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.

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.


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.

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.

Unconstitutional filibuster/cloture keeps government big

Senate action on cloture motions, 1917-2016, shows the ascendance of unconstitutional filibuster/cloture

Senate action on cloture motions [1]

Unconstitutional filibuster/cloture violates the Constitution’s core practical purpose, and plain text

…the core purpose of the new Constitution was to jettison the Articles and the “[g]reat inconveniences had… been experienced in Congress from the article of confederation requiring nine votes in certain cases.”

Delegates… fixed representation in the House according to population, while giving each state an “equal voice” in the Senate.

Article I, Section 3 specifies that the Vice President shall serve as President of the Senate, “but shall have no Vote, unless they be equally divided.” Put simply, Article I, Section 3 shows that the Framers meant for final Senate action on proposed matters to hinge on the vote of a legislative majority, with the Vice President’s vote to determine whether an aye-voting or nay-voting majority exists in the event that the Senators themselves are “equally divided.”

Article I, Section 7 states that “[e]very Bill which shall have passed the House of Representatives and the Senate… shall…. be presented to the President. The critical term in this clause is “passed,” which Americans understood at the time of the framing… to hinge on “the act of a majority of a quorum” in the absence of “specific limitations… found in the Federal Constitution” itself. This understanding finds support in established practice at the time of the framing, Noah Webster’s dictionary of 1828, and the two English legal dictionaries that existed in 1787.

…the Constitution specifies five and only five instances in which the chambers of Congress are to act by supermajority vote. This list… demonstrated understanding—noted by Joseph Story nearly two-hundred years ago—that “departure from the general rule, of the right of the majority to govern, ought not to be allowed but upon the most urgent occasions.”

…Article II’s unitary textual treatment of judicial-branch and executive-branch nominees counsels against countenancing a different treatment of the two groups with regard to permissible forms of senatorial “consent,”…

…Article VI requires Senators… to take an oath to support the Constitution, and so they must honor the limits it imposes.

Unconstitutional filibuster/cloture was confirmed illegal during ratification

In Federalist No. 22, Hamilton decried… “If a pertinacious minority can controul the opinion of a majority… the sense of the smaller number will overrule that of the greater…”

Federalist No. 54 assured the ratifying community that “[u]nder the proposed Constitution, the federal actswill depend merely on the majority of votes in the Federal Legislature

In Federalist No. 58, Madison… concluded that… supermajority voting rules would invite “an interested minority [to] take advantage of [such rules] to screen themselves from equitable sacrifices to the general weal or … to extort unreasonable indulgences.” “It would no longer be the majority that would rule; the power would be transferred to the minority.”

Federalist No. 58 spoke of the risks of supermajority voting rules “[i]n all cases where justice or the general good might require new laws to be passed.”

Federalist No. 75… found fault with “all provisions which require more than the majority of any body to its resolutions.”

Unconstitutional filibuster/cloture was Progressively slipped into place

…the earliest Senates permitted a majority of members to halt debate on any pending matter pursuant to what was called the “Previous Question Rule.”

…the Senate abandoned the Previous Question Rule in 1806… instead for a system that in effect required unanimous consent to end debate on pending matters.

A true filibuster—pursuant to which dissenters openly take and hold the Senate floor—threatens to saddle dissenters with opprobrium by exposing their actions for all to see, making vivid their willingness to throw a wrench in the workings of the upper chamber. …the need to filibuster in this way had exactly this deterrent effect.

…senators utilitized speech-based delays only in exceptional cases for the remainder of the nineteenth century.

…targeted use of obstructionist speechmaking triggered ameliorative reforms, including the Senate’s replacement in 1917 of its unanimous-consent policy with a rule that authorized cloture by a vote of two-thirds of the members in attendance.

…during most of the twentieth century, filibusters focused on civil rights bills, which were bitterly denounced by southern segregationists. …the high water mark of obstructionist speechifying came when southern Senators occupied the floor for seventy-four days in an effort to block passage of the Civil Rights Act of 1964.

…in 1975 the Senate adopted its current rule, which requires sixty votes to end debate, regardless of the number of Senators present. In addition, during this same time frame, the chamber embraced a “two-track” system… in which delays in acting on one matter would not block the Senate from moving forward with other business… The modern stealth system leads to no floor debate.”

Unconstitutional filibuster/cloture keeps unconstitutional big government ratchet-locked in place

One effect of these changes is that the use of Rule XXII to block action by Senate majorities has soared to unprecedented heights in recent years—indeed, to dizzying heights. As a result, “almost all significant legislation” now needs the support of sixty Senators…

…the Cloture Rule… has come to contravene the fundamental principle of legislative majoritarianism established by our founding charter.[2]

  1. Senate Action on Cloture Accessed 28 Jan. 2017.
  2. Coenen, Dan T. “The Filibuster and the Framing: Why the Cloture Rule is Unconstitutional and What to Do About It.” Boston College Law Review 55.1 (2014): 39-92.

Money control by government people denies us money self-regulation by business people

US consumer price index 1800-2016 shows effect of money control by government people after 1913

US Consumer Price Index for 1800-2016,[1]
scaled so 1913 CPI = 100

Under private control between wars before 1913, prices fell; a dollar bought more. Under government control since 1913, prices shot upward; a dollar buys less.

Money control by government people is not natural

Money is a government monopoly.

If there is no incentive to please consumers, the products or services monopolies sell tend to be more expensive and of lower quality than would be the case under competition, where a number of firms are free to compete for the consumer’s business.

Natural rights theorists argue that individual rights are being violated if government, which is supposed to protect property and political rights, prevents individuals from entering a line of business.

Money is not a natural government monopoly. It came into existence spontaneously out of the market process. Gold and silver coins, and promises to pay in gold and silver, have served consumers well for hundreds of years. From 1839 until the advent of the Federal Reserve Bank in the United States in 1913, most money in circulation consisted of privately issued bank notes…

Money control by government people is unstable and does us outsized harm

“The economy has been much less stable since the establishment of the Fed restored a government monopoly in currency issuance. The wholesale price index in 1913 [the year the Federal Reserve Board came into existence] was 87 percent of what it had been 73 years earlier… By contrast, in the 73 years since the founding of the Fed, the wholesale price index has risen to 825 percent of its 1913 level.”

“What we should have learned is that monetary policy is much more likely to be a cause than a cure of depressions, because it is much easier, by giving in to the clamour for cheap money, to cause those misdirections of production that make a later reaction inevitable, than to assist the economy in extricating itself from the consequences of overdeveloping in particular directions. The past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process.

“Just as the absence of competition has prevented the monopolist supplier of money from being subject to a salutary discipline, the power over money has also relieved governments of the necessity to keep their expenditure within their revenue…There can be little doubt that the spectacular increase in government expenditure over the last 30 years, with governments in some Western countries claiming up to half or more of the national income for collective purposes, was made possible by government control of the issue of money.”

Government control over the money supply increases centralization, which tends to reduce individual freedom. Asserting economic control over the individual also runs the risk of political control, since economic and political freedom are intertwined.

Money control won’t be given up easily by Progressive government people

One way to minimize this excessive control over the individual is to prohibit government from controlling the money supply. “One of the most effective measures for protecting the freedom of the individual might indeed be to have constitutions prohibiting all peacetime restrictions on transactions in any kind of money or the precious metals.”

Unfortunately, constitutions have a tendency to get twisted beyond recognition by the courts, at least that has been the American experience, so having a constitutional provision is not a perfect solution either. But it is better than nothing.

The long-run solution seems to be to phase-out government money as private money takes its place. Once government money is abolished there will be less pressure to restore the government’s monopoly position.

Money control by business people would be self-regulated by producers and consumers

Initially, the introduction of private money would be slow. However, over time, the money that holds its value best would be preferred over money that depreciates in value — the exact reverse of Gresham’s Law, which holds that bad money drives good money out of circulation. Gresham’s Law only holds true when government sets fixed exchange rates between or among competing currencies.

Thus, money would act just like other goods and services. Consumers would shop for the brand that best serves their needs. They would prefer stable currencies to unstable ones, and the market would weed out the bad from the good.[2]

  1. Consumer Price Index (Estimate), Accessed 25 Mar. 2017.
  2. McGee, Robert W. “The Case for Privatizing Money.The Asian Economic Review 30.2 (Aug. 1988): 258-273.

Trade strengthens plants, so people’s productivity increases and prices fall

Nonexporter plants and exporter plants vs. labor productivity, showing that trade strengthens plants

Figure 2A. When labor productivity is higher, plants export more.

Trade strengthens plants a few plants at a time and a few products at a time

…exporters are in the minority; they tend to be more productive and larger, yet they usually export only a small fraction of their output.

…of the roughly 200,000 plants in the Census, only 21 percent report exporting anything.

Even the plants that do export sell mostly at home. Around two-thirds of the exporters sell less than 10 percent of their output abroad. More than half of exports come from these plants.

Fewer than 5 percent of the exporting plants (which also account for about 5 percent of exporters’ total output) export more than 50 percent of their production.

Trade strengthens plants by leaving them larger and more productive

How can we reconcile the low level of export participation and export intensity by individual plants with the fact that 14 percent of gross U.S. manufacturing production is exported? The major reason… is that the plants that export are much bigger, shipping on average 5.6 times more than nonexporters. Even excluding their exports, plants that export ship 4.8 times as much to the U.S. market than their nonexporting counterparts.

…plants… differ substantially in measured productivity. A substantial number of plants have productivity either less than a fourth or more than four times the average.

Plants that export appear to be more productive.

…Figure 2A brings out the striking association between [productivity and export performance]. The exporters’ productivity distribution is a substantial shift to the right of the nonexporters’ distribution.

…exporters have a 33-percent advantage in labor productivity overall, and a 15-percent advantage relative to nonexporters within the same 4-digit industry.

When trade strengthens plants, prices get lower

…greater efficiency not only raises the probability of exporting, it will also likely result in a lower domestic price. Even though, as we showed above, more efficient plants tend to be further ahead of their rivals, so can charge a higher markup, these rivals, nonetheless, tend to be more efficient themselves, forcing the plant to set a lower price.

Although foreign markets are small in plants’ revenues, the international economy nonetheless plays an important role in determining which producers are in business and which are good enough to export.

Trade strengthens plants because people shift to high-productivity plants

Lower trade barriers… tend to nudge out low-productivity plants while enabling the highly productive to sell more abroad.

Even though the number of U.S. plants fall there is little net job destruction (but substantial job turnover).

Aggregate productivity rises as employment shifts from low-productivity plants driven out by import competition to high-productivity plants turning toward export markets.[1]

  1. Bernard, Andrew B., et al. “Plants and productivity in international trade.” The American Economic Review 93.4 (2003): 1268-1290.

Tax cuts work, stimulus fails, debtor stimulus fails big

GDP output responses to hypothetical 1% impulse personal income tax cuts based on post-WWII data.

Tax cuts provide GDP increases that are
rapid, large, and long-lived

  • Hypothetical response if average personal income tax rate was cut 1% and then immediately raised back up.
  • Based on quarterly post-WWII US data.
  • Two alternative factoring-out sequences were used to remove the effects in the data from simultaneous corporate tax cuts.
  • Dashed lines are 95% confidence intervals.[1]

Capital gains tax cuts increase output quite a lot,
personal income tax cuts increase output just a little,
sales tax cuts reduce output

We find that the average values of the capital, labor, and consumption tax multipliers are 2.74, 1.39, and 0.62, respectively. That is, a one dollar decline in tax revenue from a cut in the tax rate on capital income stimulates output by approximately two dollars and seventy four cents on average.

The capital tax multiplier ranges from a low of 2.54 to a maximum value of 3.08. The range for the labor tax multiplier is 1.27 to 1.56. The consumption tax multiplier varies least… 60 to 0.65.[2]

Government stimulus spending reduces output

…the estimated multiplier for temporary defense spending is 0.4–0.5 contemporaneously and 0.6–0.7 over 2 years. If the change in defense spending is “permanent”… the multipliers are higher by 0.1–0.2.

These multipliers are all significantly less than 1… [3]

Debtor-government stimulus spending kills output

When debt levels are high, increases in government expenditures may act as a signal that fiscal tightening will be required in the near future. Moreover, as recent events in southern Europe and Ireland illustrate, these adjustments may need to be sudden and large. The anticipation of such adjustment could have a contractionary effect that would tend to offset whatever short-term expansionary impact government consumption may have.

Under these conditions, fiscal stimulus may therefore be counter-productive.

…we built a sample of country-episodes where the ratio of the total debt of the central government exceeded 60% of GDP. Our estimate for the impact multiplier is close to zero, and we estimate a long run multiplier of -3.[4]

  1. Mertens, Karel, and Morten O. Ravn. “The dynamic effects of personal and corporate income tax changes in the United States.” The American Economic Review 103.4 (2013): 1212-1247.
  2. Sims, Eric, and Jonathan Wolff. “The State-Dependent Effects of Tax Shocks.” (2016).
  3. Barro, Robert J., and Charles J. Redlick. “Macroeconomic Effects From Government Purchases and Taxes.” The Quarterly Journal of Economics 126.1 (2011): 51-102.
  4. Ilzetzki, Ethan, Enrique G. Mendoza, and Carlos A. Végh. “How big (small?) are fiscal multipliers?” Journal of Monetary Economics 60.2 (2013): 239-254.

Property rights start with an individual having secure title to his own labor

Merchant and scribe in painting show property rights developing first for elites.
[1, Cover]

Property rights were secured by elites, then by individuals

All of human history has had but three social orders.

The first was the foraging order: small social groups characteristic of hunter–gatherer societies.

The limited access order or natural state emerged in the first social revolution. Personal relationships, who one is and who one knows, form the basis for social organization…, particularly personal relationships among powerful individuals.[2, p. 2] The natural state reduces the problem of endemic violence through the formation of a dominant coalition whose members possess special privileges. Elites – members of the dominant coalition – agree to respect each other’s privileges, including property rights…[2, p. 18]

In the open access orders that emerged in the second social revolution, …impersonal categories of individuals, often called citizens, interact over wide areas…[2, p. 2] Open access orders control violence through a different logic than the natural state. These societies create powerful, consolidated military and police organizations subservient to the political system.[2, p. 21] …these countries developed new economic and political institutions that… secured open access to legal enforcement of rights…[2, p. 27]

Property rights are ownership of yourself and your labor

…every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his.[3]

…each individual, as a natural fact, is the owner of himself, the ruler of his own person. The “human” rights of the person that are defended in the purely free-market society are, in effect, each man’s property right in his own being, and from this property right stems his right to the material goods that he has produced.[1, p. 291]

…not only are property rights also human rights, but in the most profound sense there are no rights but property rights… Seizing the results of someone’s labor is equivalent to seizing hours from him and directing him to carry on various activities. If people force you to do certain work, or unrewarded work, for a certain period of time, they decide what you are to do and what purposes your work is to serve apart from your decisions. This process whereby they take this decision from you makes them a part-owner of you; it gives them a property right in you. Just as having such partial control and power of decision, by right, over an animal or inanimate object would be to have a property right in it.[4]

  1. Rothbard, Murray Newton. Power and market: government and the economy. 4th ed., Ludwig von Mises Institute, 2006, Cover and p. 291.
  2. North, Douglass C., John Joseph Wallis, and Barry R. Weingast. Violence and social orders: a conceptual framework for interpreting recorded human history. Cambridge University Press, 2009, pp. 2, 18, 21, 27.
  3. Locke, John. The Second Treatise of Civil Government. 3rd ed. with corrections and improvements, 1764. Chapter 5, Section 27.
  4. Nozick, Robert. Anarchy, state, and utopia. Basic books, 1974. p. 172.