Category Archives: Pith

What Causes Rent-Seeking?

us capitol dome
A bit of pith, courtesy of James Buchanan in his excellent rent-seeking primer, “Rent Seeking and Profit Seeking,” which can be found in pages 103-115 of the first volume of his collected works, The Logical Foundations of Constitutional Liberty (the quote is on p. 109):

Rent-seeking activity is directly related to the scope and range of governmental activity in the economy, to the relative size of the public sector.

Or, as the bank robber Willie Sutton supposedly put it even more pithily, “that’s where the money is.”

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Quotation of the Day

Liberalism vs. illiberalism in a nutshell:

“[I]t is one thing to persuade, another to command; one thing to press with arguments, another with penalties.”

-John Locke, A Letter Concerning Toleration

John Locke, Angry Internet Commenter

john-locke
It isn’t just crazy Internet people who use all-caps to emphasize their points, apparently. John Locke, writing well before the Internet age in 1690, writes early in his Second Treatise of Government (at the end of section 8):

EVERY MAN HATH A RIGHT TO PUNISH THE OFFENDER, AND BE EXECUTIONER OF THE LAW OF NATURE.

At least it’s all-caps in my Kindle edition. The Cambridge edition uses mere italics. Either way, do not mess with this man.

Quote of the Day

From p. 57 of George Stigler’s witty and often humorous essay collection, The Intellectual and the Marketplace:

Economics is sometimes called the dismal science. I resent the phrase, for only young children should get angry at a corpus of knowledge that prevents hopeless and costly endeavors.

Why Opinion Pages Are Insipid

Benjamin Constant, in 1815, presciently describes nearly every U.S. newspaper’s editorial page two centuries later, from David Brooks on the right to E.J. Dionne on the left:

The ambition of the writers of the day is at all times to seem more convinced than anyone else of the reigning opinion. They watch which way the crowd is rushing. They dash as fast as they can to overtake it. They think thereby to acquire glory for providing an inspiration they actually got from others.”

-Benjaimin Constant, Principles of Politics Applicable to All Governments, p.4.

As opposed to, say, thinking for oneself and consistently applying the basic principles one believes in.

Stigler on the Regulatory Mindset

George Stigler was a Nobel-winning economist who applied the economic way of thinking to regulation at a time when doing so was even more unfashionable than it is today. He was also known for his wit.

Near the end of his paper “The Economists’ Traditional Theory of the Economic Functions of the State,” which appears as chapter 7 in his 1975 collection The Citizen and the State: Essays on Regulation, he has a pithy public choice-style insight (p. 112):

We have a long, long list of market failures. These should be corrected if possible, and there are only two alternatives to the market: the state, and prayer. It turns out the two were merged in one.

There’s a lot packed into that bit of pith. Intentionally or not, Stigler was referring to what Harold Demsetz called the Nirvana fallacy. The relevant comparison isn’t between market outcomes and perfection; it’s between market outcomes and possible improvements. This is where economists’ never-ending focus on perfect competition models comes back to bite them in the rear end. Economists and regulators alike pray fervently.

Unable to escape from Hayek’s knowledge problem and public choice concerns such as regulatory capture, regulations not only routinely fail to improve on market outcomes, they often make make matters worse.

As Arnold Kling pointed out, the lesson learned isn’t the idealistic Chicago school motto, “Markets work well. Use markets,” nor is it the Nirvana fallacy-prone MIT-Harvard dictum, “Markets fail. Use government.” It’s the realist GMU-style “Markets fail. Use markets.”

Politics 101

When votes are at stake, truth takes a distant second to electoral success. This was just as true in Benjamin Constant’s 1815 as it is in our 2012:

“Everyone is more concerned to hit hard than accurately.”

-Benjamin Constant, Principles of Politics Applicable to All Governments, p. 4.