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The Library of Economics and Liberty
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22 июля, 23:33

One Giant Leap, by David Henderson

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At Tyler Cowen’s recommendation, I bought One Giant Leap: The Impossible Mission that Flew Us to the Moon,by Charles Fishman. I recommend it, with reservations. I had known very little of the moon landing. When it happened, on July 20, 1969, I didn’t have access to a television. I was working in a nickel mine at Soab Lake, 40 miles south of Thompson, Manitoba, and all we had was radio. A number of us sat around listening to it on radio and then went to bed. I still remember the question asked by my 38-year-old roommate in our 12 by 8 room, after we turned out the lights. “Do you think God will be mad at us for going to the moon?” he asked. Not wanting to wear my atheism on my sleeve, I answered, “No, I don’t think he will be.” What I liked about One Giant Leap It’s an excellent discussion of the development of the technology and of the various challenges. I hadn’t realized the incredible challenges that had to be met or how touch and go the whole thing was. One of the highlights is the story of Bill Tindall, who knocked heads at MIT to get the programmers there to be focused on throwing out inessential programs and keeping only what mattered.  A great line that starts the chapter “The Man Who Saved Apollo” is Tindall’s statement to the MIT engineers: “You sit at the very center of the success or failure of this extremely important program. You’re behind. Get it through your head: You are f**king this thing up.” Another highlight is the story of how John Houbolt insisted to Robert Seamans, the second in command at NASA and way up the organizational chain from Houbolt, that the only way to make it work was to have a lunar orbit rendezvous rather than having the whole thing land on the moon and take off. Houbolt prevailed. Another is the story of how close they came to running out of fuel as the lunar module descended to the moon. Astronaut Neil Armstrong used valuable fuel trying to find a find a good place to land on the uneven moonscape. Also, because the computer kept sending out alarms as the module was landing, one young MIT programmer, Don Eyles admitted, “If it were in my hands I would call an abort.” This was with the lunar module only feet above the moon.   What I didn’t like about One Giant Leap Fishman’s section on John F. Kennedy’s going back and forth about whether a moon landing was a good idea and why it was a good idea is way too lengthy. Fishman tells every little quiver of thought JFK had in each direction. I would bet that most readers would be like me, finding it interesting that JFK was ambivalent, but not needing to know each little switch in his thinking. Related to that, the book should have been at least 50 pages shorter. There’s a lot of verbosity. The other main thing I didn’t like was Fishman’s lengthy final chapter, “How Apollo Really Did Change the World.” In it, Fishman tries to justify the approximately $20 billion, in that decade’s dollars, expenditure on Apollo. He doesn’t succeed. He does tell us how the Apollo demand for integrated circuits sped up the computer revolution and that’s probably his best case. But other things would have sped it up. Counterfactuals are hard but he doesn’t even try.         (2 COMMENTS)

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22 июля, 16:14

The Discouraged Suitor, by Bryan Caplan

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Labor economists occasionally have a crisis of faith.  After years of scrutinizing the unemployment rate, they suddenly remember… discouraged workers.  Who are they?  They’re people who want a job, but aren’t officially unemployed because they aren’t actively searching for work. This is a serious problem – and a serious flaw with official unemployment rates.  True, we should not forget the Prideful Worker Effect – the workers who say they want a job, but refuse to do any job for which they’re genuinely qualified.  But if you take introspection half as seriously as I do, you can hardly deny that lots of people find job search extremely demoralizing.  When your whole ego and sense of self are on the line,  one needs Stoic determination to keep looking in the face of multiple rejections.  Every parent has seen even the sweetest of children surrender to despair.  Does anyone seriously believe that human beings cease to have these emotions by their eighteenth birthday? Happily, there’s a silver lining: If you ever become a discouraged worker, strong social norms rise to your defense.  Imagine you fail to find a job.  If anyone mocks your failure, virtually everyone will take your side.  The same applies if a bystander snarks, “I guess your very best just isn’t good enough, haha.”  Until you finally land a job, parents, friends, and total strangers will share a bounty of comfort, hope, and friendly advice on how to do better. Yes, you may prefer to brood alone.  Social norms, however, insist that discouraged workers need to be encouraged even if they don’t want to be encouraged.  If you say, “I can’t find a job,” you will hear a barrage of questions: “Where have you looked?”  “Are you using social media?”  “Maybe you’re aiming too high?”  “Have you asked your friend, Jim?”  Or even: “The economy’s picking up; have you tried re-applying anywhere?”  You’ll also enjoy an abundant supply of truisms: “You’ve got to keep trying,” “We all fail, but you can’t give up hope,” and “There’s no harm in asking.”  A tad annoying, but these questions are the expression of a valuable social norm: Encourage the discouraged. Once you take the plight of the Discouraged Worker to heart, you might wonder, “Are there any major analogous social ills that I’ve also overlooked?”  The first that comes to my mind is what I call the Discouraged Suitor.  Lonely people normally search for a mate; they’re analogous to the conventional unemployed.  Some lonely people, however, are analogous to Discouraged Workers.  Such people want to find love, but the dating experience is so depressing they stop trying. Denying the existence of Discouraged Suitors is as dogmatic as denying the existence of Discouraged Workers.  In both cases, people face a challenge of epic proportions: convince an employer to hire you… or convince a stranger to love you.  When the stakes are this high, failure is scary.  Unsurprisingly, then, we commonly respond to failure with despair: “I’ll never find a job” or “I’ll never find love.”  Discouraged Workers silently endure deep feelings of uselessness.  Discouraged Workers silently endure deep feelings of loneliness. There is however one major difference: Social norms on the treatment of Discouraged Suitors are none-too-supportive.  Parents and friends naturally urge the lonely to persist in the pursuit of true love: “There’s someone out there for everyone!”  Yet social norms have also long allowed public mockery of the socially awkward and unattractive: “You’re 25 and never had a girlfriend, heh!”  In recent years, moreover, norms against sexual harassment have become stricter and vaguer.*  Is asking a co-worker out on a date sexual harassment?  What about asking twice?  Sure, the probability that you will be fired for one vague affront remains low.  The typical Discouraged Suitor, however, is already petrified of rejection.  When the norm shifts from “Let them down easy” to “Zero tolerance for sexual harassment,” many lonely people choose the safe route of silent sorrow. Personally, none of this affects me.  I met my wife when I was nineteen, and have never dated anyone else.  Along the way, though, I have met many silently suffering lonely souls.  If Discouraged Workers deserve sympathy, don’t Discouraged Suitors deserve the same?  Needless to say, this doesn’t mean that Discouraged Suitors have a right to be loved or even liked.  Like everyone else, however, they should be treated with good manners.  Indeed, since Discouraged Suitors rarely speak up on their own behalf, should we not make an extra effort to consider their feelings? * Morrissey, one of my favorite singers, has said made multiple inflammatory comments on sexual harassment, but there’s a kernel of truth here: “Anyone who has ever said to someone else, ‘I like you,’ is suddenly being charged with sexual harassment.  You have to put these things into the right relations. If I can not tell anyone that I like him, how would they ever know?” (7 COMMENTS)

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19 июля, 23:59

The JEC report on the economy, by Scott Sumner

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The Joint Economic Committee of Congress has released a report that responds to the 2019 Economic Report of the President. The table of contents has a section on monetary policy, which caught my eye: Later on in the report (page 33) I saw this: Scott Sumner (2018) offers a proposal that involves the Federal Reserve setting “specific quantifiable goals” for price stability and maximum employment, or a metric that simultaneously embodies both, over the upcoming year. After the year has elapsed and the data becomes available, if the relevant metric(s) varied from the pre-specified goal, the Federal Reserve would report to Congress that monetary policy had been either too easy or too tight, and would propose how it will rectify the deviation. This would make it easier for the Federal Reserve to explain and justify corrective measures. An enhanced public understanding and acceptance of Federal Reserve corrective measures would enable less invasive Federal Reserve interventions as markets would adjust their behavior in advance. For example, if NGDP growth were used as the metric, and if it fell below the goal, then banks, anticipating corrective Federal Reserve measures, would be less inclined to curtail lending to hoard reserves, leading monetary conditions to ease and reducing the need for more drastic Federal Reserve interventions. I may be biased, but it seems to me that Congress really “gets it”.  I hope the Fed is paying attention to the policy views of their boss.  Believe it or not, there’s a lot that Congress could teach the Fed. HT:  Alex Schibuola (9 COMMENTS)

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19 июля, 16:29

The Case Against Education: Now in Paperback, by Bryan Caplan

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The Case Against Education is now in paperback, with a new Afterword by yours truly.  Highlights from the Afterword: My earlier work (Caplan 2007) maintains that when economists and the public disagree, the economists are usually right.  The Case Against Education, however, focuses on a rare topic where economists and the public are on the same page.  The sad result, in my view, is that economists end up rationalizing popular errors rather than correcting them.  Not all economists, of course; Michael Spence won a Nobel Prize for developing the signaling model on which my book relies.  Yet by and large, labor and education economists thoughtlessly equate schooling with “human capital formation.” Though this allegation may seem harsh, I stand by it.  Almost all of the evidence on jobs and incomes that economists present on behalf of the human capital model is equally consistent with the signaling model.  To adjudicate the debate, we need to go beyond economics to psychology, sociology, and education research – the fields that directly measure students’ learning and workers’ skills.  Yet few economists who specialize in education bother to skim this extra-economic research, much less read it carefully. What about that Arteaga study? An excellent article, but given the massive quantity of prior research, I am baffled by the idea that any one paper could appreciably tip the scales.  If the numbers from Universidad de Los Andes came out the other way, can we really imagine many economists abandoning the human capital model, or even significantly moderating their support?  In any case, the Colombian curriculum reform axed some of economics and business students’ most vocational coursework! [T]he reform: (i) took six mandatory courses and change them to optional courses (Monetary Policy, Public Finance, Trade, Marxist Economics, Colombian Economic Policy, and Social Programs Evaluation); (ii) reduced the number of optional courses by four; (iii) combined two probability and statistics courses into one; and (iv) combined accounting and economic measurement courses into one. The business department eliminated Computer Programming, Simulations, and Microeconomics I. In addition, the requirement of six upper-division electives was reduced to three. For both majors, instruction time was reduced from 4.5 years to 4 years. (Arteaga 2018, p.214) After interviewing employers, Arteaga reports: (i) most knew about the reform from talking to recent graduates; (ii) they believe they can detect changes in human capital through tests they administered in the recruitment process; (iii) they argue that for some jobs, the content made optional in the new curriculum is critical; (iv) they believe that taking fewer elective courses affects graduates’ labor prospects beyond the recruitment process, because the professors in those courses are helpful with job offers and job referrals; and (v) wages for new graduates are fixed. Obviously Arteaga had to work with the natural experiment that really occurred, but she is looking for signaling outside its native habitat.  Looking forward, researchers should instead keep their eyes peeled for curriculum reforms that add or subtract clear-cut “fluff.”  The foreign language requirements so many Ph.D.s in the sciences used to endure are one fine example. Big picture: After ceding sprawling intellectual territory to signaling, however, most respondents balked at my top policy recommendation: educational austerity.  If we’re wasting hundreds of billions of taxpayer dollars on a vast academic arms race, why not cut the subsidies?  The balkers coalesce into four main groups: humanists, reformers, egalitarians, and fatalists. How do all four groups go wrong?  Buy the book to find out! (6 COMMENTS)

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19 июля, 00:52

Political issues of the 2020s, by Scott Sumner

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Politics is always in a state of flux, with old coalitions dissolving and new coalitions forming. Urban planning is likely to be one of the hot issues of the next decade, which will help to shape this realignment. Consider the case of Plano, a large affluent suburb of 288,000, north of Dallas.  The city government put together a plan to add high density housing near transit corridors, which is an increasingly popular trend in urban planning.  Texas is known as a pro-development state, and has much lower housing prices than many other major population centers, due to lenient zoning rules. Texas is also a politically conservative state.  Nonetheless, the plan to add to Plano’s housing stock attracted intense opposition.  This 2018 article provides some background analysis: Looking at the history of accusations, rumors, and disinformation surrounding this fight, the conflict seems more closely connected to clashing visions of American life. Beginning with the Levittown developments after World War II, the American suburb was sold as an ideal of success built on prosperity and homogeneity. But the sense of permanence and security suggested by that ideal was also something of an illusion. The suburban development model, in fact, promoted a cycle of growth that transformed communities into a kind of disposable commodity. Today’s attractive suburb becomes tomorrow’s eroding, challenged community. North Texas’ inner-ring suburbs were once treasured, only to be abandoned for the greener pastures of Plano. Now, just as Carruth once moved from Farmers Branch to Plano, younger families are moving farther out, to towns like Anna and Melissa. For the communities left behind, the only way to survive is to adapt, which is exactly what the Plano Tomorrow plan attempts to do. As demographics have shifted, the inner-ring suburbs have seen their tax bases shrink, infrastructure crumble, and schools suffer. By strategically introducing pockets of density that complement existing suburban neighborhoods, the Plano Tomorrow plan offers a road map to shoring up long-term prosperity. Even Carruth admits she enjoys the shops and restaurants at the mixed-use Legacy West development. The article also suggests that there might have been racial overtones to opposition to the construction of apartment complexes: There is, of course, an ugly subtext to all this talk about density and development. During a recent election, the Plano mayor says, he was accused of “trying to turn Plano into another Harlem.” An opponent’s campaign slogan was “Keep Plano Suburban.” “It is not only the elephant in the room, it is the hippopotamus and the bear in the room,” LaRosiliere says. A more recent article from a month ago suggests that the mayor will be unable to enact the plan, due to strong opposition: Saturday’s defeat of council member Ron Kelley by Shelby Williams and Lily Bao’s victory over Ann Bacchus for an open seat means Mayor Harry LaRosiliere’s long-held majority support has evaporated. Now municipal decision-making must move forward with a council divided, 4-to-4, between LaRosiliere and his bloc versus those elected leaders who are likely to oppose him on key contentious issues. The campaign was unusually nasty, on both sides: Many of the voters I talked with said this election was a referendum on the development-friendly faction of the council, which they believe has arrogantly rammed growth down residents’ throats. And Gov. Greg Abbott’s endorsement of Williams and Bao sealed the deal for many voters. What passed for campaigning was a smutty mess: Homophobic and Islamophobic comments on social media. Whispers that developers would walk away from important projects. Statements such as “evil people who claim to be Christians” and candidate signs and literature defaced with “liar” and the 666 “sign of the beast.” Accusations of law-breaking and political conspiracies involving conservative Empower Texans and liberal out-of-state donors. In the final days, Bacchus’ opponents captured video of her appearing to spit in the direction of opponents at a polling place. Bacchus denied she did so. Amid the false accusations, name-calling and shameless behavior, I was most struck by the absolute absence of middle ground. Supporters of each candidate were certain theirs was the champion and the opponent was the devil incarnate. It’s a bit odd to see a conservative Texas governor weigh in on a city council race in a suburb, even more unusual to see him favor the candidates opposed to new development.  Within Texas, liberal Austin has traditionally been more cautious about development than more conservative areas such as Dallas and Houston. In my view, the debate over urban planning will jumble up ideological allegiances, just as issues such as trade, technology, school choice and foreign policy are increasingly crossing party lines.  Eventually, each party will coalesce around a new matrix of views.  But with America’s two party system that won’t be easy.  Look for the 2020s to be a politically confusing decade, before a new partisan split comes into existence.  Things were so much clearer during the 1980s. PS.  If Will Wilkinson is correct, then arguments about urban density are actually arguments about fundamental issues such as cultural and political identity. (20 COMMENTS)

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18 июля, 18:48

Somewhere Inside Humanity, by David Henderson

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I told Min-Jin that Iain and I met at a concert while in college. I couldn’t figure out how to describe the sounds of the Chemical Brothers. Just then, Min-Jin started singing some Western songs, beginning with “My Heart Will Go On,” by Celine Dion. It seemed that everyone, no matter how isolated their society is, knows the movie Titanic and the song that goes with it. “Do you know what hip-hop is?” I asked. She looked confused. “It’s like rap music,” I continued. “Oh, yes!” she replied and jumped up from the couch where she was sprawled out. “Is this rap music?” she asked and began to bounce up and down with her arms spread out. “Yo, yo, yo!” she chanted before keeling over laughing. We were two young women from opposite worlds sharing a moment of levity. It was the first time I had felt anything other than fear and sadness during my captivity.   The “I” in the above quote is Laura Ling, the U.S. reporter who briefly was on the North Korean side of the Tumen River, which separates China and North Korea, and was chased to the Chinese side by North Korean soldiers and captured. Min-Jin is one of her guards while she was in captivity for over 4 months. I found that passage particularly moving: humans being joyful humans in ugly circumstances. I thought Laura Ling did it right: always reaching for the humanity in her captors. The book this is from, Somewhere Inside, by Laura Ling and her sister, Lisa Ling, is the first one I’ve read and finished at my cottage in Canada. (2 COMMENTS)

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18 июля, 16:52

“España Es Como Una Madre”, by Bryan Caplan

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Our most memorable Uber driver in Madrid was a young Pakistani man.  We gave him twenty minutes; he gave us his odyssey.  Too bad I failed to recorded the conversation, because this would have been a great interview to broadcast on Spanish radio. Our driver’s story: Back in Pakistan, he lived in hunger, so he left home to seek his fortune.  In popular parlance, he became part of the “European migrant crisis.”  He traveled solo, journeying from Pakistan to Iran to Turkey.  Then he zigzagged around the EU, passing through Greece, Romania, Germany, Italy, and France.  Our driver gave few details, but each of these countries treated him badly.  He had to hide from the authorities, and could not legally work. After three months, however, he reached Spain – and his life turned around.  My Spanish sources tell me that migrants must normally wait three years to receive work permission, but my driver somehow managed to get his work papers almost immediately. Three years later, he speaks Spanish, has plenty to eat, and loves his new home.  Indeed, he practically describes Spain as a libertarian paradise: work hard, don’t hurt people, don’t steal, and you’ll have a good life.  Using his Spanish travel documents, he was even able to visit Britain.  He liked it, but saw no hope of ever legally working there. My Spanish is very poor, but I had no trouble understanding our driver when he gushed, “España es como una madre” – “Spain is like a mother.”  He didn’t say a word about government benefits; he was overjoyed to live in a country where he could live in peace and get ahead by working hard.  Though we didn’t even have a language in common, he was my kind of guy.  The American Dream is also the Spanish Dream, because both are the World Dream.   (5 COMMENTS)

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17 июля, 17:56

Minimum Wage: A Most Remarkable Belief, by Pierre Lemieux

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In a study published earlier this month, “The Effects on Employment and Family Income of Increasing the Federal Minimum Wage,” the Congressional Budget Office (CBO) estimated that a gradual increase of the federal minimum wage to $15 an hour by 2025 (from the current $7.25) would boost the wages of 17 million workers at the cost of 1.3 million pushed out of employment. (Lower increases in the minimum wage would have similar but reduced effects.) The reaction of Rep. Bobby Scott (D., Va.), as reported by the Wall Street Journal (“$15 Minimum Wage Would Bring Mixed Fortunes for U.S. Workers,” July 8, 2019) was typical of what many if not most minimum wage advocates believe: If you look at the whole report, there’s no question there are significant benefits for a massive number of people that far outweigh whatever the cost might be. This is a most remarkable belief. It means that the state should purposely intervene to harm some citizens in order to favor others. If the state represents all citizens equally, how could this discrimination be justified? One common answer is that the alternative of non-intervention would similarly discriminate against the other group—in favor of the 1.3 million against the 17 million. However, this idea that non-intervention is merely another form of intervention is difficult to defend in a free society. It assigns the same value to a constraint generated by the equal liberty of everybody, and a constraint imposed by the power of some people. It negates the moral difference between “I cannot earn more because no consumer wants to pay more for what I can produce,” and “I cannot earn more because some group of individuals have decided to forbid anybody to pay me a wage I am willing to accept (instead of being unemployed).” Interestingly, minimum wages don’t even satisfy the criterion of welfare economics (and cost-benefit analysis) according to which imposing costs on some individuals in order to generate benefits for others is justified if the benefits are greater than the costs and the gainers could theoretically compensate the losers and still be better off. Since minimum wages create some unemployment, it necessarily reduces the total value of production, which implies that some individuals must be harmed. In the case under consideration, the CBO estimates that American families would incur a net loss of $8.7 billion in real income (in 2018 dollars). Real individuals must shoulder this loss. At a less philosophical but related level, what we know about economics contradicts the idea that economic efficiency could be improved by politicians and government bureaucrats fixing the minimum (or the maximum) level of wages or other prices. Even if the minimum wage increased the total value of production, it would still be a strange belief to view it as a desirable public policy. For it amounts to accepting that the state actively discriminate against some of its subjects (or supposed citizens). It amounts to accepting what Anthony de Jasay called “the adversarial state,” which, instead of being an impartial arbiter, actively takes sides among its subjects (see my Econlib review of his book The State). One way to argue with the 1.3 million American workers unemployed because of the minimum wage increase is to tell them something like the following. “Sure, you are unemployed in order that 17 millions of your comrades earn more. But this is part of your cost of living in society, and you do obtain overall net benefits from your participation in the social contract. In this case, you are the ones harmed, but in other cases—like, say, Medicaid or public education for your children—you win.” This contractarian argument, however, does not satisfy the sort of (tacit) social contract that would be beneficial to everybody as theorized by James Buchanan. It is extremely doubtful that a unanimous social contract can be seriously invoked to defend the minimum wage. Being denied the opportunity to participate in the labor market, even if one’s wage would otherwise be low, is a major handicap, both financially and psychologically. And this handicap hurts the least productive and flexible workers (this is why they are the ones to lose their jobs), those who are already at the bottom of the social ladder and are far from overprivileged by the status quo. As a means of redistribution, the minimum wage often amounts to taking from the poorest in order to give to the less poor. (I say “often” because many minimum wage earners, like second earners or children, live in non-poor families.) How can we can imagine everybody consenting to a social contract allowing that? Even if one supports some state redistribution (or social insurance) in some circumstances (as Buchanan did), the minimum wage exemplifies a most coercive and arbitrarily form of redistribution. (51 COMMENTS)

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17 июля, 16:08

Reflections from Spain, by Bryan Caplan

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I just got back from a five-week visit to Spain.  The first four weeks, I was teaching labor economics at Universidad Francisco Marroquín while my sons took Spanish-language classes on Islamism, Self-Government, and the Philosophy of Hayek.  Then we rented a van and saw Cordoba, Seville, Gibraltar, Fuengirola, Granada, and Cuenca.  During my stay, I also spoke to the Instituto von Mises in Barcelona, Effective Altruism Madrid, the Rafael del Pino Foundation, and the Juan de Mariana Institute.  I had ample time to share ideas with UFM Madrid Director Gonzalo Melián, UFM professor Eduardo Fernández, Juan Pina and Roxana Niculu of the Fundación para el Avance de la Libertad, and my Facebook friend Scott McLain.  Using my sons as interpreters, I also conversed with about 25 Uber drivers.  Hardly a scientific sample, but here are my reflections on the experience. 1. Overall, Spain was richer and more functional than I expected.  The grocery stores are very well-stocked; the worst grocery store I saw in Spain offered higher quality, more variety, and lower prices than the best grocery store I saw in Denmark, Sweden, or Norway.  Restaurants are cheap, even in the tourist areas.  Almost all workers I encountered did their jobs with a friendly and professional attitude.  There is near-zero violent crime, though many locals warned us about pickpockets. 2. The biggest surprise was the low level of English knowledge of the population.  Even in tourist areas, most people spoke virtually no English.  Without my sons, I would have been reduced to pantomiming (or Google translate) many times a day.  Movie theaters were nevertheless full of undubbed Hollywood movies, and signs in (broken) English were omnipresent. 3. I wasn’t surprised by the high level of immigration, but I was shocked by its distribution.  While there are many migrants from Spanish America, no single country has sent more than 15% of Spain’s migrants!  The biggest source country, to my surprise, is Romania; my wife chatted with fellow Romanians on a near-daily basis.  I was puzzled until a Romanian Uber driver told me that a Romanian can attain near-fluent Spanish in 3-4 months.  Morocco comes in at #2, but Muslims are less visible in Madrid than in any other European capital I’ve visited. 4. 75% of our Uber drivers were immigrants, so we heard many tales of the immigrant experience.  Romanians aside, we had drivers from Venezuela, Peru, Ecuador, Colombia, and Pakistan.  Even the Pakistanis seemed highly assimilated and almost overjoyed to reside in Spain.  By the way, Uber in Spain works even better than in the U.S.  The median wait time was 3 minutes, and the prices were about one-third less than in the U.S. 5. Refugees from Chavismo were prominent and vocal.  One Venezuelan Uber driver was vocally pro-Trump.  You might credit Trump’s opposition to Maduro, but the driver said she liked him because “He doesn’t talk like a regular politician.”  I wanted to ask, “Couldn’t you say the same about Chavez and Maduro?!” but I was in listening mode. 6. I’ve long been dumbfounded by Spain’s high unemployment rate, which peaked at around 27% during the Great Recession and currently stands at about 15%.  Could labor market regulation really be so much worse in Spain than in France or Italy?  My chats with local economists – and observation of the labor market – confirmed my skepticism.  According to these sources, a lot of officially “unemployed” workers are lying to collect unemployment insurance while they work in the black market.  Immigrants reported little trouble finding work, though they did gravitate toward “New Economy” jobs like Uber driving.  I still think that Spanish unemployment is a tragic problem, especially for the young.  Yet properly measured, finding a job in Spain is plausibly easier than finding a job in France or Italy.  (This obviously raises the question, “To what extent is unemployment in France and Italy inflated in the same way?”  If you know of good sources, please share in the comments). 7. If I didn’t know the history of the Spanish Civil War, I never would have guessed that Spain ever had a militant labor movement.  Tipping was even rarer than in France, but sincere devotion to customer service seems higher than in the U.S.  Perhaps my sons charmed them with their high-brow Spanish, but I doubt that explains more than a small share of what I saw.  A rental car worker apologized for charging me for returning my car with a 95% full tank, adding, “Sorry, but my boss will yell at me if I don’t.” 8. Catalan independence is a weighty issue for both Barcelona and Madrid libertarians.  Madrid libertarians say that an independent Catalonia would be very socialist; Barcelona libertarians say the opposite.  I found the madrileños slightly more compelling here, but thought both groups were wasting time on this distraction.  Libertarians around the world should downplay identity and focus on the policy trinity of deregulating immigration, employment, and housing.  (Plus austerity, of course). 9. UFM Madrid Director Gonzalo Melián was originally an architect.  We discussed Spanish housing regulation at length, and I walked away thinking that Spain is strangling construction about as severely as the U.S. does. 10. Spanish housing regulation is especially crazy, however, because the country is unbelievably empty.  You can see vast unused lands even ten miles from Madrid.  The train trip to Barcelona passes through hundreds of miles of desert.  Yes, the U.S. has even lower population density, but Spain is empty even in regions where many millions of people would plausibly like to live. 11. The quickest way to explain Spain to an American: Spain is the California of Europe.  I grew up in Los Angeles, and often found myself looking around and thinking, “This could easily be California.”  The parallel is most obvious for geography – the deserts, the mountains, the coasts.  But it’s also true architecturally; the typical building in Madrid looks like it was built in California in 1975.  And at least in summer, the climates of Spain and California match closely.  Spain’s left-wing politics would also resonate with Californians, but Spain doesn’t seem so leftist by European standards.  Indeed, Spaniards often told me that their parents remain staunch Franco supporters. 12. My biggest epiphany: Spain has more to gain from immigration than virtually any other country on Earth.  There are almost 500 million native Spanish speakers on Earth – and only 47 million people in Spain.  (Never mind all those non-Spanish speakers who can acquire fluency in less than a year!)  Nearly all of these Spanish speakers live in countries that are markedly poorer and more dangerous than Spain, so vast numbers would love to migrate.  And due to the low linguistic and cultural barriers, the migrants are ready to hit the ground running.  You can already see migration-fueled growth all over Spain, but that’s only a small fraction of Spain’s potential. 13. Won’t these migrants vote to ruin Spain?  I don’t see the slightest hint of this.  Migrants come to work, not to change Spain.  And it’s far from clear that natives’ political views are better than migrants’.  Podemos, the left-wing populist party, doesn’t particularly appeal to immigrant voters.  Vox, the right-wing populist party, seems to want more immigration from Spanish America, though they naturally want to slash Muslim immigration. 14. How can immigration to Spain be such a free lunch?  Simple: Expanding a well-functioning economy is far easier than fixing a poorly-functioning economy. The Romanian economy, for example, has low productivity.  Romanian people, however, produce far more in Spain than at home.  Give them four months to learn the language, and they’re ready to roll. 15. According to my sources, Spain’s immigration laws willfully defy this economic logic.  When illegal migrants register with the government, they immediately become eligible for many government benefits.  Before migrants can legally work, however, they must wait three years.  Unsurprisingly, then, you see many people who look like illegal immigrants working informally on the streets, peddling bottled water, sunglasses, purses, and the like.  I met one family that was sponsoring Venezuelan refugees.  Without their sponsorship, the refugees would basically be held as prisoners in a government camp – or even get deported to Venezuela.  Why not flip these policies, so migrants can work immediately, but wait three years to become eligible for government benefits?  Who really thinks that people have a right to the labor of others, but no right to labor themselves? 16. Our favorite day was actually spent in Gibraltar.  Highly recommended; you simply cannot overrate the apes.  I was astounded to learn that the border with Spain was totally closed until 1982, and only normalized in 1985.  In a rare triumph of the self-interested voter hypothesis, 96% of Gibraltarians voted against Brexit.  Crossing the border is already kind of a pain; pedestrians have to go through (cursory) Spanish and British passport checks both ways, and the car line is supposed to take an hour.  I’d hate to be living in Gibraltar if security gets any tighter. 17. Big question: Why is Spain so much richer now than almost any country in Spanish America?  Before you answer with great confidence, ponder this: According to Angus Maddison’s data on per-capita GDP in 1950, Spain was poorer than Argentina, Chile, Mexico, Peru, Uruguay, and Venezuela, and roughly equal to Colombia, Bolivia, Costa Rica, Cuba, Ecuador, Guatemala, and Panama.  This is 11 years after the end of the Spanish Civil War, and Spain of course stayed out of World War II. 18. Related observation: Once you’ve seen Spain, the idea that underdevelopment and oppression are somehow “intrinsic to Islam” is ridiculous.  The monuments of eight centuries of Muslim civilization in Spain are all around you.  So are basic facts like: Muslim Cordoba was once the largest city in Europe – and plausibly the most tolerant as well.  While bad outcomes are somewhat persistent, dramatic turnarounds are also common. 19. Another example: In less than a century, Spain has gone from being a battleground between reactionary Catholicism and violent atheism to a land of extreme religious apathy.  Non-practicing Catholics now outnumber practicing Catholics 2:1. 20. After I visit a new country, Tyler Cowen always asks me, “Are you long or short?”  In terms of potential, I’m very long on Spain.  The trinity of “deregulate immigration, employment, and housing” is vital in almost every country, but this formula would do more for Spain than nearly any other country.  Wise policy would make Spain the biggest economy in Europe in twenty years flat.  Unfortunately, these policies are highly unlikely to be adopted anytime soon, so my actual forecast is only moderately positive.  At this point, I can picture Tyler aphorizing, “The very fact that a country has massive unrealized potential is a reason to be pessimistic about its future.”  But this goes too far.  All else equal, a higher upper bound is clearly a reason for optimism – and by European standards, the Spanish economy is now doing very well. 21. Overall, my visit has made me more optimistic about Spain.  Much of the measured unemployment is illusory, and immigrants are pouring in to profit from Spain’s combination of high productivity and linguistic accessibility.  Housing policy remains bad.  Since housing regulation is decentralized, however, some regions of Spain will be atypically tolerant of new construction.  Where is the Texas of Spain?  I don’t know, but that’s where the future is. Correction: I originally stated that Spain had lower population density than the contiguous U.S., but I was mixing up population per square mile and population per square kilometer. (29 COMMENTS)

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17 июля, 02:50

Health care subsidies are almost impossible to reform, by Scott Sumner

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Imagine if the government gave people a subsidy of $5000 each time they bought a new car. That would be inefficient, encouraging the excessive purchase of new cars. Now imagine that the subsidy was 40% of the price of the car, up to a price of $25000. That would be even more inefficient, encouraging the excessive purchase of cars, and also encouraging the purchase of cars of excessively high quality. Now imagine a 40% car subsidy that had no upper limit. That would be extremely inefficient. That last option, a “Cadillac subsidy”, is a good description of our health care system. The government effectively pays roughly 40% of the cost of private health insurance, via tax subsidies. That means if you buy a health care plan that costs $20,000/year, it actually only sets you back roughly $12,000/year. This subsidy encourages people to consume too much healthcare. By far the best aspect of the Obama healthcare bill was the “Cadillac tax” on expensive health care plans. The best way to think about this “tax” is that it essentially removed the 40% subsidy on health insurance premiums, above a certain level. It’s analogous to going from a 40% subsidy on all new cars, to a 40% subsidy on only the first $25,000 spent on a new car. In my previous post I discussed the awesome power of the health care industry. According to this article, tomorrow we may see an example of that power in Congress: Congress will be voting Wednesday on a repeal of what is known as the “Cadillac Tax”—a provision of the Affordable Care Act which would place a 40% tax on employer-sponsored health care plans which provide excess benefits. Think tanks and industry advocates have been fighting the implementation of the tax for years, and successfully delayed it until 2023. The tax was supposed to be a funding source and would include 40% on anything greater than the value of health insurance benefits surpassing approximately $11,200 for individuals and $30,150 for families in 2022, according to the Tax Foundation. . . And now it seems like it’s headed for the chopping block. Needless to say, any repeal is unlikely to be offset by tax increases or spending cuts in other areas. We’ll just add the bill to the tab that we are already leaving to the next generation. The deficit will continue to reach unprecedented levels for a period of peace and prosperity. Is there any constituency for sensible economic reforms, in either party? (22 COMMENTS)

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16 июля, 18:59

Why both liberals and conservatives will lose on health care (in the short run), by Scott Sumner

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Our current health care system fails at almost every level. Because the health care for most people is paid for by third parties (mostly the government), costs have exploded to levels far high than optimal. This has reduced real wages for millions of Americans. And yet tens of millions of lower and moderate-income people have no health insurance at all. Liberals want to remedy this situation with some form of universal health care, while conservatives would like to the system to adopt more free market mechanisms to hold down costs. Both will likely fail. The basic problem here is that health care has grown to 17% of GDP, a level where the industry is simply too powerful to reform. Washington state recent adopted a public option, allowing its citizens to buy into a Medicare type insurance policy. But opposition from the health care industry was so strong that they had to boost payments to 160% of Medicare levels to buy off the opposition. But the law also made big compromises that experts say will make it less powerful. To gain enough political support to pass, health care prices were set significantly higher than drafters originally hoped. “It started out as a very aggressive effort to push down prices to Medicare levels, and ended up something quite a bit more modest,” said Larry Levitt, senior vice president for health reform at the Kaiser Family Foundation. The basic problem for both liberals and conservatives is that their proposed reforms would imply a huge fall in income to the health care industry, and that’s not politically feasible for the following two reasons: 1. Liberals favor European style health care, which typical costs about 10% of GDP. It’s not politically feasible to raise enough revenue to pay for a Medicare program costing 17% of GDP. Indeed that sum is greater than the total amount of revenue currently raised by the federal government. Socialized medicine in America can only be achieved by slashing the incomes of doctors, nurses, administrators, support staff, and other medical industry personnel to much lower levels. 2. Conservatives favor a more market-oriented approach, as in Singapore. But Singapore spends only 5% of GDP on health care, a sum that would be completely unacceptable to America’s health care industry. Liberals believe their opponents on health care are heartless conservatives. Conservatives believe their opponent are starry-eyed liberals. Both are wrong; it is the health care industry itself that blocks all meaningful reforms. Maybe change will be possible in the long run, if we nibble away at the power of big medicine in a 100 tiny reforms, one step at a time. HT:  Tyler Cowen (23 COMMENTS)

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16 июля, 17:07

Against Tu Quoque, by Bryan Caplan

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War crimes trials often weigh on the consciences of the conscientious.  Aren’t such proceedings mere “victor’s justice”?  The hypocrisy is usually palpable; after all, how often does either side in a violent conflict walk away with clean hands?  Unsurprisingly, then, one of defendants’ favorite legal strategies is to tell their prosecutors, “Well, you guys did the same.”  It’s called the tu quoque defense: An argument from fairness, the tu quoque argument has an enduring appeal to the human conscience. Simply put, tu quoque is the Latin rendition of “you too”, with the argument built-in, though often unstated: “Since you have committed the same crime, why are you prosecuting me?” Cast in more affirmative terms, the argument is that if one side in a conflict has committed certain crimes, it has no authority to prosecute or punish nationals of the other side for the same or closely similar crimes. Whatever effect a decision-maker may choose to give it, the argument troubles the human soul, when it is presented in a fitting situation. To be honest, though, I have trouble seeing why this argument has any appeal, much less “enduring appeal.” Consider: If a law is unjust, the less you enforce it, the better.  This remains true even if 99% of violators get punished, because sparing 1% is less unjust than sparing 0%.  To quote one of the best things Murray Rothbard ever said about ethics: [T]he justice of equality of treatment depends first of all on the justice of the treatment itself. Suppose, for example, that Jones, with his retinue, proposes to enslave a group of people. Are we to maintain that “justice”  requires that each be enslaved equally? And suppose that someone has the good fortune to escape. Are we to condemn him for evading the equality of justice meted out to his fellows? It is obvious that equality of treatment is no canon of justice whatever. If a measure is unjust, then it is just that it have as little general effect as possible. Equality of unjust treatment can never be upheld as an ideal of justice. By the same logic, if a law is just, the more you enforce it, the better.  This remains true even if 99% of violators are never punished.  Giving 1% of monsters what they deserve is less unjust than giving 0% of monsters what they deserve.  If you have the chance to inflict retribution on 1% of the camp guards at Auschwitz, why not go for it?  Sure, if you’re a war criminal yourself, we should urge you to submit to punishment as well.  If that’s not going to happen, though, why not take whatever justice you’re willing to dole out? Justice aside, the consequentialist case against the tu quoque defense is also solid.  Since victory is never assured, it’s good for people on all sides to know, “I will be harshly punished for my war crimes… if my side loses.”  While it would be better if people knew they would be punished regardless of the outcome of the war, conditional deterrence is better than no deterrence at all. Isn’t it possible, though, that people will commit additional war crimes to avoid prosecution for earlier war crimes?  The answer, of course, is: “Sure, it’s possible.”  Most obviously, fear of war crimes trials provides an incentive to murder witnesses ASAP.  Yet the same goes for any law.  Laws against murder create an incentive to murder people who witness your murders.  Yet this is a flimsy objection to laws against murder, because shrewd consequentialists focus on overall net effects, not worst-case scenarios. What’s the best case against war crimes trials?  Simple: War crimes trials might delay peace – or reignite a war – and war is hell.  Indeed, war is often hellish enough to overcome the intuitive moral presumption in favor of making violent criminals suffer for their misdeeds.  When countries adopt amnesties to prevent future bloodshed, I keep my mind open. When you firmly have the upper-hand, though, I say retribution dulce et decorum est.  Letting Soviet war criminals off the hook in 1991 was defensible, though it would have been safe and wise to permanently bar former Communist Party members from holding public office.  In 1945, though, defeated Axis war criminals were sitting ducks.  Making tens of thousands of them pay in full for their offenses would have been easy, just, and instructive.  Punishing all the war criminals on both sides would naturally have been even more just and instructive, but anything but easy. (6 COMMENTS)