Almost Classical

One of the tendencies among progressives, and among statist conservatives, is to give government far more credit for invention and creativity than it deserves. They point to projects funded or supported by government as evidence of the value of larger, centralized projects, but they forget you cannot prove a negative. Because government is so intertwined in modern innovation and basic research, it is nearly impossible to prove what would be happening without government. People have forgotten that that big projects, like the Transcontinental Railroad, were actually boondoggles that catered to political cronyism, not genuine innovation. (There were better managed, more profitable railways that were crushed by the federalization led by the robber barons.) The market, left to its own, might fill gaps. We simply will never know. My thoughts on this are prompted by too many people claiming we need more and more and more federal spending, supported by higher taxes on the "rich...

A September 2015 report from the Brookings Institute demonstrates that significant increases in top marginal tax rates would have minimal effects on both income inequality and the federal budget. This report was prepared by William G. Gale, Melissa S. Kearney, and Peter R. Orszag. It should be stressed that Orszag was Pres. Obama's director of the Office of Management and Budget and a former director of the Congressional Budget Office. Nobody can claim Orzsag is a conservative or libertarian — he is an excellent analyst. Read the report here: http://www.brookings.edu/~/media/research/files/papers/2015/09/28-taxes-inequality/would-top-income-tax-alter-income-inequality.pdf A larger hike in the top income tax rate to 50 percent would result, not surprisingly, in larger tax increases for the highest income households: an additional $6,464, on average, for households in the 95-99th percentiles of income and an additional $110,968, on average, for households in the top 1 perc...

The Georgetown University Center on Education and the Workforce ( cew.georgetown.edu ) tracks the return on investment (ROI) of college and specific college degrees. Though going to college is better than not, assuming the individual graduates on time and from a good school, what you study also affects earnings. What we know about college and income: Obtaining a four-year degree is worth about $1 million over a lifetime compared to not earning a college degree. Obtaining a degree from one of the 20 most elite universities is several times more valuable than earning a degree from a non-elite undergraduate university.  Obtaining a science, technology, engineering, or math degree from any respected school is better than a liberal arts degree, by an average of $3.4 million in lifetime earnings! Obtaining a liberal arts degree from a low-ranked school is similar to not having attended a college! The following charts are from the CEW 2015 report, based on 2014 data....

Fascist! It's the insult that's separated enough from "Nazi!" that it remains popular on blogs, in columns, and even within books claiming to be scholarly. Books claim to identify liberal fascism, conservative fascism, and I am fairly certain there must be a book about moderate fascism. The problem is that left-right political dichotomies fail to appreciate that political theories and governmental systems overlap and intertwine. American liberals and progressives point to the nationalistic and "traditional values" of Italian Fascism to claim all fascists are of the right. American conservatives and libertarians emphasize the origins of the Italian fascist movement from within unions and socialist organizations to claim all fascists are of the left. As professor Crispin Sartwell writes: The left-right spectrum is often characterized in terms of two extreme poles. One way to see that this is incoherent is that these poles can be defined in mutually in...

Stop complaining about how unfair Uber is, social justice crusaders. Simple market truth: Uber would not thrive if public transit, mass transit in various forms, and licensed providers such as taxis were good enough to meet market demands. Don't complain about Uber not having to comply with the Americans with Disabilities Act and other regulations while mass transit must. Think about what these complaints reveal: mass transit, with all that it must do to comply with laws, regulations, and union contracts doesn't have many happy supporters. Why is that? If the rules are so wonderful, why does anyone want an Uber or a Lyft? Why is Zipcar rising in popularity? Mass transit works in densely populated, geographically small areas. That's not most of the United States, with two-thirds of us living in suburban or rural communities. I support public transit. In fact, I believe public transit, by its natures, should be free to use because the benefits are shared in the ...

When Genius Failed (Photo credit: Wikipedia ) No, Wall Street isn't Las Vegas. Investing is not gambling. Notice I use the word investing, not speculating. NOTE: I am not an investment adviser or broker and this blog post is meant only as an overview of basic investment research and theory within the academic discipline of economics. If you want investment advice, talk to a financial professional and your retirement planning specialist.  In 1973, Burton Malkiel published the seminal work on efficient market theory , A Random Walk down Wall Street . If you had invested $100,000 that year in a broad, large-cap index fund and held it for the next 30 to 40 years, you would have earned better returns than if you had invested with more than 85 percent of active fund managers. Not by just a little bit, either. According to Charles Wheelan's Naked Economics , you could have outpaced the "stock pickers" by $140,000 with a simple S&P 500 index fund. In a ...

The simplistic, and intentionally misleading, discussions of "libertarians" and classical liberalism tend to paint all libertarians as "anti-government." These popular caricatures of libertarians appear in various "progressive" publications and on many websites. The common theme is if libertarianism worked, Somalia or {insert lawless nation here} would be libertarian paradise. Yet, libertarianism requires functioning courts, enforceable laws, and the planning of some shared commons. If contracts don't matter, if you can take my life without consequence, if we can't travel across territories, then we don't have individual freedom or commercial markets. You can find these high-school level analyses equating Somalia with libertarianism easily online without my help; these are works I'd never accept from my college students. It's no better when classical liberals caricature progressives as uncritical supporters of all big government. Mos...

Absurdly high prices. Debt. Stocks in 1928. Tech companies in 1999. Housing in 2007. The 1637 Dutch Tulip Mania. These are the things people associate with economic bubbles. Ask most people and they will tell you a bubble is when people pay more for a thing than it is worth in a reasonable market. That's a simple model for demand bubbles, but not the complete picture. For many quantitative economists, the basic bubble is the speculative, positive price variance bubble. But, there are also negative bubbles, when pricing collapses yet producers continue to believe demand (and prices) will soon increase offset the oversupply. These are deflationary gluts. Bubbles, positive and negative, occur when the market price for any good or service rapidly departs from the long-term median trend of price stability. A severe bubble is when a significant number of consumers are willing to go into debt to obtain a good or service with the primary intention of selling the good (or serv...

The Statue of Liberty front shot, on Liberty Island. (Photo credit: Wikipedia ) It's hard, really hard to make it big in America. Well, yes, success takes work, especially if you are trying to start a business, but some in the media and within academia seem to want to convince their audiences that unless you are born wealthy and white, there's almost no hope at all of living the American Dream. The United States does have widening inequality. There are complex explanations for this, including the fact that our wealthy are wealthier (on average and at median) than the wealthy elsewhere. Income inequality, which isn't the same as wealth inequality , is also increasing for many complex reasons. But, there are actual signs that more people can and do start businesses. You wouldn't know that, though, based on how some present research data to the public. The following article from Quartz ( The Atlantic ) is so flawed, statistically and philosophically, it demonst...

Populist proposals for free or reduced college tuition won't help reduce inequality and might exacerbate it. Yet, I still support tuition breaks at state universities for some specific fields of study to encourage more graduates in those fields. How could free education be a bad idea to reduce inequality? Educational attainment K12 corresponds to income, and parental education attainment; test scores also correspond to income and parents; free colleges still have limited space; elite schools, both private and state, will remain elite; and college breaks benefit the upper-middle class most. Yes, some students from low-income and lower-middle would be helped by free tuition, but many already qualify for grants and scholarships. The reality is that college tuition is a middle class concern, like the home mortgage deduction. Politicians aim for the middle, where voters are. Colleges are not going to build thousands of new classrooms and hire tens of thousands of instructor...