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Pierre Lemieux



Articles by Pierre Lemieux

The Elementary Basics of Inflation

6 days ago

It is always surprising how even the financial press is confused about inflation. I am not speaking of complex conflicting theories on the causes of inflation but of the very basic distinction between inflation and changes in relative prices.
For example, The Economist just wrote:
America’s annual inflation rate stood at 5.3% in August, down slightly from the 13-year highs of the previous two months. There was some evidence that inflationary pressures may be levelling off, such as an easing of prices for used cars, which have driven some of this year’s inflation. [my emphasis]
An increase in the price of used cars cannot generate or “drive” inflation for a simple reason: it works the other way around. Inflation, which is defined as a continuous and sustained

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“Just Read the Instructions”

9 days ago

Except perhaps for some psychopaths, everybody hopes that the four members of the Inspiration4 mission (watch a video) will safely return to earth. One remarkable thing is how, just a few years ago, most people would have not believed that a crew of civilians would soon orbit the earth in an adventure financed by a billionaire (Jared Isaacman) on a reusable and already-used spacecraft built by the company of another billionaire (Elon Musk). That only military missions flew to space in the past half-century illustrates how our societies are militarized.
We cannot know in advance what new and unexpected possibilities individual liberty and entrepreneurship will open, just as we may not know which ones have been foreclosed by government regulation and standardization.

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Rent-Seeking in Slightly Different Words

13 days ago

We—we, economists and supporters of individual liberty—owe it to Mr. Trump to have reminded us how a powerful state and crony capitalism are dangerous. In fact, state power and cronyism are the two faces of the same Janus. A powerful state has a lot to give and much power to take, so that “capitalists” come to it for privileges (for example, subsidies or tariffs) or to avoid restrictions.
Speaking of Mark Zuckerberg and other tech executives, Trump just declared on Fox News (watch the video) in his usual way of speaking:
People are sick. You know, Zuckerberg … used to come to the White House to kiss my ass.
(The rare politician who is also a Latinist will no doubt recall what Livius, in Ab Urbe Condita (2, 32), said of the way Menenius Agrippa addressed the

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Removal of Government Statues

16 days ago

The government of Virginia just removed the statue of Confederate general Robert E. Lee, erected in Richmond during the Jim Crow era. Contrary to today’s ruling intelligentsia and government, their precursors were not perfect.
But let’s be serious: Jim Crow governments were certainly despicable. So was the federal government, which long promoted policies that favored discrimination. So would be a pure woke government who would simply discriminate against new hated groups, discrimination being the central business of the unconstrained Leviathan. (See also my post “Jim Crow: More Racist than the Railroads,” Econlog, December 18, 2020.)
This being said, one should not applaud governments removing monuments that happen to go against current ideological fads. The

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The Word “Societal”

19 days ago

The current issue of The Economist challenges “the illiberal left.” Among other related phenomena, “the espousal of new vocabulary … is affecting ever more areas of American life. It has penetrated politics and the press.” The magazine observes, perhaps a bit late, that “it is starting to spread to schools.” How can the wokes succeed in changing common terms to advance their ideological agenda? Governments certainly help with their indirect subsidies to universities if not their open support of woke causes.
In an appendix to his novel 1984 (published in 1949), George Orwell wrote, somewhat prophetically:
The purpose of Newspeak was not only to provide a medium of expression for the world-view and mental habits proper to the devotees of Ingsoc [English Socialism],

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No World Sugar Shortage Expected

23 days ago

No shortage of sugar is expected despite the decrease in world supply caused by unusually cold weather in Brazil, the largest producing country. the Wall Street Journal reports  (“Sugar Prices Soar After Brazil Cold Snap,” September 3, 2021):
There is no prospect of a sugar shortage, traders and analysts say. Rather, higher prices are likely to draw sugar out of India and into the world market.
Note however that the story ignores the impact of higher prices on lowering quantity demanded compared to what it would otherwise have been.
On a free market, an increase in demand (the whole schedule of quantities demanded and prices) or a decrease in supply (the whole schedule of quantities supplied and prices) brings a price increase, not a shortage. A shortage is the

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The State as it Is, Not as it Should Be

25 days ago

Many people think that the state is benevolent and wise or, if not, that it would be if it were run by people like them or, more exactly, like the person expressing this opinion. This is “politics with romance,” to paraphrase economist James Buchanan. Although a government sometimes succeeds in doing something with apparent efficiency, it usually fails by its own standards and, irrespective of its success, creates as much discontent as contentment.
One problem is that the state is made of, and influenced by, many persons with different interests, opinions, preferences, and values. Another problem is that an electorate is demonstrably irrational. Still another problem is that the state suffers from built-in inefficiencies due to the politicians’ and bureaucrats’

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Afghanistan and Incentives

August 16, 2021

Except for a few heroes or fanatics, nobody wants to be the last one to fight when his comrades (or perhaps foreign allies) have stopped shooting, abandoned their position, or surrendered. And every soldier knows that every one of his comrades is having the same thought about where his self-interest lies. So when they think the wind is about to turn, it has already turned and the whole battalion or army lays down its arms. This explains Afghanistan last week.
The prospect of 72 virgins in the afterlife counts of course, but more mundane incentives too.
Game theory has formalized this sort of problem as the famous Prisoner Dilemma. It may be in the common interest of all to continue fighting, but if every individual thinks it is in his own interest to stop, he will.

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Is “Governing” Good for the Governed?

August 12, 2021

It is a tired cliché to say that the government should govern. But is it true? What does “governing” mean? Consider the following illustration: on Tuesday, when announcing his resignation, New York Governor Andrew Cuomo repeated the cliché. He said:
The best way I can help now is if I step aside and let government get back to governing.
We are again dumbstruck by Cuomo’s selfless devotion to the public good, which is, as we know, characteristic of all politicians’ altruism. But my question here is different: Is “governing” so obviously good?
The first chapter of Anthony de Jasay’s seminal book The State is titled “The Capitalist State” and presents a minimal state whose role is precisely not to govern, that is not to favor some individuals at the cost of harming

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Climate Agnosticism

August 10, 2021

I am rather agnostic toward “climate change” or “global warming” as it was called before the expression mutated for reasons that may be known only to our loving intelligentsia. I must say I was impressed by Tyler Cowen’s argument for (government) combatting climate change but, having now escaped his spell, the reasons for my agnosticism triumph again. The Economist’s story on the United Nations sixth report on climate change comforts me (“The IPCC Delivers its Starkest Warning about the World’s Climate,” August 9, 2021):
The oncoming dread registers yet more clearly than it did in the IPCC’s previous major assessment, AR5, published in 2013-14. The Earth has warmed over a tenth of a degree since then; it is now approximately 1.1ºC (2ºF) hotter than it was in the

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Andrew Cuomo and Politics Without Romance

August 6, 2021

Whether New York Governor Andrew Cuomo is guilty as charged, the statement he made in his defense illustrates what public choice theory has taught economists: as James Buchanan wrote, we must study “politics without romance.”
At about 12:50 in the video (well worth watching), Cuomo declared:
My job is not about me. My job is about you. What matters to me at the end of the day is getting the most done I can for you. And that is what I do every day.
Perhaps we can find politicians genuinely devoted to doing good for their electors, who selflessly sacrifice themselves to that task, and who don’t realize that the benefits they provide to some (“you”) are at the cost of harming others (those who don’t agree or see their own opportunities reduced). Perhaps we can even

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Intelligentsia Fetishes

August 5, 2021

The questions we ask or the passing comments we make depend on the explicit or implicit theories we hold about the world, including normative theories and values. This is not to say that anything is as true as anything else or that any value is as defensible as any other, but that one’s theories and values should be examined. What one says can also be motivated by virtue signaling, that is, showing one’s good standing with the group one wants to endear or persuade.
Unexamined passing comments are often influenced by the intelligentsia’s intellectual fetishes. I found a few examples in a book that is otherwise serious and challenging: Daron Acemoglu and James A. Robinson, The Narrow Corridor: Sates, Society, and the Fate of Liberty (Penguin, 2019). I will have a

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What Is Infrastructure?

August 3, 2021

The $1-trillion infrastructure deal between Congressional Democrats and Republicans may at least help us answer the question: What is infrastructure? Economic definitions, when you can find them, are not enlightening. They often provide a mere list of what are supposed to be instances infrastructure without providing a key to their common features.
Criticizing the infrastructure deal, a Wall Street Journal editorial provides a list of its own of “traditional public works” (“A Not So Grand Infrastructure Deal,” July 29, 2021):
The U.S. could use more investment in roads, bridges, cyber-security and ports, as well as for drought, wildfire and flood mitigation.
The same editorial shows how different and wider is the list concocted by Democratic and Republican horse

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Why the Pursuit of Truth Matters

August 2, 2021

One of the most disquieting and perhaps prophetic chapters in Friedrich Hayek’s The Road to Serfdom (University of Chicago Press, 1944) is the one on “the end of truth.” The future Nobel economics prize winner argued that a totalitarian government or one getting there must necessarily make war on truth.

But does truth really matter? I take truth to mean the concordance between beliefs on the one hand and, on the other hand, logic and observation. Preferences are not a matter of truth: there is nothing true or false in preferring dark to white chocolate, although persuasion can lead an individual to discover things that he actually prefers. Art, faith perhaps, and Gödelian interstices between the true and the provable, not to speak of the unexplained usefulness

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Covid-19 and the Inefficiency of State Coercion

July 29, 2021

An article by legal scholar Richard Epstein published in the Hoover Institution’s Defining Ideas defends George Mason University professor Todd Zywicki who is challenging his university’s Covid-19 vaccine mandate (“The Uneasy Case for Universal Vaccinations,” July 27, 2021). Epstein presents economic and constitutional arguments against this sort of mandate, at least those imposed by a public institution. Epstein explains the gist of the economic case, based on individual incentives:
A final consideration is that it might be wise not to impose any mandate at all. This view argues that the social case for vaccine mandates is not there. Most individuals will probably get the vaccine because it is in their self-interest to do so. Free riding is not an enticing option,

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Two Weaknesses of Socialism

July 25, 2021

Two weekend stories in the Wall Street Journal remind us of two weaknesses of socialism or, for that matter, of any collectivist control of the economy.
The first story reports on how the federal and state governments have blundered in distributing a trove of money to landlords and tenants in order to prevent evictions due to the Covid and lockdown recession (Andrew Ackerman, “End of Eviction Moratorium Puts Many Tenants at Risk of Losing Their Homes,” Wall Street Journal, July 23, 2021):
“The capacity to process applications does not match the volume of need,” said Jim MacDonald, chief community investment officer at the United Way of Greater Kansas City, which is helping distribute about $30 million in the area.
In other words, the capacity to process

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What Is Economic Growth?

July 14, 2021

We, including many economists, sometimes forget what is economic growth in a normative sense, that is, what we should count as “good” economic growth. Economic growth does not consist in producing more of this or that good (or service). It does not even necessarily consist in producing a larger quantity of all goods. Nor does it consist in producing the largest value of goods calculated by weighing the quantities produced with any set of prices. To have any normative (moral) significance, to be evaluated as good or not good, economic growth requires more than that.
It is not surprising that, in order to say something about the goodness of economic growth, we need some moral criteria. The evaluation of any policy or social situation ultimately requires the same.

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Thanks to the Oppressed Chinese

July 11, 2021

Assuming a nuclear war can be avoided, perhaps future historians will remember the growth of the Chinese influence in the world as the event that saved individual liberty, prosperity, America, and Western civilization. At least, that’s the optimistic way to look at Chinese tyranny and its impatient imitators in the West.
This hope is inspired by the Cold War. When Communists were conspicuously and proudly in power in the Soviet Union (and in China and elsewhere), they served as a foil for Western rulers and citizens, who were constantly reminded of what not to become. Communist policies such as restrictions on international trade, central planning, tax tyranny, police surveillance, philosophical and artistic crushing, philosophical poverty, persecution of

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There is No Shortage of Labor

July 4, 2021

Except if remuneration—the price of labor—is capped by government, there can be no more shortage of labor than a shortage of, say, steel. As is currently the case, labor can become more expensive like car rentals have become; it could be very expensive, like BMWs, if demand were even higher compared to supply. But if a market price obtains at which as much as one wants is available, speaking of a shortage is a confusing use of language. Indeed, it is precisely because a non-government-controlled price can rise, thereby reducing quantity demanded and increasing quantity supplied, that there is no shortage. (See my econlog post “Don’t Confuse Shortage and Smurfage.”)
When an employer says he cannot get the labor he needs, he is typically trying to say (assuming that

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A Mildly Optimistic Note About America

June 28, 2021

At a time when majorities everywhere seem to believe that the market is imperfect and the government (the government each one thinks he would run, not the current one run by others) is perfect, America sometimes or perhaps often looks like a relatively enlightened spot. Compared to probably all advanced countries, a sizeable minority—if not sometimes a majority—of Americans hold opinions that are economically more realistic and more consistent with the ideal of a free society.
Thanks to Peter Van Doren, editor of Regulation, for bringing to our attention a working paper titled “Price Gouging in a Pandemic” by Christopher Buccafusco (Yeshiva University School of Law), Daniel Hemel (University of Chicago Law School), and Eric Talley (Columbia Law School). The authors

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Making China Great Again

June 24, 2021

It is not totally impossible that, despite diminishing economic freedom and near-zero free speech, the Chinese economy will continue to grow at high rates. That these rates will reflect genuine economic growth, that is, increased production that responds to consumers’ demand. That some other way than free markets will be discovered to express consumers’ demand. That industrial policy will coerce businesses into efficiently satisfying consumers’ demand. That the centralized Chinese state will find a solution to the central planner’s information problem—what individuals prefer, which trade-offs each is willing to make, and what are all the production functions and all local conditions in the economy. That a dictatorial central government will erase the experience of

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John McAfee and Tax Evasion

June 24, 2021

John McAfee died in a Spanish prison today from a suspected suicide (“John McAfee, Software Pioneer Turned Fugitive, Dies in a Spanish Prison,” New York Times, June 23, 2021). He had just lost a legal battle to avoid extradition to the United States after being prosecuted for tax evasion. He was also sued by the Securities and Exchange Commission.
I don’t know which, if any, among the offenses he was suspected of over the years, the eccentric entrepreneur was actually guilty of.  It would not be overly surprising to discover that it is getting riskier to be eccentric in our over-regulated societies. He ran for the Libertarian nomination before the 2016 presidential election. (Not that you should hold that against me, but he was one of my Twitter and Facebook

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Individualism and Western Civilization

June 14, 2021

In his 1944 book The Road to Serfdom, Friedrich Hayek, a future (1974) Nobel economics prize winner, spoke about “the individualist tradition which has created Western civilization” (p. 73 in the edition edited by Bruce Caldwell, University of Chicago Press, 2007).
Stokely Carmichael, a black nationalist of the 1960s and chairman of the Student National Coordinating Committee, said (as quoted in Donald Critchlow’s In Defense of Populism [University of Pennsylvania Press, 2020], p. 97):
When you talk about black power, you talk of building a movement that will smash everything Western civilization has created.
This trope has been common for at least several decades among the people who call for a political system that would impose their ideas by force and reduce the

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Individualism and Western Civilization

June 14, 2021

In his 1944 book The Road to Serfdom, Friedrich Hayek, a future (1974) Nobel economics prize winner, spoke about “the individualist tradition which has created Western civilization” (p. 73 in the edition edited by Bruce Caldwell, University of Chicago Press, 2007).
Stokely Carmichael, a black nationalist of the 1960s and chairman of the Student National Coordinating Committee, said (as quoted in Donald Critchlow’s In Defense of Populism [University of Pennsylvania Press, 2020], p. 97):
When you talk about black power, you talk of building a movement that will smash everything Western civilization has created.
This trope has been common for at least several decades among the people who call for a political system that would impose their ideas by force and reduce the

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The Centrality of Exchange

June 11, 2021

Most government interventions consist in forbidding adult individuals (or their voluntary associations) to freely engage in acts of exchange: securities laws, antitrust laws, minimum-wage laws, maximum prices (like in “price gouging” laws, for example), laws and regulations mandating or banning discrimination, legal privileges for trade unions, tariffs and import controls, and so forth. Some believe that all these interventions are required, and required in growing number.
Many people including some economists ignore or forget the benefits of voluntary exchange. In The Wealth of Nations (1786), Adam Smith illustrated the centrality of exchange in economic relations (and, in fact, in all social relations) when he wrote about
a certain propensity in human nature …

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Tax Maximizers: Good Greed and Bad Greed

June 8, 2021

Greed is good or useful when greedy people automatically serve the interests of their fellow humans; exchange on free markets is the paradigmatic case. Greed is bad when it works by exploiting or dominating others, including through political force or deceit. At least, that is the way an economist would think if he is willing to make a value judgment in favor of the consumer, which is what he generally does when evaluating a public policy or an economic system.
Assuming that a corporate income tax is justifiable, we can apply the same principle to the international corporate tax system and to the new minimum tax proposed by the G-7 governments (Paul Hannon, Richard Rubin and Sam Schechner, “G-7 Nations Agree on New Rules for Taxing Global Companies,” Wall Street

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Lessons from China (and from Hayek)

June 6, 2021

A Wall Street Journal report of today (Stephanie Yang, “China’s Tech Clampdown Is Spreading,” June 6, 2021) suggests that the Chinese government is clamping down on tech companies just like the US and EU governments are doing, and often using the same rhetoric. Any economic theory of politics—in fact, any political theory—must be able to explain that. The WSJ writes:
Not a week seems to go by without Chinese regulators calling out tech companies for alleged offenses ranging from inconsistent pricing to imperiling user privacy to difficult working conditions. In May, China’s cyber regulator accused 105 apps, including short-video and job-recruitment apps, of illegally collecting and using personal data. It ordered the companies to fix their problems within three

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Economic Justification for Chinese Coercion?

June 2, 2021

The Chinese government relaxed to three children per family its former limit of one child after 1979 and two after 2015 (Lyian Oi, “China Delivers Three-Child Policy, but It’s Too Late for Many,” Wall Street Journal, June 1, 2021). Standard economic analysis provides an easy justification for limiting children: a child can be viewed as a negative externality “for society” because a more numerous population imposes costs on taxpayers and, through reduced family resources for education and other factors, on economic growth. This argument has been used, sometimes via environmentalism (example: a World Bank study of 1990).
This, however, mainly demonstrates the plasticity and omnipresence of externalities and the uselessness or danger of the concept itself. As I

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Tulsa Under an Economics-of-Politics Lens

June 1, 2021

One hundred years ago today, on May 31 and June 1st, 1921, white mobs descended on a prosperous black enclave of Tulsa, Oklahoma, dubbed “Black Wall Street.” The original purpose was to lynch a black man who was in custody after being accused of raping a white woman. The riots that followed, in which armed black men also (understandably) participated, ended up with hundreds of black residents killed or injured, and the burning and looting of most of the neighborhood (as shown on the feature image of this post, a photograph taken on June 1, 1921). For example, Dr. A.C. Jackson, a nationally renowned surgeon, “was shot dead by the mob, after he walked out of his home with his hands held up.”
A debate is going on in Oklahoma about how public schools taught or should

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The Producer as a Guilty Prostitute

May 28, 2021

Following a lawsuit brought by environmental groups, a court in The Hague (Netherlands) just ordered Shell to cut 45% of its carbon emissions by 2030 because the company “is partially responsible for climate change,” as the Wall Street Journal puts it (Sarah McFarlane, “Shell Ordered by Dutch Court to Cut Carbon Emissions,” May 26, 2021). The company will quite certainly appeal the ruling but, irrespective of the final result, it is interesting to ask what could have led to that and what are the implications.
If Shell may be bossed around by a court not because it did anything illegal but to force it to do in the future something considered good, what prevents a court from giving direct non-purchase or lower-purchase orders to its customers? Consumers are the ones

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