Brexiters FOR State Aid?

Once upon a time, Newt Gingrich could say that Boris Johnson was “Margaret Thatcher with wild hair”. Now that would be difficult to argue.

Matthew Lesh, Head of Research at the Adam Smith Institute, reports on CapX that “the UK could sacrifice a deal with the EU — which would in the short run seriously disrupt trade in goods and services, undermine security service data sharing, and raise serious legal issues around the Northern Ireland Protocol — for the worst possible reason: an interventionist economic agenda.” Lesh adds: “For a supposedly conservative Government that just vanquished Corbynite socialism, that would be quite something.”

Lesh’s article is well worth reading.

As an outsider, I can see that a “No Deal” path would energize Brexiters and thus strengthen the government’s position in the country. It is an expensive way of making your supporters happy: nasty divorces often are. But it may well be that Johnson and his cabinet think the price is worth paying. Yet in politics, you can hardly do stuff claiming that you are doing it only for the sake of pleasing your voters: that would defy their very purpose, as voters themselves want high motives and nice sounding reasons, for you to do stuff which actually pleases them.

The high motive and nice sounding reason the British government worked out is that it should be able to support- with taxpayer money- all the companies it cares for. The Guardian (which is not Reason magazine) perfidiously reminds us that “Margaret Thatcher thought Europe allowed too much of it [state aid], Jeremy Corbyn believed there was not enough”.

On the one hand, then, the fact that the British government thinks the state aid issue is palatable to its voters as an excuse for a “No Deal” Brexit tells us something. Namely, that perhaps our vignette of the Tory voter as by and large more free-market oriented than others does no longer resemble reality. Sure, these voters detest the EU more than anything else, but their leaders’ vocabulary used to imply that the EU ought to be detested because it is bureaucratic and protectionist (do you remember “Global Britain”?), a petty organization that regulates anything which moves. Now should it be detested because it puts a brake on government subsidies…?

On the other hand, it may well be that conservative politicians, on top of believing a “No Deal” Brexit will be good for their popularity, actually believe that England needs more latitude in spending taxpayers money to the benefit of businesses of government’s choosing.

On that, I have little to add to the point Lesh makes:

Forsyth claims the Government is concerned that without subsidies the UK risks becoming “a technological vassal — reliant on either the United States or China, both of whom are unafraid to use the state to shape these markets”.
This is crazy technological isolationism. No single country can or should develop every single technology and keep it for themselves. We are much richer because of technologies developed and produced in other countries. Imagine how awful everything would be if we only used British-made goods no iPhones, no Zoom, no Samsung TVs, no Amazon, no Microsoft Windows. The list is endless. Remember too that the great tech success stories in the US, and even in communist China, are led by the private sector, not the state.
According to [ITV’s journalist Robert] Peston, Dominic Cummings [the main adviser to Boris Johnson] believes that the key to British success in the first industrial revolution was being the first mover in many key industries. Again, though this had little to do with state intervention. In fact, quite the opposite.
The reason Britain was successful during the industrial revolution was a combination of freedom to disrupt existing modes of production and a strong emphasis on entrepreneurship, underpinned by property rights. We should take the same approach today by getting rid of cumbersome red tape and taxes that hold businesses back.

Among contemporary ruling classes, the “technological isolationism” Lesh underlines is going strong. Everybody wants “his” science and “his” technology to be on top of everyone else’s. This is quite bizarre because one would think that if there is one area in which the benefits of international cooperation are clearly apparent is science and research. When a safe and effective vaccine about Covid-19 is happily produced, will you be refusing it, if it does not come out of your national labs?


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The Right to Labor

Honor laborers by letting them work

On this Labor Day, it’s fitting to appreciate and defend people’s right to engage in labor. That right has been under attack since March as state and local governments have threatened force to stop waiters and waitresses, bartenders, hairdressers, manicurists, gym trainers, and Pilates instructors, to name a few, from practicing their trade.

And it’s not as if the politicians defending those rules think that they themselves should be subject to them. Nancy Pelosi’s only apology for breaking a rule in San Francisco by getting her hair done was for being set up (i.e., caught on camera), not for breaking the rule. Chicago major Lori Lightfoot thought that she should be able to her hair done even though the commoners are not.  The difference, you see, is that she was “in the public eye.” Government workers in San Francisco are allowed to go to government-run gyms while the government keeps private gyms closed.

As I said in a recent talk I gave on Zoom to an audience in Nashville on August 13:

Classical liberals and libertarians have often been charged with not caring about the working class. That charge never stood up to scrutiny. But it is especially clear now that we who advocate the right to make a living are the true defenders of the working class.



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Ninos Malek on the Ins and Outs of Free Speech


Ninos P. Malek is a Lecturer in the Economics department at San Jose State University and a Professor of Economics at De Anza College in Cupertino, California. He earned his Ph.D. at George Mason University. He sent the following to me and gave me permission to run it.


Some conservatives, notably Tucker Carlson and Dennis Prager, complain that big “tech monopolies” are squashing conservative ideas. They claim that Google, Facebook, and Twitter are enemies of free speech because they block or take down conservative opinions.

Do these tech giants deny free speech? No, they do not. In my own home, I have the right to control the speech and behavior of my guests. For example, I might tell them to stop using foul language while they are on my property. This would not violate their free speech. I have a right to create and enforce my own rules on my private property; moreover, my guests were not forced to come to my house or to stay at my house. Similarly, Google, Facebook and Twitter have the right to control what is said on their sites. No one is forced to use those sites. Someone who feels strongly enough about their alleged anti-conservative bias can simply stop using their services.

These giant tech companies (I purposely do not refer to them as “monopolies”) may well filter out conservative websites from their search engine or block posts and “tweets” that have a conservative slant. But conservatives do not have a right to have their organizations displayed on a private company’s search engine. Individuals or organizations do not have a right to post their opinions and material on a private company’s private property—their social media platform.  And I write this as someone who generally supports Prager U and other conservative organizations.

Prager argued in a congressional hearing that these major companies are suppressing ideas, thereby threatening the future of the United States. He stated that he had contacted Google to ask why it blocks certain Prager U videos, but Google apparently did not offer him an explanation by the time he testified.

Carlson has pointed out that many media companies depend on Google, giving Google power. In fact, he says he believes that no company in human history has had so much power over information. According to Carlson, “It’s been clear for a very long time that the Big Tech companies have now surpassed the federal government as the chief threat to our liberties.”

The critics of these large technology companies point to Section 230 of the Communications Decency Act of 1996 as the source of their power. Section 230 prevents the courts from holding major tech companies like Google, Facebook, and Twitter responsible for what individuals do based on the content of their sites. The argument in favor of Section 230 is that, without it, these companies might not exist out of fear of litigation, so that consumers would be worse off.

I agree that “progressives,” who are diametrically opposed to conservative ideals and moral values, run Google, Twitter and Facebook. This is no shock since these companies are based in the San Francisco Bay Area.  The problem is that while conservatives claim they believe in the free market, they actually want the government to intervene in the market. A true supporter of liberty, freedom, and free markets would oppose government intervention.

Now, if the government ordered Google, Facebook, and Twitter to filter out conservative sites or to block out conservative opinions, that would be a violation of free speech. If the government legally prevented an entrepreneur from competing with Google, Facebook, or Twitter then that would anticompetitive. In a truly free market, the only responsibility that the government has with respect to business is to enforce contracts and prosecute violations of property rights—not to make sure everyone gets a “fair shake” on someone else’s private property.

When the administrations at public institutions block conservative speakers or when leftist organizations or students shout down and shut down conservative speech at taxpayer-financed institutions, those are violations of free speech because those institutions are tax-funded. Only government can violate free speech rights.

There is nothing wrong with Dennis Prager asking individuals to voluntarily sign a petition to get Facebook to stop blocking Prager U videos. However, that is different from asking the government to force private companies to give everyone an equal voice. Just as it would not be a violation of free speech or a denial of liberty if a conservative company blocked liberal voices or material from its website, there is no right for conservatives to have their voices heard or their material played on the private property of a private company.




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Something there is that doesn’t love a wall

The Economist has an article that discusses the proposed US shutdown of WeChat. This caught my eye:

Foreigners in China have long relied on virtual private networks (vpns) to jump the great firewall. Now, Oscar Li, a postgraduate in Colorado, plans to do the reverse. After his mother in China heard the news about a possible WeChat ban, she called him, frantic with worry. He reassured her that he would download a vpn to circumvent the new great firewall of America.

A sign of the times.

Readers interested in China should also checkout a longer article in the same issue of The Economist, which provides an excellent discussion of recent changes in Chinese economic policy.

PS.  Here’s a bit more from that famous Robert Frost poem:

Before I built a wall I’d ask to know
What I was walling in or walling out,
And to whom I was like to give offense.
Something there is that doesn’t love a wall


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Stay Out of Holly Golightly’s Way

I recently re-watched Breakfast at Tiffany’s. It was a particular favorite of mine in college, so I’d seen it many times before. But I had never really noticed how many lessons about economic opportunity there were to find in Holly Golightly’s life experiences.

Trailer screenshot -Public Domain

[Spoiler alert, in case you’ve been busy for the past 60 years.]

In the iconic opening scene of the film, Holly Golightly (played by Audrey Hepburn) is out on an early morning walk, still fully dressed from the night before. She is wearing the outfit that is not only the most memorable of the film, but perhaps of Hepburn’s entire career. Her hair is swept up to show off a multi-strand of pearls and the low-cut back of her black Givenchy dress. With coffee and pastry in hand, she stops for some quality time with the jewelry in the windows of the Tiffany & Co. flagship store.

Some think Holly Golightly was a prostitute, but writer and director Truman Capote says he saw her not as a “callgirl” but as an “American geisha.” She doesn’t have sex for money, as far as we know. She charms. She attends parties, lights up a room, works hard to make people feel good about themselves (and about her). There’s not an invoice for her time but she often gets “fifty dollars for the powder room” from her dates, money to tide her over until she can marry a husband rich enough that she’ll never have to worry about money again. This comes to a head in a tense exchange with the film’s main love interest, the down-on-his-luck writer Paul Varjak, in the New York Public Library. Paul declares his love and Holly responds by telling him about the rich bachelor she has her eye on. When he responds with anger, Holly fires off,

“Holly: What, do you think you own me?

Paul: That’s exactly what I think.

Holly: I know, that’s what they all think. That’s what everybody always thinks, but everybody happens to be wrong!

Paul: Well I am not everybody! … Or am I? Is that what you really think? Am I no different from all your other rats and super-rats? Wait a minute. That’s it. If that’s what you think, if that’s what you really think, there’s something I want to give you.

Holly: What’s that?

Paul: Fifty dollars for the powder room.”


In addition to the disturbing conflation of love with ownership, this scene is where Paul’s disgust for Holly’s willingness to prioritize financial security over romance becomes painfully clear. Economist Victoria Bateman notes the divide between those who make their money with their brains and those who make their money with their bodies, and the particular contempt reserved for women who use their bodies to procure financial gain. Until this moment, Paul is absolutely enchanted with Holly. They have been tearing up New York City, having a fabulous time, staying up late talking, taking care of each other. But once Holly makes it clear that her priorities are different from his, he becomes furious.

I won’t spoil the rest of the film by telling you why Holly makes the choices she does. And it doesn’t really matter anyway. The point is that the world Holly lives in—like it or not—is one in which her choice of how to support herself works. She’s supplying something in demand, and making the most of the opportunities available to her. Life is hard, and people sometimes choose paths that don’t quite gel with other’s sensibilities. Would it be trite of me to point out in 2020 that women who engage in sex work (or even just work with a sexy presentation) have just as much right to freely choose that path as anybody else?

And, for those who are aware of the ways in which women have historically been denied economic opportunity, there’s a sinister side to the Paul Varjaks of the world finding even more ways to shut doors. Of course, Paul is just one person, and a fictional one at that. But to the extent that his attitude gets used to push through legislation that systematically denies women opportunity under the guise of protecting them and their morality, it’s downright dangerous for women and detrimental to economic growth. The economy is constituted of billions of small opportunities pursued daily that, if not interfered with, add up to the mutual satisfaction of wants that keep people fed, healthy, and able to pursue meaningful lives. This is true even when those opportunities are pursued by people whose choices we may not always agree with or understand. We still benefit from their contributions to the market, and learn from watching to see if their actions are getting them somewhere we might like to go, or somewhere we might like to avoid.

It’s easy to see the many analogies that can be drawn between Holly’s experiences and the many other forms of entrepreneurship that are looked down upon by one group or another. And, for those who wish to maximize opportunity and well-being, the response is the same. You don’t have to like what Holly does. Just stay out of her way.



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Economics: Prices, Pri-ces, P.R.I.C.E.S.

It is impossible to understand the economy—that is, the economic consequences of individual actions—without understanding the role that prices play or are prevented from playing. This was a crucial scientific discovery of modern times. For that very reason, microeconomic theory used to be called “price theory.” So it is troubling to observe that many of our contemporaries and even many financial journalists ignore that discovery. Even economists tend to forget it when their moral values or virtue signaling is at stake.

An illustration of the problem was given by a Wall Street Journal feature of August 21 titled “Why Are There Still Not Enough Paper Towels?” The role of prices and price controls is nowhere mentioned. The very word “price” only appears twice, mainly from a management perspective: the competition of “Japan’s low-price cars” in the 1970s and the fact that overcapacity “would not allow you to price in a way that meets customer needs.” This last phrase, from P&G’s chief executive, could be read as referring to prices established on free markets, but it is as close as the story comes to prices. Not surprisingly, the report cannot explain why a shortage of paper towels persists:

The United States of America, heralded as the land of plenty, still doesn’t have enough paper towels. … An average of 21% of household paper products were out of stock at U.S. stores as of Aug. 9

The story’s “economic” explanation is essentially that

[t]he scarcity is rooted in a decadeslong quest by businesses at all levels, handling many different products, to eke out more profit by operating with almost no slack.

In other words, the culprits are bad capitalists who are trying to maximize profits with tricks such as lean manufacturing and just-in-time delivery. The authors do not conclude, but they could as well have concluded, that this is why so few shortages exist under communism and socialism, in Cuba or Venezuela, not to mention the former Soviet Union.

The real reason for persistent shortages, as I explained in many recent Econlog posts (including “Why Shortages Are Not More Widespread,” August 17), is that prices are capped under the threat of government prosecution. It is that consumers are forbidden to bid up prices. It is that bad capitalists are forbidden to maximize profits to respond to consumer demand, except sometimes stealthily. Being an obedient government crony is becoming an easier path than serving consumers.

The featured image of the present post is a photograph I took last week of the gun counter at a major retailer in Maine. It illustrates what a “land of plenty” looks like when price adjustments along supply and demand curves are forbidden.

The Wall Street Journal story has some feebly redeeming value. It provides many examples of why marginal cost increases with production. It hints at the fact that reducing product diversity has been a stealth way of responding to consumer demand despite price controls. But as a purported explanation of why shortages persist, it is at best misleading.


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Bannon’s Nationalist Adventure: Natural Justice?

Economists assume that each individual has his own preferences that guide his actions. The moral problem starts when an individual wants to force his preferences on other individuals’ choices. If, for this kind of moral sin, God had wanted to strike Steve Bannon off his horse on the road to Damascus and perhaps punish him with a nervous breakdown, He would have done exactly what He did on August 20: get Bannon arrested by federal agents on a Coast Guard boat.

Bannon is the former Executive Chairman of Breitbart News and Trump adviser. A believer in providential or natural justice (which is of course something different from economics) might think that Bannon’s arrest was a wake-up call or punishment for his protectionist crimes, that is, conspiring to impose his own preferences by force on individuals who want to trade.

I suspect that when Bannon saw the Coast Guard boat approaching the yacht on which he was sailing along the Connecticut coast, his nationalist heart bounced in his manly chest. He must have thought something like: “Here is our great Coast Guard tasked with keeping foreigners and their goods off our coasts (including Mexican rapists if they ever try to get around The Wall). The mighty Coast Guard is here to protect me, an American citizen.”


Caravaggio, Conversion on the Way
to Damascus (Wikipedia Commons)

In fact, the Coast Guard was there to arrest him—another instance of a military unit assuming internal police functions, the sort of thing that the Founders feared from a permanent army.

I don’t know if Bannon is guilty of the crimes he is accused of, which have not been proven in court. And I will not discuss here the economics and ethics of the plethora and reach of laws that, in America like in other Western countries, give an air of quasi-inevitability and quasi-normalcy to the words of Lavrentiy Beria, chief of Soviet state security under Joseph Stalin: “Show me the man and I’ll show you the crime.”

It was not the least irony of Bannon’s nationalist adventure of August 20 that the Coast Guard originated from Revenue-Marine, a service created by Congress in 1790 at the request of Alexander Hamilton with the purpose of collecting customs duties—even if, at that time, tariffs were used more to finance a small government than to protect Americans from foreign goods. As usual for a government bureaucracy, mission creep has proceeded.


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The new McCarthyism

A new McCarthyism is emerging. Marxist intellectuals are being “canceled” with increasing frequency. So why aren’t we hearing more about this problem? Perhaps because the attempts to cancel Marxists are now coming from the left.

When David Shor recently lost his job it could be argued that he wasn’t being cancelled because of his Marxist beliefs, rather it was for tweeting a routine academic study by a black scholar.

In the most recent case, however, a prominent black Marxist scholar named Adolph Reed was barred from speaking at a left wing political event precisely because of his Marxist beliefs. Recall that Marxists believe that the most important distinctions in society are between economic classes, and that workers of the world should unite. That’s also Reed’s view.

This sort of traditional Marxist theory is now viewed as racist, because it denies that race, not class, is the most important distinction in society. Thus, just as in the early 1950s, Marxists are being cancelled—this time by their fellow leftists.

PS.  Reason magazine directed me to a wonderful short essay on cancel culture by Nick Cave.  Who says pop stars aren’t worth listening to?


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The wheel of ideology revisited

I plan to argue that libertarianism is likely to shift from being a right wing ideology to a centrist ideology. To do so, I’d like to revisit a post I did back in 2011, which proposed a three part ideological framework. The post was a bit half-baked, so I hope to improve it here by grounding it in more clearly thought out principles.

Here’s the graph I proposed, drawn by commenter Vlad Tarko:

Why not a two side ideology—left and right?  Or how about the four-quadrant approach favored by many libertarians?  Why do I have three ideologies, each combined with two value systems, leading to 6 outcomes?

Let’s start with the left/right ideological axis, which has been around since at least the French Revolution.  Intellectuals on the left would probably define “right wing” as follows:  The right supports government policies that favor the stronger groups in our society.  These might be economic policies that protect the rich.  They might be ethnic nationalism that favors the dominant ethnic group.  They might be rules that enforce the moral values of the dominant religion.  They might be pro-military policies.  According to this view, the left supports government policies that favor the weak and downtrodden.

This perspective has a grain of truth, although of course the left also favors policies that support groups such as intellectuals, educators, public employees unions, and others that are hardly weak and downtrodden.  Nonetheless, this left/right dichotomy does make some sense.

Then I’d argue that modern political systems tend to move society toward a “two tribe” structure.  Even in the multiparty democracies in Europe, you often end up with one governing coalition and a primary opposition party.  And of course referenda are even more intrinsically binary.  Thus a society with 13 tribes ends up with a political system with two super-tribes, each of which is a coalition of smaller tribes.  This is how the left/right spit forms.

But then why three ideologies?  There’s a third option—government policies that do not directly favor any tribe—the minimal state.  (Yes, I know that laissez-faire indirectly favors some people, I’ll come back to that important point later.)

But why not four ideologies:  Government policies that favor tribe A, policies than favor tribe B, policies that favor neither and policies that favor both?  On closer inspection, it’s not really possible for policy to favor both.  Consider the four policy regimes:

1. Tax everyone $1000 and give all the money to tribe A.

1. Tax everyone $1000 and give all the money to tribe B.

3. Tax everyone $1000, and give $1000 to everyone.

4.  Tax no one.

On closer inspection, option 3 and 4 are basically identical.  So in a two-tribe polity, there are three possible ideologies.  Have policy favor A, have policy favor B, or laissez-faire (do nothing.)  Just as a math set with {0, 1, -0 and -1} is identical to a set with {0, 1 and -1}.

Back around 1800, laissez faire ideology (classical liberalism) was viewed as a left wing ideology.  That’s because governments had traditionally extracted taxes from peasants to provide a more lavish lifestyle for aristocrats.  By the late 1800s, classical liberalism began to be seen as a more right wing ideology, which allowed “robber barons” to exploit downtrodden workers.  In America, it has continued to be viewed as a right wing ideology (often called libertarianism), even in recent decades.  But this may be about to shift.

In a recent post, I pointed out that many conservative intellectuals are becoming highly dissatisfied with ideas associated with laissez-faire, such as “neoliberalism” and “radical individualism”.  These new conservatives are increasingly willing to embrace a strong state that promotes conservative values.  This might include nationalism, protectionism, immigration restriction and enforcing religious values.  If this shift becomes real and sweeps most of the conservative movement, then the libertarian position will no longer be seen as particularly right wing.  It may not be seen as left wing (as progressives are moving left in recent years), but it will be seen as more centrist than before–at least in a left/right sense.  A sort of radical centrism.  That idea is probably more understandable to Latin Americans.

Let’s apply the three ideologies to housing policy:

1. The left:  Nimbyism to protect low-income neighborhoods from gentrification.

2. The right:  Nimbyism to protect affluent neighborhoods from construction of apartments for the working class.

3. Classical liberals:  Yimby!

The previous post also posited that there are two value systems for each ideology.  For the left and the right there are both “corrupt” (i.e. selfish) and idealistic proponents of their ideology.  It makes less sense to use this dichotomy for libertarians, as their ideology forces them to oppose interventionist policies that favor their own financial interest.  You might object, “But don’t low taxes favor the rich?”  Yes, but a truly corrupt rich person would not be satisfied with low taxes, he’d demand affirmative government policies (tariffs, subsidies, etc.) that favored his financial interests.  But that policy would not be libertarian.  He’d become a right winger who hid behind “pro-capitalism” rhetoric.  We’ve all met that sort of person.

Instead of an idealistic/corrupt dichotomy, in the 2011 post I found it more useful to divide libertarians up into “consequentialists” (such a utilitarians) and “deontologicalists” (who believe freedom is a “natural right”).  To be clear, I’m not arguing that libertarian intellectuals are more pure than left or right intellectuals.  Indeed true believers in any of the three ideologies tend to be idealistic, and the corrupt part of the left and right tribes barely pays any attention to principled arguments.

To the extent that a few people seemed to find my wheel to be clever, it was because of the way the six groups related to each neighbor.  This is the part of the post that The Economist (Will Wilkinson?) chose to excerpt:

My goal here is to set things up in such a way that each group has a values affinity to those on one side, and an ideological affinity to those on the other side. So you could circle any two adjoining groups, and describe a common feature:

1. Progressives/Pragmatic libertarians: Both tend to be secular utilitarians, or at least consequentialists

2. Pragmatic and dogmatic libertarians: Both favor very small government

3. Dogmatic libertarians and idealistic conservatives: Both are nostalgic for the past, and revere the (original intent of) the Constitution.

4. Idealistic conservatives and corrupt Republicans: Both are Republicans.

5. Corrupt Republicans and corrupt Dems: Both believe in realpolitik, are disdainful of fuzzy-headed, idealistic intellectuals.

6. Corrupt Democrats and idealistic progressives: Both are Democrats

Thus on values there are three pairings: utilitarian, natural rights, and selfish. On ideology there are three different pairings: Democrat, Republican and libertarian.


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Tyler Cowen’s Shocking Post on the Russian Vaccine


My Body, My Choice

On August 5, economist Tyler Cowen wrote:

How about that Russian vaccine they will be trying in October?

To be clear, I won’t personally try it, and I don’t want the FDA to approve it for use in the United States.

I was shocked, not by Tyler’s own decision not to try it–we all make our own risk/reward tradeoffs–but by his willingness to have the FDA prevent me and other Americans from trying it.

Now you might say that Tyler didn’t say he wanted the FDA to disallow the vaccine; all he said is that he doesn’t want the FDA to approve the Covid-19 vaccine.

That would be a legitimate objection to my criticism if Tyler didn’t understand that as long as the FDA doesn’t approve a drug or test, it also doesn’t allow it.

I have long advocated that the FDA be stripped of its power to disallow drugs and, instead, simply be an information agency. Under my proposal, the FDA could insist on information about safety and efficacy before approving, but it would not be able to prevent drugs that it hasn’t approved.

I’m disappointed that Tyler seems not to agree.

A separate issue, of course, is whether it’s a good idea to take the vaccine. David Friedman gives his view here and, I think, overstates the case for the Russian vaccine’s efficacy. My own view is that I would happily be the one millionth person to take it.



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