BC’s weekend reads

  1. I thought the Nancy MacLean’s book attacking James Buchanan was great for present-day libertarianism, in that it only weakens the already weak Left. Henry Farrell and Steven Teles share my sensibilities.
  2. What is public choice, anyway? And what is it good for?
  3. One of the Notewriters reviews James C Scott’s Seeing Like A State
  4. Aztec Political Thought
  5. Turkey dismisses 7,000 in fresh purge
  6. 10 Chinese Megacities to See Before You Die

Minimum Wages: Short rejoinder to Geloso

A few days ago I posted here at NOL a short comment on some reaction I’ve seen with regards to Seattle’s minimum wage study. Vincent Geloso offers an insightful criticism of my argument. Even if his point is quite specific (or so it seems to me), it offers an opportunity for some clarification.

But first, what was my argument? My comment was aimed at a specific point raised by advocates of increasing minimum wages. Namely, that even if Seattle’s study shows an increase in unemployment, a study with a larger sample may say otherwise. My point is that the way I’ve seen this criticism raised is missing the economic insight of minimum wage analysis, namely that jobs will be lost in less efficient employers and employees first. So far so good. The problem Geloso points out is with my example. I refer to McDonald’s as the efficient employers fast food chain (think of economics of scale) and as less efficient employers the neighborhood family-run little food place (neighborhood’s diner).

Geloso correctly argues that different employers react in different ways. It is expected, for instance, that a larger employer such as a fast-food chain would have more options to make a marginal adjustment when there is an increase in minimum wages. Of course, I agree, but the point I’m rising is about where jobs will be lost first (not the specific mechanism in each employer). Geloso flips my example and argues that a small diner has more (in relative terms) to lose by letting go one out of two employees than a fast food joint that has to let one employee go among maybe ten thousand. By letting one employee go, the small employer loses a larger share of its output. Therefore a small employer would be more inclined to keep all of his labor force and cut costs on another front (less hours work in average doesn’t cut it, that’s like a shared unemployment that would also cut output down).

A large employer like a fast food chain, however, can let one out of ten thousand employees go because the loss in output is not that significant. I have two issues with this example. The first one is that a fast food chain is facing the increase in minimum wage ten thousand times, not two. To cut even the rise in cost, the firm fast food chain has to cut down its labor force 15% (1,500 employees.) But I think the problem with this example does not end here. If it were the case that small diners don’t cut employment but fast food chains do, then we should see more unemployment in larger employers than in small neighborhood diners.

A second point I want to make is with Geloso’s argument that the study is about focusing “like a laser” on one out of multiple channels in the group most likely to respond in that manner (unemployment?). That the study, as long as the focus is on unemployment, should focus on the less efficient employers (and employees) first, and not just look at the unaffected employers because that’s where we just happen to have better statistics for is my point. There are two options. The first option is that what matters is focusing on the channel the increase in cost will be managed by employers. But this is neither a focus on unemployment nor on the criticism I’m replying to. Option number two, that the study should focus on the employers “most likely” to reduce unemployment, which is actually my point regardless of how many “channels” are included in the sample.

Against Guilt by Historical Association: A Note on MacLean’s “Democracy in Chains”

It’s this summer’s hottest pastime for libertarian-leaning academics: finding examples of bad scholarship in Nancy MacLean’s new book Democracy in Chains. For those out of the loop, MacLean, a history professor at Duke University, argues in her book that Nobel-prize winning public choice economist James Buchanan is part of some Koch-funded vast right-libertarian conspiracy to destroy democracy as inspired by southern racist agrarians and confederates like John Calhoun. This glowing review from NPR should give you a taste of her argument, which often has the air of a bizarre conspiracy theory. Unfortunately, to make these arguments she’s had to cut some huge corners in her federally-funded research. Here’s a round-up of her dishonesty:

  • David Bernstein points out how MacLean’s own sources contradict her claims that libertarian Frank Chodorov disagreed with the ruling in Brown v. Board.
  • Russ Roberts reveals how out-of-context Tyler Cowen was taken by MacLean, misquoting him to attribute to Cowen a view which he was arguing against.
  • David Henderson finds that she did the same thing to Buchanan.
  • Steve Horwitz points out how wildly out-of-context MacLean took a quote from Buchanan on public education.
  • Phil Magness reveals how much MacLean needed to wildly reach to tie Buchanan to southern agrarians with his use of the word “Leviathan.”
  • Phil Magness, again, reveals MacLean needed to do the same thing to tie Buchanan to Calhoun.
  • David Bernstein finds several factual errors about MacLean’s telling of the history of George Mason’s University.

I’m sure there is more to come. But, poor scholarship and complete dishonesty in source citation aside, an important question needs to be asked about all this: even if MacLean didn’t need to reach so far to paint Buchanan in such a negative light, why should we care?

I admittedly haven’t read her book yet (so could be wrong), but from the way even positive reviewers paint it and the way she talks about it herself in interviews (see around 15:30 of that episode), one can infer that she is in no way interested in a nuanced analytical critique of Buchanan’s public choice models or his arguments in favor of constitutional restrictions on democratic majorities. Her argument, if you can call it that, seems to be something like this:

  1. Democracy and majority rule are inherently good.
  2. James Buchanan wants stricter restrictions on democratic majority rule, and so did some Southern racists.
  3. Therefore, James Buchanan is a racist, evil corporate shill.

Even if she didn’t need to establish premise 2, why should we care? Every ideology has elements of it that can be tied to some seedy elements of the past, it doesn’t make the arguments that justify those ideologies wrong. For example, the pro-choice and women’s health movement has its roots in attempts to market birth control to race-based eugenicists (though these links, like MacLean’s attempts, aren’t as insidious as some on the modern right make them out to be), that does not mean modern women’s health advocates are racial eugenicists. Early advocates of the minimum wage argued for wage floors for racist and sexist reasons, yet nobody really thinks (or, at least, should think) modern progressives have dubious racist motives for wanting to raise the minimum wage. The American Economic Association was founded by racist eugenicists in the American Institutionalist school, yet nobody thinks modern economists are racist or that anyone influenced by the institutionalists today is a eugenicist. The Democratic Party used to be the party of the KKK, yet nobody (except the most obnoxious of Republican partisans) thinks that’s at all relevant to the DNC’s modern platform. Heiddeger was heavily linked to Nazism and anti-Semitism, but it’s impossible to write off and ignore his philosophical contributions and remain intellectually honest.

Similarly, even if Buchanan did read Calhoun and it got him thinking about constitutional reform, that does not at all mean he agreed with Calhoun on slavery or that modern libertarian-leaning public choice theorists are neo-confederates, and it has even less to do with the merits of Buchanan’s analytical critiques of how real-world democracies function. In fact, as Vincent Geloso has pointed out here at NOL, Buchanan has given modern scholars the analytical tools to critique racism.

Intellectual history is messy and complicated, and can often lead to links we might—with the benefit of historical hindsight—view as situated in an unsavory context. However, as long as those historical lineages have little to no bearing on people’s motivations for making similar arguments or being intellectual inheritors of similar ideological traditions today (which isn’t always the case), there is no relevance to modern discourse other than perhaps idle historical curiosity. These types of attempts to cast guilt upon one’s intellectual opponents through historical association are, at best, another intellectually lazy version of the genetic fallacy (which MacLean also loves to commit when she starts conspiratorially complaining about Koch Brothers funding).

Just tell me if this sounds like a good argument to you:

  1. Historical figure X makes a similar argument Y to what you’re making.
  2. X was a racist and was influenced by some racists.
  3. Therefore, Y is wrong.

If it doesn’t, you’re right, 3 doesn’t follow from 2 (and in MacLean’s case 1 is a stretch).

Please, if you want to criticize someone’s arguments, actually criticize their arguments; don’t rely on a tabloid version of intellectual history to dismiss them, especially when that intellectual history is a bunch of dishonest misquotations and hand-waving associations.

Vincent Geloso Interviewed for his Work on the War on Drugs

Regular readers of NOL know that fellow notewriter Vincent Geloso has done a lot of great work on the war on drugs. Dr. Geloso was recently on Student for Liberty’s Podcast to discuss a paper he recently co-authored compiling data on the effects of the war on drugs on increased security costs, which he previewed a few months ago on NOL. He had a wide-ranging discussion on his findings, secondary effects of the war on drugs in terms of economic costs, the psychology of policing with the war on drugs, and comparing the drug war to prohibition. Check out the discussion.

P.S. If you’re not already listening to SFL On Air, you should and not just because I’m in charge of marketing for it.

From the Comments: Naval Power and Trade

This is an extremely interesting point, the worth of fighting pirates and guerre de course seems difficult but is completely worth the effort. Strangely, just before reading this post, I finished the book To Rule The Waves by Arthur Herman, which asserts that the rise of large-scale trade went hand in hand with the growth of British naval strength, and points very specifically to the 18th and 19th centuries. On page 402, he asserts that it was only naval protection that enabled British trade to grow considerably during the Napoleonic wars (over 11,000 British merchants were captured by the French from 1793-1815 and far more would have been but for the British blockades and convoy protection). How much can one measure the cost-to-yield of maintaining peaceful trade against such depredation?

Herman also argues that Naval research and technology drove the development of far better seagoing technologies without which large-scale merchant ventures would have had far lower yield (perhaps the most famous example is the Longitude Prize) and the demand for iron and ship production was a major driver of the early Industrial Revolution. While I think that both of these arguments are very vulnerable to crowding out arguments, it seems to me that there were nuanced interconnections between technology, trade, and naval power that each had positive feedback into the others. It seems to me that by examining the very large investment made by the British East India Company in their merchant marine in this very period gives a parallel in which private interests made similar investments in protection of sea trade routes, showing its probable positive return on investment.

I am glad to see that you have recognized that naval production was almost always based on relative strengths of navies. The huge decomissioning trends of the mid-19th century in Britain was exceeded by that of their enemies/rivals (the Dutch had been weak since the late 1600s, the French were exhausted completely, and the Spanish and Portuguese were on a long decline worsened by French occupation). However, there is one major aspect to consider in examining naval strength longitudinally: complete revolution in ship technology. Steam, iron plating, and amazing advances in artillery picked up hugely after 1815, and the British navy in the Crimean War would have been unrecognizable to Nelson. I am not sure how this would affect your analysis, because navies became simultaneously more expensive and more effective, and GDP was exploding fast enough to support such high-tech advances without bankrupting the Brits. I am sure this is not an original problem, but I am interested in seeing how historical economists can control for such changes.

Good luck on this paper, it seems like an extremely useful examination with a lot of interesting complications and a fundamentally important commentary on the balance between maintaining law and allowing market determination of resource distribution.

This is from my fellow Notewriter Kevin on another fellow Notewriter’s (Vincentrecent post about shipping and imperial navies.

From the Comments: Weber, Geloso on inequality

How did I not see these before? Rick chimed in on Zak’s post about inequality and libertarianism awhile back. As usual, he tries to give the opposition the benefit of the doubt:

Taking public choice logic seriously means considering the political distortions/impediments to proposed policy. Taking inequality seriously is the flip side of that. Perceptions of (and attitudes towards) inequality matter and libertarians (and conservatives) would do well to acknowledge it.

I suspect that the problem is that 1) (like any ideology) we’ve got a blind spot, and inequality is in that spot. 2) Our liberal friends can see into that blind spot. 3) They’ve got a blind spot that leads them to make silly policy prescriptions (e.g. ignoring public choice roots of inequality and instead calling for policies that would reduce growth). And as a result, 4) we’re turned off by discussion of inequality before considering it.

Vincent, in the usual French manner, has a different take:

Okay massive disagreement here:

A: Inequality is not something “measurable” in the sense of utility. I chose to be an economist. My income is X% below that of my wife who went to school fewer years than I did and her income grows faster than mine and she will live longer than me (in probabilistic terms given life expectancy differences M/F). According to that definition, my couple is an unequal one and growing more unequal. Yet, I would not trade her job for mine even if her job was twice as remunerative (she is an attorney). I chose a path of lesser income because it made me happy. Income maximization was, in that case, not synonymous with utility maximization. By definition, rich societies will have more cases like that since gains in marginal utility may not be associated with marginal gains in monetary income. See the issue of the backward-bending labor supply curve.

B: The literature on linking growth to inequality is VERY weak. Look at the empirical papers, the results often depend on the choice of variables and the time window. It NEVER accounts for what I mentioned in point A. More importantly, there is NO THEORETICAL LINK with neoclassical theory on this (with the notable exception of Herb Gintis and Sam Bowles and I am working on a paper tackling their logic) that is axiomatically consistent. An empirical observation without a theory that is logically sound (the most repeated is the general Keynesian argument about consumption, but that is very weak and that rebuttal is powerful in the theoretical papers) is basically rubbish.

C: The Great Gatsby Curve is also rubbish since most of the past observations are based on the weird assumptions that mobility based on father-sons is a proper estimate to compare with modern estimates. You can consult the very convincing rebuttals made by Scott Winship. Moreover, the Great Gatsby curve is again a case of empirical observations without theory. I don’t need any of this story to see that mobility is down (modestly) at the same time that labor market restrictions are up.

There is more discussion, too.

A Warm Welcome

Folks, NOL is coming up on 5 years as a cooperative venture. It’s been a lot of fun and it wouldn’t have the feel it has without your continued support and encouragement. I’d like to extend a warm welcome to two new members of the consortium: Dr Vincent Geloso and William Rein. Behold:

Vincent Geloso has recently completed his PhD dissertation at the London School of Economics and Political Science in the field of economic history. He specializes in law and economics, development economics, and economic demography. He has published articles in Journal of Population Research, Essays in Economic and Business History and Economic Affairs.

Vincent was my roommate at a FEE summer seminar back in 2009 (the same summer I met Rick at an IHS summer seminar). He’s from Quebec but is a Canadian first and foremost. You can start checking out his non-NOL work here. If you are considering a non-profit to give to for this holiday season, I highly recommend IHS and FEE. Just look at what their work has done in regards to NOL. And:

William Rein is a sophomore studying Philosophy and Criminal Justice at Chico State University. He married jurisprudence a long time ago, starting seeing modern physics on the side, and just recently has been hooking up with phenomenology. Every now and then he gets caught up in journalism and opinion writing.

You can start checking out his non-NOL work here. I have many a fond memory of Chico State (and some not-so-fond ones too). Please, be on your best behavior for at least their first couple of posts!