“I don’t like to think of the world that way.”

From Russ Roberts’ recent EconTalk podcast with Timothy Taylor (Taylor speaking):

…you are reminding me a little bit of a conversation I had with an old friend of mine a few years back, a non-economist. We were talking about the minimum wage and I was trying to explain sort of an economic viewpoint of the minimum wage–in a nonpartisan kind of way. So what I was sort of saying was, ‘Look, minimum wage, the extra money for that minimum wage, it has to come from someplace. And maybe it comes from hiring fewer workers or maybe it comes from more productivity or maybe it comes from cutting certain job perks or it comes from higher prices to consumers or it comes from lower wages–but it comes from some place. And so, without specifying the place, you have to understand where it comes from. And you have to think about that tradeoff.’ And my friend looked at me for a long slow moment and said, ‘You know, I really don’t like to think of the world that way.

 

And this:

It’s interesting to me when, for example, when Steve Jobs died, there was sort of this outpouring of, I don’t know, emotional support for the man and his life’s work. And what’s interesting about that was, Steve Jobs was, you know, as ruthless a capitalist as there’s been. And at that moment, though, it was okay that he was a ruthless capitalist–and never gave any money to charity. It was sort of celebrated for a little while. And I just thought: that’s interesting; here’s a moment–when Sam Walton died, I don’t know if there’s the same feeling of, ‘Wow, he revolutionized something.’ And a certain kind of praise. And I think some of that is, for lack of a better word– you’re referring to this as, well, it’s kind of a class thing.

What fails better?

David Henderson on private companies like Walmart filling the gap while Flint, Michigan’s government flounders to provide safe water to its citizens.

The point I’d add is that failure happens in government and private companies. That’s a fact. There’s no getting around it. That’s why Walmart is closing 100+ stores.

There never has been an organization of humans that only produces successes. We live in a trial-and-error universe.

The question then becomes what handles failure better?

I wrote about this in a series of three posts that can be accessed here. In short, I think there are 3 things to look for in systems that handle failure better:

  1. Lots of independent trials. In a trial-and-error universe you can never predict what works and what doesn’t, so it helps to try lots of stuff.
  2. No single point of failure. Think Death Star. And, yet the First Order didn’t learn from the Empire’s mistakes! Just like one generation of central planners don’t learn from previous generations. They believe they will do it better.
  3. How far away the decision-makers are from the benefits and cost of their decisions. The further removed they are, the less careful they will be in their decisions.

Knowledge is

Great Quote of the Day from Cafe Hayek. Especially this part:

In particular, free trade facilitated the exchange of knowledge across countries about new production methods and business practices.

An Boudreaux then wisely comments on this:

…knowledge itself – that most precious and misunderstood ‘input’ into the operation of any commercial society – is spread more widely, effectively, surely, and quickly when trade is free.

We don’t think in these terms. When I read this, I imagined a teacher holding an iPhone up to her class and asking her students, What is this?

I then imagined answers from her class such as:

  • It’s an iPhone.
  • It’s a social media device.
  • It’s technology.
  • It’s whatever you need it to be, for the most part.

And then the teacher responding:

Yes. It’s all of that. But, it’s something more. It’s a culmination of knowledge from across the world and time. It’s here now and accessible to you because of the knowledge of millions of people who exist now or in the past. 

Think of it this way. If you had to rely only on yourself (like cavemen), or your family (like hunter gatherers), or the people in your town (like feudal societies), or your state (like closed-border communist/fascist and sometimes socialists societies) or people in some government somewhere (like people who think government can provide all we need) to make things for you, you would not have this or the benefits that you enjoy from it. 

We never think of how knowledge of others benefit us. Just think if you had to rely on yourself to come up with even the most basic element of this device: its touch screen. Where would you have started? Would you ever figured out how to make it before you starved to death?

Simple exchange of knowledge allows us to have the best standard of living ever experienced on this planet. We should grow to appreciate things that allow us to share knowledge (like free trade, immigration, etc.) and be very leery of things that stifle it.

 

Walmart can’t win for losing

For years (maybe decades), the media portrayed Walmart as the big bad wolf for opening stores.

Now, it seems ironic that the media portrays it as the big bad wolf for closing stores.

You Get What You Incent

Most parents learn this the hard way with their children.

Those in government sometimes learn it. It seems this former administrator of New York City’s welfare program, Robert Doar, gets it, too, as evidenced by his piece in the Wall Street Journal.

He writes:

I am not an economist, but one likely reason for the dismal labor-force participation is that many U.S. assistance programs act more like work replacements than work supports.

Consider the 45 million recipients of food stamps. While touring the country with the National Commission on Hunger, I often heard from recipients that the Supplemental Nutrition Assistance Program was good at providing electronic-benefit transfer cards, but not so effective at helping them get a job.

Thomas Sowell

Mark Perry about Thomas Sowell:

…there is no economist alive today who has done more to eloquently, articulately, and persuasively advance the principles of economic freedom, limited government, individual liberty, and a free society..

I agree. Perry’s post contains 16 (or is it 15?) of his favorite Sowell quotes that are worth a read.  Here’s a good one:

Helping the Poor. It was Thomas Edison who brought us electricity, not the Sierra Club. It was the Wright brothers who got us off the ground, not the Federal Aviation Administration. It was Henry Ford who ended the isolation of millions of Americans by making the automobile affordable, not Ralph Nader.

Those who have helped the poor the most have not been those who have gone around loudly expressing “compassion” for the poor, but those who found ways to make industry more productive and distribution more efficient, so that the poor of today can afford things that the affluent of yesterday could only dream about.

I think society would be better off if Sowell’s Basic Economics was used as the text for Econ 101. Maybe I should start a petition or something.

Get a book by Thomas Sowell now and read it. I think of this one often: White Liberals and Black Rednecks.

Overconfidence in opinions

This example occurred to me on a recent jog.

A woman was jogging on the sidewalk on the other side of the street from me. We were both running in the same direction.

She was ahead of me. I caught up to to her. She kept my pace for a few hundred yards, then she slowed down and I passed her.

Later I turned to see where she was. She had crossed the street to my sidewalk, but was a good distance behind me.

I thought to myself, maybe she thinks my side of the road is faster.

Then I thought, if I told the story just like that, most people would discount that immediately as a case of mistaken cause.

They may think, no you left her behind because you’re faster. How dumb is it to think you can get faster simply by running on your sidewalk?

I thought to myself that would be a great example of how something that sounds dumb, could make sense with a wee bit more information.

It’s winter. There’s snow and ice on the ground. My side of the road had seen more sun which had melted the snow and ice off my sidewalk. Her side of the road still had patches of snow and ice because it was shaded from the sun by embankments and trees.

So, indeed, she did get faster simply by crossing the street.

This example reminds of many conversations I’ve had over the years where a person forms an opinion and doesn’t budge. They believe they have all the information they need and stick to their guns.

But, if they were just a bit more imaginative or open to other bits of information, maybe they wouldn’t be so married to their opinions.