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Yes, I am now becoming an internet meme where basically anything and everything can be tied into climate change. I’d like to make a few short observations today.

  1. What happened to the climate change discussion? It really does seem to be low-level background noise. My advice to those people who are posting regularly about the insanity of the Chump Administration and getting apoplectic about the daily news, probably want to take this time to refocus our discussions and debates to longer-term bigger issues. It’s not just climate change I am referring to of course.
  2. A student and I were discussing what psychologists have been learning about happiness and we got to talking about the 5 things psychologists say are most important for happiness. I of course suspected that one of the things that contributes to happiness (actually, I should be clearer, when we say, “contributes to happiness” we really mean, “how much of the difference in happiness between different people is thought to be explained by factor X?”) was the freedom to control one’s own life and destiny and make choices, but he mentioned to me that psychologists now seem to think that 50% of the variance is explained by … genetics!

  3. In addition, we discussed how people quite readily adapted to changes in life conditions, and even in the extreme circumstances where humans suffer incredible misfortunes, after a time they adapt to a baseline level of happiness that is no worse than people who are not afflicted with the same misfortune. Here is a short article illustrating.

I’d like to focus for a moment on (3). If it turns out that what “society” cares about most is maximizing human happiness, but that our happiness is largely determined by genetic factors, and that changes to our material and physical well-being are but one-time adjustments to happiness which ultimately get replaced … then what is the case for worrying about the damages that climate change will bring? After all, we can physically adapt to much of the problems that are going to be caused by climate change by moving (slowly over time by the way) and by changing the patterns of farming and production (which will be changing anyway, so this is a matter of the type of change, not whether we change at all). And even if climate change physically threatens us, wouldn’t the implications of this behavioral literature be obvious? We would quickly adapt to the new world we live in, and it would not be worse (or better) than the one we are in right now?

I am not saying here that this is the reason to do nothing about climate change, but what I am suggesting was that to the extent that activists and professors and policymakers wish to weaponize happiness and behavioral research, I am not sure the weapons are not easily turned onto themselves. My deeper point is that this observation probably (1) lowers the social cost of carbon and (2) probably should encourage folks to appreciate the economics of climate change more and not less. After all, if people used to feel “free” to discard the economic insight of thinking of costs and benefits because it doesn’t capture happiness correctly, and now it turns out that the insights from happiness research suggest climate change won’t alter our happiness very much, then what else are you to rely upon if you are claiming “science” as the reason to “do something?” Now, using economics, you simply have to demonstrate that the benefits of mitigation exceed the costs, regardless of the implications for happiness.


I have written this a zillion times before … but I have been in and around economics since 1993, and never in my entire career have I had a teacher or article or book teach me about “trickle down” economics. This is a perjorative term conjured from the ether by anti-market proponents, and the strawiest of straw men with which to criticize markets.

I will give a dollar (or produce a short blog post in your honor) to anyone who can name who said the following:

Unlike Friedman the “evangelical,” added _____, ______ was more of an “anthropologist” with little interest in influencing policymakers or becoming one himself. At a press briefing following a meeting with President Reagan shortly after he won the Nobel, _____famously remarked that the economy was in a “depression” and that if he had been Reagan’s economics professor, he would have given the president an “incomplete.” When asked what he thought of trickle-down/supply-side economics—the bedrock of Reaganomics—_____ called it “a gimmick.” Shortly thereafter, he was booted offstage.

No peeking. And no, it was not Paul Krugman.

As you might imagine, I sort of put this fellow in the economics version of Richard Feynman, and I believe his work is still understudied at least at the intro level. Here is another excerpt:

He could also be fiercely independent in his views. ____ recalled a debate between ____ and Friedrich Hayek over welfare capitalism. Hayek believed even a little bit of welfare capitalism would eventually lead to a totalitarian, Soviet-like regime. _____ disagreed. “To paraphrase, ____ said we already have a great deal of welfare capitalism and nothing seems to have been destroyed. We still have a great economy and a great political system which gives consumers the opportunity to express themselves, both through their purchasing and also through their electoral behavior, and they seem to be satisfied. Maybe there isn’t a slippery slope.” The debate between the two continued up until _______’s death in December 1991. Hayek followed suit a few months later.

Go Green!

Solar powered picnic tables? Check.

Solar powered trash cans? Check.

Dedicated green blog? Check.

Recycling cans everywhere? Check.

Water bottle filling stations? Check.

Stopping our snowblowers from leaking gas/oil all over the sidewalks and into our waterways? Ummmm …

Go Gassy

As you ponder the inane debates about tax “reform” (i.e. deck chairs and symbolism), suppose you take the work of Martin Feldstein seriously. He has previously estimated that the dead weight loss in an economy due to taxation would be up to 30% of the size of the tax take. Now, I suspect the direct effect is smaller if only because not all taxes are equally distorting.

But for fun, take this to be true.

The US federal government in 2016 collected $3.27 trillion in taxes. The states collected $1.60 trillion in taxes. Local entities collected $1.26 trillion in taxes. Therefore, in total, the government in the U.S. collects $6.13 trillion in taxes.

Note, that taxes are neither bad nor good from a pure economic standpoint. They are transfers. The reason economists may be frustrated with taxes is that the collection of taxes themselves generates distortions in economic activity by shielding the role that prices play in a market mechanism. In other words, taxes generate inefficiency – which means that even if we collected the same amount of taxes, we could still have all of the current government programs we want AND be considerably richer. I do not think many critics of economists understand this point.

How inefficient might our tax system be? (now, I think it is in many regards worse than this, I am just talking about the direct dead weight losses here). Well, if the tax take is $6.13 trillion, then simply because we do a terrible job of collecting taxes our country is poorer by $1.84 trillion!

Let me say it again. We could have exactly the government we have right now, yet could generate an additional $1.84 trillion in economic transactions every year, just by restructuring the tax system to be efficient. Lest you think this is chump change, can you name ANY program that could generate even a fraction of those gains? And not only that, these are not one time gains, this is activity that happens each and every year.

To put that in context, the inefficiency of our current tax system is the equivalent of putting an entire economy the size of Brazil into the trash, each and every year. The dead weight loss of our tax system is larger than the entire economy of Brazil, South Korea, Russia and even Australia and Canada. Let that sink in a little bit as you all argue over the crumbs in the corner.

I would prefer to be the only propertyless person in a propertied world rather than the only propertied person in a propertyless world.

I will preface this again by arguing that universities, when they are not functioning like kindergartens, are still a shining example of US excellence, sources of research and learning and hopefully positive spillovers, and we probably want to not destroy that. That said, redistributing priorities within many universities is probably in order and this tax bill is probably not going to encourage that.

Obviously, our university is alarmed at the prospect of having the “benefits” it pays certain students taxed, and for potentially having a share of its endowment income taxed. It is moderately entertaining to see our university now, forcefully, argue that the law of demand actually exists and that corporations are, in fact, people (the U of R is a corporation, no less than Exxon is). It is also moderately entertaining to hear our university discuss cost, access and affordability all the while sponsoring football teams, entire departments that suck resources and value away from the valuable enterprises on campus, spend hundreds of thousands (probably millions, but we are not told) on “sustainability” efforts, and much much more. Furthermore, despite what universities say about how important their mission is, in terms of access to opportunity, it may already be the case that “too many” people go to college, and it is also undeniably the case that college is a place for the world’s rich and soon-to-be rich are housed. If ever there was a regressive idea, tax support for higher education is. We are all supposed to be progressive advocates for redistribution, correct? It would seem to me that arguing for tax relief for universities is akin to the much maligned (and of course unicorny) “trickle down” economics that is the hobgoblin of many critics of the last 40 years.

On the other hand, and kudos to SSC for pointing this out, for the mostly stupid stuff in the current tax bill (and don’t believe the budget shenanigans, it will increase deficits over the long run) providing a giant pile of money to universities across the board, or making a large number of universities “free” for students would probably have been smarter and more fiscally responsible than the turb-bomb we are going to have dropped on us.

But the chickens are returning like the prodigal chicks they are – for years I have been having it rammed down my throats that we could all pay more in taxes, that minimum wages do not distort the choices of firms, that the “rich” could pay more, and so on. And now we see what happens when the scope is turned onto you. It’s the same thing for the absolute ecstasy and enthusiasm with which executive power and administrative fiat was celebrated just one short Administration ago, never paying attention to our warnings that some day someone you don’t trust or like is going to be at the steering wheel.

My prediction – none of those lessons will be learned. And your government will get bigger and more expansive the next time the Administration turns over.  And your universities will _____ …

Somehow, I do not think that even the current train wreck of both our actual political governance and our political discourse will encourage anyone to actually question whether government should be as big, powerful and as expansive as it is.

As one of my favorite Twitter feeds now reminds me, “Eat Arby’s.”

I frame the analytic discussions about markets versus socialism as a knowledge problem. The key to the success in any “economic system” is to figure out a way to have valuable knowledge and information produced, transmitted and acted upon – even by actors who do not know that they are part of the solution. The standard discussion then revolves around how challenging it is to produce and transmit such knowledge, especially when it is tacitly held and dispersed.

Some may counter that the reason socialist planning does not work is simply a matter of computational power. Once AI and computers are good enough to figure out what everyone wants, when they want it, where they want it, and to figure out how to produce things, we can put the entire economy on autopilot and the government can plan away. This is mistaken for a few reasons, not the least of which is that the process does not allow for entrepreneurial dynamics.

But my point today is simpler. If in fact we get to a world where AI and computers and machine learning are powerful enough to do this, then of course we would also be living in a world where all of the “textbook” assumptions about the Coase Theorem hold. In other words, all transactions costs would drop to zero, potential negotiators would know who and where and how to negotiate, and therefore we truly can live in a laissez-faire world – just make sure someone has an initial property right, and we can seamlessly negotiate our way out of any social problem.

So, dear socialists, the coming computer revolution does not mean what you think it means – there is just as much reason to suspect that it makes a more transactions driven world easier to sustain. And certainly, if you ask people whether they cherish autonomy or some computer system optimizing on their behalf … well, OK, strike that.


When it comes to the environment, we are asking how we can maintain a healthy environment with our continuing human activity? Emissions projections U.S. Energy Information Administration predict that we will likely continue to pollute at an exponentially increasing rate as the years go on. 

But hey, it’s an actual link to the US government, so it must obviously make the point. Except it doesn’t.

CO2 reductions

Projections for U.S. energy-related carbon dioxide (CO2) emissions have generally been lowered in recent editions of theAnnual Energy Outlook(AEO), the long-term projections of the U.S. Energy Information Administration. The lowered projections reflect both market and policy developments that have reduced recent and projected growth in energy demand and its expected carbon intensity. The chart presents projected energy-related CO2emissions from AEOs issued since 2009 in terms of changes relative to emissions in 2005, a commonly used comparison year, particularly with regard to mitigation targets.

EIA’s AEO reflects laws and regulations in place at the time the analysis was performed. New policies are incorporated in subsequent editions of the AEO as they are put in place. For example, updated fuel efficiency standards for light-duty and heavy-duty vehicles were incorporated in AEO2012 and AEO2013, tending to lower CO2emissions relative to earlier projections. The CO2projection in AEO2013 generally falls below that in AEO2012, and remains more than 5 percent below the 2005 level throughout a forecast horizon that for the first time extends to 2040. However, near-term expectations of industrial growth in response to the availability of low-priced natural gas result in somewhat higher projected levels of CO2emissions at the end of the current decade than in last year’s outlook.

This defiition was particularly excellent:

Sustainability is the ability for something to sustain itself over time

YMMV on where to go with that. But clearly by that definition, …


Today I reprint a slightly edited piece I put together several years ago. I’d change a lot of it, from the content to the tone, if I were to do it over – but one must live with one’s younger self. Happy Thanksgiving to all.

Four centuries after the celebration of the first Thanksgiving, there is still widespread disagreement about the reason for the Pilgrims’ feast. But whether it was a harvest festival, a strictly religious observance, or a thank you to the local Wampanoag Indians, such a feast would not even have been possible were it not for the abandonment of the utopian ideas the Pilgrims laid out in the original Mayflower Compact.

Imagine a world where the earnings you generate from teaching, or nursing, or tending your orchard, from working the cash register, or mowing some lawns – all of the fruits of your efforts went into a common pool. Imagine further that each of your friends and neighbors, and every stranger in Monroe County was entitled to an equal share of what was placed into the kitty. It didn’t matter whether you mowed 20 lawns per day or one, whether you treated 30 patients per day or none, whether you taught 50 students per day or none – you received the same “income” as everyone else in the community. Imagine further that your home was owned in common by all in your community and that rearing your neighbor’s children was as much your responsibility as anyone else’s.

Such was the intention of the Compact – by eliminating any semblance of private property and personal accountability, which were declared to be the foundation for avarice and selfishness – prosperity and brotherly love would result. How did it work out?

You need only look at the cleanliness of your office fridge or the condition of a public bathroom for a glimpse into the horrors of such collectivism. People suffered, starved and perished. Governor Bradford wrote in his diary, “For this community (so far as it was) was found to breed much confusion and discontent, and retard much employment that would have been to their benefit and comfort. For young men that were most able and fit for labor and service did repine that they should spend their time and strength to work for other men’s wives and children without any recompense … that was thought injustice.”

Most shocking perhaps is that this injustice generated penury, jealousy and sloth in a society comprised entirely of (self-professed) holy people, each with a common cause, each from a similar background, and in a community with less than 200 settlers. The lessons for a society comprised of people of varying degrees of “saintliness”, with differing interests and backgrounds, and hundreds of millions in size should be obvious.

Confronting the disaster of collectivism, Plymouth’s elders wisely “resorted” to a system of private property and free exchange. Bradford wrote of the reforms, “… it made all hands very industrious, so as much more corn was planted than otherwise would have been. The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression…By this time harvest was come, and instead of famine, now God gave them plenty, and the faces of things were changed, to the rejoicing of the hearts of many, for which they blessed God.”

I doubt many Pilgrims themselves properly understood the nature of their original problem, nor its solution – which is why I doubt that the first Thanksgiving was a celebration of liberty and private property. While they might have thanked Providence and luck for the bounties that followed the change in property institutions in 1623, it was only their industry, thrift and discipline in response to the formation of private property institutions that such a feast was even possible. For a truly detailed and incredible account not only of the first Thanksgiving, but of the sad and incredible struggle the local Indian tribes had with their new European neighbors, I cannot recommend more highly Nathaniel Philbrick’s bookMayflower in large part because of its telling of the largely forgotten yet historically important King Phillip’s War. 

Fast forward to 2017, where the most productive among us are made to feel like criminals, and the non-productive (those who are able) are portrayed as innocent victims of a tyrannical system of capitalism. That Thanksgiving is a “national” holiday is ironic – for it is was a celebration enabled by an explicit movement away from “nationalistic” ideals – a celebration made possible by the unleashing of the individual productive efforts of all in the Plymouth colony.

I am blessed to have a healthy family, the ability to have completed my formal education, and the discipline to work hard with the lot I was given in life. Providence and luck has been kind to me. I give thanks to that every single day of my life. But on this day, this 395th renewal of Thanksgiving Day, as many in our nation clamor to gallop anew down a 21st century style collectivist path (health care for everyone, financial bailouts, auto bailouts, fairer taxes, public/government schools, managed trade, green-collar subsidies, farm subsidies, licensing restrictions, “living wages”, public-private (i.e. cronyist) partnerships and more) littered with the tragedies of hundreds of failed experiments before us, let us remember what made the first Thanksgiving possible, and what has made our modern prosperity possible.he productive efforts of billions of individuals past and present who unknowingly cooperate each and every day in an effort to improve their own lots, have bestowed upon us a gift even greater than the yams, apples, turkeys, wheat, and other resources that we were naturally endowed with. Just how large a gift have they given to each of us? Imagine yourself alone in the New England wilderness on a cold and wet November day 500 years ago. The difference between the “fire roasted” yam you might conjure up with days of immiserating work in 1516 and the majestic spread set out before you today in 2017 is but a glimpse of the bounty that liberty and property have bestowed upon us. Let us hope that the light of liberty remains lit, so that we may see our way through harsh and brutal winters that might lie ahead.

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