Prices are going down. Here’s where you can see the difference. (Becca Stanek, 11/23/23, The Week)

According to Nerdwallet, citing data released in November by the Department of Labor, the “consumer price index — a proxy for inflation — remained flat from September to October, at 3.2%.” Moreover, the consumer price index report “shows year-over-year price index drops in 92 goods and services categories (among 338 measured).”

In further evidence of this trend, “retailers such as Walmart say an era of price hikes is fading,” The Wall Street Journal reported. Meanwhile, “Adobe, which tracks online sales through its analytics arm, predicts holiday discounting will hit record highs.”


Cutting inheritance tax is not just fiscally unsound – it’s unfair (Ben Ramanauskas, 11/20/23, Cap X)

[U]sing this increased revenue to cut inheritance tax would not only be fiscally unsound, it would be deeply unfair. It would represent an even greater shift away from taxing wealth and towards wages. Cutting inheritance tax at this time would therefore be a giveaway to the wealthiest funded by working people.

Rather than cutting inheritance tax, the Chancellor should instead eliminate fiscal drag by unfreezing the income tax and national insurance thresholds.

The main reason for this is that it will allow people to keep more of their money. While inflation is returning to target, there is still a cost of living crisis gripping the country. Millions of households across the country are struggling to make ends meet despite working hard, often in multiple jobs. Increasing tax thresholds in line with inflation will mean that they have more money to spend on themselves and their families.

Ending fiscal drag would also boost productivity. We have seen stagnant productivity growth in the UK since the Global Financial Crisis and while the tax rate is far from being the main cause of this, it has almost certainly contributed to it. As Paul Krugman pointed out, ‘Productivity isn’t everything, but, in the long run, it is almost everything’. Productivity is the key driver of economic growth, which has been persistently low and is forecast to be non-existent over the next year. We have already experienced one lost decade in the UK and we are set to experience another if we don’t turn things around. The government should be doing whatever it takes to boost productivity, and so ending fiscal drag should be a priority.

Unfreezing tax thresholds could also help with the labour shortages facing many areas of the economy. While the labour market is loosening, it is tight by historical standards. Firms are really struggling to get staff to work for them, especially in hospitality and social care. If a person knows that they will be no better off in real terms then they are unlikely to say yes to an extra shift or take on another job. Allowing them to keep more of their money will incentivise them to work longer hours or look for another job.

In other words, stop punishing work, investment, and savings to make them more attractive.


Milei’s Policy Challenges (luis pablo de la horra, 11/24/23, Law & Liberty)

Milei’s plan to tackle inflation hinges on the radical step of dismantling Argentina’s central bank (BCRA) and embracing the US dollar as the nation’s official currency. This proposition has sparked fervent debate, evident in the strong resistance it faces from politicians across the political spectrum and prominent academics. Nonetheless, there is a widespread acknowledgment that decisive action must be taken to confront the nation’s foremost economic challenge. Does dollarization represent the optimal strategy to set the nation on a path toward monetary stability?

There is no straightforward answer. Dollarization is not the first best choice, as it deprives central banks of the monetary policy tools they typically employ to address economic crises. For instance, in the face of deflationary pressures, a central bank would typically reduce the policy rates to stimulate economic activity. In a dollarized economy, the national central bank is either eliminated (as Milei proposes) or loses its authority over monetary policy, leaving policymakers with fewer resources to use in the event of a crisis.

Furthermore, the elimination of the BCRA implies the loss of its role as a lender of last resort to address liquidity issues within the banking sector, especially during financial crises. Likewise, the process of dollarization demands an ample supply of dollar reserves, and the BCRA has notably reduced its holdings over the past year. This reduction in reserves could potentially introduce complications in the dollarization process. The question then arises: are these challenges insurmountable?

Undoubtedly, the ideal stance for a country or a group of countries is to uphold monetary policy autonomy. However, the effectiveness of such a policy hinges on the existence of an independent central bank endowed with the capacity to promote price stability through judicious monetary measures. This stands in contrast to the BCRA, which has demonstrated a dismal track record in controlling inflation, as evidenced by the recurring inflationary episodes over the past decades.

A less radical course of action could involve retaining the peso while endowing the BCRA with independence from political interference, thereby curbing its tendency to monetize government debt. Regrettably, this option might be hindered by the BCRA’s lack of credibility and the historical inability of politicians over the past decades to effectively address and control inflation by granting independence to Argentina’s central bank.


Misunderstanding Milei (g. patrick lynch, 11/23/23, Law & Liberty)

It took almost 80 years. That’s how long Argentina’s economy and society have been in free fall. In some ways, it’s a testament to our greatest fears about democracy and self-government that no political leader had the political incentives and simple nerve to buck the status quo. Eighty years of relentless, grinding inflation and spiraling deficits, followed by defaults, currency devaluations, and restarts before November 19. But finally, the people of Argentina have rejected a failed status quo. Javier Milei publicly won a near landslide by Argentinian standards, and when one considers the probability of Peronist cheating at approximately 100%, the margin was likely much higher. Whether or not the alternative Argentinians have chosen will “fix the situation” is for now beside the point. They have exercised the one option they have—rejecting the incumbents for the promise of something different. That’s all that democracy promises.


Milei’s main, nay fundamental, policy proposals are all in the context of this backdrop. His firm commitment to abolishing Argentine central banking and cutting social spending is straight out of Ludwig von Mises and Milton Friedman, and it is completely appropriate given the circumstances. The only way that an “anarcho-capitalist” could be elected was in a situation of failed governance and welfare statism so dire that he could crack the door open slightly and introduce ideas unknown by the mainstream intelligentsia, let alone the average Argentine on the street. […]

There are no easy solutions here, which is part of the reason the media and its stale-minded intellectual influences have no solutions to offer. They are left with nothing but vague language, scare tactics, and labeling. What took 80 years to destroy will take decades, perhaps centuries to recreate. Well before he won the first round of voting back in September, Milei was asked what his model for Argentina was. He replied, Ireland. Ireland of course famously cut taxes and regulation, freeing its economy and spurring rapid economic growth. Argentina could do worse than Ireland, but anything different than its current path will be an improvement.

We know what works and what doesn’t. Do what works.


Inflation Destroys Rotten Governments (HAROLD JAMES, 11/23/23, Project Syndicate)

In Argentina, the election of a radical self-styled anarcho-capitalist, Javier Milei, as president can be understood as the immediate consequence of the incumbent Peronist regime’s inability to deal with inflation, which has hit an annualized rate of 143%. Milei’s most important campaign promise was to restore price stability by abolishing the central bank and replacing the Argentine peso with the US dollar.

Ending monetary autonomy is obviously a bold and risky experiment that will severely limit government action. But that is exactly the point. Since the previous government tried to do too much, and manifestly failed, voters now feel as though anything would be better than more mismanagement. […]

[R]ussian inflation also surged in 2022, following the full-scale invasion of Ukraine – just as it had done in 2014 after the initial seizure of territory in Crimea and eastern Ukraine. Then, from April 2022, the inflation rate fell for a full year, and almost looked as though it would settle at a respectable 2.5%. But that stability turned out to be an illusion. Inflation returned this summer, following Wagner Group leader Yevgeny Prigozhin’s aborted putsch, and it now represents the greatest immediate risk to Russian President Vladimir Putin’s wartime regime.

Moscow’s city government is candid about this source of angst, and even Putin, who generally avoids acknowledging weaknesses, recently commented on inflation and its threat to Russian families. The Russian central bank has duly hiked its policy rate to 15% – almost three times higher than the US federal funds rate.

As Putin may well know, discontent over prices is often the first sign of an authoritarian regime’s loss of social support.


Dollarization for Argentina? (Scott Sumner, 11/20/23. Econlib)

  1. Dollarization would solve the problem of hyperinflation.
  2. If Argentina intends to dollarize, now would be a good time to do so.
  3. Dollarization is not a panacea. Argentina still needs Chilean-style economic reforms, and there’s no guarantee that dollarization would lead to those reforms.
  4. Dollarization is less risky than a currency board, but not completely free of risk.

There are two reasons why this is an ideal time for dollarization. First, years of hyperinflation have produced a very small monetary base (in real terms, obviously.) Many Argentine citizens have already switched their money holdings from pesos to dollars. Thus the fiscal cost of dollarization would be relatively low. Given Argentina’s severe economic problems, it would still be a heavy lift, but it’s doable if they are determined to make the switch. Fiscal reforms would obviously make the job much easier, and Milei has promised to slash the budget. I certainly don’t think he’ll cut anywhere near as much as promised, but some cuts seem likely.


These AI agents could cut your workweek to just 3 days (Siôn Geschwindt, November 21, 2023, NextWeb)

Most of us would love a break from the 9-to-5 grind, evidenced by the recent hype over the four-day workweek. But a new startup from the UK promises to help you toil even less than that — while remaining just as productive.

The company is called Tomoro and it’s on a mission to cut the working week to just three days within the next five years. It aims to achieve this using AI “agents” — essentially, large language models (LLMs) which can freely make decisions within defined guardrails, as opposed to rule-based machines. These agents will act like robotic personal assistants.


China’s Self-Inflicted Economic Wounds (TAKATOSHI ITO, 11/21/23, Project Syndicate)

[X]i’s obsession with control continues to pose a serious threat to China’s prospects. Not only does it hamper innovation by domestic firms; it also discourages foreign investment.

Already, foreign companies, such as the polling and consultancy group Gallup, are fleeing the country. This can be partly explained by China’s economic slowdown, which has reduced the availability of high-return investment opportunities and, together with demographic trends, promises to shrink the Chinese market over time. But, with China still targeting 5% growth, there is clearly more going on.

In fact, foreign companies worry about becoming the target of spurious antitrust investigations, and fear that the newly expanded, but deliberately vague counter-espionage law could result in them being punished for normal business activities. Of course, US restrictions on high-tech exports to and investment in China are not helping matters.

China today shares many features with Japan in the 1980s. But the biggest risks to its economic prospects are all homegrown. By prioritizing security and stability – through surveillance, control, and coercion – over economic dynamism, China’s leaders are abandoning some of the policies and principles that underpinned the country’s “economic miracle.”

You can’t have a Clash of Civilizations when there is only one.


Does Money Make You Happy? The Latest Research Might Surprise You: Evidence that money does, in fact, buy happiness continues to surface (Emma Kerr and Jessica Walrack, 11/17/23, US News)

Another study released in January of 2022 and led by Jon M. Jachimowicz, an assistant professor at Harvard Business School, explored the many ways money can be used as a problem-solving tool that results in more overall happiness.

In the study, 522 participants with incomes ranging from less than $10,000 to more than $150,000 tracked daily events and emotional responses for 30 days in a diary. The results showed that although there was no significant difference in the frequency of stressful events experienced by participants across income levels, money reduced the intensity of the emotional response to those events.

And on the whole, researchers determined that people with higher incomes report greater levels of life satisfaction.

“It’s not that rich people don’t have problems,” Jachimowicz told Harvard Business School’s Working Knowledge publication, “but having money allows you to fix problems and resolve them more quickly.” He explains that income increases a sense of control which can mitigate the intensity of distress and lead to greater life satisfaction.

“Money provides people with a sense of autonomy and freedom to live the life they want to live,” Killingsworth says.

“It’s not necessarily because they’re buying fancier cars and having nicer meals, though they may be, but a lot of what money is doing is allowing them to carry out their intentions and desires as agents in the world as opposed to being overly constrained by resources,” he adds.

Thus, UBI.


What’s the Matter with Chile?: A review of The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism by Sebastian Edwards (Geoff Shullenberger, Winter 2023, American Affairs)

The Left, in Chile and abroad, has been blindsided by recent events, as evidenced by its inability to make sense of the failure of the new consti­tution, much less the rise of Kast. For its part, the surging Chilean Right, which now openly harkens back to the Pinochet era as a political ideal, has little to say about why so much of the public took to the streets in 2019 or why nearly 80 percent rejected the old constitution in the 2020 plebiscite. A more sober and insightful response to these questions comes from the Chilean economist Sebastian Edwards, who teaches at UCLA. His new book, The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism, was written to make sense of the 2019 estallido social and the subsequent ascent of Boric. But he takes the long view, returning to the economic policies of the Allende administration, then documenting in painstaking detail the controversial reforms of the “Chicago Boys”—the University of Chicago–trained economists who devised the neoliberal model imposed under Pinochet—and the modifications of this program after the return of democracy.

Edwards’s central aim is to account for what he calls the “Chile paradox.” “By 2015,” he writes, “Chile was the indisputable economic leader of Latin America.” How is it, then, that the country with “the highest income per capita, the lowest incidence of poverty, and the best overall social indicators” in the region witnessed a massive revolt on material grounds, the leaders of which demanded a total overhaul of the economic system? The answer cannot simply be that other modes of social well-being were sacrificed to the neoliberal ideal of growth at all costs. This was largely true in the period the neoliberal model was initially imposed under Pinochet, but most of the period of sustained growth was overseen by social democratic leaders who were deeply concerned with avoiding this exact pitfall, and governed accordingly. At the same time, given the coalescence of four-fifths of the public around scrapping the constitution, the revolt can’t be dismissed as ideological confusion or a fit of pique. Clearly something was and is deeply amiss in this apparently successful nation; the willingness of voters to support candidates nostalgic for the dictatorship is as conspicuous a symptom of this as was the earlier left-wing revolt.

In various ways, Edwards is uniquely well-positioned to interpret the history he sets out to chart. He is a member of one of the most illustrious old-money families in Chile. His forebears include the publishers of Santiago’s premier newspaper, El Mercurio, and the literary figures Joaquín Edwards Bello and Jorge Edwards. The latter served as Allende’s ambassador to Cuba, even as other members of the family were among those lobbying the U.S. government to assist in Allende’s overthrow. Sebastian, like Jorge, was evidently something of a black sheep in his largely conservative family. As he recounts, he studied economics at the Universidad de Chile, the more left-leaning of the country’s two most prestigious universities, supported the Socialist Party, and even took a job in Allende’s government while still a student. “After the coup d’état,” Edwards recounts, “our school was closed because, according to the military, it was a ‘nest of communist rats.’” He managed to avoid the misfortunes that befell other student activists after the coup—perhaps due to family connections—and transferred to the Universidad Católica, the more conservative of the two major universities. It was a fateful change of scene.

Starting in the 1950s, as Edwards explains, the Católica’s economics department had become the hub of an academic exchange with the University of Chicago. The program got its start from U.S. government efforts to fight the influence of communism abroad by instilling market-friendly views in economists in training. This was the birthplace of the “Chicago Boys.” Talented Católica economics students were given the opportunity to pursue further study at Chicago, the seat of Milton Friedman and Friedrich von Hayek. When Edwards joined the depart­ment in 1974, the Chicago Boys hadn’t made their name yet; on the contrary, they had toiled in relative obscurity for two decades, with free market ideals generally unpopular in an intellectual panorama still domi­nated by other paradigms. This situation in Chile reflected that in much of the world during the three decades after the Second World War, when Keynesianism was mostly uncontested.

Just a year before the coup in Chile, Friedman famously stated: “Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.” Left-wing intellectuals like David Harvey and Naomi Klein have often accounted for the triumph of neoliberalism in the 1970s by quoting Friedman’s words as an illustration of the movement’s playbook—the “shock doctrine,” as Klein called it. They have taken post-coup Chile as ground zero for the approach Friedman seemed to be advocating. In their simplest version, such accounts can take on a Manichaean, conspiratorial quality. Edwards, who through his deep connections to Católica and Chicago is well-acquainted with most of the people involved in Chile’s neoliberal reforms, offers a counterpoint to such narratives. His personal loyalties do not make him reticent to criticize the Chicago Boys’ policies or their complicity with the dicta­torship. Nonetheless, he argues that Chile’s neoliberalization was a far more contingent and internally conflicted process than is often understood.

Edwards’s qualified defense of the Chicago Boys begins with his highly critical account of Allende’s economic policies. Defenders of Allende tend to attribute the serious economic woes of his government to external meddling by the United States and internal sabotage by right‑wing elements. Without denying these were factors, Edwards argues that Allende’s policies failed for foreseeable reasons. Initially, the socialist government succeeded in its goal of increasing aggregate de­mand through government spending—a standard Keynesian aim, pur­sued in a particularly radical fashion. But the longer-term result was to cause inflation to surge to over 700 percent in the year prior to the coup. “What the Allende government engaged in,” Edwards writes, “decades before it got its name, were policies very similar to those touted by the supporters of Modern Monetary Theory”: in effect, print lots of money and pretend inflation isn’t a thing.

Edwards also offers an inside view of the Allende regime’s haphazard attempts to deal with the fallout through what he calls a “surrealistic system of price controls.” As a nineteen-year-old student, he was re­cruited to work in the government Directory of Industry and Commerce, which had the power to authorize or refuse requests for price increases from industry. With inflation rendering authorized prices almost instantly outdated, producers had to constantly submit new price requests, which were “promptly denied.” As Edwards remarks, “Any first year student would have predicted the results of this viciously circular process: massive shortages and a thriving black market for all sorts of goods.” The government responded by cracking down harshly on the black market, shutting down stores that failed to comply with official prices and confiscating their goods. These heavy-handed tactics became a drag on the government’s popularity.

It was in response to these mounting problems that some in Allende’s government began developing the secret project known as Cybersyn, which has recently become the subject of considerable scholarly and popular interest. Guided by the English management consultant Stafford Beer, Cybersyn was supposed to use cutting-edge cybernetic theory and the latest technologies—the telex and the computer—to determine the correct prices of every good in the country. The project has become attractive to those on the left today who imagine that new communication technologies might be used to develop a more intelligently managed economy than was viable in earlier socialist projects. But Edwards is dismissive of the oft-floated idea that Cybersyn could have remedied Chile’s deep economic woes if given more time. He recalls a meeting he attended, at which Beer was present, in which the impracticality of the project seemed evident even to the consultant on whose ideas it was based.

In other words, whatever errors the Chicago Boys themselves made once they had the opportunity to reshape Chile’s economy, Edwards is clear that they were right to believe that the path taken by Allende’s government could only lead to disaster.

Francis Spufford’s Red Plenty is an amusing look at why cybernetics is so unworkable.