Language acquisition is a labor of love, but it’s labor-intensive

Mother-baby synchrony shows the start of language acquisition [1]

Language acquisition depends on social contact

Children get their information about language from their caretakers and the adults around them. They tend to pick up on the most frequent nouns, verbs and adjectives first, and then extend their range. They attend to what is in the joint focus of attention for adult and child, to what is physically and conversationally present, and hence to the language directed to them as addressees.[2]

Infant attention… was significantly higher in response to the live person than to either inanimate source… During live exposure, tutors focus their visual gaze on pictures in the books or on the toys they talk about, and infants’ gaze tends to follow the speaker’s gaze… Infants in the live exposure sessions were visibly aroused before the sessions – they watched the door expectantly, and were excited by the tutor’s arrival, whereas infants in the non-social conditions did not.

Exposure to a new language in a live social interaction situation induces remarkable learning in 9-month-old infants, but no learning when the exact same language material is presented to infants by a disembodied source.[3]

Language acquisition is fostered by emotional expression

…infant-directed speech style reflects free vocal expression of emotion to infants, in comparison with more inhibited expression of emotion in typical adult-directed speech. …infant-directed speech is accompanied by exaggerated facial expressions of emotion…[4]

American infants exposed in the laboratory to Mandarin Chinese rapidly learned phonemes and words from the foreign language, but only if exposed to the new language by a live human being during naturalistic play. Infants exposed to the same auditory input at the same age and for the same duration via television or audiotape showed no learning…[5]

…infant-directed prosody itself is not special. What is special is the widespread expression of emotion to infants in comparison with the more inhibited expression of emotion in typical adult interactions.

…infants prefer to listen to infant-directed speech expressing positive (approval) affect over infant-directed speech expressing negative (prohibition) affect…[4]

Infants of nondepressed mothers readily learned that their mothers’ speech signaled a face, whereas infants of depressed mothers failed to learn that their mothers’ speech signaled the face. Infants of depressed mothers did, however, show strong learning in response to speech produced by an unfamiliar nondepressed mother.[6]

Language acquisition takes substantial labor and time

… a mother’s immediate social feedback results both in greater numbers and more mature, adultlike vocalizations from infants…

…infants vocally imitate adult vowel sounds by 5 months but not acoustically matched nonspeech sounds that are not perceived as human speech…

By 10 months… Children raised in Beijing listening to Mandarin babble by using tonelike pitches characteristic of Mandarin, which make them sound distinctly Chinese. Children being raised in Seattle listening to English do not babble by using such tones and sound distinctly American.[5]

Language acquisition labor changes, but the labor continues

Parents frequently check up on what their children mean. They often do this by reformulating with a side sequence or an embedded correction what they think their children said. Since the child’s utterance and the adult reformulation differ while the intended meanings are the same, children infer that adults are offering a correction. Analyses of longitudinal data from five children between 2;0 and 4;0… show that (a) adults reformulate their children’s erroneous utterances and do so significantly more often than they replay or repeat error-free utterances; (b) their rates of reformulation are similar across error-types (phonological, morphological, lexical, and syntactic) in both languages; (c) they reformulate significantly more often to younger children, who make more errors.[7]

At a conservative estimate, the average 5-year-old child will have learned more than 2,000 words… and will learn up to 3,000 more per year in the coming school years…[8]

  1. Melina, Remy. “” LiveScience, 23 Aug. 2011, Accessed 14 Oct. 2017.
  2. Clark, Eve V. “How language acquisition builds on cognitive development.” Trends in cognitive sciences 8.10 (2004): 472-478.
  3. Kuhl, Patricia K. “Is speech learning ‘gated’ by the social brain?” Developmental science 10.1 (2007): 110-120.
  4. Trainor, Laurel J., Caren M. Austin, and Renée N. Desjardins. “Is infant-directed speech prosody a result of the vocal expression of emotion?” Psychological science 11.3 (2000): 188-195.
  5. Meltzoff, Andrew N., et al. “Foundations for a new science of learning.” Science 325.5938 (2009): 284-288.
  6. Kaplan, Peter S., et al. “Infants of depressed mothers, although competent learners, fail to learn in response to their own mothers’ infant-directed speech.” Psychological Science 13.3 (2002): 268-271.
  7. Chouinard, Michelle M., and Eve V. Clark. “Adult reformulations of child errors as negative evidence.” Journal of child language 30.3 (2003): 637-669.
  8. Baddeley, Alan, Susan Gathercole, and Costanza Papagno. “The phonological loop as a language learning device.” Psychological review 105.1 (1998): 158-173.

Immigration criteria that don’t rig elections will protect freedom

Percent of youth under 18 in state who were children of immigrants as of 2008 helps show that immigration criteria favor big government

Percent of youth under 18 in state who were children of immigrants as of 2008 [1]

Immigration criteria bring in people who favor big government

…Pew researchers asked if respondents completely agreed, mostly agreed, mostly disagreed, or completely disagreed with the following statements:

  1. There need to be stricter laws and regulations to pro­tect the environment.
  2. It is the responsibility of the government to take care of people who can’t take care of themselves.
  3. The government should help more needy people even if it means going deeper in debt.
  4. Poor people have become too dependent on govern­ment assistance programs.

Responses to these four items form a single factor or scale score, higher values in this case indicating greater approval of increased regulation and redistribution, or opposition to limited government. What explains where respondents score on these questions once they are combined and scaled? Democrats are far more likely to favor an activist role for govern­ment than Republicans — and the difference is about a 42-point gap separating “Strong Democrats” from “Strong Republicans”.[2]

…there is a significant negative correlation between the growth in the immigrant share of the population and the Republican vote share in elections for the House.

Change in Republican vote share vs. change in immigrant population share shows that immigration criteria favor big government

Increasing the immigrant fraction by 1.00% increases the big-government vote fraction by 0.72% [3]

Immigration criteria favor big government for at least 2 generations

About eight-in-ten (83%) first-generation Hispanics say they would rather have a bigger government with more services than a smaller government with fewer services. While still a clear majority, the share opting for an activist government is lower (71%) among second-generation Hispanics.

Among Asian Americans, more of the first generation (57%) than the second generation (47%) prefer a bigger government that provides more services. Second-generation Asian Americans hold views more similar to those of the general public on this issue.

Hispanics and Asian Americans favor big government, showing that immigration criteria favor big government

Hispanics and Asian Americans favor big government [4]

The majority of both Muslim Americans… and the general public… favor increased federal government spending to help the needy (73 percent and 63 percent, respectively)…

American Muslims favor big government, showing that immigration criteria favor big government

American Muslims favor big government [5]

Immigration criteria threaten citizens’ freedom

Overall, the share of immigrants steadily increased over time. The nationwide average share of immigrants in the total population was 9.1 percent in 1994, rising to 17 percent in 2012.

Immigrant fraction per state in 1994 shows effect of immigration criteria

Immigrant fraction per state in 1994

Immigrant fraction per state in 2012 shows effect of immigration criteria

Immigrant fraction per state in 2012 [3]

Immigration criteria swing the vote, rigging elections

Demography is destiny
The past: California
The present: Florida, Colorado, Nevada, and Virginia
The future, near term: Arizona, North Carolina
The future, long term: Georgia, Texas [6]

Using standard statistical methods, this research has estimated the impact of the rising percentage of immigrants across U.S. counties on Republican presidential voting in the presidential elections from 1980 to 2012. Across all U.S. counties, including the many smaller counties, the estimated effect of immigration is to drop Republican vote share about two percentage points. Even in seemingly remote locations with negligible immigrant populations, the effect is sufficient to move a 51 percent county to a 49 percent county. Aggregated over the large number of counties and viewed through the template of the Electoral College’s winner-take-all system of elections, the impact of immigration is easily suf­ficient, by itself, to decide upcoming presidential elections.[2]

  1. Passel, Jeffrey S. “Demography of immigrant youth: Past, present, and future.” The Future of Children1 (2011): 19-41; 28.
  2. Gimpel, James G. Immigration’s Impact on Republican Political Prospects, 1980 to 2012.Center for Immigration Studies, 2014, pp. 4-5, 11.
  3. Mayda, Anna Maria, Giovanni Peri, and Walter Steingress. Immigration to the US: A problem for the Republicans or the Democrats? w21941. National Bureau of Economic Research, 2016, pp. 12, 13, 46, 48.
  4. Second-Generation Americans. A portrait of the adult children of immigrants.Pew Research Center, 2013, p. 73.
  5. Read, Jen’nan Ghazal. “muslims in america.” Contexts4 (2008): 39-43; 41.
  6. Wolgin, Philip, and Ann Garcia. Immigration Is Changing the Political Landscape in Key States. Center for American Progress, 2013, p. 2.

Deflation healthy sign of productivity, saving, adding value, liberty

Actual price levels, and price levels with normal deflation, 1948-1976, showing deflation healthy sign

Actual price levels, and price levels with normal deflation, 1948-1976 [1:12]

Deflation healthy sign overcome by government

…western monetary institutions in the era of the classical gold standard were far from being perfect. Governments frequently intervened in the production of money through price control schemes, which they camouflaged with the pompous name of “bimetallism.” They actively promoted fractional-reserve banking, which promised ever-new funds for the public treasury. And they promoted the emergence of central banking through special monopoly charters for a few privileged banks.[2:18]

A paper money system… merely distributes the existing resources in a different manner; some people gain, others lose. It is a system that makes banks and financial markets vulnerable, because it induces them to economize on the essential safety valves of business: cash and equity. Why hold any substantial cash balances if the central bank stands ready to lend you any amount that might be needed, at a moment’s notice? Why use your own money if you can finance your investments with cheap credit from the printing press?[2:7]

Paper money has caused an unprecedented increase of debt on all levels: government, corporate, and individual. It has financed the growth of the state on all levels, federal, state, and local. It thus has become the technical foundation for the totalitarian menace of our days.[2:21]

…in practice, there are at any point in time two, and only two, fundamental options for monetary policy. The first option is to increase the quantity of paper money. The second option is not to increase the paper money supply. Now the question is how well each of these options harmonizes with the basic principles on which a free society is built.[2:29]

Inflation is an unjustifiable redistribution of income in favor of those who receive the new money and money titles first, and to the detriment of those who receive them last. In practice the redistribution always works out in favor of the fiat-money producers themselves (whom we misleadingly call “central banks”) and of their partners in the banking sector and at the stock exchange. The rich stay rich (longer) and the poor stay poor (longer) than they would in a free society.[2:33-34]

Deflation healthy sign of productivity growing

…throughout modern history, improvements in aggregate productivity have overshadowed occasional setbacks. According to one widely-used estimate, from 1948 to 1976 total factor productivity in the US grew by an average annual rate of 2 per cent. Had a (total factor) productivity norm been in effect during this time, US consumer prices in 1976 would on average have been roughly half as high as they were just after the Second World War.[1:11]

Deflation healthy sign because saving pays off

Imagine if all prices were to drop tomorrow by 50 percent. Would this affect our ability to feed, cloth, shelter, and transport ourselves? It would not, because the disappearance of money is not paralleled by a disappearance of the physical structure of production. In a very dramatic deflation, there is much less money around than there used to be, and thus we cannot sell our products and services at the same money prices as before. But our tools, our machines, the streets, the cars and trucks, our crops and our food supplies—all this is still in place. And thus we can go on producing, and even producing profitably, because profit does not depend on the level of money prices at which we sell, but on the difference between the prices at which we sell and the prices at which we buy. In a deflation, both sets of prices drop, and as a consequence for-profit production can go on.

There is only one fundamental change that deflation brings about. It radically modifies the structure of ownership. Firms financed per credits go bankrupt because at the lower level of prices they can no longer pay back the credits they had incurred without anticipating the deflation. Private households with mortgages and other considerable debts to pay back go bankrupt, because with the decline of money prices their monetary income declines too whereas their debts remain at the nominal level.

…bankruptcies—irrespective of how many individuals are involved—do not affect the real wealth of the nation, and in particular that they do not prevent the successful continuation of production. The point is that other people will run the firms and own the houses—people who at the time the deflation set in were out of debt and had cash in their hands to buy firms and real estate. These new owners can run the firms profitably at the much lower level of selling prices because they bought the stock, and will buy other factors of production, at lower prices too.[2:25-27]

Deflation healthy sign because adding value pays off

…deflation… stops inflation and destroys the institutions that produce inflation. It abolishes the advantage that inflation-based debt finance enjoys, at the margin, over savings-based equity finance. And it therefore decentralizes financial decision-making and makes banks, firms, and individuals more prudent and self-reliant than they would have been under inflation.

Deflation healthy sign that liberty is secure

…deflation eradicates the re-channeling of incomes that result from the monopoly privileges of central banks. It thus destroys the economic basis of the false elites and obliges them to become true elites rather quickly, or abdicate and make way for new entrepreneurs and other social leaders.[2:40]

Deflation puts a brake—at the very least a temporary brake—on the further concentration and consolidation of power in the hands of the federal government… It dampens the growth of the welfare state, if it does not lead to its outright implosion.

… deflation is at least potentially a great liberating force. It… brings the entire society back in touch with the real world, because it destroys the economic basis of the social engineers, spin doctors, and brain washers.

…if our purpose is… to restore… a free society, then deflation is the only acceptable monetary policy.[2:41]

  1. Selgin, George. Less than zero. The case for a falling price level in a growing economy. The Institute of Economic Affairs, 1997.
  2. Hülsmann, Jörg Guido. Deflation and liberty. Ludwig von Mises Institute, 2008.

Trade restraint begins at home, to protect big business

U.S. Chamber of Commerce proposals in 1934 show that trade restraint begins at home[1:113-114]

Trade restraint was a response to innovators

…starting with the early 1900s and continuing through the 1920s, American business underwent quite radical changes in the development of major new industries and new methods of manufacture and product distribution.[1:16]

…Schumpeter concluded that price competition is not the most significant factor to which firms have to respond. In his view, “it is not that kind of competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization… competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives.” [1:17]

Trade restraint was pilot-tested during World War I

Businessmen, recalling the managed harmony of the war years, confronted the intensely competitive 1920s with hopes of realizing a more durable and predictable setting in which to conduct business. Firms that viewed the processes of change as threats to their positions began organizing resistance.[1:18]

The systemwide benefits of maintaining openness in competition—with no legal restrictions on freedom of entry into the marketplace or on the terms and conditions for which parties could contract with one another—were being rejected by business organizations more concerned with the survival of individual firms and industries.[1:18]

As a consequence, business leaders expressed an increasing desire for the maintenance of conditions of equilibrium that would help preserve the positions of existing firms.[1:16]

Trade restraint moved big business from competing economically to competing politically

One finds industry leaders and trade groups railing constantly against the “price cutter,” the “cutthroat” competitor, and the entrepreneurial interloper who dared to “invade the territory” of an established competitor. Such efforts invariably began with voluntary methods of “self-restraint.” When voluntary approaches failed to produce the desired stability, many businessmen—mindful of the advantages experienced under the War Industries Board—sought to effectuate this spirit of “cooperation” through politically backed programs designed to fashion a greater degree of centralized business decision-making. Characterizing their proposals as “industrial self-regulation,” business spokesmen and trade associations worked to secure for themselves a diluted competitive environment that would not be threatening to their interests. Such political efforts to control trade practices led, ultimately, to the enactment of the National Industrial Recovery Act…[1:19] The purpose of such legislation… was to repress and stabilize competitive conditions-to ossify industries and restrain those influences that represented the threat of change.[1:121]

[I]ndustrial concentration is not the inevitable outgrowth of economic and technical forces, nor the product of spontaneous generation or natural selection. In this era of big government, concentration is often the result of unwise, manmade, discriminatory, privilege-creating governmental action. Defense contracts, R and D support, patent policy, tax privileges, stockpiling arrangements, tariffs and quotas, subsidies, etc., have far from a neutral effect on our industrial structure. In all these institutional arrangements, government plays a crucial, if not decisive, role. Government, working through and in alliance with “private enterprise,” becomes the keystone in an edifice of neomercantilism and industrial feudalism. In the process, the institutional fabric of society is transformed from economic capitalism to political capitalism.[1:212]

  1. Shaffer, Butler D. In Restraint of Trade: The Business Campaign Against Competition, 1918-1938. Bucknell University Press, 1997.


Profit or loss is working to add more value, and seeing customers decide

Return on assets of US firms shows profit or loss offers on average little margin for error

Return on assets of US firms [1]

Profit or loss means buying low now and selling high later, using capital and labor to add value

The activities of the entrepreneur consist in making decisions. He determines for what purpose the factors of production should be employed.[2]

The capitalist-entrepreneur buys factors or factor services in the present; his product must be sold in the future. He is always on the alert, then, for discrepancies, for areas where he can earn more than the going rate of interest. The difference between the general interest rate and his actual return is his… profit…

Profit or loss measures net value added compared to all other value-adding

Every entrepreneur… invests in a process because he expects to make a profit, i.e., because he believes that the market has underpriced and undercapitalized the factors in relation to their future rents. If his belief is justified, he makes a profit. If his belief is unjustified, and the market, for example, has really overpriced the factors, he will suffer losses.

…profits are an index of maladjustment, but in a sense precisely opposed to that usually meant. …profits are an index that maladjustments are being met and combatted by the profit-making entrepreneurs. These maladjustments are the inevitable concomitants of the real world of change. A man earns profits only if he has, by superior foresight and judgment, uncovered a maladjustment—specifically an undervaluation of certain factors by the market. By stepping into this situation and gaining the profit, he calls everyone’s attention to that maladjustment and sets forces into motion that eventually eliminate it. [3]

Profit or loss is finally booked when customers agree to final prices and quantities

…entrepreneurs… are unconditionally and totally subject to the sovereignty of the buying public, the consumers.

The consumers by their buying and abstention from buying elect the entrepreneurs in a daily repeated plebiscite as it were. They determine who should own and who not, and how much each owner should own.

Each ballot of the consumers adds only a little to the elected man’s sphere of action. To reach the upper levels of entrepreneurship he needs a great number of votes, repeated again and again over a long period of time, a protracted series of successful strokes. He must stand every day a new trial, must submit anew to reelection as it were.

Profit and loss are the instruments by means of which the consumers pass the direction of production activities into the hands of those who are best fit to serve them.[2]

It is the consumers… who make the decisions for the economic system. The consumers, through their buying and abstention from buying, decide how much of what will be produced, at the same time determining the incomes of all the participating factors. And every man is a consumer.[3]

  1. Hagel, John, et al. 2016 Shift Index. The paradox of flows: Can hope flow from fear? Deloitte University Press, 2016, p. 26.
  2. Von Mises, Ludwig. Planning for freedom, and twelve other essays and addresses. 3rd ed., Libertarian Press, 1974, pp. 108-150.
  3. Rothbard, Murray N. Man, economy, and state with power and market. 2nd ed., Ludwig von Mises Institute, 2009, pp. 509-516.

Cleaner environment is achieved when people get freer and wealthier

Suspended particulate matter (μg/m3) vs. GDP per capita, London and Delhi shows cleaner environment when people get wealthier

Suspended particulate matter (μg/m3) vs. GDP per capita (2011 USD)
London 1700-2015 and Delhi 1997-2015 [1]

Cleaner environment is achieved after people get free enough

This is the economic history of humanity in a nutshell. From 2 million or 200,000 or 20,000 or 2,000 years ago until the 18th century there was slow growth in population, almost no increase in health or decrease in mortality, slow growth in the availability of natural resources (but not increased scarcity), increase in wealth for a few, and mixed effects on the environment. Since then there has been rapid growth in population due to spectacular decreases in the death rate, rapid growth in resources, widespread increases in wealth, and an unprecedently clean and beautiful living environment in many parts of the world along with a degraded environment in the poor and socialist parts of the world.

That is, more people and more wealth have correlated with more (rather than less) resources and a cleaner environment…[2]

Cleaner environment has only come where there’s not too much socialism

In many cases, the overriding political imperative in socialist economies was increased industrial output, with little attention paid to accompanying air or water pollution…

When the Chernobyl accident occurred in the Soviet Union and the nuclear cloud was headed for Bulgaria the top government officials secreted themselves away in special shelters with ample supplies of food and water. Bulgarian citizens, however were not even informed that the disruption had happened and continued to eat contaminated fruit and vegetables.[3]

Cleaner environment is achieved after people get wealthy enough

The functional forms seem to reflect the relative costs and benefits that individuals and countries attach to addressing certain environmental problems at different stages of economic development. Water and sanitation, with relatively low costs and high private and social benefits are among the earliest environmental problems to be addressed. Local air pollution, which imposes external costs locally, but is relatively costly to abate, tends to be addressed when countries reach a middle income level. This is because air pollution problems tend to become more severe in middle income economies, which are often energy intensive and industrialized, and because the benefits are greater and more affordable.[4]

We find no evidence that environmental quality deteriorates steadily with economic growth. Rather, for most indicators, economic growth brings an initial phase of deterioration followed by a subsequent phase of improvement. The turning points for the different pollutants vary, but in most cases they come before a country reaches a per capita income of $8000.

GDP per capita at max level of pollution measurement shows cleaner environment when people get wealthier[5]

Even cleaner environment is achieved as people get even wealthier

Per capita air emissions of particulates less than 10 μm in diameter vs. per capita income for each individual state in the United States in 1990 shows cleaner environment when people get wealthier

Per capita air emissions of particulates less than 10 μm in diameter vs. per capita income for each individual state in the United States in 1990

Visually, the dominant feature across the set of figures is the greater variability of emission levels at low income levels. …the estimated variance for all pollutants decreased as income increased. The… curves… generally indicate a linear relationship between per capita emissions for the different classes of pollutants and per capita income, with a small number of high emitting outliers among the low-income states.[6]

  1. Ritchie, Hannah. “What the history of London’s air pollution can tell us about the future of today’s growing megacities.Our World in Data, 20 June 2017, Accessed 15 Aug. 2017.
  2. Simon, Julian L. “More people, greater wealth, more resources, healthier environment.” Economic Affairs 14.3 (Apr. 1994): 22-29.
  3. Hill, Peter J. “Environmental Problems under Socialism.” Cato Journal 12.2 (1992): 321-335.
  4. Shafik, Nemat. “Economic development and environmental quality: an econometric analysis.” Oxford Economic Papers 46.4 (1994): 757-774.
  5. Grossman, Gene M., and Alan B. Krueger. “Economic growth and the environment.” The quarterly journal of economics 110.2 (1995): 353-377.
  6. Carson, Richard T., Yongil Jeon, and Donald R. McCubbin. “The relationship between air pollution emissions and income: US data.” Environment and Development Economics 2.4 (1997): 433-450.

Sticky prices are responses to customer friction

Sticky prices illustrated

Sticky prices illustrated [1]

Sticky prices delay price jumps hoping customers will be happier

“We can’t change prices biannually, it is not the culture here.”

“We said we weren’t going to raise prices that year and I believe that once you say that, you should stick with it.”

…if the costs are stable, then doubling the frequency of price changes… invites customers to complain, to demand discounts and rebates, and to ask to renegotiate.

…price rigidity was perceived by the company’s customers to be a sign of “customer orientation” and therefore a good thing.

…many customers were more positively disposed to do business with companies who only changed their prices according to a predictable time schedule. Indeed, price rigidity was a source of pride within a company because it indicated that one’s relationship with customers was more important than the “bottom line.”

“We will take it in the pants rather than pass it on down to our customers.”

Sticky prices delay price drops that might jump up again

One member of the sales force aptly described cutting prices as “feeding the animal.” Such a decision sets up a dangerous cycle: cutting prices in order to get business this period leads to a response by a competitor with a still lower price. This lower price puts return pressure on the firm to lower its prices again.

…both the sales force and customers would sometimes argue against a price decrease because it would make a price increase in later years more expensive because of the need to convince customers that prices should go up again. Thus any price change that does not make sense for the customer can cause customer antagonism.

Sticky prices eventually jump, and effort with customers jumps up

…“every time you have one of those price changes you have to go in there and you are opening a Pandora’s box.”

“It is getting to be a running joke that every December and January I am coming in with some [price] change… They will say things like: ‘Where does that come from?… The direction is not consistent… You change discounts… dramatically, we don’t know if you are committed to us or not.’”

“Pricing season around here lasts longer than the NFL.”

“All of these costs depend on the size of the price change.”

During the pricing season we studied, a major customer called a senior vice president to negotiate a new discount level. The senior vice president and his staff flew to meet with the customer, which took two days. The team then returned to headquarters to gather additional data about the customer, similar customers, the firm’s competitors, and the effect of the customer’s purchases on the firm’s revenue. The pricing team recalculated the effect of their price changes on that customer and similar customers. They met, suggested additional analysis, met again, and decided on what they wanted to offer at the next round of meetings with the customer. Then they planned a presentation for the customer. The team then flew back with three corporate people, an area manager, and the account manager for another two days.

New large accounts require even more effort.

Although the company carries only about 8,000 products and it changes the list prices of almost all of them each year, the actual number of price changes it undertakes each year is many times higher because of the individually negotiated prices, discounts, and rebates. Therefore, the actual number of price changes undertaken is quite large, in the range of 10,000–54,000 each year.

Sticky prices speed up when overall prices move more, because people adapt

“There was… a period of some rapid inflation back in the Carter years where we would barely get a price sheet printed and you would have to start working on another one, every 6 months or so.”

“The [price] increases we experienced during that [inflationary] time were very much largely driven by cost and our average costs were going up and we were trying to recoup that… [During] high-inflation period you could get away with the high price increases. I think there was expectations in the market place; our customers are saying ‘I am able to in ate my prices to the end user so I shouldn’t be surprised when my vendor raises their prices…’ The distributors could pass on their prices a lot of easier than they can now.”[2]

  1. Koning, JP. “Are prices getting less sticky?” 14 Oct. 2015, Accessed 13 May 2017.
  2. Zbaracki, Mark J., et al. “Managerial and customer costs of price adjustment: direct evidence from industrial markets.” Review of Economics and statistics2 (2004): 514-533s.

Efficient peer teaching, starting in India, brought literacy to the modern world

A child who’s a little older teaches two other children, demonstrating efficient peer teaching[1]

A child who’s a little older teaches two other children, demonstrating efficient peer teaching

Efficient peer teaching was described in India in 1623

Peter Della Valle in 1623… “entertained himself in the porch of the Temple, beholding little boys learning arithmetic after a strange manner.” The method used a combination of four children gathered together “singing musically” to help them remember their lessons, and writing number bonds in the sand, “not to spend paper in vain . . . the pavement being for that purpose strewed all over with fine sand.” In the same way, they were taught reading and writing.

Peter Della Valle asked them, “If they happen to forget or be mistaken in any part of the lesson, who corrected them and taught them?” They said they all taught each other, “without the assistance of any Master.” For, “it was not possible for all four to forget or mistake in the same part, and that they thus exercised together, to the end, that if one happened to be out, the other might correct him.” It was, wrote the explorer, “indeed a pretty, easy and secure way of learning.”

…the “conditions under which teaching took place in the Indian schools were less dingy and more natural” than in Britain.

“When the whole are assembled, the scholars according to their numbers and attainments, are divided into several classes. The lower ones of which are placed partly under the care of monitors, whilst the higher ones are more immediately under the superintendence of the Master, who at the same time has his eye upon the whole schools. The number of classes is generally four; and a scholar rises from one to the other, according to his capacity and progress.”

Efficient peer teaching was learned in India by British Rev. Dr. Andrew Bell around 1787

Rev. Dr. Andrew Bell… arrived in India in 1787… to teach the abandoned progeny of British soldiers and native women. He found that the (expatriate) teachers in the asylum “had no knowledge of their duties, and no very great love for them.”

But then he had his moment of insight: “One morning, in the course of his early ride along the surf-beaten shore of Madras, he happened to pass a… school, which, as usual with Indian schools, was held in the open air. He saw the little children writing with their fingers on sand, which, after the fashion of such schools, had been strewn before them for that purpose.” He also saw them peer teaching, children learning from one another rather than from their masters. “He turned his horse, galloped home, shouting, ‘Heureka! Heureka!’ and now believed that he… saw his way straight before him.”

Bell first tried an experiment. He got one of the older boys who knew his alphabet to teach one of the classes that “the master had pronounced impossible” to teach. But this boy managed to teach the class “with ease.” Bell appointed him the class’s teacher. “The success exceeded expectation. This class, which had been before worse, was now better taught, than any other in the school.” He tried it in other classes, and it worked again. So Bell sacked all his teachers, and the school “was entirely taught by the boys” under his supervision.

Efficient peer teaching, popularized by Dr. Bell in London in 1797, rapidly boosted literacy in Britain

Bell returned to London in 1797 and published the description of his “Madras Method.” Following that, he was in great demand to introduce the system in British schools. First was St. Botolph’s, Aldgate in East London, followed swiftly by schools in the north of England.

…Joseph Lancaster, who created the famed Lancastrian schools across Britain—and with whom Bell was to have a furious dispute about who really invented the system— introduced peer learning in his first London school, in Borough Road, in 1801.

[Bell’s] method was adopted by the new National Society for the Education of the Poor in 1811.

…James Mill, father of John Stuart Mill, wrote in the October 1813 Edinburgh Review: “From observation and inquiry… we can ourselves speak decidedly as to the rapid progress which the love of education is making among the lower orders in England. Even around London, in a circle of fifty miles radius, which is far from the most instructed and virtuous part of the kingdom, there is hardly a village that has not something of a school; and not many children of either sex who are not taught more or less, reading and writing.”

How were such schools funded? Predominantly, it turns out, through school fees. These were very much private schools for the poor, in Victorian England. Mill noted: “We have met with families in which, for weeks together, not an article of sustenance but potatoes had been used; yet for every child the hard-earned sum was provided to send them to school.”

By 1821, 300,000 children were being educated under Bell’s principles.

Efficient peer teaching, described further by Dr. Bell in 1823, rapidly spread across the world

As it became widely emulated, Bell was asked to write an extended outline of the system, which he published in 1823. His ideas were adopted around Europe, and as far away as the West Indies and Bogotá, Colombia; the educational reformer Pestalozzi was apparently even using the Madras Method.

The system transformed education in the Western world and was arguably the basis by which mass literacy in Britain was achieved. But in its fundamental, “economical” principles, it…was based precisely on what the Rev. Dr. Andrew Bell had observed in India.

For England and Wales… “When the government made its debut in education in 1833 mainly in the role of subsidiser it was as if it jumped into the saddle of a horse that was already galloping.”

  1. “Peer teaching at the Marlboro Montessori Academy.” 30 Sept. 2014, Accessed 30 Apr. 2017.
  2. Tooley, James. The Beautiful Tree: A Personal Journey Into how the World’s Poorest People are Educating Themselves. Cato Institute, 2009, Scribd pp. 330-348.



Flat tax cuts government micromanagement, increases investment, unleashes growth

Individual wage-tax form shows that flat tax cuts government micromanagement

Figure 3.1 Individual Wage-Tax Form

Flat tax cuts government micromanagement

Direct compliance costs, both in filing and in buying expert advice, exceed $100 billion. Direct tax-planning costs—consulting with lawyers, accountants, purveyors of tax shelters, and financial planners—exceed $35 billion. Revenue lost to the Treasury due to evasion exceeds $100 billion. Distortions from pursuing tax-advantaged investments in the form of lost output may exceed $100 billion. Finally, the lobbyists who inhabit Washington’s K Street corridor probably cost the economy more than $50 billion. Total individual and corporate income taxes for the 1993 fiscal year (October 1, 1992—September 30, 1993) were about $625 billion.

Our flat tax is not an academic abstraction. We have designed tax forms, rewritten the Internal Revenue Code, and worked out all the practical details.

Flat tax cuts government unfairness to wage earners, increasing investment

Our proposal is based squarely on the principle of consumption taxation. Saving is untaxed…

Our flat tax… is designed to be fair from the start. It will insulate the poor from all taxation and will dramatically limit the taxation of wages and salaries, especially among those who are most successful and productive. It will pay for these tax reductions by imposing a sensible tax at a low rate on business income, thus raising the amount of federal revenue collected from businesses.

The current personal and corporate taxes tax wages heavily and business income lightly. The flat tax would reverse this inequity and benefit the great majority of Americans, whose income comes almost entirely in the form of wages. In comparison to the current personal income tax on wages, the flat tax would impose a lower burden on both low earners and high earners.

Flat tax cuts government complexity for wage earners

We believe that the simplicity of our system is a central feature.

The tax form for our wage tax is self-explanatory (see figure 3.1). To make the tax system progressive, only earnings over a personal or family allowance are taxed. The allowance is $25,500 for a family of four in 1995 but would rise with the cost of living in later years. All the taxpayer has to do is report total wages, salaries, and pensions at the top, compute the family allowance based on marital status and number of dependents, subtract the allowance, multiply by 19 percent to compute the tax, take account of withholding, and pay the difference or apply for a refund.

Those who believe that life would grind to a halt with the loss of deductions for interest and charitable contributions need to consider how they would alter their lives the morning the flat tax took effect. They would fire their lawyers and accountants and instead seek advice and information on sound economic investments.

Flat tax cuts government complexity for business people

It is not the purpose of the business tax to tax businesses. Fundamentally, people pay taxes, not businesses. The idea of the business tax is to collect the tax that the owners of a business owe on the income produced by the business.

All a business’s income derives from the sale of its products and services. On the top line of the businesstax form… goes the gross sales of the business—its proceeds from the sale of all its products. But some of the proceeds come from the resale of inputs and parts the firm purchased; the tax has already been paid on those items because the seller also has to pay the business tax. Thus, the firm can deduct the cost of all the goods, materials, and services it purchases to make the product it sells. In addition, it can deduct its wages, salaries, and pensions, for, under our wage tax, the taxes on those will be paid by the workers receiving them. Finally, the business can deduct all its outlays for plant, equipment, and land. (Later we will explain why this investment incentive is the right one.) Everything left from this calculation is the income originating in the firm and is taxed at the flat rate of 19 percent.

Business would be expected to run a tighter ship with the much higher returns that a 19 percent rate affords over current high rates. Tickets for box seats at baseball stadiums, club memberships, business travel, company cars, and a host of other business outlays that incorporated and unincorporated firms regularly purchase would now cost the owners of that business eighty-one cents of after-tax income, rather than the current sixty cents.

When flat tax cuts government, it unleashes growth

We project a 3 percent increase in output from increased total work in the U.S. economy and an additional increment to total output of 3 percent from added capital formation and dramatically improved entrepreneurial incentives. The sum of 6 percent is our best estimate of the improvement in real incomes after the economy has had seven years to assimilate the changed economic conditions brought about by the simple flat tax. Both the amount and the timing are conservative.[1]

  1. Hall, Robert E., and Alvin Rabushka. The Flat Tax. Hoover Press, 2007.

Off-label prescribing shows that less regulation means more clinical benefits

FDA performs worse on drugs for pain, psychiatry, and allergies, but off-label prescribing helps

The FDA performs worse on drugs for pain, psychiatry, and allergies,[1] but off-label prescribing helps patients in these areas especially

Off-label prescribing provides the majority of therapeutic uses of drugs

…once a drug has been permitted for a specified use, physicians may legally prescribe it for other uses called ‘off-label’ uses. …off-label prescribing provides a window onto a world with substantially less FDA regulation.

Off-label prescribing is regulated by the judgments of doctors, medical researchers, industry, the patient community, and patients. The off-label experience testifies to the fact that much knowledge about efficacy and safety of drugs is produced outside the FDA regulatory apparatus.

…from the 29 new drugs permitted onto the market in 1988 there were 143 substantial new uses that were developed over the subsequent five years. Importantly, 57% of the new uses were discovered by clinicians working in the field.

Drugdex and other compendia collect information about off-label indications and in effect certify thousands of drug uses quite independently of the FDA.

Off-label prescribing brings new therapies and tailored therapies

Viagra (sildenafil citrate) was initially intended to treat angina…

…when older men reported its unusual side-effect it became a blockbuster treatment for erectile dysfunction.

After being approved for that use, sildenafil citrate was also found to be useful in the treatment of pulmonary hypertension for which it was prescribed off-label. Since the market for pulmonary hypertension is considerably smaller than that for erectile dysfunction it is quite likely that had sildenafil citrate not already been permitted for erectile dysfunction it would not have been profitable to research and develop the drug for pulmonary hypertension.

This is the problem of drug loss – drugs that are never researched and developed because the permitting process is too expensive to justify the effort.

Off-label prescribing bypasses this process and brings new treatments to patients.

…when a drug reaches the end of its patent life, no firm ever has a strong incentive to undertake clinical trials despite the fact that off-label prescribing may be common.

What works well in some patients does not work well in others. Off-label prescribing increases a physician’s arsenal. A larger arsenal is useful when standard treatments fail, as they often do. When standard treatments fail it is not irrational to try treatments with less evidence of efficacy especially when the disease is life-threatening or the drug to be prescribed has a strong safety profile.

…off-label use is most common in the absence of strong scientific support in the treatment of pain, psychiatric problems and allergies. In each of these cases, standard treatments often fail, the disease in question may be difficult to diagnose even when symptoms are plain, patients are heterogeneous, and physicians and patients can with considerable safety run a series of personal drug trials to find the best match.

Off-label prescribing would help more if the FDA was less-controlling and if information was shared more-widely

The post-marketing surveillance system in the United States is weak. Analysis of data from Medicare as well as from large HMOs could be used to improve prescribing both on and off-label, especially if access to the data was widespread.

More generally, FDA currently works on a paternalistic model: one choice to rule them all. But another model, what I have called the Consumer Reports model, would meet the needs of diverse health-care consumers much better.

Consumer Reports does not try to replace consumer choice. Instead, by carefully evaluating and testing new products and providing this information to readers, Consumer Reports helps consumers to make better choices.[2]

Every drug available for prescription in the United States must have gone through at least phase I clinical trials. Phase I trials examine a drug for toxicity in healthy volunteers and establish that the drug meets a minimum level of safety.

Drugs used in FDA-approved ways have also been through phase II and phase III “efficacy” trials. Studies… consistently find few benefits and large costs.[3] …no such requirement exists for new uses of old drugs.

…the reform proposal… would resolve the inconsistency by dropping efficacy requirements, so that people would be freer to produce, sell, and market drugs, even for initial uses… Those with the best knowledge of the particular circumstances and with the strongest incentives to do right by the patient would then have expanded options of utilizing therapies that may be very beneficial.[4]

…a less paternalistic FDA would provide more information to patients and doctors, but it would also leave more choices in their hands because only patients and their doctors have the particular knowledge that allows each patient to be treated as an individual.

…innovation often arises from the bottom up rather than from the top down.[2]

  1. DiMasi, Joseph A., Christopher-Paul Milne, and Alex Tabarrok. AN FDA REPORT CARD: Wide Variance in Performance Found Among Agency’s Drug Review Divisions. Project FDA Report 7. Manhattan Institute, 2014.
  2. Tabarrok, Alex. “From off-label prescribing towards a new FDA.” Medical Hypotheses 72.1 (2009): 11-13.
  3. Tabarrok, Alexander T. “Assessing the FDA via the anomaly of off-label drug prescribing.” The Independent Review 5.1 (2000): 25-53.
  4. Klein, Daniel B., and Alexander Tabarrok. “Do Off‐Label Drug Practices Argue Against FDA Efficacy Requirements? A Critical Analysis of Physicians’ Argumentation for Initial Efficacy Requirements.” American Journal of Economics and Sociology 67.5 (2008): 743-775.