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30 марта, 04:22

The Great Recession, productivity and productivity growth, by Scott Sumner

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The sharp reduction in productivity growth since 2004 is one of the most notable recent trends in macroeconomics. Not surprisingly, some pundits have suggested that this slowdown is linked to the Great Recession. In the most simple business cycle models, output returns to the natural rate once wages and prices have adjusted. In that case, demand shocks have only a transitory impact on output. But recessions don't just cause unemployment; they also reduce investment, which leads to a smaller capital stock. In that case, might the Great Recession permanently reduce productivity and output? Probably not, but the impact of a smaller capital stock might be so long lasting that it seems permanent. Even 8 years after the trough of the Great Recession, productivity and real output might be lower than if the Great Recession had never occurred. Unfortunately, this doesn't really help us understand why recent productivity growth is so anemic. That's because the very same models that allow recessions to have a highly persistent effect on productivity, also predict exactly the opposite effect on productivity growth. Thus if our capital stock was artificially depressed by a low level of investment during the Great Recession, then the marginal product of new capital should increase, and the level of investment should also increase. Our economy is more labor intensive than if there had been no Great Recession, and this should lead to a higher than normal level of investment. In other words, if the level of productivity was semi-permanently depressed by the Great Recession, then the current growth rate of productivity should be higher than normal. But we observe exactly the opposite---productivity growth is unusually low. To summarize, we don't know why productivity growth is so low (I suspect it is related to the economy's shift to services, as well as hard to measure stuff on the internet) but it is not caused by the Great Recession. Indeed you'd expect growth to be faster than after a deep slump. And indeed growth was faster than normal after the deep slumps of 1920-21, 1929-33, 1937-38, 1974-75, and 1981-82. This is the only deep slump (in America) followed by slower than normal growth. In my view, it's a waste of time trying to construct a business cycle model where a deep slump permanently reduces the economy's growth rate. That's because if you "succeed" in explaining 2008-09, then you immediately unexplain what we thought we new about the 5 earlier slumps mentioned above. Why would anyone wish to solve one problem at the cost of creating five brand new problems? Better to treat this recovery as an anomaly, and look for reasons why productivity growth began slowing after 2004. Some people ask me if I really think it's a "coincidence" that long run trend growth started slowing at roughly the time of the Great Recession. Yes I do. I would have a much harder time accepting 5 improbable coincidences, the hypothesis that deep slumps will normally reduce GDP growth rates, but that this did not occur during the previous 5 deep slumps because each time some sort of mysterious exogenous factor came to the rescue. How likely is that? PS. Elsewhere I've argued that the slowdown in productivity growth helped to cause the Great Recession. That's because it depressed the Wicksellian natural rate of interest to a level below where the Fed thought it was, and this caused the Fed to tighten policy more than they anticipated. (4 COMMENTS)

29 марта, 22:57

Henderson on NAFTA and Mercantilism, by David Henderson

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Those statements are true. But they leave out something just as important: If NAFTA were eliminated, not just U.S. tariffs and restrictions on Canadian exports, but also Canada's tariffs and restrictions on Canada's imports would rise. So even if we restrict ourselves to considering the well-being of Canadians, Robertson has left out approximately half the gains from trade--the gains to Canadians from getting U.S. (and Mexican) goods more cheaply. If you don't understand that consumers gain from more competition, well, you've missed a lot. This is an excerpt from David R. Henderson, "The case for free trade should not rely on mercantilism," Fraser Institute blog, March 23. I recommend (obviously) the whole piece, which is not long. (1 COMMENTS)

29 марта, 20:47

Complacent Trust, by Bryan Caplan

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Together with Zach Weinersmith, I'm currently writing All Roads Lead to Open Borders, my non-fiction graphic novel on the philosophy and social science of immigration.  While there are many differences between a non-fiction graphic novel and a traditional work of non-fiction, I still strive to read broadly and deeply before I write.  Now, for the chapter on "Crimes Against Culture," I'm immersed in the vast academic literature on trust.  In economics, the word on the street is that trust is good for growth.  And from what I've seen, the leading papers confirm this result.  What's striking, though, is that lower-profile papers occasionally reach rather different conclusions.  This wouldn't be noteworthy if the lower-profile papers were clearly lower-quality papers.  But since the econometrics are simple, the main difference seems to be that the lower-profile papers were published later using more extensive data.  In academia, the early bird gets the worm, even if the later bird is closer to the truth.In coming months, I'll be blogging some contrarian papers on trust.  Today, let's start with Felix Roth's "Does Too Much Trust Hamper Economic Growth?" (Kyklos, 2009).  Big result: Estimating growth as a function of trust and trust squared yields a strong quadratic relationship:Regression 4, taking a country sample without transition countries, modulates trust as a curvilinear relationship to economic growth by including the squared term of interpersonal trust into the regression. Astonishingly, the curvilinear relationship is highly significant. All variables in the regression have the expected signs and are highly significant (99% level of significance). The linear and squared term of interpersonal trust are each statistically significant: 0.16 (4.42) and -0.0015 (-3.24). These estimates imply that starting from a low-trust country (where the interpersonal trust value is for instance 2.8, as in Brazil), increases in interpersonal trust tend to stimulate economic growth. However, the positive influence attenuates as the level of trust rises and reaches zero when the indicator takes on a mid-range of 53.3. Therefore, an increase in the level of trust appears to enhance economic growth in countries that have initial low levels of trust but to retard economic growth for countries that have already achieved a substantial level of trust.Within the OECD sub-sample, "The positive influence attenuates as the level of trust rises and reaches zero when the indicator takes on a mid-range of 42.5."  Here's the cool graph:With fixed effects, moreover, the linear effect of trust on growth looks negative:[T]aking panel data and using a fixed-effects estimation for a 41-country sample over the time period from 1980 to 2004 and with a total of 129 observations, the paper points out that economic growth is negatively related to an increase in trust. This negative finding is in contrast to most empirical findings using a cross-sectional design. The negative relationship seems to be mainly driven by developed countries from the OECD (here specifically Poland, Greece, and the United States), and the EU-15 (here particularly theUnited Kingdomand Finland), and very strongly by LMEs [liberal market economies] and Scandinavian countries.But how on Earth could trust ever be bad?  The most obvious story is Cowenian.  Excessive trust leads to (or is perhaps identical with) complacency.  If everything is awesome, who needs innovation and dynamism?Is this paper the final word?  Of course not.  Maybe the pro-trust consensus is right and Roth is wrong.  But given the prevalence of academic groupthink, the opposite wouldn't surprise me.  At all. (10 COMMENTS)

28 марта, 20:52

UBI and Health Care: What's Wrong With Murray's Approach, by Bryan Caplan

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How would a Universal Basic Income handle health care?  Normally, UBI advocates just say, "separate issue" and move on.  But not the great Charles Murray.  His In Our Hands: A Plan to Replace the Welfare State proposes two regulations to tackle the problem head on.Regulation #1. UBI recipients must purchase health insurance.  Regulation #2. "Legally obligate medical insurers to treat the population, of all ages, as a single pool."  Health insurance is still private and competitive.  But if an insurer wants to cut its price, it must cut it for everyone.On the surface, it's ingenious.  Most UBI advocates exclude health care because health insurance premiums vary tremendously from person to person.  But if health insurers have to charge a uniform premium, this problem seems to go away.  Averaging over everyone, premiums would be well below Murray's proposed UBI of $10,000 per year.  Everyone could therefore afford to comply with the mandate.  Maybe you shouldn't even call it a "mandate"; it's just a rule you have to follow to collect your UBI.The problem: As long as health insurance remains private and competitive, health insurers compete on quality as well as price.*  Since their elderly and sick customers are losing ventures, there's an obvious incentive to selectively cut their quality so they take their business elsewhere.  In Murray's world, no insurer wants to be known as a geriatric specialist.  Instead, prudence urges them to lavish services on the young and healthy.  Physical fitness programs.  Free contraception, delivered by drone for no extra charge.  That kind of thing.How severe would the problem be?  Very.  The cost of insuring a 91-year-old is far higher than the cost of insuring a 21-year-old.  If the law forces firms to charge both the same rate, firms will desperately search for ways to repel the aged and attract the young.  Blasting "today's hottest music" over the P.A. system is only the beginning.Of course, the government could impose a comprehensive system of quality regulation to prevent this kind of thing.  But given the immense cross-subsidies, enforcement would have to be both encyclopedic and draconian.  The UBI aspires to simplify the welfare state, but ends up piling a whole new strata of regulation on top of the status quo.  What's the point?I'm a huge Charles Murray fan.  In Our Hands is my favorite book on the UBI.  But his elegant effort to fold health care into the UBI fails.* This is a key part of Murray's vision: Like me, he advocates supply-side health-care reforms like ending medical licensing and allowing contractual limits on medical liability. (14 COMMENTS)

28 марта, 19:30

Hooper and Henderson Do Want the FDA Another Way, by David Henderson

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In a comment on my co-blogger Alberto Mingardi's post on the FDA, AlanG writes: FDA has to evaluate new drugs based on their risk/benefit profile. Large clinical trials of new vaccines destined to be administered to healthy children are required to really understand what risks might be present. Would you want this any other way? Yes, I would. So would my friend and co-author Charley Hooper. Here's part of what I wrote in my health care chapter in The Joy of Freedom: An Economist's Odyssey: These delays are killing people. In December 1988, for example, the FDA approved Misoprostol, a drug that prevents gastric ulcers caused by aspirin and other nonsteroidal anti-inflammatory drugs. In some other countries, Misoprostol was available as early as 1985. Using the FDA's own estimates, Sam Kazman, an FDA expert at the Competitive Enterprise Institute, a public-interest lobby in Washington, concluded that Misoprostol would have saved 8,000 to 15,000 lives a year. Thus, the FDA-caused delay cost over 20,000 and as many as 50,000 innocent lives. And that's just their delay on one out of hundreds of drugs. The tragedy is that these regulations are not necessary. The FDA may have some expertise when it comes to drug safety and efficacy, but on the only issue that matters--your tradeoffs between various risks--you are the expert, and the FDA's scientists are rank amateurs. Earlier in this chapter, I mentioned my friend Charles Hooper, who also happened to be one of my star undergraduate students and who is now a partner in the biotech consulting firm Objective Insights. Charley wrote: The choice a patient makes between therapies (with the help of his agent, the doctor) is based on many variables: efficacy, tolerability, side effects, riskiness, monetary cost, nonmonetary cost (e.g., hassle), speed of action. These drug costs and benefits must be judged within the context of many personal values and tradeoffs: the fear of death, the fear of surgery, the fear of the hospital, potential pain, and the individual's health profile, financial status, value of time, value of health, and risk tolerance. For the FDA to decide what compounds pass this complex tradeoff is preposterous, given that the FDA can never frame the problem from the individual patient's perspective. One individual's best alternative could be another's worst. We have seen this with AIDS patients: "I don't care if I develop cancer and this costs me $20,000 a year because without it I'm dead in 6 months." If, instead of medical therapies, they were telling us what kind of washing machines to buy or where to go on vacation, we would consider it laughable. This is what von Mises [Ludwig von Mises, the noted Austrian economist who showed that information problems would prevent socialism from working] said. Centralized bureaucrats cannot make the proper decisions for individuals because they lack the requisite information. Note: Commenter Don Boudreaux also addresses this issue. (11 COMMENTS)

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28 марта, 14:52

Dan Klein on Scott Gottlieb, by Alberto Mingardi

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Dan Klein comments on Donald Trump's FDA nominee for the Heartland Institute. Klein, with Alex Tabarrok, edits the FDA Review project of the Independent Institute. On Gottlieb, Klein is very positive: Scott Gottlieb is not a William Lloyd Garrison, but he motions consistently in the liberalization direction, toward reforms that would move the ball to the 45-yard line. Regarding the permission process, he has favored extending accelerated review to wider categories of drugs, simplifying permitting of generics, and depending more on surrogate-measure evidence, existing data, approval in other nations, and post-market follow-up. For patients, he has favored expanding "the right to try" or compassionate use. He has favored liberalizing manufacturer speech regarding off-label uses. He would, therefore, make the FDA less stingy with the permissions it issues. Also, he has favored making the FDA explain its decision when declining to permit a drug. Read the whole thing. (13 COMMENTS)

27 марта, 22:55

An Optimistic View on Deregulation's Prospects, by David Henderson

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My thesis is as follows: Gains from exchange contain the seeds of their own expansion. When economists and other intellectuals provide evidence that deregulation increases gains from exchange, either these intellectuals, bureaucrats, or others often draw on this evidence to seek deregulation. They don't always succeed, but they do sometimes, and one success can lead to others. [Peter] Van Doren and [Thomas A.] Firey's own story about one of the biggest deregulation successes--the deregulation of airlines--illustrates the important role of individuals and ideas. Nothing inherent dictated that Stephen Breyer would latch onto airline deregulation as the cause that he urged Ted Kennedy to pursue. Nothing inherent dictated that two bureaucrats and an appointee at the Civil Aeronautics Board (CAB) would become energized and push internally for deregulation. Yet had they and Breyer not done so, it might not have happened. There are similar stories about other successful deregulations both in the United States and other countries. This is from David R. Henderson, "A More Optimistic View," Regulation, Spring 2017. This is the 40th anniversary edition of Regulation. Editor Peter Van Doren and managing editor Thomas A. Firey write the lead article, "Regulation at 40." When Tom sent me a draft, I told him that I found it unduly pessimistic. He asked me to write a relatively short piece giving my more optimistic view. I found that I needed a lot of space to give the particulars behind my view. The third piece, "Restraining the Regulatory State," is by my favorite Brookings economist, Robert W. Crandall. One other excerpt from my piece: But deregulation would probably not have gotten nearly as far were it not for the support of intellectuals--some lawyers, but mainly economists--who systematically studied the effects of airline regulation. In his 1964 presidential address to the American Economics Association, George Stigler pointed out that from the founding of economics as a discipline in the 18th century until the early 1960s, almost all economists--although willing to advocate or oppose regulation--avoided studying its effects. As only Stigler could put it: "The economic role of the state has managed to hold the attention of scholars for over two centuries without arousing their curiosity.... Economists have refused to leave the problem alone or to work on it." But there were a few exceptions in the profession. And one of the areas in which many of these exceptions worked was airline regulation. Three early exceptions were Lucile Keyes, Richard Caves, and Stigler's student Sam Peltzman. As early as 1949, Keyes had seen through the public-interest rationale for airline regulation, pointing out that the CAB's actions protected airlines from competition. In 1962, Caves, a Harvard economist, wrote a scholarly, evidence-filled tome in which he argued the CAB was suppressing competition and such a restriction on freedom to compete was difficult to reconcile with the public interest. In 1963, Peltzman, a graduate economics student at the University of Chicago and later an economics professor there, wrote a piece in the New Individualist Review that presented a concise, carefully reasoned, empirical case against federal regulation of air fares and entry into the airline industry. While we take for granted today that economists will actually study the effects of government regulation, Keyes, Caves, and Peltzman were pioneers in that research. (3 COMMENTS)

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27 марта, 21:03

Two Intuitionist Insights, by Bryan Caplan

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From Mike Huemer's chapter in the new Arguments for Liberty, edited by Aaron Powell and Grant Babcock:Virtually all nonintuitionists are hypocritical: they adopt and retain ethical beliefs in precisely the way that intuitionists do - namely, they believe what seems right to them, until they have grounds for doubting it - with the sole difference being that they are less self-aware, that is, they don't say that this is what they are doing.  Then they hold forth about how bad it is to do that.Consequentialists are, as usual, the most egregious offenders.  They scoff at intuition in favor of "arguments," but what's the non-question-begging argument for their view?  After thirty years of philosophy, I'm still waiting.Huemer also elaborates on the asymmetry between moral and political intuitions:Even among nonlibertarians, it is not so much that most people have the intuition that the government has authority or that most people believe that government has authority, as that they are habitually disposed to presuppose the government's authority.  Most people, I suspect, have never actually thought about whether or why the government has legitimate authority.  When explicitly confronted with the fact that the government performs many actions that would be considered wrongful for any other agent, very few people say, "Yeah, so what?  It's the government, so it's obviously OK."  Rather, most people can easily be brought to feel that there is a philosophical problem here.When I present the issue to students, for example, it is very easy to motivate the problem, and no one ever suggests that no reason is needed for why government is special.  By contrast, for instance, when you point out that although it is wrong to destroy a human being, it is not considered similarly wrong to destroy a clod of dirt, no one gets puzzled.Or as Huemer explains elsewhere:At first glance, it may seem paradoxical that such radical political conclusions could stem from anything designated as "common sense." I do not, of course, lay claim to common sense political views. I claim that revisionary political views emerge out of common sense moral views.If Huemer's approach is so strong, why is it so unpopular?  I'm tempted to blame people's unphilosophical attitude, but Huemer's approach is also unpopular within philosophy.  A mix of status quo bias and emotional attachment to mainstream political ideologies is the best explanation I can muster.P.S. Jason Brennan's chapter on moral pluralism is also excellent. (9 COMMENTS)

27 марта, 18:49

Stocks did not crash this morning, by Scott Sumner

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The day after Trump won an unexpected election victory, stocks on Wall Street rose modestly. This surprised many people, as previously stocks had done poorly on indications that Trump was doing well in the polls. Some attributed this to "second thoughts", as investors realized that with the GOP (unexpectedly) holding the Senate, Trump would be able to enact a pro-business agenda of tax cuts and deregulation. Some pointed to post election statements by Trump associates that he would not be looking to start trade wars. Then stocks kept rising, and as of today they are nearly 8% above post election levels. People began to refer to the "Trump trade", the idea that the stock market rally was caused by Trump. But exactly how? Stocks move on new information, and it's not clear to me what sort of new information came on the scene during the weeks and months after the election. But let's say I'm wrong, and that 8% surge in stock prices was due to growing confidence that Trump would be able to enact his pro-business policies. Here's my question for people who hold that view: 1. What specific factors caused this growing confidence? 2. Does anyone seriously believe that after Trump's health care reform crashed and burned on Friday, investors are much more confident of his ability to get stuff through Congress than in the heady days of enthusiasm right after the election? More confident? Seriously? 3. Many foreign stock markets have also rallied significantly, including Japan and China. Were those rallies also caused by Trump? Please don't tell me that the recent rejection of health care reform, which would have included a 3.8% cut in taxes on investment income, is just a temporary setback and that the program will eventually be enacted. That claim has absolutely no bearing on this post. The post is not about what will eventually happen, it's about whether investors now have much more reason to be confident about Trump's governing skills than they did on November 9th. Stocks move on new information. Over the past 4 1/2 months Trump has loomed very large in the minds of the public, both supporters and critics. But don't make the mistake of assuming that the stock market is obsessed with personalities in the way that you are. Don't assume that just because you overestimate the importance of individuals in shaping history, the stock market also makes that mistake. Don't anthropomorphize the market; it's not "the Trump market." If growing confidence in Trump's ability to enact reforms had caused the stock price rally over the past 4 1/2 months, then stocks would have crashed this morning. Instead they fell slightly. Presidents simply are not that important for stock prices. (That doesn't rule out their importance in other areas, such as foreign policy, but even there I think they are overrated.) Here is the S&P500, which rose just over 1% the day after the election, and has added almost another 8% since then. (16 COMMENTS)

26 марта, 22:29

Best Two Paragraphs of My Weekend Reading, by David Henderson

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The turning point came in 1758. The Philadelphia Yearly Meeting [of Quakers] recorded a "unanimous concern" against "the practice of importing, buying, selling, or keeping slaves for term of life." This was the first success for the cause of abolition anywhere in the Western world. "The history of the early abolitionist movement," writes historian Arthur Zilversmit, "is essentially the record of Quaker antislavery activities." Quakers also took an active interest in the welfare of former slaves. Many masters helped to support their slaves after manumitting them. Others compensated them for their labor during slavery. When Abner Woolman (the brother of John Woodman) in 1767 freed two slaves his wife had inherited, he decided to pay them a sum equal to the amount that the estate had been increased by their labor, and asked the Haddonfield (New Jersey) meeting to help him compute a just sum. This is from David Hackett Fischer, Albion's Seed: Four British Folkways in America, p. 602. I'm reading excerpts from Fischer's book for a forthcoming Liberty Fund colloquium on "Liberty and Diversity in the United States." I had known that the Quakers were key in the abolitionist movement in the United States. I hadn't realized how key. What's interesting also is that they, not surprisingly given their anti-slavery views, seemed to be the most libertarian group in the 18th century in what was to become the United States. This showed in their views on religious freedom. Many groups in the United States wanted the "freedom" to practice their own religion but not the freedom for others. But here's another quote from Fischer: The most important of these differences [that Quakers had with other groups in British North America] had to do with religious freedom--"liberty of conscience," William Penn called it. This was not the conventional Protestant idea of liberty to do only that which is right. The Quakers believed. that liberty of conscience extended even to ideas that they believed to be wrong. Their idea of "soul freedom" protected every Christian conscience. (p. 597) It's interesting to see how hard it was, though, even for such freedom-oriented people as the Quakers, to be completely tolerant of others' peaceful differences. Check this quote from Fischer: Many Quaker immigrants to Pennsylvania had experienced this religious persecution; they shared a determination to prevent its growth in their own province. The first fundamental law passed in Pennsylvania guaranteed liberty of conscience for all who believed in "one Almighty God," and established complete freedom of worship. It also provided penalties for those who "derided the religion of others." (p. 599) (3 COMMENTS)

25 марта, 23:14

Conservatives better hope that wages and prices are sticky, by Scott Sumner

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Macroeconomists are often lousy political philosophers. In previous posts I've discussed how macroeconomic views that are considered "liberal" or "conservative" actually have no obvious relationship to those political stances. For instance there's no obvious reason why "using monetary policy" (as Milton Friedman preferred) is less interventionist that a countercyclical budget deficit (as Keynes preferred.) One of the most amusing examples of this phenomenon is the critical reaction to Friedman and Schwartz's Monetary History of the United States. When the book first came out the message was viewed as being "conservative". Thus the Great Depression (in their view) was not caused by the inherent instability of capitalism, but rather by bad monetary policy. All of the statist interventions of FDR were not needed, and indeed were often counterproductive. (That's still my view.) By the 1990s, however, it was liberal economists who defended the book against conservative critics. By the 1990s, many of the right had moved past monetarism to flexible price "equilibrium models' of the business cycle, AKA, real business cycles. Keynesians kept insisting that because of sticky wages and prices, aggregate demand shocks still matter---and pointed to the Monetary History as supporting evidence. If you survey the field of macroeconomics, circa 2017, you see economists on the left almost unanimously acknowledging that wages and prices are sticky and that demand shocks have real effects on output. On the right side of the spectrum, there are people like Greg Mankiw, John Taylor and I who believe that wages and prices are sticky, but also a large group who are skeptical about whether wage and price stickiness is a key issue in the business cycle. In fairness, the stickiness skeptics hold views are often fairly nuanced, with some acknowledging price stickiness as a factor, but doubting its importance. Still, it's clear that on average the skepticism over sticky wage/price models of the business cycle is far more pronounced on the right than on the left. An outsider might naively assume that this political dichotomy occurs because wage and price stickiness is what Al Gore would call an "inconvenient truth" for those on the right. Nothing could be further from the truth. I am mostly on "the right" in my economic philosophy, but that's only because I believe wages and prices are sticky. If someone convinced me that they are actually flexible, I might be inclined to become more of a socialist. I believe that a combination of sticky wages and monetary shocks produce most of America's economic slumps, including the Great Contraction of 1929-33, as well as other big recessions like 1920-21, 1937-38, 1981-82 and 2008-09. I do not believe the capitalist system is "inherently unstable" and that big government is needed to stabilize it, rather I believe that it is naturally stable, as long as bad monetary policy doesn't interact with wage stickiness to produce business cycles. But suppose it were shown that I am wrong, and that wage/price stickiness is not an issue---what then? That would be very bad news for my laissez-faire ideology. Now I'd have to concede that events like the Great Contraction of 1929-33 showed that capitalism is indeed inherently unstable, and that this problem could not be fixed with good monetary policy. Now I'd have to entertain other solutions, such as big government and or comprehensive economic planning. To be fair, the real business cycle view that "technology shocks" cause business cycles is not necessarily identical to the left wing view that capitalism is inherently unstable. What RBC economists call 'technology shocks' could simply be bad economic policies by the government. And in my view they sometimes are bad policies. The NIRA caused the recovery to stall from July 1933 to May 1935, while Nixon's wage price controls led to an artificial boom in1972, and then a deep recession after they were removed and workers sought catch up pay increases. But my reading of economic history is that it not possible to develop a general theory of the American business cycle based on bad government policies. Indeed even where bad policies play a role, such as Hoover's policy of high wages, high tariffs, and high taxes, they don't even come close to explaining the 1929-33 downturn. The same policies during a period of stable NGDP growth would have simply meant a bit of stagflation. And lots of periods of "big government" policies are associated with strong growth, such as the period of LBJ's Great Society (1965-69). So thank God that the right is wrong about wage/price stickiness! It is a major issue, and when combined with bad monetary policy it leads to economic instability. Without wage price stickiness it pretty hard to argue in favor of conservative economic policies. The Great Depression directly led to immense human suffering and indirectly led to WWII, which caused even more suffering. Those things simply cannot be allowed to happen. Without wage price stickiness, the right would not have any persuasive arguments against those who want to use much more interventionist policies to prevent economic Depressions. Without wage/price stickiness, capitalism really would be inherently unstable. (13 COMMENTS)

25 марта, 20:06

Restless Judge Posner, by David Henderson

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Probably the best-known current federal judge who is not a Supreme Court justice is Richard Posner. He has been a judge on the 7th Circuit since 1981. Posner is known for his judicial decisions, his crystal-clear writing style in those decisions, and his prodigious output: over 40 books and hundreds of articles in law reviews, economics journals, and popular publications. Given his importance in both academia and the federal courts, we have been due for a book that tells us more about the man. In most of the important ways, William Domnarski's Richard Posner is that book. This is the opening paragraph from "The Restless Judge," my review of the book. Another excerpt: We see Posner call out various judges for intellectual laziness. He tangles with the late Supreme Court Justice and his former University of Chicago colleague, Antonin Scalia. He acerbically dresses down some police officers who have violated a defendant's Miranda rights. He confidently reaches conclusions about public policy based on his largely self-taught economic understanding. Posner on Scalia Posner is a harsh critic of federal judges, arguing that many of them are lazy and that they should write their own decisions rather than have their clerks write them. Two famous judges whom he takes on are current Chief Justice John Roberts and the late Justice Antonin Scalia. In a 2012 article in Slate, after Scalia had dissented from parts of the majority opinion that invalidated some provisions of an Arizona law on immigration, Posner raked Scalia over the coals. Scalia had written, "[Arizona's] citizens feel themselves under siege by large numbers of illegal immigrants who invade their property, strain their social services, and even place their lives in jeopardy." Wrote Posner, "But the suggestion that illegal immigrants in Arizona are invading Americans' property, straining their social services, and even placing their lives in jeopardy is sufficiently inflammatory to call for a citation to some reputable source of such hyperbole. Justice Scalia cites nothing to support it." Aside from his question-begging use of "hyperbole"--if it were hyperbole, one would be hard put to find a "reputable source" to support it--Posner made a good point. Posner on Miranda Warning and Cops In my view, Posner was at his finest in his 2014 United States v. Slaight opinion reversing the conviction of Michael Slaight for receipt and possession of child pornography. The police had clearly denied Slaight his Miranda warning, and Posner saw through it. Dismissing the police argument that they wanted to interview Slaight at the police station rather than at his home because his windows were covered with trash bags, blocking the sunlight, Posner wrote sardonically that "the officers gave no reason why an interview, unlike painting a landscape, requires natural rather than artificial light." As to their argument that the house "had a strong smell of cats," Posner, who to his credit is pro-cat throughout the book, wrote that "police smell much worse things in the line of duty." The final two sentences of Posner's decision are terse and beautiful: "These facts are incontrovertible and show that the average person in Slaight's position would have thought himself in custody. Any other conclusion would leave Miranda in tatters." I do end, however, by pointing out that Posner seems to have undue confidence in the willingness of powerful government officials to do the right thing even when they have little incentive to do so. (7 COMMENTS)