Did covid-19 vaccination lotteries backfire?

Connecting vaccinations to lottery prizes doesn't seem to have worked too well:

Ohio, the state that launched the national movement to offer millions of dollars in incentives to boost vaccination rates, planned to conclude its program Wednesday — still unable to crack the 50% vaccination threshold. …

In late May, Oregon Gov. Kate Brown announced that Oregonians who are 18 or older and have received at least a first dose of Covid-19 vaccine will automatically be entered to win $1 million or one of 36 $10,000 prizes — with one winner in each county. Oregonians, ages 12 to 17, have a chance to win one of five $100,000 scholarships. …

The Oregonian reported in early June that the seven-day average of adults receiving their first shots had actually decreased from about 9,000 the day before Brown, a Democrat, announced the lottery to 6,700 nearly two weeks later.

In Colorado, vaccinations have slowed since its lottery was rolled out by Democratic Gov. Jared Polis last month, with about 589,000 fewer doses given out in the month since Polis’ announcement, compared to the same amount of time a month before the contest began.

Could the lotteries have backfired by implying that getting vaccinated isn't intrinsically desirable, hence the need to entice people by giving away millions of dollars? In other words, the financial incentive (a chance to win the lottery) could undercut the non-financial incentive of getting vaccinated (including virtually eliminating the risk of death, at least for now). 

There was no controlled experiment with the vaccination lotteries, so we can't know for sure what effect they had. But what happened could be analogous to the Israeli day care experiment described by Freakonomics, where a financial disincentive (a fine for parents who are late to pick up their kids at day care) undercut the non-financial disincentive (parents wanting to avoid feeling guilty for inconveniencing the day-care workers). That was a randomized controlled trial where the fee was introduced at some day cares but not others, and the result was that about twice as many parents were late at day cares that did fine them!

Happy 90th birthday to Thomas Sowell!

Here are some thought-provoking quotes by the celebrated economist and writer Thomas Sowell, who turns 90 today.

The capacity to grasp and manipulate complex ideas is enough to define intellect but not enough to encompass intelligence, which involves combining intellect with judgment and care in selecting relevant explanatory factors and in establishing empirical tests of any theory that emerges. Intelligence minus judgment equals intellect. Wisdom is the rarest quality of all — the ability to combine intellect, knowledge, experience, and judgment in a way to produce a coherent understanding.... Wisdom requires self-discipline and an understanding of the realities of the world, including the limitations of one’s own experience and of reason itself. The opposite of intellect is dullness or slowness, but the opposite of wisdom is foolishness, which is far more dangerous.

— Intellectuals and Society (pg. 2)

Some things are believed because they are demonstrably true. But many other things are believed because they are consistent with a widely held vision of the world — and this vision is accepted as a substitute for facts. Subjecting beliefs to the test of hard facts is especially important when it comes to economic beliefs because economic realities are inescapable limitations on millions of people's lives, so that policies based on fallacies can be devastating in their impacts. Conversely, seeing through those fallacies can open up many unsuspected opportunities for a better life for millions of people.…

Fallacies are not simply crazy ideas. They are usually both plausible and logical — but with something missing. Their plausibility gains them political support. Only after that political support is strong enough to cause fallacious ideas to become government policies and programs are the missing or ignored factors likely to lead to "unintended consequences," a phrase often heard in the wake of economic or social policy disasters. Another phrase often heard in the wake of these disasters is, "It seemed like a good idea at the time." That is why it pays to look deeper into things that look good on the surface at the moment.

— Economic Facts and Fallacies (pg. vii, 1)

The fact that so many successful politicians are such shameless liars is not only a reflection on them, it is also a reflection on us. When the people want the impossible, only liars can satisfy them, and only in the short run.

— May 22, 2012 article

How do you tell morality from sanctimoniousness? For one thing, morality is hard and sanctimoniousness is easy.... Morality means being hard on yourself. Sanctimoniousness means being easy on yourself — and hard on others....

Sometimes we can make a moral judgement about behavior, without being able to make a moral judgement about individual merit. I can say that drinking yourself into the gutter is not moral behavior. But it so happens that my body has a low tolerance for alcohol. It takes less alcohol to make me sick than it would take to make me drunk. Nature has made it almost impossible for me to become an alcoholic, without any moral virtue on my part. So, when I walk past a drunk lying in the gutter, I have no basis for being sanctimonious. How do I know that, if my body's tolerance for alcohol were greater, I might be lying there in the gutter and he might be walking past me under his own power?

Morally, it is still wrong to drink yourself into the gutter, no matter who does it. But this is one of many areas in which those who behave better may do so because of fortunate circumstances, which they did not create. They may be justified in saying, "There, but for the grace of God, go I." What they are not justified in doing is bending the rules to favor those whose behavior is a threat to themselves and society. It is right to try to help others raise themselves to a higher standard, but wrong to bring the standard down to where they are.

— "Morality vs. Sanctimoniousness" (speech)

After my 85th birthday ... I looked back over my life and was surprised to discover in how many different ways I had been lucky, in addition to some other ways in which I was unlucky.

Among the things I did not know at the time was that I was adopted as an infant into a family with four adults, in which I was the only child.

All sorts of research since then has shown how the amount of attention and interactions with adults a child gets has a lot to do with the way the child develops....

It was decades later, when I had a son of my own, that I asked one of the surviving members of the family how old I was when I first started to walk. She said, “Oh, Tommy, nobody knows when you could walk. Somebody was always carrying you.” ...

Although I was raised by people with very little education, they were people who wanted me to get an education. They praised my every little accomplishment when I was very young, and I was taught to read by the time I was four years old, taught by someone with only a few years of schooling herself.

Years later, when I was promoted to the seventh grade, I was surprised by what a commotion it caused. Then I was told: “You have now gone further than any of us.”

— July 8, 2015 article

(Photo of Sowell in 2018 from the Hoover Institution/YouTube via National Review.)

Do Americans overestimate what we spend on "foreign aid," or do they just have a different definition of "foreign aid"?

From 2018:

You’ve probably heard the statistic: “On average, Americans think 28 percent of the federal budget is spent on foreign aid, when it is about one percent.”

Reporters repeat versions of this “foreign aid” factoid all the time, sometimes with a certain anti-populist glee. As Ezra Klein notes, the foreign aid budget estimate is the “example budget wonks turn to when they want to underscore the public’s ignorance.” [Washington Post link.] ... A 2012 opinion piece in USA Today cited the foreign aid statistic to make the case that “not everyone should” vote.

In other words, the public’s foreign aid budget estimate underwrites an awful lot of doubt about the capacity of Americans to judge public policy.

The problem is, that statistic is quite misleading.... Americans commonly think of foreign aid as including military spending—and no surprise, given America’s enormous military budget, this inflates their estimates of the foreign aid budget....

When leaders use the language of humanitarianism to describe military endeavors, it is no wonder many Americans see defense department expenditures as a kind of foreign aid, and assume our foreign aid budget is enormous.

Also, people like to say foreign aid is only about 1% of the whole federal budget, but Wikipedia says it's about 8% of the federal deficit. That's significant. And we’ll be paying that back with interest in the future.

How we're getting more from less

Good news: "The Economy Keeps Growing, but Americans Are Using Less Steel, Paper, Fertilizer, and Energy."

That whole Reason article is worth reading, but here's an excerpt:

Both the weight of goods entering the [UK] economy and the amounts finally ending up as waste probably began to fall from sometime between 2001 and 2003.… [This] suggests that economic growth in a mature economy does not necessarily increase the pressure on the world's reserves of natural resources and on its physical environment. An advanced country may be able to decouple economic growth and increasing volumes of material goods consumed. A sustainable economy does not necessarily have to be a no-growth economy.…

Up to 1970, consumption of metals in America grew just about in lockstep with the overall economy. In the years since 1970, the economy has continued to grow pretty steadily, but consumption of metals has reversed course and is now decreasing. We're now getting more "economy" from less metal year after year. We'll see a similar great reversal in the use of many other resources.…

I was surprised to learn that total American energy use in 2017 was down almost 2 percent from its 2008 peak, especially since our economy grew by more than 15 percent between those two years. I had walked around with the unexamined assumption that growing economies must consume more energy year after year. This turns out not to be the case anymore—a profound change. Energy use went up in lockstep with economic growth in America for more than a century and a half, from 1800 to 1970. Then the increase in energy use slowed down, and then it turned negative—even as the economy kept growing. Over the last decade, we've gotten more economic output from less energy.

Greenhouse gas emissions have gone down even more quickly than has total energy use.…

How to have a career that helps a lot of people: "Scale"

This Wall Street Journal piece is called "Advice to New Grads," though it would be more relevant to someone starting college (from 2018):

If you’re volunteering at shelters or working for most nonprofits, that’s all very nice, but it’s one-off. You’re one of the privileged few who have the education to create lasting change. It may feel good to ladle soup to the hungry, but you’re wasting valuable brain waves that could be spent ushering in a future in which no one is hungry to begin with.

There’s a word that was probably never mentioned by your professors: Scale.… It’s the concept of taking a small idea and finding ways to implement it for thousands, or millions, or even billions. Without scale, ideas are no more than hot air. Stop doing the one-off two-step. It’s time to scale up.

I hear you talking about food deserts and the need for urban eco-farms to enable food justice. You certainly have the jargon down. You can hoe and sickle and grow rutabagas to feed a few hungry folks.… A better option: Find a way to revamp food distribution to lower prices. Or reinvent how food is grown and enriched to enable healthier diets.…

Don’t spend all your time caring for the sick. Prevent disease. Gene therapy, early detection and immunotherapy can change the trajectory of disease because they scale. Don’t build temporary shelters. Figure out how to 3-D print real homes quickly and cheaply. Why tutor a few students when you can capture lessons from best-of-breed teachers and deliver them electronically to millions? That’s scale.

Scale is about doing more with less.… It’s about the productivity increases that create wealth. There is too much talk of sustainability, the fight over slices of a pie, zero-sum games. That’s the wrong framework. You need sustainability only if you stick to one-off moves.…

Everyone asks, “What do you do?” If you’re employed in a business that scales—and most “boring” jobs are—tell people you’re solving global poverty.

If you want better politicians, pay them more

When Alexandria Ocasio-Cortez agrees with Thomas Sowell, maybe they’re worth taking seriously.

I agree with Rep. Ocasio-Cortez, a self-proclaimed democratic socialist, that members of Congress should get cost-of-living salary increases.

Of course the salary for members of Congress ($174,000 for most of them) is more than most people in the country make, but it’s surprisingly low for someone with such an important job, who’s raising a family in an expensive city, and could probably be making more elsewhere. That’s not the kind of salary that lets them get rich off government; that’s a sacrifice for public service.

And I agree with Sowell, a conservative economist who rarely calls for any expansion of government, but who argued in 2014 that raises for members of Congress (and other government officials) would improve government at a tiny cost:

What do we do when we want a more upscale product — a better house or car for example? We pay more to get it!

If we want better people in government, we are going to have to start paying them enough that people would not be sacrificing their families' well-being by going to Washington or a state capitol, or serving as a judge.

It is not a question of whether the people currently serving in Congress, the courts or as chief executives at the municipal, state or national level deserve a raise. Most of them don't. It is a question of whether we need far better replacements for them.

That means drawing from a wider pool, including people with real knowledge and expertise in the private sector, who currently make a lot more money than we are paying government officials. Cheap politicians turn out to be very expensive politicians, in the way they waste money, even if they are not stealing it.

We could pay every member of Congress a million dollars a year — for a whole century — for less than it costs to run the Department of Agriculture for one year.

The least we can do is make it harder to bribe them. Trying to bribe a millionaire would at least be harder than bribing some government official with a modest salary and a couple of kids going to expensive colleges.

A paraphrase can make all the difference

Sometimes paraphrasing is the most useful thing you can do. For instance, putting tariffs on imports to your country is the same thing as imposing sanctions on your own country. (That point is from this 2018 Reason article.) Let’s start calling them “sanctions” instead of “tariffs,” and see how we feel about them.

How much should we worry about the national debt?

Somewhat, but not too much, argues this Foreign Affairs article co-written by Lawrence Summers:

The deficit dismissers have a point. Long-term structural declines in interest rates mean that policymakers should reconsider the traditional fiscal approach that has often wrong-headedly limited worthwhile investments in such areas as education, health care, and infrastructure. Yet many remain fixated on cutting spending, especially on entitlement programs such as Social Security and Medicaid. That is a mistake. Politicians and policymakers should focus on urgent social problems, not deficits.

But they shouldn’t ignore fiscal constraints entirely. The deficit fundamentalists are right that the debt cannot be allowed to grow forever. And the government cannot set budget policy without any limiting principles or guides as to what is and what is not possible or desirable.

There is another policy approach that neither prioritizes cutting deficits nor dismisses them. Unlike in the past, budgeters need not make reducing projected deficits a priority. But they should ensure that, except during downturns, when fiscal stimulus is required, new spending and tax cuts do not add to the debt. This middle course would tolerate large and growing deficits without making a major effort to reduce them—at least for the foreseeable future. But it would also stop the policy trend of the last two years, which will otherwise continue to pile up debt.

Policymakers must also recognize that maintaining existing public services, let alone meeting new needs, will, over time, require higher revenues. Today’s large deficits derive more from falling revenues than rising entitlement spending. More spending is not, by itself, something to be afraid of. The United States needs to invest in solutions to its fundamental challenges: finding jobs for the millions of Americans who have given up hope of finding them, providing health insurance for the millions who still lack it, and extending opportunities to the children left behind by an inadequate educational system.

Economic textbooks teach that government deficits raise interest rates, crowd out private investment, and leave everyone poorer. Cutting deficits, on the other hand, reduces interest rates, spurring productive investment. Those forces may have been important in the late 1980s and early 1990s, when long-term real interest rates (nominal interest rates minus the rate of inflation) averaged around four percent and stock market valuations were much lower than they are today. The deficit reduction efforts of Presidents George H. W. Bush and Bill Clinton contributed to the investment-led boom in the 1990s.

Today, however, the situation is very different. Although government debt as a share of GDP has risen far higher, long-term real interest rates on government debt have fallen much lower.

As shown in the table, in 2000, the Congressional Budget Office forecast that by 2010, the U.S. debt-to-GDP ratio would be six percent. The same ten-year forecast in 2018 put the figure for 2028 at 105 percent.

Real interest rates on ten-year government bonds, meanwhile, fell from 4.3 percent in 2000 to an average of 0.8 percent last year.

Those low rates haven’t been manufactured by the Federal Reserve, nor are they just the result of the financial crisis. They preceded the crisis and appear to be rooted in a set of deeper forces, including lower investment demand, higher savings rates, and widening inequality. . . .

Low interest rates mean that governments can sustain higher levels of debt, since their financing costs are lower. Although the national debt represents a far larger percentage of GDP than in recent decades, the U.S. government currently pays around the same proportion of GDP in interest on its debt, adjusted for inflation, as it has on average since World War II. The cost of deficits to the Treasury is the degree to which the rate of interest paid on the debt exceeds inflation. By this standard, the resources the United States needs to devote to interest payments are also around their historical average as a share of the economy. Although both real and nominal interest rates are set to rise in the coming decade, interest payments on the debt are projected to remain well below the share reached in the late 1980s and early 1990s, when deficit reduction topped the economic agenda.

Government deficits also seem to be hurting the economy less than they used to. Textbook economic theory holds that high levels of government debt make it more expensive for companies to borrow. But these days, interest rates are low, stock market prices are high relative to company earnings, and major companies hold large amounts of cash on their balance sheets. No one seriously argues that the cost of capital is holding back businesses from investing. . . .

The eurozone debt crisis at the start of this decade is often held up as a cautionary tale about the perils of fiscal excess. But stagnant growth (made worse by government spending cuts in the face of a recession) was as much the cause of the eurozone’s debt problems as profligate spending. . . .

It’s true that future generations will have to pay the interest on today’s debt, but at current rates, even a 50-percentage-point increase in the U.S. debt-to-GDP ratio would raise real interest payments as a share of GDP by just 0.5 percentage points. That would bring those payments closer to the top of their historical range, but not into uncharted territory.

Deficits, then, should not cause policymakers much concern, at least for now. But some economists adopt an even more radical view. Advocates of what is known as modern monetary theory (MMT), such as Stephanie Kelton, an economist and former adviser to Senator Bernie Sanders’ presidential campaign, have been widely interpreted as arguing that governments that borrow in their own currencies have no reason to concern themselves with budget constraints. . . . This goes too far. . . . In truth, no one knows the benefits and costs of different debt levels. . . .

Although the U.S. government will remain solvent for the foreseeable future, it would be imprudent to allow the debt-to-GDP ratio to rise forever in an uncertain world. Trying to make this situation sustainable without adjusting fiscal policy or raising interest rates, as recommended by some advocates of modern monetary theory, is a recipe for hyperinflation.

The New York Times puzzles over how well the economy is doing

The New York Times explains why — unexpectedly — wages are rising and the economy has been growing at more than 3% for 9 straight months.

The Times says:

The recent gains are going to those who need it most. Over the past year, low-wage workers have experienced the fastest pay increases, a shift from earlier in the recovery, when wage growth was concentrated at the top.

The Times manages to find some not-so-great news in all that:

African-American workers have seen smaller gains over the course of the recovery, for example. And wage growth remains slow in some parts of the country that were hit especially hard by the recession.

Still, if these overall trends keep going through next year, Donald Trump will be on a glide path to reelection.

I'm not saying that to support Trump. I plan to vote against him. Just because the economy's doing well doesn't mean Trump's policies are the reason, and even if his policies are having good short-term effects they could still be bad in the long run.

But when was the last time voters denied the president a second term when the economy was doing well?

What's wrong with Elizabeth Warren's plan to forgive student debt

Sen. Elizabeth Warren might be my least favorite Democratic candidate. She keeps coming out with all these bold policies, but so many of them sound like bad ideas, like her plan to forgive most student debt. Here's the Washington Post Editorial Board (which is liberal — they endorse Democrats for president):

No one can accuse Ms. Warren of thinking small. What she really needs is a better sense of proportion. Her premise seems to be that student debt is all burden and no benefit, but this is not true: It represents an investment in skill acquisition that pays substantial long-term benefits. President Barack Obama’s Council of Economic Advisers estimated this lifetime “earnings premium” at about $1 million over a worker with only a high school education. It’s not unfair to expect people to pay back their loans out of that income.

What might be unfair is debt relief to the exclusion of other priorities with wider benefits, including to people who did not go to college at all. Ms. Warren proposes a wealth tax to cover the cost, the proceeds of which would then not be available for alternative, possibly more progressive uses. In any case, default rates are actually falling slightly, according to the latest Education Department figures; 84.7 percent of borrowers were current on their obligations as of the end of 2017, according to the New York Fed.

As for tuition-free college, why should children of families in the upper reaches of the income distribution scale receive an income-enhancing state-university education for nothing, when their parents are perfectly capable of helping defray the cost?

Does increasing the minimum wage also increase crime?

The Wall Street Journal looks at some of the harmful consequences of raising the minimum wage to $15 an hour:

New York City’s minimum wage rose again on Dec. 31. Businesses with 11 or more workers must pay $15 an hour, up from $13 last year and $11 in 2017. Employees who earn tips can be paid a lower rate, now set at $10 an hour for waiters, provided their total pay exceeds $15.

Is it merely a coincidence that the city’s full-service restaurants have fallen into a jobs recession?

Employment in January dropped 3.7% year over year, according to the Bureau of Labor Statistics. At the start of 2018, the Big Apple’s sit-down restaurants had 167,900 employees. This January, after the wage bump, it fell to 161,700, a three-year low. The preliminary February number is 161,000, even as overall city employment is up around 2% year over year.

The monthly jobs data can be noisy, but the trend fits what restaurateurs are saying. The New York City Hospitality Alliance surveyed 324 full-service eateries late last year. Nearly half, 47%, planned to eliminate jobs in 2019 to deal with higher labor costs. Three-fourths expected to cut employee hours, and 87% said they would raise menu prices.

Meanwhile, in a National Bureau of Economic Research working paper posted last month, three economists examined whether minimum-wage increases had any effect on crime from 1998 to 2016. “We find robust evidence,” they write, “that minimum wage hikes increase property crime arrests among teenagers and young adults ages 16-to-24, a population for whom minimum wages are likely to bind.”

When politicians arbitrarily set the price of labor, young workers without skills can be locked out of the job market. That’s the finding in studies of Seattle’s wage mandate by a team at the University of Washington. The new wrinkle in the NBER paper is that some of these young people turn to petty crime.

What does this say about the Democrats’ idea for a nationwide $15 mandate? “Our estimates suggest,” the economists write, “that this minimum wage hike would generate over 410,000 additional property crimes and $2.4 billion per year in additional crime costs.” . . .

How did Democrats settle on a goal of $15 anyway? An organizer with the Service Employees International Union, which is behind the public campaign, joked in 2014 that “it was a pretty scientific process: $10 was too low and $20 was too high, so we landed at $15.”

Just yesterday I noticed that a restaurant where I've sometimes gone to lunch from work in Manhattan had raised all of its entree prices to at least $20. This is more than the restaurant was charging last week. I don't plan to go back. Democrats have recklessly caused harm by raising the minimum wage to unreasonable levels.

Pete Buttigieg on "capitalism"

Mayor Pete Buttigieg said this on Meet the Press over the weekend, in response to Chuck Todd's question about whether he's a "capitalist":

Sure, yeah. I think, look, America is a capitalist society. But — it's gotta be democratic capitalism. And that part's really important, and it's slipping away from us. In other words, when capitalism comes into tension with democracy, which is more important to you? I believe democracy is more important. And when you have capitalism capturing democracy, when you have the kind of regulatory capture where powerful corporations are able to arrange the rules for their benefit, that's not real capitalism. If you want to see what happens when you have capitalism without democracy, you can see it very clearly in Russia. It turns into crony capitalism, and that turns into oligarchy. So, I know the temptation, especially for the commentariat, is to kind of align everybody as dots on a spectrum, but that's not how most voters think.

He largely seems to be associating the word "capitalism" with "regulatory capture," i.e. incumbent businesses colluding with government to keep other businesses down. The phrase "crony capitalism" is also not really about free-market capitalism, but about big government interfering with businesses. (The distinction is laid out here — scroll down for a concise explanation of crony capitalism.) Buttigieg seems to realize all that when he says "that's not real capitalism." And yet, I'm wary of this rhetorical device of associating the word "capitalism" with things that have more to do with big government than free markets.

Here's the whole video of Buttigieg's Meet the Press interview, which I've cued to start at this part of the discussion (9:50):




(The photo at the top of this post is from a 404 page on Pete Buttigieg's campaign website.)

What Elizabeth Warren doesn't tell you about the middle class

Senator Elizabeth Warren said on New Year's Eve: "The middle class is being hollowed out."




Sounds scary! But she didn't mention that the "middle class" is shrinking because they're getting richer, not poorer. They're moving up, yet Warren makes it sound like they're getting crushed. Look at this chart (explained here):

UPDATE: Some commenters on Facebook have taken issue with those statistics. I've responded over there. The truth is certainly more complicated than my glib post made it seem.

"I am a manufacturer of economic inequality."

Paul Graham writes:

Since the 1970s, economic inequality in the US has increased dramatically. And in particular, the rich have gotten a lot richer. Some worry this is a sign the country is broken.

I'm interested in the topic because I am a manufacturer of economic inequality. I was one of the founders of a company called Y Combinator that helps people start startups. Almost by definition, if a startup succeeds its founders become rich. And while getting rich is not the only goal of most startup founders, few would do it if one couldn't.

I've become an expert on how to increase economic inequality, and I've spent the past decade working hard to do it. Not just by helping the 2400 founders YC has funded. I've also written essays encouraging people to increase economic inequality and giving them detailed instructions showing how.

So when I hear people saying that economic inequality is bad and should be eliminated, I feel rather like a wild animal overhearing a conversation between hunters. But the thing that strikes me most about the conversations I overhear is how confused they are. They don't even seem clear whether they want to kill me or not.

The most common mistake people make about economic inequality is to treat it as a single phenomenon. The most naive version of which is the one based on the pie fallacy: that the rich get rich by taking money from the poor.

Usually this is an assumption people start from rather than a conclusion they arrive at by examining the evidence. . . .

we grow up in a world where the pie fallacy is actually true. To kids, wealth is a fixed pie that's shared out, and if one person gets more it's at the expense of another. It takes a conscious effort to remind oneself that the real world doesn't work that way. . . .

Even people sophisticated enough to know about the pie fallacy are led toward it by the custom of describing economic inequality as a ratio of one quantile's income or wealth to another's. It's so easy to slip from talking about income shifting from one quantile to another, as a figure of speech, into believing that is literally what's happening....

Economic inequality is sufficiently far from identical with the various problems that have it as a symptom that we'll probably only hit whichever of the two we aim at. If we aim at economic inequality, we won't fix these problems. So I say let's aim at the problems.

For example, let's attack poverty, and if necessary damage wealth in the process. That's much more likely to work than attacking wealth in the hope that you will thereby fix poverty. And if there are people getting rich by tricking consumers or lobbying the government for anti-competitive regulations or tax loopholes, then let's stop them. Not because it's causing economic inequality, but because it's stealing.

Paul Krugman explains why Donald Trump's economic policies are better than most Republican candidates'

Krugman writes (via):

[Jeb] Bush has chosen to attack Mr. Trump as a false conservative, a proposition that is supposedly demonstrated by his deviations from current Republican economic orthodoxy: his willingness to raise taxes on the rich, his positive words about universal health care. And that tells you a lot about the dire state of the G.O.P. For the issues the Bush campaign is using to attack its unexpected nemesis are precisely the issues on which Mr. Trump happens to be right, and the Republican establishment has been proved utterly wrong.

To see what I mean, consider what was at stake in the last presidential election, and how things turned out after Mitt Romney lost.

During the campaign, Mr. Romney accused President Obama of favoring redistribution of income from the rich to the poor, and the truth is that Mr. Obama’s re-election did mean a significant move in that direction. Taxes on the top 1 percent went up substantially in 2013, both because some of the Bush tax cuts were allowed to expire and because new taxes associated with Obamacare kicked in. And Obamacare itself, which provides a lot of aid to lower-income families, went into full effect at the beginning of 2014.

Conservatives were very clear about what would happen as a result. Raising taxes on “job creators,” they insisted, would destroy incentives. And they were absolutely certain that the Affordable Care Act would be a “job killer.”

So what actually happened? As of last month, the U.S. unemployment rate, which was 7.8 percent when Mr. Obama took office, had fallen to 5.1 percent. For the record, Mr. Romney promised during the campaign that he would get unemployment down to 6 percent by the end of 2016. Also for the record, the current unemployment rate is lower than it ever got under Ronald Reagan. And the main reason unemployment has fallen so much is job growth in the private sector, which has added more than seven million workers since the end of 2012.

I’m not saying that everything is great in the U.S. economy, because it isn’t. There’s good reason to believe that we’re still a substantial distance from full employment, and while the number of jobs has grown a lot, wages haven’t. But the economy has nonetheless done far better than should have been possible if conservative orthodoxy had any truth to it. And now Mr. Trump is being accused of heresy for not accepting that failed orthodoxy?

So am I saying that Mr. Trump is better and more serious than he’s given credit for being? Not at all — he is exactly the ignorant blowhard he seems to be. It’s when it comes to his rivals that appearances can be deceiving. Some of them may come across as reasonable and thoughtful, but in reality they are anything but.

Mr. Bush, in particular, may pose as a reasonable, thoughtful type — credulous reporters even describe him as a policy wonk — but his actual economic platform, which relies on the magic of tax cuts to deliver a doubling of America’s growth rate, is pure supply-side voodoo.

And here’s what’s interesting: all indications are that Mr. Bush’s attacks on Mr. Trump are falling flat, because the Republican base doesn’t actually share the Republican establishment’s economic delusions.

The thing is, we didn’t really know that until Mr. Trump came along. The influence of big-money donors meant that nobody could make a serious play for the G.O.P. nomination without pledging allegiance to supply-side doctrine, and this allowed the establishment to imagine that ordinary voters shared its antipopulist creed. Indeed, Mr. Bush’s hapless attempt at a takedown suggests that his political team still doesn’t get it, and thinks that pointing out The Donald’s heresies will be enough to doom his campaign.

But Mr. Trump, who is self-financing, didn’t need to genuflect to the big money, and it turns out that the base doesn’t mind his heresies. This is a real revelation, which may have a lasting impact on our politics.

How the Uber vs. de Blasio fight can be explained by public choice theory

Liya Palagashvili writes:

The recent showdown between ride-sharing service Uber and New York City Mayor Bill de Blasio provides a vibrant illustration of what we economists call “public choice”—basically, the study of politics through the lens of economic theory. Mayor de Blasio attempted to limit ride-sharing drivers, but Uber exposed this proposal, unleashing thousands of New Yorkers onto city council. After a weeklong public debate, de Blasio dropped the proposal. . . .

In the public choice framework, politicians are in the profession of maximizing votes, staying in office, and increasing campaign contributions. As a result, elected officials often face a tradeoff between satisfying public wants and catering to special interest groups, which donate to campaigns and lobby to politicians in order to advance their own goals. . . .

Ideally, de Blasio, who has received more than $500,000 in campaign contributions from the taxi industry, wanted to sweep his Uber cap proposal under the rug. Uber is quite popular in New York City and de Blasio may have wanted to cater to the special interest of the taxi companies without stirring backlash from his constituents. If de Blasio truly cared about road congestion (which became the public justification for the cap) and thought it was popular to demonize Uber, he could have been vocal about this position upfront. It looks good for a politician to trumpet favored positions—such as vilifying Wal-Mart and Wall Street, both of which de Blasio has criticized.

By going public with the proposal, Uber forced de Blasio to factor in the cost of catering to special interest groups. Uber’s strategy was a classic example of placing public pressure on politicians. This was why de Blasio had to provide a public justification for his proposal. He even wrote an op-ed that read much like a debate strategy of throwing mediocre arguments against the wall and hoping some of it will stick.

So, New Yorkers, who love their Uber and detest their nonexistent taxicabs on a rainy day, blasted this issue with a typical Big Apple uproar. Now what? De Blasio knows that ultimately the public elects him. And it’s too risky for his goal of staying in office to satisfy his special interest constituents. So he raised the white flag and downloaded the Uber app.

But why did Governor Cuomo and Comptroller Stringer side with Uber? First, it’s a popular position to hold, and few politicians want to miss an opportunity to rally around a fashionable flag. But more importantly, taxicab companies have no interest in providing campaign contributions to Governor Cuomo because the taxi medallion system is a local issue, not a state issue. This means that the mayor and New York City Council have discretion over important aspects of the taxi industry such as the number of taxi medallions and the barriers to entry for new competitors.

As a result, Governor Cuomo isn’t tied to the special interest of taxicab companies. But Stringer’s opposition to de Blasio is interesting as it stirs some speculation that Stringer may intend to run against de Blasio in the near future. In the game of politics, it makes sense for Stringer to side with Uber to boost his popularity.

What can we learn from this Uber fight and public choice economics? We need to have a more practical understanding of politics rather than indulging in a romantic notion that all policies intend to help residents or consumers. We often get bad policies because of self-interested exchanges between politicians and special interest groups. We shouldn’t fall head over heels every time politicians tell us they support a particular policy in order to “help the people.” Sometimes that’s just a façade for what is going on behind closed doors.

Deconstructing "privilege"

Econ prof Don Boudreaux writes:

One challenge that I encounter often when writing is that of finding an accurate adjective for describing the typical upper-middle-class American (and typical rich American). A common convention is to use the adjective “privileged” – as in, for example, “A disproportionate number of minimum-wage jobs will be filled by privileged teenagers raised in affluent suburbs.” As used in this now-conventional way, the word “privileged” describes the state of being more prosperous economically and better connected socially than is the typical working-class or poor American. . . .

I resist using “privileged” in this way. The reason is that the word “privilege” still conveys also a sense of undeserved special treatment. And so while someone might be made economically more prosperous and socially more well-connected because he or she receives undeserved special treatment, becoming economically more prosperous and socially more well-connected does not require undeserved special treatment. Many prosperous people (indeed, in America, still the vast majority of prosperous people) achieve their success through hard work, economic risk-taking (using their own money), prudent behavior, and honest dealings with others. . . . To call such successful people “privileged” . . . wrongly, if subtly, suggests that they’ve been granted some unusual special treatment that accounts for their success.

Many people are tempted to assert that it is a “privilege” in modern America to be born white, or to be born into a loving two-parent family that instills bourgeois virtues, or to be born without any significant physical or mental disabilities. It’s true that people so born are dealt a better starting hand in life than are many other people. But such a use of “privilege” is too expansive and, hence, runs the risk of verbally papering over important distinctions that should be kept visible. Such an expansive use of the word “privilege” has no obvious boundaries. If we accede to this use of the word “privilege,” then we can say also that it is a privilege to have been born in the U.S. to start with – even, perhaps, regardless of one’s skin color (post-1865) or ethnic background. Even the poorest American today is, by this expansive use of the word “privilege,” privileged in comparison to at least a couple of billion people living today throughout Africa and south and central Asia. So, too, then is anyone born in the modern world “privileged” compared to the vast majority of people born just a few centuries ago and earlier. Such an expansive use of the word “privilege” is misleading.

The etymology of the word “privilege” is obvious if you think about it: “privi” – private; “lege” – legislation. Private legislation. (“Special privileges” is, therefore, a pleonasm.) A person who is truly privileged, therefore, is a person who benefits from a special use of government force wielded in his or her favor. This use of force is not generalizable beyond the individual (or small, closed group) for whom the privilege is created. A genuine privilege is a benefit that government bestows on only an individual or on a small select group with the intention of benefiting that individual or members of that small group even if such benefits come at the greater expense of the general public.

According to this correct understanding of the word “privilege,” the vast majority of upper-middle-class and rich Americans are not privileged. While some of these people attained their wealth through favors conferred illegitimately upon them by the state (and, hence, are indeed privileged), the vast majority earned their prosperity without any such favors. . . .

Such a use also strongly suggests . . . that the best, or only, way for “underprivileged” people to become more prosperous is for them to manage to get for themselves some privileges. That suggestion is widely mistaken, as well as one that, if accepted, creates social strife rather than encourages social cooperation.

Warren Buffett has a better economic plan than raising the minimum wage

Buffett writes in the Wall Street Journal:

In my mind, the country’s economic policies should have two main objectives. First, we should wish, in our rich society, for every person who is willing to work to receive income that will provide him or her a decent lifestyle. Second, any plan to do that should not distort our market system, the key element required for growth and prosperity.

That second goal crumbles in the face of any plan to sizably increase the minimum wage. I may wish to have all jobs pay at least $15 an hour. But that minimum would almost certainly reduce employment in a major way, crushing many workers possessing only basic skills. Smaller increases, though obviously welcome, will still leave many hardworking Americans mired in poverty.

The better answer is a major and carefully crafted expansion of the Earned Income Tax Credit (EITC), which currently goes to millions of low-income workers. Payments to eligible workers diminish as their earnings increase. But there is no disincentive effect: A gain in wages always produces a gain in overall income. The process is simple: You file a tax return, and the government sends you a check.

In essence, the EITC rewards work and provides an incentive for workers to improve their skills. Equally important, it does not distort market forces, thereby maximizing employment.

The existing EITC needs much improvement. Fraud is a big problem; penalties for it should be stiffened. There should be widespread publicity that workers can receive free and convenient filing help. An annual payment is now the rule; monthly installments would make more sense, since they would discourage people from taking out loans while waiting for their refunds to come through. Dollar amounts should be increased, particularly for those earning the least.

The "soft bigotry" of "lazy abstraction" or "indifference to the specifics of Baltimore's problem"

Will Wilkinson writes:

On Friday David Brooks argued that costly big-government efforts to alleviate poverty haven't done much to improve conditions for those living in Sandtown-Winchester, the Baltimore neighbourhood where Mr Gray lived. "Saying we should just spend more doesn’t really cut it," Mr Brooks writes. "[T]he real barriers to mobility are matters of social psychology, the quality of relationships in a home and a neighbourhood that either encourage or discourage responsibility, future-oriented thinking, and practical ambition." Ingrained codes of behaviour have "dissolved", he argues, leaving residents of impoverished areas "without the norms that middle-class people take for granted."

Paul Krugman is very annoyed by this line of thinking, though he does not mention Mr Brooks by name. "It has been disheartening to see some commentators still writing as if poverty were simply a matter of values," Mr Krugman writes, "as if the poor just mysteriously make bad choices and all would be well if they adopted middle-class values." According to Mr Krugman, thinkers like Mr Brooks have it back to front. The decline in values Mr Brooks laments is plainly a response to a hopeless lack of economic opportunity for the working classes. "[I]t should be obvious," Mr Krugman avers, "that middle-class values only flourish in an economy that offers middle-class jobs."

This is an important debate, but it is not the debate to have now.

As much as they bicker, Messrs Krugman and Brooks both agree that just about any occasion can be used to mount a favourite hobbyhorse. Mr Brooks is ever on the lookout for a chance to push the all-important role of culture. Mr Krugman scans the horizon itching to point out "the devastating effects of extreme and rising inequality". Culture and inequality certainly have something to do with the Baltimore riots, but Baltimoreans did not suddenly take to the streets to protest their poverty. They rose up to protest an apparently fresh instance of a very specific pattern of injustice. . . .

It is, in fact, a problem of both culture and inequality, but not as Messrs Brooks and Krugman are in the habit of discussing it. It is the problem of an insular, truculent police culture and the grievous harm it has done to the citizens the police were meant to protect. It's a problem of inequality under the law. In 2005 more than half of Baltimore's black men in their twenties were either in prison or on parole, according to one study. This is largely the consequence of tactics in the "War on Drugs", including changes in sentencing guidelines, which have disproportionately hurt young black men. . . .

So why are Messrs Brooks and Krugman using the occasion of Baltimore’s protests to squabble over whether values explain material conditions or material conditions explain values? There's a soft bigotry — let's call it the "soft bigotry of lazy abstraction" — in their indifference to the specifics of Baltimore’s problems.

How to stop the skyrocketing cost of law school

David Lat has a good idea:

Only 57 percent of 2013 law school graduates obtained full-time legal jobs nine months after graduation. Yet the federal government subsidizes the production of even more lawyers by lending the cost of attendance to basically anyone who decides to enroll in law school, without regard for the quality of the school or the job prospects of its graduates. A student going to Harvard Law School, where 86.9 percent of 2013 grads had full-time legal jobs, has the same access to federal funds as a student going to Thomas M. Cooley Law School, where just 22.9 percent of 2013 grads work as lawyers.

This policy is hurting students. Federally subsidized loans have enabled law school tuition to spiral out of control. As noted by Professor Paul Campos, “[i]n real, inflation-adjusted terms, tuition at private American law schools has doubled over the past 20 years, tripled over the past 30, and quadrupled over the past 40,” and resident tuition at public law schools has climbed even faster. So long as the federal loans keep coming, tuition is unlikely to stop rising. In the words of Professor Brian Tamanaha, author of “Failing Law Schools,” “Federal loans are an irresistible (and life-sustaining) drug for revenue addicted law schools . . . law schools have been ramping up tuition and enrollment without restraint thanks to an obliging federal loan program.”

If the government were to stop lending for law school or even just impose per-student or per-school caps on loan amounts (perhaps combined with making it easier to discharge student loans in bankruptcy), law schools would have to dramatically lower tuition, in order to attract students.