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The Library of Economics and Liberty
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28 января, 19:29

Looking at the Wrong Books

Russ Robert’s interview with Janine Barchas opens so many avenues that I want to pursue for thought and discussion that I’m as dizzy as an Austen heroine’s younger sister at her first ball. The question of why Austen is still so firmly in the canon, what other Victorian novelists have been unjustly neglected, the popularity of modern Hollywood/BBC/Bollywood versions of Austen novels–each one merits a blog post of its own.   But I was particularly intrigued by Barchas’s discovery and analysis of cheap editions of Austen’s work. I’ve argued in a range of other articles for FEE, Cato Unbound, and Reason, that if we want to find evidence of the positive representations of the bourgeois virtues in literature, we need to read books intended for the bourgeois–not aimed at the cultural elite. I’ve used that to argue for taking romance novels and “shopgirl” novels seriously. In Barchas’s interview and book, a similar argument gives us an excellent reminder of the fact that cultural products are delightfully slippery. They refuse to stay in the class for which they are produced.    Austen’s novels, initially brought out in 3 volume editions (as was typical for many novels of the period) were priced higher than the average weekly wage. Later editions brought the price down to 6 shillings, which was still out of reach for the average unskilled worker. But their popularity spurred later even less expensive editions of the novels, which were available for a shilling or two. Suddenly Austen’s novels were in reach of nearly everyone. An elite cultural product became a pop cultural product. We think of Austen as “elite,” but because this part of her publication history has been unstudied, we are missing a huge part of the story. As Barchas says, “that phenomenon of her being read by coal miners, and school children, and ordinary working people is not something we usually have accounted for in our reception-histories of Austen, simply because we’ve been looking at the wrong books.”    And by the wrong books, Barchas doesn’t mean only what I have argued in the past–that we need to look at different genres and different authors. She means that we need to look at different editions and at publication histories of authors we think we know as well. Jane Austen started out as the kind of thing that “toffs” read, but she became the kind of thing that everyone read–and the cheap editions of her work helped that become true. (I suspect that modern pop culture versions of Austen, from Clueless to The Lizzie Bennet Diaries  have done the same for Austen in the 21st century.)   While Barchas isn’t a fan of Kindles and ebooks, I wonder if they are the most accurate modern analogue for the cheap railway editions that brought Austen into the canon? They lower the financial and transaction costs of buying or borrowing new books, and they address the storage and inheritance problems that have been worrying Russ of late. Unlike the railway editions, however, ebooks will leave no traces behind them to be mapped future students of publication history, no matter what they do to elevate and secure the reputations of their authors. (0 COMMENTS)

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28 января, 04:29

The Truth About Income Inequality

  On a global scale, inequality is declining. While it has increased within the United States, it has not grown nearly as much as people often claim. The American poor and middle class have been gaining ground, and the much-touted disappearance of the middle class has happened mainly because the ranks of the people above the middle class have swollen. And while substantially raising tax rates on higher-income people is often touted as a fix for inequality, it would probably hurt lower-income people as well as the wealthy. The same goes for a tax on wealth. Most important: Not all income inequality is bad. Inequality emerges in more than one way, some of it justifiable, some of it not. Most of what is framed as a problem of inequality is better conceived as either a problem of poverty or a problem of unjustly acquired wealth. These are two of the opening paragraphs of my article “The Truth About Income Inequality,” Reason, February 2020. Read the whole thing. (15 COMMENTS)

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27 января, 22:59

Trump, Behavioral Economics, and Public Choice

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As President Trump’s impeachment trial plays out in the U.S. Senate, it’s striking that such a grave situation has resulted from such a trivial cause. By that I don’t mean the allegations against him are trivial, but rather that the gains he allegedly sought from Ukrainian President Volodymyr Zelensky seem meager when compared to the legal and reputational risks he and several of his adjutants appear to have taken. A Ukrainian announcement of an investigation into dubious conspiracy theories involving the president’s political opponents was unlikely to deliver Trump much political benefit. However, the costs of pursuing that benefit are proving to be steep: history will record him as the third U.S. president to be impeached, the congressional proceedings and other investigations of his administration are revealing embarrassing information about him and his inner circle, and defending against the allegations (in public as well as the Senate) is consuming substantial resources that he and other Republicans could have devoted to the 2020 election cycle. It’s tempting to conclude that President Trump severely miscalculated in his benefit–cost analysis when he decided to get involved in Ukraine. Yet, he has made similar apparent miscalculations in other matters. Whether Sharpie-gate or tweeting, or short-changing his small contractors, there’s a “C’mon, really?” quality to many of the scandals and embarrassments surrounding Trump’s administration and his business. This even extends to some of his closest advisers, such as Commerce Secretary Wilbur Ross’s swiping Sweet-n-Lo packets and alleged nickel-and-dime financial improprieties. Behavioral economics suggests these indicate that Trump suffers from pervasive irrationality, heavily discounting long-term costs and benefits when comparing them to immediate and short-term ones. That could explain some of the Trump administration’s policymaking; we can interpret the administration’s approaches to trade, immigration, and foreign and defense policy as being the products questionable comparisons of risks and benefits that play out over short vs. long time horizons. On the other hand, maybe there’s no irrationality at all. Before he was President, Donald Trump made his reputation in real estate and in resorts and entertainment. Those business sectors are highly competitive, but the actual differences between competing goods in those sectors are often negligible. It’s not quite the case that “If you’ve seen one Class-A office suite, high-end condo, or luxury resort, you’ve seen ‘em all,” but it’s close. In such markets, one strategy sellers can use to boost returns is to “burnish the brand”: persuade consumers that your goods are far superior to your competitors, even if there is little true difference. Trump engages heavily in brand strategy, from the trademark gleaming brass and granite of his properties, to claims about the heights of his buildings, to claims of his business success, to the superlatives he routinely uses for his goods and himself (and criticisms of his competitors and opponents). As Andre Agassi used to say, image is everything. President Trump has simply moved brand strategy—in which he seems to have great talent—to the political arena. He expends considerable resources—and is willing to take great risks—in order to raise his reputation and portray his critics and opponents as inferior, corrupt and devious. Rather than behavioral economics, he is best understood as acting according to public choice, rationally employing his best business strategy to protect and extend his political power. And, because presidents can only serve two terms, his brand strategy time horizon extends no longer than the 2022 election—and perhaps no longer than this November’s election. (3 COMMENTS)

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27 января, 17:52

AirBnB and its stakeholders

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As most libertarians, I’m not a fan of the word “stakeholder”. To my eyes, it seems to be a shortcut for a corporatist economy. By contrasting shareholders and stakeholders, some authors seem to point in the direction of a muddled kind of capitalism, one in which businesses – rather than caring for the interests of those who actually own them – are supposed to picture themselves as doing the interests of all people somewhat concerned with their activities. Sure enough, entrepreneurs need not a “social conscience” to care about their workers and their suppliers. Their self-interest would suffice: happy employees are likely to be more productive, and if you don’t treat your suppliers decently you do so at your own risk. But stakeholder capitalism, as it is somehow called, aims at being a capitalism in which profits are deemed to be a second-order concern. There are some activities in life that cannot be managed under the profit motive (I think of a large chunk of the nonprofit sector, that does indeed do valuable things), but in the case of businesses, the refusal of taking profits into consideration could easily become a cover-up for inefficiency – if not for a conflict of interest altogether. Having said that, I think the word “stakeholder” has perhaps a different meaning in the case of platform companies and, particularly, AirBnB. AirBnb’s function is to connect supply and demand in the market for short term rentals. Different than hotel chains, AirBnB does not own or rent buildings. In a sense, AirBnB is doing a very similar job to traditional apartment rental agencies – though on quite a larger scale. Instead of face-to-face relationships such as the one I may have with an agent renting a flat for four years, AirBnB allows me to have more options and rent for quite a short time. As in the case of traditional rental agencies, but on a larger scale, properties are made available by their own owners. In this case, through the platform and to a far wide number of potential guests. What are these ‘hosts’? Shareholders, indeed not. Employees, not at all. “Consumers” of the platform services yes, indeed, in a sense: but it also goes the other way around. Take rental apartments out of the equation, and AirBnB will be of no use. For this reason, I’m more baffled than irritated at this statement by AirBnB. Leave aside the stakeholders’ rhetoric, which anyway is always good to gain you two cheers at Davos, and what you have is the complex relationship between hosts and the platform: a relationship that still requires to be worked out. AirBnB maintains it did “enable the creation of millions of entrepreneurs”. This refers to hosts at large, but we know that some people are developing true entrepreneurship (arbitraging properties or servicing hosts that could not otherwise directly take care of their guests) around the platform. It is a growing ecosystem. It will be interesting to see how it evolves – and the effects of such evolution on all the people around it (call them ‘stakeholders’ or what you like best). (1 COMMENTS)

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27 января, 14:30

Daniel Klein on Honest Income

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Economist and author Daniel Klein of George Mason University talks about the ethics of working and the potential for our working lives to make the world a better place. This is a wide-ranging conversation that includes discussion of Adam Smith, what jobs we should work on, what charities we should donate to, how we can make ourselves more virtuous, the movies Se7en and Sabrina, and ultimately what Adam Smith calls “the becoming use of our own.” (2 COMMENTS)

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26 января, 22:54

Doubts about education “reform”

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I’m skeptical of most proposals for reforming education.  Progressives tend to favor government schools, whereas conservatives tend to favor an approach that yields high test scores.  I don’t buy either view. American education reformers often point to Finland, which has produced high “PISA” scores relative to other western countries.  (They tend ignore even higher Asian PISA scores, just as they ignore Singapore’s success in health care.  Apparently only European models are useful for the US. )  But now Finland seems to be abandoning its own highly successful model, and its scores are falling: Here they describe the recent changes: Finland’s decline may make the wonks who rushed to copy its schools seem silly. But looking deeper there are still lessons to learn from Finland’s example. Despite the country having a reputation for cuddly teaching, it used to take a slightly more hardline approach. In 1996, four years before the first batch of pisa results, a group of British researchers visited the country. They found “whole classes following line by line what is written in the textbook, at a pace determined by the teacher…We have moved from school to school and seen almost identical lessons—you could have swapped the teachers over and children would not have noticed the difference.” As Gabriel Heller Sahlgren, an economist, has noted, most of the children who scored so highly in the first round of tests would have experienced this sort of schooling. By the time the results came out, many Finnish schools had started to move in a very different direction, confounding touring policymakers. A forthcoming study by Aino Saarinen and colleagues at the Universities of Helsinki and Oulu analyses pisa data from 2012 and 2015, finding that children in schools which gave pupils more freedom to direct their own learning had lower scores in maths and science. Those from poor and migrant families suffered the most. Eschewing the possibility of a happy midpoint between reading from a textbook and leaving children to their own devices, schools have continued to experiment in the years since. A wave of new institutions are being built without classrooms. A new curriculum, which began to be introduced in 2016, encourages lessons without defined subjects. So now what?  Are we to adopt the Finnish system of 1996?  Why not the South Korean or Singaporean system? In my view, we put far too much weight on test scores. In many East Asian countries there is a relentless drive to get high test scores, in order to get into top schools.  Kids are deprived of a real childhood.  That’s even affecting the US system to some extent.  This competition for top schools is a sort of “arms race” with little societal benefit. Bryan Caplan has shown that much of education covers topics with little practical value. I’d like to see the educational system focus more on entertainment and less on rote memorization.  More importantly, I’d like to see us reduce the importance of education by cutting back on public spending and ending occupational licensing requirements that force workers to get credentials of little value for the career they plan to pursue. We could save lots of money by eliminating public schools and replacing them with a voucher system at roughly half the cost per pupil.  Let private schools take these vouchers and engage in non-price competition for students.  Those who want something “better” can purchase gold-plated schooling out of their own pockets. (17 COMMENTS)

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26 января, 01:14

Calling a Tail a Leg

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How many legs does a dog have if you call a tail a leg? Four. Saying that a tail is a leg doesn’t make it a leg. –Abraham Lincoln There is no determining who is definitively right in the debate. Income is complicated. Taxes are complicated. Accounting is complicated. But Saez and Zucman have shown how focusing only on federal taxes, and not state and local taxes, has skewed our understanding of the tax code. They have also powerfully demonstrated that the very richest play by very different tax rules than the merely well-off and the working poor. So writes Annie Lowrey in the misleadingly titled “The Rich are Different from You and Me: They Pay Less in Taxes,” The Atlantic, January 23, 2020. The title is misleading because even if she makes her case that the rich pay a lower percent of their income in taxes than the rest of us (she doesn’t), there’s no disputing that they pay more in taxes. But, contrary to Lowrey’s claim, there is a way to say who is right in the debate about various income groups’ taxes as a percent of their income: estimate their taxes and estimate their income and divide one by the other. So how does Lowrey say there’s no right way? By taking seriously two Emmanual Saez and Gabriel Zucman claims: (1) that one should not treat the child tax credit and the earned income tax credit as a reduction in taxes. and (2) that one should regard employers’ contributions to their employees health benefits as a tax. Neither claim is correct. Sure, you can call an employer’s contribution to the employee’s health insurance a tax. But calling it as tax doesn’t make it a tax.   (15 COMMENTS)

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25 января, 11:52

Capitalism is making the Chinese both better and happier

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I recently discovered a long essay by Jean Fan on progress in China. Here is a small excerpt, but I’d encourage you to read the entire piece: As soon as I walked out of Shanghai’s Pudong International Airport last March, something felt different. The cleanliness of the airport had always given way to the messiness of Chinese cities. But although I braced myself for the unavoidable chaos, it never came. The cities I visited that year—Shanghai, Wuhan, and Xiangyang—were unrecognizably clean. The cars were orderly. Even the people were quieter. . . . China is changing in a deep and visceral way, and it is changing fast , in a way that is almost incomprehensible without seeing it in person. In contrast to America’s stagnation, China’s culture, self-concept, and morale are being transformed at a rapid pace—mostly for the better. . . . China today feels unrecognizable compared to the China of ten years ago. The China I visited growing up was not a nice place to be. It was dirty, poor, and desperate. I remember walking by peasant women and their children begging for food. I remember seeing wrinkled, exhausted-looking men lugging carts of coal around cities that never saw the sun—gray on gray on gray. I remember how sharply people treated each other, and how terrible it made me feel: how fiercely we had to haggle for things, how rude people were to strangers, and how cutthroat everyone was about their children doing well at gāokǎo (高考), the college entrance exam that still largely seals your fate, unless you’re well-off. I had the same sort of impression when I visited China last August, although the changes didn’t seem quite so dramatic to me.  I suspect that the cultural changes in China are occurring because of the greatly increased used of private markets.  Economists from Adam Smith to Deirdre McCloskey have explored the various ways that markets encourage virtuous behavior. Of course the state still plays a major role in China, and the Chinese state is far from virtuous.  But at least for most ordinary people in China, life is much better than a few decades ago. In the early reform era, more real income often meant the difference between life and death. More recently, the improved quality of life probably has more to do with people treating each other better than with having more material goods. Some Chinese people have nostalgia for the Mao era, when (it is said) “everyone was poor but at least we were all equal, and there was less corruption.”  In fact, there was lots of inequality during the Mao era (the cities were much richer than the countryside), and also lots of corruption.  China is a textbook examples of markets making people more virtuous. (24 COMMENTS)

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25 января, 00:32

Books as Big- and Binge-worthy- Business

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What have you binged on lately? The new Dracula? The Crown? You probably automatically thought of your TV when I said “binge,” but did you know that the novels of Jane Austen were part of the original “binge”- reading, that is. Will novels such as Austen’s ever return to such popular heights?   In this week’s episode, EconTalk host Russ Roberts welcomed literature Professor Janine Barchas to the program, to talk about her latest, The Lost Books of Jane Austen. The conversation explores the phenomenon of Austen generally and the “the industry that is Jane.” Why Jane- an author who only published over a period of six years and died young? More generally, what does literature contribute to our lives? We’d love to hear what you think. Use the prompts below, and help us continue the conversation.   1- Roberts asks Barchas why Austen doesn’t seem to be regarded as out-of-date, or even offensive to young women today. How does she answer, and how would you answer?   2- What are the “lost books” that Barchas refers to, and how do they suggest that Austen’s influence on culture may in fact be under-emphasized?   3- In what ways was the publishing industry changing in the 19th century? How did this contribute to the rise in popularity of novelists at that time? What’s an analogy to today’s world, and how is it the same? What does this suggest about the future of book publishing?   3- Barchas describes tracking down readers of editions with names written in them. What sort of discoveries did she make about Austen’s readership, and which did you find most interesting, and why? What does Barchas mean when she talks about  the “emancipatory power of literature” for the working classes?   4- Roberts and Barchas discuss the Shakespeare and Austen exhibit at the Folger Library which Barchas curated. What were some of the interesting points of comparison between these two authors from different centuries? What does it suggest to you about the nature of the cultural canon? Celebrity?   5- Both Roberts and Barchas laud the effects of reading fiction. How does Barchas defend the utility of literature and the humanities generally? To what extent is her defense persuasive?     Who’s in? Roberts asks Barchas where someone who has not read Austen should start. Anyone up for an #EconlibReads Virtual Reading Group on Pride and Prejudice??? (0 COMMENTS)

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24 января, 20:12

We Can Rebuild That. We Can Make it Better.

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As a knitter, I was fascinated by the discussion of recycled sweaters and recycled yarn in last week’s Econtalk. Russ Roberts and Adam Minter have a brief exchange about how to recycle wool sweaters. Russ posits that, “It’s easy. You just take an end and just start pulling until you get a really long piece of yarn, and you’re done. You get a new piece of yarn. Adam explains that in industrial recycling “What they do is, they take these sweaters and other wool garments, it’s not just sweaters, but wool in general, and it’s essentially chopped up. They have these big machines that rip these garments apart into their individual fibers and then re-roll them into a fabric called ‘shoddy’.”   Crafters do a lot of recycling of yarn, and we do it in ways that replicate both these approaches. Sometimes, we follow Russ’s suggestion and “just take an end and start pulling,” though the full process of raveling a sweater in order to reclaim the yarn is a little more complicated than that. Once we’ve reclaimed the yarn, though, we can knit whatever we like. My friend Vickie Howell is a knitwear designer who used yarn that was reclaimed this way in a design for diaper covers–a very practical use for yarn that’s still functional, if perhaps not at its beautiful best.    If a sweater is so lightweight or so damaged that reclaiming the yarn won’t work, crafters often treat the old sweater as a piece of fabric, cutting and sewing it to produce a new item. When my kids were toddlers I washed several moth eaten wool sweaters in hot water to felt them, put some cute patches over the damaged spots, and turned them into cardigans for the kids. Right now, I’m saving a pile of similarly beat up sweaters to make a blanket.   There is also a growing industry that uses techniques more like the ones Adam describes to make new yarn out of old materials. One of the most popular is yarn made from the recycled silk from saris. But you can find yarn made from recycled blue jeans, old t-shirts, and pretty much any fiber you can imagine. While you can’t buy it yet, crafters are even making yarn from plastic grocery bags to use in a variety of projects where strength and waterproof qualities are important.    The small amount of recycling done by home crafters and small producers of yarn may not make a huge dent in the looming piles of fabric that “your kids don’t want,” but it’s a start. And given that crafters have an ever-increasing demand for yarn and for the pleasure of crafting as a consumption good as well as a household production input, the dent may be larger than we think. (2 COMMENTS)

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24 января, 17:30

My Social Media Hiatus

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I’ll be travelling most of the next month, so this is a fine time to officially announce my election-year hiatus from social media. Never fear, I will continue blogging for EconLog.  I will continue promoting my work on Facebook and Twitter.  I’ll still use social media to publicize social events, especially Capla-Con 2020.  However, from today until March 1, 2021, I will not participate in intellectual discussions on Facebook or Twitter. My reason is simple: People go mad during presidential election years – and I refuse to be part of the madness. Back in 2016, I wasn’t horrified by the election itself.  While 2016 was a revolting spectacle, I hedonically adapted to the revolting spectacle of democracy decades ago. No, what horrified me in 2016 was the transformation of many of my friends. What transformation did I witness?  I looked at many people that I had known for years, thinkers that I believed were – whatever our disagreements – rational and decent human beings.  And I watched as they willingly surrendered to partisan irrationality and myopic rage.  I saw brilliant minds proudly endorse frankly stupid positions.  Even when I agreed with the conclusions, the arguments were awful.  And arguments should not be awful.  The whole thing was about as entertaining as watching a bunch of my friends inject heroin. Despite all this, I stayed on social media.  I tried to interpret the situation charitably.  Perhaps the fault was mine – and even the best of thinkers falls short on occasion, right?  Yet continuing the conversation with a calm and friendly tone did me little good.  By the end of 2016, I had lost close friends.  When I realized what had happened, I tried to win them back.  I would take any of them back today, no questions asked.  Yet the sad reality, I fear, is that these friends are forever lost to me. This time around, then, I’m going to skip this ugliness, retreating deep into my Bubble.  I’ll return when the collective anger has cooled.  And no, I’m not defaulting on my “civic duty.” I’m doing my civic duty right now.  As Jason Brennan (The Ethics of Voting) and Chris Freiman (Why It’s OK to Ignore Politics) ably argue, you are under no obligation to participate in this election.  If you participate, though, you are obliged to remain a rational and decent human being the entire time. (7 COMMENTS)

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24 января, 04:54

The Power of Numeracy

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In 40 years of teaching economics, I have always followed my rule of not commenting on my preferences about politicians, even when asked. Well, almost always. There was one exception. In a lecture on numeracy, which is basically literacy with numbers, I told my students that my favorite candidate for the Republican nomination for president was Indiana governor Mitch Daniels. The reason: as a former director of the federal government’s Office of Management and Budget, Daniels knew the difference between a million and a billion. The difference, of course, is huge. A billion is a thousand times a million. Another way of saying it is that a billion is 999 times more than a million. Daniels could not have been even a semi-effective head of OMB had he not applied that distinction dozens of times a day. Yet we see politicians regularly demonstrate their innumeracy in matters of public policy. And the results are costly. A little attention to numeracy by politicians, the media, and average citizens would elevate public discussion and would result in better decisions on policy, whether the issue is government budgets, terrorism, or job safety. As a bonus, applying some basic numeracy to our own private lives would help us make better decisions. The two most important ways people are innumerate are in confusing one large number with another large number and in confusing one small number with another small number. This is from “What’s Your Number?,” Defining Ideas, January 22, 2020. Read the whole thing. (5 COMMENTS)