P.S. I’m away in Florida most of this week.

(1) Why the chronic and accelerating inflation? (2) Why an inflation even during deep depressions? And while we are at it, it would be important to explain, if we could, (3) Why the business cycle at all? Why the seemingly unending round of boom and bust?

He then assures readers that Keynesianism can’t explain answer these questions, but the neglected the Austrian theory of the business cycle (henceforth ABC) can.

Rothbard begins with a lucid analysis of inflation:

The favorite explanation of inflation is that greedy businessmen persist in putting up prices in order to increase their profits. But surely the quotient of business “greed” has not suddenly taken a great leap forward since World War II. Weren’t businesses equally “greedy” in the nineteenth century and up to 1941? So why was there no inflation trend then? Moreover, if businessmen are so avaricious as to jack up prices 10% per year, why do they stop there? Why do they wait; why don’t they raise prices by 50%, or double or triple them immediately? What holds them back?

After considering some flawed explanations, he leads the witness to the right answer:  The crucial factor is consumer demand; consumer demand keeps rising because the money supply keeps rising; and the money supply keeps rising because government keeps printing more money.  Its motive, according to Rothbard, is seigniorage:

Consider what would happen if the government should approach one group of people–say the Jones family–and say to them: “Here we give you the absolute and unlimited power to print dollars, to determine the number of dollars in circulation. And you will have an absolute monopoly power: anyone else who presumes to use such power will be jailed for a long, long time as an evil and subversive counterfeiter. We hope you use this power wisely.” We can pretty well predict what the Jones family will do with this newfound power. At first, it will use the power slowly and carefully, to pay off its debts, perhaps buy itself a few particularly desired items; but then, habituated to the heady wine of being able to print their own currency, they will begin to use the power to the hilt, to buy luxuries, reward their friends, etc. The result will be continuing and even accelerated increases in the money supply, and therefore continuing and accelerated inflation.

But this is precisely what governments–all governments–have done.  Except that instead of granting the monopoly power to counterfeit to the Jones or other families, government has “granted” the power to itself.

After explaining the mechanics of fractional reserves and central banking, Rothbard finally presents the uniquely Austrian part of his story:  Expansionary monetary temporarily reduces interest rates, and business responds by making investments that, due to the reduced interest rates, now appear profitable:

For businessmen, seeing the rate of interest fall, will react as they always must to such a change of market signals: they will invest more in capital goods. Investments, particularly in lengthy and time-consuming projects, which previously looked unprofitable, now seem profitable because of the fall in the interest charge. In short, businessmen react as they would have if savings had genuinely increased: they move to invest those supposed savings.

Unfortunately, businessmen are the victim of an economic illusion.  The interest rate cut is only temporary; when rates return to their natural level, businessmen will suddenly see that they’ve made a terrible mistake.  Why then do booms last for years?  Because central banks keep printing more and more money to hold interest rates down:

Like the repeated doping of a horse, the boom is kept on its way and ahead of its inevitable comeuppance by repeated and accelerating doses of the stimulant of bank credit. It is only when bank credit expansion must finally stop or sharply slow down, either because the banks are getting shaky or because the public is getting restive at the continuing inflation,that retribution finally catches up with the boom.

The solution for inflation and business cycles alike, naturally, is for central banks to stop printing money.

Critical Comments
This chapter is a strange blend of smoke, mirrors, and elegant economic pedagogy.  Rothbard’s analysis of inflation blows every textbook account away.  The one flaw: He fails to point out (or didn’t realize) that seigniorage is a trivial source of revenue for Western democracies.

On the subject of stagflation, he completely neglects the mainstream supply-shock and expectational stories.  Since the book was published in 1978, though, these omissions are forgivable.

When he gets to the uniquely Austrian part of his story, his eloquence remains, but his story is still full of holes.  His implicit assumption is that businessmen believe that short-term interest rates cuts will last forever.  That’s a really stupid thing for businessmen to believe.   And if businessmen are really that stupid, it’s pretty unfair to blame government for the whole business cycle.  The ABC boils down to what Tyler Cowen calls a “banana subsidy story”:*

Let’s say that the government subsidized the price of bananas, you bought so many bananas, put them on your roof, and then the roof collapsed.  Is that government failure or market failure?  The price was distorted, but I still say this is mostly market failure.  No one made you put so many bananas on your roof.

Furthermore, if you’re willing to entertain banana subsidy stories like the ABC, it’s absurd to think businessmen are rational about everything except monetary policy.  Idiots will see false price signals everywhere. 

For example, if the price of pumpkins of goes up by 20% in September, lots of people might conclude that it will keep going up by 20% a month – and start growing pumpkins by the truckload.  Then suddenly on November 1, demand dries up, and we’ve got a Halloween-driven “business cycle.”  If you think businessmen are suckers for temporarily low interest rates, why not temporarily high pumpkin prices?

I admit, of course, that big economy-wide business mistakes occasionally happen.  We’re living through a once-in-a-century “cluster of errors” as I write.  But the mistake that Rothbard rests his whole theory upon is exceptionally bone-headed.  If businessmen were that stupid, the modern economy would never have arisen.

P.S. For more on the ABC, see section 3.4 of “Why I Am Not an Austrian Economist.”

* Walter Block (2001) almost literally embraces the “banana subsidy story,” except he switches from fruits to vegetables:

Let us consider an analogy, far removed from the ABC. Suppose that the proportion of peas to carrots that will satisfy consumer demand is 1:1. The government, however, decrees that the appropriate proportion is 2:1, and begins to subsidize pea production. Third premise of the syllogism: Sophisticated (but not all) investors know that this policy cannot last, that there will be political or other repercussions, and eventually the government will have to pull in its horns and cease its mischievous attempt to reallocate resources.  The question is, will this suffice to set up a peas-and-carrots cycle, given an tendency of government to pursue such policies whenever politically feasible?

And concludes:

Obviously, even far-seeing economic actors would indeed willingly invest in excessive pea production under these conditions, secure in the knowledge that they could better predict the turning point. That is, right before the government stopped its pea subsidy program, while pea resources were still at a high, the far-seeing economic actors would unload peas upon less sophisticated investors. [footnotes omitted]

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Lactose tolerance is the classic physical example. Human children have always been able to digest milk, but most adults can’t. Thanks to evolved neoteny, however, a sizable minority of grown-ups can now digest milk as if they were kids. Happily, I’m one of them. Not only can I digest milk; I chug it almost every day.

But it’s psychological neoteny that dramatically sets me apart from most people my age. I love silly games, loud music, karaoke, laughing hysterically with friends, animated intellectual discussions, sugary desserts, geological wonders, foreign lands, and the mysteries of archaeology. I have a wild imagination; I’ve written about a hundred playable stories in the genres of fantasy, sci-fi, mystery, horror, what-if history, pulp, K-drama, Bollywood, and beyond. Most of my friends are younger than me, and I love making new friends all over the world. I’d rather talk to random students than random parents. I’ve said it before and I’ll say it again: The average kid is better than the average adult.

The typical person my age is daydreaming about retirement, if they haven’t retired already. But the thought of retirement repulses me. I love dreaming up new projects, and I don’t like to sit still for more than two hours. I crave activity — and as long as I draw breath, I’ll keep doing what I love. The great Walter Williams died in his car a few minutes after he finished teaching the last class of Ph.D. Microeconomics. He never spent a single day waiting helplessly in bed for death. I want to go like Walter, though I hope to far surpass his 84 years. Per Tolkien, hail the victorious dead!

I have enough self-awareness to realize that my mind is more neotenous than my body. I had the worst accident of my life this January. None of my kids wanted to sled with me on the most amazing ice to blanket northern Virginia in twenty years, so I went alone. Ten minutes later, I had a gruesome ear injury — and no one was around to hear me scream or see the blood trail. The next day, for the first time in my life, I got stitches. Over a hundred of them. I’m fully recovered now, but if my accident had gone a little differently, I might be dead already. If I’d acted my age, none of this would have happened. Since I have an incredible bounty to live for, I plan to start being marginally more careful, so my lifetime of fun isn’t cut short. Next time I go sledding, I won’t start at the very top of the hill, especially if there’s a tiny tree at the bottom. But on the next snow day, I’ll still be on the slopes.

Why do I choose neoteny? Honestly, I struggle to imagine why anyone does otherwise. When we’re young, almost all of us are fun-loving and energetic. Why would you want to spend subsequent decades being boring and tired? Because your peers will disrespect you? Because young people won’t accept you? In our modern anonymous society, social pressure is largely a paper tiger. Fine, act your age in exceptional cases where the cost of non-conformity is high. But never forget it’s an act.

When you were a teenager, did you ever look at middle-aged people watching the news and think, “When I grow up, I want to be like them?” Not bloody likely. In contrast, even the stodgiest middle-aged people occasionally muse, “Oh, to be young again.” Being young is just better. And while biological aging is inevitable, psychological aging is largely a choice. I choose neoteny. So should we all.

During my early years in philosophy, I was almost intellectually paralyzed by the subject’s seemingly impossible challenges. Challenges like…

Prove the external world exists. No proof? Then you can’t reject solipsism.

Prove you actually know anything. No proof? Then you can’t reject radical skepticism.

Prove all your memories aren’t fabricated. No proof? Then you can’t reject memory skepticism.

Prove you even exist as a durable mental being. No proof? Then you can’t reject Hume’s dissolution of the self.

Prove any mental states exist. No proof? Then you can’t reject eliminative materialism.

Prove your sense of free will isn’t an illusion. No proof? Then you can’t reject determinism.

Prove you know anything is morally right or wrong. No proof? Then you can’t reject moral nihilism.

The only reason my intellectual paralysis was incomplete was that I quickly discovered Ayn Rand and Aristotle’s notion of axioms. Not arbitrary mathematical axioms, but literally undeniable propositions. Radical skepticism can’t be right, because whoever says “No one can know anything” is claiming knowledge. Indeed, even “Maybe no one can know anything” is claiming knowledge about what’s possible.

Still, it wasn’t until I met Mike Huemer at UC Berkeley that I found my lifelong cure for intellectual paralysis. Huemer called it “intuitionism,” but it’s largely a rebranding of the pre-existing “philosophy of common sense.” The Huemerian response to all of the preceding demands for “proof” boils down to, “It’s obvious! End of story.” The less terse version: “The point of a proof is to move from more obvious propositions to less obvious propositions. So demands for ‘proof’ of the most obvious propositions are confused.” The maximally terse version, though, is a simple: “Bah!” Or as Thomas Reid explained centuries before Huemer:

And when we attempt to prove by direct argument, what is really self-evident, the reasoning will always be inconclusive; for it will either take for granted the thing to be proved, or something not more evident; and so, instead of giving strength to the conclusion, will rather tempt those to doubt of it, who never did so before.

Responding to absurd challenges with a “Bah!” is even more fruitful than it looks, because it doesn’t just allow us to reject glaring falsehoods without further argument. By the power of the contrapositive — “If A, then B; not-B, therefore not-A” — it also allows us to reject any valid argument that implies a glaring falsehood. Or in philosophical jargon, "One man's modus ponens is another man's modus tollens."

How does the Philosophy of Bah work in practice? Suppose someone demands proof of the existence of the external world. My immediate reply is to stonewall: “It’s obvious” or “Bah.” I often add: “And it’s obvious to you, too, so what are we arguing about?” If the challenger has good-faith arguments to the contrary, I’ll add: “The premises of your argument are much less obvious than the existence of the external world, so at least one of your premises is almost certainly false.” If you really have to choose between “The external world exists” and “I could be dreaming right now,” reject the latter premise, not the former.

Think about it this way: Suppose you’re a juror on a murder trial. A witness testifies that he saw the accused hack the victim to pieces with an ax. When the defense lawyer cross-examines the witness, his only challenges are: “Prove it wasn’t a dream” and “Maybe you’re a brain in a vat.” The correct reaction for the jurors is not to peruse philosophy journals for the latest replies to these classic canards. It is to summarily declare, “Bah.” If that’s your lawyer’s best defense against the charge of murder, the jurors should convict you. If “Bah” seems dogmatic, my response is: “I’m not dogmatic; you’re gullible.” As gullible as a man who stumbles on his wife cheating in flagrante delicto who accepts the explanation, “We were rehearsing a play.”

Can the Philosophy of Bah be abused? Of course; every good idea can be abused. But the fact that someone might “Bah” the disemployment effects of the minimum wage is a terrible reason to refuse to “Bah” solipsism or radical skepticism.

Is the Philosophy of Bah limited to the most fundamental truths? No. It shines for the most fundamental truths, but it’s broadly applicable. The best three-letter summary of Hume’s brilliant “Of Miracles” is, once again, “Bah.” It is absurd to seriously entertain claims about virgin births or demonic possession. Though I also love the long version:

When anyone tells me that he saw a dead man restored to life, I immediately consider with myself whether it is more probable that this person should either deceive or be deceived or that the fact which he relates should really have happened. I weigh the one miracle against the other and, according to the superiority which I discover, I pronounce my decision and always reject the greater miracle. If the falsehood of his testimony would be more miraculous than the event which he relates, then, and not until then, can he pretend to command my belief or opinion.

Much the same goes for claims about secular miracles, like alien visitation or AI annihilation. While they’re not quite as absurd as claims about supernatural miracles, the wise response is not to approach them with an open mind, but with the words of Saint Thomas: “Except I shall see in his hands the print of the nails, and put my finger into the print of the nails, and thrust my hand into his side, I will not believe.” (Yes, I am well-aware that the point of the story of Doubting Thomas is that we should have faith, but that’s what every scammer says. Bah!) I’ll believe that aliens are visiting Earth when I hold their super-tech in my own hands and examine it with my own eyes. If you’re excited by the latest UFO evidence, I’m happy to outsource my dismissal to Mike Huemer. But if Huemer didn’t exist, I’d just exclaim “Bah!“

I’m well-aware that stonewalling isn’t very persuasive. But if someone rejects premises as obvious as “The external world exists,” trying to change their mind is a fool’s errand anyway. The point of the Philosophy of Bah is not to convince others of the obvious, but to convince yourself of the obvious. Though the world is benighted, you don’t have to be.

It is no hyperbole to say that the world of ideas overflows with total nonsense. If you’re intellectually apathetic, you won’t be fooled. The more intellectually curious you become, however, the graver the danger that your mind will be totally overwhelmed by total nonsense. If, like me, you are highly curious, the intellectual danger is overwhelming. Fortunately, the Philosophy of Bah allows you to swiftly dismiss mass quantities of nonsense, leaving plenty of time to savor the many genuine accomplishments of the human mind.

Positively, Rothbard unapologetically affirms that the poor are typically poor because of their own short-sighted, impulsive values.  He heaps praise on Harvard’s Edward Banfield – probably because Banfield was one of the few scholars who actually said what middle-class observers of the poor can’t help but think:

[U]pper- and middle-class members tend to be future-oriented, purposeful, rational, and self-disciplined.  Lower-class people… tend to have a strong present-orientation, are capricious, hedonistic, purposeless, and therefore unwilling to pursue a job or a career with any consistency. People with the former values therefore tend to have higher incomes and better jobs, and lower-class people tend to be poor, jobless, or on welfare. In short, the economic fortunes of people tend over the long run to be their own internal responsibility, rather than to be determined — as liberals always insist — by external factors.

Strange as it may seem in our post-Bell Curve age, though, Rothbard does not mention low intelligence as a contributing factor.

Normatively, Rothbard breaks with mainstream critics of the welfare state with his abolitionist stance: The only acceptable form of relief for even the “deserving poor” is private, voluntary charity; as for “the undeserving poor,” they should straighten up and fly right:

The spirit that used to animate the social work profession was a far different–and a libertarian–one. There were two basic principles: (a) that all relief and welfare payments should be voluntary, by private agencies, rather than by the coercive levy of government; and (b) that the object of giving should be to help the recipient become independent and productive as soon as possible. Of course, in ultimate logic, (b) follows from (a), since no private agency is able to tap the virtually unlimited funds that can be mulcted from the long-suffering taxpayer…As a further corollary of the limitation on funds, the social workers also realized that there was no room for aid to malingerers, those who refused to work, or who used the aid as a racket; hence came the concept of the “deserving” as against the “undeserving” poor.

Other highlights: Rothbard celebrates the private welfare system of the Mormons and points out a number of ways that regulation hurts the poor.  He also heaps scorn on – and misrepresents – Friedman’s “negative income tax,” never mentioning that the whole point is to reduce the effective 100% marginal tax rate that welfare recipients typically face.

Critical Comments
I remain a huge fan of this chapter.  While Rothbard neglects the IQ-poverty connection, modern scholars continue to neglect the Conscientiousness-poverty connection.  Frankly, it’s a ridiculous oversight.  It’s intuitively obvious: How could laziness and impulsiveness not lead to poverty?  And you don’t need fancy econometrics to detect it empirically: Kids from low-income areas were bused into my suburban elementary, junior high, and high schools, and all of Rothbard’s claims about “lower-class values” described them to a tee.

I also find his abolitionism refreshing.  Sure, private charity couldn’t maintain anything like the modern welfare state.  But I see no reason why it couldn’t provide a modest safety net for indigent children and the severely handicapped.  Private charity in the U.S. is about $300B annually – 2.2% of GDP.  Admittedly, only a small fraction of that goes to the poor now; but clearly that would change if the welfare state were abolished.  If it seems unrealistic to rely on donations to provide for the poor, consider: Back in the era of established churches, wouldn’t it have seemed equally unrealistic to rely on donations to provide for religion?

My main empirical complaints: Even in the 1970s, Rothbard should have spent more time explaining that the welfare state is primarily about helping the old, not the poor.   And he should have spent more time explaining that by world standards, the American “poor” are already well-off.  Then he could have easily moved on to the most philosophically devastating critique of the welfare state: Our immigration laws are a massive, shameful effort to prevent the free market from lifting millions of foreigners out of absolute poverty.

Of course, if Rothbard had focused on global poverty, he would have had to admit the awkward point that voluntary charity does little to alleviate the truly horrific plight of the world’s bottom billion.  If the U.S. abolished the welfare state, Americans would open their checkbooks to poor children and the handicapped who happen to be American citizens.  But the absence of a world welfare state has manifestly not led to robust private substitutes.  Modern markets are international, but modern charity remains a largely national affair.

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1. I’ll be in Spain on April 24-28. I arrive early on April 24 in Madrid, and I’ll be speaking for Liberty Con Europe that weekend. If you see me around, please say hi, though I will be extremely sleep-deprived the first day!

2. After Liberty Con ends, I’m organizing a side trip via high-speed rail to Valencia. We’ll leave by late afternoon on April 26, and I have to be back in Madrid by the evening of April 28. ¡Cuantos más, mejor!

3. From there, I fly straight to Charlotte, North Carolina. If anyone wants to organize, I’m happy to do an early dinner on April 29. Warning: I will again be sleep-deprived.

4. I am teaching three classes for UATX on May 13-June 5, and will be living in Austin the whole time. My classes: Introduction to Political Science (M/Th, 11:30-12:45), Immigration and Housing (Tu/Th, 10:00-11:15), and Education and the Family (Tu/Th, 3:30-4:45). UATX will allow a few hand-picked students to audit each class. Send me a short email about yourself if you want to give it a go.

5. During my time in Austin, I’ll be organizing multiple social events including a regular game night at UATX, an RPG mini-campaign, karaoke, and more. Want to attend any or all? I can probably get you in.

6. One evening during my stay in Texas, I’ll be speaking on housing for The Civic San Antonio. Date: TBA.

7. On June 8, I’ll be in New York City for another Soho Forum debate. This time I’m debating Simon Hankinson of the Heritage Foundation on: “Immigration and Customs Enforcement (ICE) should complete its mandate to deport all illegal aliens currently residing in the United States.” (Spoiler: No). I’ve actually had one pleasant lunch with Hankinson, so I’m optimistic that we’ll also have a pleasant debate.

We scheduled over a month before the Iran War broke out, but the latest troubles in the Gulf make our conversation all the more exciting.

While we didn’t get to every topic, here is the list of questions I was working with.

1. Intro – how we started talking about the future of the Middle East. Compartmentalization! If immigration will make West more like ME, where is the ME itself heading?

2. Basics – where Gad is from, what are all of the ME countries he’s been to and for how long

3. The (much smaller range) I’ve seen

4. Country by country, how bad is the ME now?

5. How are these countries evolving? Note the extreme variation.

6. Regression to the mean or divergence?

7. Monarchies and the ME

8. Economic, political, religious, social change, factor by factor.

9. Best-case/worst-case/most likely case scenario after Iran War

10. Best case/worst-case/most likely case for 2050. Note that’s almost exactly the time gap between Iraq War and today!

You can watch the whole conversationbelow . Enjoy!

P.S. If you post questions for Gad in the comments, perhaps I can persuade him to respond.

Discarding the idea of further elections, on February 10, 1938, the Romanian king carried out a royal coup against the political system, naming a new ministry under Patriarch Miron Cristea, head of the Romanian Orthodox Church, invested with decree powers. Within a few days it promulgated a new constitution, which in some ways superficially resembled the liberal constitution of 1923 but in fact concentrated power in the hands of the king, creating a situation analogous to the King Alexander regime of Yugoslavia earlier in the decade. The constitution was, however, in other ways comparatively moderate and did set some limits on the government’s authority. It was also accompanied by rigorous new laws on public order that increased the powers of the courts and the police…The king wavered between plans to have Codreanu murdered and renewed attempts to co-opt him politically, but the latter proved totally impossible. The Legionnaire Conducator (Leader) accepted the dictatorship and gave orders to his followers to lie low for the time being until the new arrangement weakened, but Armand Calinescu, the tough new interior minister, was determined to break his power. Codreanu was arrested once more on April 16, and several thousand of his followers were also incarcerated in the days that followed. A military court subsequently sentenced him to ten years of forced labor for subversion.

Acting leadership of the Legion passed to the young lawyer Horia Sima, known more for fanaticism than political judgment. Codreanu realized that the Romanian dictatorship would not hesitate to execute him and ordered Sima to have the Legion desist from violence or other overt actions unless it appeared that his life was in imminent danger. By midautumn Sima seems to have been convinced that the way to deal with this was through a new round of bombings and terrorism that would bring the government to its knees. Codreanu was able to send a dispatch from prison ordering the Legionnaires to desist, but it was too late. On November 30, the “night of the vampires” in Romanian folklore, a detachment of the brutal state Siguranta removed Codreanu and thirteen other top Legionnaires from prison, carrying them off in trucks. They were then strangled with wires, shot, and dumped in a lime pit at a military prison outside Bucharest.

Sima prepared the Legion for a full-scale insurrection against the Carolist dictatorship, hoping to capitalize on sympathies within the military, but found that these were insufficient. The army remained under discipline, and the Legion, like all other fascist movements, was not strong enough to launch an insurrectionary civil war. The plan for revolt on the sixth of January 1939 had to be canceled, and Sima and hundreds of other leaders and activists fled abroad, mainly to Germany. Once more a rightist authoritarian regime had suppressed a popular fascist movement, as earlier in Austria and concurrently in Hungary. The Legion, which despised democracy, the bourgeoisie, and capitalism, required at least a degree of bourgeois democracy to have the opportunity to build greater support and/or to achieve power.

Who cares if a successful politician is a crypto-Communist? Anyone with a hint of sense. Communism is a murderous totalitarian doctrine, and Communist governments largely practice what they preach. Furthermore, once Communists take over a government, getting rid of them is like pulling teeth.

Once you admit the notable prevalence and grave danger of crypto-Communist politicians during a particular era, there is a clear-cut contemporary implication: A notable share of current and would-be leaders who say they aren’t Communists are probably lying. If you’re living through this era, this raises a thorny question: “How do we identify the crypto-Communists before it’s too late?”

Needless to say, you can’t just publicly ask them, because they’ll lie. You could do a thorough background check, but the people who know the most are usually fellow Communists eager to protect their own. So you’re usually left with three admittedly imperfect heuristics.

Heuristic #1: Communist rhetoric. If you habitually voice the views of the Communist Party, it is reasonable to suspect that you’re a Communist. Remember, Communist Parties often strategically moderate their rhetoric, especially when they’re weak.

Heuristic #2: Communist policies. If you habitually push the policies of the Communist Party, it is reasonable to suspect you’re a Communist. Remember, Communist Parties often strategically moderate their policies, especially when they’re weak.

Heuristic #3: Communist ties. If you habitually ally with the Communist Party, or if you have an atypically high share of Communist friends, it is reasonable to suspect you’re a Communist. Remember: While apolitical people could easily have Communist ties by coincidence, ambitious people choose their ties more strategically.

When historians cover the Cold War, they routinely discuss cases where the U.S. supported the overthrow of a democratically elected leader who, in hindsight, definitely wasn’t a Communist. Iran’s Mossadegh, Guatemala’s Árbenz, Chile’s Allende, Congo’s Lumumba, and Indonesia’s Sukarno are the textbook examples.

I’m usually suspicious on both counts: How “democratic” were their elections really, and how confident should we be that the overthrown leaders weren’t crypto-Communists?

But even if we accept both premises, the key point is that it was hard to identify crypto-Communists at the time. Barring a definitive examination of Communist Party archives or damning testimony from Communist Party insiders, contemporary actors had to rely on my three heuristics: If he talks like a Communist, acts like a Communist, and fraternizes with Communists, there’s a good chance he is a Communist.

The crucial question then becomes: How high does the probability that a major national leader is a Communist have to be before drastic action is justified? Back in 2020, for example, I estimated Bernie Sanders’ probability of being a crypto-Communist at 15.8%. Which, to my mind, is disqualifyingly high. American checks and balances will protect you? Probably, but is that good enough?

If you delve deeper into the game theory, you discover the underlying logic of anti-Communist “paranoia.” Ambitious Communists hide their true identity because most people understandably don’t want to be ruled by Communists. This leads people to harshly punish the best predictors of Communist affiliation. Which in turn leads crypto-Communists to avoid displaying these predictors. Which makes any lingering predictors suspicious: Given strong incentives to avoid Communist rhetoric, policies, and ties, why don’t you scrupulously avoid Communist rhetoric, policies, and ties? If you answer, “Communist rhetoric, policies, and ties aren’t so bad; in fact, we have much to learn from them,” it’s time to sound the alarm.

Doesn’t the same logic hold for crypto-Nazis and crypto-fascists? Naturally. The main difference is that since World War II, both of these groups have had much lower quality human capital than Communists. This makes them less of a threat, and easier to depose. But the basic logic of “They won’t admit their true views, so we have to probabilistically infer their true views from their rhetoric, policies, and ties” is ironclad. And yes, the anonymity of the internet reveals that even in Western countries, full-blown Communists and fascists are not rounding errors (though neo-Nazis probably are).

The hardest fact for game theory to explain is that most members of these totalitarian sects aren’t crypto. Especially in a democracy, why admit to being something most people fear and hate? The best explanation, though, is easy: For followers, unlike leaders, politics is almost entirely expressive. The main reason they proclaim their allegiance to Communism or fascism isn’t to win, but to revel in the cruelty of politics.

What’s wrong with vouchers, you ask?

In the first place, the immorality of coerced subsidy for schooling would still continue in force. Secondly, it is inevitable that the power to subsidize brings with it the power to regulate and control… The power of the State over private schools, through its power to certify or not to certify for vouchers, will be even greater than it is now.

Shouldn’t education be free for all?  No way:

“Free” schools, whether current public schools or future vouchered schools, are of course not really free; someone, that is, the taxpayers, must pay for the educational services involved. But with service severed from payment, there tends to be an oversupply of children into the schools (apart from the compulsory attendance laws which have the same effect), and a lack of interest by the child in the educational service for which his family does not have to pay. As a result, a large number of children unsuitable for or uninterested in school who would be better off either at home or working, are dragooned into going to school and into staying there far longer than they should.

Mainstream economists will be puzzled by this chapter, because it ignores all the arguments about educational externalities, credit market imperfections, etc.  Rothbard instead focuses on public education’s historical connection to brainwashing and persecution of minorities, pointing out, for example, that:

[F]or Luther, the State schools were to be an indispensable part of the “war with the devil,” i.e., with Catholics, Jews, infidels, and competing Protestant sects.

This chapter also tries to win over the civil libertarian by analogizing state-controlled education to state-controlled media:

[W]hat then would we think of a proposal for the government, federal or state, to use the taxpayers money to set up a nationwide chain of public magazines or newspapers, and then to compel all people, or all children, to read them? Further, what would we think of the government outlawing all other newspapers and magazines, or at the very least outlawing all newspapers or magazines that do not come up to certain “standards” of what a government commission thinks children ought to read? Such a proposal would surely be regarded with horror throughout the country, yet this is precisely the sort of regime that government has established in the schools.

When Rothbard gets to higher-education, he gleefully points out that it forces the poor to subsidize the rich, and argues that government artificially supports the inefficient dominance of non-profits:

By exempting trustee-run organizations from income taxes and by levying heavy taxes on profit-making institutions, the federal and state governments cripple and repress what could be the most efficient and solvent form of private education…

Trustee governance is, in general, a poor way to run any institution. In the first place, in contrast to profit-making firms, partnerships, or corporations, the trustee-run firm is not fully owned by anyone. The trustees cannot make profits from successful operation of the organiza tion, so there is no incentive to be efficient, or to serve the firm’s customers properly. As long as the college or other organization does not suffer excessive deficits it can peg along at a low level of performance. Since the trustees cannot make profits by bettering their service to customers, they tend to be lax in their operations.

Critical Comments
This chapter is packed full of good material, but ignoring the standard economic arguments for subsidies is a major sin of omission.  Rothbard repeatedly cites E.G. West, but doesn’t mention West’s striking result that 19th-century England achieved high literacy with minimal state subsidies for education.  For a modern audience, isn’t that more relevant that the ravings of Martin Luther?

Since this chapter ignores the standard economic arguments, it also misses the opportunity to reverse them.  While it contains many astute observations about useless education, these barbs are atheoretical.  Rothbard never mentions the signaling model of education, which argues that education actually has negative externalities.  Government subsidizing inefficiency – isn’t that the kind of argument Mr. Libertarian loved?

Rothbard’s attack on educational non-profits is music to my ears.  Tyler Cowen has an old paper that tries to give a functionalist explanation for why most universities are non-profit.   But I think Rothbard’s barking up the right tree here.  To complete the argument, though, you need to appeal to donor irrationality: despite the obvious inefficiencies of the non-profit sector, alumni just keep giving them more money to waste.

P.S. Check out this impressive intellectual shrine to E.G. West.

The post appeared first on Econlib.

Fab and I have been arguing about culture for as long as I can remember. I’m classical, and he’s jazz. But Fab also personally illustrates much of what I’ve been claiming about culture for decades. The son of a Colombian ex-priest and a poor woman from Costa Rica, Fab is nevertheless 90% as American as apple pie.

In this conversation, Fab and I don’t just talk about my new You Have No Right to Your Culture: Essays on the Human Condition. We talk about his truly unique immigrant experience. We talk about global travel. And we talk about assimilation. If you’ve never liked a sociologist before, you’re going to like Fab. And if you’ve never learned from a sociologist before, you’re going to learn from Fab.

Enjoy!

Hard, that is, as long as you call it “the Artificial Intelligence industry.” But all of the top AIs also go by another acronym: LLMs, which of course stands for Large Language Models.* Which makes sense, because the primary output of this industry is just a bunch of words.

So what? While the Supreme Court has given government a virtual carte blanche to regulate the economy for over 80 years, constitutional protection of freedom of expression has probably never been stronger. In 1969, the Supreme Court moved from the classic “clear and present danger” test for permissible regulation of free speech to the even higher “imminent lawless action” test. By eviscerating obscenity law, Miller v. California (1973) even effectively extended full constitutional protection to almost all pornography, allowing the industry to thrive despite its extreme unpopularity. Though more Americans morally condemn pornography than abortion, the Supreme Court stands with porn.

Upshot: Once you acknowledge the truism that AI output is speech, almost all regulation of AI is ipso facto illegal. Government has no more legal right to regulate AI than it has to regulate the New York Times. Even if you’re a convinced doomer, you have to admit that the danger of existing LLMs is not “clear and present,” much less “imminent.” If the Supreme Court has an iota of consistency, the AI industry will be able — barring an anti-AI amendment to the Constitution — to fend off virtually all regulation with ease.

Does the Supreme Court have an iota of consistency? Based on past performance, the jury is still out. When (not if) AI comes before the Supreme Court, I bet SCOTUS will side with the government against the industry. But hopefully I’m wrong.

P.S. Volokh, Lemley, and Henderson, all top legal scholars, basically agree with me.

* Images and videos are the main non-linguistic AI outputs, but these too enjoy the strongest constitutional protections.

Conceivably, you’re a sincere religious fanatic, courting martyrdom so you can meet your 72 virgins. But opportunities for martyrdom are ubiquitous, and only a microscopic share of alleged true believers take advantage of these opportunities. Since actions speak louder than words, we can safely conclude that few top-ranking Iranian politicians genuinely want to die for their beliefs.

The better story is that top-ranking Iranian politicians are playing what economists call a “nested game.” While many, perhaps most, of these figures want to make peace to avoid death, they’re afraid that if they voice this opinion, their own hard-liners will kill them for cowardice. Outsiders see a united fanatical front, but only because dissenting insiders hide their true feelings.

You can see this dynamic clearly at the end of World War II in both Germany and Japan. Plenty of long-time “fanatics” tried to survive the war by hook or by crook. But as war raged, they kept their mouths shut year after year because their domestic “friends” were a much more immediate threat than their foreign enemies.

The logic of nested games even holds for national leaders. When Emperor Hirohito decided to surrender to the Allies, he provoked an attempted military coup. When asked, “Why didn’t Czar Nicholas back down in 1914?” historians’ standard answer is, “Because if he had, Pan-Slavist hawks would have overthrown him.” Even if Nicholas knew that he would lose his throne in 1917, his choices in 1914 were not “Rule in peace for life” or “Fight Germany and lose your throne in 1917.” His choices were “Try to keep the peace and lose your throne right now” or “Fight Germany and lose your throne in 1917.”

Most analysts who take the dilemmas of nested games seriously become fatalistic. Even if a large faction of the leadership of theocratic Iran, Imperial Japan, Nazi Germany, or Czarist Russia wants to make peace, they probably won’t. Indeed, even if the Supreme Leader wants to make peace, they probably won’t.

My reaction, in contrast, is agentic. If by some miracle, I were the Supreme Leader of any of these countries, I have devised a strategy to make peace with high probability of success — and low risk to myself. It’s not pretty, and once you grasp my strategy, you may think ill of me for publicizing this forbidden knowledge.

Nevertheless, this is a sketch of my master plan for making peace despite internal opposition:

Step 1. Hand-pick a small group of henchmen personally loyal to you. This is nothing out of the ordinary; almost every leader does this, especially in non-democracies.

Step 2. Privately prepare a list of all of the top enemies of peace under your nominal command. Profile the hard-liners, the hawks, the ultra-nationalists, the would-be martyrs, the true believers in revolution.

Step 3. Around midnight, summon your henchmen. Order them to wake up everyone on your list, keep them incommunicado, and bring them to a secret location within the next few hours. Give each top henchman sealed orders, with strict instructions not to open until an hour before dawn.

Step 4. If the leaders ask about the purpose of this meeting, instruct your henchmen to say that it’s “top secret” and “of utmost importance for the fate of the fatherland/motherland.” That’s it.

Step 5. As you may have guessed, the sealed orders say, “The people you have gathered are all guilty of high treason. Kill them NOW without delay. This is an ORDER from your Supreme Leader.”

Obviously this path to peace has a few rough edges. If you’re only number two in the system, it won’t reliably work unless you kill the Supreme Leader first. If you’re number eight, you probably have to simultaneously kill numbers one through seven. (Which, by the way, is approximately what von Stauffenberg tried to do in 1944, though his plans for top Nazis once captured were foolishly ambiguous).

To my knowledge, the closest historical analogue to my strategy happened in Romania on November 30, 1938. The Iron Guard was Romania’s murderous answer to the Nazi Party, and the monarchist government had most of its top leaders in prison, including party leader Corneliu Codreanu. Keeping them in prison was dangerous, and so was letting them go. Faced with this dilemma, the Romanian government saw a third option: It ordered the summary execution of their Iron Guard prisoners — and the order was strictly followed.

Yes, Romania still joined the Axis, and Romania was still a center of horrific atrocities. But rule by the Iron Guard would have been even worse — and the November 30 executions happily took that option off the table.

If my strategy is so great, why is it so rare? First and foremost, because peacemakers are relatively nice, and my strategy is ruthless. Even though Emperor Hirohito had the blood of millions on his hands, he was not personally cruel. Instead, he was weak, a people-pleaser — and the people who surrounded him were hawks (and people pretending to be hawks because they were afraid of the sincere hawks). If I were in Hirohito’s shoes, however, I say there’s an 80% chance that my strategy would have stopped Japan’s war of aggression before it started in 1931. Simultaneously summarily slaughtering your country’s hawks overnight doesn’t just remove them from the equation; it sends a message to the uncommitted that opposing peace is hazardous to your health.

Is my confidence in the efficacy of my strategy misplaced? Key point: In my hypothetical, I’m assuming a high level of crucial country-specific knowledge. When I muse, “If I were in Hirohito’s shoes…” I’m obviously assuming I can speak fluent Japanese. And I’m also assuming that I possess detailed knowledge of contemporary Japan’s institutions and personnel. These are unrealistic assumptions for Bryan Caplan, but totally reasonable assumptions for anyone in a position to try my strategy.

What about morality? Doesn’t killing hawks make you as bad as they are? Hardly. By assumption, they’re conspiring to wage unjustified war, so they deserve draconian punishment. Doesn’t killing the guilty without trial make you a murderer? No. If you genuinely know someone is guilty, trials are a matter of convenience, not morality. Aren’t trials the best way to find out if someone is genuinely guilty? Only sometimes. And if the fate of millions hangs in the balance, you shouldn’t fret about a few false positives. That’s mild deontology in action.

Couldn’t evil people use my strategy to do greater evil? Definitely, because evil people routinely use similar strategies to do greater evil. Fanatical dictatorships often target moderates and peace-makers. Wouldn’t they be even more inclined to do so if my strategy caught on? Maybe, but relatively virtuous leaders would also be more inclined to emulate my strategy if it caught on. The net indirect effect of more attempts and more prevention could easily be pacific.

Suppose I’m right. You could still say “Who cares? No one’s going to listen.” To which I have three replies.

First, even if no one listens, knowledge is valuable for its own sake. If my eccentric thesis about the ugly path to peace is often true, let it be known.

Second, my strategy doesn’t have to be widely accepted to add immense expected value. Indeed, if only one government in the next hundred years successfully uses my strategy to make a lasting peace, this will be my most valuable idea.

Last, if I’m right, there is a shocking moral corollary: Contrary to generations of apologists for “the poor leaders who had no choice but to drown the world in blood,” almost every leader does have a viable last-ditch path to peace: quickly and systematically round up your side’s warmongers and kill them without warning. The fact that so few leaders would even consider this option reinforces my long-standing claim that these “poor leaders” are in fact deeply evil. So evil that they would rather show mercy to a few hundred likely war criminals than protect millions of innocents.

I met Brian when we were both interns at the Cato Institute in 1991. We spent the whole summer arguing, primarily about moral realism. Despite his strong libertarian views, Brian at that time was a vocal if reluctant nihilist. He even told me that he wanted to attend an anti-Gulf war rally with a placard reading, “Money for subjective preferences, not war.” (To which I replied, “Preference for war is a subjective preference”). The affable Sheldon Richman ran Cato’s intern program in those days, and he spent many a lunch talking ideas with the two Brian/Bryans.

After I returned to UC Berkeley in the fall, Brian and I kept in touch via snail-mail; I even looped him into a three-way conversation with young Michael Huemer on the intuitionist response to nihilism. If I recall correctly, Brian was pondering a Ph.D. in history during our shared internship. By the time I started at Princeton in 1993, though, Brian decided to start doing history instead of getting a graduate degree of his own.

After turning his internship at Cato into a full-time position, Brian Doherty left for Reason in 1994. Deeply agentic, Doherty balanced a full-time journalism career with a series of labor-intensive book projects. I still remember getting polished drafts of the early chapters of his Radicals for Capitalism, again via snail-mail in 1994. By the time the book was published, it had evolved into by far the best history of the modern American libertarian movement. It still is. His other works included a history of the Burning Man festival (Brian was a devoted musician and fanboy) and another on Ron Paul’s presidential candidacy.

Brian’s switch to Reason fortuitously led him to relocate to Los Angeles, just 30 minutes from my childhood home. As a result, I saw Brian almost every time I visited L.A., often roping in the nearby and awesomely erudite David Gordon as well. Our preferred restaurant was just down the street from legendary comic book shop Meltdown Comics.

At the time, I was starting to explore the world of graphic novels, and Brian was my top mentor. Critically for me, we met up at San Diego’s 2007 Comic-Con, where he was moderating a panel on autobiographical comics. Panelists included Alison Bechdel (of the famous and unintentionally hilarious Bechdel test) and Brian’s longtime friend, Joe Matt. Thanks to Brian, I was able to join him and Joe for lunch. It was the first time I’d ever consorted with a working graphic novelist. While I can’t be sure, I think it was this Doherty-led meal that put me on course to become, by the grace of the noble Zach Weinersmith, a best-selling graphic novelist myself.

When Brian Doherty, feeling priced out of L.A., moved to Palm Springs circa 2015, I felt like an era was ending. But instead of moping, I simply started visiting Palm Springs more. Brian was always happy to make time for me, talking ideas with my twins and (I believe) my niece as well. I’m pretty sure we went hiking in the Indian Canyons once, but for reasons I couldn’t fathom, Brian stubbornly refused to try ascending Mount San Jacinto via its marvelous cable car.

Brian Doherty was a full-fledged polymath. Before I met him, he was already an accomplished bass player on the punk rock scene. While he made his living as a journalist and lacked a Ph.D. in history, his publication record fully warranted a prestigious history professorship. Brian knew his economics (mainstream as well as Austrian), his philosophy, and his pop culture. He knew comics far more deeply than I, introducing me to Seth’s sublime Wimbledon Green. Despite his overall great taste, he had a strange soft spot for Superman’s Pal, Jimmy Olsen. Though he ultimately seemed quite bourgeois, Brian had an array of eccentric friends. He was a better practitioner of libertarian friendliness than I’ve ever been. Besides being a punker and a Burning Man regular, he was apparently even friendly with The Nation’s cantankerous Jeet Heer.

In hindsight, my saddest memory of Brian goes back to the early 2000s, when he excitedly told me he was going to be a father. But the pregnancy ended in miscarriage, so to the best of my knowledge, Brian died childless. Alas, he would have been a pitch-perfect patriarch as well as a fantastic friend.

On some level, death is not real for me. For as long as I live, the same thought will come to mind every time I revisit L.A. or Palm Springs: Great, I hope Brian is around! My only consolation is the adage, “Don’t be sad it’s over. Be happy it happened.” Brian, I am so happy I knew you!

Summary
In this chapter on “Personal Liberty,” Rothbard puts run-of-the-mill “civil libertarians” to shame.  He’s more radical than most of the left on traditional civil liberties like freedom of speech, drugs, and wiretapping.  He stands up for the rights to libel and slander; he defends full-blown drug legalization, not a switch from “punishment” to “treatment”; and he argues that wiretapping the innocent is criminal, whether or not you’ve got a warrant. 

At the same time, Rothbard insists that many “right-wing” causes are neglected civil liberties issues.  How can there be freedom of speech when the government licenses the airwaves?  If people have a right to advocate the most heinous positions, why can’t tobacco companies advertise on television?  And if it’s wrong to persecute a whole category of people because it has an above-average fraction of bad apples (“profiling” in current parlance), what’s the deal with gun control?  Yes, criminals often use guns; but how does that justify the persecution of the vast majority of gun owners who aren’t criminals?

Critical Comments
1. I agree with Rothbard’s critique of libel and slander law.  The Western world condemns Singapore for using defamation law to silence dissent; but once you buy the principle of banning false, damaging statements, how is Singapore in the wrong? 

Furthermore, if deception should be illegal, why not self-deception?  In other words, if it is legal for me to irrationally decide that you’re a cheat, why isn’t it legal for me to share my irrational accusations with others?  In both cases, you’re losing customers because people have false beliefs about your character. 

Here’s my favorite reductio on libel and slander.  The last time I checked, the typical Randian accepted the law of defamation.  He also accepted aesthetic objectivism: “Atlas Shrugged is a great book,” is literally true.  Doesn’t it follow, then, that it should be illegal for a reviewer to deny that AS is a great book?  He’s making a false, damaging statement, right?

Let me add that in the Google age, Rothbard’s case against libel and slander is stronger than ever.  False claims abound on the Internet.  If believed, many would be very damaging.  But most Internet users have the common sense to ignore unsubstantiated accusations, so in practice they do little harm. 

2. If you really think about it, here’s the most critical paragraph in the entire book:

[I]f A is a boss in a criminal enterprise, and, as part of the crime, orders his henchmen: “You and him go and rob such and such a bank,” then of course A, according to the law of accessories, becomes a participant or even leader in the criminal enterprise itself.

Why is it so important?   Recall that Rothbard’s whole theory is that the State is a criminal gang.  So if giving orders to commit serious crimes were not itself a serious crime, he’d have to exonerate the vast majority of political leaders who never personally commit invasive acts!   In other words, the law of accessories is not a footnote to libertarian theory; it is the entire basis on which government leaders are considered mass murderers – as opposed to bystanders exercising their freedom of speech.

Once you accept the law of accessories though (and it’s absurd not to), Rothbard’s objections to charges of “incitement” and “conspiracy” make little sense.  Here’s what he says:

In our view, “incitement” can only be considered a crime if we deny every man’s freedom of will and of choice, and assume that if A tells B and C: “You and him go ahead and riot!” that somehow B and C are then helplessly determined to proceed and commit the wrongful act. But the libertarian, who believes in freedom of the will, must insist that while it might be immoral or unfortunate for A to advocate a riot, that this is strictly in the realm of advocacy and should not be subject to legal penalty.

If we bought this argument, then Hitler would not be the architect of the Holocaust, but merely its cheerleader.  After all, what did he do other than tell some people, “You and him go ahead and commit mass murder”?  What’s the difference between “telling” and “ordering” anyway?  Fortunately, it’s easy to make this contradiction go away: Rothbard should just admit that whoever “incites a riot” is an accessory to the riot, just as the Godfather who orders a murder is an accessory to murder.

3. My favorite passage from this chapter:

This is not to argue, of course, for prohibition of alcohol; once again, to outlaw something which might lead to crime is an illegitimate and invasive assault on the rights of person and property, an assault which, again, would far more justify the immediate incarceration of all teenage males. Only the overt commission of a crime should be illegal, and the way to combat crimes committed under the influence of alcohol is to be more diligent about the crimes themselves, not to outlaw the alcohol.

This sounds like a left-wing argument; but as Rothbard notes, it also undermines left-wing crusades against guns, porn, etc.  If you have trouble grasping the appeal of libertarianism, this paragraph should be a big help.  Libertarians are unusually likely to take arguments literally, and see what they actually imply, instead of just rationalizing the prejudices of their ideological sub-culture.

P.S. For a more thoughtful philosophical critique of gun control, see Michael Huemer’s “Is There a Right to Own a Gun?”

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Why, you may ask, does the filibuster endure? The usual story is “What comes around, goes around.” The other party will eventually get control of House, Senate, and presidency. Ending the filibuster helps your party fulfill its fondest dreams in the short run, but realizes your worst nightmare in the long run. Since both parties know this, the filibuster survives.

What’s weird about this story is that (a) politicians usually seem to have very short time horizons, and (b) if your party has a trifecta, it will probably take many years before the other party gets a trifecta. How long? With coaxing, I got Chat to produce the following table of how long trifectas take to fully reverse.

The average trifecta duration is 10.3 years, with a median of 8 years. What’s especially striking is that in the last century alone, Democrats won trifectas, then avoided full reversals, for multiple decades. 1933-1953 was a full generation. 1961-2003 was two full generations. Yes, the last two trifectas were brief, but atypically so.

So what? It seems like power-hungry politicians are ignoring a treasure trove of power untapped. Think about what Republicans could do by 2028 if they ended the filibuster today. They could end all immigration and raise tariffs to the skies — and the Supreme Court would totally let them do it. Indeed, abolishing the filibuster would sideline the Supreme Court altogether. After all, Republicans could simply pass a court-packing bill to fill the judiciary with loyal MAGAs.

Sure, Democrats could reverse all of this, but not until their next trifecta. If Republicans believe that Trump’s policies are half as wonderful as he claims, moreover, they should expect not electoral punishment, but electoral rewards, for delivering the full Monty. Sure, bad luck will eventually give the Democrats full control, but that could be a generation in the future, or even two generations.

Needless to say, I’m not advocating the end of the filibuster. Personally, I’d like to see the filibuster requirement raised from 60 out of 100 to 80 or 90. If I thought there was a snowball’s chance in hell that top Republicans would take this post to heart, I wouldn’t have published this post. The challenge, in my mind, is figuring out why the filibuster endures. Possibilities to consider:

1. Politicians (or at least senators) are less power-hungry and short-sighted than I suppose.

2. Politicians (or at least senators) underestimate how much extra power they could grab.

3. Politicians (or at least senators) underestimate how long it will take the other party to win a trifecta.

4. Voters really love the filibuster (or maybe time-tested constraints on government in general), so ending the filibuster would reverse the current trifecta ASAP. Historical data on the duration of trifectas is therefore misleading.

5. While ending the filibuster would be great for the ruling party in general, voters would harshly punish the specific politicians who spearheaded it. Since no particular politician wants to lead the charge, the status quo endures.

6. Others?

Please defend your favorite stories in the comments.

While I agree that Trump is terribly wrong about international trade, there’s a big difference between being wrong and being confused. While I doubt I’m ready to pass an Ideological Turing Test for Trumpian trade theory, I recently had a weird epiphany on the topic. After said epiphany, I feel capable of articulating roughly what Trump is thinking.

1. Above all, Trump wants the rest of the world to buy as much stuff from the U.S. as possible. He wants the world to buy our current output — and he wants them to buy our assets, too! His dream is piles of dollars flowing into the U.S. from all directions.

2. If piles of dollars flow into the U.S. from all directions, he thinks this will boost U.S. sales and employment.

3. Trump doesn’t know and doesn’t care about the “trade deficit” as economists define it. When he hears “trade deficit,” Trump imagines that U.S. dollars leaving the U.S. exceed U.S. dollars entering the U.S. Foreign investment means U.S. dollars entering the U.S., so on his implicit definition, foreign investment reduces trade deficits.

Why would anyone find this story plausible? Simple: It’s unadorned, old-fashioned Keynesianism. Trump wants to boost aggregate demand. The more money foreigners spend here, the more American business will sell, and the more American workers they’ll hire.

At least in the 1990s, macroeconomics textbooks often explicitly mentioned this idea under the heading of “beggar-thy-neighbor” trade policies. If standard expansionary fiscal and monetary policies are somehow unavailable, countries can “steal” aggregate demand from other countries via protectionism.

If Trump’s real goal is to boost aggregate demand, why doesn’t he just push the Fed for more expansionary monetary policy? He has, but it’s a low priority for him, probably because he dimly realizes that extremely expansionary monetary policy would also raise inflation.

If foreign dollars really poured into the U.S., wouldn’t that also be inflationary? Of course. It would be tantamount to a massive fall in global demand for the dollar. The value of the dollar plummets if and only if the price of stuff in terms of dollars skyrockets. Alas, this is a subtle point. Trump, like most human beings, can with effort connect money supply to inflation. But connecting money demand to inflation, much less trade policy to money demand, is two bridges too far.

Intellectually, then, the best response to the Trumpian theory of trade is:

1. Since the U.S. economy is near full employment and inflation barely under control, raising aggregate demand is currently a bad idea.

2. Even if raising aggregate demand were currently a good idea, expansionary monetary policy is by far the best tool for the job. Trade policy is, at best, a clumsy way to accomplish the same thing with lots of collateral economic and diplomatic damage.

3. More generally: There is never a need for the U.S. to struggle to earn back American dollars from the rest of the world. We can print all of the dollars we want.

4. In fact, America’s best-case scenario is that we can persuade the rest of the world to sell us infinite stuff in exchange for green pieces of paper that we print at near-zero cost.

What, though, is rhetorically the best response to Trumpian trade theory? While I now feel able to translate Trump Thought into textbook econ, I really don’t know how to translate textbook econ into Trump Thought. If you’re up to the task, please help me in the comments.