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Pierre Lemieux

Articles by Pierre Lemieux

Economists Should Not Forget Supply and Demand

14 hours ago

A Jule 23 Economist article about how “Generous Unemployment Benefits Are Not Keeping Americans from Work” is not easy to understand.  “[T]here is little evidence,” it claims, “to suggest that the extra $600 a week [from the federal government] is slowing down the labour-market recovery.” One would think that paying more in benefits to non-working workers would, ceteris paribus, decrease their number. Consider the last two paragraphs of the article:
Another signal that employers were struggling to fill positions would be soaring wages. Workers might hold bosses hostage with the threat of settling for benefits instead. Upon first inspection, this seems to be true. Average hourly earnings in the second quarter of 2020 increased by about 7% from a year ago, according

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Of Hydroxychloroquine and Sex With Demons

4 days ago

I know as little about biology and medicine as the typical public health expert knows about economics and the scientific study of society. I don’t know if hydroxychloroquine is effective against Covid-19 or under which conditions. However, I believe I know something about, or I have the analytical tools to understand, a social system where politicians or public health pontiffs decide what is good or not for individuals and forces it upon them.
Frequent readings about Covid-19 and a cursory perusal of recent articles in medical journals on the efficacy of hydroxychloroquine led me to believe either that the drug was detrimental or else that it had no beneficial effect. My opinion was not moved by the crowd pushing the drug, from Peter Navarro and Donald Trump to

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The 1918 Pandemic and Economic Freedom

10 days ago

One would think that, in the case of an economic shock such as a pandemic, an economy would suffer less damage and recover more rapidly the greater its level of economic freedom and the more flexible it is. To the typical economist, this seems rather obvious in theory. But is it empirically confirmed?
Worse than the current COVID-19 pandemic, the influenza pandemic that started in 1918 infected half a billion individuals or one-third of the world population and killed 50 million.
In a recent paper “Economic Freedom and the Economic Consequences of the 1918 Pandemic” (SSRN, May 2020), two young economists, Vincent Geloso (King’s University College, Ontario) and Jamie Bologna Pavlik (Texas Tech University) provide an empirical confirmation that economic freedom

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The Neo-Nazis and the Woke in 97 Words

20 days ago

The free speech of the neo-nazis and the woke must be defended not because their theories are true. As obvious as can be, their beliefs are non-sensical and dangerous. But, as John Stuart Mill argued in On Liberty, free speech is a rule for learning or approaching the truth, and the rule can only function and survive if selling intellectual snake oil is not banned. For if it is, you need somebody to determine for others what intellectual snake oil is.
However, government subsidization of one set of ideas or the other is a recipe for disaster.

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Some Reflections on Reparations for Slavery

27 days ago

In any liberal-libertarian conception of justice, there is no doubt that a liberated slave had a moral right to compensation from his master. From an economic viewpoint (what is possible and at what cost), the problem is more complex, especially across generations. In response to an article in The Economist, I would propose two arguments against reparation payments to today’s descendants of the slaves of several generations ago. These arguments suggest a new approach for effective and moral reparations.
The first argument is an economic argument: measuring the compensation due to the slaves’ descendants is impossible. Academic estimates of the harm done to American slaves range from 0.7% to 37% of today’s GDP (that is, of what American residents produce and earn in

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Flesh & Soul, Economics & Liberal Arts

July 4, 2020

On our sister website Law & Liberty, Jennifer Frey (U. of South Carolina) has a remarkable review of what seems to be a remarkable book by Zena Hitz. With Hitz, Frey defends the “monkish virtues”—and liberal arts—that David Hume attacked in the name of utility and economics. Monks, however, should also learn some economics.

The reviewed book (which I have not read) is Zena Hitz’s Lost in Thought: The Hidden Pleasures of an Intellectual Life (Princeton University Press, 2020). Every economist should read Frey’s review, a vibrant defense of the “solitude of contemplative life.” A couple of excerpts from Frey:
… the compelling case that the cultivation of our inner lives, which requires many of the monkish virtues that Hume dismissed, is fundamental to authentic

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Masks: Dr. Fauci Confirms My Hypothesis

July 2, 2020

According to a Wall Street Journal story of June 29 (“Masks Could Help Stop Coronavirus. So Why Are They Still Controversial?”), Dr. Anthony Fauci confirmed a hypothesis I proposed in an Econlog post of the same day: the long-lasting detrimental advice by the US government against ordinary people wearing masks was motivated by their shortage. This shortage was itself created by the governments’ own price-controls and their efforts to commandeer the consequently insufficient quantity supplied. The WSJ writes:
White House adviser Dr. Anthony Fauci said this month that he initially dismissed masks because medical workers were facing a shortage in supplies.
The link in the quote above points to a June 16 WSJ story that does not in fact mention anything like that—but

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The Scientific Look-and-Feel of Public Health

July 1, 2020

An individual with a human brain can make the following value judgments: (1) maximum health is the most important thing in human life; (2) health must be as equal among individuals as physically possible; and (3) these two value judgments should be imposed on everybody. Once this is done, the most efficient means to pursue these goals can be scientifically studied, using both the medical sciences, economics (including, at the first rank, public choice analysis), and possibly other sciences. (I take a science to be a body of logical theories not disproved by observable facts.)
Of course, it will likely be found that the presence of two objective functions—maximize health and maximize equality—requires trade-offs. For example, some academics and government

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In an Epidemic, Individuals are not Plants

June 29, 2020

An econometric study by Austan Goolsbee and Chad Syverson of the University of Chicago estimates that the lockdowns imposed by state and local governments may have been responsible for only 7% of the drop in economic activity. Most of the impact came from individuals who decided to avoid crowded places, as can be seen by comparing traffic in shops that were not under lockdown orders and those that were.
This is consistent with a basic economic idea: individuals respond to incentives (here, the fear of being infected), even in the absence of coercion. People are not just plants.
The authors used a database of cellphone data on foot traffic spanning contiguous counties subjected to different or differently-timed legal restrictions from March 1 to May 16. The data

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Closing or Reopening the Economy

June 28, 2020

That the expressions “closing the economy” or “reopening the economy” are widely and unthinkingly used suggests a deep problem: the state—governments at all level—has become so incredibly powerful that it can open or close large parts the complex and multifaceted network of exchanges between millions of individuals. It’s like if the government were a store owner and we were its store employees.
As I pointed out in an earlier post on this blog, even the Wall Street Journal writes unblinkingly that “countries,” by which it means national governments, can “reopen their societies.” If the state is so powerful as to open and close “its” society, perhaps it’s time for society to close its government—or, certainly, big chunks of it?
This language acknowledging Leviathan-

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The “Trump Economy” Before Covid-19

June 18, 2020

In the cover feature of the Summer issue of Regulation, I review the American economy and the economic performance of the Trump administration before Covid-19 hit. I review the evidence on unemployment, GDP growth, wages, stock prices, regulation, trade, public finance, etc. Nine figures illustrate my evaluation. A short excerpt on only one of the topics covered:
In the spring of 2016, then-candidate Trump told WashingtonPost reporters Bob Woodward and Robert Costa, “We’ve got to get rid of the $19 trillion in debt,” referring to the gross federal debt (which actually was $18.1 trillion at the end of 2015). “How long would that take?” the interviewers asked. “Well,” Trump answered, “I would say over a period of eight years.” Would he increase taxes to achieve that?

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Discrimination and State Power

June 16, 2020

Reading a column by Karen Attiah in the Washington Post (“Monuments of White Supremacy Obscure the History of Colonial Crimes. That’s Why They Must Come Down,” June 13, 2020), I remembered the guy who defended the state by asking, “If the state did not exist, who would have abolished slavery?” The real question is, of course, “If the state did not exist, who would have protected slave owners with overwhelming monopolistic force?” The guy should have known Article IV, Section 2 of the US Constitution about fugitive slaves, which remained in force until the 13th Amendment in 1865:
No Person held to Service or Labour in one State, under the Laws thereof, escaping into another, shall, in Consequence of any Law or Regulation therein, be discharged from such Service or

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Cooking Official Statistics Is Not Easy, for Now

June 15, 2020

After the Bureau of Labor Statistics announced a drop in the unemployment rate—from 14.7% in April to “only” 13.3% in May—a friend emailed me to share his suspicion that the unexpectedly low figure was a propagandist lie. The probability of that is not zero, I explained to him, but it is extremely low.
These data are gathered (through a monthly survey of 70,000 households), assembled, analyzed, and summarized by bureaucrats from the Census Bureau and the BLS, many of whom are professional statisticians. Bureaucrats could of course be co-opted or corrupted by political leaders, as they were in Argentina and Greece not so long ago. But there are reasons why this is less likely to happen in America.
Any attempt at political interference in official statistical data

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The American Economy Just Before Covid-19

June 9, 2020

The determination by the National Bureau of Economic Research that the American economy entered into recession in February 2020 was a surprise for many. The recession started before the World Health Organization declared a pandemic and a full month before President Trump declared a state of emergency. But is this early recession really surprising?
In a feature article to appear in the forthcoming (Summer) issue of Regulation, which will hit the newsstands before the end of this month and the web earlier, I tried to see what diagnosis of the “Trump economy” (if such a label can be used) could be made on December 31, 2019.
My article contains 9 figures that give a good idea of the evolution of the American economy during these three years. Some of the data may

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Is Being a Cop So Dangerous?

June 7, 2020

Any defendable normative political philosophy—at any rate, any classical-liberal one—holds that policemen are the citizens’ servants, not their masters. A policeman owes respect to a peaceful citizen and, to a certain point, even to a violent one. The policeman is paid by the citizen, not the other way around. While protecting some citizens, policemen have no right to attack innocent bystanders or protesters.
I use the European term “policeman” (which of course includes policewomen) instead of the American “police officer” for a purpose. It seems to better avoid the implication of extraordinary power and emphasizes that policemen are civilians among other civilians.
Trying to explain police violence in America (which is only endemic in parts of the country), The

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A Humble State with No Motorcade

June 4, 2020

In many ways, the modern world, including economic freedom, was born from the fear of tyranny and the institutions (generally unsuccessful) to prevent it. In Power and Prosperity: Outgrowing Communist and Capitalist Dictatorships (Basic Books, 2000), famous economist Mancur Olson had interesting historical remarks about Italian city-states in early modern times:

Sometimes, when leading families or merchants organized a government for their city, they not only provided for some power sharing through voting but took pains to reduce the probability that the government’s chief executive could assume autocratic power. For a time in Genoa, for example, the chief administrator of the government had to be an outsider—and thus someone with no membership in any of the

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Something to Learn from the Trump Presidency

June 2, 2020

The president of the United States tweeted a video of an alleged rioter (who, in all likelihood, is an American citizen, not a “Mexican rapist”) with the threatening comment:
“Anarchists, we see you!”
Is it for the president to identify suspects? So much for the ideal of the rule of law, it seems.
But my point is different and relates to the benefits of personal knowledge. I have always hoped that a journalist would, during a press conference, ask the president something like “Mr. President, what do you mean exactly by ‘socialism’?” Or, “Mr. President, what do you mean by ‘the extreme left’ and how does it differ from the left?”
Since Mr. Trump’s tweet of yesterday and his other recent references to “anarchists” as another type of scapegoat, my dream has changed. I

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Major Advantage of a Limited State

May 26, 2020

A major advantage of limited government is that the most dangerous individuals can do only limited damage if they rise at the top of the state.
A recent book I am reading (and will review for Regulation) provides a good illustration. In More: The World Economy from the Iron Age to the Information Age, Philip Coggan writes (p. 210):
Ford was, like many other early auto leaders, both a visionary businessman and a thoroughly nasty person. In 1920 he published a series of pamphlets with the title The International Jew: The World’s Foremost Problem, which earned him a citation in Adolf Hitler’s Mein Kampf. As late as 1939 Ford sent Hitler a cheque for $50,000 on his birthday and, in the following year, claimed that “international Jewish bankers” had caused the outbreak

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The National-Security Fraud

May 23, 2020

A cogent argument can be made for national security in the sense of protecting one’s free country against foreign tyrants. In the Wealth of Nations, Adam Smith argued that some exceptions could be made to economic freedom in the name of the “common defence.” In his book The State, Anthony de Jasay argues more daringly that the only function of the “capitalist state” or minimal state would be to prevent an ordinary state from replacing it, whether domestic or foreign.
A minimal state… “if you can keep it,” Benjamin Franklin would say. Two current examples illustrate that what the state does in the name of national security or related justifications is generally aimed at increasing its own power.
The Chinese state plans to impose new national-security measures on

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Rumors of War

May 14, 2020

Will future historians recount how World War III was started by an unknown and rather eccentric American economist obsessed with China and by a president desperate to stay in power by stirring nationalism after a disastrous and unpopular first term? Let’s hope not but consider some troubling trends.
In response to a tweet of mine pointing out that President Trump is (characteristically) “both for and against lockdowns,” a Twitter follower suggested that the coronavirus was an act of war:
If you feel the need to point fingers, why not point out the real culprits, the CCP [Communist Party of China]? It is really hard to believe that the international spread was not intentional. It is beyond criminal gross negligence. An act of war, literally.
He is not the only one

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“Our Most Fundamental American Values”

May 11, 2020

A Wall Street Journal story reports about an “anarchic market” and “grey market” in personal protective equipment or PPE (masks, gowns, and such) because, it suggests, there is “little gear coming from the U.S. government” (“A Chaotic Gray Market Determines Who Gets Coronavirus Gear-and Who Doesn’t,” May 8, 2020). As if government allocation of goods were normal. Welcome to the country of free enterprise.
In this area, America is not worse than most other countries but it is not better either. Many people don’t realize that any good is scarce in the sense that buyers and would-be buyers wish it were less expensive. They don’t realize an emergency is also a matter of degree. The emergency argument is, at bottom, an argument for government allocation in general. It

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Collectivist or Confused Clause in the WaPo

May 10, 2020

Language is a complex phenomenon. How is it possible, with ambiguous concepts and syntax and slippery figures of speech, to say anything meaningful? Or to convey the same ideas in different languages, say, English, French, and Latin? (I don’t mention Chinese because it looks like Chinese to me—or, as Casca said in Shakespeare’s Julius Caesar, “it was Greek for me.”) Compare with the neat logic of mathematics. I will not address these deep issues, but I just read a sentence in the Washington Post that nicely illustrates the complexity of language and its political danger.
In the first sentence of his otherwise instructive piece (“A Tale of Two Epidemics: Scientists in Sweden and Britain Fight Over Who Took the Right Public Health Path,” Washington Post, May 8,

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The Dangers and Arbitrariness of Antitrust

May 4, 2020

The standard argument for antitrust laws and regulations is that competition, which is good, should be imposed by the state. There is something ironic in the idea that the most monopolistic organization of all, the state, should be trusted to maintain competition. We should not discount the state’s incentive to protect itself from the competition of what Bertrand de Jouvenel called “social authorities” (“pouvoirs sociaux” in the French original, literally meaning “social powers”) or what Anthony de Jasay called “private force.”
In a recent book, Thomas Philippon, professor of finance at the University of New York, argues that tougher enforcement of antitrust laws by the EU government is one of two factors explaining why European markets are now more competitive

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The Abominable $1200 Gift: Timeo Danaos…

May 1, 2020

“It arrived while I slept,” a Facebook friend said (I quote from memory), grateful for the $1,200 deposit in his bank account from the fairy “IRS TREAS.” It’s magical. You have done nothing (except being unwillingly subject to the risk of a coronavirus and work ban) and a tax-free gift appears in your bank account! It should happen more often, right?
This will be the first terrible consequence of the “Economic Impact Payments” sent or being sent to more than 80 million Americans. Many people will think that if it can be done once, it can be done regularly, like every month to finance a guaranteed income. Many MMT proponents think that money creation can finance any goodies that they or the majority want.
One absurdity in the abominable gift is that the crisis that

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Owing the Public Debt to Ourselves

April 27, 2020

Will a snake who eats its tail end up disappearing? Can we make the public debt disappear? Friday, the Congressional Budget Office announced that the 2020 federal deficit, which its March forecast put at $1-trillion, is now projected to be $3.7 trillion. The federal debt held by the public will increase by roughly the same amount.
The Economist is far from alone in making the snaky sort of statement that appears in “After the Disease, the Debt” (April 23, 2020):
In fact a country’s public debt is not like a household’s credit-card balance. When the national debt is owned by its citizens, a country in effect owes money to itself.
We may agree with the first part of the statement: the government’s debt is not like a credit-card balance, for the simple reason that a

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Black Markets Raise their Ugly Head

April 14, 2020

You know there is a government-created shortage when a black market raises its useful head—sorry, its ugly head.  “Government-created shortage” is a pleonasm: except accidentally and very temporarily, it is the only sort of shortage that exists, as opposed to a “smurfage.” A black market is followed by government repression. It is already happening here about items subject to the current price controls, just like it happened in 18th-century France or in the USSR, or like it is happening now in Venezuela or Cuba, and in countless times and places during the adventure of mankind.
Whether it will get worse or not depends on whether and how long the government continues to repress voluntary exchange.
A few days ago, I ran across a March 20th press release from the

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Toilet Paper: Increasing Marginal Cost

April 13, 2020

A common objection to the simple supply-and-demand model that predicts a shortage when the price is capped below its equilibrium level goes as follows. Why don’t producers just produce more to fill unmet demand? They should be happy to do so. And this would just end the shortage. Correct?
No. This objection is not valid. Producers will only do so if it they make profits, which will not be the case at the capped price. Since quantity demanded is now higher than quantity supplied at the ex ante price, producers would fill the gap only if they could increase production at the same marginal cost, that is, only if they could produce additional units at the same cost. As students learn in ECON 101, marginal cost is increasing in the short-run (and often in the long-run

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The Economic Approach to Public Health

April 12, 2020

In a short article for the Reason Foundation, I distinguish between the economic approach to public health and the contemporary “public health” movement, which is a political movement. Two short excerpts:
Traditionally, public health deals with a general class of public goods related to the prevention and control of health events that are in everybody’s interest to prevent or control but that no private producer will organize because of the free-rider problem. An epidemic—the rapid spread of a contagious disease—is the paradigmatic case.
The public health movement, as it developed over the last century or two, is very different:
The public health movement, however, is generally suspicious of individual preferences and individual choices. It is openly opposed to the

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Oil prices: Laissez faire, morbleu!

April 10, 2020

In a benevolent or romantic conception of the state, it must be impossible to understand why politicians and bureaucrats hold official opinions on the price of oil, let alone intervene to control it. It must be utterly difficult to make sense of why Trump, Putin, and bin Salman want to push up oil prices. This suggests a very different theory of the state.
A story in today’s Wall Street Journal gives a hint at the alternative, non-romantic conception of the state (“Trump, Putin, Saudi Crows Prince Scramble to Fix Oil Markets,” April 10, 2020):
President Donald Trump, Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin lead the world’s top three oil producers, respectively. Mr. Trump is counting on support from the country’s now-vast oil

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Economic Theory and the Real World

April 9, 2020

Economic theory is useful because it helps explain what’s happening in the real world, which is complex and opaque. Last week, in the course of a conversation on the federal price controls on products related to the current emergency (When Free Market Prices Are Banned, April 1, 2020), I wrote:
The next step, if history is any guide, is to try and correct the failure of previous interventions with another one (until the next one): forbid exportations.
Today’s Wall Street Journal writes (“Faulty N95 Masks Hamper Hospitals on Coronavirus Front Lime,” April 9):
The Trump administration said Wednesday that it would restrict the export of certain masks and gloves for four months.
The story is interesting because it further illustrates the continuation of the humongous

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