taken?

Overall, RBG’s life and success are a testament to the power of encouragement. The experiences and lessons we receive directly from parents and teachers matter, as do the lessons from history about those who paved the way before us. Waypavers like RBG feed that inkling of doubt: maybe what we thought was impossible is in fact possible.

 

 

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

 


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Tullock’s COVID Spike

There is perhaps no greater goal than promoting safe behavior during a pandemic.  Policy makers need to know the correct proscriptive policy to encourage, or perhaps force, citizens to act in safer ways.  For citizens themselves, the calculus is different.  Safe behavior can fall on a continuum of greater or lesser risk, but that typically corresponds with costs.  Some behavior that is very safe can be costly.  Gordon Tullock famously explored this trade off with his thought experiment “Tullock’s Spike”.

 

Automobiles have become a lot safer over the past 30 years, and much of that is the result of innovation in safety technology.  One of the biggest advances has been anti-lock brakes.  These prevent cars from skidding during braking and allow for more mistakes by drivers.  In theory, they should make us safer.

 

But researchers found something odd – a lot of these innovations did not seem to be promoting safer driving.  Instead, empowered by a feeling of safety, individuals decided to drive less safely assured that the advances in auto safety would allow them to travel more quickly (lowering their costs) while not incurring the risks.  Anti-lock brakes, airbags, seat-belt laws, crumple zones, all lower the costs of accidents to individuals.

 

How then to “encourage” safety?  Tullock said, let’s put a sharp metal spike in the middle of the steering wheel.  That would have the practical effect of keeping the costs directed, literally, at the driver who would adopt safer practices.

 

Why is this relevant today other than to remember Tullock’s unconventional way of thinking?  Public health officials face the exact same dilemma.  COVID-19 cases are rising, particularly among the young.  Despite shaming, nagging, and pleading, the young are not heeding the pleas of our public officials to act “safely,” and are going to bars, having meals, and otherwise leading relatively normal lives.  They are doing this because there is no spike on the steering wheel.  The young and healthy are largely unaffected by COVID and understand this.  After having been deprived of many things over the past six months, they are, understandably, reluctant to continue to live in semi-isolation.

 

It seems to me policy makers have a stark choice.  Closing bars and forcing public mask wearing won’t solve the problem.  Young people will move to private homes and parties.  They will continue to meet and talk and flirt and do what young people do.  The only way to change their actions is to force them to pay the costs for the COVID increase.  I would suggest we need to think more in terms of a tax.  Anyone under the age of 30 who tests positive for COVID and through contact tracing can be shown to have engaged in risky behavior should pay a tax or penalty.  It may not be perfect, but it will change the calculus for those who right now are driving very safe Ferraris and putting other members of society in direct risk of infection.

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The Supreme Court is a follower, not a leader

Both progressives and conservatives obsess about who is appointed to the Supreme Court, as if political ideology determines whether someone is a highly qualified judge. Or perhaps it is because they believe their preferred justices will produce a better set of public policies.  In fact, the hope of remaking the Court to fit one’s ideology remains a mirage, always hovering just over the horizon.  Here’s Janan Ganesh of the FT:

Whoever was “right”, the evidence that liberalism won continues to amass. Last week, the Supreme Court ruled to extend LGBT rights. It also frustrated President Donald Trump over the treatment of young undocumented migrants. And this is after the right’s Long March through the judiciary, masterminded by the Federalist Society and other campaign groups. Away from the recent cases, which dealt with statutes, the call for the strictest possible adherence to constitutional text has the romantic aura of all lost causes.

Ganesh’s essay is entitled “How conservatives lost the culture war”:

The failures do not end there. Take immigration. When conservatism hardened into a movement in the mid-20th century, 5 per cent of the US population was foreign-born. Now the level is near an all-time high at 14 per cent. Or take the status of gay people. Public opinion on same-sex marriage has flipped from two-to-one against to two-to-one in favour since the millennium.

President Trump recently put a hold on H1-b immigration, but given polling data (increasingly favoring immigration) I expect a surge in immigration in the future, perhaps as soon as 2021.  That’s partly because the pause in high-skilled immigration is like shooting ourselves in the foot, while “Making Canada Great Again“:

Mr Trump’s decision to extend a ban on permanent US residency applications and stop issuing other work permits such as H-1B visas has transformed Canada’s ability to compete for scarce talent, said technology and consulting executives who are among the biggest users of such visas.

“This may be a Canadian Jobs Creation Act. You can go to Toronto and hire people there and work quite effectively,” Cisco chief executive Chuck Robbins told the Financial Times this week. . . .

Rich Lesser, chief executive of Boston Consulting Group, told the FT that his firm had already offered jobs to several candidates who would be affected by the new H-1B and L1 visa rules. Instead of rescinding those offers, “by necessity we will move them to other countries, probably Canada”.

The US risked suffering “a migration of top talent” which would otherwise have been paying American taxes, he warned, dismissing the administration’s argument that the measures would speed the recovery of the US economy.

A CBRE study last year found that Toronto was North America’s fastest-growing market for tech jobs and its third largest after the San Francisco Bay Area and Seattle. . . .

“Interest has exploded,” said Irfhan Rawji, who founded a company called MobSquad 18 months ago to help American start-ups place tech workers rejected by the US immigration process in Canada.

Note that Toronto was already booming before the recent US moves to limit immigration.

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Transaction Costs are the Costs of Engaging in Economic Calculation

This year marks the 100th anniversary of the publication of Ludwig von Mises’s seminal article, “Economic Calculation in the Socialist Commonwealth,” which marked the first salvo in what later became the socialist calculation debate. Though the contributions of F.A. Hayek to that debate, and to economic science more broadly, have been well recognized, what is somewhat forgotten today is that the fundamental contributions of another economist were also born out of the socialist calculation debate. I am referring to none other than Ronald Coase.

 

As Coase outlines in his Nobel Prize Address, he had been a student of Arnold Plant in the Department of Commerce at the LSE, who introduced him to Adam Smith’s invisible hand, and the role that the price system plays in coordinating the allocation of resources to their most valued uses without central direction. The insights of Coase, like Mises, were both motivated from the attempt by the Bolsheviks to implement central planning in Soviet Russia. As Coase writes, “Lenin had said that the economic system in Russia would be run as one big factory. However, many economists in the West maintained that this was an impossibility,” a claim first put forth by Mises in his 1920 article. “And yet there were factories in the West, and some of them were extremely large. How did one reconcile the views expressed by economists on the role of the pricing system and the impossibility of successful central economic planning with the existence of management and of these apparently planned societies, firms, operating within our own economy?” The answer put forth to this puzzle was what Coase referred to as the “costs of using the price mechanism,” (Coase 1992, 715). This concept, which later came to be known as “transaction costs,” was first expounded in his seminal article, “The Nature of the Firm” (1937) and later developed in subsequent articles, “The Federal Communications Commission” (1959) and “The Problem of Social Cost” (1960). But, it is interesting to note that Coase also states that “a large part of what we think of as economic activity is designed to accomplish what high transaction costs would otherwise prevent or to reduce transaction costs so that individuals can freely negotiate and we can take advantage of that diffused knowledge of which Hayek has told us” (1992: 716).

My point here is not to trace the historical origins of the parallel insights drawn by Mises and Coase, or other economists working in the Austrian tradition and the transaction-cost tradition for that matter. Rather what I wish to suggest here is that what Coase (not just Hayek) had been stressing in his insights learned from the socialist calculation debate cannot be fully appreciated without placing his contributions in the context of what Mises had claimed regarding the problem of economic calculation. Reframed within this context, I would argue that the concept of transaction costs can also be understood as the costs of engaging in economic calculation. However controversial my claim may seem, this reframing of transaction costs as the costs of associated with economic calculation has a precedent that can be found not only in Coase, but also in more recent insights made by economists working in the Austrian tradition (see Baird 2000; Piano and Rouanet 2018).

How do transaction costs relate to the problem of economic calculation? According to Coase, the most “obvious” transaction cost is “that of discovering what the relevant prices are” (1937: 390). The costs of pricing a good (i.e. transaction costs) are based, fundamentally, on the costs of defining and enforcing property rights in order to create the institutional conditions necessary for establishing exchange ratios, hence prices, in the first place. This also entails not only cost of negotiation and drawing up contracts between trading partners, but also discovering who are the relevant traders partners are, as well as discovering what are the actual attributes, such as quality, of the good or service being exchanged.

Carl Dalhman (1979) argues that all such transaction costs can be subsumed under the umbrella of information costs, but the nature of such information is not one that can be obtained only through active search per se, as if all such information is already “out there” and therefore acontextual. Rather, the very nature of such information is not just tacit and dispersed (Hayek 1945), but contextual (see Boettke 1998). The discovery of relevant trading partners, the valuable attributes of a good being exchanged, and the price to which trading partners agree, emerges only within a context of exchangeable and enforceable private property rights. This last point is precisely the argument that Ludwig von Mises had meant in his claim that economic calculation under socialism is impossible! Outside the context of private property, subjectively held knowledge cannot be communicated as publicly held information without first establishing the terms of exchange in money prices to allocate resources to their most valued uses.

In his Presidential Address to the Society for the Development of Austrian Economics, published in The Review of Austrian Economics as “Alchian and Menger on Money,” Charles Baird (2000) best illustrates the point I’m making here. Carl Menger (1892) and Armen Alchian (1977) had made distinct, though complementary stories as to why money emerges spontaneously, namely to reduce transaction costs. Menger argued that money emerges to avoid the costs associated with the double coincidence of wants between exchange partners. On the other hand, Alchian emphasized that money emerges to reduce the costs of calculating and pricing the value of the various attributes of a good, such as in comparing the quality of different diamonds. Money prices reduce the costs of pricing the quality of diamonds, thereby providing information, discovered by middlemen, to non-specialists about what kind of diamond they are purchasing (i.e. higher quality or lower quality). As Baird writes, “Menger’s story is incomplete. But so, too, is Alchian’s. On the other hand, both stories are complete on their own terms. Clearly what is needed is someone to put these two stories together” (2000: 119). Thus, reframing transaction costs from an Austrian perspective, money, firms and other institutional arrangements emerge to reduce the costs associated with economic calculation.

In a lecture written to honor F.A. Hayek in 1979, later published posthumously in The Review of Austrian Economics, James Buchanan boldly declared the following: “The diverse approaches of the intersecting schools [of economics] must be the bases for conciliation, not conflict. We must marry the property-rights, law-and-economics, public-choice, Austrian subjectivist approaches” (Buchanan 2015: 260). The link that “marries” these distinct schools, including the Austrian School, is the notion of transaction costs. However, this underlying link cannot be understood without first reframing, I would argue, the concept of transaction costs as the costs of engaging in economic calculation. The “marriage” of these intersecting schools, as Buchanan and others have suggested, highlights distinct aspects of the economic forces at work in the market process, as well as the alternative institutional arrangements that emerge to reduce the cost of transacting and thereby exploit the gains from productive specialization and exchange.

 

 


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

 

 

References

Alchian, Armen A. 1977. “Why Money?” Journal of Money, Credit and Banking 9(1): 133–140.

 

Boettke, Peter J. 1998. “Economic Calculation: The Austrian Contribution to Political Economy.”  Advances in Austrian Economics 5: 131–158.

Buchanan, James M. 2015. “NOTES ON HAYEK–Miami, 15 February, 1979.” The Review of         Austrian Economics 28(3): 257–260.

Coase, Ronald H. 1937. “The Nature of the Firm.” Economica 4(16): 386–405.

Coase, Ronald H. 1959. “The Federal Communications Commission.” The Journal of Law & Economics 2: 1–40.

Coase, Ronald H. 1960. “The Problem of Social Cost.” The Journal of Law & Economics 3: 1–44

Dahlman, Carl J. 1979. “The Problem of Externality.” The Journal of Law & Economics 22(1): 141–162.

Hayek, F.A. 1945. “The Use of Knowledge in Society.”

Menger, Karl. 1892. “On the Origin of Money.” The Economic Journal 2(6): 239–255.

Mises, Ludwig von. [1920] 1975. “Economic Calculation in the Socialist Commonwealth.” In F.A.     Hayek  (Ed.), Collectivist Economic Planning (pp. 87–130). Clifton, NJ: August M. Kelley.

Piano, Ennio E., and Louis Rouanet. 2018. “Economic Calculation and the Organization of     Markets.” The Review of Austrian Economics, https://doi.org/10.1007/s11138-018-0425-4

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