Today is the 209th birthday of Frederic Bastiat, the patron saint of economic communicators.
Of all the essays ever written, the one I most wish every voter could read and understand is Bastiat’s That Which is Seen and That Which is Not Seen. A boy breaks a window. Someone in the crowd observes that it’s all for the best—if windows weren’t occasionally broken, then glaziers would starve. This can’t be right, says Bastiat. If it were, we’d have no reason to diapprove of a glazier who pays boys to break windows. But why is it wrong? It’s wrong because it focuses on what is seen—six francs in the glazier’s pocket—and ignores what is unseen, namely the shoemaker who is deprived of a sale because those six francs come from what would have been the homeowner’s shoe budget.
Bastiat’s great insight in this essay is that exactly the same fallacy, in only slightly subtler form, underlies many of the public policy positions that were taken seriously in the 19th century—and, we might add, in the 21st.
Continue reading ‘Frederic Bastiat’
Print
Today is the 165th birthday of Georg Ferdinand Ludwig Philipp Cantor, the mathematician who indirectly inspired me to major in math. In my first few semesters of college, I was at best an indifferent student, finding little inspiration in the humanities majors I was bouncing around among, playing a prodigious amount of pinball, and attaining (according to rumor) history’s first-ever grade of C in Peter Regenstrief’s Poltical Science 101. Then one day, my friend Bob Hyman happened to mention that some infinities are larger than others, and set my life on track. This—the vision of Georg Cantor—was something I had to know more about. Before long I was immersed in math.
What does it mean for some infinities to be larger than others? Well, for starters, some infinite sets can be listed, while others are too big to list. The natural numbers, for example, are already packaged as a list:
The integers, by contrast (that is, the natural numbers plus their negatives) aren’t automatically listed because a list, by definition, has a starting point, whereas the integers stretch infinitely far in both directions. But we can fix that by rearranging them:
So the integers can also be listed.
Continue reading ‘Split Infinities’
Print
A month ago, I posted a portrait gallery of my personal heroes and invited readers to identify the faces; a few days later I posted the answer key.
To my mild surprise, the face that generated the most controvery—in both comments and email—was that of Abraham Lincoln, who was born 201 years ago on this day. Readers pulled no punches. ScottN wrote: “Lincoln is on a different list I have: People Who Caused the Most Unnecessary Deaths.” Peter wrote: “[Lincoln] was a tyrant and a racist to boot.” And the consistently provocative and thoughtful Bob Murphy wrote:
I would love to hear your reasons for including Lincoln. I have the same misgivings as the other commenter above, though I was going to introduce them with levity. (E.g. “I know you like math, Steve, so is that why you included the guy who maximized the wartime deaths of Americans?”)
I replied to Bob (and others) by email, with some sketchy thoughts and a promise to blog about Lincoln sometime on or before his birthday. With the deadline looming, I realize that I have little to add to those sketchy thoughts. So here, with only some minor editing, is the email I sent to Bob Murphy:
Continue reading ‘Ten Score and One Year Ago’
Print
In the theory of externalities—that is, costs imposed involuntarily on others—there have been exactly two great ideas. The first, forever associated with the name of Arthur Cecil Pigou (writing about 1920) is that things tend to go badly when people can escape the costs of their own behavior. Factories pollute too much because someone other than the factory owner has to breathe the polluted air. Nineteenth century trains threw off sparks that tended to ignite the crops on neighboring farms, and the railroads ran too many of those trains because the crops belonged to someone else. Farmers keep too many unfenced rabbits when they don’t care about the lettuce farmer next door.
Pigou’s solution—and it’s often a good one—is to make sure that people do feel the costs of their actions, via taxes, fines, or liability rules that allow the victims to sue for damages. Do a dollar’s worth of damage, and you’re charged a dollar.
Pigou endorsed this policy not because it seems fair, though it does seem fair to many, but because it yields, under what he believed to be very general conditions, the optimal amounts of damage. We don’t want too much pollution, but we don’t want too little, either, given that pollution is a necessary by-product of a lot of stuff we enjoy. Pigou offered a proof—now standard fare in all the textbooks—that his policies lead to the perfect compromises, in a sense that can be made precise.
The second great idea about externalities sprang full-blown from the mind of a law professor and subsequent Nobel prize winner named Ronald Coase, who stunned the profession in 1960 by pointing out that Pigou’s argument runs both ways. If you breathe the pollution from my factory, I’m imposing a cost on you—but at the same time, you’re imposing a cost on me. After all, if you lived somewhere else, you wouldn’t be complaining about the smoke and I wouldn’t be getting punished for it.
Continue reading ‘Happy 99th Birthday, Ronald Coase’
Print
The greatest financial mistake of my life occurred on the day my father offered to bet his entire net worth against mine that the great Johnny Mercer had written the song Don’t Fence Me In. Now “Don’t Fence Me In” is a marvelous song, and Johnny Mercer could have been justifiably proud to write it—if only Cole Porter had not written it first. I happened to know this about Cole Porter; I knew it as surely as I know the authors of Romeo and Juliet and The Wealth of Nations. But for some reason I’ve never understood, I refused the bet, thereby condemning myself to a life of poverty. Still I console myself with the knowledge that you don’t have to be rich to be touched by the grace of Johnny Mercer, who was born one hundred years ago today.
The guy was a phenomenon. He wrote the lyrics for over 1500 songs, and the music for at least a few hundred. And he was a singer-songwriter decades before the likes of Bob Dylan, Phil Ochs and Joni Mitchell allegedly invented the genre. God, he was smooth. By and large, I’d rather hear Johnny Mercer sing his own songs than any of the myriad covers that have become American classics—and that’s saying something for a guy who was covered repeatedly by the likes of Frank Sinatra and Ella Fitzgerald.
Continue reading ‘Too Marvelous for Words’
Print
