Macroeconomics

The Hockey Stick of Human Prosperity

In this series, Professor Don Boudreaux explores the question economists have been asking since the era of Adam Smith -- what creates wealth? On a timeline of human history, the recent rise in standards of living resembles a hockey stick -- flatlining for all of human history and then skyrocketing in just the last few centuries.

It's a Wonderful Loaf

A whimsical animated short film based on Russ Roberts's poem about emergent order and the supply of bread. For more information and resources related to the ideas in this film, visit http://www.wonderfulloaf.org. It's a Wonderful Loaf is an ode to the hidden harmony that is all around us--the seeming magical ways that we anticipate and meet the needs of each other without anyone being in charge.

Adam Smith's Surprising Guide to Happiness

"It's kind of shocking to realize the person known as the father of modern economics, Adam Smith, didn't think the pursuit of wealth was a very good idea," says economist Russ Roberts. "He thought it was corrosive, thought it was bad for you, thought ambition was bad for you, thought the pursuit of fame would destroy your character and your happiness, your serenity, your tranquility."

Hans Rosling's 200 Countries, 200 Years, 4 Minutes - The Joy of Stats

Hans Rosling's famous lectures combine enormous quantities of public data with a sport's commentator's style to reveal the story of the world's past, present and future development. Now he explores stats in a way he has never done before - using augmented reality animation.

A Surprising Supply of Communist Dupes

A Surprising Supply of Communist Dupes, by Bryan Caplan

Posted 6 February on Library of Economics and Liberty, from which it was shamelessly stolen.

When I was first learning economics, I was surprised by how pro-communist many economics textbooks were.  I don't mean, of course, that economics textbook ever said, "Communism is good."  What I mean, rather, is that textbooks were very positive relative to communism's historical record.  Indeed, many seemed deeply ignorant of actual communism, basing their assessment on second-hand information about communists' stated intentions, plus a few anecdotes about inefficiencies.  Many textbook authors were, in a phrase, communist dupes: Non-communists who believe and spread a radically overoptimistic image of communism.

At least that's what my admittedly flawed memory says.

This homeschool year, I'm prepping my sons for the Advanced Placement tests in Microeconomics and Macroeconomics.  Our primary text is Cowen and Tabarrok, which includes accurately horrifying details about life under communism.  But we're also working through all the test prep books.  And while skimming the Princeton Review's Cracking the AP Economics, bad textbook memories came flooding back to me.  It's mostly a normal econ text, but here's what it tells us about communism:

Communism is a system designed to minimize imbalance in wealth via the collective ownership of property.  Legislators from a single political party - the communist party - divide the available wealth for equal advantage among citizens.  The problems with communism include a lack of incentives for extra effort, risk taking, and innovation.  The critical role of the central government in allocating resources and setting production levels makes this system particularly vulnerable to corruption.

Is this passage really so awful?  Yes.  Let's dissect it sentence-by-sentence.

Communism is a system designed to minimize imbalance in wealth via the collective ownership of property. 

Communist regimes generally had low measured inequality, but collective ownership of property was never primarily a means of "minimizing wealth imbalance."  The official communist line was that collective ownership would lead to high economic growth - and ultimately cornucopia.  And in practice, communist regimes made collective ownership an end in itself.  Just look at their repeated farm collectivizations that caused horrifying famines in the short-run, and low agricultural productivity in the long-run.  You wouldn't keep doing this unless you valued collective ownership for its own sake.

Legislators from a single political party - the communist party - divide the available wealth for equal advantage among citizens.  

What actually happened under communism was rather different.  Communist regimes began with mass murder of their political enemies, businessmen, and their families.  Next, they seized the peasants' land, leading to hellish famines.  In time, they launched major "industrialization" campaigns, but obsessively focused on building up their militaries, not mass consumption.  And no communist regime has ever tried to "divide wealth for equal advantage."  Bloodbaths aside, communist regimes always put Party members' comfort above the very lives of ordinary citizens.

The problems with communism include a lack of incentives for extra effort, risk taking, and innovation. 

Communist regimes did provide poor incentives to produce consumer goods for ordinary citizens.  But they provided solid to excellent incentives in the sectors they really cared about: the military, secret police, border guarding, athletics, space programs, and so on.

The critical role of the central government in allocating resources and setting production levels makes this system particularly vulnerable to corruption.

Talk about praising with faint damnation.  Never mind mass murder, famine, pathological militarism, and state-mandated favoritism for Party members.  What's really telling is that communism was "particularly vulnerable to corruption."

A defender of Cracking the AP Economics could protest, "It's talking about the idea of communism, not the practice of Communism."  But re-read the passage.  There's nothing in the idea of communism that makes it "vulnerable to corruption."  This is clearly a complaint about how communism really worked - and it leaves students with the impression that corruption was communism's chief defect.

A more reasonable response would be, "This passage is terrible, but unrepresentative.  I dare you to find five similarly credulous evaluations of communism in other textbooks."  I strongly suspect I can meet this challenge; plenty of textbook authors, past and present, were probably communist dupes.  But for now, I'm too busy to meet this challenge.  Feel free to share evidence - or counter-evidence - in the comments

Let me tell you about the very rich

You're one of them.

From DONALD J. BOUDREAUX:

From fiction to reality in 30 years

Among the Christmas gifts that my 19-year-old son, Thomas, received this year is one that he bought for himself: For $129, he got a Google Home device. Physically, it's a nondescript item that's shaped and sized like a soup can. But its powers are impressive!

Say “Hey Google” — then ask a question, such as “When was the first newspaper published in America?” A pleasant female voice answers. (“The first newspaper published in America was in Boston on September 25th, 1690.”)

With Google Home in my home, I feel very much like Captain Picard on the starship Enterprise. The only difference is that Capt. Picard prefaced each question that he asked his fictional 24th-century supercomputer with “Computer,” while I preface each of my questions with “Hey Google.”

Some of the finest science-fiction fantasies of the 1980s are today affordable realities for ordinary Americans. Yet we continue to be told by pundits and politicians — left, right and center — that ordinary Americans' material standard of living today is no higher than it was when the late Gene Roddenberry first revived his famed TV-show franchise. (“Hey Google, when did ‘Star Trek: The Next Generation' first air?” Answer: “September 28th, 1987.”)

Google Home is no mere toy. It's got an amazingly high-quality speaker, making Google Home also a great music system. But even if you insist on regarding Google Home — or its competitor, Amazon's Echo — as little more than an elaborate knickknack, the very fact that our economy makes such knickknacks available at affordable prices testifies to our economy's astonishing wealth. Only an extraordinarily wealthy society can afford to devote significant amounts of resources and human creativity to the development and production for mass distribution of elaborate knickknacks.

Yet ironically, Americans' immense prosperity in 2017 is revealed most vividly in riches that are difficult to see if you aren't looking for them. Most of what makes Americans today materially far richer than Americans of 1987 are things that are so familiar now that we take them for granted. Consider just some of the goods and services that were unavailable to ordinary Americans 30 years ago: individual-serve coffee-makers (“Keurigs”), high-definition televisions, downloadable and streaming music, movies and TV shows, Lasik surgery, Viagra, smartphones, GPS navigation, laptop computers, the Internet.

Each of these items was attention-grabbing when first introduced. But they all became so widespread so quickly that they are today part of our landscape.

Even more hidden from view are smaller innovations that were either nonexistent or very rare 30 years ago. One of my favorites is plastic garbage bags, each with its own internal drawstring.

An even better relatively small innovation involved beer. Most beer in 1987 was mass-produced stuff that, brewed with a taste to be drinkable by nearly everyone, had a taste that was distinctive and interesting to no one. Today, of course, store shelves bend under the weight of a seemingly infinite variety of delicious craft-brewed beers and ales.

So grab your favorite brew and raise a glass to the human ingenuity and free markets that continue to increase our prosperity.

Donald J. Boudreaux is a professor of economics and Getchell Chair at George Mason University in Fairfax, Va. His column appears twice monthly.

Author Michael Lewis discusses The Big Short and the future of finance

Author Michael Lewis discusses his book The Big Short: Inside the Doomsday Machine, the future of finance as he sees it, and his thoughts on whether today's business students have a chance at changing it. Part of the Dean's Speaker Series, co-sponsored by the Center for Responsible Business as part of its Peterson Series on Sustainable Finance.