The (True) Legacy of Two Really Existing Economic Systems by Dan Ariely, Ximena Garcia-Rada, Lars Hornuf, Heather Mann :: SSRN

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457000

Daniel J. Smith
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Some Links feedly

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Some Links
// Cafe Hayek

(Don Boudreaux)

Adam Ozimek draws from the recent study showing that large retailers pay their workers more, on average, than do smaller retailers a relevant lesson about minimum-wage legislation. (HT Tyler Cowen) A slice:

If monopsony power is an important feature of the labor market, and monopsony power should be prevalent when firms are bigger and therefore have a larger share of the local industry, then why do big firms pay more than small firms? The small mom and pops should be closest to operating in a competitive labor market and have little bargaining power, but they pay less. Maybe the productivity effects of big retailer outweigh the monopsony effect, but that just is another way of saying it’s not as an important feature of the market. In addition, ask yourself whether you predicted this result of big firms paying more before you read about this study. Be honest, if someone asked you to predict the results, would you have told a story about big firms bargaining workers down to lower wages? If so, it is time to re-evaluate your views.

Here’s the cover of my forthcoming book, The Essential Hayek. (I thank Jason Clemens and his marvelous colleagues at the Fraser Institute for making this book possible.)

HAYEK full cover–14 JUL 28 (1) (1)

Bill Shughart offers yet another reason to shut down, completely, that great geyser of cronyism, the U.S. Export-Import Bank.

Here’s a new article, this one in the Independent Review, by Ben Powell on sweatshops.

Ira Stoll explains that, contra Paul Krugman’s claims, Kansas’s fiscal house is not in bad shape.

Doug Bandow wisely counsels Uncle Sam not to rush back into Iraq.

Here is Steve Davies’s remembrance of John Blundell.

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Bruce Benson on the Holdout Problem, David Henderson | EconLog | Library of Economics and Liberty feedly

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Bruce Benson on the Holdout Problem, David Henderson | EconLog | Library of Economics and Liberty
http://econlog.econlib.org/archives/2014/07/bruce_benson_on.html
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Mary Poppins Should Stick to Nannying Only People Who Pay Her to Nanny (and Celebrities Should Stick to Celebritying) feedly

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Mary Poppins Should Stick to Nannying Only People Who Pay Her to Nanny (and Celebrities Should Stick to Celebritying)
// Cafe Hayek

(Don Boudreaux)

From the great folks at Reason we get Remy’s response to Kristen Bell’s economically uninformed attempt to justify an increase in the minimum wage.

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The New York Times Inadvertently Offers Evidence that Genuine Economic Inequality is Not Rising… fe edly

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The New York Times Inadvertently Offers Evidence that Genuine Economic Inequality is Not Rising…
// Cafe Hayek

(Don Boudreaux)

… or, at least, is not a problem that threatens to tear modern, market-oriented societies apart at the seams, is in Eduardo Porter’s New York Times essay from a few days ago. Here’s a slice:

In every one of the 26 nations, most of them in the developed world, for which they collected data, people believe that the income gap is smaller than it really is.

Porter’s essay grapples with what Porter apparently believes is a mystery: if monetary income (or wealth) inequality is rising, why don’t the masses see it? Why aren’t the masses up in arms about this inequality? After all, professors and other intellectuals – those whom Deirdre McCloskey rightly ridicules as “the clerisy” – are up in arms about it. Yet the masses are not. Strange, that (if you’re a “Progressive”).

The gaudy and excessive consumption of the one percent should cause the deprived, crumb-eating 99 percent to grab their pitchforks, storm Wall Street and the City of London, and demand their ‘fair share’ from the plutocrats who unjustly (somehow) steal it from them. But it’s not happening. The 99 percent aren’t behaving as their “progressive” wannabe-caretakers think they should behave.

…..

One reason, I’m sure, is that rising inequality in monetary incomes or wealth is NOT the same thing as rising inequality in economic welfare (extra emphasis intentional). It’s not even close – although rare is the “Progressive” who acknowledges the reality that changes in income (or wealth) are not identical to changes in consumption-ability (that is, in real economic well-being). Inequality of monetarily reckoned income or wealth can rise while inequality of consumption opportunities can fall. See, for example, here and here and here and, especially, here.

If ordinary people – spared lectures and long tomes by intellectuals – are blind in their daily lives the vast differences in economic fortunes that intellectuals are constantly warning will trigger revolutionary anger in ordinary people, then the most plausible explanation for this blindness is that there is, in reality, nothing to see. Ordinary people aren’t blind; instead, “Progressives” are hallucinating. If ordinary people’s reactions (as reported by Porter) are evidence of economic reality, then everyday life in market-oriented societies is not marked by growing economic inequality of the sort that ultimately matters: inequality in people’s ability to consume. If professors must write 700-page books, and “Progressive” columnists must harp continually about growing economic inequality, in order for ordinarily people even to begin to become aware of this inequality, then it’s quite implausible to maintain that modern capitalist societies are generating ‘terrifying’ degrees of economic inequalities.

In short, if you must study charts in economics books in order to learn that you are intolerably destitute compared to some other people, then, in fact, you are not even remotely close to being destitute in any economically meaningful sense of the term.

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Daniel J. Smith
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Moral Effects of Socialism feedly

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Moral Effects of Socialism
// Marginal Revolution

Dan Ariely and co-authors have an interesting new paper looking at moral behavior, specifially cheating, in people who grew up in either East or West Germany.

From 1961 to 1989, the Berlin Wall divided one nation into two distinct political regimes. We
exploited this natural experiment to investigate whether the socio-political context impacts
individual honesty. Using an abstract die-rolling task, we found evidence that East Germans
who were exposed to socialism cheat more than West Germans who were exposed to
capitalism. We also found that cheating was more likely to occur under circumstances of
plausible deniability.

…If socialism indeed promotes individual dishonesty, the specific features of this socio-political
system that lead to this outcome remain to be determined. The East German socialist regime
differed from the West German capitalist regime in several important ways. First, the system
did not reward work based to merit, and made it difficult to accumulate wealth or pass
anything on to one’s family. This may have resulted in a lack of meaning leading to
demoralization (Ariely et al., 2008), and perhaps less concern for upholding standards of
honesty. Furthermore, while the government claimed to exist in service of the people, it failed
to provide functional public systems or economic security. Observing this moral hypocrisy in government may have eroded the value citizens placed on honesty. Finally, and perhaps most
straightforwardly, the political and economic system pressured people to work around official
laws and cheat to game the system. Over time, individuals may come to normalize these types
of behaviors. Given these distinct possible influences, further research will be needed to
understand which aspects of socialism have the strongest or most lasting impacts on morality.

It’s interesting that Ariely et al. try to explain cheating as a result of socialism. My own approach would look more to the virtue ethics of capitalism and Montesquieu who famously noted that

Commerce is a cure for the most destructive prejudices; for it is almost a general rule, that wherever we find agreeable manners, there commerce flourishes; and that wherever there is commerce, there we meet with agreeable manners.

See Al-Ubaydli et al. for a market priming experiment and especially McCloskey on The Bourgeoise Virtues for more work consistent with this theme.

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Daniel J. Smith
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Income Inequality Is Not Rising Globally. It’s Falling. – NYTimes.com feedly

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Income Inequality Is Not Rising Globally. It’s Falling. – NYTimes.com
http://www.nytimes.com/2014/07/20/upshot/income-inequality-is-not-rising-globally-its-falling-.html?_r=2
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Daniel J. Smith
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