Monthly Archives: August 2019

Ian Kershaw – The Global Age: Europe 1950-2017 

Ian Kershaw – The Global Age: Europe 1950-2017 

Kershaw is best known as a historian of Nazi Germany, and the author of the definitive two-volume Hitler biography. More recently, he has turned his focus to modern Europe more generally. This book concludes a two-part series. The first, gloomier half is To Hell and Back: Europe 1914-1949; this volume is rather sunnier.

Major themes early in the book include the fall of the Iron Curtain and rapid nuclear armament, along with all the tension and unease those developments caused. I was previously unaware of the scale of post-war migration to escape socialism. East Germany lost about 2 million people to West Germany during the 1950s, with an average of 2,300-2,400 people escaping daily until the Berlin Wall was finished in 1961.

As the book goes on, the reader realizes how deep the scars of 20th century’s first-half tumult run. The very reason for the formation of the European Community and its various iterations on up to the European Union was to prevent another world war. In line with thinkers from Montesquieu in the 18th century on up to Cordell Hull in the 20th, have argued, close trade and economic ties help to maintain peace. Economic integration will make war so costly that no country would dare attempt another round of Napoleonic conquest or, more to the point, a Third Reich.

This argument is deeply felt throughout the continent at a visceral level, something most American observers don’t see. The EU’s agricultural and regulatory policies have few defenders, but then those aren’t the EU’s raison d’etre. Understanding that dynamic is essential to understanding the Brexit debate and other debates about the EU’s future. It does not hinge on a socialism-vs.-markets debate. For most of the debate’s participants, it is instead about nationalism-vs.-cosmopolitanism, or more fundamentally, how best to prevent another World War II.

Even the Cold War was largely an echo of World War II. Most of the continent was overtaken by one of two forms of totalitarianism; communism just happened to be the one that lasted longer. In the post-war Stalin and Khrushchev years, the Soviet bloc was a feared nuclear enemy, requiring NATO and extensive U.S. involvement to keep it at bay.

But as time went on, Brezhnev-era political sclerosis took its toll while the more market-oriented West grew. The Soviet threat became gradually less scary and less stable. By the Gorbachev era, the thinking went from how to deal with nuclear fallout to how to deal with the political and economic fallout from communism’s coming collapse. An American reader might see the Europe-Russia relationship under Yeltsin as a little bit like the dynamic between the Griswold family and Uncle Eddie in the National Lampoon’s Vacation movies.

Kershaw is more of a political historian than a social one, so everyday life for ordinary European people is not the focus here. Music, fashion trends, and art are mostly cordoned off into separate short chapters throughout the book, roughly one per decade. If you want to know what it was like to live there during this period, go elsewhere. But Kershaw is excellent at identifying larger historical themes and seeing how they interact and play out. Kershaw is also a talented prose stylist; this book reads quickly and easily enough for the reader to forgive its 700-page length.

Kershaw also clearly lacks substantive background in economics. He shows this in his frequent use of the term “neo-liberal,” which has no coherent definition. It is nearly always used as a pejorative, though Kershaw’s usage ranges from neutral to mildly negative, further adding to the confusion. In discussing trade issues, Kershaw adheres to the balance of payments fallacy, which would flunk him out of a freshman introductory economics course.

He also does not grasp that John Maynard Keynes and Milton Friedman’s differing monetary policies share a common conception of the quantity theory of money. They part ways on the ought, not so much the is. In addition, Kershaw cites Friedman’s Capitalism and Freedom as Friedman’s statement on monetary theory. That book contains just one chapter out of thirteen on monetary issues. Friedman’s 800-page Monetary History of the United States, coauthored with Anna Schwartz, was his definitive work, the leading cause of his Nobel Prize, and is hardly obscure.

So long as one takes Kershaw’s attempts at economic theory and policy analysis as seriously as they deserve, this is an excellent survey of a neglected area of history that is impacting everything from today’s Brexit debate to trade relations with the United States to how Europe will deal with the rise of China as a major power.

Tyler Cowen – Big Business: A Love Letter to an American Anti-Hero

Tyler Cowen – Big Business: A Love Letter to an American Anti-Hero

Big businesses are not perfect, and Cowen gives several examples. This is not a hagiography. Instead, Cowen argues that most people underestimate the amount of good that big businesses do. They make possible affordable communications, books, culture and art (and the supplies needed to make them), transportation that expands employment options for workers, safe and diverse food supplies, architecture, and more. As with many of Cowen’s books, it reads quickly and easily, almost a little too much so. When he offers the occasional insight, take a minute longer than he does to ponder it. This has been received as the prolific Cowen’s best book in some time, and I agree with the sentiment.

David Neumark and William L. Wascher – Minimum Wages

David Neumark and William L. Wascher – Minimum Wages

A comprehensive literature review covering more than 100 studies. Neumark and Wascher also discuss findings in their own work. Overall, they find that minimum wages have small disemployment effects. As a poverty relief measure, they are also not as effective as other measures such as straight cash or the Earned Income Tax Credit. In part this is because minimum wages often miss their intended target; many minimum wage earners are disproportionately young people who still live with their parents in households well above the poverty level. Minimum wages also increase inequality among low earners. People who keep their jobs often get a modest raise. But companies will dump their lowest-skilled workers and take on fewer part-time workers, which includes many women with young children who want to help make ends meet. They find similar effects in reviewing research on other countries including Canada, the UK, Mexico, Brazil, and much of Latin America.

Surprisingly for such a thorough book, Neumark and Wascher leave out a long list of non-wage tradeoffs that come with minimum wages. They address hour cuts, hiring freezes, price increases, lower profits, and unintended income distributions. But they mostly leave out benefit cuts, workplace conditions, stricter break and vacation policies, job perks such as employee discounts, free parking and meals, and other possible tradeoffs. These are difficult to measure with any method besides surveys, which are notoriously unreliable. As a result, there is little to no empirical research on these tradeoffs, even though economists, legislators, and pop culture have acknowledged their existence for decades.

As result, most minimum wage literature focuses on employment, which is easier to measure. It is also the most drastic tradeoff employers can make, which is why they go to great lengths to avoid doing it, preferring other tradeoffs that are unfortunately harder for outside researchers to measure. This “tyranny of metrics” effect has lowered the quality of the minimum wage debate on both sides.

Gabriel García Márquez – Love in the Time of Cholera

Gabriel García Márquez – Love in the Time of Cholera

Compared to One Hundred Years of Solitude, this book has a much lighter feel. It is almost like a farce at times, though a little more jaded. A a mix of bemused weariness with a touch of nostalgia might be a better description. The book’s lack of epic drama, heartbreak, and tragedy stands in intentional contrast to its title. Marquez had plenty of gray hairs by the time he wrote this book, and he looks on the younger characters’ passions with a bit of an “I remember those times, but don’t always miss them” kind of smile. In line with Márquez’s famous magical realist style, lovesickness in this book is sometimes literal, manifesting itself as a physical illness with symptoms similar to cholera.

The main characters are a young couple who part before they can marry, and a young doctor who the woman meets afterwards and has a loving, mostly happy marriage with. Fifty years later, after the doctor/husband passes away, the former couple, now elderly, meet again. He claims to have stayed loyal to her all that time, but this turns out not be true—and how.

Much of the book recounts the various romantic foibles the three had throughout their lives, some serious and some not, with a mix of amusement and wistfulness. A particularly amusing character is a parrot who taunts the doctor. An excellent example of Márquez’s brand of magical realism, the parrot sometimes talks as though he understands what the doctor is saying and is capable of holding human-level conversation, but other times seems like an ordinary bird.

On the Radio: China Tariffs

Earlier today, I appeared on the Alan Nathan Show to talk about tariffs and a possible trade deal with China.

I’m not sure how to access show archives, but if I can find audio I’ll post a link.

Tariffs Are Not Encouraging Chinese Reforms

In a syndicated piece at Inside Sources, Kate Patrick quotes me on President Trump’s China tariffs:

The Competitive Enterprise Institute (CEI), in response to China’s latest tariff retaliation, criticized the Trump administration for continuing a trade war that has not produced the kind of trade agreement Trump wants, adding that Congress should reclaim its constitutional tariff-making authority to stop the trade war.

“Tariffs have once again failed to get China to make needed reforms, instead of responding to Trump administration tariffs with retaliation,” Senior Fellow Ryan Young said. “The administration should change course and re-engage the World Trade Organization dispute resolution process and rejoin the Trans-Pacific Partnership. China has already been lowering trade barriers against other countries and could do so with the U.S.”

Read the whole thing here.

This Week in Ridiculous Regulations

A humorous diplomatic row over Greenland was not the only news of the week, with China tariffs, divisive rhetoric, and recession fears also putting in appearances. Rulemaking agencies published new regulations ranging from Death Valley airstrips to Lipochitooligosaccharide.

On to the data:

  • Last week, 68 new final regulations were published in the Federal Register, after 69 the previous week.
  • That’s the equivalent of a new regulation every 2 hours and 28 minutes.
  • Federal agencies have issued 1,876 final regulations in 2019. At that pace, there will be 2,860 new final regulations. Last year’s total was 3,367 regulations.
  • Last week, agencies published 447 notices, for a total of 14,121 in 2019. At that pace, there will be 21,526 new notices this year. Last year’s total was 21,656.
  • Last week, 1,734 new pages were added to the Federal Register, after 3,075 pages the previous week.
  • The 2019 Federal Register totals 44,535 pages. It is on pace for 67,889 pages. The 2018 total was 68,082 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Three such rules have been published this year. Six such rules were published in 2018.
  • The running compliance cost tally for 2019’s economically significant regulations currently ranges from $294.9 million to $439.2 million. The 2018 total ranges from $220.1 million to $2.54 billion, depending on discount rates and other assumptions.
  • Agencies have published 44 final rules meeting the broader definition of “significant” so far this year. 2018’s total was 108 significant final rules.
  • So far in 2019, 318 new rules affect small businesses; 14 of them are classified as significant. 2018’s totals were 660 rules affecting small businesses, with 29 of them significant.

Highlights from last week’s new final regulations:

For more data, see “Ten Thousand Commandments” and follow @10KC and @RegoftheDay on Twitter.

On the Radio: Antitrust

On Sunday morning from 8-9 AM PT, I’ll be on the Bob Zadek Show talking antitrust regulation. He has a promo article with a link to listen live here. See also Wayne Crews’ and my antitrust paper.

Antitrust Basics: Think Long Term, Not Just Short Term

This is the seventh entry in the “Antitrust Basics” series. See below for previous posts.

Moore’s Law states that computing power doubles every year and a half or so. An antitrust case against IBM, by contrast, lasted for 13 years, never reached a decision, and was eventually dropped because the original issue had long become obsolete. Markets are ongoing-long-term processes but antitrust cases are often short-term reactions to temporary situations—even if they sometimes last so long as to outlive the problem they seek to address.

Today’s Neo-Brandeisians and right-wing populists calling for an antitrust revival are not the only analysts prone to short-termism. Robert Bork, famous for his antitrust skepticism, writes on p. 311 of his 1978 book “The Antitrust Paradox”:

Antitrust is valuable because in some cases it can achieve results more rapidly than can market forces. We need not suffer losses while waiting for the market to erode cartels and monopolistic mergers.

Bork’s statement focuses on short-term results while ignoring long-term underlying processes, and has several other problems besides. How do regulators and judges know which cases are causing consumer harm and which are not? How do they ensure cases are chosen on the merits and not for politically-motivated reasons?

Cases also often take years to resolve. Assuming regulators do identify a valid case, how would they, and the judges who hear the case, know if market activity could address the problem by the time the case is decided? Do the benefits of regulatory action exceed the court and enforcement costs? Are the affected companies in a position to capture the regulators?

More to the point, does the short-term benefit come at a greater long-term cost? An enforcement action now could have an unforeseen deterrent effect on future mergers, contracts, and innovations, including in unrelated industries. The consumer harm from these could well exceed the short-term benefits of a short-term improvement on market outcomes—assuming that regulators are consistently capable of such a feat.

In the 1969-1982 IBM case, regulators eventually gave up, however belatedly. But this is not guaranteed to happen in every case. And who knows what consumer-benefiting innovations IBM could have developed with the time and resources it ended up devoting to defending itself in this case?

As the Justice Department and Federal Trade Commission conduct their investigations into Facebook, Google, Amazon, and Apple, they should keep their limited abilities to answer such questions in mind—as well as their bosses’ short-term focus, which rarely extends beyond the next election cycle.

For more, see Wayne Crews’ and my paper, “The Case against Antitrust Law: Ten Areas Where Antitrust Policy Can Move on from the Smokestack Era.” Further resources are at antitrust.cei.org.

Previous blog posts in the Antitrust Basics series:

U.S.-China Trade War and the 2020 Election

I just saw this now, but I was quoted in an August 13 U.S. News & World Report article on China tariffs:

“The administration has been saying otherwise, but it is good to see that they do not believe their own words,” Ryan Young, a senior fellow at the libertarian Competitive Enterprise Institute, said in a statement Tuesday. “Several rounds of China tariffs have so far failed to encourage the Chinese government to make needed reforms. Beijing has instead consistently retaliated with its own trade barriers, hurting the U.S. economy as well as its own.”

Read the whole thing here.