A Philosophy of Markets

from Jason Brennan:

Peter Jaworski and I have a book on commodification, Markets without Limits, coming out next month. Our thesis is that any service or good that you may give away for free, you may sell for money.

Pointer from Bryan Caplan.

If it’s worth doing, it’s worth doing for a profit. That sounds like what I said about Planned Parenthood controversy. If harvesting body parts from aborted babies is ok, then they should be allowed to profit from it. But if it’s not ok, then doing it for free would not make it better.

The WaPo and the Train Terror Incident

Yesterday, they put the story on page 7. They could not bear to move the story about the Cuban sustainable farmer off the front page to make room for it.

Today, they put it on the front page, with the headline “Train Suspect Known to be a Risk.” They focused their page one coverage on this aspect, and waited until the end of the story on the jump page to discuss the Americans and a Brit who overcame the terrorist.

I can only conclude that anything that smacks of Civilization vs. Barbarism is just too much for WaPo editors, or perhaps their readers, to bear.

Speaking of which, whether this “known risk” slipped through or not depends on the denominator. I mean, how many names are on this list of “terror risks”? Are we talking about 100, or are we talking about 10,000? If it’s 100, then, yes, the security forces should be able to keep tabs on them and not leave it up to unarmed heroes. On the other hand, if it’s 10,000, then the list has no tactical value, but it gives you an idea of what you are up against.

Libertarians and Organ Harvesting

I have not noticed any libertarian commentary on the Planned Parenthood controversy. I assume that if there were such commentary, it would say

1. Planned Parenthood should not receive any government funding. Even if it gets out of the abortion business altogether.

2. There is nothing wrong with Planned Parenthood buying and selling organs from aborted fetuses.

Of course, as far as I know, there is no specifically libertarian position on when life begins. If a libertarian took the view that life begins at conception, then that would make abortion murder, and that would make commerce in organs problematic, because it would be an encouragement to murder.

But if you don’t think that abortion is murder (and please do not try to settle that issue in the comments section of this poor little blog), then should libertarians not be speaking up for the right to sell the organs of the aborted babies?

Chris DeMuth on the Regulatory State

He writes,

The representative legislature has also been a victim of modern habits of mind, which tend to value identity over locality, rationalism over representation, and decision over deliberation. Each of the three branches of American government (which correspond to a division of functions found in all modern governments) has its own distinctive principles of operation and legitimacy. The judiciary’s principles are reason and resolution—courts determine the facts of a dispute, resolve the dispute by deduction and inference from texts and precedents, and explain their reasoning publically. The executive’s are (since the Age of Jackson) personality and action—presidents incarnate important features of national character and aspiration, dominate political attention and debate, and take personal actions that settle some matters in a stroke and redefine others by changing the “facts on the ground.”

The legislature’s principles, representation and compromise, are relatively unimpressive. Representing geographic localities is not what it used to be, because of the globalization of commerce and culture and increased personal mobility; locality is not without political importance, but many people today care much more about representation of their personal values, group identities, and vocational and avocational interests. Individual legislators have little capacity for decisive personal action: on their own they can campaign, give speeches and interviews, write letters, question hearing witnesses, and cast votes, none of which hardly ever resolves anything. Their primary assignment is to negotiate and horse-trade with other representatives of similar, differing, and conflicting interests and values, leading to collective decisions that no one is entirely happy with or, quite frequently, to no decision at all.

When you have time, read the whole thing (it’s long). Pointer from Carl Eric Scott.

I agree with much of DeMuth’s diagnosis, which is that the dangerously powerful regulatory state has emerged in part due to the structural weakness of Congress. However, I do not think that his proposed solutions, the most prominent of which is ending the Senate filibuster, even approach providing a solution.

Off the top of my head, the reform that I would propose is to regularly re-charter all regulatory agencies. Perhaps every three years. You could use that re-chartering to rein in the jurisdiction of agencies. You could re-charter the FCC in a way that takes away any authority to regulate the Internet. You could re-charter the EPA in a way that takes away any authority to regulate carbon dioxide, or at least make it regulate carbon dioxide within a well-defined Congressional mandate. Re-chartering the FDA. Re-chartering the Federal Reserve. It could get to be quite fun.

Grumpy Regarding the Regulatory State

John Cochrane writes,

The agencies demand political support for themselves first of all. They are like barons in monarchies, and the King’s problems are secondary. But they can now demand broader support for their political agendas. And the larger partisan political system is discovering how the newly enhanced power of the regulatory state is ideal for enforcing its own political support.

Read the whole thing.

Perhaps the most persistent news story of 2015 has been the way that various policemen have responded with shockingly aggressive use of force when they encountered what they viewed as lack of cooperation, primarily from African-American suspects. Think of that as a metaphor for how regulatory agencies respond when they see lack of cooperation. At least, that is how I read Cochrane.

Playing the Status Game

Tyler Cowen writes,

So much of debate, including political and economic debate, is about which groups and individuals deserve higher or lower status. . .

I hypothesize that an MR blog post attracts more comments when it a) has implications for who should be raised and lowered in status, and b) has some framework in place which allows you to make analytical points, but points which ultimately translate into a conclusion about a).

My comments:

1. Lowering another group’s social status is the most powerful message of all. It is more powerful than raising the status of those who one likes.

2. It would be an interesting exercise in honesty for everyone who uses social media for political discussions to say, “My main purpose is to lower the status of the following three groups. . .” What would my answers be? MIT economists would be high on the list. Also progressives. And people who align entirely on one of the three axes.

3. How much of writing in the social sciences and the humanities (can you broaden this to other academic disciplines?), including research papers and journal articles, is motivated and made popular by the way that it affects relative group status?

You can take man out of tribal society, but you cannot take tribal society out of man.

Hipster Politics

Greg Ferenstein writes,

Today, on every recent major issue that divides the Democratic Party, the side favoring highly-skilled workers has won over labor union opposition

Pointer from Tyler Cowen. Ferenstein says that the Democrats’ Silicon Valley constituency favors public charter schools, high-skilled immigration, Korean Free Trade, and Uber, while opposing the Keystone Pipeline. Unions have taken the opposite side, but at least in Congress the Democrats are going against the unions.

The article is interesting throughout. My thoughts:

1. I don’t think that the tech crowd is enthusiastic about the oppressor-oppressed axis. And yet they still consider Barack Obama to be cool. I doubt that Elizabeth Warren or Bill de Blasio do much for them. Or Hillary Clinton, for that matter. As far as I can tell, Silicon Valley does not have a dog in the Democratic race for President.

2. From the tech crowd’s perspective, Republicans are better on education and on Uber. In both cases, Republicans are more supportive of entrepreneurialism.

3. Still, I do not expect the tech crowd to defect from to the Republican Party. There will emerge some issue that makes the tech crowd hard-core Democrats. In the past, abortion rights played that role among many of my friends. They are not techie types, and they hold conservative views on some economic and foreign-policy issues, but for them Republican opposition to abortion rights was always considered a show-stopper. So what issue will play that role today in among the tech crowd? Gay marriage? Immigration?

What the Fed Represents

John Cochrane writes,

The Fed should welcome limits on its responsibilities, and a clear and happy arrangement with Congress.

This might be true in a world where people were focused on implementation of Constitutional principles. But think about what the Fed represents. Do you remember when on health care people were saying that we need something like the Fed for health care?

The Fed represents the idea of experts with esoteric expertise who are independent from Congress. Their exercise of discretionary power is deemed vital for the health of society. The Fed thus represents the ultimate Progressive institution. Rational governance tames the free market. Non-partisan technocrats overcome the flaws in Constitutional democracy.

This mythical Fed is what is threatened by the sorts of laws that Cochrane was asked to testify about.

Don Kohn gives the mainstream response. Pointer from Mark Thoma.

Defining Money Like a State

Kathleen McNamara writes,

single currencies are never the product of debates about optimal economic solutions. Instead, currencies like the U.S. dollar itself are the result of political battles, where motivated actors try to centralize power. This has most often occurred “through iron and blood,” as Otto van Bismarck, the unifier of Germany put it, as a result of catastrophic wars. Smaller geographic units were brought together to build the modern nation state, with a unified fiscal system, a common national language that was often imposed by force, a unified legal system, and, a single currency. Put differently (with apologies to sociologist Charles Tilly), war makes the state, and the state makes the currency.

The U.S. case is instructive. America used to have a chaotic multitude of state currencies and privately issued bank notes, with complex exchange rates between them. This only changed thanks to the Civil War. The American greenback was created in 1863 when Abraham Lincoln’s Republican Party muscled through legislation giving the federal government exclusive currency rights. It was only able to do this because Southern legislators, who opposed more centralization of power, had seceded from the American union.

Pointer from Mark Thoma, who comments, “whether the euro was politically motivated for the most part, or not, economics matters for the sustainability of a political union.”

The Future of Democracy, Freedom, and Prosperity

A simple topic for four of us to spend an hour discussing. The conclusion of my opening remarks:

one sort of maybe fictional type scenario would be that you would get a sudden sovereign debt crisis in the United States that would take place in an environment where the political feelings are frayed–there’s a lot of controversy; people no longer see the legislators and the executive as having legitimacy for solving their problems. They take to the streets. There’s fighting; there’s violence. And at that point the people are ready to turn to some kind of dictator to resolve the violence. So that’s kind of a fictional scenario. There’s certainly you can see either economic or political ways to avoid it. But that would be sort of my one pessimistic scenario relative to maintaining our open access order. Which, if we do maintain our open access order, I think eventually we do recover prosperity and we sort of maintain freedom.

John Cochrane worries about

the vast attempt of our government to control economics from the big Dodd-Frank and Obamacare down to the small regulations against Uber and occupational licensing for hairdressers, and so forth. This enterprise has vast power. It’s increasingly politicized. And right now it’s used already to silence opposition to the regulatory fiefdoms. What bank dares to speak out against the Dodd-Frank Act? What health insurer dares to speak out against Obamacare?

It seems to me that strong regulation often has the support, or at least the acquiescence, of incumbent business interests. The question is whether potential new competition is thwarted. Lee Ohanian, another speaker in this session, is pessimistic on that score.

Another recent study found that the decline in community banking accelerated considerably in the last few years, reflecting economies of scale in managing new regulation associated with Dodd-Frank. Small Business Administration says that lending to small businesses has declined by about 20% since 2008, which was of course the year of the Great Recession. And in 2013 only 1 new bank entered the banking industry. So you look at the outcome of Dodd-Frank–declining competition, fewer banks, lack of entry, higher costs, regulators with broad mandates who make vague and far-reaching rules–this represents a sharp departure from the clear and specific limits on government.