Thursday, 18 August 2022

"Think globally, act locally"

As economist David P. Henderson explains, this post's title (shared with his own) is not a misprint. "I know," he says, "that the actual bumper sticker, which I used to see around California regularly, is 'Think Globally, Act Locally'.

(And there's an even better one that says Think Globally, Drink Locally. But that's for another day.)

Anyway, Henderson continues, his point is that too many folk -- especially in a hot summer where reporters and politicians live -- are confusing climate and weather. Even alleged scientists. Hear him out:

I watched CBS Sunday Morning’s August 7, 2022 segment on climate change, one of the people interviewed seemed to have [this confusion]. His name is Peter Kalmus and he’s a climate scientist at NASA’s Jet Propulsion Laboratory. In the interview with Tracy Smith, he pointed to the hot summer in big parts of the United States and said:
'Twenty years from now, we will look back on the summer of 2022 and we will wish that he had it this good. We will wish that it was this cool. And that’s not an exaggeration whatsoever.'
    But wait. He’s looking at temperatures in the United States. I just got back from my cottage in Canada, where the spring and early summer were unusually cool. And my cottage is only about 60 miles north of the U.S. border. So he seems to be 'thinking locally,' that is, generalising from weather in the United States, and acting globally, that is, advocating solutions for the world.
    Moreover, he seems to be confusing climate and weather... So actually, Peter Kalmus is exaggerating.

A "climate scientist" exaggerating. Would surely hardly ever happen.

Yes, this is an overseas sample. But I'm sure you can find your own local examples...

Wednesday, 17 August 2022

"Writers represent the part of our culture that engages with humanity through ideas ... May it never be eroded by the brute force of an arm wielding a knife."

Salman Rushdie (seen above in earlier days), was attacked by a knife-wielding loon earlier this week, 
33 years after a 'fatwa' was placed upon his head for writing his novel The Satanic Verses

"[J]ust as the mind recoils at the sight of a single book burned, the spilled blood of an author inspires revulsion.
    "[Salman] Rushdie ... has become something of an absolutist on the freedom of expression. In a speech at Emory University in 2015, he said that “limiting freedom of expression is not just censorship, it’s an assault on human nature.” He rejected the relativistic notion that “freedom of expression is culturally specific” and that certain cultures can simply “reserve the right to reject it.” To him, the right to speak your mind, about anything, is universal, and he warns of the danger that accompanies the fact that it has ceased to be considered as such....
    "Writers represent the part of our culture that engages with humanity through ideas, whose passion is expressed through sentences and paragraphs and pages. It’s a realm we should not just preserve but defend. May it never be eroded by the brute force of an arm wielding a knife. We should all hope that Rushdie survives. And not just because a writer should never have to give his life for what he has written. But because we need him to keep reminding us of the worst of what can happen—the violence that can happen—to someone who has used nothing more than his words."

          ~ Gal Beckerman, from his op-ed 'All Because Salman Rushdie Wrote a Book'

“What was once destiny is now a decision.”

“What was once destiny is now a decision.”
~ Russ Roberts, on how human progress expands the choices available to us. From his interview with Tim Ferris about his new book, Wild Problems in Life and the Decisions That Define Us: Listen here, transcript here. And more here.


Tuesday, 16 August 2022

INFLATION: "Under such a system, the increase in the quantity of money is limited only by the self-restraint of government officials."

"A system of fiat paper money, that is, a system in which the monetary unit is a mere piece of paper stamped as such by government officials—a system in which pieces of paper are not a claim to anything beyond themselves and thus themselves possess ultimate debt-paying power—such a system virtually guarantees that prices will rise. Under such a system, the increase in the quantity of money is limited only by the self-restraint of government officials. As will be shown, these officials have great incentives to increase the quantity of money and are under constant pressure to increase it. Hence, the quantity of money increases at a rate sufficient to increase aggregate demand more rapidly than aggregate supply, with the result that prices rise."
~ George Reisman, from page 506 of his book Capitalism: A Treatise on Economics. Read it online here, or buy it here (currently at half-price!)


"I strongly oppose that regime, and trade with the Chinese people is my method of opposing the regime."

wut as of today, we should be rooting for China to become a rich country, because in the long run that’s the only way to preserve world peace. [America's] current trade war is giving the hardliners in the Chinese government the upper hand, and sidelining the liberals. (Ditto for Iran, where sanctions have also backfired.) That’s exactly the opposite of what my commenter wants to happen. We tried trade sanctions against Japan in the 1930s, and that did not work.
    "It may feel good to 'take a stand' against evil. But the best way to do so is to engage in mutually beneficial trades with the victims of the evil regime, which means helping the oppressed residents of the country you are trading with. If we had been trading with Cuba over the past 60 years, the Castro regime would likely be gone by now. It’s the average people who suffer when you cut off trade, not the leaders.
    "Now let me answer the commenter’s question: 'How can you support in any way the most murderous, totalitarian empire in world history?'
    "I strongly oppose that regime, and trade with the Chinese people is my method of opposing the regime."

          ~ Scott Sumner, from his post 'Politics is the problem -- trade is the answer'

Monday, 15 August 2022

Political principles

"Parties of the right once they stray from their principles find themselves out of office.
    "Parties of the left once they stick to them they’re out of office."

          ~ Bob Jones, speaking in the 1984 election [hat tip Cactus Kate]

Friday, 12 August 2022

The New Green Imperialism: Fossil Fuels for me, but not for thee

"The rich world’s fossil fuel hypocrisy is on full display in its response to the global energy crisis triggered by Russia’s invasion of Ukraine. While the wealthy G7 countries admonish the world’s poor to use only renewables because of climate concerns, Europe and the United States are going begging to Arab nations to expand oil production, Germany is reopening coal power plants, and Spain and Italy are ramping up African gas production. So many European countries have asked Botswana to mine more coal it will have to triple its exports.
    "A single person in the rich world uses more fossil fuel energy than all the energy available to 23 poor Africans. The rich world became wealthy by massively exploiting fossil fuels, which today provide more than three-quarters of its energy. Solar and wind deliver less than three per cent.
    "Yet the rich are choking off funding for any new fossil fuels in the developing world. Most of the world’s poorest four billion people have no meaningful energy access so the rich blithely tell them to 'leapfrog' from no energy to a green nirvana of solar panels and wind turbines. This promised nirvana is a sham consisting of wishful thinking and green marketing. The world’s rich [are showing they] would never accept off-grid, renewable energy themselves — and neither should the world’s poor."

Thursday, 11 August 2022

Grammarly: Government Edition

Need help with your political spin? Unable to properly prevaricate under pressure? Unsure how to redefine your words to help properly fudge them? Then has the trusted app Grammarly got news for you: 
“Whether you want to spin your way out of a recession, walk back your support of rioters, or simply rile up your donor base, Grammarly offers helpful suggestions to make your political messaging as murky as you need."

Think it's a joke? 

All the video's definitional changes are from real-life examples. For instance: A recession, long defined as two consecutive quarters of negative growth, is now something more subtle and complicated, only to be defined years after the fact by special experts. “Infrastructure,” which most people think of as roads, bridges, etc., now includes the green new deal, with tons of solar/wind subsidies. And of course views that were moderate, centrist, or even libertarian a couple of decades ago are now dangerous right-wing extremism.

An announcement about an Aotearoa Government Edition has already been announced. 

"That's just the way I am!"

"Saying 'that's just the way I am' is a missed opportunity for growth.
    "Personality is not your destiny. It's your tendency. No one is limited to a single way of thinking, feeling, or acting.
    "Who you are is not about the traits you have. It's what you decide to do with them."

           ~ psychologist Adam Grant [hat tip Jeffrey Young]


Wednesday, 10 August 2022

INFLATION: Critique of the "Cost-Push" Explanation in General

See earlier posts in this series about what doesn't cause inflation:

"The supporters of the various cost-push doctrines recognise the validity of the formula for the general consumer price level*. However, they perceive the role of rising demand in a different way than do the supporters of the quantity theory of money. While the supporters of the quantity theory of money see more monetary demand as the cause of higher prices, the supporters of the cost-push doctrines see it as the cause of greater production and supply. In their view, more demand causes correspondingly more production and supply and therefore does not raise prices. The reason the supporters of the cost-push doctrines believe this is because they see the existence of unemployed labour and idle plant-capacity, and they assume that so long as unemployment and idle capacity exist, the effect of more demand is simply to enable more people to be employed and therefore for production to be increased. 

    "The supporters of the cost-push doctrines are willing to concede that more demand is potentially capable of raising prices. But that, they say, could happen only in the context of an economy operating at full employment and in which, therefore, supply could not be further increased in response to more demand. At that point, they are willing to admit, more demand would not be accompanied by more supply and would thus drive up prices. The expression they use to describe this situation of more demand raising prices at the point of full employment is, of course, 'demand-pull inflation.' At the point of full employment, they say, more demand 'pulls up' prices. This so-called demand-pull inflation is the only potential influence of more demand on prices that they recognise. To them, more demand as a cause of inflation means 'demand-pull inflation.'

    "Observe how the supporters of the cost-push doctrines think. They have decided that more demand is capable of raising prices only at the point of full employment. They have decided that short of full employment, the effect of more demand is not higher prices, but more supply.... The reason rising costs are taken as the explanation is because, in fact, the prices of many [mass-produced] goods are determined in the first instance on the basis of their cost of production, as I showed in Chapter 6 of this book.

    "Of course, I also showed that all prices determined by cost of production are still ultimately determined by supply and demand... Cost of production—and this point is relevant now—is always based on prices, including wages, which are the price of labour....

    "The fact that cost of production is not an ultimate explanation of prices constitutes a major logical deficiency of the cost-push doctrine. Because what the cost-push doctrine is actually claiming is that some prices rise because other prices rise, and it is content to leave matters at that. For example, the supporters of the cost-push doctrine blame inflation on such things as the rise in the price of steel or the rise in wages achieved by various unions. They do not offer any explanation of what makes possible the higher price of steel or the higher wages obtained by the unions. 

    "In fact, as already shown, what the cost-push doctrine boils down to is the claim that certain key prices, and this includes wages, rise arbitrarily, without any explanation other than the greed of those who raise them. The cost-push doctrine, in the last analysis, is a doctrine that tries to blame price increases on some form of arbitrary power. It tells us, in effect, that prices rise simply because some powerful people are making them rise.

    "Now it is true that in our present economic system, that is heavily overlaid with government regulations and controls—i.e., the so-called mixed economy—arbitrary [politically-protected monopoly] power does exist.... But this much can be said right now: The basic reason why arbitrary power on the part of sellers is not a sufficient explanation of rising prices is that such higher prices as it might bring about always cause reductions in the quantity of the good or service that can be sold and, therefore, act as a brake on any further such price increases. This is closely related to an even more fundamental objection, namely, that the cost-push doctrines are equivalent to an attempt to blame inflation on falling supply, which we have already seen is invalid. 

Tuesday, 9 August 2022

"Inflation has not merely economic or social consequences, but moral and psychological ones too...."

"Inflation has not merely economic or social consequences, but moral and psychological ones too....
    "For one thing, inflation destroys the very idea of enough, because no one can have any confidence that a monetary income that at present is adequate will not be whittled down to very little in a matter of a few years.... Unfortunately, when there is inflation, the only way to insure against poverty in old age is either to be in possession of a government-guaranteed index-linked pension ... or to become much richer than one would otherwise aim or desire to be. And the latter turns financial speculation from a minority into a mass pursuit...
    "Inflation plays havoc with the virtue of prudence, for what is prudence among the shifting sands of inflation? When inflation rises to a certain level, it is prudent to turn one’s money into something tangible as soon as it comes to hand, for tomorrow, as the song goes, will be too late. Everything becomes now or never. Traditional prudence becomes imprudence, or naivety, and vice versa.
    "Inflation comes in more than one form. For quite a number of years it took the form of asset inflation, while the prices of consumables remained relatively constant or actually fell....
    "Asset inflation ... has certain social and psychological consequences. First, it puts the meaningful accumulation of assets for those who do not already possess them out of reach.... This in turn has the effect of transforming a society divided by permeable classes into a fixed caste society....
    "Asset inflation fosters delusions in those who benefit from it.... I am richer on paper, and for some dizzy people this feeling of wealth encourages sumptuary expenditure, often on credit.... Gone in my lifetime is the idea that debt is to be avoided, that it is discreditable to live entirely on credit, and shameful not to repay....
    "Inflation has not merely economic or social consequences, but moral and psychological ones too....

          ~ Theodore Dalrymple, from his post 'Inflationary Vice'

"Most modern economic theory describes a world ... through the government's eyes."


"Most modern economic theory describes a world presided over by a government (not, significantly, by governments), and see this world through the government's eyes. The government is supposed to have the responsibility, the will, and the power to restructure society in whatever way maximises [wellbeing]; like the U.S. Cavalry in a good Western, the government stands ready to rush to the rescue whenever the market 'fails,' and the economist's job is to advise it on when and how to do so. Private individuals, in contrast, are credited with little or to ability to solve collective problems among themselves. This makes for a distorted view of some important economic and political issues."

~ Robert Sugden, from his 1986 book The Economics of Rights, Co-operation, and Welfare

Monday, 8 August 2022

The Banality of Evil

Image Credit: Ryohei Noda-Flickr } CC BY 2.0

If Evil comes calling, do not expect it to be stupid enough to advertise itself as such. It’s far more likely that it will look like your favourite uncle, or your sweet grandmother. Or that nice man who rules Russia. Hannah Arendt’s eyewitness assessment of Nazi war criminal Adolf Eichmann as “terribly and terrifyingly normal” took the world by surprise, but as Lawrence Reed explains in this Guest Post, her thesis delivers the ever-timely warning that evil is, above all, banal.

Hannah Arendt’s Chilling Thesis on Evil

by Lawrence Reed
Nine months after the Nazi war criminal Adolf Eichmann died at the end of a noose in Israel, a controversial but thoughtful commentary about his trial appeared in The New Yorker. The public reaction stunned its author, the famed political theorist and Holocaust survivor Hannah Arendt (1906-1975). It was February 1963.

Arendt’s eyewitness assessment of Eichmann as “terribly and terrifyingly normal” took the world by surprise. Her phrase, “the banality of evil,” entered the lexicon of social science, probably forever. It was taken for granted that Eichmann, despite his soft-spoken and avuncular demeanor, must be a monster of epic proportions to play such an important role in one of the greatest crimes of the 20th Century.

“I was only following orders,” he claimed in the colourless, matter-of-fact fashion of a typical bureaucrat. The world thought his performance a fiendishly deceptive show, but Hannah Arendt concluded that Eichmann was indeed a rather “ordinary” and “unthinking” functionary.

How callous! A betrayal of her own Jewish people! How could any thoughtful person dismiss Eichmann so cavalierly?! Arendt’s critics blasted her with such charges mercilessly, but they had missed the point. She did not condone or excuse Eichmann’s complicity in the Holocaust. She witnessed the horrors of national socialism first-hand herself, having escaped Germany in 1933 after a short stint in a Gestapo jail for “anti-state propaganda.” She did not claim that Eichmann was innocent, only that the crimes for which he was guilty did not require a “monster” to commit them.

How often have you noticed people behaving in anti-social ways because of a hope to blend in, a desire to avoid isolation as a recalcitrant, nonconforming individual? Did you ever see someone doing harm because “everybody else was doing it”? The fact that we all have observed such things, and that any one of the culprits might easily, under the right circumstances, have become an Adolf Eichmann, is a chilling realisation.

As Arendt explained, “Going along with the rest and wanting to say ‘we’ were quite enough to make the greatest of all crimes possible.”

Eichmann was a “shallow” and “clueless” joiner, someone whose thoughts never ventured any deeper than how to become a cog in the great, historic Nazi machine. In a sense, he was a tool of Evil more than evil himself.

Commenting on Arendt’s “banality of evil” thesis, philosopher Thomas White writes, “Eichmann reminds us of the protagonist in Albert Camus’s novel The Stranger (1942) [or the singer who "shot a man in Reno, just to watch him die], who randomly and casually kills a man, but then afterwards feels no remorse. There was no particular intention or obvious evil motive: the deed just ‘happened.’”

Perhaps Hannah Arendt underestimated Eichmann. He did, after all, attempt to conceal evidence and cover his tracks long before the Israelis nabbed him in Argentina in 1960—facts which suggest he did indeed comprehend the gravity of his offenses. It is undeniable, however, that “ordinary” people are capable of horrific crimes when possessed with power or a desire to obtain it, especially if it helps them “fit in” with the gang that already wields it.

The big lesson of her thesis, I think, is this: If Evil comes calling, do not expect it to be stupid enough to advertise itself as such. It’s far more likely that it will look like your favorite uncle or your sweet grandmother. It just might cloak itself in grandiloquent platitudes like “equality,” “social justice,” and the “common good.” It could even be a prominent member of Parliament or Congress.

Maximilien Robespierre and Louis Antoine de Saint-Just, I suggested in a recent essay, were peas in the same pod as Eichmann—ordinary people who committed extraordinarily heinous acts.

Hannah Arendt is recognized as one of the leading political thinkers of the Twentieth Century. She was very prolific, and her books are good sellers still, nearly half a century after her death. She remains eminently quotable as well, authoring such pithy lines as “Political questions are far too serious to be left to the politicians,” “The most radical revolutionary will become a conservative the day after the revolution,” and “The sad truth of the matter is that most evil is done by people who never made up their minds to be or do either evil or good.”

Some of Arendt’s friends on the Left swallowed the myth that Hitler and Stalin occupied opposite ends of the political spectrum. She knew better. Both were evil collectivists and enemies of the individual (see list of suggested readings below). “Hitler never intended to defend the West against Bolshevism,” she wrote in her 1951 book The Origins of Totalitarianism, “but always remained ready to join ‘the Reds’ for the destruction of the West, even in the middle of the struggle against Soviet Russia.”

To appreciate Hannah Arendt more fully, you could begin by viewing the movie based on her life (trailer above), and I offer here a few additional samples of her writings:
The moment we no longer have a free press, anything can happen. What makes it possible for a totalitarian or any other dictatorship to rule is that people are not informed; how can you have an opinion if you are not informed? If everybody always lies to you, the consequence is not that you believe the lies, but rather that nobody believes anything any longer. This is because lies, by their very nature, have to be changed, and a lying government has constantly to rewrite its own history. On the receiving end you get not only one lie—a lie which you could go on for the rest of your days—but you get a great number of lies, depending on how the political wind blows. And a people that no longer can believe anything cannot make up its mind. It is deprived not only of its capacity to act but also of its capacity to think and to judge. And with such a people you can then do what you please.
The ideal subject of totalitarian rule is not the convinced Nazi or the convinced Communist, but people for whom the distinction between fact and fiction (i.e., the reality of experience) and the distinction between true and false (i.e., the standards of thought) no longer exist.
The essence of totalitarian government, and perhaps the nature of every bureaucracy, is to make functionaries and mere cogs in the administrative machinery out of men, and thus to dehumanise them.
The trouble with Eichmann was precisely that so many were like him, and that the many were neither perverted nor sadistic, that they were, and still are, terribly and terrifyingly normal. From the viewpoint of our legal institutions and of our moral standards of judgment, this normality was much more terrifying than all the atrocities put together, for it implied—as had been said at Nuremberg over and over again by the defendants and their counsels—that this new type of criminal, who is in actual fact hostis generis humani, commits his crimes under circumstances that make it well-nigh impossible for him to know or to feel that he is doing wrong.
Totalitarianism begins in contempt for what you have. The second step is the notion: “Things must change—no matter how. Anything is better than what we have.” Totalitarian rulers organise this kind of mass sentiment, and by organising it they articulate it, and by articulating it they make the people somehow love it. They were told before, thou shalt not kill; and they didn’t kill. Now they are told, thou shalt kill; and although they think it’s very difficult to kill, they do it because it’s now part of the code of behaviour.
The argument that we cannot judge if we were not present and involved ourselves seems to convince everyone everywhere, although it seems obvious that if it were true, neither the administration of justice nor the writing of history would ever be possible.

For Additional Information, see:
Lawrence W. Reed is FEE's President Emeritus, Humphreys Family Senior Fellow, and Ron Manners Global Ambassador for Liberty, having served for nearly 11 years as FEE’s president (2008-2019). He is author of the 2020 book, Was Jesus a Socialist? as well as Real Heroes: Incredible True Stories of Courage, Character, and Conviction and Excuse Me, Professor: Challenging the Myths of Progressivism. Follow on LinkedIn and Like his public figure page on Facebook. His website is His post first appeared at Fee.Org.

Friday, 5 August 2022

Thursday, 4 August 2022

Douglas Adams on democracy

"'It comes from a very ancient democracy, you see...'
    "'You mean, it comes from a world of lizards?'
    "'No'" said Ford, who by this time was a little more rational and coherent than he had been, having finally had the coffee forced down him, 'nothing so simple. Nothing anything like so straightforward. On its world, the people are people. The [political] leaders are lizards. The people hate the lizards and the lizards rule the people.'
    "'Odd,' said Arthur, 'I thought you said it was a democracy.
    "'I did,' said Ford. 'It is.'
    "'So,' said Arthur, hoping he wasn't sounding ridiculously obtuse, 'why don't the people get rid of the lizards?'
    "'It honestly doesn't occur to them,' said Ford. 'They've all got the vote, so they all pretty much assume that the government they've voted in more or less approximates to the government that they want.'
    "'You mean they actually vote for the lizards?'
    "'Oh yes,' said Ford with a shrug, 'of course.'
    "'But,' said Arthur, going for the big one again, 'why?'
    "'Because if they didn't vote for a lizard,' said Ford, 'the wrong lizard might get in. Got any gin?'"
~ Douglas Adams, from his novel So Long and Thanks For All the Fish

Wednesday, 3 August 2022

Now is good


The Hugh Laurie quote above offers somewhat similar advice to Conary's poem, below. Stephen Hicks has two stories that bear on both...
The Clock of Life, by Wilfred Grindle Conary
The clock of life is wound but once
And no man has the power
To tell just where the hands will stop,
At late or early hour.
To lose one’s wealth is sad indeed,
To lose one’s health is more.
To lose one’s soul is such a loss
As no man can restore.
The present only is our own.
Live, love, toil with a will.
Place no faith in ‘tomorrow’
For the clock may then be still.

Tuesday, 2 August 2022

"If a nation of engineers like Germany can’t make renewables work ... nobody can"

"Aussie PM Anthony Albanese [is] testing to destruction the fallacy that renewable energy can reduce power bills [as news comes that] 'Electricity prices rose to their highest on record – and the nightmare is set to continue'...
    "[The] Prime Minister’s response to this crisis is to stand by his modelling that renewables will bring down power prices. But even if renewables were capable of bringing down power prices, which they aren’t, by staying the course [the] PM is condemning ordinary Australians to years of excruciating electricity bills.
    "Remembers those coal plants various Aussie governments celebrated shutting down? Any of them could have taken the edge off today’s spiralling energy prices.
    "Remember those nuclear plants Australia refused to consider building? Nuclear plants are immune from short term price fluctuations, they only have to be refuelled every two years, and the next batch of fuel can be prepared ahead of time, ready for use. Australia has vast reserves of Uranium.
    "The one thing that won’t save [Australians] is renewables. If a nation of engineers like Germany can’t make renewables work, if Germany can’t sever their dependency on Russian gas through all the billions they have invested into renewables, nobody can."

Heatwaves: "Longer-term records show that heat waves in the 1930s remain the most severe in recorded U.S. history..."

"6. Longer-term records show that heat waves in the 1930s remain the most severe in recorded U.S. history (see Figure 3). The spike in Figure 3 reflects extreme, persistent heat waves in the Great Plains region during a period known as the 'Dust Bowl.' Poor land use practices and many years of intense drought contributed to these heat waves by depleting soil moisture and reducing the moderating effects of evaporation."
~ from the US Environmental Protection Agency website, cited in Calvin Beisner's article 'Are This Summer's Heatwaves Extraordinary?


Monday, 1 August 2022

"New Zealand's border fully re-opens today..."


... even as New Zealand leads the world.

It almost appears as if no-one cares about "it" anymore.

As a great woman once observed, you can evade reality, but you can't evade the consequences of evading reality.

[Charts from OurWorldInData]

"When plunder becomes a way of life..."


"When plunder has become a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorises it and a moral code that glorifies it."
~ Frederic Bastiat, from the essay 'The Physiology of Plunder', in his book Economic Sophisms [hat tip Ron Manners]

Thursday, 28 July 2022

Government "Stimulus" Schemes Fail Because Demand Does Not Create Supply

Keynesian economists believe in the magical thinking that, if government spends more money, then it creates wealth in the process by allegedly "creating demand." But as Frank Shostak explains in this guest post, the only thing that can create demand for goods is genuine wealth generation. In short, the magical thinking of government "stimulus" schemes fail because demand does not create supply ...

Government "Stimulus" Schemes Fail Because Demand Does Not Create Supply

Guest Post by Frank Shostak

By popular thinking, the key driver of economic growth is the increase in total monetary demand for goods and services. It is also held that overall output increases by a multiple of the increase in money expenditure by government, consumers and businesses.

It is not surprising, then, that most commentators believe that through fiscal and monetary stimulus, government can prevent the US economy falling into a recession. For instance, increasing government spending and central bank monetary pumping will strengthen the production of goods and services.

It follows then that by means of increases in government spending and central bank monetary pumping the authorities can grow the economy. This means that the demand for the Reserve Bank's paper creates the supply of real goods and services -- in short, that demand creates supply. However, is this truly the case?

Why Does Supply Precede Demand?

In the real world, before something can be consumed if must first have been produced. In the free market economy, wealth generators do not produce everything for their own consumption. Part of their production is used to exchange for the produce of other producers. Hence, production always precedes consumption, with something exchanged for something else. This also means that an increase in the production of goods and services sets in motion an increase in the demand for goods and services.

According to David Ricardo:
No man produces but with a view to consume or sell, and he never sells but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person.
Note that one’s demand is constrained by one’s ability to produce goods, and the more goods that an individual can produce the more goods he can demand. If a population of five individuals produces ten potatoes and five tomatoes—this is all that they can demand and consume. The only way to raise the ability to consume more is to raise their ability to produce more. In this sense, demand is understood as desire backed with wherewithal -- in this case, with real goods.

On this James Mill wrote:
When goods are carried to market what is wanted is somebody to buy. But to buy, one must have the wherewithal to pay. It is obviously therefore the collective means of payment which exist in the whole nation constitute the entire market of the nation. But wherein consist the collective means of payment of the whole nation? Do they not consist in its annual produce, in the annual revenue of the general mass of inhabitants? But if a nation's power of purchasing is exactly measured by its annual produce, as it undoubtedly is; the more you increase the annual produce, the more by that very act you extend the national market, the power of purchasing and the actual purchases of the nation…. Thus it appears that the demand of a nation is always equal to the produce of a nation. This indeed must be so; for what is the demand of a nation? The demand of a nation is exactly its power of purchasing. But what is its power of purchasing? The extent undoubtedly of its annual produce. The extent of its demand therefore and the extent of its supply are always exactly commensurate.

Expanding Pool of Savings Is the Key to Economic Growth

Without the expansion and the enhancement of the production structure, it will be difficult to increase the supply of goods and services in accordance with the increase in the total demand. The expansion and enhancement of infrastructure hinges on the expanding pool of savings (this pool comprises of final consumer goods). The pool of savings is required in order to support various individuals that are employed in the enhancement and the expansion of the infrastructure.

Consequently, it does not follow that an increase in government outlays and loose monetary policy will lead to an increase in the economy’s output. It is not possible to lift the overall production without the necessary support from the flow of savings.

For instance, a baker produces ten loaves of bread and exchanges them for a pair of shoes with a shoemaker. In this example, the baker funds the purchase of shoes by producing the ten loaves of bread. Note that the bread maintains the shoemakers’ life and well-being. Likewise, the shoemaker has funded the purchase of bread by means of shoes that maintains the bakers’ life and well-being.

Assume the baker has decided to build another oven in order to be able to increase production of bread. To implement his plan, the baker hires the services of the oven maker, paying him with some of the bread he is producing. The building of the oven here is supported by the production of bread. If for whatever reasons the flow of bread production is disrupted, the baker would not be able to pay the oven maker. As a result, the making of the oven would have to be abandoned.

Hence, what matters for economic growth is not just tools, machinery and the pool of labour, but also an adequate flow of consumer goods that maintains individuals’ life and well-being.

Government Does Not Generate Wealth

Government does not produce wealth -- government in general is a consumer, not a producer -- so an increase in government outlays cannot revive the economy. Various individuals who are employed by the government expect compensation for their work. One of the ways it can pay these individuals is by taxing others who are generating wealth. By doing this, the government weakens the wealth-generating process and undermines prospects for economic recovery.

According to Murray Rothbard:
Since genuine demand only comes from the supply of products, and since the government is not productive, it follows that government spending cannot truly increase demand.
Certainly, governments fiscal and monetary stimulus do appear to improve the economy -- if, that is, the flow of existing real savings is large enough to fund all the government-sponsored activities, while still permitting a growth rate in the activities of wealth generators. If the flow of savings is decreasing, however, overall real economic activity cannot be revived regardless of any increase in government outlays and monetary pumping by the central bank. In this case, the more government spends and the more the central bank pumps, the more will be taken from wealth generators, thereby weakening any prospects for a recovery.

For example, when loose monetary and fiscal policies diverts bread from the baker, he will have less bread at his disposal. Consequently, the baker will not be able to secure the services of the oven maker. As a result, it will not be possible to boost the production of bread, all other things being equal.

As the pace of loose policies intensifies, a situation could emerge whereby the baker will not have enough bread left to even sustain the workability of the existing oven. (The baker will not have enough bread to pay for the services of a technician to maintain the existing oven in a good shape). Consequently, the production of bread will actually decline.

Similarly, other wealth generators, because of the increase in government outlays and monetary pumping, will have less savings at their disposal. This in turn will hamper the production of their goods and services and will retard and not promote overall real economic growth. As one can see, not only does the increase in loose fiscal and monetary policies not raise overall output, but on the contrary, it leads to a weakening in the process of wealth generation in general.

According to Jean-Baptiste Say:
The only real consumers are those who produce on their part, because they alone can buy the produce of others, [while] … barren consumers can buy nothing except by the means of value created by producers.


In popular thinking, increases in government spending and central bank monetary pumping strengthens the economy’s overall demand. This, in turn, the thinking goes, sets in motion increases in the production of goods and services, leading to the belief that “demand creates supply.”

If individuals do not allocate enough savings in order to support increases in the production of goods and services, however, the economy cannot expand. In order to be able to exchange something for goods and services, individuals must first have something to exchange. This means that in order to demand goods and services, individuals must first produce something useful.

Hence, supply drives demand, not the other way around. Increases in government spending result in the diversion of savings from the wealth-generating private sector to the government, thereby undermining the whole wealth generating process. Likewise, monetary pumping sets in motion the wealth diversion from wealth generators toward the holders of pumped money.

 Frank Shostak
Frank Shostak's consulting firm, Applied Austrian School Economics, provides in-depth assessments of financial markets and global economies. He received his bachelor's degree from Hebrew University, his master's degree from Witwatersrand University, and his PhD from Rands Afrikaanse University and has taught at the University of Pretoria and the Graduate Business School at Witwatersrand University.
A version of this post first appeared at the Mises Wire.

Wednesday, 27 July 2022

" One of the most surprising things I've witnessed in my lifetime is the rebirth of the concept of heresy...."

"One of the most surprising things I've witnessed in my lifetime is the rebirth of the concept of heresy. In his excellent biography of Newton, Richard Westfall writes about the moment when he was elected a fellow of Trinity College:
Supported comfortably, Newton was free to devote himself wholly to whatever he chose. To remain on, he had only to avoid the three unforgivable sins: crime, heresy, and marriage.
    "The first time I read that, in the 1990s, it sounded amusingly mediaeval. How strange, to have to avoid committing heresy. But when I reread it 20 years later it sounded like a description of contemporary employment....   
    "Why has this antiquated-sounding religious concept come back in a secular form? And why now?
    "You need two ingredients for a wave of intolerance: intolerant people, and an ideology to guide them. The intolerant people are always there. They exist in every sufficiently large society.... To unite [them], an ideology must have many of the features of a religion. In particular it must have strict and arbitrary rules that adherents can demonstrate their purity by obeying, and its adherents must believe that anyone who obeys these rules is ipso facto morally superior to anyone who doesn't....
    "How do you disable the concept of heresy? Since the Enlightenment, western societies have discovered many techniques for doing that, but there are surely more to be discovered.
    "Overall I'm optimistic...."

            ~ Paul Graham, from his article 'Heresy' [hat tip Duncan B.]

Tuesday, 26 July 2022

"The real lesson to be drawn from these not-really-unprecedented heat waves is that it is not the weather that we should fear. The real danger is the prospect of running short of the reliable, low-cost energy we need to protect ourselves from these climate dangers"

"This [northern hemisphere] summer’s heat waves are triggering the predictable hysteria among the climate elites.... The hysteria is replete with the always-reliable Chicken Little hand wringing about “saving the planet from the climate crisis' ... [and lamentations about] people prioritising keeping cool and safe over 'fighting climate change.' [T]he real lesson to be drawn from these not-really-unprecedented heat waves [however] is that it is not the weather that we should fear. The real danger is the prospect of running short of the reliable, low-cost energy we need to protect ourselves from these climate dangers due to the ... long-running War on Fossil Fuels...
    "My mission is and has long been to save humanity from the crusading planet savers. That 'European countries are now backing away from their commitments to meet carbon-neutral goals' may be bad news for climate catastrophists. But it’s actually good news for humans."

~ Mike LaFerrara, from his post 'The Real Danger is Not Too Much Heat, but Too Little Reliable Low-Cost Energy'
Mike LaFerrara's Recommended Related Reading:

Monday, 25 July 2022

"...if we stop setting the right priorities in technological development, if we stop improving the agricultural productivity, then progress will stop. That is what I fight against."

"LIFE EXPECTANCY IS THE BEST SINGLE MEASURE FOR QUALITY OF LIFE. The increase of world life expectancy with increasing world population (more people, more brains, more creative power) is the best evidence against the evil Malthusian movement [fixated upon environmental catastrophe] and the World Economic Forum’s destructive Great Reset ideology.
    "However, if we stop thinking rationally, if we stop investing in truthful science and education, if we stop setting the right priorities in technological development, if we stop improving the agricultural productivity, then progress will stop. That is what I fight against."

~ Franco Battaglia and Guus Berkhout, from, their post 'Ability of mankind to solve problems is beyond imagination'

"Māori are as diverse in thought and opinion as any other group of people."

"[N]o-one speaks on behalf of [all] Māori. I doubt even King Tuheitia would make such a claim. There are a few Māori leaders who might be able to pull together a coalition of Māori voices to speak with unity on some kaupapa of the moment, but Māori have a jealous tendency to always retain the right to speak on their own behalf. Even a kuia of Whina Cooper’s mana struggled to hold together the coalition of Māori interests that swung in behind the Land March of 1975. What is so hard to grasp about this - Māori are as diverse in thought and opinion as any other group of people."
~ Aaron Smale, from his op-ed 'The political liability of Matt Tukaki' [hat tip Home Paddock]

Saturday, 23 July 2022

The Government's He Puapua Report "often reads like a wish-list of outcomes that one might see emerging from a university Maori Studies Department"

James Allan was until recently a professor of law at Otago University, and is now at the University of Queensland. In other words, he is a knowledgable fellow who, being now outside the boundaries of academic backlash here, is able to speak freely about where he sees this place going.

He was commissioned by Lee Short's Democracy Action group to undertake a formal analysis of the Labour Government's 'He Puapua' Report, its programme for racial inequality that has all but become its Party Manifesto. He concludes:
[The He Puapua] Report often reads like a wish-list of outcomes that one might see emerging from a university Maori Studies Department.  
Brand new written constitution? Tick.
Based on an equal partnership between Maori and non-Maori (or the Crown or the government)? Tick.
To the extent that many or most New Zealanders will not be overly sympathetic to these sweeping proposals do we need to ‘educate the public’? Tick.
And do so at the taxpayers’ expense? Tick.
Give international law an implicit but clear pre-eminence or pride of place in terms of its importance as a valid and legitimate source of law? Tick.
Focus on groups not individuals? Tick.
Make a bland sort of socialistic equality of outcome the core concern rather than a far more liberal equality of opportunity? Tick.
Demand yet more money (better described as ‘resources’) from taxpayers for all of this? Tick.   
That and more of the same gives the flavour of this Report.

There is also more than a little hint of condescension scattered throughout the Report. For instance, ‘[w]e consider Aotearoa has reached a maturity where it is ready to undertake the transformation necessary to restructure governance to realise rangatiratanga Maori’ (p. iii, with a very similar sentiment expressed very similarly on p.4). Likewise, but less overtly, a similar tone is struck with the various mentions of the need for ‘a strong education campaign.’

Meanwhile difficult issues are glossed over, issues such as
  • who will count as a Maori  
  • the exiguous democratic credentials of international law itself, 
  • whether New Zealanders would be given a binding referendum vote on any package of reforms that emerged from these two-party insider negotiations, 
  • whether intra-Maori decision-making procedures would have to pass some sort of democratic hurdle, and so on.
Yet another difficulty, perhaps an inevitable one, is that those who lack Maori language skills will find the Report is sometimes wilfully obscure. Are we talking about sovereignty or self-determination and which variant of which? What, precisely, is ‘kawanatanga karauna’ or ‘nga taonga’? Readers not fluent in Te Reo, even those who are, will now and again feel they are wandering around a Report filled with the smoke of obfuscation.

Of course, in some ways the Report’s goals are perfectly sensible and would be shared by the vast preponderance of New Zealanders. Maori social welfare statistics are far below the median level and across all sorts of areas. Lifting these is a worthy goal and one that needs doing. However, whether that requires the sweeping constitutional and legal change mooted by the Report is quite another matter. Indeed, whether that mooted constitutional and legal change would in fact bring about those desired social welfare improvements is another matter. And it is one that can be doubted by reasonable people.

The main goal of this Report is to advocate for a good deal more power-sharing by the Crown with Maori, or at least with Maori tribal groups, than exists at present and to do so by relying heavily on the [1835] Declaration [of Independence].

The exact level of that desired power-sharing is kept unclear, but hints that the goal is a 50-50 split are scattered throughout. Still, the government of the day appears to have asked for precisely the sort of document that the authors of this Report delivered. Hence, it is no criticism of the authors of the Report that that is what they delivered....

This is a radical Report. Its recommendations are radical. Were those recommendations to be fulfilled to any considerable degree they would undercut majoritarian democracy; they would impinge upon elements of the Rule of Law; and they would exchange newer, worse, more aristocratic constitutional arrangements for older, better, more democratic ones.

At times the Report deals in condescension, verbiage and arguably deliberate linguistic obfuscation. There are repeated calls for more and more and more taxpayers’ monies. To attempt to legitimate the Report’s recommendations, international law is made to do a great deal of work, too much work. Putting international law on the same plane as (or possibly even on a higher plane than) the domestic law of one of the world’s oldest and most successful democracies is a tough sell, to put the point as kindly and as generously as possible.

None of those points in the preceding paragraph runs contrary to the possibility that the authors of the Report have delivered just what the government that commissioned the Report wanted. Indeed, the fact that that commissioning government has already taken steps in the areas of water and health to fulfil the spirit and general exhortations of the Report certainly suggests this is a plausible possibility.

The purpose of this first Analysis has been to examine in some detail the underpinnings of the Report, to lay out its conceits and first principles, and to show that these are unlikely to be widely shared or desired by the preponderance of New Zealanders. Whether an opposition political party will want to make use of this Analysis to fight back against its worldview and its suggested changes is something only time will tell.
Download his full Analysis here. Speech here:

Friday, 22 July 2022

INFLATION: A Critique of the “Profit-Push” Explanation

See earlier posts in this series about what doesn't cause inflation:
"According to the 'profit-push' doctrine [which we've heard most recently from politicians, union economists, and self-serving central bankers], prices rise primarily not because wages are rising but in order to increase the profits of 'powerful monopolists' and 'greedy big businessmen.' It is the push for ever higher profits, say the supporters of this doctrine, that initiates the so-called 'wage-price spiral'...
    "All things considered, it is probably by far the most popular explanation of inflation ... [but like all the other popular explanations] it ignores the fact that in the absence of rising [monetary] demand, rising prices reduce sales volume—that is, they reduce the quantity of goods that can be sold. The prospective loss of sales volume makes even a government-protected monopolist limit his price at some point....
    "This [is because] a rise in demand for [for the monopolist's products] is accompanied by an equivalent drop in the demand for other things. The effect of the drop in demand for other things is either to reduce the prices of other things or the supply of other things that is sold. In either event, the problem of inflation again does not come up—because we either have no rise in the general price level or one that can only be associated with a decrease in supply. 
    "In order for the [monopolist]’s rate increase to be connected with a problem of inflation, its customers must be in a position to enlarge their spending for [their products] without having to reduce their spending for other things. But this means they must be in a position to make a larger aggregate monetary demand. Consequently, the only possible explanation of how even protected legal monopolists could raise their prices in a way that is relevant to the problem of inflation is that of a growing aggregate monetary demand. And this, of course, in turn depends on an increasing quantity of money....
    "This is what is responsible for the rise in prices expressed in terms of paper money. The situation is comparable to selecting a melting ice cube as a unit of volume and then observing that all measurements of volume persistently increase....
    "Nevertheless, ... despite the fact that it is an effect, not a cause of inflation, many people, particularly in politics and in the news media, never tire of blaming rising prices on the rise in the nominal rate of profit and implicitly or explicitly demand that government controls be imposed to limit profits."
~ George Reisman, from pages 911-13 of his book Capitalism: A Treatise on Economics. Read it online here, or buy it here (currently at half-price!)

Sri Lanka Crisis Reveals the Dangers of Green Utopianism

President Rajapaksa’s fertiliser ban wasn't the only factor behind Sri Lanka’s economic crash. But as Chelsea Follett and Malcolm Cochran explain in this guest post it's definitely part of this story -- and a a grim preview of what can result from distorting markets in the name of utopian priorities. 

Sri Lanka Crisis Reveals the Dangers of Green Utopianism

by Chelsea Follett and Malcolm Cochran

Last week, a group of Sri Lankan protestors took a refreshing dip in President Gotabaya Rajapaksa’s pool. It was probably a welcome respite from the steamy eighty-degree day in Colombo, as well from the unprecedented economic crisis currently devastating the country. Over the last year, Sri Lanka has experienced an annual inflation rate of more than 50 percent, with food prices rising 80 percent and transport costs a staggering 128 percent. Faced with fierce protests, the Sri Lankan government declared a state of emergency and deployed troops around the country to maintain order.

On Thursday morning, the New York Times published an episode of The Daily podcast discussing some of the forces behind the collapse. They outlined how years of irresponsible borrowing by the Rajapaksa political dynasty, combined with the damage caused by Covid lockdowns to Sri Lanka’s tourism industry, drained the country’s foreign exchange reserves. Soon, the country was unable to make payments on its debt or import essential goods like food and gasoline. Strangely, the hosts of the podcast, which reaches over 20 million monthly listeners, didn’t mention President Rajapaksa’s infamous fertiliser ban once during the entire thirty-minute episode.

Yet the fertiliser ban was, in fact, a major factor in the unrest. Agriculture is an essential economic sector in Sri Lanka. Around 10 percent of the population works on farms, and fully 70 percent of Sri Lankans are directly or indirectly dependent on agriculture. Tea production is especially important, consistently responsible for over ten percent of Sri Lanka’s export revenue. To support that vital industry, the country -- until recently -- was spending hundreds of millions of dollars every year to import synthetic fertilisers. But that was "until recently."

Because during his election campaign in 2019, Rajapaksa promised to wean the country off these fertilisers with what he said would be a ten-year transition to organic farming. He expedited his plan in April 2021 with a sudden ban on synthetic fertilisers and pesticides. He was so confident in his policies that he declared in a (since stealthily deleted and memory-holed) article for the World Economic Forum in 2018, “This is how I will make my country rich again by 2025.” It didn't. As the eco-modernist author Michael Shellenberger writes, the results of the experiment with primitive agricultural techniques were “shocking:”
Over 90 percent of Sri Lanka’s farmers had used chemical fertilisers before they were banned. After they were banned, an astonishing 85 percent experienced crop losses. Rice production fell 20 percent and prices skyrocketed 50 percent in just six months. Sri Lanka had to import $450 million worth of rice despite having been self-sufficient just months earlier. The price of carrots and tomatoes rose fivefold. … [Tea exports crashed] 18 percent between November 2021 and February 2022 — reaching their lowest level in more than two decades.
Of course, Rajapaksa’s foolish policy wasn’t revealed to him in a dream. As Shellenberger points out, the ban was inspired by an increasingly Malthusian environmentalism led by figures like the Indian activist Vandana Shiva, who cheered the ban last summer. Foreign investors beholden to the same ideology also praised and rewarded Sri Lanka for “taking up sustainability and ESG (environmental, social and corporate governance) issues on its top priority.” ESG represents a trend (or lasting shift, depending on who you ask) in some investors’ priorities. Put simply, it is an attempt to move capital toward organisations that further a set of amorphous environmental and social justice goals instead of toward the enterprises most likely to succeed and turn a profit.

Proponents of ESG have been pushing for government mandates requiring enterprises to disclose detailed information related to environmentalism and other social goals. That distorts and harms the smooth functioning of the capital markets that keep modern economies running and, in some cases, incentivises nice-sounding but economically inefficient projects, like a return to primitive agriculture. “The nation of Sri Lanka has an almost perfect ESG rating of 98.1 on a scale of 100,” notes David Blackmon in Forbes, and “the government which had forced the nation to achieve that virtue-signaling target in recent years [has as a result] collapsed.” 

Sri Lanka, in other words, offers a grim preview of what can result from distorting markets in the name of utopian priorities.

Consider a long-run perspective. Throughout most of human history, farmers produced only organic food—and food was so scarce that, despite the much lower population in the past, malnutrition was widespread. The long-term, global decline in undernourishment is one of humanity’s proudest achievements. Lacking any sense of history and taking abundant food for granted however, some environmentalists want to transform the global food system into an organic model. They see modern agriculture as environmentally harmful and would like to see a transition to natural fertilisers that would be familiar to our distant ancestors, such as compost and manure.

However, conventional farming is not only necessary to produce a sufficient amount of food to feed humanity (a point that cannot be emphasized enough—as the writer Alfred Henry Lewis once observed, “There are only nine meals between mankind and anarchy”) but in many ways it is also better for the environment. According to a massive meta-analysis by the ecologists Michael Clark and David Tilman, the natural fertilisers used in organic agriculture actually lead to more pollution than conventional synthetic products.This is partly because fertilisers and pesticides also allow farmers to farm their land more intensively, leading to ever-higher crop yields, which allows them to grow more food on less land. According to HumanProgress board member Matt Ridley, if we tried to feed the world with the organic yields of 1960, we would have to farm twice as much land as we do today. 

Despite successfully feeding more people than every before, the amount of land used globally for agricultural has peaked and is now in decline. So long as crop yields continue to increase, more and more land can be returned to natural ecosystems, which are far more biodiverse than any farm. Smart agriculture allows nature to rebound.

In wealthy countries, conventional farming is becoming ever-more efficient, using fewer inputs to grow more food. In the United States, despite a 44 percent increase in food production since 1981, fertiliser use barely increased at all, and pesticide use fell by 18 percent. As the esteemed Rockefeller University environmental scientist Jesse Ausubel noted, if farmers everywhere adopted the modern and efficient techniques of U.S. farmers, “an area the size of India or the USA east of the Mississippi could be released globally from agriculture.”

Most importantly, it must be re-stated, conventional agriculture feeds the world. Since the Green Revolution of the 1950s and 60s, world agricultural production has exploded, causing the per-capita global food supply to rise from barely over over 2,000 kcal per day in 1961, to reach nearly 3,000 in 2017. And this even as the world population itself exploded. While hunger is now making a comeback, that is not any lack of the ability to produce enough food -- it is wholly due to war, export restrictions, and the misguided policies of leaders like Rajapaksa his environmental (and "ethical investment") mentors.

To be sure, the fertiliser ban itself was not the only factor behind Sri Lanka’s economic crash. Much of the damage was also caused by the hastiness of the ban, and the difficulty of obtaining enough organic alternatives. However, the idea that organic farming can produce enough food for the world is an unreachable fantasy based on the naturalistic fallacy — the baseless notion that anything modern, such as agriculture incorporating non-natural components produced by the ingenuity of man, must be inferior to the all-natural precursor.

As Ted Nordhaus and Saloni Shah from the Breakthrough Institute point out, “there is literally no example of a major agriculture-producing nation successfully transitioning to fully organic or agroecological production.” We must never take the relative rarity of starvation in modern times as a given, nor romanticise and seek to return to farming’s all-organic past. Unfortunately, the delusion seems to be spreading, helped along by the global shift toward ESG. Last Sunday, Narendra Modi, the prime minister of India, praised “natural farming” during a speech in Gujarat, calling it a way to “serve mother earth” and promising that India will “move forward on the path of natural farming.” 

Let’s hope not.

* * * * * 

Chelsea Follett
Chelsea Follet works at the Cato Institute as a Researcher and Managing Editor of

Malcolm Cochran
Malcolm Cochran is a research associate at

Their Human Progress article also appeared at the Foundation of Economic Education.