Category Archives: Great Thinkers

No Due Date Book Club Notes: James Buchanan, Week 2

I recently joined Liberty Fund’s No Due Date economics book club, where over the next year, participants will read one book per month selected by GMU economics professor Peter Boettke. Pete will also lead group discussions and provide other resources. January’s selection is the first volume of James Buchanan’s collected works, The Logical Foundations of Constitutional Liberty, which collects many of his better-known papers from throughout his career. Buchanan was one of the cofounders of public choice theory, and won the 1986 economics Nobel.

This post, the second of three, collects my notes from those readings. I’m posting them here mostly for my benefit, so I can easily find them during the discussions, and can refer back to them later if I cite them in the future. Readers new to Buchanan or curious about the major themes of his work might benefit from skimming these notes, though I highly recommend reading the primary source. I may or may not do this for future months’ readings, depending on how useful it is.

Note that I copied and pasted these notes unedited from a Word document I kept open while reading. These notes do not always distinguish between as-is descriptions of Buchanan’s arguments, and my opinions and original thoughts about them. Reader beware.

WEEK 2: PUBLIC FINANCE IN THE DEMOCRATIC PROCESS

“Individual Choice in Voting and the Market” (Journal of Political Economy, 1954), pp. 75-88.

-Buchanan builds a model of individuals making decisions. They just happen to be voting decisions. For simplification, it’s a direct democracy model without representatives.

-In markets, consumers get what they want. This is not guaranteed in voting markets. There is uncertainty. This affects voter behavior.

-People might vote to signal values, knowing it might not cost them personally. Hence the people who vote for Prohibition, then visit their bootlegger.

-Mises: people bear less personal responsibility for their voting choices than their market choices. So their political choices are more corruptible than their market choices.

-p. 81: “Choice implies that alternatives are mutually conflicting; otherwise, all would be chosen, which is equivalent to saying that none would be chosen.”

-Market choices are unbundled, and less mutually exclusive than political choices, which are take-it-or-leave-it bundles. P. 82: “As a result of this difference, individual choice in the market can be more articulate than in the voting booth.”

-Market decisions are among actual alternatives; political decisions are among potential choices. If the voter loses, they don’t get their preferred choice. Even if they do, there is no guarantee the political process will operationalize it. (he doesn’t seem to make this last point, but would likely agree with it.)

-Market “voters” can be overruled in the sense that, say, their favorite store ot product will go out of business if they don’t get enough “co-voters.”

-All of these differences would remain true under complete economic equality. Objections that “one dollar, one vote” in the marketplace is unfair is not an objection to the points Buchanan is actually making.

-Market choices are not more rational than political choices. The individuals making them are the same. Their differences are in incentives and institutions, not in rationality.

-Section VII, on when to use ballot box instead of the market, is a bit muddled. Institution-level changes gain their legitimacy through the ballot box. Political choices should be made when private choices harm the goals of a majority, or when they are obviously inferior—and it is worth the tradeoffs in choice and liberty to use political means. I would add in something about transaction costs.

-A language problem: current language does not differentiate between market freedom and market power. This semantic point leads to a lot of avoidable confusion.

“Social Choice, Democracy, and Free Markets” (Southern Economics Journal, 1954), pp. 89-102.

-Reaction to Kenneth Arrow’s Possibility Theorem’s philosophical implications. His major argument is that cyclical majorities, which are a product of the intransitive democratic preferences that Arrow’s theorem predicts, provide a bulwark against the tyranny of the majority, and allow for ongoing policy experimentation, rather than setting the initial, “rational” result in stone.

-This highlight’s Buchanan’s subjectivism. He isn’t terribly concerned with this or that policy. He is concerned with the larger system-level processes. Normatively, he seeks to avoid tyranny and stasis, and that’s about it.

-This rests in turn on the core Buchanan theme of methodological individualism. Societies don’t reason or have preferences, individuals do.

-Arrow misuses the word “process,” which has caused confusion in both Arrow and his debaters.

-Buchanan argues that Arrow’s theorem applies to how a welfare function is derived—but not the decision-making process that reacts to that function.

-That doesn’t matter for voting behavior, but it does for market behavior, according to Buchanan. Arrow’s theorem is useful for analyzing voting, but not for markets.

-Methodological individualism: the concept of “social rationality” is incoherent. Societies do not reason, individuals do.

-Interesting side point from Buchanan: utilitarians are individualists, and are therefore philosophically inconsistent whenever they leave the individual and speak of social utility. I add that interpersonal utility comparisons are also impossible.

-Because individuals are rational and the concept of rationality does not apply to societies, we can observe intransitive “preferences” and cyclical majorities in democracies. Also, these inconsistencies can be useful as a check on power and on tyrannies of the majority.

-Cyclical majorities also allow for ongoing experimentation with new policies. The status quo is never set in stone.

-Buchanan invokes near-unanimity as a benchmark of true collective choice, prefiguring The Calculus of Consent, which would appear eight years later.

-Market decisions to tend to obey the transitive property, since they are made solely at the individual level. They are not public choices. Buchanan does allow that this is true only to the extent that an individual’s preferences are, in fact, transitive. Anyone who has spent time with a small child knows that real-life human preferences are not always transitive.

“The Pure Theory of Government Finance: A Suggested Approach” (Journal of Political Economy, 1949), pp. 119-132.

-Buchanan contrasts individualist and collectivist (organismic) approaches to costs and benefits of taxes and spending.

-It was standard practice at the time to count only the costs of government, and not the benefits. Buchanan argues that both matter, and benefits should be counted as well. Later in his career, he would have taken this in a more explicitly public choice direction—the implications for concentrated benefits and diffused costs are obvious. Here, he hints at it, but doesn’t go very far in that direction of analysis.

-One problem with the collectivist/organismic approach is that it thinks in aggregates, rather than in terms of separate individuals. Since interpersonal utility comparisons are impossible, so are accurate societal cost-benefit calculations.

-A price theory point Buchanan does not make: the technical difficulties of separating individual costs is “expensive” in terms of effort and complexity for economists. This is why they choose the “cheaper” option of thinking in aggregates. While rational from a price theory standpoint, this leads to unrealistic analysis.

-Buchanan argues that the aggregate cost of the state should equal its aggregate benefits, in which seems a fairly straightforward Marshallian calculation at the margin. He is agnostic about how those costs and benefits are distributed. That’s for the political process to decide.

-This article clearly reflects his recent study of Italian political economists. He quotes several.

-One of them raises a good point: if political benefits were to be equally spread out, a capita tax would be fair. Since that is not what most people want the state to do, that is why government costs are not equally distributed, nor its benefits.

-The “fiscal residuum” is the difference between a government’s costs and benefits. These will vary from person to person. The goal is for it to equal zero for society as a whole (Buchanan ignores transaction costs and political waste here, but for this simple model’s purposes, that is fine). A progressive tax and benefit system would have a negative residuum for rich individuals, and a positive residuum for poor individuals.

-(Not Buchanan’s point) In practice, democracies often have positive residuums for the middle class, which has the largest number of voters, and negative residuums for the rich and poor. This is for public choice reasons—politicians know want to maximize votes more than they want to maximize any distributional fairness norms they may have.

“Positive Economics, Welfare Economics, and Political Economy” (Journal of Law and Economics, 1959), pp. 191-209.

-Economic theory was developed by utilitarians, and the discipline has been taken over by positivists. Even Milton Friedman is a positivist. This is where Paretian welfare economics comes from. Most economists are not content to describe what is; part of their job is advising policymakers on what should be. Buchanan doesn’t like this.

-Clever insight about Pareto optimality: it avoids the cardinal no-no of interpersonal utility comparisons. Individuals make their own decisions about what makes them better off and worse off, so no interpersonal comparisons are needed. Kaldor and Hicks took Pareto’s approach and developed the new welfare economics.

-A newer development in welfare economics, headlined by Paul Samuelson and others, rejects Kaldor and Hicks. Samuelson, et al rely on a “social welfare function,” and thus commit the non-no of interpersonal utility comparisons.

-Welfare economists, especially of the Samuelsonian variety, assume omniscience of the observer or policymaker. Buchanan says this is unrealistic, and should not guide policymaking. It gives too much power to policymakers to make decisions on others’ behalf.

-Revealed preferences as fatal to the omniscience assumption: We don’t know other people’s preferences until they reveal them through their actions.

-An economist should not decide upon changes, because he has no way to know society’s preferences; the very concept is incoherent. Instead, an economist should present a menu of changes, upon which individuals can decide on, either individually or through the political process.

-This is another example of Buchanan’s subjectivity. His ideological priors are liberal in the sense that he cares about individual consent. But he’s neutral about which policies individuals consent to.

-A rough analogy to Buchanan’s job description for economists is as medical diagnosticians. The patient has a problem, the economist uses their tools to diagnose it and prescribe possible remedies. But ultimately the patient chooses what action to take—though in this case through political consensus, not individual choice.

-Compensation for externalities, such as pollution: Buchanan sees payment for externalities not as an ethical concern for policymakers, but as necessary for an an honest prices system, so individuals can make their own accurate decisions about Pareto-optimal changes. His subjectivity shows up again.

-A political economist’s job is to suggest possible gains from trade, not to impose them against people’s wills—the economist doesn’t know people’s preference functions, and could make non-Pareto-optimal mistakes.

-Good question on p. 203: “Unless the relevant choices are to be made by some entity other than individuals themselves, why is there any need to construct a “social” value scale?”

-Buchanan exposes the vulnerabilities of his own argument—this is the mark of a good scholar. His argument depends on people being reasonable; this is not always true. His argument depends on a contract theory of the state; many people object to this. And no large group of people will be unaminous in decisionmaking, which is the ideal. Some “relative unanimity” benchmark short of that will have to do in real-world political systems, such as a majority vote, a 2/3 majority, or whatever rule people decide on. Buchanan is agnostic on which relative unanimity rule is best.

-If a policy doesn’t gain unanimous consent, is it Pareto optimal? Tough question. Real-world societies will nearly always have to settle for something short of that ideal.

-Which also makes a society progressively more vulnerable to tyrannies of the majority, the closer the adoption rule moves to a 50-percent-plus-one majority.

-A bit of game theory: economists must think at least one move ahead. Don’t recommend what people want right now, recommend what people will want after a proposal goes through the political process.

No Due Date Book Club Notes: James Buchanan, Week 1

I recently joined Liberty Fund’s No Due Date economics book club, where over the next year, participants will read one book per month selected by GMU economics professor Peter Boettke. Pete will also lead group discussions and provide other resources. January’s selection is the first volume of James Buchanan’s collected works, The Logical Foundations of Constitutional Liberty, which collects many of his better-known papers from throughout his career. Buchanan was one of the cofounders of public choice theory, and won the 1986 economics Nobel.

This post, and the following two, collect my notes from those readings. I’m posting them here mostly for my benefit, so I can easily find them during the discussions, and can refer back to them later if I cite them in the future. Readers new to Buchanan or curious about the major themes of his work might benefit from skimming these notes, though I highly recommend reading the primary source. I may or may not do this for future months’ readings, depending on how useful it is.

Note that I copied and pasted these notes unedited from a Word document I kept open while reading. These notes do not always distinguish between as-is descriptions of Buchanan’s arguments, and my opinions and original thoughts about them. Reader beware.

January – James Buchanan, The Logical Foundations of Constitutional Liberty: Collected Works, Vol. 1

WEEK 1 of 3: WHAT SHOULD ECONOMISTS DO?

“What Should Economists Do?” (Southern Economics Journal, 1964), pp. 28-42.

-They should seek understanding of Smith’s propensity to truck, barter, and exchange.

-They should do catallactics, not oikonomia

-Methodological individualism. Societies don’t have ends in mind, individuals do.

-Lionel Robbins and Max U. as adversaries.

-Don’t posit things as problems; that implies a solution—and a solver, usually the economist or some politician. The real world is far more complicated than that.

-Subtle point, but important: A Max U. robot doesn’t really make choices among alternatives. It follows a pre-determined program.

-“Symbiotics” is Buchanan’s preferred term for economics, even over catallactics. It captures the inherently social nature of what economists study. It is a social science. There is no economics or symbiotics in studying Robinson Crusoe until Friday joins him.

-Another subtle point from Frank Knight: in perfect competition, there is no competition, and no trade as we understand the terms.

-Equilibrium through the perfect competition lens is harmful to understanding. When equilibrium does happen it’s an emergent process. Both of those words matter. Nobody designs it, and the process never ends. Something can always change.

-Markets are institutions and processes, not Max U.s achieving societal goals.

-Politics is also exchange. Economists should study it that way.

-Market exchanges are between equals; political exchanges are between superiors and subordinates.

-Public choice, properly done, is not normative. He expects pushback on this point.

“Politics without Romance” (Lecture, Institute for Advanced Studies, Vienna, Austria, 1979), pp. 45-59.

-Don’t fall for the Nirvana approach. Compare realistic alternatives when looking at institutional arrangements.

-Public choice is supposed to be positive, not normative. First figure out what is, which does not vary from person to person, before proceeding to the should part, which does vary from person to person.

-Pre-constitutional political exchange precedes market exchange.

-Political exchange affects the whole public; hence the name “public choice.” Market exchange affects only the individuals involved (ignoring externalities, which Buchanan does not mention).

-Tension: where does legitimacy come from? Buchanan says it comes from contracts, not rights. But contracts themselves depend on consent. A tension in his thought?

-A “productive state” can emerge to provide public goods by solving transaction cost problems, at least to some extent.

-Cyclical majorities tend to happen in democracies under certain rules. Arrow was on to something, though he tended to ignore institutions.

-Duncan Black and the median voter theorem also have explanatory power in how political exchange works.

-Most people are multi-issue voters, which makes modeling all but impossible, and can result in cyclical majorities.

-Good analogy: people vote on the temperature they want. Then we see if the heating and cooing system is capable of delivering it.

-In a representative democracy, representatives’ incentives are not the same as their voters’ incentives.

-Marginalism does not exist in political goods. They are all-or-nothing bundles. Marginalism does exist in market goods. Consumers can choose a little more or less of each product as they choose.

-Public choice is for something, not just against the romantic view of politics. It is for enabling human cooperation, and avoiding the Hobbesian trap. It sees institutional design as the method that can accomplish this as best people are able.

“Keynesian Follies” (Book chapter contributed to a Nobel conference volume, The Legacy of Keynes, 1987), pp. 164-178.

-Keynes was an artist, not a scientist. His goal was to change the perception og his economist peers. This was one reason he changed his mind so often.

-The depth of Keynesian follies are from Keynes’ followers more than the man himself.

-Keynes was aware of the importance of institutions; less so his followers. Keynes built a model to get people to think that monetary policy mattered less than fiscal policy. The trouble began when this was taken as scientific, rather than a goading to move scholarship in a certain direction.

-Keynes was responsible for people to concentrate on employment as a policy objective, and therefore neglect monetary and market institutions.

-Thought: Is Buchanan getting the arrow of causality wrong? And I have my doubts that people were ever as institution-minded as Buchanan seems to argue.

-Buchanan argues for a full employment impossibility theorem, taught by Henry Simons and C.O. Hardy. Closed market economies have three possible characteristics, of which only two are simultaneously possible at a time: 1) full employment, 2) stable money, and 3) noncompetitive labor markets.

-Keynes’ theory was of its time, but didn’t work in the 1940s and later. Possible implication (would Buchanan go there?) Institutions, if not timeless, are at least more long-term oriented.

-Monetary policy has much stronger effects than fiscal policy. Why then, Buchanan asks, are most Keynesians (asidE from Lerner) focused instead on fiscal policy? One possibility is an ideological preference for a larger public sector.

-Keynesians should have known that fiscal fine-tuning (surplus during booms, deficits during busts) is impossible for public choice reasons. Politicians don’t work that way.

-Keynes the artist of 1936 intended to persuade people to take extraordinary policy actions during extraordinary times, when the normal political rules didn’t necessarily apply. The Keynes of a more stable era would likely have given different advice, but his disciples didn’t seem to realize that.

-Buchanan closes by asking if many Keynesian follies could have been avoided by widespread use of a commodity standard. My answer is maybe, but would the tradeoffs have been worth it?

John Stuart Mill on the Limits of Economics

We must never forget that the truths of political economy are truths only in the rough: they have the certainty, but not the precision, of exact science.

-John Stuart Mill, Principles of Political Economy, Book 2, chapter XVI.4, p. 422.

John Stuart Mill on Lawyers

The exorbitantly-paid profession of lawyers, so far as their work is not created by defects in the law, of their own contriving, are required and supported principally by the dishonesty of mankind.

-John Stuart Mill, Principles of Political Economy, Book 1, chapter VII.5, p. 110.

Fighting Bias and Misinformation, from Pierre Bayle’s 17th Century to the Social Media Age

Many people insist that media bias and misinformation are getting worse in the social media age, and we need to do something about it. Depending on whether one leans Democratic or Republican, tech companies are either not doing enough to stop right-wing misinformation from spreading, or are censoring legitimate conservative content. Some conservatives feel so aggrieved they are even pushing to revive the fairness doctrine, which they used to oppose.

Bias and misinformation are impossible to measure, which puts a rather obvious damper on peoples’ certainty about them. Ironically, this is at least partially because of the human brain’s built-in biases, such as recency bias, availability bias, and pessimistic bias. In fact, media bias and misinformation are nothing new, and have likely gotten neither better nor worse over time.

These problems have been around so long that the 17th century philosopher Pierre Bayle wrote in an issue of his 1680s periodical Nouvelles de la République des Lettres (News from the Republic of Letters):

“History is dished up very much like meat. Each nation and religion takes the same raw facts and dresses them in a sauce of its own taste, and each reader finds them true or false according to whether they agree or disagree with his prejudices.”

More than 300 years later, this holds up well. And it’s not just with history. People also put their own tastes on current events. Different people take identical facts and prepare them differently, usually in line with whatever their ideological priors are.

Just being aware that everyone does this can go a long way toward minimizing the harmful effects of bias and misinformation. Beyond awareness, there are also many simple, low-effort actions one can take, some of which Bayle might endorse if he were alive today:

  • Avoid cable news channels. They do not inform people, so much as get them riled up. People who feel outraged click on more articles, keep the TV on, and generate more ad revenue. Outlets encourage this by framing news stories as us-vs.-them struggles first, and only secondarily by presenting information. These are two very different things! Learn to tell them apart. If you find yourself getting outraged over something a personality figure from the other political party said, or about the culture war story of the day, that’s usually a good sign that you’re getting riled up rather than informed. There are better uses for your time, and for your blood pressure.
  • Purge low-quality sources from your social media feeds (or abstain entirely). Use those mute and block buttons on people who post low-quality content that does not add value to your feed. That’s your space, and you can curate it however you want. If someone’s posts are mostly outrage stories, your social media feed will likely be both more enjoyable and more informative if they are not part of it. Spend some real-life time with that person instead, which will likely elicit better social etiquette. People are more considerate of others when they are face to face rather than venting their spleen, alone, into a keyboard.
  • Put a little effort into statistical literacy, and be skeptical of too-good-to-be-true stories that appeal to your ideological priors. Arming yourself with the right tools is as easy as picking up a layman-friendly book or two. Financial Times columnist and BBC presenter (and friend of CEI) Tim Harford’s latest book, The Data Detective, is an excellent guide that is also a delight to read. I also recommend Hans Rosling’s Factfulness, which I reviewed earlier on this blog. Jonathan Rauch’s new book The Constitution of Knowledge has a lot wisdom, which he also shared earlier this year at a CEI online event. My colleague Iain Murray strongly recommends his old boss’ book, David Murray, Joel Schwartz, and S. Robert Lichter’s It Ain’t Necessarily So: How the Media Remake Our Picture of Reality. Reading a chapter a day from any of these books is a far better use of 30 minutes than getting outraged over Tucker Carlson or Rachel Maddow’s latest rant.
  • Keep an eye on the longer arcs of history, not just today’s ephemeraElizabeth Nolan Brown’s recent Reason article “40 Ways Things Are Getting Better” is one example of journalism that gets this. There are plenty of reasons for short-term pessimism; that keep groups like CEI busy. But there is also a strong case for long-run optimism. Both can simultaneously be true, as CEI founder Fred Smith captured in his “Despairing Optimist” letters. Matt Ridley’s The Rational Optimist and his new book How Innovation Works, for which he also did a CEI event, are immensely helpful for seeing the big picture.

Notice that none of these strategies involve government regulating political speech. They are all ideas that you and I can implement right now; change begins at home. Ultimately, individuals hold power over bias and misinformation, not the other way around. We should learn to use that power wisely, and not delegate it away to Washington, where it will get politicized and misused. It takes some effort, which is why many people don’t bother. But the payoff is worth it.

Pierre Bayle had a good sense of this dynamic. He was an important bridge figure between the Scientific Revolution and the Enlightenment—which means he helped to inspire modernity as we know it. He emphasized the virtues of tolerance and skepticism by individuals, in part because he was forced into exile from his native France over his religious beliefs. He settled in the more tolerant Netherlands, where he produced works in astronomy, philosophy, religion, literature, and even produced the Dictionnaire Historique et Critique (Historical and Critical Dictionary), an early encyclopedia that predated Denis Diderot’s more famous 1751 Encyclopédie by 60 years. France’s outrage-induced loss was the Netherlands’ gain, and ours.

We live in better times. But the lessons Bayle took from his day’s outrage culture are still useful in dealing with today’s excesses. Times change, but people are people, wherever you go. That is mostly to the good—though as we see in the news and on social media, not entirely. There is always reason for optimism, if we know how to look for and act on it.

Hayek Was No Diplomat, but He Had a Point

Peter Boettke summarizes’ F.A. Hayek’s famous 1974 Nobel Prize lecture on p. 83 of his new book The Struggle for a Better World:

At the start of Hayek’s lecture, he implores his audience to fess up to the fact that those in the economics profession had nothing to be very proud of, as they had made a mess of things.

This is not how one wins hearts and minds. No wonder Hayek was unpopular in his own profession! But he makes an important point that better diplomats still need to make today, again and again:

Hayek goes on to argue that the cause of the mess was the misconstruing of what economics can, cannot achieve as a science. Economics is a science of complex phenomena, yet the modern administrative state demanded an economics of simple phenomena to accomplish the policy tasks conceived.

Economists and the policy makers they work with need to be more humble. But humility does not come easily to people in public policy. In fact, there is a selection bias against it. People tend not to enter the field unless they believe they can come with a plan that’s better than what everyone else has come up with. This audacity is desirable to some extent–things would rarely improve if nobody thought improvement was possible. Market entrepreneurs must have the same audacity to succeed in their world. But many policy makers do not check their ambitions with enough humility. And unlike private entrepreneurs, there is no profit-and-loss system to let them know when they’re wrong.

Who Bears the Burden of Proof in Justifying Regulations?

John Stuart Mill gave his answer on p. 938 of the Liberty Fund edition of his Principles of Political Economy, in volume 3 of his collected works:

“[T]he onus of making out a case always lies on the defenders of legal prohibitions.”

The modern legal scholar Randy Barnett calls this the presumption of liberty. People are presumed to be free to act. If a third party wants to intervene, the burden is on them to prove why they should be allowed to.

Book Review: Walter Williams – Up from the Projects: An Autobiography

Walter Williams – Up from the Projects: An Autobiography (Stanford: Hoover Institution Press, 2010)

Williams, in typically blunt fashion, said that his purpose in writing this short (160 pages) autobiography wasn’t self-aggrandizement. It was to make it harder for people to misquote him. It also gave him something to refer journalists to, rather than waste time answering the same old questions over and over. It pairs well with Suffer No Fools, a documentary on Williams’ life released around the same time.

I wrote about the arc of Williams’ life in my recent tribute to him. The short version is that he was born poor in Philadelphia. He was smart but not necessarily obedient, though he wasn’t afraid of working hard when he wanted to. He worked as a cab driver for a while, spent some time in California with his father, and spent two years in the army in the Jim Crow south. He caused enough good trouble to be shipped off to Korea, and then honorably discharged. Outside of the military, he was also arrested three times for causing good trouble, and was once the victim of a racially motivated police beating in Philadelphia while driving his cab.

Williams eventually discovered economics, and earned his Ph.D at UCLA when its department was ranked 12th in the country. One of his teachers was Armen Alchian, justly considered one of the world’s top price theorists. Williams eventually wound his way to George Mason University in 1980, where he would teach until the day he died.

Williams’ rare gift for clearly communicating economic ideas gave him national prominence, and helped give Mason’s fledgling economics department a national reputation. He wrote a long-running column, frequently appeared on radio and television, and, oddly, was a frequent fill-in host for Rush Limbaugh. Williams also continued to teach George Mason’s first-year Ph.D-level microeconomics course, which became a rite of passage for grad students.

Book Review: Walter Williams – All It Takes Is Guts: A Minority View

Walter Williams – All It Takes Is Guts: A Minority View (Washington: Regnery, 1987)

A collection of Williams’ syndicated columns. He covers a variety of issues including race and gender, regulation, economic policy, and more. While much of the numbers and political personalities are dated at this point, the core debates are very much alive.

Many of the best columns come from William’s overlooked research on apartheid-era South Africa. He went on a research and speaking tour there in 1980. He found that apartheid, as most racism does, had a sharp anti-capitalist underpinning. This directly contradicts many Western activists’ views. If socialism means significant state ownership of the means of production, then South Africa had a socialist economy. Williams argued that “if socialists would convert to Christianity, they would find themselves quite comfortable in South Africa.”

State intervention was necessary to enforce apartheid because discrimination is bad for business. It denies shuts out large numbers of people from the economy for no good reason. A lot of South Africans would not follow apartheid-style rules voluntarily, including many people who were genuinely racist. The South African government overruled markets’ anti-racism with state-owned media, oil, and other industries.

Labor regulations such as minimum wages were enforced for openly racist reasons. Blacks generally were paid less than whites, so minimum wages essentially either shut Black workers out, or gave white workers first crack at any job. Minimum wage regulations in America were passed during the Progressive Era for the same reason. They continue to have similar effects on minority employment, even though this is no longer intended.

Williams also argued that well-meaning American efforts to disinvest from South Africa would backfire for two reasons. One, American investment in South Africa was a small share of total foreign investment there, and an even smaller share of total investment. Few people would notice. Two, the areas where Americans did invest tended to disproportionately involve Black workers, such as mining. American disinvestment would hurt Black workers there, while doing nothing to end apartheid. Fortunately, this became a moot point before too long. Racism remains a severe problem in South African culture, though, and likely will for generations to come.

From a historical perspective, it is interesting to see how far ahead of the curve Williams was during apartheid. He opposed racism the same as everyone else with a conscience. But he took the time to actually research the situation, travel to South Africa, learn about the situation on the ground, and then propose policies—economic and political liberalization and cultural engagement—that would actually do good, rather than just signal good intentions.

Walter Williams, 1936-2020

Walter Williams passed away this week at age 84. He was the rare economist to succeed as both an academic and a popular communicator. His success came both despite and because of his growing up poor in Philadelphia. He and his sister were raised by a single mother. They lived in a housing project for much of his childhood, and they were on and off welfare for much of that time. But she set high standards for her children, and saw that they met them. In the introduction to Williams’s 1987 book All it Takes Is Guts: A Minority View, he thanked his mother, “who taught me to be independent, suspicious of the status quo, and ambitious.”

After a single semester of college in Los Angeles, he worked as a cab driver for a bit back in Philadelphia, then served in the Army. He was stationed in the Jim Crow south, and the experience was eye-opening. He committed several inspired acts of disobedience aimed at fighting the pervasive racism around him, which led to a failed attempt by one of his commanding officers to court-martial him, and a transfer to Korea. He also wrote a letter to President John F. Kennedy about racism in the military, and received a response from a higher-up in the Defense Department. This would not be the last of his writings to draw a response.

After the army, he worked as a probation officer, finished college, and earned his Ph.D. from UCLA at a time when its department was one of the country’s best. Williams spent his days in the company of world-class price theorists such as Armen Alchian, with whom he would remain friends until Alchian’s death in 2013. He also befriended James Buchanan, who would go on to win the economics Nobel for his role in founding public choice theory, and was briefly a UCLA faculty member during this period. He also met Thomas Sowell, who shares Williams’s gifts for clear reasoning and clear writing.

After bouncing around a few different academic positions, including Temple University and a year at the Hoover Institution at Stanford University, he found his home in 1980 at George Mason University, where he would teach for the rest of his life.

Mason had been granted its independence from the University of Virginia less than a decade before, and had no reputation to speak of. The whole school, not just the economics department, was essentially still under construction. Williams played a major role in building up their economics department, which has produced two Nobel Prize winners—Buchanan in 1986 and Vernon Smith in 2002, who also won CEI’s Julian Simon Award in 2015. Many of today’s top economists either attended or teach at Mason.

Williams would not only become the department’s longtime chairman, he would continue to teach the first-year microeconomics course required of all Ph.D students. Most professors who achieve Williams’s level of fame drop their teaching responsibilities like a hot potato. Williams embraced it. His course became something of a rite of passage, and he had a way of pairing a no-nonsense demeanor with a sense of encouragement. He wanted his students to do well, but they had to earn it.

But there is that whole fame part. Like many academics, he had top-notch mentors and colleagues, such as Alchian, Buchanan, and Sowell. But his emphasis on classroom work also sharpened his ability to explain ideas in ways that people can understand them. This is what would give him a national reputation—along with the fact that he was unapologetic about where his reasoning led him, even when it was unpopular. And on issues from minimum wages to labor regulations to fighting racial discrimination, he often was unpopular.

Williams published roughly 150 scholarly articles in his career, which is more than most academics achieve. But this was only a fraction of his output. Of his 13 books, four are collections of his newspaper columns, which he continued to write until the end of his life. Few economists have had more readers than Walter Williams. He had a gift for communication, and he was not shy about using it.

Williams’s first famous book was 1982’s The State Against Blacks, which argued that many well-intended government policies actually made racial discrimination worse. Minimum wages, for example, not only lop off the bottom rungs of the economic ladder, as I’ve also argued, they actually make it easier for racist employers to discriminate. When the price of labor goes up, more people vie for fewer job openings. Employers have an easier time using non-price reasons for choosing whom to hire, such as hiring only people of their own race, or intentionally excluding Blacks or women.

Rent controls reduce the incentive to build new housing or to maintain existing housing. Minorities are worst affected by this, for similar reasons. With fewer housing spots available compared to demand, racist landlords can indulge their bigotry far more easily than they can in a free market.

Ball State University economist Steve Horwitz, who earned his Ph.D at George Mason and was CEI’s 2020 Julian Simon Award winner, said in a Facebook post, “*The State Against Blacks* was formative in my thinking about how markets and race interacted, and what a progressive libertarianism might look like. *South Africa’s War Against Capitalism* helped too.”

That book argued that Apartheid was the opposite of free-market policy. Markets punish discrimination, or at least make it more expensive. Apartheid was government regulation that forced even non-racists to discriminate, on pain of fines or worse. Markets bring people together so they can exchange for mutual benefit. It takes government policies such as Jim Crow and Apartheid to keep people apart—hence the very term “Apartheid.”

Horwitz’s point is an important one for the future of the free-market movement. Williams is an excellent role model here. Most free-market advocates have too narrow a view of things. Economic freedom is only one kind of freedom that markets can help preserve. Markets are also moral playgrounds, as George Mason economists Virgil Storr and Ginni Choi argue. In markets, people learn to trust and to be trustworthy. They learn that openness to strangers is an opportunity, not a threat. Everyone has something to offer, if you let them. Markets teach people that not only is discrimination is bad for business, it is also immoral.

Sound economic reasoning, such as Williams spent a career practicing, shows why the conventional policies people turn to in fighting discrimination are largely counterproductive. It also shows why markets are far more effective for achieving progressivism’s nobler goals than their usual policies. That dialogue needs to be more open; nothing was ever accomplished with silence.

If more classical liberals take the time to show how free markets, and not top-down policy making, can empower women, minorities, and the developing world, they can help reduce poverty, create opportunities for innovation, and reduce racism. Above all, markets create opportunities. For people who lack them, this is incredibly meaningful.

These are not always popular things to say, inside the liberty movement or out of it. But Williams didn’t mind. His reasoning is correct, as was his moral sense. So, he spoke up in print, on radio, and on television. While the fit does not seem natural, he was a frequent guest host for Rush Limbaugh’s talk radio program. Williams’s appearance in Milton Friedman’s 1980 Free to Choosetelevision series on PBS led to his own three-part PBS series in 1982, Good Intentions, based on The State Against Blacks. In his autumn years, Williams was the subject of the documentary “Suffer No Fools,” and wrote his autobiography, “Up from the Projects.” And he continued writing until almost the day he died.

Walter Williams set quite the example in his life and in his work. Now it is up to us to live up to it.