Wednesday , October 27 2021
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Pierre Lemieux

Articles by Pierre Lemieux

Is Powell Right About Inflation?

3 days ago

If we believe what its chairman is saying, the Fed does not seem to know what inflation is. The Wall Street Journal of Friday wrote (Nick Timiraos, “Powell Says Supply-Side Constraints Have Worsened, Creating More Inflation Risk,” October 22, 2021):
“Supply-side constraints have gotten worse,” Mr. Powell said Friday at a virtual conference. “The risks are clearly now to longer and more-persistent bottlenecks, and thus to higher inflation.”
The economic definition of inflation is a sustained or persistent (not transitory)  increase in the general price level as the Journal hinted to just before the quote above, but it is not clear if it was paraphrasing Mr. Powell. What is pretty sure is that inflation cannot be caused by mere “supply-side constraints,” except if

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The Simplicity of Our System of Government

10 days ago

An interesting essay in Saturday’s Wall Street Journal suggests, if we go farther than the author, that “the simplicity of our system of government,” although a worthy ideal, has become a mere historical memory if not a propaganda tool for the democratic Leviathan. The story is about Andrew Jackson who, before his death, refused to be buried in a marble sarcophagus believed to have once contained the remains of a Roman emperor. The idea had been advanced by U.S. Navy commodore Jesse D. Elliot. (See Mary Beard, “A Tomb Not Fit for a President,” WSJ, October 16, 2021.)  Jackson’s reaction, Beard writes, stood
as a symbol of the down-to-earth essence of American republicanism and its distaste for the vulgar bric-a-brac of monarchy or autocracy. …
Jackson was 77 years

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Give Leviathan an Inch…

13 days ago

In his 1651 book Leviathan, Thomas Hobbes argued that, in order to protect its subjects, the state—“Leviathan”—need to be all-powerful. The problem, others noted and history showed, is that a non-democratic Leviathan is a recipe for tyranny. But a democratic state will respect every citizen’s interests because we love ourselves. The democratic Leviathan loves you because he is you. This theory took many forms up to the present day.
James Sensenbrenner, a former congressman who was instrumental in the adoption of the “Patriot” Act of 2001, is part of the legions who implicitly support this theory. In a Wall Street Journal op-ed, he complains that this Hobbesian law now threatens parents who object to the teachings of public schools (“The Patriot Act Wasn’t Meant to

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Authoritarian Left, Authoritarian Right

14 days ago

The Biden administration is intent on forcing large private businesses to have their employees vaccinated against Covid-19 or to produce weekly test results. The governor of Texas issued an executive order forbidding private businesses from mandating the vaccine for their employees. (See Eric Boehm, “Texas Gov. Greg Abbott Bans Private Businesses from Mandating Vaccines for Workers,” Reason Magazine, October 12, 2021.)
This illustrates a trend that has been developing for some time whereby anything affected by a so-called “public interest” is either banned or compulsory. In the process, what was deemed private becomes public.
Note that the process has no built-in stopping mechanism. On the contrary, as more areas of life become matters of dirigiste democratic

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The Continuum Between Liberalism and Anarchism

17 days ago

In a private comment on my Regulation review of Acemoglu and Robinson’s The Narrow Corridor, George Mason University professor Daniel Klein challenges the continuity I see between (classical) liberalism and anarchism. The contentious point was summarized in the last paragraph of my review:
An improved and more useful study of the narrow corridor would, in my opinion, switch the normative positions of anarchy and the state. Instead of looking at how the state can protect “society” against anarchy, it would ask how the state can protect feasible anarchy—that is, whatever level of anarchy is possible. The normative primacy should go to anarchy, not to Leviathan.
Dan wrote to me (and allowed me to share it):
I think that we ought to be talking up liberalism, and

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Saule Omarova and Friedrich Hayek

23 days ago

Three-quarters of a century ago, Friedrich Hayek warned that the West was on “the road to serfdom.” President Biden’s nomination of Ms. Saule Omarova as Comptroller of the Currency is another illustration that the peril has not receded.
A graduate of Moscow State University in 1989 on the Lenin Personal Academic Scholarship, Omarova has not apparently understood that the state cannot run the economy without tightly—and in fact, savagely—controlling individual lives. In the 2oth century, Communism gave what we would think was a definitive illustration. Other sorts of totalitarianism came close: at the forefront was National Socialism, which was both nationalist and socialist as its name confirmed. Hayek saw all that, as you can see in my review of The Road to

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Contra Gensler and the Chinese Mirror

September 27, 2021

Gary Gensler, the chairman of the Securities and Exchange Commission, may be everything a classical liberal wants to avoid. I will take him as representative of the federal bureaucracies that want to control cryptocurrencies and the emerging decentralized finance (“DeFi”) markets. (See Andrew Ackerman, “Stablecoins in Spotlight as U.S. Begins to Lay Ground for Rules on Cryptocurrencies,” Wall Street Journal, December 25, 2021.)
In an instructive article, The Economist evoked the breath-taking potentialities of DeFi: cryptocurrencies, blockchains technologies, fungible or non-fungible tokens, etc. (“Adventures in DeFi Land,” The Economist, September 18, 2021). A few quotes:
Piece by piece a new kind of economy is being built through applications on various

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Avoiding Biases: Lessons from Michael Huemer

September 23, 2021

The featured image of this post is a photograph I took two weeks ago less than a mile from my home in Maine. It is only illustrative but, I think, powerfully illustrative.
In evaluating the truth, objectivity requires one to check one’s own biases. It is not absolutely impossible that in an advanced society with multiple independent officials and checks against election fraud (as opposed to a banana republic), the government’s party steals an election. It is not absolutely impossible either that the opposition steals the election, as some claim happened in the 2020 federal elections. It is however very unlikely. This remains true if one—like your humble blogger—does not like the party that actually won.

In his recent introduction to philosophy for college

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The Elementary Basics of Inflation

September 20, 2021

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”

September 17, 2021

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

September 13, 2021

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

September 10, 2021

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”

September 7, 2021

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

September 3, 2021

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

September 1, 2021

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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