"Imagine there's no countries
It isn't hard to do"
1962, few people knew that the future of popular music was to be found
in Liverpool, England and Hamburg, Germany. In the early 1970's, few
people knew that the future of information processing was to be found
at the Homebrew Computer Club. In 1993, few people knew that the future
of online software was in Champaign-Urbana, Illinois.
from now, perhaps people will be saying that something big got started
recently at the George Mason University department of economics. Maybe
if you become a Masonomist now, you will be getting in early on a trend
that will soon catch on much more widely . (Note: my formal link with
GMU is rather tenuous--I teach one course as an adjunct. Informally, my
links through blogging are stronger.)
The excitement at Mason is in blogs and books. The three most well-known blogs are Marginal Revolution (Tyler Cowen and Alex Tabarrok), Econlib (Bryan Caplan and myself), and Cafe Hayek (Russ Roberts and Don Boudreaux). Robin Hanson (Overcoming Bias)
is one of many other Mason faculty and graduate students who blog. This
year, both Caplan and Cowen produced influential books, Myth of the Rational Voter and Discover Your Inner Economist, respectively.
do Masonomists blog so avidly? I think it is because there is a sense
that we are onto something, and we want to ramp up the conversation
among ourselves as well as communicate with a wider audience.
Lose the we
economists favor the free market, with reservations. Masonomics rejects
the reservations. If John and Mary are free individuals, and John
trades with Mary, then John and Mary both are better off. End of story.
Most other economists believe in the need for
government intervention. Like many non-economists, they talk about
government policy in terms of we. We must, we have to, we need, we should, etc.
upon a time, "We, the people" was the preamble to a charter that
reminded those in government of the limitations on the power granted to
them. In today's political discourse, "we" is more often the preamble
to something like a call for an involuntary collective health system.
If you want to be a Masonomist, you have to lose the we. When people use we in today's politics , they are doing two things.
Appealing to a moral entity that stands apart from and above John, Mary, or any other individual
Treating government as the embodiment of that higher moral entity
can be a Masonomist and believe (1). It is a good thing to have a
conscience and moral standards. It is a good thing to engage in
volunteer work, to form organizations that address the needs of others,
and to act unselfishly toward family and others in your community.
encourage our noble impulses. Tyler Cowen's book is a cross between a
self-help manual and an essay on moral philosophy. In one section, he
suggests ways that one can modify one's behavior in order to give
enough to charity and to ensure that one's charitable contributions are
However, Masonomics is unrelenting in its rejection of (2). For many years, George Mason has been the home of Public Choice Theory,
which says that instead of imagining what a wise, omniscient,
benevolent government might do, one should pay attention to how
government operates in practice. Nobel Laureate James Buchanan, founder
(with Gordon Tullock) of Public Choice, is the gray eminence of
In practice, the impetus for stopping John
and Mary from trading typically comes not from a higher moral entity,
but from Mary's competitor Sam. For example, Boudreaux has studied the
history of anti-trust. In theory, anti-trust laws are designed to
protect consumers from high-priced monopoly. In practice, anti-trust laws are used by competitors to punish low-price
competition. For example, when Microsoft was hit with anti-trust
action, the "crime" was giving away a web browser for free! You can
learn more by listening to this conversation between Boudreaux and Roberts.
Melinda Gates, Lose the We
I should emphasize that "lose the we"
does not mean that one should be selfish or uncompassionate or
uncaring. Instead, it means that you should channel your impulse to do
good by actually doing good. Saying we and advocating government policy is instead a way of feeling good. It is an arrogant, demagogic pose.
If you believe so strongly in we,
why don't you put your money where you mouth is? Why don't you donate
money to the government? I know my answer to that question. I try to
choose charities that have low overhead and programs that seem to me to
be working. I think that donating to private charitable organizations
is more worthwhile than donating to government. If you, too, make no
donations to government, then your actions say "lose the we." If your words say otherwise, then perhaps you should rethink your words.
For example, Melinda Gates recently wrote,
We believe that Americans have the power to improve millions of
children's lives by telling their political leaders -- in the 2008
presidential campaign and beyond -- that high schools matter and by
demanding to know more about their plans for fixing them.
Americans can speak with one voice, then the next president and other
elected leaders will feel compelled to offer visions and plans that
will help ensure that every child in America attends a great high
Melinda Gates, lose the we. The visions and plans of our elected leaders are part of the problem in education, not the solution.
in the 1980's, I recall that Microsoft had a very low profile in
Washington. Technology leaders, including Bill Gates, seemed to feel
this way: those who can, compete; those who can't, lobby. In this view,
a technology firm that has a big lobbying focus is indicating that it
has lost its way. If the Gates Foundation cannot come up with a better
way to spend its money than to plead with politicians, then I would
suggest that it has lost its way.
Masonomist Trade Doctrine
Dani Rodrik, an economist at Harvard, where we gets used without a second thought, thinks that Masonomics overstates the case for free trade.
He argues that we cannot prove that everyone in a country benefits from
free trade. This is true. In fact, it is theoretically possible for
more people to be hurt by trade than benefit from it. Therefore, Rodrik
implies, it is conceivable that we should have tariffs, or, at the very least, we need to compensate those who are "hurt" by free trade.
Masonomics says to lose the we.
Instead, like John Lennon, let us imagine that there are no countries.
John and Mary are trading, and they are both better off, but an
economist calculates that Sam would be better off if John and Mary were
prevented from trading. What entity has the moral authority to stop
John and Mary from trading?
Governments lay claim to legal authority to collect taxes or impose restrictions on trade across borders. But there is no moral
significance to a border. If John, Mary, and Sam all lived within the
same country, the question of whether free trade is good for "us" would
never arise. John's right to trade with Mary without interference on
behalf of Sam would not be questioned. It is hard to see how moving
Mary across a border changes the situation from a moral or economic
Boudreaux will tell you that one of the
most widely-quoted economic statistics, the national trade deficit, has
no meaning. There is no we that is in debt to a they. There are only individuals who have issued securities to individuals.
It is true that governments issue securities also, and government deficits are truly something that we
will have to repay. Some of those government securities are held by
foreigners. There is certainly something meaningful about the total
liabilities of government, and there may be something particularly
meaningful about the liabilities of our government that are held by
citizens of other countries or by foreign governments. But that is not
what is measured by the national trade deficit.
not measure the balance of trade between Maryland and Virginia, and no
one is the worse for this ignorance. Similarly, if we stopped measuring
the balance of trade between the U.S. and China, no knowledge would be
lost. Indeed, our overall economic literacy would increase, because
there would be fewer misleading stories written about trade deficits.
The Cure for Market Failure
the University of Chicago, economists lean to the right of the
economics profession. They are known for saying, in effect, "Markets
work well. Use the market."
At MIT and other bastions
of mainstream economics, most economists are to the left of center but
to the right of the academic community as a whole. These economists are
known for saying, in effect, "Markets fail. Use government."
Masonomics says, "Markets fail. Use markets."
along the way, mainstream economics became hung up on the concept of a
perfect market and an optimal allocation of resources. The conditions
necessary for a perfect market are absurdly demanding. Everything in
the economy must be transparent. Managers must have perfect information
about worker productivity and consumers must have perfect information
about product quality. There can be nothing that gives an advantage to
a firm with a large market share. There cannot be any benefits or costs
of any market activity that spill over beyond that market.
argument between Chicago and MIT seems to be over whether perfect
markets are a "good approximation" or a "bad approximation" to reality.
Masonomics goes along with the MIT view that perfect markets are a bad
approximation to reality. But we do not look to government as a
"solution" to imperfect markets.
Masonomics sees market
failure as a motivation for entrepreneurship. As an example of market
failure, let us use a classic case described by a Nobel Laureate,
which is that the seller of a used car knows more about the condition
of the car than the buyer. Masonomics predicts that entrepreneurs will
try to address this problem. In fact, there are a number of
entrepreneurial solutions. Buyers can obtain vehicle history reports.
Sellers can offer warranties. Firms such as Carmax undertake
professional inspections and stake their reputation on the quality of
the cars that they sell.
Masonomics worries much more
about government failure than market failure. Governments do not face
competitive pressure. They are immune from the "creative destruction"
of entrepreneurial innovation. In the market, ineffective firms go out
of business. In government, ineffective programs develop powerful
constituent groups with a stake in their perpetuation.
disdains the obscure mathematics of mainstream economics. There is
nothing about Masonomics that is beyond the comprehension of an
Although Masonomics has no
pretensions to be over the average person's head, Masonomists are
reluctant to concede anything to popular opinion. For example, Bryan
Caplan's book describes the economically ignorant voting public as a
menace. As consumers, ordinary people have sufficient incentive to
learn what is best for them. As voters, they do not.
it comes to matters of fact and analysis, Masonomics does not care how
many people feel a certain way, or how strongly they feel it. Robin
Hanson exemplifies this unforgiving intellectual outlook. For example,
he recently wrote:
main problem in health policy is a huge overemphasis on medicine. The
U.S. spends one sixth of national income on medicine, more than on all
manufacturing. But health policy experts know that we see at best only
weak aggregate relations between health and medicine, in contrast to
apparently strong aggregate relations between health and many other
factors, such as exercise, diet, sleep, smoking, pollution, climate,
and social status. Cutting half of medical spending would seem to cost
little in health, and yet would free up vast resources for other health
and utility gains. To their shame, health experts have not said this
loudly and clearly enough.
policy wonks are aware of the large number of studies that show little
relationship between the amount of medical services a population
receives and the health of that population. However, hardly anyone is
willing to follow this result to its logical conclusion, namely, that
we probably would be better off with less medical care. Hanson
understandably regards this as a remarkable blind spot among health
One of the variables that is
correlated with health status is Unmentionable. This Unmentionable
Factor affects life expectancy, income, international differences in
the standard of living, and many other phenomena. Garett Jones is a
young economist who incorporates The Unmentionable into his research. I describe
a recent paper of Jones as saying that "people with high levels of The
Unmentionable are better able to co-operate with one another." Not
surprisingly, Jones has just joined the faculty at George Mason.
Are You Ready?
So, if you are ready to get in on the next Big Thing in political economy, now you know what to do:
--lose the we
--recognize that market failures exist, and that is why we need markets
--arrive at truth by following the facts, not the fashions
When Masonomics itself becomes fashionable, it will be time to look for something else.