The Growth Solution

Carl Schramm & Robert Litan, in the current issue of The American argue for a new entrepreneurial agenda. Excerpt:

By the policies they champion, our future presidents can have an important impact on how rapidly our economy grows. Continued growth in per capita incomes, generated through ongoing improvements in productivity, is what drives improvements in living standards. Faster growth also will give us more resources to address each of our major domestic and foreign policy challenges.

Of course, government does not generate growth. But the private sector’s success, and thus the pace at which the economy advances, depends heavily on the rules, incentives, and basic infrastructure that government sets and provides..

Cheer Up - These Are the Good Old Days

Assures Jeff Jacoby:

ARE YOU anxious? Dejected? Fearful? Why wouldn't you be, considering the barrage of rotten news assaulting you from every direction?

"Everything seemingly is spinning out of control," moaned the apocalyptic headline on a recent AP dispatch. "Midwestern levees are bursting. Polar bears are adrift. Gas prices are skyrocketing. Home values are abysmal. Airfares, college tuition, and healthcare border on unaffordable...

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Austrian Theory of the Trade Cycle

Free audiobook download of the Austrian Theory of the Trade Cycle, which was compiled in 1996 by Richard Ebeling, and includes essays by Roger Garrison, Ludwig von Mises, Gottfried Haberler, Murray Rothbard, and Friedrich Hayek.

'Solutions' to Problems Caused By 'Solutions'

Thomas Sowell:

We don’t look to arsonists to help put out fires but we do look to politicians to help solve financial crises that they played a major role in creating.

How did the government help create the current financial mess? Let me count the ways...

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Hayek's Challenge

Bruce Caldwell talks about his book Hayek's Challenge: An Intellectual Biography of F.A. Hayek in an excellent hour-long conversation with Will Wilkinson.

related: Jason Steorts's review in National Review. Excerpt:

As Hayek's ideas matured, he became increasingly critical of developments within mainstream economics; his works evolved in striking—and sometimes seemingly contradictory—ways. Caldwell is ideally suited to explain the complex evolution of Hayek's thought, and his analysis here is nothing short of brilliant, impressively situating Hayek in a broader intellectual context, unpacking the often difficult turns in his thinking, and showing how his economic ideas came to inform his ideas on the other social sciences. Hayek is fortunate in his biographer. Hayek's Challenge is a success, and Caldwell proves himself capable of presenting Hayek's ideas—in all fields—with both depth and clarity.

The Charming Peasant Life of Pre-Industrial Europe

Don Boudreaux, at Cafe Hayek, quotes William Manchester's 1992 book A World Lit Only By Fire on the romantically rustic lifestyles of peasants in late-medieval and even Renaissance Europe, a world sadly lost after mankind opted for carbon-burning industrialisation instead:

Lying at the end of a narrow, muddy lane, his rambling edifice of thatch, wattles, mud, and dirty brown wood was almost obscured by a towering dung heap in what, without it, would have been the front yard. The building was large, for it was more than a dwelling. Beneath its sagging roof were a pigpen, a henhouse, cattle sheds, corncribs, straw and hay, and, last and least, the family's apartment, actually a single room whose walls and timbers were coated with soot. According to Erasmus, who examined such huts, "almost all the floors are of clay and rushes from the marshes, so carelessly renewed that the foundation sometimes remains for twenty years, harboring, there below, spittle and vomit and wine of dogs and men, beer...remnants of fishes, and other filth unnameable. Hence, with the change of weather, a vapor exhales which in my judgment is far from wholesome."

The centerpiece of the room was a gigantic bedstead, piled high with straw pallets, all seething with vermin. Everyone slept there, regardless of age or gender -- grandparents, parents, children, grandchildren, and hens and pigs -- and if a couple chose to enjoy intimacy, the others were aware of every movement. In summer they could even watch.....

If this familial situation seems primitive, it should be borne in mind that these were prosperous peasants. Not all of their neighbors were so lucky. Some lived in tiny cabins of crossed laths, stuffed with grass or straw, inadequately shielded from rain, snow, and wind. They lacked even a chimney; smoke from the cabin's fire left through a small hole in the thatched roof -- where, unsurprisingly, fires frequently broke out. These homes were without glass windows or shutters; in a storm, or in frigid weather, openings in the walls could only be stuffed with straw, rags -- whatever was handy....

Typically, three years of harvests could be expected for one year of famine. The years of hunger were terrible. The peasants might be forced to sell all they owned, including their pitifully inadequate clothing, and be reduced to nudity in all seasons. In the hardest times they devoured bark, roots, grass; even white clay. Cannibalism was not unknown. Strangers and travelers were waylaid and killed to be eaten, and there are tales of gallows being torn down -- as many as twenty bodies would hang from a single scaffold -- by men frantic to eat the warm flesh raw.

P.J. O'Rourke Visits China

For years I’ve been active in Freedom House, the oldest of the private organizations advocating for international freedom and democracy. We’ve seen progress, especially since 1989. We’ve seen backsliding. And we’ve seen stasis, notably 1.3-billion-persons’-worth of stasis in China. Freedom House rates China as “Not Free.” On a scale of 1 to 7—where 1 is as free as human nature allows and 7 is completely otherwise—China scores 6 on civil liberties and 7 on political rights.

Yet we at Freedom House cannot be exactly right. A mere increase in China’s prosperity must mean that more Chinese have greater wherewithal to exercise some aspects of free will. Certainly the Chinese are more free now than they were during the Great Leap Forward, when millions were constrained by starving to death. And the Chinese are freer to go about their business than they were during the Cultural Revolution, when there was no business to go about...

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In Defense of Sweatshops

Benjamin Powell:

I do not want to work in a third world "sweatshop." If you are reading this on a computer, chances are you don't either. Sweatshops have deplorable working conditions and extremely low pay—compared to the alternative employment available to me and probably you. That is why we choose not to work in sweatshops. All too often the fact that we have better alternatives leads first world activists to conclude that there must be better alternatives for third world workers too...

“An Introduction to Austrian Economics” by Thomas Taylor

New, free, audiobook version of Thomas C. Taylor's 1980 An Introduction to Austrian Economics.

Text version here

The Essential Role of Recessions

Alan Reynolds, at the Wall Street Journal:

A reporter on Fox News recently asked, "Which presidential candidate is most qualified to turn the economy around and avoid a recession?" The quick answer is: none.

No candidate will become president soon enough to matter, and to ask the question is to presume that recessions can and should be avoided. But some business mistakes require time to be fixed. Too many houses were built in some areas, so prices have to fall to discourage more building and encourage more buying. Some banks made too many bad loans, so they need to become more cautious...

update: Walter Williams

The Theory of the Firm

Another great podcast from EconTalk:

Mike Munger, of Duke University, talks about his new article, which looks at why firms exist. If prices and markets work so well (and they do) in steering economic resources, then why does so much economic activity take place within organizations that use command-and-control, top-down, centralized structures called firms? Within a firm, most of the goods and services that the workers use are given away rather than allocated by prices--computer services, legal services and almost everything else is not handed out by competition but by fiat, decided by a boss. A firm, the lynchpin of capitalism, is run like something akin to a centrally planned economy. Munger's answer, drawing on work of Ronald Coase, is a fascinating look at the often unseen costs of making various types of economic decisions. The result is a set of fascinating insights into why firms exist and why they do what they do.

related: The Peter Klein lecture "The Theory of the Firm", from this mp3 archive, is typically good and covers a lot of the same ground.

Man vs. the Welfare State

Here's a longish excerpt from Henry Hazlitt's 1969 book Man vs. the Welfare State. Obviously outdated now in its warnings against an international drift toward socialism, but sadly not so in its attack on bureaucracy, regulation, and other government interventionism.

From time to time over the last thirty years, after I have talked or written about some new restriction on human liberty in the economic field, some new attack on private enterprise, I have been asked in person or received a letter asking, "What can I do" — to fight the inflationist or socialist trend? Other writers or lecturers, I find, are often asked the same question.

The answer is seldom an easy one. For it depends on the circumstances and ability of the questioner — who may be a businessman, a housewife, a student, informed or not, intelligent or not, articulate or not. And the answer must vary with these presumed circumstances.

The general answer is easier than the particular answer. So here I want to write about the task now confronting all libertarians considered collectively...

Peter Boettke on Austrian Economics

A great discussion with Peter Boettke, about the Austrian economic tradition, its founder Carl Menger, later figures such as Ludwig von Mises and F.A. Hayek, and its distinctive ideas on subjective value, marginal utility, and methodology, which set it in firm opposition to the more mainstream neo-classical tradition.

related: Boettke on Murray Rothbard's critique of socialism

Around the World in 80 Ideas

From the Adam Smith Institute:

"80 ideas in economic and social reform, illustrated
by practical examples from around the World."

contents

The Concept of Opportunity Cost

Russ Roberts explains:

One of the challenges of being an economist is explaining what you do for a living. People understand that one of the things a professor of economics does is teach economics. But what is that, exactly? Most presume it has something to do with investing and financial management. When I once told my seatmate on an airline flight that I was an economist, she said, what a shame, my husband loves the stock market. Hmm. I didn't tell her that other than the advantages of investing in indexed mutual funds, I know next to nothing about the stock market.

My seatmate might have profited from reading Alfred Marshall who called economics "the study of mankind in the ordinary business of life." This was the enterprise of Marshall and Adam Smith and Friedrich Hayek and Milton Friedman: they tried to understand what people do and the implications of their behavior for the society at large.

But my favorite definition of economics is a variant of Marshall's. It comes from a student who heard it from another teacher of hers: economics is the study of how to get the most out of life. I like this because it strikes at the true heart of economics—the choices we make, given that we can't have everything we want. Economics is the study of infinite wants and finite means, the study of constrained choices. This is true for individuals and governments, families and nations. Thomas Sowell said it best: no solutions, only tradeoffs. To get the most out of life, to think like an economist, you have to be know what you're giving up in order to get something else. That's all opportunity cost is..

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Understanding Say's Law

Steven Horwitz:

My task here is to explore the way in which Say’s Law of Markets (named for the great Classical economist Jean-Baptiste Say) has been fundamentally misunderstood by economic theorists and laypersons alike, and to explore some of the consequences of this misunderstanding.

W. H. Hutt once referred to Say’s Law as the most fundamental ‘economic law’ in all economic theory. In its crude and colloquial form, Say’s Law is frequently understood as supply creates its own demand, as if the simple act of supplying some good or service on the market was sufficient to call forth demand for that product. It is certainly true that producers can undertake expenses, such as advertising, to persuade people to purchase a good they have already chosen to supply, but that is not the same thing as saying that an act of supply necessarily creates demand for the good in question. This understanding of the law is obviously nonsensical as numerous business and product failures can attest to. If Say’s Law were true in this colloquial sense, then we could all get very rich just by producing whatever we wanted.

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What Makes a Nation Wealthy?

Tyler Cowen reviews Gregory Clark's new book A Farewell to Alms:

Economists typically explain the wealth of a nation by pointing to good policies and the quality of a country’s institutions. But why do these differences exist in the first place?

In A Farewell to Alms: A Brief Economic History of the World Gregory Clark, an economics professor at the University of California, Davis, identifies the quality of labor as the fundamental factor behind economic growth. Poor labor quality discourages capital from flowing into a country, which means that poverty persists. Good institutions never have a chance to develop...

New York Times

Is Greed Good?

John Stossel says yes

sample:

If pursuing profit is greed, economist Walter Williams told me, then greed is good, because it drives us to do many good things. "Those areas where people are motivated the most by greed are the areas that we're the most satisfied with: supermarkets, computers, FedEx." By contrast, areas "where people say we're motivated by 'caring'" - public education, public housing etc. - "are the areas of disaster in our country. ... How much would get done," Williams wondered, "if it all depended on human love and kindness?"

related: Stossel's excellent ABC documentary, "Greed", can be seen (in 6 sections) here

Robert Frank: The Economic Naturalist

Robert Frank talks about his new book, The Economic Naturalist: In Search of Explanations for Everyday Enigmas, in this excellent hour-long podcast interview with Russ Roberts.

The book, described by Steven Pinker as "fascinating, mind-expanding, and lots of fun," argues that the traditional way of teaching economics via graphs and equations often fails to make any impression on students. He outlines an alternative approach, where students find interesting enigmas from everyday life, then try to explain them using the economic way of thinking. Some of the most interesting of these, with solutions, are then collected in his book, such as:

* Why are newspapers, but not soft drinks, sold in vending machines that allow customers to take more units than they paid for?

* Why is there a light in your refrigerator but not in your freezer?

* Why do some cars have fuel fillers on the left, and others on the right?

* Why do the keypads of drive-up cash machines have Braille dots?

* Why is milk stored in rectangular cartons, and soft drinks in round cans?

* Why are CD cases smaller than DVD cases when the discs are the same size?

* Why are whales, but not chickens, in danger of extinction?

* Why do 24-hour convenience stores have locks on their doors?

* Why are brown eggs more expensive than white ones, even though the two types taste the same and have identical nutritional value?

related review: Herald Tribune

Anti-Trust Regulation: The Case for Repeal

"The United States has had antitrust legislation at the federal and state level for more than 100 years. (The Sherman Antitrust Act [1890] and the Federal Trade Commission Act [1914] are the basic federal statutes.) The laws make illegal "every contract, combination … or conspiracy in restraint of trade" and any attempt to "monopolize" through merger or acquisition; in addition, "unfair … and deceptive practices" are also forbidden. Given this broad regulatory mandate, antitrust law is arguably this nation's oldest ad hoc "industrial policy." But whether any of this regulation has ever made economic sense is entirely debatable...

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