This Time Isn’t Different
William F. Buckley once defined a conservative as “Someone who stands athwart history, yelling Stop.” With apologies to Buckley, we might define an economist as someone who stands athwart the contemporary public policy conversation, yelling, “This time isn’t different!”
The last decade has demonstrated that economic insights painstakingly won over the course of centuries can be unlearned in the blink of an eye.
Old, bad arguments are all the rage again, suggesting that future thinkers may have to rediscover in a frenzied bout of “new learning” that which was once considered our common intellectual inheritance about how markets work.
One concern with so much of the “new economic thinking” at both ends of the ideological spectrum is that it often fails to clear a minimal argumentative bar. At the very least, advocates for “new thinking” ought to acknowledge that the arguments for economically orthodox positions stood the test of time for a reason. At the very least, they should seek to establish that, for some reason, this time is different. Otherwise, new economic thinking collapses to little more than chronological snobbery.
It would take volumes to thoroughly answer every one of these old arguments in new garb. So, instead, I’d like to speak to the many well-meaning intellectual “fence-sitters” I’ve met who are conflicted about the arguments they’re hearing. These folks aren’t professional economists. Such fence-sitters have—thankfully because it means my standard of living is higher—specialized in endeavors other than scrutinizing arguments. But I want these earnest, genuine, and intelligent fence-sitters to know just how high the argumentative bar that advocates for new learning must clear.
Here are six recent instances where yesterday’s economic orthodoxy wasn’t accorded the hearing it deserves.
1. Price Controls
This time is different: AOC has proposed national rent control. Other voices have attempted to resurrect price ceilings as a solution to inflation.
But the old orthodoxy was and is ironclad. When placed below the market-clearing price, price ceilings don’t merely cause shortages, the stuff of Econ 101. They unleash a Pandora’s box of social pathologies which, in the fullness of time, call forth commentators once again lampooning markets and demanding Public Policy 2.0 to address the problems caused by Public Policy 1.0.
When prices don’t allocate, some other mechanism, such as violence, seller caprice, or seller prejudice, does. Until the new advocates of price controls show that people no longer respond to incentives and no longer adapt to changing constraints, it’s prudent to believe that this time isn’t different.
2. Trade
This time is different: International trade is gutting the American heartland. It’s sending manufacturing overseas. It’s hurting blue-collar wages.
These claims are frequently repeated, though they’re not the sorts of sophisticated objections to free trade that academic economists—almost unanimously free traders—discuss. And for good reason: These claims have little theoretical or empirical support. See here and here for starters.
Trade still makes both parties better off after all these years. It still boosts output in both countries, which isn’t to deny that competition (whether foreign or domestic) can cause some people to lose their jobs. Other jobs come into existence, though these rarely get covered in the press. Welcome to life on a planet of change and innovation.
As economists have emphasized since Adam Smith, the elites do not benefit disproportionately from free international trade. Bill Gates could care less about price hikes for washing machines. The average American is hit hard, though, when big-ticket household appliances, like washers and dryers, increase by twelve percent each. That’s less money in the pockets of American households, which translates to less spending on other domestic producers and/or less savings with which to jumpstart new businesses. In other words, tariffs are still a tax on domestic consumers.
Why opt for a tissue of 17th-century Mercantilist fallacies when the intellectual case for enrichment-by-trade is still so viable? I’d even be willing to surmise that the idea that free trade enriches has been scrutinized more than any other social scientific claim. It’s still undefeated. We’d need a lot of evidence to reject the null hypothesis. This time isn’t different.
3. Antitrust
This time is different: Robber barons rule the American economy, so the claim goes. When new entrants arise, today’s big tech barons gobble them up.
Big tech firms indeed charge low (or zero) prices and make their output available to anyone with an internet connection (over five billion people for those keeping score at home). But that’s precisely how they work their harm, says the new antitrust advocate! Big tech “enslaves” people to their passions while censoring user viewpoints. The new antitrust advocates point out that you are the product, as if making this claim is sufficient to establish harm.
Yet, long-standing wisdom suggests that the means of antitrust will not accomplish the goals of its Johnny-come-lately advocates.
The intellectual arc of antitrust has been one of learning, retrogression (what Oliver Williamson called the “inhospitality tradition”), followed by “new learning,” and now what appears to be the retro-retro-gression of the Neo-Brandeisians. Consider the eerie parallels to yesterday’s “Barons.” Contrary to popular belief, the 19th-century “titans of industry” were actually lowering prices and expanding output—all before antitrust came along. Why, then, did antitrust emerge? It was a useful cudgel with which to bludgeon the more successful competition.
Can’t hang with your rivals in fair market competition because they charge lower prices? At least antitrust allows you to charge them with the crime of predatory pricing. Even if you lose, you win: Time navigating our serpentine legal system is time not devoted to production.
The so-called big tech firms are manifestly not the emergent outcomes of unalloyed market forces. They’ve leaned on the government in many ways to make their lives easier and make the prospects of would-be rivals more challenging. I am concerned that antitrust will be one more weapon in their non-market strategy arsenal. In fact, there are at least seven distinct channels by which firms have abused antitrust laws to gain the upper hand on the competition. What makes those seven threats irrelevant this time? And until we have a compelling answer, might it be best to reason that this time isn’t different?
4. Technological Innovation
This time is different: Today’s capital goods innovations won’t make us richer, but poorer. Unlike the transition from the scythe to the combine and the switch from the abacus to the calculator, “artificial intelligence” will eventually culminate in widespread job loss and impoverishment. Whereas yesterday’s capital goods inarguably lead to increases in output per head and concomitant decreases in working hours, today’s innovations will generate a permanent underclass of the unemployed.
Yes, there may be reasons to be cautious or skeptical of AI. I’m not a computer scientist. Can a hostile AI mutate and take over the universe? It beats me. Will immoral people use AI for immoral ends? To ask is to answer. Yet so much of the doomer discourse isn’t about sci-fi scenarios or humans’ penchant for misusing that which they create. Instead, much of the conversation centers on a very old objection, the battle cry of Ned Ludd, that AI will take “our” jobs. True, the doomers can’t agree on who will lose their jobs, only that it will be very bad when (not if) it happens.
I don’t have a crystal ball, but I do have economic theory, which is the next best thing. Economic orthodoxy has long held out three important truths about innovation. First, jobs aren’t valuable for their own sake. Creating jobs is easy—enslave everyone and put them to work on the world’s largest pyramid in Des Moines, Iowa (because, why not?) Clearly, then, it matters not whether people are expending effort but whether they are transforming their environment into successively higher states of value. When innovation brought by Henry Ford “destroyed” the blacksmiths, we were not poorer but more prosperous.
Second, machines and tools augment and improve unaided human labor. We don’t just produce more goods with machines, but better and different goods too. Our houses are bigger, stronger, and possess more capabilities for our ability to use tools. Check-in on Robinson Crusoe’s progress if you don’t believe me.
Third, all successful innovation disrupts, destroys, and creates new jobs. If it didn’t, all our occupations would be accounted for in this near-comprehensive list of old-timey jobs: Farmer, farmer, farmer, and farmer. There was no repairer of the combine tractor before it existed. And, as one economist argues, humans in the AI age will continue possessing a comparative advantage across various activities that demand judgment in the face of uncertainty.
The “old economics” that explained the enriching consequences of the Industrial Revolution is well-situated to predict the outcomes of capital goods innovation in the 21st century. Seeing no compelling reason to discard the innovation orthodoxy just because the gadgets are newer and shinier, I must conclude that this time isn’t different.
5. Socialism
This time is different: To many of my students, the early 1990s collapse of the Soviet Union is as emotionally distal as the fall of the Roman Empire in 476 A.D. They have no viscerally negative association with the word “socialism.” To the modal Gen Z’er/Millennial, the term positively connotes vague notions of sharing, sociability, and an expansive social safety net. Some think “socialism” is a synonym for “Scandinavia.” They both start with “s.” What’s not to like?
But when it comes to the “Big Bad Ideas That Won’t Die Olympics,” socialism is a gold medalist. It would be silly to overlook the pile of bodies in the corner. Still, even today’s social media socialists who champion a kinder, gentler collectivism spend little time grappling with the body blow that economics dealt central planning over a century ago. Without private property, you don’t have prices. Without prices, you don’t have profit and loss. Without profit and loss, you don’t know whether production created or destroyed wealth.
Looking at you, industrial policy, i.e., “socialism-lite.”
Here are three basics to take to the bank:
- Wealth must be produced.
- Producers don’t know what or how to produce without the guidance of profit and loss.
- You can’t tinker with how the pie is cut without changing incentives to bake the pie in the first place.
Having sought effective rebuttals to these ideas and finding none, I conclude that this time isn’t different.
6. Inflation
This time is different: Corporate greed, market concentration, supply chain disruptions, COVID, etc., are your new inflationary bugbears.
I say “new,” but nothing is novel about blaming producers for governments’ monetary mischief. Merchants have long been a convenient scapegoat for the rising prices that profligate governments generate, a point Richard Wagner and James Buchanan made in 1977. Indeed, the same scapegoating tendency existed in the Middle Ages before the discovery of economics.
Pre-economic explanations for inflation existed for centuries and were cut from the same cloth as today’s greedflationists: Attribute social phenomena to the avarice of merchants.
Do we need new theories of inflation, or should we double down on the hard-won and hard-to-swallow knowledge of past ages—that price inflation results when governments create more money? When it comes to the recent bout of economy-wide price hikes, it’s not as if the Monetary Theory 101 explanation lacks purchase. Once again, it seems that this time isn’t different (from the 1970’s).
Economic knowledge is eternally in danger of gently sliding over the precipice of collective amnesia. As Thomas Sowell or Ludwig von Mises would warn us, economic progress is not inevitable, and we’re never further than a generation removed from squandering our intellectual and material inheritances. Catechizing a new generation in that old-time economic religion seems as pressing a task as ever.
This article was adapted from Marginalia. You can read the original here.
