Posts filed under ‘Classical Liberalism’
Bruno Leoni Institute Seminar for Young Scholars
| Peter Klein |
The Institute Bruno Leoni, named for the great classical liberal legal scholar, announces a seminar for young scholars (under 35 years old) on competition, regulation, and antitrust. It’s 3-5 October, 2008, in Sestri Levante (Italy). Economists, sociologists, philosophers, legal scholars, and historians are encouraged to apply. Here is the call for papers. Bill Niskanen and Steve Littlechild are the keynoters. Other than the blatant ageism, it looks like a great event.
The Role of Economic Analysis in Public Policy
| Peter Klein |
Here are two views on the role of economic analysis in public policy, from a passage in Robert Dodge’s biography of Thomas Schelling recounting the early days of Harvard’s Kennedy School of Government:
A tension [among the faculty] began to develop over an ideological difference between two groups. The question that brought about the division concerned the proper role of the policy analyst. Schelling’s view was the same as it had been since the Cold War, and there were other economists in the school who generally agreed. They believed that the approach to policy analysis was to begin by rationally analyzing situations, seeking to understand how things work and what outcomes would be. His idea had been to “solve the puzzle first.” Policy was something that came after understanding. Throughout his career Schelling had fought against the idea of beginning with outcomes, what he saw as looking at problems backward, and had believed that strategic analysis was required in advance to understand situations before developing public policy.
A group headed by Steve Kelman and future Secretary of Labor, Robert Reich, held a different view. This group cared about policy management as well as public policy analysis. Their main argument was that values couldn’t be separated from public policy, and the antiseptic and purely analytical approach of Schelling’s group was incomplete. Policy analysis, the Reich group felt, was to be used in determining a successful path to the goal one hoped to achieve. They believed it was necessary to acknowledge and identify openly what one was trying to achieve or affirm when carrying out a policy. . . . (more…)
Schumpeter and Knight on Democracy
| Peter Klein |
With the US primaries in full swing, and “democracy fever” sweeping the land, it’s perhaps a good time to share a couple of my favorite quotes on democratic governance:
Thus the typical citizen drops down to a lower level of mental performance as soon as he enters the political field. He argues and analyzes in a way which he would readily recognize as infantile within the sphere of his real interests. He becomes a primitive again. (Joseph A. Schumpeter, Capitalism, Socialism, and Democracy, 3rd edition, pp. 262-63.)
The probability of the people in power being individuals who would dislike the possession and exercise of power is on a level with the probability that an extremely tender-hearted person would get the job of whipping master in a slave plantation. (Frank H. Knight (1938), quoted in F. A. Hayek, The Road to Serfdom, p. 152.)
The Chicago School of Antitrust
| Peter Klein |
Josh Wright of GMU Law and Truth on the Market was on our campus this afternoon to present his paper “The Roberts Court and the Chicago School of Antitrust: The 2006 Term and Beyond” (thanks to Thom for hosting). The paper provides a nice overview of the evolution of antitrust theory and practice over the last several decades. Josh describes three historical phases of antitrust thinking: the Harvard approach (Bain’s structure-conduct-performance paradigm), the Chicago approach, and the modern “post-Chicago” approach (based on game-theoretic industrial organization).
Josh defines “Chicago” broadly to include not only Demsetz, Peltzman, B. Klein, Bork, Posner, and Easterbrook but also Williamson and others who in the 1970s and 1980s challenged the conventional wisdom that deviations from perfect competition (resale price maintenance, exclusive dealing, block booking, and the like) are per se anticompetitive. I think this is a reasonable taxonomy (though Williamson would be horrified to be included as a Chicagoan). Note that this definition rejects the caricature of Chicago economists as laissez-faire ideologues (indeed, Chicagoans are viewed by Austrians as wishy-washy interventionists on competition policy [1, 2]). Instead, it defines the Chicago approach as the “rigorous application of price theory,” “the centrality of empiricism,” and the “emphasis on the social cost of legal errors in the design of antitrust” (as emphasized by Easterbrook). (more…)
Best Dissertation Title I Read Today
| Peter Klein |
“Pimps and Ferrets: Copyright and Culture in the United States, 1831-1891,” by Eric Anderson (Bowling Green State University, American Culture Studies/History, 2007). Abstract:
How did people think about copyright in the nineteenth century? What did they think it was? What was it for? Was it property? Or something else? How did it function? Who could it benefit? Who might it harm? Pimps and Ferrets: Copyright and Culture in the United States, 1831-1891 addresses questions like these, unpacking the ideas and popular ideologies connected to copyright in the United States during the nineteenth-century.
This era was rife with copyright-related controversy and excitement, including international squabbling, celebrity grandstanding, new technology, corporate exploitation, and ferocious arguments about piracy, reprinting, and the effects of copyright law. Then, as now, copyright was very important to a small group of people (authors and publishers), and slightly important to a much larger group (consumers and readers). However, as this dissertation demonstrates, these larger groups did have definite ideas about copyright, its function, and its purpose, in ways not obvious to the denizens of the legal and authorial realms.
This project draws on methods from both social and cultural history. Primary sources include a broad swath of magazine and newspaper articles, letters, and editorials about various copyright-related controversies. Examining these sources — both mainstream and obscure — illustrates the diversity of thinking about copyright issues during the nineteenth century, and suggests alternative frameworks for considering copyright in other times.
Via Bill Stepp, who says the “study fills a yawning gap in copyright history, and offers a radically different focus on the development of this institution from the dominant legal perspective.” You’ll have to download the searchable PDF to find the meaning of the title.
Economic Advisers to Presidential Candidates
| Peter Klein |
Last week’s Freakonomics column in the NY Times asked “What Does A Presidential Candidate’s Economic Adviser Actually Do?” McCain adviser Douglas Holtz-Eakin gives the best (facetious) response: “The first thing that the economics adviser brings to any campaign staff is a hip coolness and bling.” The serious answers are interesting too.
Several high-profile academic economists are involved with the 2008 campaign: Greg Mankiw and Glenn Hubbard are advising Romney, Micheal Boskin works for Giuliani, and Austan Goolsbee is helping Obama. Maverick Republican Ron Paul hasn’t announced any official economic advisers — “my advisers [are] Mises and Hayek and Sennholz,” he told Business Week — but this list of academic supporters includes some distinguished economists (scroll down to the Ks).
Opera and Mandated Standards
| Peter Klein |
More on Opera and Microsoft. Besides demanding that Internet Explorer be unbundled from Windows, Opera wants the European Commission “to require Microsoft to follow fundamental and open Web standards accepted by the Web-authoring communities.” But what standards? Determined how, and by whom? “[S]peaking as a web developer,” writes Mike Gunderloy on WebWorkerDaily, “I do not believe that I want the courts stepping in to determine what standards must be implemented in shipping products.” He notes:
- It’s not at all clear just what are the “fundamental and open Web standards.” Some sites are already experimenting with HTML5 and CSS3, even though the standards are in flux and not thoroughly implemented. Are these fundamental yet? Are things like MathML fundamental? Who decides?
- No browser is perfect. Depending on how closely your read the standards and interpret them, you can always find a test to break any given browser. Will some other vendor turn around and demand that Opera be pulled until it fixes its own rendering bugs? If the end result is that only perfect browsers can be shipped, we will have no browser at all.
- Once they get involved, why would the courts stop at regulating browsers? Imagine a takedown order aimed at a site you just deployed because it won’t validate. There are people out there determined to make the Internet a better place by forcing us all to be less sloppy. I’m not sure I want them to end up in control.
As the critics of Microsoft’s critics have frequently pointed out, asking the courts to determine optimum technical standards makes no sense — and neither does asking the courts to determine the optimum bundle (“you can buy a suit coat and a pair of suit pants, but not a suit”), the optimum set of vertical contractual restraints (“software licenses are OK, per-processor licenses aren’t”), and so on. Why can’t we let the market decide?
Et Tu, Opera?
| Peter Klein |
Opera is an innovative company that makes a fine web browser and has a devoted following. I use Opera Mini, which is in many ways superior to the native browser on my BlackBerry. So I was dismayed to learn that Opera has adopted the “if you can’t beat ’em, file an antitrust suit against ’em” approach to its dealings with Microsoft. Happily for Opera, the company is based in Norway, allowing it to make its case before the Microsoft-unfriendly European Commission without being accused of forum-shopping. But, really, haven’t we been through all this already?
Best Web-Themed Passage I Read Today
| Peter Klein |
A succinct summary of government’s attitude toward the web, courtesy of today’s NY Times:
[M]any in the business world . . . understood years ago that the Web represented not simply another mass medium to be gamed but also a fundamental shift in the once static relationship between producer and consumer. It is by nature a participatory medium, in which customers demand a more personal stake in the products they consume. . . . Companies have realized that since they can no longer expect to unilaterally define the market the way they once did, they might as well let the market have some control over designing and branding the product.
Perhaps only in Washington, where so few people have dominated so much for so long, is this trend viewed as inherently negative.
From a short piece on the spontaneous, decentralized, web-fueled Ron Paul campaign (via Lew Rockwell). See more here and here.
Jacques Barzun Turns 100
| Peter Klein |
Jacques Barzun, the eminent historian and cultural critic, turns 100 in a couple of weeks. Barzun has written more books than I’ve read so it’s hard to give an overall summary of his contributions. This New Yorker profile tells us that “[m]ore than any other historian of the past four generations, Barzun has stood for the seemingly contradictory ideas of scholarly rigor and unaffected enthusiasm.” Now that’s a nice tribute.
Many of my friends like Barzun’s 2000 book From Dawn to Decadence: 1500 to the Present: 500 Years of Western Cultural Life, a sweeping history that compares favorably to Martin van Creveld’s Rise and Decline of the State. Perhaps more relevant for the O&M crowd is Barzun’s 1974 Clio and the Witch Doctors: Psycho-History, Quanto-History, and History, a defense of traditional, qualitative, narrative history against the newer disciplines of cliometrics and what Barzun calls “psycho-history.” Cliometrics, which substitutes simplistic, mono-causal explanations for the complex interplay of people and institutions through time, is attempting “to rescue Clio from pitiable maidenhood by artificial insemination.” Agree or disagree, you have to respect the way the man writes.
A Plea for Economic Education
| Peter Klein |
As economists have long emphasized, individuals need not understand the full benefits of participation in the division of labor to benefit from it. But when the market is continually under attack from special interests and from ideologues both left and right, a little knowledge goes a long way. Jeff Tucker puts it nicely:
The old-style classical liberals [Adam Smith, Hayek] reveled in the fact that [the market’s] “impersonal forces” worked without anyone really being aware of them, or having to understand them. The checkout lady at the store just shows up, pushes buttons, gets paid, and stays or leaves based on her assessment of her own well-being. Everyone else does the same. The pursuit of self-interest generates this amazing global matrix that benefits everyone.
The old liberals reveled in the fact that no one had to understand it, but then the system itself came under attack, and needed defense. It had to be understood to be explained, and explained in order to be preserved.
This is why Ludwig von Mises set out to revise liberal doctrine. It is not enough that people participate unknowingly in the market economy. They must understand it, and see how, and precisely how, their smallest and selfish contribution leads to the general good, and, moreover, they must desire that general good.
All of which is to say that in an enlightened world, it would be a good thing for that cashier to understand economics from the point of view of those who pay her. It would be good for striking workers to understand how they are harming not only their bosses but also themselves. It would be good for voters to see how supporting government benefits for themselves harms society at large.
An economically literate public is the foundation for keeping that amazing and wild machine called the market working and functioning for the benefit of the whole of humanity.
Waldfogel’s “Tyranny of the Market”
| Peter Klein |
Joel Waldfogel visited our campus last week to discuss his new book, The Tyranny of the Market. I wasn’t sure what to expect. Joel is a creative and original thinker, a careful empiricist, and a nice guy. He’s one of the small (but growing) number of accomplished economists (Steve Levitt, Austin Goolsbee, Greg Mankiw, Brad DeLong, Steve Landsburg, etc.) who take the time to write for a general audience, a particularly meritorious activity. On the other hand, while I haven’t read Joel’s book, I was underwhelmed by this summary in Slate, as was most of the econo-blogosphere (1, 2, 3, 4).
After hearing Joel’s presentation and discussing it with him afterwards I’m more sympathetic to his case, but only slightly. His basic argument is simple: Under increasing returns, if the number of potential users of a particular good or service is sufficiently small, and the fixed costs are sufficiently large, then the good or service will not be produced even though there exist users whose willingness to pay exceeds the marginal cost of production. This Joel characterizes as a market failure, a challenge to the view that market provision, unlike government provision, allows everyone to have his preferences satisfied. If the state provides one color of tie, selected by majority vote, then I may be stuck with a red tie even when I prefer blue, while under market competition we all get the color we want. Not so, says Joel; if only a few of us prefer blue and the fixed costs are high enough then blue won’t be offered for sale. (more…)
Why the Resistance to Prices?
| Peter Klein |
When the quantity demanded exceeds the quantity supplied — causing shortages, delays, congestion, misallocation — the solution is to raise the price. Every freshman economics student knows this. Why, then, are regulators, industry groups, and consumer representatives so often opposed to rationing by the price mechanism? Is it simply Bryan Caplan’s anti-market bias? Is it interest-group politics? Or is there something specific people don’t like, or don’t understand, about prices?
Two examples: (1) Airline landing slots. I worked on this problem with Dorothy Robyn back at the CEA in 2000. The US FAA prices airport landing slots, and access to the air traffic control system, on a per-passenger basis, regardless of time of day, season, overall stress on the system, and so on. In other words, the price charged has no relation to the marginal cost of provision. The obvious solution is some kind of congestion pricing mechanism. But the major players are generally opposed. Mike Giberson provides details on the latest attempt to use prices to reduce air-travel delays. Time-of-day pricing? “We are unalterably, adamantly opposed to it,” says the head of the Air Transport Association, the airlines’ lobby group. (more…)
Tribute to Bob Higgs
| Peter Klein |
It was a great pleasure watching Robert Higgs accept the 2007 Schlarbaum Award for Lifetime Defense of Liberty at the Mises Institutes’s 25th Anniversary Celebration in New York. Bob is an outstanding scholar whose 1987 book, Crisis and Leviathan, should be required reading for Naomi Klein. He is a fierce defender of political and economic freedom, private property, and the rule of law. Bob also edits the Independent Review, a terrific interdisciplinary journal that values clear exposition as well as academic rigor (a rare combination, these days).
Earlier this year a group of Bob’s friends, colleagues, and former students produced a Festschrift volume, Government and the American Economy: A New History, in his honor. Contributors include Price Fishback (the editor), Gary Libecap, Stanley Engerman, Robert McGuire, Richard Sylla, John Wallis, Jeff Hummel, Robert Margo, Mark Guglielmo, Werner Troesken, Sumner La Croix, Randal Rucker, E. C. Pasour, Jr., Lee Alston, and Joseph Ferrie. The result is “a series of stimulating cameos by a distinguished assemblage of economic historians,” writes reviewer Gavin Wright (himself a distinguished economic historian). Check it out!
Nye on Wine and Trade
| Peter Klein |
John Nye is a very interesting economic historian. I still remember his fiery (and controversial) talk at the inaugural ISNIE conference in 1997, in which he urged new institutional economists to separate themselves from their brothers and sisters in mainstream economics. (Other participants, such as Paul Joskow, thought this was a bad idea.)
John’s new book, War, Wine, and Taxes: The Political Economy of Anglo-French Trade, 1689-1900 (Princeton, 2007) argues that Britain was not, contrary to popular perception, devoted to free trade after the repeal of the Corn Laws in 1846. The British retained high tariffs on French wine, among other goods, leading to substantial welfare losses among Britons. (more…)
Why Are Markets So Scary? Some Things (Liberal) Academics Get Wrong
| David Hoopes |
Many people make incorrect assumptions about capitalism. Some would have us believe that capitalism is based on greed, selfishness, and promotes behavior that is completely self-centered. This is a common interpretation of Smith’s advice to allow people to make decisions based on self-interest. Examples are easy to find in the many organization theory-based papers complaining about economics and economists.
Two very good papers can aid in a deeper understanding of the invisible hand. First is James Q. Wilson’s “Adam Smith on Business Ethics.” A central point Wilson makes is that Adam Smith assumed people will behave with a moral sense. Wilson, “A moral man is one whose sense of duty is shaped by conscience; that is, by that impartial spectator within our breast who evaluates our own actions as others would evaluate it.” By suggesting people be allowed to make decisions based on their own self interest Smith was not advocating selfishness and greed. What then was he advocating?
This leads to the second paper, Harold Demstez’s “The Theory of the Firm Revisited.” In the third paragraph Demsetz notes that the debate between mercantilists and free traders was over the role of the government in the economic affairs of the state. “Is central economic planning necessary to avoid chaotic economic conditions?” The great achievement of the perfect competition model, what Demsetz argues should be called perfect decentralization, is its abstraction from centralized control of the economy.
Thus, the central element to capitalism is that decision making is pushed down as far as possible. (more…)
Academics and Ideology Redux
| Peter Klein |
More on academics and left-liberal ideology. Becker and Posner weigh in with explanations based on demographic change, selection bias, and other structural characteristics of higher education. See also these comments by Ilya Somin (1, 2) and David Bernstein on the new study by Gross and Simmons. David wins the quote-of-the-day prize with this gem:
It turns out, according to the study, that 17.6 of professors in the social scientists consider themselves Marxists. Only academics doing a survey of other academics could possibly think that this is low.
Kleins Behaving Badly
| Peter Klein |
Cousin Naomi is in the news again. Her new book, The Shock Doctrine: The Rise of Disaster Capitalism, is attracting a lot of attention in the econo-blogosphere, virtually all negative. The Economist offers this guide to the commentary. The only sensible person who likes the book appears to be Joe Stiglitz, taken to task here by Pete Boettke. Klein’s shocking treatment of Milton Friedman has raised hackles everywhere (see this and this). Ultimately, her thesis is unsupported by any historical evidence. When one is a “cultural critic,” however, facts and reason are not too important.
World Freedom Atlas
| Peter Klein |
Here is a terrific resource: the World Freedom Atlas, a “geovisualization tool” — i.e., cool interactive map — for world statistics. It includes the most important variables used by economists including income and purchasing power from the Penn World Table, legal origin from LLSV, economic freedom from the Fraser Institute and the Heritage Foundation, policy constraints from Witold Henisz, the World Bank’s governance indicators, and a host of other variables from Acemoglu, Johnson and Robinson; Barro and Lee; Easterly and Levine; Persson and Tabellini; and several others. All that’s missing is links to the original datasets. Still, an impressive tool. (HT: Mike Kellermann)
The Political Economy of Entrepreneurship
| Peter Klein |
Entrepreneurship and political economy are two of the fastest-growing fields in applied economics, so it is only natural that they come together. Magnus Henrekson and Robin Douhan have a new volume coming out in the International Library of Entrepreneurship Series, The Political Economy of Entrepreneurship (Elgar, 2007). It contains reprints of classic and contemporary papers by Schumpeter, Kirzner, Baumol, Stigler, de Soto, Acemoglu, Lerner, and many others.
Henrekson and Douhan identify in their introduction (which you can read here) three key aspects of entrepreneurship as it relates to political economy: (more…)
Organizations and Markets 
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