Paul Krugman, COVID-19, and Broken Windows

The jury is still out on which of two things — COVID-19 or the panic over COVID-19 — will cost more lives and do more damage to the global economy. My money’s still on the latter. In the meantime, I’ve developed a surefire, Groundhog Day type test for whether the emergency is over:

Watch for Nobel laureate economist and New York Times columnist Paul Krugman to start trying to convince us it was, all in all, actually a GOOD thing.

Krugman on 9/11: “[T]he direct economic impact of the attacks will probably not be that bad. And there will, potentially, be two favorable effects.”

Krugman on Fukushima: “[T]he nuclear catastrophe could end up being expansionary, if not for Japan then at least for the world as a whole.”

Krugman would even have us believe that Pearl Harbor ended the Great Depression (which actually ended more than half a decade later). “If we suddenly had a threat of war and a military build up,” he once asserted on ABC News’s Roundtable,  “you’d be amazed how fast the economy would recover.”

Krugman is the 21st century’s foremost evangelist of the Broken Window Fallacy.

In Frederic Bastiat’s “parable of the broken window,” a shopkeeper’s son carelessly breaks a window pane.

A witty onlooker — Paul Krugman’s ideological ancestor — considers this a good thing because it creates business for the glazier who replaces broken windows.

As Bastiat points out, though, while the cost of replacing the  pane is seen, other things aren’t:  That was money the shopkeeper could have spent on a new pair of shoes, or on a book he wanted to read.

Instead of buying something that improves his life, the shopkeeper has to spend that money just getting back to his previous condition.

To cover costs like replacing the window, he probably raises prices, meaning his customers have to spend more on his products, leaving them less to spend on other things they might like.

Even the glazier’s customers get screwed. Broken windows increase demand, which means higher prices. The man building a new house has to pay more, and wait longer, for new windows.

The matter is a loss, not a gain, for everyone except the glazier.

Can we expect to see some long-term beneficial consequences from COVID-19 and its associated hysteria? Yes.

Two likely outcomes are large, permanent increases in “telecommuting” (working from home instead of traveling to an office) and “distance learning” (taking classes from home instead of traveling to a university campus).

Those two trends were already noticeable, but fear of contagion is boosting them tremendously. When the fear subsides, the benefits will be remembered. Not as many people will be returning to offices and campuses as left them. That means lighter traffic, lower energy consumption, and more spare time for many workers and students.

Those are good things, but we could have had them any time we wanted them, with or without COVID-19 and the associated mass hysteria. Contra Krugman, any “bright side” to catastrophe costs more than it’s worth.

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Reflections on Guatemala

I first journeyed to Guatemala 20 years ago, hosted by Universidad Francisco Marroquín.  Two weeks ago, I returned for a delightful extended visit, accompanied by my Spanish-speaking elder sons and former EconLog blogger Jim Schneider.  I spent over a week doing guest lectures at UFM, then gave Friday’s keynote talk for the Reason Foundation’s “Reason in Guatemala” conference.  During our trip, we were also able to visit the awesome Mayan ruins of Tikal and Yaxha.  Here are my reflections on the experience.

1. Guatemala has dramatically improved over the last two decades.  Multinational businesses are now all over Guatemala City.  Restaurants and luxury products are all over, but so are businesses that cater to average Guatemalans.  Local grocery stores are packed with familiar international brands and products.  There are multiple Walmarts.  Even Costco is there, doing business as Pricesmart.  We argued about whether the Oakland Mall was more impressive than Tyson’s I, but it was definitely a tough call.  Smartphones are naturally ubiquitous.  Whenever we strayed from the tourist areas, we saw ordinary citizens enjoying simple material pleasures like Pollo Campero.

2. When I last visited Guatemala, the high-end businesses seemed grossly overbuilt; the shiny malls were almost empty.  Now, however, Guatemalans actually seem to be consuming the fruits of progress.  The cavernous Oakland Mall was packed at lunchtime on a weekday – and the pedestrianized streets near the National Palace were full of locals.  La Aurora Zoo was world-class, but we saw no other foreign tourists.

3. Our sponsors at UFM strove to keep us perfectly safe.  For the first few days, they drove us everywhere.  Yet almost every local assured us that four guys walking around Zone 10 in broad daylight were extremely safe.  By the end, we were walking comfortably through a wide range of neighborhoods, though only by day.  Crime is clearly down, thanks in no small part to massive private security.  Even small stores often have heavily-armed guards, and razor wire is almost always in your field of vision.

5. The greatest danger to pedestrians is probably the poor sidewalks; there are many dangerous pits even in elite neighborhoods.  The problem is so dire and the cost of fixing it is so small that I’m surprised that local businesses haven’t raised money to solve it.  I know Latin America’s philanthropic tradition is weak.  Yet good publicity aside, wouldn’t the Oakland Mall soon recoup a $50-100k investment in the surrounding sidewalks?  Would local government really block this public-spirited initiative?

6. We didn’t have to walk far to see absolute poverty.  No one looked malnourished, and even kids living in shacks and huts usually wore new, store-bought clothes.  Still, we saw families living in shacks (in Guatemala City, especially near the airport) and huts (especially on the drive to Yaxha).  During one severe traffic jam, we saw kids under ten washing car windows.  We also witnessed several families of clowns busking in the streets.

7. By official measures, Guatemala is dramatically poorer than any of the Caribbean islands we recently toured, with per capita GDP of $3200 nominal and $7600 PPP.  Yet this is mightily difficult to reconcile with what we saw with our own eyes.  Overall, the Caribbean islands looked a lot like the road from Flores to Yaxha – a mixture of modest modern houses and primitive shacks and huts.  Everything else in Guatemala looked vastly better than St. Maarten or St. Kitts.  While this partly reflects higher population, the biggest contrast is that almost every Guatemalan looks like he has useful work to do.  The Caribbean islanders, in contrast, have high levels of desperate peddling and outright idleness.

8. Guatemalan prices confused not only us, but local economists as well.  Grocery prices are very high.  Guatemala’s Pricesmart and my local Costco sell many identical goods, so I can confidently say that the former’s prices were roughly twice as high as I normally pay.  Local chains were even pricier.  One prominent local businessman blamed Guatemala’s low port capacity – and impishly shared his thrilling plans to build a big new port in the near future.  Restaurant meals aren’t cheap either; everything from fast food to premium steaks costs about the same as it would in Virginia.  The only product that was blatantly cheaper than usual was Uber – about one-third of the U.S. rate.  (Since gas prices were a bit higher than in Virginia, drivers’ take-home pay must be low indeed).  Other services, such as tour guides, were also big bargains.

9. As I toured Guatemala, I couldn’t help but notice how happy the people looked, especially the women.  I wondered if my impression could just be confirmation bias, but now that I’m back home I’m confident that the contrast is stark.  Guatemalan men look at least marginally happier than American men.  Guatemalan women look much happier than American women.  You could say that this merely reflects cultural differences in expressiveness, but that strikes me as sheer stubborn denial.

10. UFM was the jewel of our visit.  UFM could well be the most beautiful of the hundred-odd universities I’ve toured in my life.   Built in a ravine, it elegantly blends distinctive architecture with gorgeous tropical flora.  UFM also hosts two stunning museums – Popol Vuh (archaeology) and Ixchel (textiles).  Best of all, UFM is an academic libertarian paradise.  The ideas and imagery of my intellectual heroes adorn the whole campus – Milton Friedman, Ayn Rand, and Ludwig von Mises are only the beginning.  Yet there is no sign of dogmatic orthodoxy.  Good manners prevail; faculty and students are eager to hear new ideas and debate old ones.   Unlike most other institutions, UFM administrators are especially intellectually engaged.  UFM President Gabriel Calzada Alvarez was overjoyed to talk ideas with my sons for hours.

11.  The students of UFM look even happier than the rest of their countrymen.  You could say this is because they’re drawn from Guatemala’s richest families, but so are Americans in the Ivy League – and those kids are hardly pictures of good cheer.  The gender gap was so big that I wouldn’t have believed it if I hadn’t seen it with my own ideas; female UFM students appear extraordinarily happy.  UFM econ’s male/female ratio is also strangely low; several of the classes I taught were virtually all-female.

12. My Guatemalan audiences took to Open Borders like fish to water.  The cultural and political threat of Muslim immigration was the sole recurring objection.  In Guatemalan eyes, Latin America and the U.S. share a common Judeo-Christian culture, so many were surprised to hear how many U.S. citizens view Latin Americans as culturally alien or even unassimilable.

13. On the latter issue, the Guatemalans are plainly correct.  Pre-assimilation to the North American way of life is prevalent and intense.  Virtually everyone at UFM speaks and understands English well.  About a fifth of the public signs in Guatemala City are entirely in English, and an additional third are in Spanglish.  The Guatemalan elite already lives the American dream, más o menos.  The average Guatemalan struggles to do the same.  A dozen different people emphatically described Guatemalans as “deeply conservative,” but Tarantino was on t.v. every time I flipped the channels.

14. Even Guatemalan libertarians rarely complained about specific domestic government policies, but if you look at their Economic Freedom of the World ranking, there is plenty to decry.  Guatemala gets great scores on Size on Government and Sound Money, and a good score on Freedom to Trade Internationally.  Yet it gets an awful score for Legal System & Property Rights, and an even worse score for Regulation.  New construction projects are all over Guatemala City, but one of the locals told me it takes 2-3 years to obtain permission to build.  Imagine how much construction there’d be if you cut the delay down to 2-3 months or 2-3 weeks!

15. So what do Guatemalans complain about?  I asked one of my classes to tell me what most bothered the average Guatemalan; then I proposed workable policy responses for each problem.  Their first answer was “corruption.”  I suggested hiring a team of Swiss or Singaporeans to take over Guatemala’s internal affairs department.  They saw the logic of importing trustworthiness, but told me that Guatemalans wouldn’t accept it.  Their next answer was “traffic.”  I proposed electronic road pricing.  They again saw the logic, and again told me that Guatemalans wouldn’t accept it – even if the gas tax were abolished at the same time.  My students also saw crime – especially kidnapping – as a grave problem.  They were almost dumbstruck when I suggested a big switch from incarceration to flogging, even though Guatemala’s indigenous peoples already heavily rely on corporal punishment.  In a poor country with heavy corruption and high crime, the case for flogging is mighty indeed.  Just ask criminal-justice reformer Jason Brennan!

16. If I had to move to another country, Guatemala would be high on my list.  First and foremost, I love the UFM community.  American liberalism and conservatism are intellectual dead-ends, and I would enjoy forever escaping from both.  I also prefer to be around very happy people, and on that score Guatemala handily beats the U.S.A.  Guatemala does have some scary features, but the longer I stayed, the more I relaxed.  Yet for now, I continue to prefer the U.S.  Wages are obviously much higher here, and PPP measures notwithstanding, a dollar goes further in the U.S. than in Guatemala.

17. The Mayan archaeological sites we visited deserve all the hyperbolic adjectives people apply to them.  The contrast between the pyramids and the palaces, however, is vast.  The pyramids you leave thinking, “Human beings made these?!  Without wheels?!”  (As well as, “They performed human sacrifices here?!  What the hell was wrong with these Mayans?!”)  The “palaces” of the Mayan leaders, in contrast, look smaller than many apartments in Fairfax.  To reverse Galbraith, the Mayan elite lived lives of public affluence and private squalor.

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American Fictionalists

It is both fun and informative to consider lists.  To debate the list is a sign that you have engaged with someone who knows what she is talking about.  This morning, I asked Google to find web pages that opined as to whom might be included on a list of the greatest American fictionalists (novelists, short story writers, poets, and playwrights).  Google and I found a page at NoSweatShakespeare.com, which contained a list, 20 Best American Writers. I’ll not quibble with the score of authors enumerated, but I might have substituted others (Jack London, Robert A. Heinlein, Ayn Rand, Robert Penn Warren, Dashiell Hammett, Robert Frost, for instances).

At any rate, these scriveners became famous because they could voice the sentiment of a people at their best. My goal is to present each of the 20, along with a quote that typifies this:

  • Nathaniel Hawthorne 1804 – 1864
    Nathaniel Hawthorne was a novelist and short story writer. Hawthorne’s works have been labelled ‘dark romanticism,’ dominated as they are by cautionary tales that suggest that guilt, sin, and evil are the most inherent natural qualities of humankind. His novels and stories, set in a past New England, are versions of historical fiction used as a vehicle to express themes of ancestral sin, guilt and retribution…

    No man, for any considerable period, can wear one face to himself and another to the multitude, without finally getting bewildered as to which may be the true.

  • Edgar Allan Poe 1809 – 1849
    Edgar Allan Poe was an American writer, editor, and literary critic. He is best known for his poetry and short stories, particularly his tales of mystery and suspense. He is generally considered the inventor of detective ficiton. Poe’s work as an editor, a poet, and a critic had a profound impact on American and international literature. In addition to his detective stories he is one of the originators of horror and science fiction. He is often credited as the architect of the modern short story…

    All that we see or seem is but a dream within a dream.

  • Herman Melville 1819 – 1891
    Herman Melville was an American writer of novels, short stories and poems. He is best known for the novel Moby-Dick and a romantic account of his experiences in Polynesian life, Typee. His whaling novel, Moby-Dick is often spoken of as ‘the great American novel’ ’vying with Scott Fitgerald’s The Great Gatsby and Mark Twain’s Huckleberry Finn for that title…

    It is better to fail in originality than to succeed in imitation.

  • Walt Whitman 1819 – 1892
    Walt Whitman was a poet, essayist, and journalist who transformed poetry around the world with his disregard for traditional rhyme and meter and his celebration of democracy and sensual pleasure. His masterpiece, Leaves of Grass, a collection of poems, is widely studied by poets, students and academics, set to music, translated into numerous languages, and is widely quoted. His influence can be found everywhere – in contemporary best seller lists to feature films and musical works, both “serious” and popular…

 … re-examine all you have been told at school or church or in any book, dismiss whatever insults your own soul …

  • Emily Dickinson 1830 – 1886
    Unknown as a poet during her lifetime, Emily Dickinson is now regarded by many as one of the most powerful voices of American culture. Her poetry has inspired many other writers, including the Brontes. In 1994 the critic, Harold Bloom, listed her among the twenty-six central writers of Western civilisation. After she died her sister found the almost two thousand poems the poet had written…

We turn not older with years but newer every day.

  • Mark Twain 1835 – 1910
    Samuel Langhorne Clemens , far better known as Mark Twain, was an American writer, businessman, publisher and lecturer. He progressed from his day job as pilot of a Mississippi riverboat to legend of American literature. His work shows a deep seriousness and at the same time, it is hilariously satirical, as seen in his many quotes on all aspects of life. His masterpiece is the novel, Huckleberry Finn, which is regularly referred to as ‘the great American novel.’…

Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did do. So, throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.

  • Henry James 1843 – 1916
    Henry James is regarded as one of the key figures of 19th-century literary realism. He is noted for writing from a character’s point of view’ which allowed him to explore consciousness and perception. His imaginative use of point of view, interior monologue and unreliable narrators brought a new depth to narrative fiction, all of which were influential on the writing of the novelists who followed him. He was nominated for the Nobel prize for literature three times….

Cats and monkeys — monkeys and cats — all human life is there!

  • T.S. Eliot 1888 – 1965
    Thomas Stearns Eliot was an American-born, British, poet, essayist, playwright, critic, now regarded as one of the twentieth century’s major poets. He received more rewards than almost any other writer of the past two centuries, including the Nobel prize, the Dante Gold Medal, the Goethe prize, the US Medal of Freedom and the British Order of Merit…

Only those who will risk going too far can possibly find out how far one can go.

  • F. Scott Fitzgerald 1896 – 1940
    Francis Scott Fitzgerald was an American novelist, widely regarded as one of the greatest, if not the greatest, American writers of the 20th century. He is best known for his novel, The Great Gatsby, which vies for the title ‘Great American Novel’ with Mark Twain’s Huckleberry Finn and Herman Melville’s Moby-Dick. Fitzgerald’s place on this list is justified by the fact that his great novel is actually about America…

Either you think — or else others have to think for you and take power from you, pervert and discipline your natural tastes, civilize, and sterilize you.

  • William Faulkner 1897 – 1962
    William Cuthbert Faulkner was a Nobel Prize laureate, awarded the literature prize in 1949. He wrote novels, short stories, poetry, and screenplays. He is known mainly for his novels and short stories set in the fictional Yoknapatawpha Country, Mississippi. Faulkner is one of the most celebrated American writers, regarded, generally as the great writer of the American South…

Never be afraid to raise your voice for honesty and truth and compassion against injustice and lying and greed. If people all over the world…would do this, it would change the earth.

  • Tennessee Williams 1911 – 1983
    Thomas Lanier Williams III, known as Tennessee Williams is one of America’s most popular playwrights and now regarded as one of the most significant writers of the twentieth century. He wrote more than thirty plays, some of which have become classics of Western drama. He also wrote novels and short stories but is known almost exclusively for his plays. His genius was in the honesty with which he represented society and the art of presenting that in the form of absorbing drama…

I think that hate is a thing, a feeling, that can only exist where there is no understanding.

  • Arthur Miller 1915 – 2005
    Arthur Miller was a playwright and ‘great man’ of American theatre, which he championed throughout his long life. His many dramas were among the most popular by American authors and several are considered to be among the best American plays, among them the classics, The Crucible, All My Sons, A View from the Bridge and, above all, the iconic American drama, Death of a Salesman. He also wrote film scripts, notably the classic, The Misfits…

 … life is God’s most precious gift; no principle, however glorious, may justify the taking of it.

  • Joseph Heller 1923 – 1999
    Joseph Heller was an American writer of satirical novels, short stories and plays. Although he wrote several acclaimed novels, his reputation rests firmly on his masterpiece, the great American anti-war satire, Catch 22. Because of the quality of the novel and the impact it has made on American culture it has catapulted Heller into the ranks of the great American writers…

There was only one catch and that was Catch-22, which specified that a concern for one’s safety in the face of dangers that were real and immediate was the process of a rational mind. Orr was crazy and could be grounded. All he had to do was ask; and as soon as he did, he would no longer be crazy and would have to fly more missions. Orr would be crazy to fly more missions and sane if he didn’t, but if he was sane he had to fly them. If he flew them he was crazy and didn’t have to; but if he didn’t want to he was sane and had to.

  • Ernest Hemingway 1899 – 1961
    Ernest Hemingway was a novelist, short story writer, and journalist. He published seven novels, six short story collections, and two non-fiction works, and won the Nobel Prize for Literature in 1954. More works, including three novels, four short story collections, and three non-fiction works, were published posthumously…

Now is no time to think of what you do not have. Think of what you can do with what there is.

  • Raymond Chandler 1888 – 1959
    Raymond Chandler was a British-American novelist who wrote several screenplays and short stories. He published seven novels during his lifetime. The first, The Big Sleep, was published in 1939. An eighth, Poodle Springs, unfinished at his death, was completed by another great crime writer, Robert B Parker. Six of Chandler’s novels have been made into films, some more than once…

I knew one thing: as soon as anyone said you didn’t need a gun, you’d better take one along that worked.

  • Toni Morrison 1931 – 2019
    Toni Morrison’s novels are known for their vivid dialogue, their detailed characters and epic themes. Her most famous novel is the 1987 novel, Beloved. She was awarded both the Pulitzer Prize and the American Book Award in 1988 for Beloved, and the Nobel Prize for Literature in 1993…

Freeing yourself was one thing, claiming ownership of that freed self was another.

  • Vladimir Nabokov 1899 – 1977
    Vladimir Vladimirovich Nabokov was a Russian-American novelist, and also a famous entomologist, specialising in butterflies, a topic on which he wrote several academic books. He wrote nine novels in Russian, but it was when he began writing in English that he achieved international recognition…

I know more than I can express in words, and the little I can express would not have been expressed, had I not known more.

  • Flannery O’Connor 1925 – 1964
    Mary Flannery O’Connor wrote two novels and thirty-two short stories, and also several reviews and commentaries. Her reputation is based mainly on her short stories. She was a Southern writer and relied heavily on regional settings and typically southern characters. She was strongly Roman Catholic, which informed her exploration of ethics and morality…

The truth does not change according to our ability to stomach it.

  • John Steinbeck 1902 – 1968
    John Ernst Steinbeck was the author of 16 novels and various other works, including five short story collections. He is widely known for the novels, East of Eden, Of Mice and Men, and particularly, the Puliter Prize winning novel, The Grapes of Wrath, his masterpiece, which is one of the great American novels: it has sold more than 15 million copies so far…

All war is a symptom of man’s failure as a thinking animal.

  • John Updike 1923 – 2009
    John Updike was a novelist, short story writer and poet. He was also a literary and art critic. He published more than twenty novels, numerous short-story collections, eight volumes of poetry and many children’s books. He is most famous for his ‘Rabbit‘ series – novels that chronicle the life of his protagonist, Harry Angstrom – in which Updike presented his progress over the course of several decades…

They can be wonderful bastards because they have nothing to lose. The only people who can be themselves are babies and old bastards.

  • Kurt Vonnegut 1922 – 2007
    Kurt Vonnegut was an American writer who published fourteen novels, three short story collections, five plays, and five works of non-fiction. He is most famous for his novel ‘Slaughterhouse-Five’ (1969) which has become an American classic. It’s a semi-autobiographical novel based on his experience as a prisoner of war who survived the allies’ bombing of Dresden…

So it goes.

 

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Glimpses of Hidden America

I’m a pretty cynical guy when it comes to nation-states. So it might be surprising to hear that I sort of love in the vision of America most of us learned in school.

It’s a place where people generally tell the truth, work hard, love their families, help each other, stand up for the weak, tolerate differences, resist tyrants, chase frontiers, do justice, and create wealth.

If this seems like a dream, it is. This is “hidden America.” Probably the America you’ve experienced hasn’t worked out quite this way.

Part of the problem is that we may be looking in the wrong place.

I don’t believe the “United States” has very much to do with a good vision of America. The bureaucrats and the enforcers typically just control, manipulate, and harass. The politicians grandstand, and the legislation corrupts and impoverishes. The corporate types join in.

But there’s a whole lot more to America than the government, the big corporations, or the culture wars. I catch little glimpses of this “hidden America” here and there.

I see it in people who volunteer their free time to make things better, like when my friends and I showed up to help a forest cleaning crew this Saturday. They hardly asked any questions: we just grabbed saws and got to it. There was trust there, and an openness to strangers I doubt you’d find much elsewhere.

I see it in countless small businesses. There’s a plumber I know who comes home every day to feed his horses alongside his wife and two young daughters. And he has the biggest grin and joy to spare for his kids despite a hard job.

I see it in every old-timer who passes on wisdom and every young person who listens. It’s there in the kids who leave the countryside for the big cities, or leave the big cities for the countryside. It’s the high-fives at 5Ks, the fierce competition that ends with a handshake, and the company that makes electric scooters the new fad.

In hidden America, cooperation is the norm, and people couldn’t care less what your politics are. Character comes before party or belief. It’s the America that could live without the American empire. It’s the America that shares a common thread with the pioneers, the farmers, the inventors, the musicians, and all the decent people who came before us.

This is the America I suppose I will always love, even if it is a myth 9 times out of 10. And every now and then, I get to meet it.

Originally published at JamesWalpole.com.

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When Did We Become Socialists?

Nobody asked but …

What state has reached the highest level of socialism?  It happened when:

… and so it goes.

— Kilgore Forelle

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Words Poorly Used #146 — Partisanship

The word “partisan” comes from variants of words for separation or apartness.  But it doesn’t refer to individuality or critical thinking.  Partisans are usually shackled to an idea that is the opposite of individuality, responsibility, or critical thinking.  Partisans usually knuckle under to groupthink.  Think about the removal from office activity in Congress recently.  Only one member of either chamber voted conscientiously.  Only one did original thought.  All the rest based their opinions on borrowed opinion — partisan opinion.  So justice was not served, rather partisanship was served.

 

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