Category: Government

Saving our free society

The vast majority of every new generation want to make society a better place. They support policies that they believe will contribute to making society fairer and “nicer.” As they age their altruism may tilt toward self-enrichment and self-protection at the expense of fairness (cronyism), but initially their motives are pure. The key issue is what policies they believe will help make society a better place. “The-search-of-purpose-nature-and-nurture-genes-and-culture”

We can be thankful that American voters in throwing out a dishonest, divisive, egomaniac didn’t endorse the socialist wing of the Democratic Party.  We seem to have moved back to the broad center.  “Dan Mitchell–a victory for Biden-a defeat for the left”  It is hard to know where to look for and find the truth today, and our society will suffer because of that.  But as we review and debate the policy proposals of a Biden administration, we must remember that we are all looking for the truth about what will make our society better (fairer, freer, and more virtuous).  We must listen to each other’s concerns and carefully evaluate each other’s proposals. But we have a duty to ourselves and our neighbors to study history for what has worked and what hasn’t and to do our best to understand why limited government and maximum reliance on our own decisions and the decisions of our neighbors is the best framework in which to help make society better.

The growing number of today’s youth who look favorably at socialism (whatever they understand that to be) is worrying because it reflects an incorrect assessment of what socialism has always delivered. To today’s youth: If you really care about making society better, take the time to study the history of socialism and learn why it failed and is bound to fail and why societies that are freer and law abiding are both more virtuous and more prosperous. “Socialism-as-seen-by-millennials”

Saving the American Dream

The American Dream is under attack.

“The American Dream is the belief that anyone, regardless of where they were born or what class they were born into, can attain their own version of success in a society where upward mobility is possible for everyone. The American Dream is achieved through sacrifice, risk-taking, and hard work….” “The American Dream is to succeed by work, rather than by birth”. The Dream has attracted the world’s best and brightest to our shores making America the world’s leading economic powerhouse and enabling us to live freely as we each determine what we are willing to work for, for ourselves and our families.

Historically, individuals have been limited in what they could achieve by where they were born in society, by their parent’s position in life, and by who they knew. Companies of individuals were limited by the restrictions placed on them by their governments, often by the protections from competition government granted their friends (crony capitalism). Such traditional societies limited the freedom and ambitions of its citizens and limited the productivity of its human and physical resources. In short, traditional societies were keep poorer than they would have been if their citizens had been freer to innovate and compete.

The American Dream is now under attack by Donald Trump’s trade protectionism, crony capitalist government favoritism, immigration walls, and weakening of the international rule of law that has extended the benefits of specialization and trade globally. It is also being attacked by Alexandria Ocasio-Cortez’s (LOC’s) vision of state leadership and control of production and a new generation of idealistic, but uninformed, voters who mean well but have missed the lessons of socialism’s failures. If we are to save the conditions in the United States in which the American Dream still lives, we must better understand what has led so many Americans to vote against it.

I am sure that the answers to that question are many and complex, but broadly speaking two stand out in my mind, both of which point to the measures needed to restore support for the dream.

The first is to better educate the public, especially its younger members, about the conditions that allow and encourage a productive, innovative economy. This includes understanding the proper role of government in protecting private property, enforcing contracts, maintaining public safety (the rule of law) and in providing the public infrastructure that facilitates private activities and commerce (the commons of public goods). It includes the lessons of why all socialist economies have failed as a result of the corrupting incentives of state direction of economic activity rather than the competitive search by profit seeking private enterprises for better ways to serve the public.

The second answer concerns the adequacy and efficiency of our social safety net. The American Dream concerns individuals who take responsibility for their own well-being. While on average this has opened the way for most to prosper to the extent of their talents and energy, some will, often through no fault of their own, fail and fall off the tightrope. Society has an interest (even beyond the obvious humanitarian one) in softening the fall. It has an interest in an effective social safety net. 

Some–those who have not understood the lessons of socialism’s failures–have looked to trade and immigration restriction to prevent them from losing their jobs. They object to the economic benefits of free trade when it means that they must look for a new job (however, most manufacturing job losses in the U.S. have resulted from technical progress and the resulting increase in productivity rather than from cross border trade). “Econ-101-trade-in-very-simple-terms”  “Trade-protection-and-corruption” Those with such views have supported Trump’s anti free market policies. They have been attracted by Trump’s “I win you lose, us vs them” rhetoric.

AOC and her friends point to the widening income inequality–the dramatic increase in the incomes of the wealthiest and the stagnation of the incomes of the middle class in recent years–and demand income redistribution. But she fails to understand that it has been the growth of government’s role in the economy and the incentives in big government toward corruption and crony capitalism (protectionism for the wealthy) that have reduced competition and protected the position and markets of the biggest companies with friends in government. Socialism would make those incentives even stronger.

America’s dynamism and success reflects the creative destruction of risk-taking entrepreneurs and their hard-working employees.  https://economics.mit.edu/files/1785  However, the workers whose jobs are displaced by new products and new technologies may need help in finding and retraining for new jobs. They may need financial assistance in between (unemployment insurance). If nothing else, this may be the cost of their support for such a dynamic system.  Our social safety net sometimes provides poor incentives and sometimes has holes. It is time to seriously consider replacing it with a less intrusive and more comprehensive Universal Basic Income.  “Our-social-safety-net”  “Replacing-Social-Security-with-a-Universal-Basic-Income”

The American Dream–the foundation of our freedom and affluence–is under attack from the left and the right. We should fight to preserve (or restore) it.

Buy American

Buy American is un-American. Much if not most of what we already buy is American, meaning made in America. Though it would be rather challenging to identify products (leaving aside services) that are 100 percent made in American, i.e. that do not have at least some components produced abroad, 85% of U.S. GDP is domestically produced. So why is the slogan “buy American” un-American?

Buy American has several understandings. There are laws, such as the Buy American Act of 1933, that require the U.S. government to give preference to American goods and services over others in its purchases. To the extent such laws have any effect, they require the purchase of goods and services that would not otherwise be chosen–that would not otherwise meet the test of the best value for the taxpayers’ dollars. This law aims to protect American jobs. This, of course, is a misunderstanding of the reality. Buy American, when it changes behavior at all, protects some undeserving jobs at the expense of other jobs that are worth keeping.  It protects jobs producing goods and services that would not otherwise be profitable. In short, it keeps American workers employed in activities that are less productive than would otherwise be the case. In the long run, it does not increase employment but rather reallocates workers to less productive tasks. In short, buy American lowers our standard of living. Thus, we can be thankful that it only requires 51% domestic content to qualify as “American.”

So why does our current government adopt such policies? For the same reason we have slapped a tariff on Canadian steel. It is not to make the American economy more productive or to keep it fully employed (which it already was when President Trump imposed such a tariff for “national security” reasons (I kid you not).  Rather, like other “protectionist” measures, it is to protect the jobs of particular, favored industries or workers, or what you might call political corruption.  Such favored industries are not competitive without such protection or why bother.

Beyond the legal requirement for government to Buy American, the plea to the general public is voluntary.  But why should we purchase products that we otherwise would not have (because they were more expensive or inferior)?  As with government buying American, the effect is to draw workers into activities at which they are less productive than they would have been otherwise. So “Buy American” is un-American because, if taken seriously, it would lower our standard of living and is contrary to the free market and entrepreneurial spirit that has made America the prosperous society that it is.

Are Venture Capitalists racists?

Shifting sovereignty from Kings to the people, was the beginning of human flourishing. In the United States, in its constitution the people returned only those powers to their government necessary to protect their wellbeing. The right to and protection of ones honestly acquired property is an essential aspect of this arrangement. This includes, of course, the right to invest our property anyway we choose.

Venture capitalists are those wealthy people who choose to take great risks in the prospect of large gains by investing in “startups” that have not yet established their profitability.  Put differently venture capitalists are prepared to finance an unproven idea/product/service that might gain public approval, i.e. might become profitable, though most of them fail.  As consumers we have benefited enormously from goods and services my parents never would have even imagined that a few wealthy investors took a chance on.

So the idea that the government might need to enact laws to insure that a venture capitalist’s investments do not reflect racial bias is shocking at several levels. “In the clubby world of venture capitalists, who spent $130 billion in the United States last year and helped anoint the world’s four most valuable companies and countless other successful start-ups, there is effectively no legal backstop that ensures people of color have an equal opportunity to share in its wealth creation.”   “Black-entrepreneurs-venture-capital”

First of all is the right of these investors to their property. They can give it all to their daughters if they want to.  Marxists and other egalitarians reject such a right but that would throw away the whole basis of the wealth our capitalist system has created that Marxists would like to redistribute.  But I want to focus on why capitalism minimizes the role of bias in our economic decisions.  This was explored long ago by Nobel Lauriat Gary Becker in his famous 1976 book on the Economics of Discrimination.

Becker’s basic point is that if your economic decision is influenced by racial or sexual or any other non-economic bias it will cost you money, i.e. you will make less than you otherwise would have.  If you hire a man when a woman was better qualified, he will contribute less to your company’s income than would have the woman, thus you pay a financial price for your bias. The same is true if you hire a white person when a black one was better qualified, etc.

The purpose of venture capitalist investments is to make a bundle by funding the next great idea. Most will fail but one or two turn into Facebook, or Amazon.  It may well be that a venture capitalist systematically under rates the potential of black entrepreneurs, i.e. that he suffers racial bias.  But in that case he will be less successful in his investments.  Capitalism will punish him for his prejudices and diminish his importance as a venture capitalist because it will diminish his wealth. None the less, an Irish venture capitalist may well bias her investments toward fellow Irishmen and a black venture capitalist may risk an extra break for a fellow black. But the profit motive of capitalism will discourage departures from objective evaluations of investment prospects.

The idea that a law should forbid or discourage racial or sexual bias when venture capitalists decide in what to invest is without merit.  Moreover, it is hard to imagine what such a law would look like and/or on what basis a government bureaucrat would overrule and direct the placement of a private investor’s chose of investments.

To peak briefly at the other–entrepreneurial–side of the equation, the unbiased opportunity provided by capitalism has attracted many foreigner entrepreneurs to our shores.  Steve Jobs (Apple, NeXT, Pixar), who was adopted at birth, was the son of Joanne Schieble who was Swiss-American and Abdulfattah “John” Jandali who was Syrian.  Steve Wozniak, Apple cofounder, was the son of Polish and Swiss-German parents.  Sergey Brin cofounder of Google/Alphabet escaped from the Soviet Union.  The famous architect, I.M. Pei, immigrated from China.  “How-12-immigrant-entrepreneurs-have-made-america-great”

The order to reopen–who gives it?

Like all of us, President Trump is eager to reopen the economy. Does he have the authority to do so or do state governors? Fortunately, neither can force us to start eating out again, or return to our offices. We remain a country where those decisions rest with each of us individually (or jointly with your boss with regard to returning to your office, shop or factory). That means that those parts of the economy that have shut down will get going again when the affected businesses have taken measures to protect their customers and employees sufficient to regain their customers’ trust that they are safe places to visit. But as I argued last month, that should always have been the basis of social interactions.  “Beating-covid-19: Compulsion-or-Persuasion-and-guidance”

The broad-based, blunt instrument of sheltering at home unless your activities are vital (says who?) is imposing staggering damage to the economy.  The best way to minimize that damage is to restore public trust as quickly as possible that those with it are being isolated and treated.  A blanket shut down of non-essential activities is not the best approach. Each of us in our personal situation can better determine where we feel safe to go than can a government agency.  However, some of us will not give sufficient weight to the dangers of exposing our friends and the general public to the disease if we might have it.  Public policy should educate the public to the dangers of covid-19 and how best to protect ourselves and should minimize the financial incentive to continue working when sick. State coercion (mandatory quarantines) should only be applied to those testing positive for the virus.  This approach will allow all firms and stores to operate whose employees and customers judge them to be safe and will give businesses maximum incentive to make themselves safe.

Covid-19 will be around for at least another year or two until an effective vaccine is available and then distributed to more than 60 percent of the world population. The most effective way to contain its spread in the interim is to undertake widespread, quick, and accurate testing and to quarantine those who test positive with efficient contact tracing.  Adding the newly available tests for antibodies indicating immunity to the virus will identify those who are no longer susceptible to acquiring or spreading the disease. They should be safe in public.  Other corona viruses have created immunity in those who have had them and SARS-CoV-2 is expected to do the same, though this has not yet been established.

The U.S. has belatedly increased its testing for the virus. Initially it impeded the development and supply of test kits. As of April 16, the U.S. has tested 10,266 people per million while Germany has tested twice that. The U.S. by that date had 105 deaths per million while Germany had less than half that.  The Food and Drug Administration (FDA) should get out of the way and allow profit seeking entrepreneurs to flood the market with test kits.  The government should focus its (our) money on a large increase in testing for the virus and quarantining those testing positive and those they contacted and should offer significant financial prizes for an effective vaccine and for the development (or discovery) of effective treatments. Unlike patents as an incentive, this will encourage collaboration and knowledge sharing among those attempting to develop treatments.

On April 16 President Trump outlined guidance for the phased reopening of closed businesses and activities that is consistent with the approach outline above.  The government’s traditional public health role is important. But much more discretion should be given to individual case by case judgements about risks and entrepreneurial initiatives about remedies rather than broad based government edicts.

We will not return and cannot be required to return to the public square until we believe it is safe to do so. Individual shops and firms have a financial incentive to find convincing approaches to being safe and will get there quicker than even the best-intentioned government official issuing instructions and mandates. The government has an important role to play in fighting this virus and facilitating our return to normal life, but it should remove impediments it often creates to the private sector’s management of the related risks and the huge and unnecessary damage it imposes on the economy.

Econ 101: covid-19 resource priorities

U.S. cases of covid-19 (those testing positive for the virus that causes it) continue their exponential growth exceeding 333,000 on April 5 with over 9,500 associated deaths. In a few days some hospitals will run out of the protective equipment and ventilators needed by their staff and patients.  How should the existing stock of these items be allocated to the most urgent and/or “worthy” uses and how should the inadequate supply be most effectively augmented?  Should a central authority (the “government”) choose who gets them or should the highest bidder in the market?  Should new supplies be demanded by the government employing the Defense Production Act of 1950, or should producers respond to the profits of higher prices? Should we follow the socialist or the capitalist approach?

In normal times (which these are not) the demand for hospital supplies is met by a competitive market of producers in response to prices offered by hospitals. In a well-functioning economy these prices reflect the cost of producing them and a modest profit sufficient to attract the desired supply. In this way scarce resources (the supply of any resource, starting with labor time, is limited) are allocated to their most valued uses as measured by what people are willing to pay for them. Because of the rapid and dramatic increase in the need for face masks (N95), and other protective gear needed by doctors and nurses the current supply does not satisfy the demand. This includes both emergency stocks and the flow of newly produced supplies.  Unbelievably some hospitals are preventing doctors from wearing appropriate protective gear at the detriment of their own safety and the future supply of doctors. “Doctors-say-hospitals-are-stopping-them-from-wearing-masks”  In Italy the shortage of ventilators is already causing doctors to deny them to those most likely to die in order to make them available to those more likely to live with their assistance (triage).

How should this inadequate stock of equipment be allocated among those demanding it, all of whom cannot be satisfied?  The two broad classes of approaches to allocating the existing supply until it can be increased are for a government body to determine who needs it most according to some politically accepted criteria or for market suppliers to allocate it to the highest bidders. Many books have been written to document why market allocation (capitalism) has dramatically outperformed government allocation (socialism) thus lifting most of the world’s population out of dire poverty (over 90% by 2009). But what about the emergency situation we are now in with the exponential spread of a new virus that is about ten times as deadly as the annual flu?

“The governors of New York, Texas, Illinois and other states have said they are competing with the federal government and other states in a mad scramble for lifesaving supplies such as surgical masks, N95 respirators, isolation gowns and ventilators that are widely drained or out of stock.” .” “Gouged-prices-middlemen-medical-supply-chaos-why-governors-are-so-upset-with-trump”

The oversight of healthcare delivery in the U.S. resides in the states and municipalities rather than the Federal government. However, the Federal government does support medical research and provides health guidance to the states.  Of the approximately 5,100 hospitals in the United States the Federal government owns about 200, primarily for its military and veterans. It also maintains its own emergency stockpile of medical equipment for its hospitals and to backstop shortages in state and private hospitals. In principle the Federal government could set standards for which of these non-Federal hospitals would benefit most from being allocated ventilators and other equipment from the Federal stockpile if their own supplies become inadequate. It might even dictate how private market supply would be allocated in the event of shortages.

Government allocation carries a larger risk of political and personal corruption factors influencing resource allocation than does market allocation. While the private market is not without corrupt players, the bottom line of needing to attract and satisfy customers who have other options in order to make a profit to stay in business disciplines private suppliers and tends to weed out crooks. A company’s reputation for honesty and product quality is a critical part of its staying in business. Poorly performing companies go out of business, while poorly performing and/or corrupt governments rarely do. New York governor Andrew Cuomo’s request to President Trump for help with its shortage of ventilators and other medical supplies met with pandemic expert Jared Kushner’s rebuttal that the governor was over estimating New York’s needs and that more ventilators should be allocated elsewhere.  Nothing political here. Move along.

Another and potentially more damaging potential of government allocation concerns the U.S. government’s “competition” with other countries for the scare supplies. “The White House late Thursday ordered Minnesota mask manufacturer 3M to prioritize U.S. orders over foreign demand, using its authority under the Defense Production Act, or DPA, to try to ease critical shortages of N95 masks at U.S. hospitals.

“The Trump administration has asked 3M to stop exporting the masks to Canada and Latin America, and to import more from 3M’s factories in China, the company said Friday…. At the same time, officials in Berlin criticized the United States on Friday over what they said was the diversion of 200,000 masks that were en route from China…. These are things that Americans rely on,” Trudeau said, “and it would be a mistake to create blockages or reduce the amount of back-and-forth trade of essential goods and services, including medical goods, across our border.” “White-House-scrambles-scoop-up-medical-supplies-angering-canada-germany”

“Canadian Prime Minister Justin Trudeau said his government has been ‘forcefully’ reminding American counterparts that trade ‘goes both ways across the border.’  Thousands of nurses in Windsor, Ontario, he noted, travel to Detroit each day to work in hospitals there. Several of them have since tested positive for covid-19.” These steps are incredibly short-sighted as is Trump’s trade policy in general. As the biggest and strongest country in the word, the U.S. should be engaging with the rest of the world to lead a cooperative approach to fighting covid-19 rather than throwing its weight around because, at the moment, it still can. These are the sorts of behavior that can lead to war.

Following quickly on the heels of allocating the existing stockpile of equipment, is the closely related question of how to increase and allocate the supply going forward as quickly as possible.  Market allocation of the existing stock prioritizes those willing to pay the most as an indication of the intensity of their need (or who has more money to spend, but the wealthy always have a greater impact on allocation whether through government or the market). Established firms aim to maximize their profit over time and will take into account their long run relationship with regular customers when agreeing on prices for the existing supply. This limits so called “price gouging”, but the prospect of higher prices accelerates the market’s supply response. Many governors instead “pleaded for the White House to invoke the Defense Production Act, the legislation that would compel American companies to make critical supplies.” “Gouged-prices-middlemen-medical-supply-chaos-why-governors-are-so-upset-with-trump”

While history clearly demonstrates that market allocation is superior to government command of the economy, it struggles in current emergency circumstances even if or when government interference is removed (such as the government’s interference with market development and supply of covid-19 test kits).  Knowledge is essential for good decision making.  A virtue of market allocation is that knowledge that is impossible  to properly centralize in socialist economies can be exploited in decentralized individual decision making in response to market generated prices that match supply with demand (See F. A. Hayek’s “The_Fatal_Conceit”).  Markets rely on trust that is built in various ways from experience. The Internet reports reviews of products by users. Uber drivers are rated by riders. Company reputations are carefully built and protected.

In the current sudden surge in demand for certain medical supplies the system is overloaded, and hospitals search beyond their usual suppliers. New marketers emerge to help hospitals find new suppliers. The reliability and quality of the supplied products lack market experience and feedback.  Governments can play a supportive role by requiring transparency about product contents and/or performance but can also get in the way if regulations are more costly than their benefits.  “’The dynamic of the market is very weird at this point,’ said Andrew Stroup, a co-founder of Project N95, a nonprofit clearinghouse working to connect hospitals with suppliers. The group has received more than 2,000 requests from health-care institutions searching for more than 110 million pieces of personal protective equipment.”   “Gouged-prices-middlemen-medical-supply-chaos-why-governors-are-so-upset-with-trump”

In the imperfect world we all live in we would do best to maximize the role of private entrepreneurs and firms to develop and supply the best possible products, limiting the government’s role to protecting private property and contract enforcement, and establishing standards that help promote consumer confidence and trust in suppliers. Private, profit motivated producers maximize their profits by best surviving and satisfying the desires of their customers.

Beating covid-19: Compulsion or Persuasion and Guidance

March 31, 2020

The number of deaths in the U.S. from covid-19 have doubled every three days over the last 22 days amounting to 3,141 by the end of March 30. At that point there were 163,788 confirmed cases (those testing positive for the virus).  https://www.ft.com/coronavirus-latest  The actual number of cases is thought to be considerably larger but remains undetected because of limited viral testing.  America’s overall strategy for containing the virus is to isolate those infected in order to stop or slow its spread until a vaccine can be developed, tested for safety and effectiveness, manufactured and administered (one to two years after the discovery of the vaccine, with luck) or until enough of the population has acquired immunity as the result of surviving from the disease (herd immunization), i.e., almost everyone who gets it. The details of the approach vary from community to community.

The virus that causes covid-19 is spread from person to person. It can be picked up from surfaces touched by a sick person, coughed or sneezed into the air within six or so feet or by direct contact, but it can only enter one’s body via the month, nose or eyes.  “Prevent-getting-sick/how-covid-spreads”  “Protecting-yourself-from-coronavirus”  Thus those who test positive for the virus should be isolated from the rest of us (quarantined) and the rest of us should self-isolate if we experience symptoms of the disease. To protect ourselves from picking up the virus and bringing it to our faces we can reduce our social interactions (work from home, avoid public gatherings such as religious services, and restaurants, bars and public entertainment). Two measures are more important than any others: test as many people as possible in order to detect and isolate those with the virus and wash our hands with soap frequently.  The President’s coronavirus-guidelines for American

These measures can be imposed by government decree and enforcement by the state or can be urged by public education and voluntary individual actions. On March 17 the Governor of Virginia explained why he had not ordered restaurants and bars to close. “Northam said too many Virginia residents rely on restaurants for their meals to justify ordering they shut down.”  “Northam-adopts-10-person-standard-opposes-closing-restaurants”  For the United States as a whole and for most communities (public health services are administered by cities and states) the restrictions on our activities are voluntary. The specific guidance or rules are determined locally, thus providing useful data on which approaches work best.

As in Singapore, S. Korea, Japan, Hong Kong, Sweden and a few other countries, business closures in the U.S. have generally been voluntary until March 30. But unlike these countries, which have successfully kept death rates relatively low, the U.S. failed to undertake significant testing for the virus for more than two months after the outbreak of the disease in Wuhan, China. After the tenth death, the death rate from covid-19 in the U.S. has doubled every three days and passed the number of 9/11 deaths on March 30. On March 30, the Governor of Maryland, followed by the Governor of Virginia and the Mayor of the District of Columbia, made shelter in place mandatory: “We Are No Longer Asking Or Suggesting That Marylanders Stay Home, We Are Directing Them To Do So.” “As-covid-19-crisis-escalates-in-capital-region-governor-hogan-issues-stay-at-home-order-effective-tonight”

There is general agreement that testing should be pursued vigorously and those testing positive should be quarantined and their contacts tested, etc. This buys time to better prepare for the increased demand for medical care that will be needed and to develop treatments and vaccines. Though many will die needlessly in the U.S. because of a several months late start with such a program, the question remains which policy to follow for everyone else going forward.  Should it be government mandates to shut most things down and keep everyone home (or at least try to), or should we rely on the choices of each individual for how best to protect themselves and their loved ones while carrying on with their lives? What are the matrixes by which that choice should be judged? “This-pro-trump-coastal-community-in-florida-hit-early-by-virus-sits-at-emotional-nexus-of-national-debate-over-reopening-economy-amid-health-crisis”

In my opinion maximizing individual choices about how to respond to the epidemic is both more effective and more in keeping with America’s freedom loving culture. By more effective I mean that it will best slow the spread of the disease with minimal damage to the economy and the quality of our lives. We each have a strong incentive to protect ourselves from contracting the virus. We also care about protecting others from exposure (most strongly our families and loved ones) but can be deterred from that goal by the loss of income if we stay home. The CARES Acted signed into law a few days ago is meant to compensate firms that shut down temporarily and workers who stay home temporarily and thus to better align the incentives to protect others with the financial consequences.

We protect ourselves and others by diligently adhering to enhanced hygiene practices (frequent hand washing) and by reducing unnecessary social contacts (no hand shaking etc.). As with most everything else in life we are each better able to determine how best to balance the risks of social interactions (whether to work from home or in the office) with safer isolation, than are government officials making general rules for everyone.  The countries that have adopted this approach have left their citizens free to go to work or restaurants but undertaken extensive educational programs on the best practices to protect against transmission of the virus. “South-korea-keeps-covid-19-at-bay-without-a-total-lockdown”

South Korea, Singapore, Taiwan and other countries taking this approach provide their citizens with honest information needed by them to evaluate the risks of different choices. This includes information on who is infected and identifying infection hot spots. In the U.S. a person’s health status is private. But when a person carries a contagious disease into the public, his/her condition should be made known to those who risk exposure.  “Coronavirus-data-privacy”

Government mandates to shelter in place or cease many business activity will become increasingly difficult to enforce (have you watched the “Steven Soderbergh movie Contagion”). Persuading the public to adjust their behavior in ways that slow the virus’s spread and providing helpful guidance on how best to do so until a vaccine is found or most of the population becomes immune would be both more effective and more politically popular.

Covid-19: What should Uncle Sam do?

On February 29 the first person in the United States died from Covid-19, the disease caused by SARS-CoV-2, the so-called novel coronavirus first observed in Wuhan, China.  On March 12, three more people succumbed from this disease bringing the total to 41. Ten days later on March 22, 117 died bringing the total to 419 as the exponential growth of Covid-19 deaths continues. Globally 15,420 had died by midday March 23 and deaths are rising fast.

How and where will this end?  Shutting the economy down and keeping everyone isolated in place until the virus “dies” for lack of new victims would ultimately kill everyone from starvation (if not boredom).  This pandemic will only end (stabilize with the status of the flu, which currently kills about 34,000 per year in the U.S.) when an effective vaccine is developed and administered to almost everyone. This will take one year to eighteen months if it is discovered today, and that is if we are lucky that the safety and effectiveness trials go according to plan. Without a vaccine, the pandemic will “end” when most of us have acquired immunity to it as a result of having and surviving (as almost everyone will) covid-19 –acquiring so called herd immunity.  This assumes that having and surviving the disease will immunize us. This is generally the case with viruses but has not yet been established for SARS-CoV-2.

Our hospitals and medical services could not handle the patient load if every one contracted this disease over too short a period, so it is important to slow down the pace of infection–so called flattening the curve (which could spike quickly as you see from the opening paragraph). The ideal strategy is to allow the infection of those with low risk of serious illness or death to speed up herd immunity with minimum demand on our limited health facilities, while protecting and treating the most vulnerable. The young and healthy are least vulnerable and the old and health-impaired are the most vulnerable.  We should reopen schools and restaurants after Easter and gradually restart our cultural entertainment lives adhering to higher standards of hygiene and public interaction. This would be ideal both with regard to speeding up herd immunity and with regard to minimizing that damage to the economy.

What should government do?

I am from the government and I am here to help (it is risky to attempt humor in these times, but what the hell). “Treasury Secretary Steven Mnuchin warned GOP senators that the unemployment rate could spike to nearly 20 percent if they fail to act dramatically…. The United States is expected to lose 4.6 million travel-related jobs this year as the coronavirus outbreak levies an $809 billion blow to the economy, according to a projection released yesterday by the U.S. Travel Association…. Research from Imperial College London, endorsed by the U.K. government, suggests that 2.2 million would die in the United States and 510,000 would die in Britain if nothing is done by governments and individuals to stop the pandemic.” “six-chilling-estimates-underscore-danger-of-coronavirus-to-public-health-and-the-economy”

“Infectious disease experts do not yet know exactly how contagious or deadly the novel coronavirus is. But compared to SARS and MERS, SARS-CoV-2 [as the novel coronavirus is now labeled] has spread strikingly fast: While the MERS outbreak took about two and a half years to infect 1,000 people, and SARS took roughly four months, the novel coronavirus reached that figure in just 48 days.”  “Mapping the Novel Coronavirus Outbreak”

The U.S. does not have the medical equipment or hospital beds that will be needed for those anticipated to need ICU facilities.  And as poorly equipped medical staff fall ill from their exposure to the Coronavirus, we will run out of enough doctors and nurses to care for them forcing us to default to the unpleasant realities of medical triage where doctors begin to assess and choose those that have a higher probability of survival and to leave the weakest to fend for themselves. This has already started in Italy.

So, what should the government do? Its response might be considered under three categories:  a) Stop or slow the spread of covid-19; b) Help state and local health service providers care for those needing it; and c) minimize the damage to the economy (i.e. to those whose income is affected by the disease or the measures taken to slow the spread of the disease).

As with all good policies, as the government determines its immediate approaches to the crisis, it should keep one eye on the longer run implications of the policies adopted. It should balance the most effective immediate actions with the minimization of what economists call moral hazard in the future.  The simplest and best-known example of moral hazard results from the now hopefully banished practice of governments bailing out banks when they fail as a way of protecting depositors. This one way bet for the banks–they profit when they win their bets and the government bails them out when they lose them–encouraged banks to take on excessive risks. In the U.S. we have replace bank bail outs with deposit insurance and efficient bank resolution (bankruptcy) procedures. “Key Issues in Failed Bank Resolution”

If economists do nothing else, we pay very close attention to incentives, particularly those created by government rules and regulations (including taxes and subsidies).  Government financial assistance must also be carefully designed to be temporary, recognizing the danger that expansions of government into the economy in emergencies have the bad habit of becoming permanent.

From these general considerations our response should be guided by these principles: Measures should be effective with the least cost. They should be narrowly targeted. They should be temporary. The cost of financial assistance should be shared by all involved–no bailouts.

Flatten the curve 

The government’s first priorities must be to slow the spread of covid-19 while supporting the medical needs of those contracting it.  Limiting the number of infected will limit the resulting deaths (guesstimated to be around 1% of those infected by this virus). Slowing the rate at which people are infected–flattening the curve–will reduce the peak demand for hospital beds and related services until a vaccine is found (once one or several candidates are discovered today, it will take 12 to 18 months of tests to establish its safety and effectiveness and manufacture enough to start administering it).

Despite clear warnings that the novel coronavirus posed serious threats to the U.S. for which we were not prepared, President Trump failed to act until very recently, calling the scare a Democratic plot as recently as February 28. “Trump-says-the-coronavirus-is-the-democrats-new-hoax”  “U.S. intelligence agencies were issuing ominous, classified warnings in January and February about the global danger posed by the coronavirus while President Trump and lawmakers played down the threat and failed to take action that might have slowed the spread of the pathogen, according to U.S. officials familiar with spy agency reporting.” “US-intelligence-reports-from-january-and-february-warned-about-a-likely-pandemic”

Countries that acted quickly to identify and isolate those infected by the virus have generally succeeding in slowing its spread without shutting their economies down.  South Korea, Singapore, and Taiwan have tested widely and quarantined those testing positive, many of whom were asymptomatic. Their economies have not been shut down. Restaurants and bars remain open as do schools in Singapore and Taiwan.  New cases in S Korea have fallen to very low levels two weeks ago and active cases have been declining since March 11 as more people recover than acquire the disease. On March 22 only two people died from the disease.  Cases and deaths have remained low in Japan, Singapore and Taiwan. The following describes the lesson’s from Singapore’s success: plan ahead, respond quickly, test a lot, quarantine the sick, communicate honestly with the public, live normally:  “Why-Singapore’s-coronavirus-response-worked–and-what-we-can-all-learn”

As a result of the U.S. failing to act earlier, the potential for this approach has been reduced in the U.S.  Nonetheless, the government should urgently remove its barriers to testing, increase the supply of tests, and pay most of the cost of testing. In order to discourage frivolous testing those being tested should pay a small amount of the cost (e.g. ten dollars per test).  Even today (March 21) very few Americans are tested despite frantic catch up efforts by the U.S. government.  “A-government-monopoly-led-to-botched-covid-19-test-kits-but-private-labs-are-now-saving-the-day” Positive test results (“cases”) in the U.S. are rising rapidly (983 new cases on March 16 jumped to 9,339 on March 22, for a total of 33,546). However, as so little testing has been possible, there is no way we can know whether this dramatic increase reflects increases in infection or only the increase in the identification of existing infections. “Peggy Noonan gets tested–finally”

As a result, the government has urged people to stay home, and most entertainment centers (theaters, cinemas, restaurants, gyms, and bars) have closed, and a few state governors are mandating it.  Many international flights have been cancelled.  Aside from grocery stores and pharmacies, most shops and malls have closed. A controversy is raging over whether closing schools does more harm than good. Among the arguments against it is that because serious illness and death among the young is rare but they can spread the disease (to their families at home and others), attempting to block their infection interferes with herd immunization (protection from infection as the result of a large proportion of the population becoming immune as the result of recovery from infection).

The economic impact of those drastic measures will be explored below, but the government must now urgently prepare for the surge of covid-19 patients promising to overwhelm our brave medical health care workers, medical supplies and hospital beds even with these draconian measures. Priorities must be given to properly equipping medical service providers and training their replacements as they fall ill. Hospital beds and respirators and other equipment needed for the more seriously ill must be urgently produced, in part by turning out and away, less seriously ill patients and those with non-emergency, elective treatments. We can delay the investigation into why these steps where not taken two months ago when the need was identified.

Care for the sick

The government should support the market’s natural incentives to develop better treatments and ultimately a vaccine (i.e. profit). This raises challenging policy issues. Protecting the patent rights of firms developing treatments protects the profit incentive for them to do so. However, the sharing of research findings, thus threatening such patents, can greatly accelerate the discovery of helpful medicines or procedures. Hopefully rights can be established and protected that both encourage drug development and cooperative information sharing.

The failure of the U.S. government to provide for or allow significant testing for covid-19 is a scandal. The government should get out of the way. “Coronavirus-and-big-government” Its claim last week and the week before that testing was opening up is sadly not true.  By March 19th the U.S. with a population of 327 million had only tested 103,945 people (0.03%).  S. Korea with a population of 51.5 mil. had tested 316,664 by March 20th (0.6%) and Germany with a population of 82.9 mil. had tested 167,000 by March 15th (0.2%)  “Covid-19-why-arent-we-prepared”

President Trump’s trade war has damaged world’s ability to fight covid-19 in general but more specifically his tariffs on medical supplies are contributing to their shortage in the U.S.  “The US-China trade war has forced US buyers to reduce purchases of medical supplies from China and seek alternative sources. US imports of Chinese medical products covered by the Trump administration’s 25 percent tariffs dropped by 16 percent in 2019 compared with two years earlier.”  “Tariffs-disrupted-medical-supplies-critical-us-coronavirus-fight”

Save the economy

Having missed the opportunity to flatten the curve via testing and targeted quarantines, the U.S. has taken much more drastic steps to restrict public interactions, shutting down the entertainment, educational, and transportation sectors of the economy. These should result in temporary interruptions of the supply of these services that will bounce back when the restrictions are lifted. Some output will be lost forever (lost classroom time, and restaurant meals) but others can be recouped or at least restored to original levels (rates). Clothing and other retail items not purchased during the shut down can be purchased later.

What the economy will look like afterward (hopefully only a few months) will depend on several factors. The first is the extent to which our public behavior is altered permanently. Home movies might permanently replace some part of our usual attendance to the cinema. Teleconferencing might permanently reduce meeting travel or accelerate the existing trend in that direction, etc.

The policies being debated in congress at this moment for protecting individuals and firms from the financial cost of the temporary shutdown can profoundly affect the future composition and condition of the economy. Every big firm out there is working on how they can tap some of the taxpayer’s money that government will be giving out. Those pushing government interventions into new areas on a permanent basis will exploit the occasion to slip in their favorite policies. Unfortunately, once the government moves into an area– it rarely withdraws. Almost 19 years later, the horrible Patriot Act, adopted when a scared public was willing to trade off liberty for security, is still largely with us.

Our public interest would be served by incentives that lead those who might be sick with covid-19 to stay home rather than risk infecting others, and by policies that enable viable firms that lost customers and individuals who stayed home to bridge their financial gap until returning to normal. Affected firms and individuals will continue to have expenses (food, rent, mortgages, etc.) but no incomes. They should be provided with the funds to meet these expenses in order to return to life/work when the lights go back on. The sharing of the cost of those funds must be considered politically fair and must incentivize the desired behavior. Everyone must have some skin in the game (a share of the cost). Adopting measure that fill those criteria will not be easy.

The government (taxpayers) should cover much of the cost of the covid-19 related medical services and hospital costs, including very widespread testing. Medical service providers should be tested daily (e.g., several doctors have died from covid-19 in Italy). Anyone staying at home and testing positive should receive sick leave paid for by the government.

Assistance to companies and the self-employed should be as targeted as possible on those forced to reduce or stop operations as a result of covid-19. Where possible, assistance should take the form of loans to companies that continue to pay wages to their employees even if not working. Restrictions should be placed on how such loans are used (no stock buy backs, or salary increases during the life of the loans). Bank and lending regulators should allow and in fact encourage temporary loan forbearance by the lenders on temporary arrears from otherwise viable firms. “Bailout-stimulus-rescue-check” One small businessman convincingly argued that wage subsidies that keep working on the payroll are better than generous unemployment insurance, which makes it easier for firms to lay off their workers. “Dear-congress-i’m-a-small-business-owner-heres-what-my-business-needs-to-survive”

What about the big companies, such as Boeing, the airlines, the Hotel Chains, and Cruise ship operators? Yes, they should be included in the loan forbearance and incentive loan programs, but they should receive no special consideration beyond that. If government (partially) guaranteed loans through banks to pay wages and other fixed expenses for a few months are not enough to finance a firm’s expenses without income for a few months it is probably not viable in the long run anyway and should be resolved through bankruptcy as were GM and Chrysler in earlier financial crises. This would wipe out the stakes of owners while preserving the ability of the firm to return to profitable operation with new owners. “Bailing-out-well-if-bail-out-we-must”

Monetary policy

The American economy (and elsewhere) is suffering in the first instance a supply shock (sick people unable to work and produce). This fall in income from supply disruptions also reduces demand. Cutting the Fed’s already low interest rate target to almost zero is a mistake. No one will undertake new or expanded investments because of it, and its impact on reducing the return on pensions and other savings will, if anything, reduce spending. The last decade of very low interest rate policy targets has already contributed to excessive corporate debt and inflated stock prices (recently deflated back to normal).

Injecting liquidity via new lending facilities and international swap lines, as the Fed is now undertaking, is the correct response. If lenders allow their borrowers to delay repayments for a few months, they need to replace that missing income somehow (rather than calling in nonperforming loans and bankrupting the borrower). The Federal reserve should substitute for that income by lending to banks freely against the good collateral of government debt or government guaranteed debt.

“The vital need of everyone in the economy, from the corner drugstore to the local transit authority to the mightiest multinational, is liquidity: credit to meet payroll and other key obligations so as to remain solvent until the end of what we all must hope is a finite crisis.”  “Here’s-an-economic-aid-plan-better-than-mitch-McConnell’s”

Macroeconomic policy

As noted above, the government’s help should be narrowly targeted to the direct victims of covid-19.  A general fiscal or monetary stimulus is not needed or desirable.  Nonetheless, it will add to the federal debt that is already bloated by years of annual deficits at the peak of a business cycle when a surprise is customary and appropriate.

“The United States is not confronted with a financial crisis and a follow-on crisis of demand, as in 2008 or 1929. Rather, previously robust consumption and production are being deliberately halted to save lives. Thus, traditional tools of monetary and fiscal stimulus, such as zero interest rates and direct cash aid to households, are unlikely to prove decisive. You can’t shop, or invest in new construction, while on lockdown.”  “Here’s-an-economic-aid-plan-better-than-mitch-McConnell’s”

This is a dangerous period both for our personal health and for the health of the economy. Affected firms should be helped in order for them to continue paying their employees and to remain solvent until they can return to production. But the United States has failed to prepare properly and is handling the fight against covid-19 poorly. We need to reopen our schools and restaurants and return to normal at a reasonable pace while allowing herd immunity to develop at a faster pace while supporting the most rapid development of a vaccine possible. Don’t fight this wildfire with our eyes shut while enhancing the dangers of future fires from ill-advised measures undertaken in this emergency environment.

Stay strong everyone. We will all get through this.

Socialism as seen by Millennials

“Seventy percent of millennials in a new poll say that they are somewhat or extremely likely to vote for a socialist candidate.” “70-percent-of-millennials-say-theyd-vote-for-a-socialist”  That, and the current lead of Bernie Sanders, a self-proclaimed Socialist, for the Presidential nomination of the Democratic Party, means that those of us who believe that capitalism is the foundation of our freedom and prosperity have a job to do to convince millennials that they are wrong about Socialism.  If Sanders wins the Democratic Party’s nomination, which I doubt, his long history of support for Soviet communism will be marched out by the Republicans. “Bernie Sanders support of communism is a moral failing”  As recently as a few days ago, Sanders was praising Fidel Castro. “Bernie-sanders-didnt-mention-the-dark-side-of-education-in-castros-cuba”  Sanders is not even a registered Democrat. But my concern is that so many millennials (born between 1981 and 1996) and Gen Z’s (born between 1995 and 2015) are attracted to Socialism. We need to convince them that it will not deliver the better society that they think it will.

We need to start with the recognition that these new generations, like all of their predecessors, want to do the “right thing.” “The-search-of-purpose”  They are searching for how best to address the deficiencies of life in America today. While dire poverty has been reduced from over 90% to less than 10% by capitalism, there is still that 10%.  Adult literacy has been at 99% for a few decades but the quality of public school education has been declining.  Only half of elementary school students in California are proficient in English (i.e., performed at grade level). “California-school-test-scores-2019”  And so on. The question is how to address these problems? What should we do to further improve our lives economically and culturally? Should we increase the role of government in directing resources and making our decisions or reduce it or adjust it? Do we need more Socialism or more Capitalism?

In 1919 the “Old Bolsheviks,” Nikolai Bukharin and Evgeny Preobrazhensky, wrote in the widely read The ABC of Communism, that the communist society is “an organized society,” based on a detailed, precisely calculated plan, which includes the “assignment” of labor to the various branches of production.  As for distribution, according to these eminent Bolshevik economists, all products will be delivered to communal warehouses, and the members of society will draw them out in accordance with their self-defined needs.  I urge my young friends to read the fuller account in Ralph Raico’s  “Marxist-dreams-and-soviet-realities”

The theoretical and historical/empirical cases against Socialism are overwhelming, at least to those of us who lived through the cold war and the decline and fall of the Soviet Union in the early 1990’s and the Israeli kibbutzim more gradually in the 1960s through 1980s.  Cuba, North Korea and Venezuela provide contemporary examples.  Sanders and many millennials reject these examples (sort of) as reflecting the bad luck of state capture by bad guys (I am not aware of any bad girl examples). But the centralization of the power to direct businesses and people that is the essence of Socialism, is a natural and powerful magnet for bad guys.  No socialist regime has escaped the opportunities and temptations to favor its friends and relatives with government contracts or protections from the horrors of competition. “Crony capitalism”  Venezuela is a particularly shocking example of the rapid deterioration of one of South America’s wealthiest countries.

Sanders often points to the Scandinavian countries as examples of the softer democratic Socialism he now says he has in mind.  But he is fifty years out of date. The experiment with “democratic socialism” by, for example, Sweden in the 1960s and 70s was a failure and abandoned in recent decades. “Bernie Sanders’s Scandinavian fantasy”

Socialism has failed historically because it lacks incentives (financial rewards) for hard work and the development of better mouse traps, provides incentives for corruption, and is really hard to “get right.”  National Socialism (Nazism) and other versions of socialism involved top down control over many aspects of society.  But the central allocation of resources and decisions about what we may and may not do–central planning–suffers from serious informational challenges even when made by smart and totally honest people. Friedrich Hayek had much to say about the importance of prices in a market economy for providing critical, decentralized information on people’s preferences and thus on the optimal allocation of resources. “The Road to Serfdom”

But we are not likely win over the younger generations to capitalism just on the bases that it has given us standards of material well-being and individual freedom unimaginable several hundred years ago.  We also need, I think, to defend its moral superiority while offering promising remedies to its remaining deficiencies.

The morality of capitalism rests, in my view, in its capacity to give us, and to protect, our ownership of the fruits of our own labor. This means also the freedom to decide how to live.  It is a system in which we bear the primary responsibility for our own decisions and actions and their consequences.  It is a system that flourishes in a culture of trust and mutual caring and thus encourages such values. It is a system that rewards and thus encourages virtuous behavior. The top down, central planning, central control of socialism tends to have the opposite effect.  A common saying in the Soviet Union (USSR), while it still existed, was that “They pretend to pay us, and we pretend to work.”

America was unique in its time (exceptional) in establishing a constitution and government in which the people gave up limited authority to their government to protect their property and liberty, rather than, as with the Magna Carta, the sovereign giving up some of its authority to the people.  See American Exceptionalism.  In the personal freedom this provided and the accompanying responsibilities it imposed, Americans flourished in every sense of the word more than most. Those who fall behind or floundered were not ignored.  It was a country of free and virtuous people and as Thomas Jefferson said at the end of his presidency in 1809: “the sole depository of the sacred fire of freedom and self-government.”[1]  Seymour Martin Lipset in the middle of the 1990s used the concept of this exceptionalism to explain “why the United States is the only industrialized country which does not have a significant socialist movement or Labor party.…”  I would hate to see that change.

Countries differ in the balance of personal freedom and security (safety net, police, army) they seek. But in the most successful ones the provision by the government of security is limited and well targeted to minimize its infringements on personal freedom.  Here are my earlier thoughts on improving the government’s role in and contribution to an orderly free market, capitalist system: “My-political-platform-for-the-nation-2017”

Let me end with a quote from Winston Churchill to drive my point home: “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”  Indeed, Capitalism has its flaws, but Socialism has no success stories that we should strive to emulate. The way to move forward is to repair the flaws in a Capitalistic free market society.

[1] Quoted in Tucker and Hendrickson, Empire of Liberty p 7; see John P. Foley, ed. The Jeffersonian cyclopedia (1900).

The search for purpose: Nature and Nurture – Genes and culture

Every healthy boy and girl searches for the meaning and purpose of their lives. We ask why we are here and what we should do with our lives.  Where do we want to go and be in the future? How do we think we can best get there?  What should we strive for or should we strive at all?  The search for meaning can be agonizing but it is part of human nature to ask, “Who am I?”.

But we do not search in a vacuum.  That we search at all can be attributed to our genetic inheritance. Over the millennia our ancestors who pondered this question and chose and worked toward goals of mutual help and cooperation, prospered and multiplied relative to those who didn’t.  While personal and family survival and wellbeing come first, working together with others enhanced the wellbeing of both. In a fascinating presentation at the Cato Institution, Nicholas Christakis, Sterling Professor of Social and Natural Science, Yale University, discussed his new book “Blueprint: evolutionary origins of a good society”  He argued that the evolutionary survival of the fittest also favored (selected) those disposed to love, friendship, cooperation, and teaching. Homo sapiens with those qualities formed more successful and durable groups.

This happy genetic predisposition, however, was just the start, the foundation from which the search for the meaning of our lives was launched. The rest of the answer is the product of the values taught to us by, or absorbed from, our parents, family, and community and its religious and other institutions, and filtered by our reason, which is another capacity favored by evolution. The cultural values from which we learn what our peers value and respect in us can contribute to successful and prosperous societies (and their economies) or not. Children growing up in poor neighborhoods dominated by gangs are more likely to see success in terms of the demands of their gang. The esteem of their gang peers will be earned by very different behavior than in neighborhoods in which honesty and respect for the law are valued.  Gang culture does not contribute to safer, more prosperous neighborhoods or societies.

Cultures that reward cooperation, honesty, and trust enjoy more successful economies as well. Financial wealth is only one source of esteem, however, and after being well feed and well clothed, the respect of our communities probably tops the list of aspirations for our lives. The cultural values in which we map out our goals profoundly influence the choices we make.  Adam Smith’s “invisible hand” guiding our actions for our self-enrichment serves us individually and the society we live in best when functioning in a culture of mutual respect, honesty, and cooperation.  In free market, capitalist economies, individual workers and entrepreneurs profit by satisfying the wants of others. Thus, competitive capitalism encourages a culture of serving others and such a culture encourages successful economies.  These are win – win societies.

“The overwhelming weight of evidence supports the conviction that when human beings, created in the image of God as free, rational, social, and moral animals, are allowed to creatively serve each other’s needs and responsibly plan their own lives, they flourish. And when a nation’s citizens flourish, the nation as a whole flourishes as well.”  “Dylan Pahman: Why-economic-nationalism-fails-conservatism”

So where should today’s Generation Z and Millennials look to find meaning and purpose for their lives? Most of us want to “do good” for our community, country and the world as well as for ourselves and our families. Will today’s youth see this marriage of public and personal good in the world of personal freedom and responsibility described by Adam Smith, or in the world of greater central government assistance (control) advocated by Bernie Sanders?

Sanders says he is a socialist, but I doubt that he means government ownership and direction of the means of production, which is the traditional meaning of socialism.  Rather he seems to mean government provision of important goods in our lives (heath care, education, jobs, etc.)  But the provider also determines what and how to provide.  Are the key decisions in our lives to be made by each of us within the legal and cooperative framework of norms and support provided by our culture and government of limited scope, or to be determined centrally for our benefit by a larger more dominant government and its employees? Government employees no doubt feel good when they help others, but capitalism provides a financial reward for doing so as well. Human greed is more likely to be tempered by the requirements of success in free markets than in government bureaucracies.

Though the average family, and especially the poor, have never before had such wealth broadly defined, today’s world suffers many shortcomings. The social safety net of a properly limited government is not always effective or well designed.  Each person in our newest generation in seeking the esteem of its family and community will ask how best to fix these shortcomings and to address and reduce the barriers to their’s and their neighbor’s fulfillment of their potential for a rich and fulfilling life. Will they turn to the “socialism” of Bernie Sanders or the individual/family-based free market model of Adam Smith?

So called “socialism” is enjoying a resurgence of popularity among American youth today. Even before Trump’s election a majority of 18-29 year old’s viewed socialism favorably. “Why-so-many-millennials-are-socialists”  Why is this, given the strong theoretical and empirical case against it?  For one they were not alive to see its greatest failures (though we now have Venezuela and North Korea).  They seem to think of countries like Sweden as socialist. While the free market capitalist country of Sweden has a larger government than the U.S., it ranks only a bit below the U.S. on the Frasier Institute Index of Economic Freedom (8.07 versus 7.83 in 2015).  For example, Sweden adopted a nationwide universal voucher program (school choice) in 1992, well ahead of the U.S.  https://www.fraserinstitute.org/studies/economic-freedom

Like every generation before it, today’s youth wants to “do good.” They want to contribute to making the world better than it already is. Those of us who highly value our personal freedom as the basis of how we live and who have studied the weaknesses of government provided and guided economic resources [e.g., https://wcoats.blog/2020/01/25/crony-capitalism/] must take up the challenge of explaining the superiority of a family based social structure and honest, law abiding, mutual respecting, cooperative culture. While free market capitalism has produced incredible riches for almost everyone, its primary virtue, and potential appeal to Generation Z, is its promotion of caring for and serving our fellow man.