Utopia, you are standing in it!

In 1978 Robert Lucas and Thomas Sargent launched a famous attack on Keynes and Keynesian economics, which they viewed as having been discredited by the confluence of high inflation and high unemployment in the 1970s. They also expressed optimistism that an equilibrium approach to business-cycle modeling would succeed in replicating reasonably well the observed time-series variables relating to output and employment. In particular they posited that a model subjected to an unexpected monetary shock causing an immediate downturn from an equilibrium time path would be followed by a gradual reversion to that time path, thereby capturing the main stylized facts of historical business cycles. Their optimism was disappointed, because the model that Lucas had developed, based on an informational imperfection preventing agents from distinguishing immediately between real and nominal price changes, could not account for downturns because the informational imperfection assumed by Lucas could not account for the typical…

What’s socialism?

Is it the centrally planned economies of Cuba and North Korea? Or the kleptocracies of Zimbabwe and Venezuela?

How about the interventionist welfare states of Greece, Italy, and France? Or the redistribution-oriented Nordic nations?

Since socialism means different things to different people, the answers will be all over the map.

But there’s one constant. However it’s defined, it doesn’t work.

Joshua Muravchik, writing for the Wall Street Journal, shares the many and inevitable failures of socialism.

It’s hard to think of another idea that has been tried and failed as many times in as many ways or at a steeper price in human suffering. …Marx (1818-83)…called his vision “scientific socialism.” Inspired by the dream of proletarian revolution overthrowing capitalist immiseration, socialist parties sprouted across Europe. Yet instead of growing poorer, workers in industrialized countries saw improvement in their living standards…

CO2 is not pollution
In the end nature determines how much of the trace gas carbon dioxide is in the atmosphere, via the carbon cycle. Certain human activities may alter the numbers up or down temporarily. There’s vast expense, including lots of pipelines nobody wants, with no known finishing line in so-called ‘carbon capture’.
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Up to a fifth of emissions cuts from the Inflation Reduction Act are expected to come from carbon capture technologies, but there are major technical and political hurdles, says Climate Home News.

US president Joe Biden is expected to sign off a sweeping climate, energy and health care bill on Tuesday (16 August). It contains about $370 billion to foster clean energy development and combat climate change, constituting the largest federal climate investment in history.

Several studies project that its climate and energy provisions could enable the United States to reduce its…

Incentives matter.

Sometimes that can be explained with wonky discussions of marginal tax rates or welfare traps.

But that may not be the best approach when trying to convince someone with no aptitude for economics. So what’s the best way of introducing such concepts to, say, a Bernie Sanders supporter?

You can point to the economic chaos in places such as Greece and Venezuela and explain that Margaret Thatcher was right when she warned that socialists eventually run out of other people’s money.

But that’s probably not too effective because they’ll simply point to Sweden and Denmark and you’ll have a hard time educating them that those countries became successful when government was small and that they’ve been falling behind ever since big welfare states were imposed.

So perhaps we first need to help them understand very simple notions.

That’s why, when trying to introduce basic concepts, I’ll often…