Leading the Revival of Individualism & Self Reliance

It’s Not About Climate. It’s About Control – Of Everything You Do, Including Washing Dishes.

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Fascism, Communism, Nazism — all gifts to the world from Europe. Now it’s nonsensical worries about climate change resulting in deliberately built-in inefficiencies in everything from household appliances to transportation methods.

Compared to the U.S., Europe’s love of control-down economics leaves it in the dust:

“The US GDP is five times that of Germany, seven times that of France and UK, 10 times of that of Italy, and 14 times of that of Spain in 2018.” And when the UK leaves the EU as I predict it will, the gap will be much larger.

Still, the control freaks of the left are determined to copy the European model and hamstring us in ways that make us easier to control.

I’ve spent a great deal more time overseas than juniors on their semester abroad in Avignon have, and I can tell you that everything from working mothers to GDP are beset by control economies. It takes forever to do the laundry in Europe. The machines may save energy and water but it leaves housewives having to spend much, much longer to get the family laundry done. So much time it takes to accomplish normal household chores that full-time working mothers are rarer there than here.

When comparing employment statistics between the United States and the EU, we find that:

  • Women are more likely to be managers in the United States than in the EU.
  • Labor force participation for women is lower in the EU than in the United States.
  • Part-time employment among women is greater in the EU than in the United States.

The gender wage gap is larger in the EU than in the United States.[snip]  In EU countries, women are also more likely to hold part-time jobs than in the United States. This suggests that EU policies have not helped women remain in full-time positions and advance their careers, opting instead to pursue jobs with fewer hours and more flexibility.

In recent years, motivated by bugaboo claims — first about depleting supplies of energy and then about climate change (“the social cost of carbon”) — the Department of Energy regulated home appliance efficiency. The net result was reduced efficiency and product performance.

Do homeowners really want to wait two hours (twice what it once took) to get these dishes done? This administration thinks not.

Like many other Obama-era DOE standards, the marginal energy and water savings were likely not worth the added cost to consumers, but what really set the dishwasher standard apart was its impact on product performance. It added significantly to the time it takes to do a load, which at more than two hours was about twice what it took before federal regulators got involved.

However, the underlying statute, the Energy Policy and Conservation Act of 1975, contains provisions protecting consumers from efficiency standards that reduce product features and performance, so on March 21st, 2018 the Competitive Enterprise Institute petitioned the agency to set a new standard. DOE granted the petition last week and has formally begun a rulemaking to determine whether a new efficiency rule is warranted that would permit dishwashers that can do the job in an hour.

DOE should be applauded for righting this regulatory wrong. But even better than fixing bad regulations is preventing them from happening in the first place, and towards that end DOE is considering a number of useful process reforms that would discourage anti-consumer efficiency standards in the future. The agency should also consider excluding the social cost of carbon from appliance rulemakings so that this program can’t again prioritize climate activism over consumers.

After undoing the ridiculous appliance standards, I’d hope the administration takes a look at the policies trying to force us out of cars by reducing, instead of increasing, traffic lanes for cars — providing reserved bike lanes already severely choke traffic as population grows. Regardless of how many people bike around Amsterdam to the delight of visiting college juniors from America, it doesn’t fit most of the U.S. or its  people.

MOTUS looks at Portland for an example but it’s become ubiquitous.

Let me posit this hypothesis, liberalism is the new secular Puritanism. Instead of believing in a just and almighty God they believe in government. Instead of basing their beliefs and religion on the Bible they base it on their own – ever-expanding — belief system: the principles of government. The Puritan ideal of living a life of pious, consecrated actions translates for the new Puritans to insisting that YOU live a pious life, consecrated to THEIR principles. Because you were born too stupid to determine what’s best for you. Hence the need for social engineering; here’s an example of that at its finest:

Portland to create ‘equitable mobility’ task force to investigate how to charge people to use local roads.

Portland City Council approved a plan Wednesday to study short-and-long-term strategies to charge people to use city streets, an effort intended to reduce congestion and curb carbon emissions as the region expects as many as 500,000 new residents by 2040.

The city will create a Pricing for Equitable Mobility task force to study and recommend potential road user fees — such as cordons, where drivers are charged to use certain streets in the city center or potentially more robust freeway tolls in the area…

Commissioner Chloe Eudaly, who oversees the transportation bureau, said the city must take bold steps to try and get people out of their cars. “We are going the wrong direction on transportation,” she said.

In other words, they are going to pursue (taxpayer-funded) ways to manipulate you to do what we want you to do, which is “get out of your cars.” No matter how they attempt to package and sell it, it’s always about control. And it’s always them, controlling you.

Contrary to the claims of those who want to get us out of our cars and into public transportation, cars make increased productivity, less dense population, housing, and work opportunities possible. People are not, as they often are in European urban centers, confined to living close to work on bus and metro lines or in biking distance, shopping in the same corridors, and schooling their children in the same paths. It makes them easier to control and limits their choices. Near me, it is not unusual for people to work in Virginia, drop their kids off at school and after-school activities in D.C., and shop and live in Maryland.  Using public transportation or bikes would make this quite impossible in any reasonable amount of time.

It’s of a piece with the Left’s wish to control dialogue through Facebook and Twitter, YouTube, and such, and through the censoring of contrary opinion by deeming it not “politically correct.”  But there, too, I see a ray of rising anti-totalitarianism .We do not like this nonsense.

Among the general population, a full 80 percent believe that “political correctness is a problem in our country.” Even young people are uncomfortable with it, including 74 percent ages 24 to 29, and 79 percent under age 24. On this particular issue, the woke are in a clear minority across all ages.

Youth isn’t a good proxy for support of political correctness — and it turns out race isn’t, either.

Whites are ever so slightly less likely than average to believe that political correctness is a problem in the country: 79 percent of them share this sentiment. Instead, it is Asians (82 percent), Hispanics (87 percent), and American Indians (88 percent) who are most likely to oppose political correctness. [snip]

The one part of the standard narrative that the data partially affirm is that African Americans are most likely to support political correctness. But the difference between them and other groups is much smaller than generally supposed: Three quarters of African Americans oppose political correctness. This means that they are only four percentage points less likely than whites, and only five percentage points less likely than the average, to believe that political correctness is a problem.

It’s always about control and the left thinks they should control all the levers. Alexandria Ocasio-Cortez’ chief of staff admitted it this week, telling a crowd: “The interesting thing about the Green New Deal, is it wasn’t originally a climate thing at all. Do you guys think of it as a climate thing? Because we really think of it as a how-do-you-change-the-entire-economy thing.”

I can’t imagine American voters opting to put idiots like this in charge. Neither does Tom Maguire.

I remain shocked (in a totally non-shocked way) that Dem “strategists” seem to be seeking a progressive Presidential candidate whose coattails should let them sweep Congressional districts in Brooklyn, Manhattan, San Francisco and a few other urban enclaves while losing most of the country.

Do they understand “swing districts”? Do they understand that winning Brooklyn with 85% of the vote doesn’t send more people to Congress than winning with a mere 75%?

I beg you: Don’t let them know this.

This article appeared at americanthinker.com

Entrepreneurship Brings Innovation And Betterment For All. Government Regulation Throttles It.

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Even in an age of hyper-partisanship, people still like a good underdog story and few are better than the small start-ups taking on the giants of industry. Entrepreneurialism helps create jobs, innovations, and other economic and social opportunities. It’s a story everyone can get behind.

Everybody, that is, except the incumbents and their political lackeys, who do not want pesky upstarts disturbing the status quo. Those companies and policymakers will take steps to protect their market and political turf—primarily through the creation and preservation of regulations. They usually sound well intentioned, but ultimately they only serve their interests at the expense of competitors, consumers, and the public.

This partially explains the decline in business dynamism in recent decades. “Business dynamism, is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over,” explain Brookings scholars Ian Hathaway and Robert E. Litan. This dynamic process of entry, entrepreneurialism, and constant Schumpeterian “creative destruction” is essential to a well-functioning economy. Unfortunately, Hathaway and Litan, along with many other economists, have documented how this dynamic process has been slowed by various factors.

A new NBER working paper, “The Failure of Free Entry,” finds that “regulations and lobbying explain rather well the decline in the allocation of entry.” Economists Germán Gutiérrez and Thomas Philippon show that, “regulations have a negative impact on small firms, especially in industries with high lobbying expenditures.” Their results also document how regulations, “have a first order impact on incumbent profits and suggest that the regulatory capture may have increased in recent years.”

The problems of excessive lobbying (or “rent-seeking”) and “crony capitalism” are well-documented, especially by public choice scholars. But almost all economists and political scientists agree that competition and new entry are essential for expanding economic opportunity and enhancing consumer welfare. With openness comes dynamism.

Too often, however, regulatory systems are rigged to guarantee to opposite—stasis. “Time and again, the losing interest groups created by scientific progress or technological change have been able to convince politicians to block, slow, or alter government support for scientific and technological progress,” says Mark Zachary Taylor, author of The Politics of Innovation. “The losers and their political representatives have interfered with markets, public institutions and policies, and even the scientific debate itself—whatever they can do to protect their interests.”

When the status quo can be protected through political shenanigans, it creates perverse incentives for firms. As Tyler Cowen notes, “lobbying reorients the culture of a company toward politics and law, and away from innovation.” Instead of being market entrepreneurs, they become what scholars refer to as “political entrepreneurs” or “unproductive entrepreneurs.” Such entrepreneurs are not creating value for society; they are just expropriating it from others.

Economists George Stigler and Mancur Olson did pioneering work explaining how and why this occurs. Stigler identified how firms will “invest” in legislation or regulation as they did any other input. “The state—the machinery and the power of the state—is a potential resource or threat to every industry in the society,” Stigler wrote in 1971. “With its power to prohibit or compel, to take or give money, the state can and does selectively help or hurt a vast number of industries.”

Olson explained how special interests accomplished this in practice. “Lobbying increases the complexity of regulation and the scope of government,” he argued in his 1982 book, The Rise and Decline of Nations. It also gives rise to what Olson referred to as the problem of “complex understandings” of law and regulation.

“When regulations are established through lobbying or other measures, there is an incentive for ingenious lawyers and others to find ways of getting around the regulations or ways of profiting from them in unexpected ways,” he noted. “The more elaborate the regulation, the greater the need for specialists to deal with these regulations,” and, “[w]hen these specialists become significant enough, there is even the possibility that the specialists with a vested interest in the complex regulations will collude or lobby against simplification or elimination of the regulation.”

In his 2015 book, The Business of America is Lobbying, Lee Drutman confirmed Olson’s insight using hard data to show how lobbying has become “sticky” over time in the sense that “lobbying has its own internal momentum” and has become self-perpetuating. “As companies lobby more,” Drutman argues, “they have a greater capacity to tackle big issues, and they have more lobbyists encouraging corporate managers to think of public policy as a strategic advantage.” This is the essence of Olson’s problem of “complex understandings” in action.

These complex understandings result in mountains of regulatory restrictions. For example, Mercatus Center research documents how the Code of Federal Regulations contained over 1,080,000 total restrictions as of 2016 and that “regulation has grown steadily by about 13,000 restrictions per year.” As this sea of red tape swells, the “landscape that entrepreneurs have to navigate becomes ever more twisted and tortuous,” notes Stony Brook University finance professor Noah Smith. “The eventual outcome is a reduction in both dynamism and the forward march of technology.”

This has troubling implications for the innovative capacity of business as well as the overall competitiveness of the entire economy. These acts of political favoritism “not only misallocate resources in the short term but they also discourage dynamism and growth over the long term,” note Brink Lindsey and Steven Teles in their recent book, The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality.

Indeed, as additional Mercatus Center research shows, “[e]conomic growth in the United States has, on average, been slowed by 0.8 percent per year since 1980 owing to the cumulative effects of regulation.” This means that “the U.S. economy would have been about 25 percent larger than it actually was as of 2012” if regulation had been held to roughly the same aggregate level as it stood at in 1980.

Moreover, another Mercatus study found that, “a 10 percent increase in regulatory restrictions on a particular industry is associated with a reduction in the total number of small firms within that industry by about 0.5 percent.” And a 2016 study by Boston University economist James Bessen also found that, since 2000, growing regulation and political activity accounted for a large share of the rise in valuations and profits among established corporations.

Excessive lobbying and rent-seeking also make efficient government impossible and lead to what Jonathan Rauch has labeled “demosclerosis,” or “government’s progressive loss of the ability to adapt.” “[A]s layer is dropped upon layer,” he notes, “the accumulated mass becomes gradually less rational and less flexible,” he argues.

So how do we address this problem? In a previous essay, I argued a periodic “spring cleaning for the regulatory state” was essential if we hope to address regulatory accumulation. For starters, we need to get the problem of over-licensing and over-permitting under control at the federal, state, and local level. While sometimes justified, licenses are a direct restriction on entry and entrepreneurialism and should only be employed for the riskiest activities and professions. “Permissionless innovation” should be the default.

Many other laws and regulations create direct or indirect barriers to the emergence of new ideas and organizations. “Sunsets” can help get that problem under control. Lawmakers should take the regulatory state off of autopilot and ensure that all laws and regulations are sunset on a regular timetable to keep rules fresh. This would also help get rid of the many regulations that have outlived their usefulness, or did not make sense to begin with.

To be sure, reform will be slow, but we need to start somewhere. As I noted before, some states are finally getting serious about cleaning house and are using sunsetting efforts and other regulatory reforms. If we all really care as much about new business start-ups and innovation as much as we all profess, then it is time to get serious about removing simple obstacles to a happier, healthier, and wealthier country.

Adam Thierer is Research Fellow at the American Institute for Economic Research

Democracy Is Not Correlated With Economic Growth, And May Slow It Down.

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Democracies are much richer than non-democracies and their wealth has made them the envy of the world. The close correlation between democracy, high GDP per capita, and economic, military, and cultural power has made modernity appear to be a package deal. When people look at rich, powerful countries they typically see a democracy and they think, “I want that.”

At the same time, however, the academic literature on the causal effect of democracy on growth has shown at best weak results. Here is the all-star team of Acemoglu, Naidu, Restrepo, and Robinson (ungated) in the JPE summarizing:

With the spectacular economic growth under nondemocracy in China, the eclipse of the Arab Spring, and the recent rise of populist politics in Europe and the United States, the view that democratic institutions are at best irrelevant and at worst a hindrance for economic growth has become increasingly popular in both academia and policy discourse. For example, the prominent New York Times columnist Tom Friedman (2009) argues that “one-party non democracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century. ”Robert Barro (1997, 1) states this view even more boldly: “More political rights do not have an effect on growth.”

Although some recent contributions estimate a positive effect of democracy on growth, the pessimistic view of the economic implications of democracy is still widely shared. From their review of the academic literature until the mid-2000s, Gerring et al. (2005, 323) conclude that “the net effect of democracy on growth performance cross-nationally over the last five decades is negative or null.”

Acemoglu et al. continue, “In this paper, we challenge this view.” Indeed, using a multitude of sophisticated econometric strategies, Acemoglu et al. conclude “Democracy Does Cause Growth.” In their sample of 175 countries from 1960 to 2010, Acemoglu et al. find that democracies have a GDP per-capita about four times higher than nondemocracies ($2074 v. $8149). (This is uncorrected for time or other factors.) But how much of this difference is explained by democracy? Hardly any. Acemoglu et al. write:

Our estimates imply that a country that transitions from nondemocracy to democracy achieves about 20 percent higher GDP per capita in the next 25 years than a country that remains a nondemocracy.

In other words, if the average nondemocracy in their sample had transitioned to a democracy its GDP per capita would have increased from $2074 to $2489 in 25 years (i.e. this is the causal effect of democracy, ignoring other factors changing over time). Twenty percent is better than nothing and better than dictatorship but it’s weak tea. GDP per capita in the United States is about 20% higher than in Sweden, Denmark or Germany and 40% higher than in France but I don’t see a big demand in those countries to adopt US practices. Indeed, quite the opposite! If we want countries to adopt democracy, twenty percent higher GDP in 25 years is not a big carrot.

As someone who favors democracy as a limit on government abuse, I find this worrying. One optimistic response is that the nondemocracies that adopt the policies necessary to make a nation rich, such as support for property rights, open markets and the free exchange of ideas, may not be such bad places. These beasts, however, appear to be rare. But if they are truly rare there must be more to the democracy-GDP per capita correlation than Acemoglu et al. estimate. So what are they missing? I am uncertain.

If democracies don’t substantially increase growth, why are they rich? Acemoglu et al. don’t spend time on this question but the answer appears to be reverse causality (from wealth to democracy) and the fact that today’s rich democracies adopted capitalism early. But don’t expect the wealth to democracy link to be everywhere and always true, it’s culturally and historically bound. And catch-up is eliminating the benefits of the head start.

If much of the allure of democracy has been higher GDP per capita then the allure has been a mistake of confusing correlation for causation. A fortunate mistake but a mistake. The literature on democracy and growth implies that there is no reason to reject an alternative history in which the world’s leading industrial economy was a nondemocracy. Nor why we could not see some very rich nondemocracies in the future–nondemocracies that would be as on par with the United States as say Sweden, Denmark and Germany are today. If that happens, the case for democracy will look very much weaker than it does now as the correlation between democracy and wealth will be broken and the causal effect more evident even to those without sophisticated econometrics.

We Should Be Happy That China Is Stealing Our Intellectual Property. It’s A Positive Sign Of American Vibrancy

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“I’m going to have a heart attack in the next year or two, and that’ll be it. I’m trying to get the music out of my head first.” Those are the words of two-time Rock ‘n Roll Hall of Fame inductee David Crosby (The Byrds, Crosby, Stills & Nash) to the Wall Street Journal’s Alan Paul.  Crosby is seemingly preparing fans for what’s ahead.

Since he has eight stents in his heart, his days are numbered. He wants to get the music recorded now. If the music reaches other musicians, and subsequently impresses them, watch as the music of tomorrow winds up sounding derivative of Crosby’s today. That’s the nature of the business.

For readers who want to know more about how this works, they would be wise to go see director Andrew Slater’s spectacular new documentary, Echo In the Canyon. An oral history of the 1960s Los Angeles music scene, it’s also an unwitting slayer of economic myth.

At present it’s popular among the punditry (left and right) to say that “China’s” so-called theft of intellectual property from U.S. companies exists as an existential threat to the economic prominence of the United States. More realistically it’s a sign of the immense vitality of the U.S. economy, and the certainty that it will remain vital well into the future. To be clear, so-called IP “theft” is an indicator of abundant economic progress.

Music arguably explains this as well as any other art form. Paraphrasing the late Steve Jobs paraphrasing Picasso, great artists steal. The incomparable artist in Jobs was never shy about lifting great ideas. Thank goodness he wasn’t. Thank goodness musicians aren’t either.

Indeed, it was a known quantity that the Beatles’ favorite band was Crosby’s The Byrds. During a 1966 stateside press conference held by the Beatles, Crosby actually sat behind them as they spoke to the media. From a musical perspective, all these bands were incestuous. Translated, they were routinely stealing ideas from one another on the way to music that got better and better. As the late Tom Petty explained it to Echo In the Canyon (“Echo” going forward) star/narrator/artist interviewer Jakob Dylan, “Anytime something good happens [musically], it’s going to show up somewhere else.”

The Beatles were heavily influenced by American rock ‘n roll that the band members picked up while listening to Radio Luxembourg. They adopted the styles and sounds of American musicians only to create their own own; albeit one derivative of what had first been produced in the U.S.

Where it gets more interesting is that in 1965 the Beatles released Rubber Soul. Viewed as the first “concept album” free of the filler that had previously been the album norm, Beach Boys’ musical savant Brian Wilson (described by interviewees in Echo as a modern Mozart) was blown away. He even worried about how his band would compete in the future.

What the Beatles achieved musically ultimately inspired him. The fruit of his inspiration was Pet Sounds, an album thought by many musical types to be the best ever. Notable is that the Beatles were blown away, so much so that they responded with another classic of their own: Sgt. Pepper’s.

American rock n’ roll inspired four Liverpudlians on the way to the Beatles, the Beatles were inspired by The Byrds, plus they had a friendly rivalry with the Beach Boys. Rubber Soul led to Pet Sounds, which led to Sgt. Pepper’s. As Jackson Browne explained it to Dylan, “with music, what happens influences everything else.” Petty went so far as to sheepishly acknowledge what Jobs wasn’t afraid to shout: great artists steal.

The good news is that the relentless borrowing among musicians in 1960s Los Angeles didn’t wreck the music industry as much as it set it on a path of amazingly profitable creativity. In any industry defined by relentless achievement and wealth, there’s going to be a great deal of copying, lifting, stealing – pick your word. Looked at from a sports perspective, the wildly prosperous National Football League is a monument to stolen ideas.

Taking the above further, it’s only in industries bereft of the creative and talented that individuals don’t see the genius of perfecting the ideas of others. Music reached its creative heights amid relentless copycatting. Absent it, the sounds of the 1960s that millions still enjoy today wouldn’t be worth listening to, or creating documentaries about.

Applied to China, it’s said by all too many who should know better that Chinese IP theft threatens “American” economic supremacy. More realistically, the increasingly profit-focused Chinese people are doing what entrepreneurs of all nationalities have long been doing. The bigger problem was when the Chinese lacked the freedom to be creative, and build on the ideas of others.

Importantly, what’s happening in China signals much better ahead for the economies of China and the U.S., along with the rest of the world. Endless imitation among the creative, and perfection of existing ideas by those creative types in the U.S. and China promises a great deal of progress. The winners will be consumers who invariably benefit from the fruits of competition.

The U.S. is the most prosperous nation on earth. That it is explains why entrepreneurs from around the world (including China) want to “steal” or imitate the clever doings of creative minds in the U.S. Pundits view this as a threat, think we should empower the federal government to penalize the theft, but the much bigger worry would be if the creative found nothing worth emulating.

In short, all the hand wringing about intellectual property theft is trite, and the stuff of individuals unaware of how industries have evolved throughout time. Growing government to fight IP theft would trample on our freedom, it would slow the positive evolution of living standards, and worst of all, it would quite simply halt progress. Viewers of Echo In the Canyon will see through art why the latter is true.

John Tamny is editor of RealClearMarkets, and Director of the Center for Economic Freedom at FreedomWorks

It Remains Possible For Cryptocurrencies To Replace State Monopoly Currency, Bringing The Competition Hayek Imagined.

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Cryptocurrencies offer the possibility of breaking governments’ stranglehold over the issuance and control of money. For most bullish observers that means a future where currencies compete and technologies differentiate to meet a variety of needs and transactions.

But a smaller group known as Bitcoin maximalists insists that even freed from state control, a currency monopoly of sorts is inevitable and desirable. Due to its first-mover advantage and radically decentralized architecture, they have no doubt that Bitcoin will be that monopoly.

Bitcoin may turn out to be a better version of blockchain technology than its closest competitors, but maximalists’ steadfast claim that their vision of the future is inevitable is hard for most economists and other informed observers to swallow. At the heart of the Bitcoin-maximalist argument is the importance to currencies of network effects.

One cannot deny that a currency grows in usefulness as it gains more users. But if we move from a world of paper and coins to one of computer code, exchanges and conversions of different currencies might become fast and easy enough to dramatically reduce the importance of network effects.

Past market data cannot predict the future, but it can offer a fresh perspective on an often wildly contentious debate. Comparing Bitcoin and its four closest competitors yields no evidence that the process of Bitcoin monopolization proclaimed inevitable by maximalists has begun. To be sure, Bitcoin has outperformed other cryptocurrencies by measures of price and volatility. But the data suggest a market leader and several smaller but robust competitors.

Best in Its Class

There are thousands of blockchain-based tokens, including many that have already been rendered nearly devoid of value by the inevitable bursting of a bubble in 2018. But the four highest-profile cryptocurrencies behind Bitcoin — Ethereum, Ripple, Litecoin, and Bitcoin Cash — don’t appear headed for extinction soon. At the time of this writing, these four major altcoins had a market capitalization of about $63 billion, a fraction of Bitcoin’s $223 billion but still a major presence in the market.

The chart below tracks the relative price performance of the five cryptocurrencies since the day that the last of the group, Bitcoin Cash, was created by a fork from Bitcoin. It pegs the value of each to be equal on that date in order to show relative returns ever since.

Behind the wild day-to-day fluctuations in all five cryptocurrencies are several important points. First, Bitcoin has significantly outperformed its closest competitors over the past two years, though the margin would have been much lower even a month ago. Second, the overall pattern of ups and downs in the price of each cryptocurrency broadly track each other. Clearly, the market views at least the most prominent cryptocurrencies as a class of assets, with common factors affecting their value.

The Least-Shaky Ground

Extreme volatility renders widespread practical use of a currency nearly impossible, and the chart above does not paint a pretty picture. In previous work, we’ve shown that Bitcoin’s average daily price movements are several times greater than those of fiat currencies such as the pound, euro, and yen. The chart below, which also updates an earlier analysis, shows that Bitcoin in turn is less volatile than its closest contenders.

In the first half of 2019, Litecoin and Bitcoin Cash had average daily price movements of 4 percent (either up or down), about double that of Bitcoin, with Ripple and Ethereum in between. Volatility is another measure by which Bitcoin is the clear winner among the top five cryptocurrencies. But once again, these are assets that track each other in performance. Since 2016, this measure of volatility moved in the same direction each year for all five cryptocurrencies. Again, this looks like a class of assets with better and worse performers, without an inevitable march toward monopolization in sight.

When You Plan, Markets Laugh

Based on recent past performance, one can reasonably conclude that among cryptocurrencies Bitcoin is the most robust asset with the best chance for widespread adoption. But wise observers know that in markets, past performance often doesn’t predict the future.

The idea of inevitability does not mix well with the logic of markets. We need markets and competition precisely because as human beings we have nowhere near the information or capacity necessary to make deterministic statements about the future. The future of money will likely look nothing like any of the possibilities we currently imagine.

Max Gulker is an economist and writer who joined AIER in 2015.

Clever Marketing And Repositioning Has Made Socialism A Popular Product For Kids.

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For decades, democratic socialism was an old man’s ideology. Its adherents were aging hippies, old-time union organizers, and folks who fondly remembered the pre-’60s left. As recently as 2013, the average member of the Democratic Socialists of America (DSA) was 68 years old. Even today, the ideology’s best-known spokesperson, Sen. Bernie Sanders (I–Vt.), is 77.

But Sanders is suddenly an outlier. Today, most DSAers are young: The average member is 33. The ideology’s second-best-known spokesperson, Rep. Alexandria Ocasio-Cortez (D–N.Y.), is just 29. And the DSA’s ranks have grown larger as well as younger. Socialist gatherings buzz with youthful energy, and they are taking place all over the country.

This movement is flexing its political muscles, having helped elect a number of candidates to office—most famously Ocasio-Cortez, who has quickly become a prominent voice in Congress. The DSA has every intention of shifting the “Overton window” of American politics far to the left. And if we’re not careful, it might succeed.

Despite his own advanced age—and even though he’s not a member of the group himself— Sanders is by far the person most responsible for bringing this wave of young people into the DSA. His groundbreaking 2016 campaign for the Democratic presidential nomination helped spread socialist ideas to a generation born after the collapse of the Soviet Union.

“Bernie Sanders is who introduced me to socialism,” says Alex Pellitteri, co-chair of New York City’s chapter of the DSA’s youth arm, the Young Democratic Socialists of America. “I was a Democrat, I was a liberal, but I had never really crossed that line to socialism.”

Essentially, Sanders has done for democratic socialism what Ron Paul did for libertarianism in the late ’00s: make it an exciting, cool, radical alternative to the mainstream parties’ staid orthodoxies. Just as Paul challenged other Republicans’ commitment to waging increasingly unpopular wars, Sanders slammed Democratic frontrunner Hillary Clinton for her Wall Street ties, her hawkish foreign policy, and her general lack of left-wing bona fides. Clinton won the nomination, but Sanders put up a much better fight than expected—a testament to the popular appeal of the ideas he was proposing.

Those ideas included a single-payer health insurance system, free tuition for all college students, a federal minimum wage of $15 an hour, and a more progressive tax system that confiscates wealth from the richest 1 percent and redistributes it to everyone else. Such proposals are particularly popular with younger Americans. According to a 2018 Harvard Institute of Politics poll, 55 percent or more of 18- to 29-year-olds support a $15-an-hour federal job guarantee, free college tuition, and Medicare for All. In a Harris Poll this year, 73 percent of millennial and Gen Z respondents thought the government should provide universal health care, and about half said they’d prefer to live in a socialist country. While Americans overall have a much more favorable view of capitalism than socialism, Americans between 18 and 24 do not: 61 percent have a positive reaction to the word socialism, compared to 58 percent for capitalism.

One reason for this is that people like Sanders have studiously worked to get a softer definition of socialism into circulation. Throughout the 20th century, the word evoked either the working class directly seizing the means of production or the government nationalizing industries, setting prices, and reducing or abolishing the right to own private property. The latter was much more common in practice, and the countries that took that route—the Soviet Union, mainland China, the Eastern European states, etc.—had horrific human rights records. Socialist regimes found it necessary to negate a whole host of individual rights and to arrest or murder dissidents in order to realize their ends.

But the founders of the DSA rejected Soviet-style socialism. They had more in common with the socialist parties of Western Europe, which established generous welfare states and sometimes nationalized industries, but which operated within the boundaries of a democratic political system, not a one-party police state. In 1962, future DSA founder Michael Harrington quarreled with the authors of the Port Huron Statement, a leftist student manifesto, because he felt they hadn’t denounced the Soviet Union in strong enough terms. About a decade later, Harrington’s former faction of the Socialist Party split off to form the Democratic Socialist Organizing Committee, which later merged with another organization to become the DSA.

When today’s most prominent democratic socialists are asked to explain their ideology, they tend to skimp on the substantial structural questions and lean on paeans to dignity, generosity, and equality. Sanders has defined democratic socialism as “the understanding that all of our people live in security and dignity” and “a government and an economy and a society which works for all.” Ocasio-Cortez defines it as “democratic participation in our economic dignity.”

It shouldn’t be surprising that democratic socialism, reduced to a set of pleasant-sounding buzzwords and some proposals to give more people free stuff, is having a moment.

And what a moment it is. “When Harrington died in 1989,” The Nation observes, “his organization hadn’t grown much beyond the 6,000 aging members it had had at its founding.” After a quarter-century, the members were even more aged and little else had changed. The DSA’s official magazine, Democratic Left, had 6,700 subscribers in 2016.

A year later, in the wake of Sanders’ first presidential campaign, the magazine had more than 28,000 paid subscribers. By 2018, it had 46,000. The organization now claims about 50,000 members. Many of them are concentrated in New York City, but DSA chapters can be found in 180 towns across the country.

The success of democratic socialism is much broader than just one organization. The socialist magazine Jacobin, founded in 2010 by Bhaskar Sunkara, increased its circulation from 10,000 in 2015 to 40,000 in 2018. The socialist podcast Chapo Trap House, which debuted in March 2016, is now the second most popular account on the crowdfunding platform Patreon, and its hosts rake in an average of $123,500 in donations per month.

Democratic socialists have won electoral victories too. The DSA is not a political party and does not run its own candidates, instead endorsing Democrats and independents who it feels are sufficiently committed to socialism. (Sex and the City actress Cynthia Nixon, for instance, received the DSA’s endorsement in her unsuccessful 2018 primary run against New York Gov. Andrew Cuomo.) In the 2016 and 2017 elections, DSA-backed candidates won a smattering of races around the country, including a seat in the Virginia House of Delegates. And in 2018, Ocasio-Cortez, a 20-something organizer and complete political unknown, won a stunning Democratic primary victory over incumbent Rep. Joe Crowley. She became an overnight sensation, and in the general election she was one of two DSA members to capture House seats. Rashida Tlaib (D–Mich.) was the other.

Ocasio-Cortez’s savvy use of social media has generated tons of press coverage. She now has more Twitter followers than House Speaker Nancy Pelosi (D–Calif.). Conservative websites and cable channels love to pillory her, but that has only helped her become one of the most visible members of Congress.

Sanders is the only major 2020 presidential candidate to self-identify as a democratic socialist. But most of the Democrats have signed on to DSA-friendly policies. Sens. Kamala Harris (D–Calif.), Elizabeth Warren (D–Mass.), and Kirsten Gillibrand (D–N.Y.) have joined Sanders in backing Medicare for All. The Green New Deal, Ocasio-Cortez’s pie-in-the-sky plan to tackle climate change while creating public works projects, has been endorsed by a host of candidates: Sanders, Warren, Harris, Gillibrand, Sens. Cory Booker (D–N.J.) and Amy Klobuchar (D–Minn.), and former Housing and Urban Development Secretary Julián Castro.

If the centrist standard-bearer, Vice President Joe Biden, wins the Democratic nomination, it will be a setback for the movement. But democratic socialists are not pinning all their hopes on the presidency, even as they work to install Sanders in the White House. They are patiently growing their ranks, expanding their influence, and increasing their cultural cachet.

So far, the strategy is working. If you assumed that socialism’s appalling 20th century failures would relegate it permanently to the ash heap of history, you were wrong.

Robby Soave is an associate editor at Reason.

The Anti-Federalists Turned Out To be Right – But No-One Reads Them Any More.

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What does the Constitution protect? “If you talk to somebody on the street,” he might say “it protects my right to speech, or it protects my right to go to church, or it protects my right to petition my government,” Judge Andrew Oldham says. “Or in Texas, it protects my right to keep and bear arms.” In other words, when you mention the Constitution, most people think of the Bill of Rights.

If you ask who created the Constitution, most people would list well-known Founders like James Madison, Alexander Hamilton and John Adams. During the debate over drafting and ratification, these men were known as Federalists. They designed the constitutional structure, yet they resisted including a Bill of Rights.

In 1789, when Rep. Madison introduced the first 10 amendments in the First Congress, he was making a concession to the Anti-Federalists. Those writers and politicians—including Robert Yates, Mercy Otis Warren and Richard Henry Lee—opposed the original Constitution. Partly because they lost, their arguments are poorly understood today. Their papers are out of print, most law students never read them, and no one sings about them on Broadway.

Judge Oldham, 40, seeks to raise their profile. A former clerk for Justice Samuel Alito and general counsel for the governor of Texas, he became one of the youngest judges on the federal bench when the Senate confirmed him to the Fifth U.S. Circuit Court of Appeals in July 2018. He quickly earned a reputation as one of the judiciary’s most intellectually ambitious members, and he’s making a public case that the Anti-Federalists can enrich the legal community’s understanding of the Constitution’s original meaning. They matter, he tells me, not merely because they secured the Bill of Rights but “because of all of the things they said” during the ratification debates.

“We understand what the document itself meant in 1787,” Judge Oldham says, through the “dialectic” between the Federalists and the Anti-Federalists. Many arguments in the Federalist Papers—in which Hamilton, Madison and John Jay made their case for the Constitution—were rebuttals to Anti-Federalists who published first after the Constitutional Convention. “They’re talking to each other,” Judge Oldham says. Reading them against each other “shows you what people thought the document was doing.” Yet few of today’s jurists—Justice Clarence Thomas is a notable exception—frequently cite the Anti-Federalist Papers.

The Anti-Federalists’ arguments were often “scattershot,” Judge Oldham says, partly because they “weren’t collaborating in the same way” as their Federalist rivals. But they all worried that basic liberties were at risk “if we have a new federal government that has new power, and no Bill of Rights.” The Anti-Federalists would ask: “What if Congress does X, and it’s going to abridge my rights?” The Federalists would reply: “Congress can’t do X because Article I, Section 8”—Congress’s enumerated powers—“doesn’t have that power in it.”

Yet the Anti-Federalists’ reading of history was that “our rights are secure when we write them down on paper,” Judge Oldham says. Their models were the 1628 Petition of Right and the 1689 English Bill of Rights. States ended up ratifying the Federalists’ Constitution “on the premise that it would have these amendments to it.”

Judge Oldham is impressed by the prescience of Anti-Federalist concerns “about the way executive power would evolve over time.” In a forthcoming paper for the New York University Journal of Law & Liberty, he quotes the Anti-Federalist Cato (thought to be future Vice President George Clinton), who wrote that the presidency would “create a numerous train of dependents” in the executive branch, so that the president would end up “surrounded by expectants and courtiers”—an aristocracy, which might be compared to today’s Washington elite.

No one in the 18th century could predict the form the federal bureaucracy would take in the 20th century. Yet the Anti-Federalists’ concerns are telling. They worried about “the capaciousness of executive power,” Judge Oldham says, comparing it to “the abuses of the past that they’d seen in England.” The Federalists countered that the separation of powers would prevent any part of the new federal government from becoming too powerful. The legislative, executive and judicial branches were coequal and would check and balance one another.

Yet in recent decades, as Christopher DeMuth has written, “Congress has delegated its lawmaking powers: voting by lopsided margins for goals such as clean air and equality of the sexes, while leaving the hard choices—the real legislating—to specialized executive-branch agencies.” These administrative agencies not only make rules but enforce and adjudicate them—carrying out the functions of all three governmental branches with nary a check.

Polarization has accelerated the growth of the administrative state. With the elected branches divided, more power has fallen to the bureaucracy. The Anti-Federalists, in their way, foresaw this. They worried that a large country would be too divided to govern effectively. They wanted a “small republic”—even 13 states “was enormous to them,” Judge Oldham says. “If the people in Georgia and the people in New Hampshire have very different conceptions of . . . what government is, what liberty looks like, or what people are supposed to be doing with respect to their government,” the Anti-Federalists thought, then “their public officials are going to be pulled in different directions,” and “everybody is going to be disaffected and frustrated.”

Madison and the Federalists, by contrast, argued that “the bigger the country gets, the more Georgias and New Hampshires we have,” the better—that polarization can “create a stasis that preserves liberty,” Judge Oldham says. Madison, he adds, would have been shocked if you told him the Constitution would endure for 40 years, much less 240. Yet as the Anti-Federalists predicted, polarization has put American governance under strain.

The Federalists and Anti-Federalists, Judge Oldham says, were “worrying about the same sorts of stuff that we worry about today”—to wit: “Is my government being responsive to the people? Do we want it more responsive, or less responsive? If we want it more responsive, are there going to be consequences to having it more responsive?”

The Anti-Federalists were concerned government wouldn’t be responsive enough. “There’s a strand that runs through Anti-Federalist thought that is kind of anti-elite, or populist,” Judge Oldham says. They envisioned a constituent talking to his members of Congress and expecting them to “do what I ask them to do—basically speaking for me.” The Federalists, by contrast, feared that a hyperresponsive federal government would descend into mob rule. They were more comfortable delegating power to elected officials to “use their best judgment.”

Which brings us back to the administrative state. In Mr. DeMuth’s view, the rise of populism in the U.S.—and elsewhere in the West—is in part a reaction to the rise of “declarative” government by unelected bureaucrats and judges. Court cases about administrative law don’t make as many headlines as those about hot-button issues like abortion or racial preferences, but they get to the core Founding-era question of who makes the law. “The legal argument is, who decides?” Judge Oldham says. “There’s an agency; there’s Congress; there’s the courts. And the whole discussion is about, where do you put the locus of the decision-making?”

Many conservatives hope that the federal courts could play a role in moving decision-making back to Congress, reinvigorating representative government. Defenders of the administrative state counter that experts need wide deference to manage a complex society and economy. Are its opponents like the Anti-Federalists—clinging to an outmoded form of government in the face of massive change that makes new institutions inevitable?

While they abhorred unaccountable executive power, taking the Anti-Federalists seriously could also argue against muscular judicial interference in the administrative state. The Anti-Federalists worried about an all-powerful federal judiciary impinging on the elected branches and the states. In Langley v. Prince, a decision last month upholding a murder conviction, Judge Oldham himself cited the Anti-Federalists to argue for judicial restraint: “The principal Founding-era concern regarding the scope of Article III was that it could empower federal judges to run roughshod over state courts,” he wrote. “Few things bring this concern into sharper relief than using logic games in federal habeas to set free from state custody a thrice-convicted child-murderer.” He included a citation to an October 1787 essay by Brutus (thought to be Robert Yates), prompting a colleague to quip in dissent: “I had thought the Anti-Federalists lost.”

Judge Oldham declines to comment on his Langley opinion, and he plays his cards close to his chest when it comes to how much the judiciary should get involved in reviewing the decisions of federal administrative agencies. But he notes that the horizons of administrative law have changed dramatically over his young career. When he was a law clerk, it was “an article of faith” that administrative agencies would enjoy vast deference in legal challenges: “We have Chevron , we have Skidmore, we have Auer, we have Seminole Rock”—all Supreme Court decisions requiring judges to defer to executive-branch agencies. The “intellectual puzzle” was “how do we apply them, or which one applies.”

Today, “the way the scholars are writing about it, the cases the courts are granting—they’re reconsidering everything.” One of the scholars he has in mind is Columbia Law School’s Philip Hamburger, who likens the power of administrative agencies to the “royal prerogatives” of 17th-century English monarchs, which provoked the American Revolution.

In the term just concluded the Supreme Court decided two important cases on administrative law. In one, Gundy v. U.S., the justices upheld the delegation of lawmaking power to the administrative state 5-3—but Justice Brett Kavanaugh didn’t participate, and Justice Alito asserted in a concurring opinion that he was open to overturning the precedent in a future case. In the other, Kisor v. Wilkie, a majority composed of the four liberal justices and Chief Justice John Roberts said courts still must defer to administrative agency’s interpretations of their own rules—the Auer precedent Judge Oldham mentioned—but issued new guidance for lower courts that limits agency power.

Judge Oldham suggests the decisions raise more questions than they answer. If these are “either exciting or perilous times for administrative law,” Gundy and Kisor make them “even more exciting, or more perilous.”

Liberals and conservatives are deeply polarized on the administrative state. So were the Federalists and Anti-Federalists in the late 18th century, yet they had a common tradition. Judge Oldham notes that “they’re all naming themselves after leaders of the Roman Republic”—Publius, Brutus, Cincinnatus—because they all supported republicanism and believed “the only legitimacy of the government” was that it acted on behalf of the people.

For all their disagreements, today’s left and right also believe this. But intense polarization, as the Anti-Federalists recognized, can create a fertile ground for tyranny. That makes fidelity to the Constitution all the more important, and reading the Anti-Federalists and the Federalists together can aid that project. Judge Oldham cites Sir Thomas More in Robert Bolt’s 1960 play, “A Man for All Seasons,” on the importance of always being faithful to the law, even when it doesn’t suit one’s immediate purposes: “If we cut down every law in England to get after the devil, then when the wind blows, and the devil turns round on you, where do you have to hide, with all of the laws of England being laid flat?”

In building the administrative state, progressives have aimed at vanquishing many devils—and in some cases succeeded. Yet they might have stretched the limits of the nation’s fundamental law in the process. The election of Donald Trump ought to bring home the risk that the devil may one day turn round on them.

This article appeared at wsj.com on July 6, 2019. Mr. Willick is an assistant editorial features editor at the Wall Street Journal.

How the Gig Economy Can Save a Generation Drowning in Student Debt⁠—If We Let It

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When Guenevere Garrido got accepted into UCLA, she knew it was an opportunity she couldn’t turn down, even if she wasn’t sure how she was going to pay her tuition. Like 44 million other Americans, she made the decision to take out student loans and borrowed $40,000 to pay for her college education.

Majoring in child development, Garrido’s first job after graduation was working in a preschool where she made $13 an hour. While she eventually made a career switch into a higher paying job, no matter how much her paycheck increased, she was still being strangled by debt.

Flexible Side Jobs Empower

Combined with accrued interest and other outstanding debt, Garrido soon found herself $68,000 in the hole. Realizing she needed supplementary income to dig herself out, Garrido decided to start driving for Uber and the rideshare company SideCar. Since both companies let drivers set their own hours, Garrido was able to drive nights and on the weekends without it interfering with her full-time job. In July 2016, just three years after she began participating in the gig economy, Garrido made her very last student loan payment. In 2018, she became 100 percent debt free.

Garrido credits that second income with changing her life. The additional money allowed her to pay down her loan and taught her life skills she didn’t even know she needed. She described no longer feeling helpless, but empowered.

“There were times when I made a payment of $3,000 at once. It was always about preparation,” she told NBC News.

It definitely gave me the discipline and the focus and the hustle to do it, because I was more focused on my money and making that extra income. It made me more conscious. That first year gave me the muscle to really be disciplined to pay off the rest of my loans.

As of now, the average student loan debt is pushing $40,000. To make matters worse, more than one out of every ten people are delinquent on their monthly payments. Fortunately, the gig economy has offered a lifeline to a generation of college graduates crippled by student loan debt and eager to break free of their financial chains.

A Growing Gig Economy

According to the Bureau of Labor Statistics, in 2017, 55 million people, or more than 35 percent of the US workforce, were participants in the gig economy. By 2020, that number is expected to jump to 43 percent. Yet, instead of praising the gig economy for creating so many opportunities for Americans, many insist that these workers are being treated unfairly and need to be made full-status employees, completely disregarding why this sector is so appealing to so many.

California legislators are currently considering a bill which, if signed into law, will majorly disrupt the gig economy. Assembly Bill 5 (AB 5), would effectively change the employment status of hundreds of thousands of freelance workers within the state from independent contractors to full-status employees, placing new financial burdens on employers and threatening the livelihood of the entire gig economy and its participants.

If they are not careful, the entire gig economy may soon be regulated out of existence.

The bill passed the State Assembly—the state’s lower house—at the end of May by a vote of 53-11 and will now need to be approved by the California State Senate before reaching Governor Gavin Newsom’s desk. AB 5 comes in response to labor rights activists pushing for rideshare companies like Uber, Lyft—as well as other gig economy participants like DoorDash and TaskRabbit—to give its contractors the same employment rights as are granted to regular employees.

“Every worker in California deserves to earn a living wage, benefits, and to be able to join together with their co-workers so they can set standards for their jobs,” Doug Bloch, political director at the local chapter of the Teamsters union in California, told Politico.

While these labor activists might be filled with good intentions, they are failing to understand, or at least recognize, why so many people—consumers and contractors alike—were drawn to the sharing economy in the first place. And if they are not careful, the entire gig economy may soon be regulated out of existence.

Don’t Make the Gig Economy Something That It Isn’t

The steep rise of the gig economy over the last decade has ushered in a whole new era of job opportunities for Americans. For those looking to supplement their income, moonlighting as an Uber driver is a great way to earn extra money quickly. For artists or writers looking to build their careers, many might work full-time jobs during the day and then take on “gigs” working hourly or at a per-piece rate. And with the number of Digital Nomads increasing, taking “gigs” as opposed to traditional employment has allowed many young people to travel and live life on the go, rather than staying strapped to one place.

In addition to a quick onboarding process that allows participants to begin earning money within a week of signing up, the gig economy allows the flexibility of having a part-time job and access to additional income whenever you feel like it with few strings attached.

The gig economy’s contractor model has helped keep freelancers and transitioning workers on their feet during times of personal financial crises.

And in exchange for this flexibility, those who participate as contractors forgo the benefits typically given to full-status payroll employees, like health insurance or vacation pay.

This is how the gig economy works, and it is what has made it so attractive to so many (see graph above). In choosing to participate in the gig economy, contractors understand what it is they are signing up for and what they are sacrificing. By not having to request time off or make sure you haven’t used too many of your vacation days, you have made the choice that you value your freedom over the security of a job with benefits and health care. This is about subjective value and personal choice, not oppression or exploitation.

And, while California lawmakers and labor activists might not want to admit it, in many cases the gig economy’s contractor model has been precisely what has helped keep freelancers and transitioning workers on their feet during times of personal financial crises.

A Path to a Decent Living

A few years ago, Moises Abrego abruptly lost his job. He was fortunate enough to quickly find a position selling insurance, but since that profession relied heavily on commission, he was still struggling to make ends meet as he built up a client base. Abrego needed supplemental income quickly if he was going to be able to make his mortgage payment and prevent a foreclosure on his home—a concern that kept him awake at night.

After a friend told him about Uber, Abrego decided to give it a try. Since Uber is contractor-based, he didn’t have to go through a lengthy interview process or wait weeks for an answer from a prospective employer. Instead, he was able to start making money almost immediately.

A New Jersey resident at the time, he found that he could make about $800 a week staying local or about $2,000 if he was willing to drive into the city. With this additional income, Abrego was able to generate enough money to keep his house and pay his bills.

Thornberg writes that “the idea these people are being exploited and need help just doesn’t fly.”

“There are many others out there who are struggling. Do not hinder our opportunity to get those jobs,” Abrego said. “Uber is providing a good means for people to make a decent living and support their families.”

By turning contractors like Abrego into full-status employees, the California legislature is threatening to hinder the growth of the burgeoning sector and potentially spell the end of the gig economy. As economist Chris Thornberg points out, these legislators fundamentally misunderstand the appeal of gig work.

“California’s economy has the lowest unemployment rate it has ever had. People have options, and they’re still choosing to drive Uber or Lyft,” Thornberg writes. “The idea these people are being exploited and need help just doesn’t fly.”

What Makes Someone an Employee?

At the heart of this new proposed legislation rests the pressing question of what makes someone a full-status employee versus a contractor. In 2018, the California Supreme Court handed down its ruling in the case of Dynamex Operations West, Inc. v. Superior Court of Los Angeles. The ruling, now known as the “Dynamex decision,” dealt with the employment status issue of contracted delivery drivers and instituted the “ABC test” as a means of determining whether or not a person is an employee or a contractor. The ABC test sets specify:

(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

It is estimated that the California state government loses about $7 billion annually from the alleged misclassification of employees.

The new bill gives legal teeth to the Dynamex decision by setting forth legislation that would mandate that companies use the ABC test to determine the tax and employment status of each worker. While passed off as a giant leap forward for workers rights, this bill is really a means for the government to get its hands on more money.

It is estimated that the California state government loses about $7 billion annually from the alleged misclassification of employees. By forcing employers to categorize more of their workers as full-status employees, the state hopes to increase its tax revenue. Yet, even with revenue serving as an obvious incentive for government officials, this hasn’t stopped labor activists from jumping on board and making this an issue of employee rights—something it most certainly is not. And if the bill is approved, which is likely given California’s political climate, the economic repercussions will be felt in sectors beyond just the gig economy alone.

The Economic Consequences: Not Just the Gig Economy

In addition to the contractors suffering from the passage of AB 5, companies themselves will suffer tremendous losses. If gig economy “employers” are forced to pay for their contractors benefits and higher pay, many will be unable to financially stay afloat. And without Uber in business, you cannot have Uber drivers. And without these jobs, which in 2015 accounted for 160,000 for Uber alone, many would find themselves suddenly without a previously relied upon income.

But Uber and others in the gig economy are hardly alone in fearing what these employment status changes may do to its financial livelihood. Independent contractors can be found in almost every industry, and in California, a state dominated by the entertainment sector, Hollywood is expected to suffer huge losses.

From actors to makeup artists and everything in between, Hollywood is comprised of many independent contractors and thrives as a result. If instead of this gig model, the entertainment industry is forced to take on additional costs in order to treat each contractor as an employee, the whole sector could be threatened.

Thornberg predicts that if AB 5 is signed into law, many film and television productions would be forced to either leave the state or find a way to cut costs elsewhere. “The reaction is typically lower base pay,” he says.If California wants to protect workers and foster a thriving economy, it should allow people to make their employment decisions independent of state action. “For the industry to shake out, ultimately people are going to get more in the way of benefits, more in the way of comfort, and less in the way of take-home pay.”

And Hollywood is not the only ally of the gig economy when it comes to the new legislation. Already, several other industries have come forward asking for exemptions from the bill, including: doctors, dentists, lawyers, architects, insurance agents, accountants, engineers, financial advisers, real estate agents, and hairstylists who rent booths at salons.

Unions can yell about worker rights until they are blue in the face, but at the end of the day, the people who should be involved in determining a “worker’s” status is the company and the individual performing the work. If a contractor wants to be a full-status employee, he or she can decline contract work and find a job where this is possible.

Legislators should also not be too hasty in altering the employment status of gig economy workers unless they want to bear the responsibility of rendering the sector completely nonexistent in the process. If California wants to protect the rights of its contractors and help foster a thriving economy, it should allow people like Moises Abrego and Guenevere Garrido to make their employment decisions independent of state action.

This article first appeared at fee.org

How To Expose The Intentional Distortion And Mendacity In Leftist Politicians’ Income Inequality Claims.

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Barack Obama proclaimed income inequality to be “the defining challenge of our time” in a 2013 speech. Inequality continues to be a hot political topic and serves as the pretext for recent proposals floated by various politicos like a 70 percent marginal tax rate, student loan forgiveness and universal day care.

Indeed, couched in language like “not everyone is sharing in this prosperity” (Sen. Amy Klobuchar) and “the economy…is working for a thinner and thinner slice at the top” (Sen. Elizabeth Warren), the subject received its fair share of attention at the recent Democratic debates.

Such high political stakes make it even more concerning that the majority of income inequality research is so misleading.

Snapshot in Time

Most income inequality data represent merely a snapshot in time. Of course, people move about income levels through the duration of their lifetime. Today’s “low-income” individual may be a recent college grad from an upper middle-class family merely working an entry-level job on her way to a lucrative career. Or consider a retired couple with pension plans, savings, investments, a paid-off house and other assets. They may have little “income,” but they have enough wealth to afford a comfortable lifestyle.

Conversely, today’s “high-income” earner may be a small business owner who struggled for decades and finally had a successful year. Indeed, according to Tufts University economist Gilbert Metcalf, “higher-annual-income groups are likely to contain some people at the peak of their age-earnings profile for whom peak earnings are a poor measure of annual ability to consume.” That is, someone may put together a few years of high earnings that don’t reflect his or her long-term well-being.

In short, the people captured in the “low-income” category at a given moment in time may not necessarily be poor, and vice versa. Snap-shot income measures in no way tell us anything about the financial well-being over the lifetimes of the people being studied.

For instance, University of Michigan-Flint economist Mark Perry examined U.S. census data to confirm that “more than 3 out of 4 households in the top fifth of (income-earning) households are in their prime earning years between 35-64 years old.” He continued, “The lowest quintile households are more than 1.5 times as likely to be younger (under 35) as the highest quintile households, and more than three times as likely to be old (65 and over).”

In other words, younger, less experienced workers earn less than their older, more experienced counterparts. Should this type of “inequality” be considered “the defining challenge of our time”?

In sum, simple “income” statistics often provide a misleading snapshot of citizens’ financial well-being, and thus provide an extremely poor indicator upon which to base policy.

Rich Getting Richer and Poor Getting Poorer?

Rarely left out of income inequality “analysis” by progressives is the alleged observation that the rich are getting richer while the poor get poorer.

This proclamation, however, also suffers in large part due to a static view of the data.

As Russ Roberts, economist at Stanford University’s Hoover Institution wrote in this 2018 article, “the biggest problem with the pessimistic studies is that they rarely follow the same people to see how they do over time. Instead, they rely on a snapshot at two points in time.”

A far better measure is to measure the same people over time, rather than aggregate figures.

“When you follow the same people over time, you get a very different story from the standard one,” Roberts discovered.

Indeed, “When you follow the same people over time, the largest gains over time often go to the poorest workers; the richest workers often make no progress,” he wrote.

Roberts cites a study published by the Pew Charitable Trusts that examined the Panel Study of Income Dynamics which tracked data on the same people from the late 1960’s up to 2002 that showed “children raised in the poorest families made the largest gains as adults relative to children born into richer families.”

Moreover, recent research by the Office of Tax Analysis in the Treasury Department “used tax returns to see how rich and poor did between 1987 and 2007. They find the same encouraging pattern: poorer people had the largest percentage gains in income over time (compared to richer people).”

Specifically, the study examined people who were between the ages of 35-40 in 1987 and then followed up with them 20 years later when they were 55-60.

The results shattered the myth of the common narrative. “The median income of the people in the top 20% in 1987 ended up 5% lower twenty years later. The people in the middle 20% ended up with median income that was 27% higher,” Roberts reported.

“And if you started in the bottom 20%, your income doubled. If you were in the top 1% in 1987, 20 years later, median income was 29% lower.”

By following the same people over time, researchers discovered that low-income earners experienced far greater income gains compared to those starting out richer. Admittedly, many of those starting out in lower incomes may not have caught up with those starting at the top after two decades, however, this data clearly dispels the notion that the rich have gotten richer while the poor got poorer.

Differences in Household Size

Another flaw with income inequality research is the heavy reliance on “household income” as a measure.

Naturally, households with two working adults will tend to earn more than those with one or no income earners. For instance,  Perry analyzed 2016 U.S. Census Bureau data and found that 63 percent of households in the lowest income quintile nationally had no income earners, and had an average of just 0.43 earners per household. Conversely, households in the top quintile featured an average of 2.04 earners.

The number of earners per household also has a substantial impact on median household income. Failing to disclose average number of earners when discussing household income data, as is so often the case, is irresponsible.

Furthermore, as divorce rates rise and people are increasingly living on their own, household income measures can drop even if every individual is doing better. For instance, take a married couple each earning $50,000, for a household income of $100,000. Say they divorce and start living separately, and five years later are each earning $60,000. Both are better off, but the aggregate household income measure would see a drop in average, as two $60,000 income households drive down the average compared to the former single household with $100,000 in income.

Estimates of household income are clearly misleading and can lead to some erroneous conclusions.

Racial Inequality

Having established that using household income data, without any analysis, is intellectually lazy and misleading leads us to the analysis of racial income inequality so en vogue today.

Simply pointing out such income discrepancies is proof positive of discrimination, according to progressives; an “institutional” discrimination that must be addressed by massive government programs to correct.

But what does the data really tell us?

Federal Reserve data shows that nationally, 29 percent of white households have two earners, compared to 27 percent of Hispanic and 18 percent of black households. (1)

Also, according to U.S. Census Bureau demographic data, the median age of whites in the nation is 40.1, compared to a median age for blacks of 33.8.(2)

And nationally, the median income for men with a bachelor’s degree or more is $46,518 and women $30,406, compared to $24,485 and $13,801, respectively, for high school grads.

According to U.S. Census Bureau data, 24.3 percent of whites age 25 and over nationally have at least a bachelor’s degree, compared to 19 percent of blacks and 13 percent of Hispanics.(3)

Moreover, 18 percent of white households feature both parents with a bachelor’s degree or higher, compared to 5 percent of black and 6 percent of Hispanic households nationally.

Differences in the number of household earners, average age and educational attainment between races explains much of the differences in income.

Finally, when evaluating claims that income disparity between races proves systemic discrimination we can compare the levels of economic success among people of color. After all, racists just see people of color, and do not differentiate based upon different backgrounds.

As Thomas Sowell wrote in his book “Civil Rights: Rhetoric and Reality,” “Blacks may ‘all look alike’ to racists, but there are profound internal cultural differences among blacks.”

As a result, comparing results for people of the same color but different culture is a valuable tool to provide an indication of other factors besides discrimination at work.

As Sowell detailed in his book, Jamaicans and Nigerians, for instance, earn noticeably more income than native blacks.

Conclusion

Income inequality is a pretext for massive expansion of state power and social control. Trillions of taxpayer dollars and hundreds of federal means-tested programs are directed to stem the supposed crisis of income inequality. But the research purportedly bolstering the narrative that income inequality is a threat to civil society is woefully misleading.

Income inequality stirs up emotions in many people, but sadly the first casualty to the passions is the truth. It is vital to factually evaluate inequality data, failure to do so will continue to enable the growth of the federal leviathan.

[1]  FEDS Notes, Federal Reserve System. September 27, 2017. Available online at: https://www.federalreserve.gov/econres/notes/feds-notes/recent-trends-in-wealth-holding-by-race-and-ethnicity-evidence-from-the-survey-of-consumer-finances-20170927.htm

[2] U.S. Census Bureau, American Fact Finder. Annual Estimates of the Resident Population by Sex, Age, Race and Hispanic Origin for the United States and States: July 1, 2018. Available online at: https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk#

[3] U.S. CENSUS BUREAU, CURRENT POPULATION SURVEY. TABLE 1. EDUCATIONAL ATTAINMENT OF THE POPULATION 18 YEARS AND OVER, BY AGE, SEX, RACE, AND HISPANIC ORIGIN: 2018. AVAILABLE ONLINE AT: HTTPS://WWW.CENSUS.GOV/DATA/TABLES/2018/DEMO/EDUCATION-ATTAINMENT/CPS-DETAILED-TABLES.HTML

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Social Justice Claims Based On Envy Bring On A Siege Mentality.

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If you believe that fairness and what philosophers call “desert,” or deserving the benefits and harms we receive, are the most important features of a society, you’ll spend a lot of time being upset.

My favorite statements of this problem are by F.A. Hayek and J.R.R. Tolkien.

From Hayek (The Mirage of Social Justice, pp. 68-69):

Are we not all constantly disquieted by watching how unjustly life treats different people and by seeing the deserving suffer and the unworthy prosper? And do we not all have a sense of fitness, and watch it with satisfaction, when we recognize a reward to be appropriate to effort or sacrifice? The first insight which should shake this certainty is that we experience the same feelings also with respect to differences in human fates for which clearly no human agency is responsible and which it would therefore clearly be absurd to call injustice. Yet we do cry out against the injustice when a succession of calamities befalls one family while another steadily prospers, when a meritorious effort is frustrated by some unforeseeable accident, and particularly if of many people whose endeavours seem equally great, some succeed brilliantly while others utterly fail….

Our complaints about the outcome of the market as unjust do not really assert that somebody has been unjust; and there is no answer to the question of who has been unjust. Society has simply become the new deity to which we complain and clamour for redress if it does not fulfill the expectations it has created. There is no individual and no cooperating group of people against which the sufferer would have a just complaint, and there are no conceivable rules of just individual conduct which would at the same time secure a functioning order and prevent such disappointments.

From Tolkien (The Fellowship of the Ring):

Frodo: What a pity that Bilbo did not stab [Gollum] when he had a chance!

Gandalf: Pity? It was Pity that stayed his hand. Pity, and Mercy: not to strike without need. And he has been well rewarded, Frodo. Be sure that he took so little hurt from the evil, and escaped in the end, because he began his ownership of the Ring so. With Pity.

Frodo: I am sorry. But I am frightened; and I do not feel any pity for Gollum.

Gandalf: You have not seen him.

Frodo: No, and I don’t want to. I can’t understand you. Do you mean to say that you, and the Elves, have let him live on after all those horrible deeds? Now at any rate he is as bad as an Orc, and just an enemy. He deserves death.

Gandalf: Deserves it! I daresay he does. Many that live deserve death. And some that die deserve life. Can you give it to them? Then do not be too eager to deal out death in judgement. For even the very wise cannot see all ends.

Late in the summer of 2018, in anticipation of hurricane season — the time when both the weather and the arguments about “price gouging” are hottest — I wrote a piece on problems with regulating price. In it, I made an analogy to a military siege. A siege, after all, is a tactic to take a fortified city by starving the population into surrender. A number of readers challenged me on this analogy. Here’s what I said:

Anti-price-gouging (APG) laws block [market-based] resupply, as effectively as an enemy army might lay siege to a city. A “siege,” after all, is when a military unit surrounds a city and prevents needed supplies from getting through. APG laws actually require state and local officials to lay siege to cities. That would be an act of war if another army did it, but when we do it to ourselves it’s just “public policy.”

One reader, in an email eerily similar to Frodo’s sentiment saying those who act badly deserve punishment, had this to say:

Munger, you are just a shill for thieves and pirates. What you are missing is that these price-gougers don’t deserve those high prices. There is an undeserved benefit to acting badly and raising price. That’s why people are willing to [give up access to goods they need], because they care about morality. (emphasis original)

What my reader meant was that people are willing to accept the consequences of APGs  — empty store shelves — because the alternative is to give an undeserved benefit — profit — to people who act badly and raise prices in an emergency. I think that might be empirically right, but that doesn’t justify besieging U.S. cities with our own armies.

If you don’t want to reward “price gougers,” just don’t buy their stuff. But why would you feel justified in using force — in this case, literal force, with National Guard units surrounding cities such as New Orleans and blocking supplies from entering on the grounds that “you might sell those!”? There are accounts from across the ideological spectrum, from the Left to the Right, that claim there was a systematic effort to prevent supplies from being brought in after Katrina.

The best explanations I have heard all involve the attempt to control a “black market” in supplies and a desire — bolstered by the state government — to enforce the APGs. One of the clearest and most direct accounts, by Walter Block, raises the question of why there was a “black market” in the first place. After all, if some people need things, and other people are trying to bring those things in and deliver them, why is the government interfering?

I really think the answer is the siege mentality of prioritizing the restriction of “undeserved” profits. The focus on social justice, even ahead of helping the desperate, seems to be something very deep in the human psyche.

But our reason should be able to overcome this passionate delusion. The notion of “desert,” or deserving all of the benefits we enjoy or the harms we suffer, destroys opportunities for cooperation that would make literally everyone better off. The logic of the market system requires that we understand that desert is beyond our control.

The idea that we can achieve such outcomes in complex market systems is simply mistaken; the idea that we should pursue a desert-based patterned system of social justice borders on insane. It’s an empty and destructive distraction; as F.A. Hayek put it in The Fatal Conceit (p. 118): “The whole idea behind distributive justice — that each individual ought to receive what he morally deserves — is meaningless in the extended order of human cooperation.”

It would be better to let us help each other, even if sometimes someone manages to benefit.

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