Voter Participation: Something Has to Be Done

In California, 70% of eligible voters are registered, and 47% of those turned out in a recent election. Thus about a third of those who could vote do so. These are dismaying numbers.

Dismaying because they are too high.

Why? First, some more dismaying numbers:

When Newsweek recently [2011] asked 1,000 U.S. citizens to take America’s official citizenship test, 29 percent couldn’t name the vice president. Seventy-three percent couldn’t correctly say why we fought the Cold War. Forty-four percent were unable to define the Bill of Rights. And 6 percent couldn’t even circle Independence Day on a calendar.

Too many ignorant fools are casting votes. People who believe that minimum wage laws create wealth, free trade destroys wealth, or clergymen should be forced to marry gay couples, to pick just a few examples. We need to bar these ignoramuses from the voting booth.

How? For starters, ditch the 26th amendment to the Constitution and the raise the voting age to at least 30. Get the 20-somethings out of the way; too many still believe in free lunches.

Second, change the 24th amendment to require poll taxes rather than forbid them. There is no justice in forcing non-voters to pay election costs.

Third, institute stiff qualification exams. Voters need know the vice president’s name, understand the Cold War, identify July 4 as Independence Day, and a whole lot more. Informed voters would be mostly immune from pandering demagoguery.

Disenfranchisement will lead to alienation and rebellion, some will say. Perhaps, and this could be alleviated by a phase-in of the changes. But then voting will become a privilege that young people can aspire to, as they might aspire to a corporate management position.

Another objection: my proposal is elitist. Of course it is! If there’s one thing we desperately need in this country, it’s a reversal of the egalitarian sentiments that have poisoned so much public discourse. We need to encourage and acknowledge the best and the brightest. Ignorant fools should not be allowed to operate dangerous machinery or pull levers in voting booths.

The Myth of Primitive Communism

Juhoansi02In my new article at FEE, “The Myth of Primitive Communism,” I argue that hunter-gatherers like the Ju/’hoansi share food with each other, not because they are selfless communists, but because favors and obligations are their most valuable commodities.

Please take a look. I’d be very interested in my fellow Notewriters’ erudite responses.

A metaphor for the Socialist Calculation Debate

This week’s episode of EconTalk was fantastic, and in particular drew an important parallel between the complexity of the human brain and the complexity of market economies. The guest was discussing radical nanotechnology (basically the idea that engineers could out do bacteria by applying good design principles in place of random mutation and natural selection), and Russ pointed out that the logic is basically the same as in Socialism. Radical nanotechnology runs into a fundamental problem as long as it ignores the emergent processes occurring at the molecular/cellular level.

Later, the guest discusses the issue of artificial intelligence and points out that the fundamental unit of biological computing is not the neuron (which we simulate on computers using neural networks), but the molecule. In other words, natural intelligence is the outcome of a complex process that isn’t simple enough for us to easily replicate on a computer.

All that in mind, the idea of socialism* is like the idea that we could replace a brain with a pocket calculator. Yes, the idea is to get a very powerful calculator, but the problem is that it’s replacing a computer that’s far more complex and sophisticated.


* i.e. Centralized control of the means of production… socialism has nothing to do with sharing (you’re thinking “Egalitarianism”) and everything to do with control, and particularly the attempt to rationalize complex systems.

When Europe Rejected Morocco

Did you know that in 1987 the government of Morocco formally submitted an application to become a member of the European Union?

Brussels flatly rejected the application, arguing publicly that Morocco was not a European country and also that Morocco had a poor human rights record. This rejection marks one of the biggest mistakes that Brussels has ever made in its short-but-brilliant history (along with instituting a central bank).

Does anyone know of any scholarly literature showing that the admittance of authoritarian states to the EU or other federal-esque institutions will have the effect of liberalizing the political regimes of such states, as long as the republics admit these states one or two at a time? I did a blog post on it awhile back, but a blog post is not a peer-reviewed journal article.

The best counter-example of federalism-as-a-path-to-liberty that I can think of is the pre-Civil War US. The US federal system was made up, in part, of a number of authoritarian states that promoted and enforced chattel slavery. This example does not address the EU model, however, where Brussels admits neighboring poor states and a gradual liberalizing effect takes place.

In the US example, factions within the slave states benefited economically from the use of slaves, and this economic prosperity was tied up directly to the political institutions of the US. So, the US Senate had a number of pro-slavery representatives that not only made sure slavery could not be attacked politically, but also that the interests of slaveholders were advanced at the expense of the non-slaving states (and, of course, the slaves themselves). In other words, a powerful minority with interests very different from the general intent of the classical liberal framework of Madison’s constitution.

Once the number of free states became great enough to overcome the number of slave states in the Senate, a war became much more likely. It became more likely because the interests of the (illiberal) slaveholders were directly challenged by the numerical superiority of free state representatives in both houses.

In short, the pre-Civil War US was made up of two factions – one liberal and one illiberal – that were almost equal in power. The EU does not have to worry about this, though. It should be much bolder in admitting despotic, neighboring states into its apparatus. (The same goes for the US.) Imagine if Morocco had been admitted into the EU in 1987. There would likely be representatives in Brussels bitching about austerity instead of representatives of the King torturing and imprisoning Moroccan citizens for reasons unknown.

Why Don’t Tribes Transition to Market Defense?

Ongka
Ongka, a “big man” of the Kawelka tribe. Image from http://www.stewartstrathern.pitt.edu/

Watch almost any anthropological film about a newly discovered “isolated tribe,” and you’re likely to see at least one “tribesman” wearing a t-shirt.

People in bands and tribes and chiefdoms — who have since time immemorial handled most of their economic transactions for food, clothing, and shelter through traditional economies of gift exchange and family sharing — eagerly become buyers and sellers for products on the global market as soon as they get the chance.

They grow coffee beans or trap furs, and they use the money to buy firearms, machetes, cell phones, and jean shorts. In other words, they jump right in to the market. And usually, the tendrils of global trade have arrived way before the anthropologists and their film crews.

But people in the same bands, tribes, or chiefdoms seem to hang on to their family and gift-based economies for political, military, and legal services.

They do not jump to create or hire market solutions (mercenaries, defense corporations), and they instead eventually transform — by hook or by crook — into a state or into a people subjugated by a state.

Why does this happen? Why do we get states for defense and markets for everything else?

Let me back up and explain my terms:

In the examples I’m familiar with, humans use one of four main methods to organize law enforcement and military protection:

1. Kin-based. Your extended family (a “band,” “clan,” or a “lineage”) and maybe an alliance of intermarried and neighbouring extended families (a “tribe” or a “village”), protects you. You are technically free to leave the family or the village, but that could leave you without protection unless you are marrying into a new one.

Examples: Cree, Tahltan, Ju/‘hoansi

2. Prestige-based. A famous leader (a “big man” or “chief”) and his warriors protect you in return for material gifts and social deference. You can pull your support from the leader — more easily if he’s just an informal “big man” and less easily if he’s a formal “chief.” And there are usually other nearby leaders or aspiring leaders who would happily accept your patronage.

Examples: Yanomamo, Kawelka, Trobriander

Systems #1 and #2 are often blended together, as in the Trobriander case, where each man’s connections to the chief are determined partly by family relatedness and partly by gift exchange.

3. State-based. A compulsory ruler (a “king” or “president”) and his warriors protect you in return for taxes and/or labor. You are never free to pull your support, although you are sometimes free to leave through emigration.

Examples: Aztec Empire, Canada, People’s Republic of China

4. Market-based. A private enterprise (a “defense contractor”) protects you in return for money. You are free to pull your support and choose another contractor, or go without.

Example: Detroit’s Threat Management Center

Now, we could also sketch out the same 4 methods for the basic kinds of economic exchange people do for food, shelter, and all the other goods and services in life besides defense. People can give and receive the things they want and need through #1 family networks, #2 prestige-oriented gift exchange, #3 state redistribution, and #4 markets.

What I see throughout the world in the last 500 years is that as globalisation advances, people in all or almost all cultures eagerly take their systems of food, shelter, etc. out of systems #1 and #2 and go into system #4. In other words, people in bands, tribes, and chiefdoms all over the world desperately want the metal tools, firearms, t-shirts, cell-phones, and everything else that the market offers, and so they find ways to sell goods or services and thus money that lets them buy that stuff.

For instance, hunter-gatherers who once collected food to share with their family now collect furs to sell internationally, or instead serve as bush guides to wealthy tourists from foreign cultures.

But people almost never eagerly or rapidly take their law and defense systems out of kin and prestige and into markets.

Instead, they tend to hang on to kin or prestige-based methods of law enforcement and warfare until they (a) get conquered by a state or (b) organize themselves as a state (whether to fend off would-be conquerors or to become conquerors themselves).

So in highland Papua New Guinea for instance, the Dani and the Kawelka were happy to grow coffee beans and other crops to put on the market by the 1970s. But they didn’t start hiring mercenaries for defense. Instead, they stuck to their big men and their tribes until their military organizations were absorbed into state militaries or turned into paramilitary movements aiming to create or seize control of a state.

Markets became the center of food production. States became the center of defense production.

Later on, after states have arrived as military organizations, sometimes they start expanding and controlling parts of the economics of food, shelter, education, etc., through compulsory redistribution.

Conversely, shifts to market-based defense seem to occur after a society has already had state-based defense — like in Moresnet or Kowloon (PDF). And the market organizations arise when, for some reason, the state-based defense system relaxes or collapses.

Why does this bifurcated trend keep happening?

Why do people in these societies transition into markets for most goods and services but states for law and war?

Do state-based militaries and police forces simply outcompete (or outfight) market ones?

Am I missing major counterexamples, or even misunderstanding my own examples?

Declining to Wed Gay Couples: Right or Wrong?

News item: the Georgia governor has just vetoed a bill that would, among other things, have allowed ministers to decline to wed gay couples.

What a tangle. Let’s see if we can sort things out.

First of all, many decent people, your humble servant included, find the concept of “gay marriage” troubling. I believe any two adults (or three or more) should be free to make any contract they like regarding sharing assets, pledging fidelity, and so forth. I just wish they wouldn’t call it “marriage.” That term is taken.

Second, hate is not a crime. Some people express repugnance or hatred for homosexuality. Ayn Rand called the practice immoral, an attitude that is hard to fathom in this day and age but perhaps understandable given the tenor of her times. Some go farther and express hatred for homosexuals per se. But as long as these people refrain from initiating force or fraud, they should not be molested. Boycotts, shunning, and criticism are legitimate responses to such people, but forcible restraint is not.

Third, rights are not granted by governments. Rights derive from our basic nature as humans, as thinkers such as Ayn Rand and Murray Rothbard have so eloquently demonstrated. Contractual “rights” should have a different name, perhaps “privileges.” These are actions that have been legitimized by a voluntary agreement. Thus for example, no one has free speech “rights” on a campus. Students may have free speech “privileges” on a campus if the owners of the campus have granted that privilege in a written or implied contract.

Fourth, freedom of association is a basic human right, and includes freedom of dissociation, whether in personal or business relations. Some years ago I posted a defense of the late Lester Maddox who famously attempted to exclude blacks from his chicken restaurant. My post generated considerable blowback, but I stand by it and note that in this day and age, anyone who tried to exclude blacks would not be elected governor of Georgia as Maddox was, but instead lose most of his customers and close his doors.

In summary, no minister needs permission from the state to deny wedding services to a gay couple. And religion has nothing to do with it. Anyone should free to decline business or personal relationships with anyone, for any reason whatever, or for no reason at all.

How Fascism Will Come To America

John T. Flynn’s As We Go Marching was written in 1944, but there isn’t a line in this excerpt that doesn’t fit today’s situation perfectly.  I read the book many years ago and will pull it out and read it again.

Fascism will come at the hands of perfectly authentic Americans who have been working to commit this country to the rule of the bureaucratic state; interfering in the affairs of the states and cities; taking part in the management of industry and finance and agriculture; assuming the role of great national banker and investor, borrowing billions every year and spending them on all sorts of projects through which such a government can paralyze opposition and command public support; marshaling great armies and navies at crushing costs to support the industry of war and preparation for war which will become our nation’s greatest industry; and adding to all this the most romantic adventures in global planning, regeneration, and domination, all to be done under the authority of a powerfully centralized government in which the executive will hold in effect all the powers, with Congress reduced to the role of a debating society.

HT: Jacob Hornberger, Future of Freedom Foundation

What does complexity theory tell us about government?

I’m reading Complexity: The Emerging Science at the Edge of Order and Chaos which has the absolute best testimonial on the front cover: “If you liked Chaos, you’ll love Complexity.”

This book was written in 1993 so I’m pretty late to the show, but it’s worth raising the issue: complex systems require governance, but that need not mean government.

In the copy below the author is writing about how complex systems–systems with components that affect one another in simple ways resulting in emergent orders at the system-wide level–occupy an interesting space between chaos and order. Too much order and you end up with something fixed and unchanging. Too much chaos and you’ve got noise.

The second full paragraph misses an important point that should have been obvious to the author and the researchers who he’s paraphrasing. The government is an endogenous element in the wider economy. If we think of the economy as a network of people (individual nodes) who cluster into sub-networks (organizations), the government is just a collection of nodes and clusters that follow different rules than the rest. Granted, these clusters often serve important roles (e.g. courts). But the anarchist branches of economics have pretty clearly demonstrated that removing the state from these roles doesn’t always lead to chaos. Ripping the state out like a band-aid would be an awful idea, but gently scaling (scoping?) back the state need not be a disaster.

This band between chaos and order is wider than they’re giving it credit for. We can only examine this band from our own perspective… as human beings who are tiny components of this much larger network of networks. The range of configurations that could allow a peaceful, flourishing society is essentially infinite. Yes, governance is necessary, but strengthening any particular set of nodes cannot allow for governance of the system as a whole. It can only allow for governance of a sub-set of the wider network.

Emergent orders cannot be controlled from within.

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A hypothesis implied by Galbraith

pp. 171-172 of Competition and Entrepreneurship has J.K. Galbraith asserting, “that independently determined consumer desires [do not] dictate the pattern of production. The ‘institutions of modern advertising and salesmanship…cannot be reconciled with the notion of independently determined desires, for their central function is to create desires–to bring into being wants that previously did not exist.'”

Beyond the obvious first step (recognizing that consumers’ desires could not possibly be determined independently of the market process), this raises an interesting hypothesis: Advertisers should a) recognize that they’re selling snake oil and consume significantly less than similar people, or b) be particularly excited about the prospects of new and exciting products generally. In either case advertising should affect them differently than regular consumers and they should consume a different amount than consumers generally. At the very least, their consumption patterns should be different from regular consumers in the particular goods that they are advertising.

The criticism of advertising as socially wasteful (i.e. using up resources without actually making consumers better off) may hold up if evidence is found in support of the above hypothesis. In the case of pattern ‘a)’ it may be clear that advertising is manipulative and anti-social. But in the case of pattern ‘b)’ or the null (advertisers buy the same junk as the rest of us) we either have to abandon the criticism of advertising or come up with some ad hoc story about how everyone is stupid and their preferences shouldn’t matter.

Why Rising Prices May Indicate Abundance

I am currently writing a piece with Pierre Desrochers (University of Toronto at Mississauga) regarding environmental trends and economic theory for the conference of the Association for Private Economic Education (see here). In the process of writing up the first draft of the article, I had to revisit another article I wrote (with Desrochers) and I found a passage which now offers me a greater value than when I initially wrote it. In that piece, me and Desrochers basically argued that rising prices for certain environmental goods may not always indicate rising scarcity. In fact, we argued that prices could increase even if a resource grew in abundance.  Here is the passage from our article currently undergoing revise and resubmit:

Thirdly, technological innovations that increase productivity might drive up the price of a commodity without this truly reflecting the scarcity of the resource. Whale oil is a case in point. The decline of the whaling industry in the United States began around 1850 at which point real prices began to increase (Bardi 2007). However, economic historians agree that this was not because of resource depletion or overfishing (Davis, Gallman and Hutchins 1988). Brook Kaiser (2013) thus found that the increasing demand for illuminants created pressures on prices, which in turn motivated the development of substitutes like petroleum-derived kerosene. However, whale bone and oil prices did not fall as kerosene production expanded and, in spite of falling demand, prices stayed high and even increased. The answer to this conundrum is opportunity cost as the important surge in American labor productivity was greater than the observed increase in productivity in the whaling industry. This meant that the opportunity cost of using workers, capital and other resources in the whaling industry was great. These workers, capital goods and other resources were progressively reallocated to other industries. In the process, the whaling industry faced higher costs relative to productivity. While marginal players in the whaling industry exited, the supply of inputs to the whaling industry decreased and prices had to be increased [by the remaining firms in order for economy-wide equilibrium to be achieved]. Hence, prices in that situation are not reflective of depletion or expansion of resource stock.

 

The Dark Side of Polycentricity

Who’da thunk?!

This raises the question: would anyone pay attention if the federal government wasn’t such a mess? I don’t think so. Oh well… can’t win ’em all.

On Scottish Free Banking (a Canadian Perspective)

Yesterday, George Selgin responded on Alt-M to a series of (relatively) recent paper that posit the impossibility of private money. While Selgin does criticize the theoretical reasoning of the papers, the majority of his case is based on the historical experience of private money – notably the Scottish experience with free banking.

I wanted to write something on this, but Selgin got there faster. Indeed, the historical evidence of free banking in Canada, Scotland, Sweden and the limited experiences observed in France and elsewhere provide a strong backing for soundness of private money. Selgin is right to emphasize this.

However, I can provide a small piece of evidence to support his case. It is not only scholars like Selgin who believe that the historical experience of Scotland was positive. As far back as 1835 and as far away as Canada, the robustness of the Scottish free banking experience was lauded. Consider the following quote from a report to the House of Assembly of Upper Canada (modern day Ontario):

“In Scotland, private banking has long existed and fewer failures have occurred there than in any other part of the world; their Joint Stock Banking Companies embrace some of the following principles by which the public are quite secured and the institutions useful as Banks of Deposit and circulation, while the stock is above par, and proved to be a good investment”

This report was actually presented in Canada arguing that Scottish free banking was a solution to a longstanding problem in the colony : dearth of small denominations. The “big problem of small change” was a real issue in the colony and created important frictions. The problem was most likely created by the fixing of exchange rates between the different currencies at levels dissonant with the actual value of different currencies so that “bad money drove out good money” (see Angela Redish’s work). The report recommended legislative actions to encourage the formation of banks that would issue private notes to solve this problem. Newspapers in the neighboring colony of Lower Canada also praised (in the early 1830s) the role that banks played in easing the problem of “poor money”.

I have made an initial foray on this with Mathieu Bédard of Aix-Marseille School of Economics (and we plan to make another few) and  showed that the role of free banking in improving economic growth was considerable exactly because of the issue of private money. While Canada is a small, it provides some additional support to the claim that private money can indeed exist, survive and be superior to state money.

Source:  House of Assembly of Upper Canada. 1835. Report of the Select Committee to which was referred the subject of The Currency. Toronto : M.Reynolds Printer.

P.S. Below there is a picture of a half-penny issued by the Quebec Bank in 1837 showing that there was even private coinage in Canada.

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A libertarian argument for an FDA

Whoa! Yeah, I’m going to do this, but let me start with some caveats. First, this is an argument, not the argument. Every silver lining has a storm cloud, and acknowledging the silver lining doesn’t mean you’re in favor of tornadoes. Second, I’m being sloppy with the term libertarian; classical liberal is closer to the truth, but doesn’t make for as good a title. Most importantly, I think my argument is swamped by the traditional libertarian arguments against the FDA. All that said, this argument has some interesting implications for how we think about intervention generally. Here goes…

The human body is a complex system that we do not fundamentally understand. Although every complex system is unique, they have similarities. In the case of both the human body and society/markets, interventions lead to unintended consequences which can offset the (ostensible) gains from the intervention. At the end of the day, although the FDA intervenes in the complex system of human society, it also prevents intervention in the complex system of human physiology.

The Hippocratic Oath instructs its speaker to not play God and to avoid over-treatment, and the justification for that is made clear in a recent Econ Talk. The guest was on to promote his book which discusses the problem of medical reversal–the phenomenon of medical practices that are adopted and subsequently abandoned after evidence shows the practice to be ineffective or worse. From this position he argues that the FDA’s mandate to ensure not just safety, but efficacy, is especially important. His argument is that because of the cost of type II error the FDA ought to go further.

Let’s look at two extreme cases. In the “anything-goes” world, we might have a lot of people trying good and bad interventions with a lot of harm being done to the unlucky ones. You and I know that the real problem is one of information and that in a perfect world we would have “anything-goes-that-consumers-with-access-to-good-information-from-Consumer-Reports-®-or-a-competitor” but this world still leaves us with the problem (which we face in today’s FDA-evaluated world) that consumer trial-and-error is a poor substitute for randomized control trials.

At the other extreme we have the “first-do-no-harm-second-do-real-good” world of an ideal FDA. This world has very steep type I errors but instead of two steps forward, one step back, we would have one step forward, then another, and never any steps back…. but of course each step forward would cost a few billion dollars.

Neither extreme is ideal, but the second world is one where standards of evidence are taken very seriously. In that world I’d be a third grade teacher instead of a college professor. The standards of evidence are at the core of the problem of medical reversal, but also the problem of economic intervention (which is far less likely to be reversed, even in the face of good evidence indicating that it should be).

As far as medical intervention is concerned, my position is bullish on better efficacy evaluation of medical procedures but still bearish on the FDA itself. But looking at the FDA from this angle opens up an interesting thought experiment: what might be the effects of an Economic Intervention Standards Authority? In practice it would probably be awful (my guess is a federal bureau that attempts to quash Tiebout competition), but in a libertarian utopia it would be the bureaucracy that libertarian kids with administrative bents would dream of heading.

Why Britain, in the Great Depression, is the best example in favor of NGDP targeting

A few weeks ago, I finished reading Scott Sumner’s The Midas Paradox. As an economic historian, I must say that this is by far the best book on the Great Depression since the Monetary History of the United States. Moreover, it is the first book that I’ve read that argues simply that the Great Depression was the result of a sea of poor (and sometimes good) policy decisions. However, coming out of the book, there was one thing that came to mind: Sumner is underselling his (very strong) case.

In essence, the argument of Sumner looks considerably like that of Milton Friedman and Anna Schwartz: The Federal Reserve allowed the money supply to contract dramatically up to 1932, turning what would have been a mild recession into a depression.  However, Sumner adds a twist to this. He mentions that after the depth of the monetary contraction had been reached, there was a reflation allowing an important recovery during 1933. This is standard AS-AD macro of a (very late) expansionary policy to allow demand to return to equilibrium. Normally, that would have been sufficient to allow the rebound. Basically, this is the best case for NGDP targeting: never let nominal expenditures fall below a certain path because of a fall in demand.  The problem, according to Sumner, is that the recovery was thwarted by poor supply-side policies (like the National Industrial Recovery Act, the Agricultural Adjustment Act etc.). The positive effects of the policy were overshadowed by poor policy. And thus, the depression continued.

To be fair, Sumner is not the first to emphasize the “real” variables side of the Great Depression. I am especially fond of the work of Richard Vedder and Lowell Galloway, Out of Work, which is a very strong candidate for being the first econometric assessment of the effects of poor supply-side policies during the Great Depression. I was also disappointed (but not too much since Sumner did not need to make this case) to see that no mention was made of the Smoot-Hawley tariff as a channel for monetary transmission (as Allan Meltzer argued back in 1976) of the contraction. Nonetheless, Sumner is the first to bring this case so cogently as a story of the Great Depression. Thus, these small issues do not affect the overall potency of his argument.

The problem, as I mentioned earlier, is that Sumner is underselling his case! I base this belief on the experience of England at the same time. Unlike the United States, the British decided to apply their piss-poor supply-side policies during the 1920s – well before the depression.  The seminal paper (see this one too) on this is by Stephen Broadberry (note: I am very biased in favor of Broadberry given that he is my doctoral supervisor) who argued that the supply shocks of the 1920s caused substantial drops in hours worked and although the rise of unemployment benefits played a minor role, the vast majority of the causes were due to the legal encouragement of cartel formation. As a result, there were no supply-side shocks during the depression to create noise. However, England did have a demand-side expansionary policy in 1931. Even if it was by accident more than by design, England left the gold standard in September 1931. This led to the equivalent of an easy monetary policy and the British economy stopped digging and expanded afterwards. The Great Depression was not a pleasant experience for the British, but it was not even close to the dreadful situation in the United States. As a result, we can see whether or not it was possible to exit the Great Depression by virtue of a monetary policy. I’ve combined the FRED dataset on monthly industrial production and the monthly GDP estimates for inter-war Britain produced by Mitchell, Solomou and Weale (see here) to see what happened in England after it left the gold standard. As one can see, the economy of Britain rebounded much more magnificently than that of the United States in spite of supply-side constraints.

GBUSA

Sumner should expand on this point! To be fair, he does talk about it briefly. Not enough! A longer discussion of the British case provides him with the “extra mile” to cover the distance against competing theories. The absence of supply shocks in Britain during the Depression confirm his story that the woes of the United States during the 1930s are due to initially poor monetary policy and then poor supply-side policies. In my eyes, this is a strong confirmation of the importance of the NGDP level target argument!

With such a point made, it is easy to imagine a reasonable counterfactual scenario of what economic growth would have been after monetary easing in 1933 in the absence of supply-side shocks. Had the United States kept very unregulated labor and product markets, it is quite reasonable to believe (given the surge seen in 1933 in the Industrial Production data) that the United States would have returned to 1929 levels. In the absence of such a prolonged economic crisis, it is hard to imagine how different the 1930s and 1940s would have been but it is hard to argue that things would have been worse.

UPDATE: From the blog Historinhas, Marcus Nunes sent me the graph below confirming the importance of the NIRA shock on eliminating all the benefit from easy money after 1933.

J Goodman (1)

Prediction: Trump-Sanders 2016

You heard it here first. At some point soon the two populist campaigns will join forces and take the White House with Donald Trump as the president. The odd-couple reality show residuals will foist Bernie to the top of Forbes’ “Lamest Billionaires” list before he’s even sworn in.

idiocracy3

By 2018 the supreme will be hearing disputed disputes over MLB umpires’ decisions. By 2024 they will be the official referees of Wrestlemania. Incidentally, Wrestlemania 42 is where Bernie Sanders will peacefully shuffle of this mortal coil. Conspiracy theorists will insist that he was killed before the event by a Russian assassin and that his aides carried his dead corpse in so that they could attend the event. After that it will only be another 5 years before the last Facebook (by then a branch of the Social Security Administration) comment using the phrase “Feel the Bern” which by then will understood to be a reference yeast infections.

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In fact, lots of good, funny, and interesting things will happen in the future! CSPAN will final get watchable. Even better news: selling the broadcast rights to the State of the Union Address will finally put a dent in the debt. And as budgets shift away from bureaucracies towards more explosive, entertaining, and big-data-y ventures, red tape will whither away. With a good dose of good luck, the world going to hell in a hand basket might be the best thing that’s ever happened to us.