Evaluating the free market by comparing it to the alternatives (We don't need more regulations, We don't need more price controls, No Socialism in the courtroom, Hey, White House, leave us all alone)
A large body of evidence finds that relative mobility in
the US has declined over the past 150 years. However, long-run mobility
estimates are usually based on White samples and therefore do not
account for the limited opportunities available for nonwhite families.
Moreover, historical data measure the father’s status with error, which
biases estimates toward greater mobility. Using linked census data from
1850 to 1940, I show that accounting for race and measurement error can
double estimates of intergenerational persistence. Updated estimates
imply that there is greater equality of opportunity today than in the
past, mostly because opportunity was never that equal. (JEL J15, J62,
N31, N32)
That is from Zachary Ward of Baylor University. If that is true, and
it may be, how many popular economics books from the last twenty years
need to be tossed out? How many “intergenerational mobility is
declining” newspaper columns and magazine articles? Ouch. No single
article settles a question, but for now this seems to be the best, most
up to date word on the matter.
"Understanding the market
process as a systematic, error-corrective sequence of profit-inspired
entrepreneurial discoveries, continually reshuffled and redirected as a
result of the ceaseless impact of exogenous changes, should drastically
alter our appreciation of key features of capitalism.
—Israel M. Kirzner, Competition, Economic Planning, and the Knowledge Problem1 (page 301)
This volume of the collected works of Israel M. Kirzner, edited with a
modestly brief introduction by Peter J. Boettke and Frederic Sautet,
addresses deep and important questions that most economists would rather
skip. These pertain to what distinguishes market activity from central
planning, the economic role of entrepreneurs, and what is meant by
competition.
I found the conceptual issues that Kirzner raises to be
intellectually challenging, and so I imagine that many readers will as
well. If you pick up the book, I recommend starting near the back with
the essay “How Markets Work: Disequilibrium, Entrepreneurship, and
Discovery,” in order to get a general overview before you tackle the
essays from the beginning.
Here, I will focus primarily on the question of what distinguishes a
market economy from a centrally planned economy. While my discussion is
informed by Kirzner’s writing, I do not claim to completely understand
or share his views.
In a market economy, decisions about what to produce and how to
produce are made by individual entrepreneurs. In order for entrepreneurs
to do this in a way that promotes more efficient economic outcomes:
1. They must be guided by a profit incentive.
2. They must compete in a never-ending process in which they correct mistakes and seize opportunities for improvement.
Many economists believe that the main weakness of socialism is the absence of a profit incentive. But Kirzner writes,
Our further exploration of the interface
between the economics of socialist calculation and the economics of the
process of entrepreneurial competition will permit us to argue, I
believe, that there are analytical grounds for maintaining that the
Misesian “problem of knowledge” is indeed anterior to [the] problem of
motivation. (page 151)
The problem of knowledge is to discover what consumers want and how
to efficiently provide for those wants. Entrepreneurial competition is a
process for making such discoveries. In the absence of such
competition, the central planner must rely on guesswork.
In a socialist economy, the planner lacks a means for obtaining
information on what individuals want. Kirzner point out that,
conversely, a market economy has no concept of what “society” wants.
A market economy is by definition made up
of a multitude of independently-made individual decisions. In such a
context to talk of decisions made “by society” is, at best, to engage in
metaphor. “Society” does not, as a simple matter of fact, choose; it
does not plan; it does not engage in the “allocation of resources”; it
does not have ends; it does not have means; to talk of society facing
“its” allocative, economizing problem is, strictly speaking, to talk
nonsense. (pages 153-154)
Those of us who wish to defend both methodological individualism and
markets are faced with a paradox. When we say that the economy works
well, we are claiming to speak for the entire society. But as
individualists, we would say that there is no such moral entity as
“society.”
My way of dealing with the paradox is to say that I have my
intuition about what constitutes a “good economic outcome for society,”
and you have yours. If our intuitions have little or nothing in common,
then we have no basis for further discussion. But if our intuitions are
similar, then we can have a productive dialogue about what sort of
institutional arrangements are likely to produce desirable outcomes
relative to our respective intuitions.
During the “socialist calculation debate,” economists who advocated
socialism conceded that the price mechanism performs an essential
information-processing function. They suggested, however, that a
government bureau (today we would say a powerful computer) could store a
list of all of the economy’s inputs and outputs. Call this the WAC, for
Walrasian-Auctioneer Computer. The WAC would then propose a set of
prices for inputs and outputs. Consumers would decide on their demands,
and firms would decide on outputs. The WAC would look at the results to
see what shortages or surpluses emerged. For inputs or outputs that are
in surplus, the WAC would adjust prices downward. For inputs and outputs
that are in shortage, the WAC would adjust prices upward. Then it would
allow consumers and firms to respond to this new set of prices, and
look at those results. This process would continue until all surpluses
and shortages were eliminated.
In fact, the process just described is problematic, because the
economic activity that takes place at “false prices” in one iteration
might alter the desired activity at a subsequent iteration. It by no
means guarantees smooth convergence to the point where all markets are
in balance.
An alternative is to have the WAC announce a set of prices but not
allow trading to take place. Instead, the WAC asks everyone to report
what they wish to trade at those prices. Based on these wishes, the WAC looks at the resulting surpluses and shortages as hypothetical.
It proposes a new set of prices to eliminate these hypothetical
shortages, and everyone reports what they wish to trade at these new
prices. Assuming that this iterative process converges to a balanced
solution, the WAC finally allows trading to take place at the
market-clearing set of prices.
Some remarks about this hypothetical WAC mechanism:
1. Most mainstream economists, whether they favor socialism or not,
do not worry about whether or not the WAC mechanism exists or is
feasible. The standard approach is to construct economic models that
assume that the economy works “as if” it used the WAC mechanism. In
particular, it can be taken for granted that the economy will adjust to
equilibrium states. Therefore, the task of the economist is to analyze
the properties of equilibrium states and to compare one such state with
another.
2. In contrast, Kirzner and other Austrian economists insist on the
importance of the fact that the WAC mechanism does not exist in the real
world. In the real world, central planners make their dictates using
guesswork, not by using databases and trial-and-error prices. Kirzner
points out that in a real-world market economy, entrepreneurs take on
the task of adjusting prices and identifying opportunities to alter the
mix of what is produced and how it is produced. A computer does not
identify shortages, surpluses, and opportunities. Individual
entrepreneurs find them.
What Kirzner calls “entrepreneurial alertness” is what grinds down
inefficiencies and drives the economy in the direction of equilibrium,
or market balance. Of course, the economy never actually reaches such a
state, because new opportunities to improve efficiency always arise as
events take place and new discoveries emerge.
3. Even if the WAC mechanism were technically feasible, I believe
that it still would not be sufficient to facilitate a socialist economy.
We would still be missing the element of “entrepreneurial alertness.”
It is one thing to believe that a factory manager could decide how many
compact cars and how many mid-size cars to produce, based on prices
proposed by the WAC. But who has responsibility for coming up with the
idea of a ride-sharing service? Or a self-driving car? That is neither
the job of the WAC nor the car manufacturer. In addition to the WAC,
would-be market socialists need a cadre of designated innovators, whose
job it is to generate new products and processes.
4. I think this still leaves open the question of how to motivate
firm managers and others in a socialist economy. You can tell a manager
to adjust production to maximize a profit that is purely an accounting
device, with no effect on remuneration. But what incentive will that
provide to managers? And will designated innovators take the right risks
if they are playing the game for tokens that are not real money?
5. While all of these arguments point to the difficulty of central
planning, this leads to the question: how do firms manage to operate?
Within a firm, activities are not guided by a price system and
entrepreneurial alertness. Instead, like a central planner, the boss
sets internal prices, notably the compensation rules for its workers.
Like a central planner, the boss chooses projects based on informed
hunches rather than leaving the selection to a market mechanism.
Skeptics of socialism like to point to North Korea or the former
Soviet Union as proof that central planning fails. But can advocates for
socialism point to Wal-Mart or Apple Computer as proof that central
planning can work?
I would say that the difference between Wal-Mart or Apple on the one
hand and North Korea or the former Soviet Union on the other is that
when central planning breaks down at one of these entities, the
ineffective firm will be weeded out and replaced much more quickly than
the ineffective socialist government.
If we think of the firm as a locus of central planning, then a market
economy consists of these planned enterprises, jostling with one
another. We might use a metaphor of ships that are centrally managed,
some large and some small, all trying to stay afloat in a sea of
competition. Corrosion and natural disasters frequently sink some of the
ships, but other ships arrive, and people’s lives generally get better
because these ships are new and improved. A centrally planned economy is
a like a single structure sitting on dry land. It is less likely to
experience rapid improvement, and when it corrodes or is hit by a
natural disaster, its population suffers for a long time."
Adherence
to healthy dietary patterns can prevent the development of
non-communicable diseases and affect life expectancy. Here, using a
prospective population-based cohort data from the UK Biobank, we show
that sustained dietary change from unhealthy dietary patterns to the
Eatwell Guide dietary recommendations is associated with 8.9 and
8.6 years gain in life expectancy for 40-year-old males and females,
respectively. In the same population, sustained dietary change from
unhealthy to longevity-associated dietary patterns is associated with
10.8 and 10.4 years gain in life expectancy in males and females,
respectively. The largest gains are obtained from consuming more whole
grains, nuts and fruits and less sugar-sweetened beverages and processed
meats. Understanding the contribution of sustained dietary changes to
life expectancy can provide guidance for the development of health
policies."
"Subway might not be the only one that's freshly baked. Sen.
Elizabeth Warren (D–Mass.) thinks the government should investigate
America's alleged "sandwich shop monopoly."
"We
don't need another private equity deal that could lead to higher food
prices for consumers," Warren tweeted Sunday. She was responding to a Politico piece
reporting that the Federal Trade Commission (FTC) is probing the
private equity firm Roark Capital's $10 billion acquisition of Subway.
Roark already owns the sandwich-serving chains Arby's, Jimmy Johns,
McAlister's Deli, and Schlotzky's. Warren said that adding Subway to
that list could create a "sandwich shop monopoly."
The senator
has made a career of crusading against such "monopolies," regardless of
how monopolististic they actually are or beneficial to consumers they
might be. (Witness her war on Amazon-branded chargers.)
Her
attack on America's alleged "sandwich shop monopoly" scores new points
for pettiness. It also shows just how broad (and therefore meaningless)
the word "monopoly" has become in modern political discourse—and at Lina Kahn's FTC.
It's easy to assert that something is a monopoly if you narrow your
focus on the market or product being discussed. There are, after all,
only so many national fast-casual restaurant chains focused on serving
deli sandwiches. If Roark snatches up Subway, then ownership of that
particular ham slice of the market may in fact look pretty consolidated.
But
from the casual consumer's perspective, competition remains robust.
There are endless options for getting a sandwich without paying a
Roark-owned enterprise. Grocery stores, convenience stores, coffee
shops, non-chain delis, and more all sell some variety of sandwich. And
yes, non-Roark-owned national sandwich chains still exist.
Sandwiches, not being the most elaborate meal in the world, can also be made by most Americans at home.
On
top of all that robust competition within the sandwich market, sandwich
shops are in heated competition with all manner of other restaurants
selling hamburgers (technically also a sandwich), hot dogs (debatably a
sandwich), burritos (not a sandwich), salads, soups, Asian rice bowls,
Mediterranean rice bowls, and more.
Consumers can, and do, flit
between all of these options with ease. Even if Roark's acquisition of
Subway gives it a stranglehold over the sandwich market, its ability to
raise prices on consumers will still be hemmed in by this dizzying array
of additional lunchtime options.
The original purpose of
antitrust laws was to prevent the Cornelius Vanderbilts of the world
from using their ownership of the commanding heights of the economy to
raise prices and gouge consumers. Libertarians have long criticized such
statutes, arguing that an existing monopoly can't sustainably charge
consumers above-market prices as long as new competitors armed with new
technologies are allowed to undercut them. And indeed, even tech
companies that once seemed invincible are now being laid low by competitive pressures.
If markets can work in that
arena, we surely don't need the government to police who owns
businesses that specialize in putting cold cuts between slices of bread."
"Thomas Piketty is well-known for his work on estimating income and
wealth inequality. That work made him an “economics rockstar” in the
eyes of the media, as he appeared to confirm a popular narrative about
rising inequality. Piketty’s stats showed a consistent trend across the
20th-century United States. Top income and wealth concentrations
followed a U-curve pattern, where the early 1900s were marked by high
“Gildedq Age” levels of inequality. These levels fell rapidly during the
1940s, stayed low until the 1980s, and rapidly rebounded until the
present day as the “top 1 percent” pulled away from the rest of the
pack.
In fact, Piketty claims that US inequality today is higher than it
was in 1929 — the highest point on the first half of the U-curve. The
main culprit behind rising inequality, according to his story, is a
series of tax cuts beginning with the Reagan administration. Just the
same, Piketty points to the mid-20th century’s tax system, where top
marginal rates peaked at over 90 percent, as the reason for the trough
in his U-curve. The resulting series of academic articles — often
co-authored with Gabriel Zucman and Emmanuel Saez — are deemed as novel
and important contributions to the scholarly literature on inequality.
The empirical work of Piketty and his coauthors has attained immense
influence in American political life. The media often touts the U-curve
and its depictions of skyrocketing inequality since the 1980s as a
stylized fact. Politicians and pundits invoke his academic works to
justify tax hikes and redistributive programs, all in the name of
combating inequality.
What if Piketty and his team got the numbers wrong though? What if
inequality wasn’t rising as fast as he claimed, or what if the effects
of growing income concentrations were already offset by existing
government programs? There would no longer be an empirical case for
hiking taxes or expanding government redistribution. That’s the
implication of a bevy of recent research articles, showing that
Piketty’s statistics could (and should) be discarded in favor of more
rigorous work.
The most recent of these is an article by David Splinter and Gerald Auten in the Journal of Political Economy.
Auten and Splinter revisited many of the data construction assumptions
made by Piketty and his acolytes in dealing with data from 1960 to 2020.
Most notably, they made sure that income definitions were consistent
over time, that the proper households were considered (as Piketty et al.
used tax units that can be easily biased by demographic changes), and
that better data were used. They ended up finding that Piketty’s
mid-century trough was not as low as advertised. They also showed that
the increase in income concentrations after 1980 was far more moderate
than Piketty claims.
In the main article by Piketty and Saez, the top 1 percent earned 9
percent of all pre-tax incomes in 1980 versus 20 percent in 2020. In
Auten and Splinter’s improvements, these proportions are 9 percent and
14 percent, respectively. After accounting for transfers and taxes
(something that Piketty and Saez fail to do), Auten and Splinter find
virtually no changes since 1960. Piketty and his defenders have thus far
attributed the differences to differing assumptions about methodology
and the calculation of imputed portions of their series. But Auten and
Splinter’s work shows that these assumptions matter a great deal,
meaning Piketty’s version is no longer an authoritative standard for
evaluating levels of inequality.
But what if we set aside the methodological disagreements about
imputed data and focus instead on simply getting the underlying
statistics right? It turns out that Piketty and Saez’s original series
had multiple accounting errors, data discrepancies, and even historical
mistakes in how they dealt with changes to the tax code.
In a recent working paper, we set aside the discretionary
disagreements over imputation and only looked at the ways that Piketty
and his coauthors handled the underlying tax statistics. At multiple
points over their century-long series, they switch out their approaches
for estimating the total amount of income earned in the United States
each year. This figure allows them to calculate the percentage of those
earnings that went to the richest 1 percent, using income tax records.
Oddly enough, Piketty’s most sweeping methodological changes happen
at crucial junctures in their depicted U-Curve, such as the sharp
decline in income inequality that they depict during World War II. It is
no coincidence that these same years coincided with an overhaul of the
tax code that standardized how the IRS collects and reports income data.
In this instance, we found that Piketty and his coauthors failed to
properly correct for the accounting changes, and used an inaccurate
estimate of total personal income earnings. Similar errors pervade the
entire Piketty-Saez series.
After correcting for these problems, we found that Piketty and his
co-authors tend to underestimate total personal income earnings, thereby
artificially pumping up the income shares of the richest earners. They
do so inconsistently though, as their largest underestimations are from
the periods between 1917-1943 and from 1986-present. These errors
correspond precisely with the two highest periods of inequality, the two
tails of the U-shaped pattern. Shifting to a consistent methodology
that does what Piketty and his co-authors aimed to do, but does so more
rigorously (we carefully assembled year-by-year data of national
accounts components to create a consistent definition rather than use a
“rule of thumb” as they did), shows that 40 percent of the differences
between Piketty and the work of Auten and Splinter is due to the
methodological inconsistencies of the former.
In earlier works published in The Economic Journal and Economic Inquiry,
we also found other signs of carelessness by Piketty and his acolytes
with data sources pre-1960. They used inconsistent definitions to link
discontinuities in tax records. They omitted certain tax filing records
after misreading their data sources. They made arbitrary decisions about
how to impute gaps in their data, and used unreliable ratios to
estimate the effects of accounting changes by the IRS. When we corrected
all of these issues, we found that inequality was far lower in the
1920s than depicted. The decline did not start in the 1940s — it started
in 1929 and close to two-thirds of it was completed by 1941. Again, the
mid-century trough was not as deep as depicted. The combination of all
work – the pre-1960 corrections and the century-long consistent
methodology can be seen in the graph below where the U-curve is far less
pronounced and at a lower level.
Other works have confirmed these points differently. A small list of
these suffices to show this. Miller et al. in an article in Review of Political Economy
showed that most of the increase from 1986 onward is due to tax
shifting behavior linked to the 1986 Tax Reform. Armour et al. in an
article in the American Economic Review showed that properly measuring capital gains eliminates all the increase since 1989. In subsequent work in the Journal of Political Economy,
Armour et al. confirmed this finding. Finally, a National Bureau of
Economic Research by Smith et al. confirmed that all of these findings also apply to wealth inequality. Moreover, work by Sylvain Catherine et al. from the University of Pennsylvania shows that Piketty and his team failed
to properly consider the role of social security which – when included –
essentially levels the evolution of wealth inequality.
Normally, these findings would be cause to revisit the conventional
wisdom around Piketty’s narrative. The problems with his underlying
statistics are now well-documented, and newer and better estimates are
available to take their place. Those estimates show a weaker U-curve
with different timing and magnitudes for its evolution. Most of the
decline to the trough is no longer tied to tax rate changes but rather
to the effects of the Great Depression. Most of the increase post-1986
is an artifice of accounting and can be probably better attributed to changes in the returns to education
during the 1970s, 1980s and 1990s which have since stabilized. Overall,
the causal link between high taxes and low inequality (or the inverse
scenario) is no longer apparent in the corrected data, which shows a
much more nuanced evolution of top income levels over time. Indeed, one
of Auten and Splinter’s main findings shows that if you look at top
income levels after taxes are paid, the top 1 percent has hovered around
a stable 8 percent income share for the last 60 years.
As the study and measurement of inequality progresses, Piketty’s (and
his team’s) main estimates have become obsolete and might be properly
consigned to the field of the history of economic thought. However,
Piketty is now calling anyone who refuses to accept his stats an “inequality denier” and saying it is equivalent to climate denial.
Critics do not deny inequality. They merely want to measure it
correctly. Piketty’s own data are deeply suspect and open to challenges
that he simply does not want to answer. Labeling his critics as
“deniers” is a way of sidestepping the many problems with his own work.
That alone warrants not only discarding his estimates but also
discounting any future research because of bad academic behavior."
"Medicare
Advantage plans are growing rapidly and cover about half of the
entitlement’s beneficiaries. Private insurers administer the plans and
are paid by Medicare per beneficiary. Insurers compete for patients by
offering benefits, including vision and dental care that aren’t
available in traditional fee-for-service Medicare.
Lower
premiums have made Advantage plans popular in particular among
low-income seniors. Plans are able to offer more benefits at lower cost
in part by reducing unnecessary care and expensive hospital stays.
Avalere,
a healthcare consulting firm, analyzed utilization rates in traditional
Medicare versus Advantage plans. After adjusting for disease and
demographics, Avalere found that fee-for-service utilization was 12%
higher for skilled nursing homes and 37% higher for hospital inpatient
care in 2019."
"private insurers have a financial incentive to keep patients out of the
hospital by improving adherence to treatments and coordination of care."
"If fee-for-service utilization rates were similar to those in the
Advantage program, Avalere projects that the hospital trust fund would
remain solvent until 2048." [instead of the projected 2031)
"the Administration is resorting to brute government force to curb
Medicare spending: restricting access to new Alzheimer’s treatments,
imposing price controls on other medicines, and reducing reimbursements
to doctors."
"Medicare’s low reimbursement rates are driving doctors to leave private
practice for hospitals, which reduces provider competition and increases
healthcare spending."
"The International Energy Agency said this week that 49.7 million miles
of transmission lines—enough to wrap around the planet 2,000 times—will
have to be built or replaced by 2040 to achieve the climate lobby’s
net-zero emissions goal. This amounts to a plan for everyone to buy more
metals from coal-fired plants in China.
Grid
investment, the IEA report argues, is needed to carry additional
renewable energy “as the world deploys more electric vehicles, installs
more electric heating and cooling systems, and scales up hydrogen
production using electrolysis.” By its estimate, the world needs to
spend $600 billion annually on grid upgrades by 2030.
Unlike
fossil fuel and nuclear power plants, solar and wind projects are
typically many miles from population centers. That means long
transmission lines, some under the sea to take electricity from
off-shore wind installations. Tens of thousands of extra power
transformers will be needed to step up and down voltage.
All
of this would cost trillions of dollars and require enormous quantities
of metals. “Copper and aluminium are the principal materials for the
manufacture of cables and lines,” the IEA report says. Transmission
lines also need insulators, such as cross-linked polyethylene and
ethylene-propylene polymer—both derived from fossil fuels.
Transformers
are made of the same specialized steel used in charging stations for
electric vehicles. Smaller transformers require non-oriented electrical
steel, used in EV motors. The green-energy gold rush has contributed to
shortages of both types. Buyers of transformers “face a wait of over 18
months,” the report notes.
Meantime,
advanced economies must replace aging equipment to prevent power
outages and safety hazards. About half of the transmission and
distribution lines in the U.S. are more than 20 years old, according to
the IEA.
Where
are the materials going to come from? The report doesn’t say, but the
most likely answer is China, which dominates global copper, steel and
aluminum production, owing to its lax environmental regulation and low
labor costs. Over the past 20 years, primary aluminum production has
increased ninefold in China while declining 68% in the U.S.
Metals
manufacturing takes massive amounts of power, and coal accounts for 60%
of China’s electric generation. In other words, the IEA’s path to a
net-zero grid would involve emitting a lot more CO2, even assuming it
wasn’t a political nonstarter, which it is."
I obtained 800 pages of ‘Diversity Faculty Recruitment Reports.’ Here’s what I found
By John Sailer. Mr. Sailer is director of university policy at the National Association of Scholars. Excerpts:
"A search committee seeking a professor of military history rejected one
applicant “because his diversity statement demonstrated poor
understanding of diversity and inclusion issues.” Another committee
noted that an applicant to be a professor of nuclear physics could
understand the plight of minorities in academia because he was married
to “an immigrant in Texas in the Age of Trump.”"
"In February 2021, then-president Kristina Johnson launched an initiative
to hire 50 professors whose work focused on race and “social equity”
and “100 underrepresented and BIPOC hires” (the acronym stands for
black, indigenous and people of color)."
"Each report required search committees to describe how their proposed
finalists “would amplify the values of diversity, inclusion and
innovation.”"
"One report said a candidate would “greatly enhance our engagement with
queer theory outside of the western epistemological approaches which
would greatly support us both in recruitment and retention of diverse
graduate populations.”"
"In a search for a professor of chemistry, the report notes that one
candidate’s “experiences as a queer, neurodivergent Latinx woman in STEM
has provided her with an important motivation to expand DEI efforts
beyond simply representation and instead toward social justice.” Another
report concedes that “as a white male” one proposed finalist “does not
outwardly present as a diversity candidate.” In his defense it notes
that he recently published on critical race theory."
"The committees cited those [diversity] statements as the sole reason for eliminating
certain candidates in fields as varied as aquatic ecology, lighting
design, military history and music theory."
"A committee searching for a professor of freshwater biology selected
finalists “based upon a weighted rubric of 67% research and 33%
contribution to DEI.” To evaluate the statements, the committee used a
rubric that cited several “problematic approaches” for which a candidate
can receive a zero score—for example, if he “solely acknowledges that
racism, classism, etc. are issues in the academy.” It isn’t enough for a
freshwater biologist to believe that racism pervades higher education."
"The rubric meanwhile gave a high score for DEI-focused activism outside
academia, for demonstrating an understanding of “intersectionality” and
for embracing a vision of “anti-racism” that “requires consistent and
long-term growth, reflection, and engagement (and that they are prepared
to put in this work).”"
"For a search in astrophysics, “the DEI statement was given equal weight to the research and teaching statements.”"
"Throughout the reports, references to the race and sex of candidates
abound. Many of the job candidates’ diversity statements emphasized
their own “intersectional” identities—“a person of color and a member of
the LGBTQ+ community,” “a first generation, fat, queer scholar of
color” and so on."
"For a role in communications, four of the 46 applicants were
Hispanic—and so were two of the three finalists. One role in medical
anthropology had 67 applicants. The four finalists include the only two
black applicants and the only Native American applicant. “All four
scholars on our shortlist are women of color,” the committee said."
"Some
search committees at Ohio State were surprisingly forthcoming about
their use of racial preferences. “Diversity and inclusion featured
prominently in all our discussions,” wrote one committee in the division
of geodetic sciences. “Naturally, most weight was given to candidates
from URM”—underrepresented minority—“backgrounds, but we also gave
considerable weight to the diversity statements that were provided by
all candidates.”
One
faculty position advertised last year was in French and francophone
studies with a “specialization in Black France.” It yielded a more
racially diverse but still majority-white applicant pool. The committee
was adamant about its intended outcome. “In our deliberations to select
finalists, the importance of bringing Black scholars to campus was
deemed to be essential. We thus chose three Black candidates.”"
By David Bernstein. David Bernstein is the founder of the Jewish Institute for Liberal Values (JILV.org) and author of Woke Antisemitism: How a Progressive Ideology Harms Jews.
"By now it’s clear to anyone paying attention that many American
college campuses have since October 7 become hotbeds of anti-Zionism and
antisemitic fervor. One Jewish professor at a small liberal arts
college in the Pacific Northwest, an institution you’re not hearing
about in the news, recently told me that “From the River to the Sea” is
among the mildest chants he hears in the raucous daily campus protests
beneath his office window. That same professor has been subject to
ongoing, fierce harassment from radical students for expressing moderate
pro-Israel positions on social media. Jewish students on his campus
have faced death threats and intimidation. Some have been escorted to
class by campus security to avoid angry mobs. And we are seeing similar
anti-Israel activity on numerous other campuses across the country.
My intention in this article is not to recount the horrors of the
current moment, but to examine the roots of the problem and to offer a
series of recommended long-term interventions. I say long-term because
much of the discussion in the mainstream Jewish community revolves
around short-term actions that may temporarily ameliorate the mayhem but
fail to address root causes and stem the tide of hate and erosion of
support for Israel. The problem on campus has been a long time in the
making and it will take a long time in the unmaking.
As challenging as it will be to affect such a shift, the stakes
couldn’t be higher. If future generations of young elites continue to be
educated into hostility toward Israel, we should expect to see a
decline in US-Israel ties with increasing pressure to end the special
relationship. And if they continue to be educated into antipathy toward
what America stands for and its role in the world, we can expect an
America that will withdraw from the global scene, eschew the use of
power, and abandon the field to hostile powers such Iran, Russia and
China. It’s hard to imagine that seemingly absurd ideological trends in
the humanities departments at American universities could wreak such
havoc. But quackery in American universities is a long-term threat to
global stability.
The Roots of Campus Hate
Three trends converge in the emergence of today’s campus hate. The
first factor is the Soviet anti-Zionist campaign of the late 1960s.
Wilson Center scholar Izabella Tabarovsky describes the
development of a field called “Zionology” in the late 1960s in the USSR
that actively discredited Zionism. In the wake of the 1967 Six Day War,
the Soviets were distressed that Israel had handily defeated their Arab
allies, and that Soviet Jews, inspired by Israel’s victory,
increasingly identified with the Jewish state. In 1969, a party
official, Yuri Ivanov, wrote “Beware: Zionism!,” which sold upwards of
800,000 copies in the USSR alone. Tabarovsky explains that the
Zionologists’ “most important contribution to global anti-Jewish
discourse was to make antisemitic conspiracy theories, typically
associated with the far right, not only palatable to the Western hard
left but politically useful to it.” In other words, the Soviets
successfully created the template for the anti-Zionist campaign we are
seeing on American campuses today.
The second factor is the emergence of postmodern and postcolonial
studies in American universities. Postmodernism holds that all of what
we consider “knowledge” and attribute to science and free discourse is
really the outgrowth of powerful interests encoding their preferred
understanding of the world in social discourses so that they can
continue to rule over the masses.
In the late 1960s, at the same time the Soviets were delegitimizing
Zionism, postmodern scholars with an activist agenda forced their way
into higher education and established ethnic studies and other “Studies”
departments across the country, which did not adhere to usual standards
of scholarly inquiry. Over time a more activist and less scholarly
brand of postmodern scholarship emerged and became the basis of today’s
radical leftist discourse, which gained further momentum through the
writings of the Palestinian-American literary critic Edward Said, the
founder of postcolonial thought. Said discredited the Western study of
the Middle East and influenced scholars to see Zionism as a colonialist
project. These popular academic theories today see the world through a
stark oppressed/oppressor binary, and are predisposed to keeping alive
anti-Zionism and other such canards about white, Jewish, and colonial
power.
The third factor is the role of Middle Eastern money. In 2019, the
Institute for the Study of Global Antisemitism and Policy (ISGAP) first
presented research findings
to the Department of Justice entitled “Follow the Money.” The research
examines illicit funding of United States universities by foreign
governments, foundations and corporations. The research revealed
billions in Middle Eastern funding, primarily from Qatar, to US
universities that had not been reported to the Department of Education.
Such funding has had a substantial impact on fueling antisemitic
discourse, identity politics and anti-democratic sentiment within these
institutions of higher education.
In other words, the ideological trends described above have been fomented by Qatari financing of American universities. A report
issued by the National Association of Scholars, “Hijacked,” describes
the problem: “The same leftist hysteria which has consumed the
humanities and social sciences since the 1960s has spread to MESCs
(Middle East Studies Centers)…Academics have repurposed critical theory
to galvanize activism on Middle East issues. For instance, they have
recast the Israel–Palestine debate as a fight for “indigenous rights”
against the supposed evils of colonialism.”
Formulating a Long-term Strategy
There is an abundance of short-term responses currently under
consideration. Among them are some which might reduce tensions
including: exhorting university presidents to actively oppose radical
voices and to discipline perpetrators who intimidate or accost Jewish
students; enforcing Title VI anti-harassment laws against those who
generate a hostile environment; banning Students for Justice in
Palestine (SJP) chapters that cross the line and bully Jewish students.
These interventions can help, but none will likely permanently lower the
level of animosity from students and professors. Some interventions,
like trying to accommodate Jewish concerns in existing campus Diversity,
Equity and Inclusion (DEI) efforts, may be downright counterproductive
and merely reinforce the ill-bred ideological conditions that fomented
the hostile sentiment in the first place.
Supporters of Israel and Jewish security in America and, indeed, all
those concerned about the health of American democracy, need to mount a
sustained effort to change the campus culture. Here’s what this
involves:
End or Transform DEI
Campus DEI bureaucracies function as an ideological authority,
reinforcing political orthodoxies on campus. The National Association of
Diversity Officers in Higher Education describes
itself as “a leading voice in the fight for social justice” by
“creating a framework for diversity officers to advance anti-racism
strategies, particularly anti-Black racism, at their respective
institutions of higher education.” Sprawling bureaucracies in major
universities now typically have 45 paid staff members who reinforce the
overall illiberal ideological environment. A 2021 study conducted by Jay
Greene at the Heritage Foundation reviewed the social media output of
campus DEI officers and found that a high percentage had hostile views
toward Israel. One can only imagine what such a study would show today.
Bari Weiss, among others, argues
that “it is time to end DEI for good.” “The answer,” she states, “is
not for the Jewish community to plead its cause before the
intersectional coalition, or beg for a higher ranking in the new ladder
of victimhood. That is a losing strategy—not just for Jewish dignity,
but for the values we hold as Jews and as Americans.” Another approach proposed
by interfaith leader Eboo Patel is to replace DEI with a less
ideological form of diversity built on the traditional American model of
pluralism. Either way, as long as the current model of DEI reigns
supreme, many universities will be hostile places for Jews and Israel.
Recommit to the Liberal University
As stated above, university humanities departments have become riven
with ideological academic programs that perpetuate notions of power and
oppression that cast Jews and Israel as oppressors. It will not be easy
to totally unseat these departments but over time we can weaken their
influence. Major Jewish donors have begun to withdraw their philanthropy
from elite universities often run by weak-kneed presidents, such as
those at Harvard and University of Pennsylvania. One of the most
important things these donors can do is to reinvest their philanthropy
in new academic programs that specifically and explicitly elevate free
inquiry and freedom of expression. Yale Law School, for example,
recently established
a new free speech and academic freedom center. Such centers can begin
to compete with the politicized “Studies” programs and attract superior
faculty and student talent.
Indeed, there seems to be a strong correlation between campuses that
stifle free inquiry and promote anti-Israel climates. The free speech
organization FIRE, which conducts
an annual College Free Speech Rankings, ranked Harvard and University
of Pennsylvania, respectively, last and second to last. Not
coincidentally, these schools are among the most hostile environments
for Jewish students who support Israel. Restoring freedom of inquiry in
college campuses is a long-term, generational challenge, and a necessary
condition for improving attitudes toward Jews and Israel.
Cut Middle Eastern Sources of Funding
There is no reason that the US must continue to allow foreign funding
of American university programs. In the aftermath of October 7, efforts
to expose Qatari funding of American university programs have picked up
steam. Hearings have been held
on Capitol Hill detailing the failure of universities to disclose
sources of funding. Now is the time to redouble such efforts. We should
not forget that Saudi Arabia was once the major funder of such
anti-American academic programs but, under the scrutiny in the post-911
atmosphere, largely pulled back. Qatar filled the vacuum. Like Saudi
Arabia before it, Qatar has much at stake in its relationship with the
US. Last year, the US designated
Qatar a major non-Nato ally, undoubtedly owing in large part to the
role the Gulf state played as an intermediary with Iran. Until recently,
however, the Biden Administration has shielded Qatar from scrutiny over
its funding of universities. Turning up the heat on the Biden
Administration to hold Qatar accountable will be critical.
Such a long-term, strategic approach to changing university cultures
will not be easy. But unless we are successful in affecting such a
change, the environment toward Jews and Israel will only worsen."
"The school closures that took 50 million children out of classrooms at
the start of the pandemic may prove to be the most damaging disruption
in the history of American education. It also set student progress in math and reading back by two decades and widened the achievement gap that separates poor and wealthy children."
"Economists are predicting that this generation, with such a significant
educational gap, will experience diminished lifetime earnings and become
a significant drag on the economy."
"Millions of young people have joined the ranks of the chronically absent
— those who miss 10 percent or more of the days in the school year —
and for whom absenteeism will translate into gaps in learning."
"More than a quarter of students were chronically absent in the 2021-22
school year, up from 15 percent before the pandemic. That means an
additional 6.5 million students joined the ranks of the chronically
absent."
"Based on survey data collected in 2021, the Centers for Disease Control and Prevention
reported this year that more than 40 percent of high school students
had persistent feelings of sadness and hopelessness; 22 percent had
seriously considered suicide; 10 percent reported that they had
attempted suicide."
"In some communities, children have fallen behind by more than a year and a half in math."
"The Department of Energy (DOE) has repeatedly documented that using natural gas in homes is far cheaper than using electricity.
This hasn’t stopped the Biden administration from trying to limit the use of natural gas in homes or some state and local governments from proposing and passing bans on natural gas hook-ups for new residential construction.
With winter, and the home heating challenges that come with it, fast
approaching, these cold truths should be of serious concern for
homeowners and policymakers.
Now there’s yet another federal
government report highlighting these differences in costs. The Energy
Information Administration (EIA) recently released its Winter Fuels Outlook. This document addresses possible scenarios for the cost of various sources of heating this winter.
EIA’s analysis sheds light on what we should be watching for winters ahead. Energy expert Robert Bryce,
points out that for the coming winter, electric heating for households
is projected to cost 77 percent more on average than natural gas. The
discrepancy is even steeper for the Northeast in particular, where
electric heat is projected to be 92 percent more expensive than gas.
Home heating is a major budget item for a lot of people in cold parts
of the country. Policies at all levels of government that limit
Americans to more expensive heating options are harmful. This includes
policies like the one in New York state that would ban new natural gas furnaces in most new buildings by 2029. It also includes DOE’s final rule that would make it more difficult for people to purchase new gas furnaces.
Cost concerns are not the only problem with government policies that
that are trying to stop people from using natural gas. Natural gas
heating and cooking, and the electric grid currently exist in parallel.
For homes with natural gas heating, if the power goes out, there’s still
heat and usually a water heater and maybe even a stove capable of
operating on natural gas. In an all-electric house, if a winter storm
takes the power out for a few days, there’s nothing much to fall back
on.
If grid capacity doesn’t expand at the same time as more homes and
businesses move to electric heating, the mismatch in demand and supply
may only become apparent during a time of grid stress—namely very cold
days. Government meddling in this only serves to make blackouts more
likely.
When it comes to personal energy decisions, people know best
what will work for their homes and families. Policymakers should respect
the individual personal energy choices of Americans and block this
dangerous and costly electrification agenda."
"When you use a product that’s closely supervised by the government,
you might be tempted to assume the bureaucratic babysitting is somehow
necessary for the product or its industry to run smoothly. Yet when
regulators first propose special supervision years after you’ve already
seen the product work as intended, you may be tempted to ask, “What
gives?”
When it comes to the Consumer Financial Protection Bureau’s (CFPB)
proposal to bring popular payment apps (like Apple Pay, Google Pay,
PayPal, Venmo, and Cash App) under a supervisory regime, the answer is that the agency sees the apps have become quite popular, and the CFPB treats success alone as a reason for more invasive oversight.
The digital payment app market is hardly crying out for a regulator
to ride to consumers’ rescue, and the CFPB’s proposed rule provides
a real‐time demonstration of how regulators won’t hesitate to “fix”
something even when—and perhaps, especially when—“it ain’t broken,” as
the old saw goes.
This month, the CFPB proposed subjecting major digital consumer
payment applications to agency supervision by designating the apps as
“larger participants” in a market for consumer financial services. The
Dodd‐Frank Act gives the CFPB the authority to supervise these larger participants,
meaning that in addition to the ability to conduct enforcement actions
for violations of consumer financial protection law, the CFPB also may
proactively monitor and examine these specially designated businesses.
Under the proposed rule, covered digital payment apps would find themselves facing a host of potential CFPB supervisory activities,
including on‐site exams involving requests for records, regulatory
meetings, record reviews, as well as compliance evaluations, reports,
and ratings. The Bureau estimates such exams would take approximately eight to ten weeks on average.
All this mucking about while a business is trying to get work done conjures images of Homer Simpson’s brief stint supervising a team of engineers:
Homer: “Are you guys working?”
Team: “Yes, sir, Mr. Simpson.”
Homer: “Could you, um, work any harder than this?”
Who exactly would become subject to CFPB supervision under the
proposal? The proposed rule would cover providers of “general‐use
digital consumer payment” apps—including both fund transfer and digital
wallet apps—that meet requirements around transaction volume (five
million transactions annually) and firm size (not being a small business
as defined by law). The proposal contains some notable exclusions,
including exemptions for apps that only facilitate payments for specific
goods or services (i.e., are not general use), as well as for transactions with marketplaces through those marketplaces’ own platforms.
One question raised by the proposal, particularly its reference to
digital wallets, is whether cryptocurrency transfers and wallets are in
scope. The answer, in short, is sometimes.
According to the CFPB, covered fund transfers include crypto
transfers, so the rule likely would cover hosted crypto wallets (where
an intermediary controls the private keys for accessing users’ funds)
used for those purposes. However, the proposed rule does not cover
purchasing or trading cryptocurrencies, as it excludes exchanges of one
form of funds for another, as well as purchases of securities and
commodities regulated by the Securities and Exchange Commission (SEC)
and the Commodity Futures Trading Commission (CFTC). (Add this to the
list of ways in which lingering questions about SEC and CFTC
jurisdiction over crypto create unhelpful regulatory ambiguity.)
The proposed rule’s application to self‐hosted crypto
wallets (where users control their own private keys) likely will hinge
on interpretive questions (including those related to the definition of
“wallet functionality”), and these could leave the agency room to find
some self‐hosted wallets in‐scope. (If the CFPB were to go this route,
it would be yet anotherexample of subjecting a core crypto technology to poorly conceived regulation.)
When it comes to the CFPB’s reasons for the proposal, perversely, the
very data indicating that the market for digital payment applications
is anything but broken is the data the CFPB cites as the basis for
subjecting the market to special supervision. According to the agency,
“The CFPB is proposing to establish supervisory authority over nonbank
covered persons who are larger participants in this market because this
market has large and increasing significance to the everyday financial
lives of consumers.” Another way to put this is that fulfilling consumer
demand alone calls for greater scrutiny.
How popular have these apps become? According to the CFBP itself,
76 percent of Americans have used one of four major payment apps; 61
percent of low‐income consumers report using payment apps; merchant
acceptance of payment apps “has rapidly expanded as businesses seek to
make it as easy as possible for consumers to make purchases through
whatever is their preferred payment method;” and adoption by younger
users may drive even further growth.
Separate survey data tend to support the idea that consumers’
positive assessments of these apps line up with their revealed
preferences. According to survey data compiled by Morning Consult
in 2017, a sizable majority of American adults were either very
satisfied or somewhat satisfied with a variety of digital payment apps,
including Venmo (71 percent), Apple Pay (82 percent), Google Wallet (79
percent), and PayPal (91 percent). Recently, some even tried to frame
Apple Pay as making payments “too easy” for consumers’ own good.
The CFPB’s proposal is not an example of a regulator seeking to
impose sorely needed order in a broken and lawless sector, but rather an
agency ratcheting up compliance requirements in an already regulated
space. For instance, consumer financial products and services—which
include consumer payment services via any technology—already are subject to the CFPB’s authority to enforce prohibitions against unfair, deceptive, or abusive acts or practices. Moreover, the CFPB already has the power to supervise
relevant financial service providers where it issues orders
determining, with reasonable cause, that the providers pose risks to
consumers, something that the agency fails to do in any convincing
manner in the proposal.
That the CFPB is seeking to assert supervisory authority over the
digital payment app market without having to identify specific risks to
consumers is emblematic of a fundamentally flawed approach to
regulation.
In the case of digital payment apps, the proposed supervisory regime
is not targeting a consumer financial service market failure but rather
a market success. Witnessing this, it’s reasonable to ask what other
supervisory regimes that consumers take for granted began as solutions
in search of problems."
I once wrote an entire book
on the causes of the Great Depression, focusing on the role of the
interwar gold standard and FDR’s labor market policies. In doing this
research, I discovered that the question of causation is quite tricky.
One can look for proximate causes, such as bad macroeconomic policy, or
deeper causes, such as institutional failures. (In theory, a depression
might also be caused by a natural phenomenon such as a plague or
drought, but that was not the case with the Great Depression. It was
clearly a human created problem.) Although we do not precisely know all
of the factors that caused the Great Depression, we have a pretty good
idea as to which hypotheses are not helpful.
Many people associated the stock market crash with the Depression due
to the fact that it occurred at about the time it became apparent we
were sliding into a deep slump. Note that I said “became apparent”; the
Depression actually began a few months before the crash. In October
1987, we had a nice test of the theory that the stock crash was a causal
element in the Depression. A crash of almost equal size occurred at
almost exactly the same time of year, after a long economic expansion.
Many pundits expected a depression, or at least a recession. Instead,
the 1987 stock market crash was followed by a booming economy in 1988
and 1989.
Of course it’s possible to explain some difference in outcome to
other factors at play, but when the difference is this dramatic (booming
economy vs. the greatest depression in modern history), one has to
wonder whether the hypothesis is of any value at all.
The same is true of the inequality/underconsumption hypothesis. Over
the last 45 years, we’ve seen an interesting test of this theory.
China has experienced a huge increase in economic inequality. More
importantly, it has seen some of the lowest levels of consumption (as a
share of GDP) ever observed. Even lower than other fast growing East
Asian economies such as South Korea. Pundits have claimed that China’s
consumption levels are too low, and that too many resources are being
devoted to investment in areas of dubious merit.
That may all be true. Perhaps China should invest less and consume
more. But it’s also clear that low levels of consumption in China have
not caused a Great Depression. Indeed China’s had one of the fastest
growing economies in the world since 1978.
Again, what impresses me about these two counterexamples (the US in
1987-89 and China since 1978) is not that things didn’t play out exactly
as the historians might have expected based on their theory of the
Great Depression. Rather what impresses me is that the results were almost 180 degrees removed from what might have been expected.
That tells me that theories that stock market crashes and
underconsumption cause depressions are essentially useless. They are ad hoc
explanations with no real supporting economic theory and no predictive
power. Why should a stock market crash cause 25% of workers to stop
working? What is the mechanism? Why should high levels of investment
cause real GDP to decline by 30% over 4 years? What is the mechanism?
If they have no theoretical support and no predictive power, then why
should we care what historians believe?
If you get creative enough you could find a causal mechanism running
through aggregate demand. But then why not argue that a decline in
aggregate demand caused the Great Depression? After all, that’s what
actually did happen.
You might say that it’s important to know the cause of the Great
Depression. But why? If the theories offered by historians provide no
help in understanding the modern world, then how are they of any use?
More broadly, I distrust all theories of economic causation developed
by non-economists (not just historians). These theories tend to rely
on “common sense”. Thus many average people think that countries are
rich because they are big, or because they have lots of natural
resources. (Perhaps because that theory sort of fits the US.) But
looking more broadly, rich countries don’t tend to be places with large
populations or high levels of natural resources. They tend to be
smaller countries in East Asia and Western Europe. The actual
(institutional) factors that explain the varying wealth of nations are
much harder to see, and hence tend to be ignored by non-economists."
In retrospect, it seems that the lesson of the Great Crash is more
about the difficulty of identifying speculative bubbles and the risks
associated with aggressive actions conditioned on noisy observations. In
the critical years 1928 to 1930, the Fed did not stand on the sidelines
and allow asset prices to soar unabated. On the contrary, its policy
represented a striking example of The Economist’s
recommendation: a deliberate, preemptive strike against an (apparent)
bubble. The Fed succeeded in putting a halt to the rapid increase in
share prices, but in doing so it may have contributed one of the main
impulses for the Great Depression."
"The
governments of Canada, the United States, and many other nations are
mandating a shift in vehicle technology: away from vehicles powered
primarily by internal combustion engines, and toward vehicles powered
primarily with electricity stored on board in batteries.
Canada’s
government has established policies designed to push automakers to
achieve the government’s goal of having 35 percent of all new medium-
and heavy-duty vehicle sales be electric by 2030, rising to 100 percent
of all new medium- and heavy-duty vehicle sales being electric by 2040.
The
US has set a target requiring 50 percent of all new passenger cars and
light trucks sold in 2030 be electric, or largely electric hybrid
vehicles. These timelines are ambitious, calling for a major expansion
of the prevalence of electric vehicles (EVs) in the major vehicle
classes in a very short time—only 7 to 10 years.
Barring
breakthrough developments in battery technology, this massive and rapid
expansion of battery-electric vehicle production will require a
correspondingly massive and rapid expansion of the mining and refining
of the metals and rare earth elements critical to battery-electric
vehicle technology.
The International Energy Agency (IEA) suggests
that to meet international EV adoption pledges, the world will need 50
new lithium mines by 2030, along with 60 new nickel mines, and 17 new
cobalt mines. The materials needed for cathode production will require
50 more new mines, and anode materials another 40. The battery cells
will require 90 new mines, and EVs themselves another 81. In total, this
adds up to 388 new mines. For context, as of 2021, there were only 270
metal mines operating across the US, and only 70 in Canada. If Canada
and the US wish to have internal supply chains for these vital EV
metals, they have a lot of mines to establish in a very short period.
Historically,
however, mining and refining facilities are both slow to develop and
are highly uncertain endeavors plagued by regulatory uncertainty and by
environmental and regulatory barriers. Lithium production timelines, for
example, are approximately 6 to 9 years, while production timelines
(from application to production) for nickel are approximately 13 to 18
years, according to the IEA.
The establishment of aggressive and
short-term EV adoption goals sets up a potential conflict with metal and
mineral production, which is historically characterized by long
lead-times and long production timelines. The risk that mineral and
mining production will fall short of projected demand is significant,
and could greatly affect the success of various governments’ plans for
EV transition."
NBER working paper by Richard V. Burkhauser, Kevin Corinth, James Elwell and Jeff Larrimore. Excerpts:
"Abstract
We evaluate progress in President Johnson's War on Poverty relative to the 20 percent baseline
poverty rate he established for 1963. No existing poverty measure fully captures poverty
reductions based on these standards. We fill this gap by developing an absolute Full-income
Poverty Measure (FPM) whose thresholds are established to obtain this same 20 percent official
poverty rate in 1963 while using a fuller measure of income and updating thresholds each year
only for inflation. While the official poverty rate fell from 19.5 percent in 1963 to 10.5 percent in
2019, our absolute FPM rate fell from 19.5 to 1.6 percent. This reflects increases in full income
throughout the distribution, with real median income more than doubling between 1963 and 2019,
together with the expansion of government transfers and tax benefits not fully captured by the
official measure. It is also broadly consistent with the expectations of President Johnson and his
Council of Economic Advisers, including Robert Lampman who predicted in 1971 that poverty
based on these absolute standards would be eliminated by 1980. However, we also show that
reductions in relative poverty since 1963 have been far more modest, falling from 19.5 to 16.0
percent in 2019."
"we create a
poverty measure, which we refer to as the absolute Full-income Poverty Measure (FPM). This
measure maintains the same 1963 poverty rate as the Official Poverty Measure, matching
Johnson’s baseline poverty rate (Johnson 1965). We hold poverty thresholds constant in
inflation-adjusted terms using the Personal Consumption Expenditure (PCE) price index, which
more accurately reflects price changes than the CPI-U inflation measure used for the Official
Poverty Measure. Additionally, unlike the Official Poverty Measure, we include both cash and
in-kind programs designed to fight poverty, including the market value of food stamps (now the
Supplemental Nutrition Assistance Program, or SNAP), the school lunch program, housing
assistance, and health insurance. Finally, we incorporate in a consistent way the technical
improvements in how income is measured since the 1960s in both our measure of full income
and in the new thresholds we create to anchor our new FPM poverty rate to the official poverty
rate of 19.5 percent in 1963."
"Let’s begin with Desmond’s core claims about extreme
poverty. According to Desmond, America is characterized by “a kind of
extreme poverty” of the “bare feet and swollen bellies” variety. This
claim flies in the face of extensive evidence that the real poverty upon
which his book focuses attention has—far from growing—been radically
diminished.
Take, for instance, a recently released 2023 Journal of Political Economy study.
Employing what the authors call “an absolute Full-income Poverty
Measure (FPM),” which “uses a fuller income measure” rather than the
official poverty rate, “and updates thresholds only for inflation,” this
paper showed that since the beginning of President Johnson’s War on
Poverty, the “absolute FPM rate fell from 19.5 to 1.6 percent.”
That is an amazing achievement. It indicates that, statistically
speaking, the war against serious poverty has effectively been won.
Moreover, when we add to this mix the fact that the poor in America
generally have cellphones, air conditioning, cars, are not even close to
starving, etc., we see that, in terms of consumption patterns, the
realities about poverty in America simply do not match Desmond’s very
bleak portrayal.
In fairness, it should be pointed out that the authors of the JPE
study note that, unfortunately, “relative poverty reductions have been
modest.” That is certainly something to be concerned about. But they
also stress another trend: that “government dependence increased over
this time, with the share of working-age adults receiving under half
their income from market sources more than doubling.” The economic and
social implications of this unfolding development, which appear to be
disproportionately affecting working-age males, are just as much a cause
for worry.
What’s curious about this particular trend is that the FPM fell in
the 1990s along with a fall in welfare dependency among black children,
black working-age adults, and working-age adults in general. That period
correlates to the welfare reforms passed by a Republican Congress and a
Democratic president in the middle of the decade. This suggests, as the
JPEauthors observe, that “a rise in dependence is not a
necessary condition for a reduction in poverty.” That is very good news
insofar as it indicates, at a minimum, that you can reduce poverty and
diminish welfare dependency at the same time. Poverty alleviation, in
other words, need not facilitate soft despotism.
One can also question Desmond’s claims about poverty in America
compared to other wealthy nations. America, Desmond states, is “the
richest country in earth, with more poverty than any other advanced
democracy.” Again, the numbers don’t indicate this.
In 2019, for instance, the National Academy of Sciences published A Roadmap to Reducing Child Poverty.
Among other things, it included an analysis of child poverty rates
across major Anglophone countries. According to its absolute measure of
deprivation, the child poverty rate in Canada (10.3) and Ireland (11.3)
is only slightly lower than that of the United States (12.5), while
Britain’s (13.5) is slightly higher than America’s. The Anglophone
country that does the best in this category is Australia (8.1).
Desmond might counter that the measurement he is using identifies the
poverty level at half of the median income of the advanced democracies.
But it is precisely because America has some of the highest
median incomes in the world that relative poverty measurements make it
seem poorer. That’s why an absolute measure of deprivation is a far more
meaningful point of comparison between American and other advanced
economies.
Putting aside the questionable statistical
foundations for his claims, another dimension of Desmond’s argument
merits considerable scrutiny. This concerns his contention that the
wealthy actually benefit from the poverty endured by their fellow
Americans. Put another way, the poor are poor because not-poor Americans
and policymakers will it to be so. That is quite an assertion, but it
turns out to be as doubtful as Desmond’s use of poverty measurements.
An
example of this concerns the minimum wage. “Corporate profits rise,”
Desmond says, “when labor costs fall.” According to Desmond, it benefits
American businesses to keep the minimum wage as low as possible because
it boosts their profits. That, he believes, translates into effectively
locking particular categories of people into subsistence wages. It
follows that the minimum wage must be raised.
Increasing minimum wage rates, however, will not likely pull
significant numbers of Americans out of poverty. Moreover, Desmond
himself acknowledges that going down that path will probably cost jobs.
Many employers will respond to minimum wage increases by reducing their
number of employees either by consolidating positions or turning to
automation to replace people. Minimum wage increases also tend to price
entire categories of people out of, say, entry level jobs. (Think
unskilled workers, young people less interested in an income than they
are in acquiring basic work skills, etc.) In any case, Desmond doesn’t
account for the fact that, in developed nations like the United States, a
higher degree of average labor productivity generally translates into
higher average wages, and minimum wages have little to do with
productivity.
A similar observation may be made about Desmond’s belief that America
needs bigger and stronger trade unions (a claim, incidentally, also
being made by interventionists on the conservative side of American
politics today). That, Desmond believes, is one way to reverse what he
believes to be the anemic growth in wages that helps account for
considerable poverty in the United States.
That claim, too, runs into a basic objection: wages and incomes for average workers have not been more or less stuck for 30 years. As the economist Michael R. Strain observes in a Project Syndicate article entitled “The Myth of Income Stagnation”:
According to the CBO, median household income from market
activities—labor, business, and capital income, as well as retirement
income from past services—was not stagnant from 1990 to 2019. Instead,
after adjusting for inflation, it grew by 26%. This is in line with wage
growth. By my calculations using Bureau of Labor Statistics (BLS) data,
inflation-adjusted average wages for nonsupervisory workers grew by
around one-third over this period.
Moreover, a more comprehensive measure of the flow of financial
resources available to households for consumption and savings helps to
account for the non-market income they received and for the taxes they
paid. After factoring in social insurance benefits (from Social Security
and unemployment insurance, for example), government safety-net
benefits (such as food stamps), and federal taxes, the CBO finds that
median household income increased by 55% from 1990 to 2019, which is
significantly faster than wage growth and certainly not stagnate. The
bottom 20% of households enjoyed even greater gains, with market income
growth of 51% and after-tax-and-transfer income growth of 74%.
None of this is to suggest that everything stated by
Desmond in this book is wrong. In fact, there are some important points
that he makes that should be highlighted. Desmond notes, for example,
that a good deal of welfare spending goes to people who are not its
intended recipients. That includes lawyers who make money out of suing
the government, as well as middle-class families with bright accountants
skilled at extracting considerable amounts of largesse from the
government.
Another instance where Desmond is correct concerns his attention to
the ways in which regulations and ordinances severely limit
opportunities for housing construction in many parts of the country. The
effect is to put home ownership—and the many positive cultural, social,
and economic effects of owning property—out of reach of a considerable
number of Americans. This also makes it difficult and more expensive for
people to leave their suburbs, towns, or even states to pursue work
opportunities. Those who consequently find themselves least able to make
such major changes in their lives are those on the lower end of the
income scale. The solution is to reduce the scope of regulations
applying to housing construction: in other words, to liberalize some of
the conditions surrounding the housing market. It is not clear to me,
however, that Desmond would be willing to accept this.
In the end, curiously enough, Desmond’s primary preferred approach
for addressing poverty is less about policies than it is about changes
in attitude. Economically well-off Americans, he argues, need to take
off their blinders about those in need around them and alter their
choices and actions accordingly.
That means rethinking things ranging from where we shop and how we
invest our capital to whom we employ and where we choose to live. “We
must ask ourselves,” Desmond writes, “and then ask our community
organizations, our employers, our places of worship, our schools, our
political parties, our courts, our towns, our families: What are we
doing to divest from poverty?” It is more than a whole-of-government
approach to poverty that Desmond is calling for; he wants a
whole-of-society approach to “finally put an end to it.”
The difficulty with all this is that America has already put an end
to the type of poverty that certainly should seriously bother Americans.
But the broader problem with his concluding recommendation is that the
key to poverty reduction is long-term economic growth. And economic
growth is delivered when people are allowed to pursue their
self-interest peacefully in a context of rule of law, constitutionally
limited government, private property rights, and dynamic
entrepreneurship.
The fact that these conditions have been the exception rather than
the norm for most of human history is why poverty was, until relatively
recently, the everyday economic reality experienced by most humans.
Understanding this and then acting accordingly is the attitudinal and
behavioral shift that will give us an America that lives up to its
promise."
By Ralph Schoellhammer. He is an assistant professor in economics and political science at Webster University, Vienna.
"The 19th century Austrian socialist Ferdinand Kronawetter
once remarked, "Antisemitism is the socialism of idiots." He was not
wrong, but I believe even he would have been surprised that most of
these idiots are either celebrities or attend the West's most
prestigious educational institutions.
But even that is, in fact, old news: In January 2009, the French public broadcaster France-2
aired footage of Palestinians killed in an Israeli air raid on New
Year's Day. As it turned out, however, the recording was from 2005 and
not 2009, and the victims were not killed by the IDF but an "accident"
of Hamas explosives detonating prematurely. And on it goes: Recently, pictures showing the carnage inflicted on the Syrian people by the Assad regime made the rounds claiming to show destruction in Gaza.
Who needs the "The Protocols of the Elders of Zion" when you have the mainstream media?
Sometimes
it seems as if no ideology evolves as quickly as antisemitism: Before
Israel, the Jews where hated for being rootless and without national
allegiances. Now that they have a state, they are hated for that. And if
the last Jew were to leave the Middle East tomorrow, some other reason
would be found to justify Jew-hatred.
In fact, after 1948, Jews had to leave most of the Middle East and North
Africa: Once thriving communities from Morocco to Iraq ceased to exist
after the regimes of these countries drove out their Jewish populations.
Many of them moved to Israel, the only state in the region that
actually allows Muslim Arabs and Jews to live side-by-side.
Alas, if you are Jewish, it is never enough: Unless all of the Middle
East is "Judenfrei," the Jews will always be painted as oppressors and
everyone else as oppressed.
So in some ways, it's not surprising to see antisemitism thrive in the
ranks of the global leftist elite. When global climate celebrity Greta
Thunberg blabberers on about
"no climate justice on occupied land," she is only revealing the next
iteration of Jew hate. It turns out that for the "environmental
movement," the solution to the "Jewish Question" seems to be more
important than addressing climate change.
Pot, porn, and paedophilia are all a go for the Dutch, but being pro-Israel? One should be careful not to go too far!
Another turn-of-the-century Austrian who would have a lot to say about
this would probably be Sigmund Freud: If the West is suffering from the
pathologies of historical guilt for all the alleged sins of its past,
Israel and the Jews are the favourite object of projection. If the Jews
are as bad as the Nazis and European colonialists, then opposing them is
like re-running history, but this time those Westerners on college
campuses can finally be on the side of the oppressed.
Both Israel and the Palestinians are just extras in an exercise of
excessive narcissism that allows one to stand "on the right side of
history" and virtue signal at no cost. Of course, this doesn't apply
when Arabs are slaughtering Arabs. There were no protests for the
peoples of Syria or Yemen or when ISIS was committing an actual genocide against the Yazidis.
That's what this all comes down to: a rewriting of history so that the
Jews' oppressors can absolve themselves of guilt and claim to be the
oppressed. During the Holocaust, the Jews experienced the worst that men
can do to their fellow man, and many in the West are itching for the
opportunity to find historic salvation in creating a moral equivalence
between the Nazis and the state of Israel.
Neither Greta Thunberg nor her acolytes have any clue about Middle
Eastern or Jewish history, because it is not about that—just as her
climate activism was never about climate, but the usual Leftist tropes from colonialism to social justice.
In
1968, Eric Hoffer wrote about a premonition that would not leave him:
"As it goes with Israel, so will it go with all of us. Should Israel
perish, the Holocaust will be upon us." After all we have seen in recent
weeks in in Western capitals and college campuses, I am afraid that he
was right."
