Saturday, December 31, 2011

Interpreting The Constitution In The Digital Era

GPS monitors can track your every movement. Brain scans can now see lies forming in your brain. And advancements in genetic engineering may soon allow parents to engineer what their children will look and be like.

These new technologies are "challenging our Constitutional categories in really dramatic ways," says George Washington University law professor Jeffrey Rosen. "And what's so striking is that none of the existing amendments give clear answers to the most basic questions we're having today."

On Wednesday's Fresh Air, Rosen, the co-editor of the new book Constitution 3.0: Freedom and Technological Change, details how technological changes that were unimaginable at the time of the Founding Fathers are challenging our notions of things like personal vs. private space, freedom of speech and our own individual autonomy.

Wednesday, December 21, 2011

The Market and the Distribution of Wealth

This view, as we said, is today held by many, even by some economists who understand the superiority of the market economy over the command economy and the frustrations of interventionism, but dislike what they regard as the social consequences of the market economy. They are prepared to accept the market economy only where its operation is accompanied by such a policy of redistribution.

The present paper is devoted to a criticism of the basis of this view.

Tuesday, December 20, 2011

The Solyndra Scandal: What Was Secretary Chu Thinking?

Reign of the technocrats - smart people and decision making

Sunday, December 18, 2011

5 books - economics is fun

Is economics actually fun?

Oh gosh, yes! Of course it’s fun. Partly because it’s relevant, but partly because there are an awful lot of things that are basically just fun stories. I wrote a book, Economics is Everywhere, which contains stories from my life and things I see, designed to illustrate economic ideas. Some of them are just hilarious. And it’s not just me, whose humour is sort of weird, I admit. Almost anyone can read them and get a good laugh out of them, while learning something. And that’s the best way to teach, I think.

Saturday, December 17, 2011

Richard Epstein on Inequality

Watch Does U.S. Economic Inequality Have a Good Side? on PBS. See more from PBS NEWSHOUR.

RICHARD EPSTEIN: What's good about inequality is if, in fact, it turns out that inequality creates an incentive for people to produce and to create wealth, it's a wonderful force for innovation. So let's just go and take somebody like Bill Gates again or any entrepreneur.

Guy earns $50 billion, right? How much consumer welfare has he created by selling products? We can estimate the amount of gains to purchases, because everybody who buys one of his products or one of Steve Jobs' products, in effect, values it more than he receives.

The social gain from inequality to consumers of those goods probably dwarfs the entrepreneurial gain by a factor of 10-1 or 20-1.

Wednesday, December 14, 2011

Throw Them All Out

Nick Gillespie wrote on November 30, 2011

I'm reading Peter Schweizer's excellent new book Throw Them All Out, which details how politicians ranging from Nancy Pelosi to John Boehner to John Kerry to Dennis Hastert use their political positions to massive advantage in trading stocks. And how politically connected fat cats such as Warren Buffett and George Soros use their access to lawmakers to swing sweetheart deals, stimulus dollars, and government-loan guarantees their way. The book is an appallingly thoroughgoing and transpartisan expose of crony capitalism as it is practiced today.

Tuesday, December 13, 2011

Is Modern Capitalism Sustainable?

Will capitalism be a victim of its own success in producing massive wealth? For now, as fashionable as the topic of capitalism’s demise might be, the possibility seems remote.

Kenneth Rogoff is Professor of Economics and Public Policy at Harvard University, and was formerly chief economist at the IMF.

Capitalism v crony capitalism

Also Chris Coyne does a very good job addressing some of the confusion between capitalism and crony capitalism that is evident in the movement.

Saturday, December 10, 2011

Elected Dirty Dealers

The real issue is that the US Congress – like many countries’ legislatures – lives by rules that are very different from those imposed on ordinary citizens. In particular, the accounting, transparency, and fraud rules that govern businesses do not apply to elected representatives.

Friday, December 9, 2011

The Hour of the Technocrats

On behavior, taxes and externalities

This excellent post by Williamson touches on behavior, externalities, the work of Robert Frank and has me reflecting on my reading of Thinking, Fast and Slow by Daniel Kahneman. Kaheman writes about stage 1 and stage 2 in thinking and the role played by these mechanisms in belief formation and bias. Both may well be at play in this discussion.

In reality, there is mobility within the income distribution, and how much mobility is an important issue here. Given mobility within the income distribution, we all care, for selfish reasons, about how the rich are treated, as we all could be rich some day, or our descendants could be rich.

Finally, I have no idea where that "behavioral elasticity" is coming from, and I don't trust it. My best guess is that it includes none of the factors that I think are important in addressing the problem. What we need here is a dynamic general equilibrium model that can take account of the short run and long run effects of a change in the income tax schedule. My best guess is that "behavioral elasticity" means that Diamond and Saez are measuring the effects of tax evasion and the intensive margin of labor supply, and that's all. If so, I think they miss most of what is important:

1. There's also an extensive margin. Tax people at a higher rate, and some drop out of the labor force.

2. Taxes affect occupational choice. Some work by Manuelli/Seshadri/Shin says that the effect of taxes on human capital is big time. Why do I want to undertake a costly and risky investment for a very small payoff?

3. Entepreneurial activity has to be very elastic with respect to tax rates at the top end. Why would I want to risk my own wealth or that of my close family for a very big payoff with very low probability, if that big payoff is taxed at 73%?

4. The United States is highly dependent on highly-skilled labor that migrates here from other countries. With a top tax rate of 73%, the Indian engineers might prefer to work in India, and the Canadian professors might prefer Canada.

Thus, I think it is likely that tax revenue is much more elastic with respect to the tax rate, particularly in the long run, than Diamond and Saez are letting on. To evaluate this properly, you need a serious model, and they have not provided one.

Monday, December 5, 2011

Robert Higgs’s Tocqueville Award Acceptance Speech

For society as a whole, I wish nothing more fervently than I wish that it should be as free as possible. For me, freedom is not simply the highest-ranked value with regard to public affairs; it stands on a level by itself, far above all the others.

I espouse individual liberty in this “extreme” fashion for two reasons, which in my mind complement one another. The first is that freedom is the optimal condition for each individual’s engagement in society. To be driven, bullied, abused, disregarded, treated with contempt and dishonor―these are bad things in themselves, not only for me, but for every human being. We ought to recoil from them, regardless of whether the perpetrator is a local cop or the government in Washington. Yet all too many of us become accustomed to such official cruelties and take them in stride without much conscious thought that they are wrongs and ought to be stopped, regardless of their source.

Individual liberty, however, is also an instrument for the creation of many of the conditions, goods, and services that constitute material abundance and relieve many of the anxieties and pains that once accompanied social life for almost everyone. Virtually everyone favors economic development, especially inasmuch as it reduces or eliminates extreme poverty. Individual liberty is a necessary condition for sustained economic progress. The specific conditions of a free society―private property rights, secure contracts, a reliable rule of law―are prerequisites for the ongoing creation of wealth in the long run. At this late date, after we have witnessed the personal horrors and economic disasters brought about by socialist central planning, it should not be necessary to go on preaching the gospel of private property and the market economy, yet we all know that many people still do not understand these essential matters and often act politically to thwart the operation of a genuinely free society.

Sunday, December 4, 2011

What’s the Matter with Rachel Maddow?

From Reason

Maddow is intelligent, serious, and well-meaning—which makes her vision all the more unsettling: It has ominous implications not only for individual liberty, but also for its concomitant: authentic spontaneous social cooperation.

I have a number of colleagues who admire and agree with Maddow. The above Reason analysis does justice both to the clear and present danger of the progressive agenda for individual liberty and personal responsibility and the more current concern with idealogues of Maddow's ilk. The patina of reasonable and thoughtful argument masks the consequence of rule by elite.

Thursday, December 1, 2011

Mesa Community College Center for Economic Education

Economics and Inequality

Kenneth Arrow

This article is part of Occupy the Future, a forum on lessons to be drawn from the Occupy movement.

The specific problems of the current U.S. economy—the drastic increase in unemployment and sluggish increase in output—overlay a tendency of much longer duration, a drastic and rapid increase in the inequality of income. Every economy of complexity produces an unequal distribution of the good things in life. But the period immediately following World War II showed a considerably increased equality of income compared with either the Great Depression or the previous period of relative prosperity.