The Libertarian Podcast, with Richard Epstein: Uber and Innovation


New York City Mayor Bill de Blasio — brace yourself for this one — is trying to make it harder for Uber to do business in the Big Apple. This comes on the heels, of course, of California trying to upend the company’s classification of its drivers as independent contractors and protests from French cabbies who are upset about the competition.

Can innovative companies like Uber overcome the political power of the incumbent companies they’re disrupting? Is it inevitable that even the most dynamic startups will have to eventually assimilate to the culture of lobbyists and rent-seeking? Those are some of the topics I take up with Professor Epstein in this week’s installment of The Libertarian. Listen in below or subscribe to the show via iTunes or your favorite podcast app.

Conservatives Are too Quick to Dismiss the Rise of the Robots


shutterstock_177607106-e1437573570674Much like the suits at  Cyberdyne Systems, James Sherk and Lindsey Burke of Heritage do not fear the rise of the robots. From their new paper “Automation and Technology Increase Living Standards”:

Automation reduces both labor costs and prices. Lower prices leave customers with more money to spend elsewhere, increasing the demand for labor elsewhere in the economy. Automation changes where and how people work, but it has not historically reduced the overall need for human employees. Little empirical evidence suggests this time is different. … Businesses do not appear to be automating human tasks at a faster rate than before. If they were, this would increase measured labor productivity growth. This has not happened.

And their chart to partially support the above point:

The Eureka Podcast: California’s Tax Problem


I’m back in California this week, being reminded all over again about this state’s many natural virtues and many manmade vices. Amongst the latter group is tax policy in the Golden State, which is — how do I put this tactfully — crazy. Beating-your-head-against-a-padded-wall crazy.

In this installment of the Eureka podcast from the Hoover Institution, I talk with Hoover fellows Carson Bruno and Bill Whalen about how the extreme progressivity of California’s tax code fuels its recurring budget crises, whether Californians are really the tax-loving lefties they’re made out to be in the popular consciousness, and whether meaningful tax reform in the Golden State is a real possibility. Listen in below:

Is Hillary Clinton Really Going to Cut Capital Gains Taxes for the Rich?


shutterstock_287370881Following through on her economic speech last week, Hillary Clinton is going to propose changing capital gains tax rates to deal with corporate “short-termism.” The Wall Street Journal has the details:

Hillary Clinton will propose a revamp of capital-gains taxes that would hit some short-term investors with higher rates, part of a package of measures designed to prod companies to put more emphasis on long-term growth, a campaign official said. … At the center is Mrs. Clinton’s proposal to change capital-gains tax rates, the details of which are being finalized. The Democratic presidential candidate’s plan would create a sliding scale with at least three new rates that change depending on how long an investment is held, the official said.

Investments held for less than a year would continue to be taxed at regular income-tax rates, which can top out at 39.6% or more for the highest earners. For those held just a little longer—likely two or three years—the current capital-gains tax rate of 23.8% for top earners would rise. The Clinton rate, which hasn’t been finalized, would be higher than the 28% President Barack Obama proposed earlier this year for the highest earners. The Clinton campaign hasn’t ruled out taxing such investments at the regular income-tax rate. The plan would include additional rates tied to the length that an investment is held, with the lowest rates for investments held the longest.

On Creating New Government Policies to Deal with the Sharing Economy


shutterstock_250766428Nick Hanauer and David Rolf outline a solution to what they (and Hillary Clinton, it seems) argue is a big, big problem right now: economic insecurity created by the growing sharing/on-demand/gig economy. Americans need a new social contract, one that brings more certainty and tangible benefits to all these part-timers and independent contractors. As they explain in Democracy Journal:

This is the new “you’re on your own,” benefit-free, race-to-the-bottom reality for millions of American workers. And as more new innovative businesses and business models are invented, this process will only accelerate. As the sharing economy kicks into high gear, more and more Americans will become independent contractors activated at the touch of a button on an app, working for a fleet of employers. … A robust set of mandatory universal benefits would put all employees and employers alike on an equal footing, while providing the economic security and certainty necessary for the middle class to thrive.

So what does this new social contract look like? It consists of two parts, what Hanauer and Rolf  have termed a “Shared Security Account” and “Shared Security Standards.”  here is how this system works:

Hillary Clinton Has a Smart Idea to Fix the Economy. Republicans Should Steal It


Hillary_Strategy_Shutterstock_500x293Bad news for Republican presidential candidates searching for a fresh message beyond moldy Reagan nostalgia and tired anti-Obamaism: Hillary Clinton just stole a potentially powerful theme right from under them.

In her economic policy speech Monday at the New School in Manhattan, Clinton said Corporate America deserves some of the blame for the weak and uneven economic recovery. Big business, she said, suffers from “short-termism” and too often practices “quarterly capitalism” where “everything is focused on the next earnings report or the short-term share price, and the result is too little attention on the sources of long-term growth: research and development, physical capital and talent.”

Now, it’s surely tempting for Republicans to view Clinton’s critique as just another Democratic attack on “job creators,” or as campaign strategery from a centrist Democratic candidate looking to ward off a more liberal rival. But there’s more to it than that, and the GOP should pay attention.

In Which the Pontiff Admits That—Is There Any Other Way to Put This?—He Has Not the Slightest Idea What He’s Talking About


FrancisFrom an article in the New York Times about the conversation Pope Francis had with journalists as he flew back to Rome from his trip to Latin America:

[T]he pope expressed “a great allergy to economic things,” explaining that his father had been an accountant who often brought work home on weekends.

“I don’t understand it very well,” he said of economics, even though the issue of economic justice has become central to his papacy.

On Hillary, Income Inequality, and the GOP


HillaryDuring her economic policy speech Monday, Hillary Clinton said the “evidence is in: Inequality is a drag on our entire economy.” But it is far from clear that’s empirically the case with advanced economies (vs. developing ones), studies suggest. For instance: There was a big jump in 1%-99% inequality during the 1990s to 21.5% in 2000 from 13.4% in 1991. (It’s actually a bit less today.) Yet both income growth and GDP growth were very strong. Clinton may credit her husband’s policies for that, but whatever. It is an example that greater inequality and broad-based income gains can coexist.

Inequality also rose in the 1980s but, again, strong income growth. As Brookings scholar Rob Shapiro wrote recently about the 1980s and 1990s: “… households of virtually every type experienced large, steady income gains, whether they were headed by men or women, by blacks, whites or Hispanics, or by people with high school diplomas or college degrees.” That even though high-end inequality doubled.

What’s more, a recent OECD study found this interesting dynamic between inequality and growth: “While the overall increase in income inequality is also driven by the very rich 1% pulling away, what matters most for growth are families with lower incomes slipping behind.” And this: “In contrast, no evidence is found that those with high incomes pulling away from the rest of the population harms growth.” And, by the way, the rise in high-end US inequality hasn’t been accompanied by worsening economic mobility.

How Small Do You Want Your Government?


Reflecting upon our debates – or, at least, disagreements – about WHINOS vs RINOS, I began to wonder if there was a difference in assessment of the relative merits of a GOP presidency vs a Hillary/Warren/Sanders (HWS) presidency. We probably all agree that anyone is better than HWS, in at least the short term. But how much better?

If you think things are bad, but not too bad, and in many important areas trending well, then the difference is pretty big. If you think things are really, really bad indeed, then the difference is pretty small. The first camp wants the immature bomb-throwers to shut up and let the adults win the election. The second camp thinks the important thing is to wake the sheeple, and if this election is lost it is a small price to pay for the longer term objective of saving the republic (if that is still possible).

Greece Gets the Worst of Both Worlds


greek facepalm-225x300It appears Greece has ended up paying two costs. It chose first to spurn the EU through a referendum and has suffered a banking system shuttered and a major contraction in its economy. It then spins around and takes a deal that is to most observers worse than the one it turned down the previous week. So it pays for a financial crisis and for more austerity.

Heckuva job, Alexis.

So while the European and US stock markets were having fun and the euro was trading down — never mind what happened in the Athens stock exchange — here is some of the mishegas happening in Greece as they approach nighttime.

Airbnb vs. Cronyism in San Francisco


San-Francisco-row-of-houses-shutterstock-500x293San Francisco housing activists last week submitted some 15,000 signatures to get an anti-Airbnb initiative on the November ballot. This group, according to TechCrunch, wants a 75-day limit on hosting or renting out properties vs. the current 90-day limit. Good for traditional hotels, not good for sharing companies. Activists contend home sharing worsens SF’s tight housing market when landlords of residential units rent to travelers rather than residents.

But there is more to the story, as Tyler Fisher of R Street explains:

But what Airbnb naysayers often fail to acknowledge is just how few homeowners are using these new platforms. Estimates range, but at most, short-term rentals make up less than 5 percent of the housing stock; Airbnb lists about 10,000 properties in a city with 379,579 residential units. When you consider that some properties are likely cross-listed on multiple sites and that many rentals are owner-occupied, the impact is further diminished.

Jeb Bests Hillary in an American Worker Tweet-Off


Jeb Bush Hillary ClintonJeb Bush is right and Hillary Clinton is wrong. You can probably say that about a lot of things. But in this case it’s about the need for more part-time American workers to work full-time in order to improve their own lots as well as the lot of the economy.

The mini spat started when Jeb Bush short-handed the point that “people should work longer hours” in a meeting with New Hampshire’s Union Leader. Hillary Clinton — who doesn’t say anything to anybody – then tweeted, “Anyone who believes Americans aren’t working hard enough hasn’t met enough American workers.”

A few hours later, Bush clarified his position with his own tweet: “Anyone who discounts 6.5 million people stuck in part-time work and seeking full-time jobs hasn’t listened to working Americans.”

So is the Greek Crisis Over? Well…


Greece_Time_Shutterstock_500x293So Greece —  in a “pre-chaos state,” according to France’s finance minister  — is choosing the depression it knows over the depression it doesn’t. By all accounts, the new fiscal proposal from Greek Prime Minister Alexis Tsipras pretty much meets creditor demands in exchange for a $60 billion bailout to cover debt repayments between 2015 and 2018. The voters said “oxi,” but their leaders are saying “nai.”

As outlined by Bloomberg, the Tsipras government more or less conceded on budget targets, conceded on sales and corporate taxes (with some tax changes starting a year later), conceded on eliminating early retirement benefits for pensioners, and conceded on the sales of state assets. What’s more, according to the Financial Times, “none of the documents submitted to creditors, including Mr Tsakalotos’s letter and a separate missive from Mr Tsipras, contain any mention of debt relief.” And if debt relief does comes, it seems more likely Greece will be given more time to pay rather than less debt to pay.

Sounds like a mega-blink.

Fun with Bubbles: How Elon Musk and the Government are Recreating the Housing Crisis


BubbleFor all the arguments between liberals and conservatives on economic issues, most boil down to one core point of contention: conservatives realize that government doesn’t do a lot of things very well. One of those things government is not very good at, compared to the private sector and free individuals, is learning hard lessons. Case in point: bubbles.

The government loves blowing bubbles more than a small child. The difference is that when a child’s bubbles pop, they don’t erupt with enough force to shake the economic foundations of entire industries, regions, or the planet.

The most famous recent example is the housing crisis and subsequent “Great Recession” of 2008. While the media and Common Core-approved textbooks still blame that crisis on the “greedy bankers,” the reality is that the federal government, with some help from local governments, huffed and puffed and blew up the housing bubble through mortgage guarantees, artificially low interest rates, zoning laws, and pressure on banks to loan to people that could never afford standard 15- or 30-year fixed-rate mortgages.

A Q&A With Derek Scissors on the Chinese Economy and Stock Market


shutterstock_292880822In light of the stock market meltdown in China, AEI scholar Derek Scissors answers a few questions on the current state of China’s economy and what to expect going forward.

1.) What is going on with the Chinese economy and stock market?

Two different things. The economy is in the process of stagnation. It’s reversible but has been going on for some time. See my testimony last month before the House Committee on Foreign Affairs, Subcommittee on Asia and the Pacific.

The Libertarian Podcast, with Richard Epstein: “The Crisis in Greece”


On this week’s installment of The Libertarian podcast from the Hoover Institution, Professor Epstein helps us navigate the thorny issues surrounding Greece’s ongoing debt problems, the consequences of last weekend’s plebiscite, and how the European Union should tackle this challenge going forward. And don’t worry — Richard still finds time to take a couple of shots at Paul Krugman.

You can listen in to the podcast below or you take us on the go by subscribing to The Libertarian via iTunes or your favorite podcasting service:

7 Myths About Scandinavia’s Social Democratic ‘Paradise’


hiker-on-mountain-shutterstock-500x293If Scandinavia didn’t exist, the left would have to invent it. Overall, Denmark, Norway, and Sweden are known as nations that combine big government with good economic growth. Low levels of inequality and poverty with high levels of innovation. Social democratic models for America, some Democrats suggest.

But in “Scandinavian Unexceptionalism: Culture, Markets and the Failure of Third-Way Socialism,” Nima Sanandaji argues that all these wonderful qualities of Scandinavian society “predated the development of the welfare state” and that “all these indicators began to deteriorate after the expansion of the Scandinavian welfare states and the increase in taxes necessary to fund it.” Some key points:

1.) Left-leaning pop stars, politicians, journalists, political commentators and academics have long praised Scandinavian countries for their high levels of welfare provision and for their economic and social outcomes. It is, indeed, true that they are successful by most reasonable measures. However, Scandinavia’s success story predated the welfare state. Furthermore, Sweden began to fall behind as the state grew rapidly from the 1960s. Between 1870 and 1936, Sweden enjoyed the highest growth rate in the industrialised world. However, between 1936 and 2008, the growth rate was only 13th out of 28 industrialised nations. Between 1975 and the mid-1990s, Sweden dropped from being the 4th richest nation in the world to the 13th richest nation in the world.

The Story of Greece’s Economic Crisis is More Than a Story About Debt and ‘Big Government’


shutterstock_243975121Greece has been to this dance before, as investment strategist Ed Yardeni notes today:

The first recorded default in Greek history occurred in the fourth century B.C. Back then, 13 Greek city states borrowed funds from the Temple of Delos. Most of the borrowers never made good on the loans, and the temple took an 80% loss on its principal. Greece has defaulted on its external sovereign debt obligations at least five previous times in the modern era (1826, 1843, 1860, 1894, and 1932).

So nothing since 1932? A pretty good run by Greek standards. Anyway, in my new The Week column I point out that Greece’s problem aren’t just about too much debt and crony capitalism. The economy has also suffered from bad macroeconomic policy in the form of a too-tight, inflation-phobic European Central Bank.

Oxi-Notes on the Morning in Europe


8af78d0e-fdf3-45f2-8677-72d06bd7b58c1) Headline writers throughout Europe have been manfully resisting all variants on the obvious Oxi-moron joke. This is perhaps because everyone on Twitter came up with it first. (I measured this.)

2) Game theorists are frantically trying to discern the strategy behind Greek Finance Minister Yanis Varoufakis’s abrupt resignation. Has he been inspired by Nash Equilibria or by Nash Schizophrenia? As yet unclear.

3) At least the result of the vote was overwhelming. I say “at least” because one of my fears was a vote so close as to make accusations of fraud and vote-rigging credible. So that’s a good thing, at least.