Right now our best and brightest pundits are trying to make us believe lots of things that just aren’t true:

1.  That fiscal stimulus can work while the Fed is raising i-rates.

2.  That trade deficits cost jobs.

3.  That manufacturing has been hit by trade, not automation.

4.  That monetary policy is ineffective.

Another another phony theme is that Trump won because he appealed to the “downtrodden voters”, which coastal elites like me don’t understand. That’s nonsense:

As you can see it’s exactly the opposite, both the low income and the lower middle income voters went strongly for Clinton, while the middle class tilted slightly to Trump

So why do our pundits keep lying to us?  They have an agenda to massively increase the size and scope of government, and want to use this election to discredit free market economics, which supposedly favors the rich.

So how do the pundits keep lying to us?  They start by singling out low income white voters, who did indeed opt for Trump (AFAIK).  Then they simply assume that black lives don’t matter, Asian lives don’t matter, and Hispanic lives don’t matter.  Low income whites are the only low income people who matter.  Hence in their view it’s perfectly accurate to say that Trump represents America’s downtrodden voters, even though it’s technically a lie.  It’s true in spirit (in their warped minds).

There’s a certain type of commenter who talks a lot about struggling low income whites, but couldn’t care less about low income minorities.  When they mention the minorities at all, it’s just to point out how “lazy” they are.  In contrast, the low income whites are not lazy, rather they are “victims of the neoliberal system”.  When leftists used to argue that minorities were the victims of the system, these very same born again populists would roll their eyes in disbelief.  Let’s call them “SJWWs”, social justice white warriors.

Now let’s all watch Trump abolish the 45% estate tax on his $10 billion estate.  His way of helping the downtrodden.

PS. The exit polls are interesting.  It seems that 47% of voters didn’t think Hillary was qualified to be President, and 61% of voters felt Trump was unqualified.  I felt that Hillary was qualified, but Trump was not.  I still feel that way.  On the other hand, I don’t agree with Hillary on lots of issues.

The most amusing factoid was that 2% of voters had a favorable opinion of both Trump and Clinton.  That’s about 2.72 million Americans.  I think it would be kind of interesting to attend a cocktail party with about 120 of those people, get a sense of how they look at life.  I’m pretty sure they are not leaving comments after my blog posts.

My previous post triggered a lot of comments that need to be addressed.  Let’s imagine a vaccine that we could give to all 7 billion people.  The vaccine would prevent lots of cases of an unpleasant illness that lasts for one week, but one out of the 7 billion will die from nasty side effects.  Does it make sense to do this?  Most intelligent people would say yes.  (To simplify things suppose the cost is almost zero, and it’s voluntary.  The program is government funded.)  We make lots of other similar trade-offs in life, as with speed limits of 65/mph rather than 25mph, even though the higher speed leads to more fatal accidents.  There are trade-offs between risk and pleasure.

If you are not with me so far, stop reading.  If you are willing to concede that a small risk of death might be a price worth paying for a more pleasant life, then consider a universe where there are 6 million Earth-like planets, all facing the same dilemma.  If it makes sense for Earth to provide this vaccine, then presumably it makes sense on those other 6 million planets.  Now the cost of the vaccine is that 42 quintillion quadrillion people have more pleasant lives, at a cost of 6 million deaths.  That doesn’t sound like such a good trade-off, does it?  That’s a lot of dead people for merely the benefit of making life better for the rest of us.  Does utilitarianism fail at large numbers?

No, utilitarianism doesn’t fail; what fails is our brainpower.  Our brains can visual that a cost of 6 million lives is much worse than a cost of one life. But they can’t visualize the fact that the benefit of 42 quintillion quadrillion happier people is vastly greater than the benefit of 7 billion happier people.  When I try to visual the number of stars in the universe, it’s not much different from my attempt to visualize the number of stars in our galaxy, even though the former number is vastly larger.

Many of the “repugnant conclusion refutations” of utilitarianism rely on similar cognitive failures.  Another set of tricks postulates some horrific practice that occurred in the past, and then ask “What if slave owners got more pleasure from slavery than the suffering of the slaves.  Would slavery be OK then?”  The trick here is that we (or at least I) find slavery repulsive largely for utilitarian reasons.  So the question puts us in an awkward position.  If we endorse utilitarianism then we seem to be endorsing actual real world slavery, even though our utilitarianism has actually caused us to reject slavery.  Indeed I’d go further, and argue that slavery was abolished in the 19th century largely for utilitarian reasons. The 19th century saw an enormous boom in utilitarian thinking.

One commenter pointed out that utilitarianism goes against certain instincts that are hard-wired into our brains.  Maybe so, but lots of those can change over time, as culture changes.  Our modern culture is more utilitarian than past cultures.  Even during my lifetime, I’ve seen the rise of utilitarian thinking in many areas (gay marriage, anti-bullying campaigns in schools, making it illegal to rape one’s spouse, civil rights for blacks, etc., etc.)

These utilitarian instincts come from the narrative arts (literature and film).  Art that makes you aware of the suffering of others.  Since young Americans saw many more sympathetic gay characters on TV than old Americans, they are far more in favor of gay marriage, and far less likely to vote for Trump.  Milan Kundera said that Europeans are the children of the novel.  There are reasons why Denmark is more utilitarian that Saudi Arabia, and why American politicians who read novels (Obama) are more utilitarian than those who do not (Trump).  If Trump would read this horrific exposé in the NYT (highly recommended), showing the human costs of Duterte’s slaughter of thousand of Filipino drug users, he might reconsider his support for the program.  Even better, if he read a novel about the lives of the victims, and their loved ones.

PS.  In fairness, utilitarianism is no cure-all.  Although Obama is more of a utilitarian, Trump’s views on labor market and financial regulation are actually more utilitarian that Obama’s, for reasons I discussed in my previous post.  You must also avoid cognitive illusions in economics.

PPS.  Don’t waste time writing comments claiming that I don’t really believe what I write.  You don’t know me, and I’m not like you.

The older I get, the more convinced I am that utilitarianism is the best value system.  What do I mean by best?  I mean the one that, if used correctly, leads to the happiest society.  But would it be used correctly?  Or would it be abused?  Bryan Caplan has a post suggesting the latter.

Here’s the problem I see with utilitarianism.  The world is full of cognitive illusions.  One of the most powerful sets of illusions is the left-liberal view that big government can solve many of society’s problems.  Just to be clear, I do think that government can solve a few problems (such as pollution and excessive inequality), but only a few.  Even though I have the same (utilitarian) value system as left-liberals, my policy preferences differ because my University of Chicago education showed me all the unintended consequences of government intervention.  Thus I can use my utilitarian value system without ending up on The Road to Serfdom.

Most left-liberals lack a University of Chicago education.  For them, the contemplation of all the societal problems that can be solved with big government is akin to playing with matches.  Quite dangerous.

So if that’s the world we live in, what’s the best solution?

1. Stick with utilitarianism, and try to spread the Chicago gospel.

2. Replace utilitarianism with a sort of natural rights libertarianism, which while not actually correct, will lead to better outcomes, even by utilitarian standards.  Spread the Ron Paul gospel.

You might notice that this is similar to the age old philosophical question of whether religion is a useful way of making society more ethical, even if based on a myth.

I believe there are good arguments on both sides of this issue, but in the end I opt for utilitarianism.  We might be able to temporarily indoctrinate some young people with books by Ayn Rand, but in the long run I think we need pragmatic arguments for a free society, if we are to convince the class of educated intellectuals who play such an important role in policymaking.

I recognize that utilitarianism is playing with fire — I just don’t see any better options.

Ramesh Ponnuru sent me a WSJ article by Greg Ip:

If workers lose their jobs to imports and central banks can’t bolster domestic spending enough to re-employ them, a country may be worse off, and keeping those imports out can make it better off.

This occurs only in certain conditions, says a new paper by Harvard University’s Larry Summers and two co-authors, but those conditions may now be present.

Mr. Summers, a former Treasury secretary, is no protectionist and no fan of Mr. Trump, whose election, he warns, could lead to recession in the U.S. and financial crisis abroad. But he does worry that chronically weak demand could make protectionism both respectable and irresistible.

Others, such as New York Times columnist Paul Krugman and Michael Pettis at Peking University have already noted how in a world with too little demand, one country’s trade surplus inflicts unemployment on the country with a deficit.

Even if Summers, Krugman and Pettis are correct (and I think they are wrong) the argument does not apply to the world we live in today.  Thus Greg Ip is mistaken when he says “but those conditions may now be present.”  They are not.

Let’s start with the US.  The US is not at the zero bound, and the Fed is expected to raise rates in a few days because they think that failing to do so would result in excessive AD.  So if protectionism somehow miraculously boosted AD in the US, the Fed would simply raise rates even faster to prevent any stimulative effect on AD.

Now it’s true that the Eurozone and Japan are both at the zero bound.  But both economies have very large current account surpluses, so obviously trade deficits are not depressing output in those two regions.  Even very depressed areas such as Italy run surpluses.

In fact, unemployment has almost nothing to do with trade “imbalances” (a term I hate).

Update:  Dilip sent me the following, from Jared Bernstein and Dean Baker:

In this context, the trade deficit was subtracting from demand in the domestic economy. Spending that could have employed people who needed jobs in the U.S. was instead employing people in Germany, China, and other countries from which America imports goods and services. In principle, the U.S. government could have looked to spur other channels of demand to offset the trade deficit, but as a practical matter this is often not easy to do: The most straightforward way to generate demand is through additional government spending, but there are major political obstacles to running large budget deficits even at times when it would be beneficial to the economy.

No, the most straightforward way to boost demand is to adopt a more stimulative monetary policy.  But that won’t happen because the Fed currently thinks it’s better to slow the growth in demand by raising its target interest rate.  (And they may well be correct.  The consensus of private sector forecasters was that we were roughly on target for 2% inflation, even before the recent bump up in TIPS spreads):

Will the US join Iran as one of the few countries that allow kidney sales?  It’s too soon to say, but Trump deserves praise if this appointment is made and approved:

President-elect Donald Trump is weighing naming as Food and Drug Administration commissioner a staunch libertarian who has called for eliminating the agency’s mandate to determine whether new medicines are effective before approving them for sale.

“Let people start using them, at their own risk,” the candidate, Jim O’Neill, said in a 2014 speech to a biotech group.

O’Neill has also called for paying organ donors and setting up libertarian societies at sea — and has said he was surprised to discover that FDA regulators actually enjoy science and like working to fight disease.

. . .

O’Neill has proposed that the FDA only require companies to prove drugs are safe before they are sold – not that they actually work.

O’Neill has also said that organ donors should be allowed to be paid. “There are plenty of healthy spare kidneys walking around, unused,” he said in a speech at a 2009 Seasteading conference.

Of course he has not been nominated yet, and it’s not clear he’d be approved by the Senate, but certainly a hopeful sign.

PS.  Here’s a recent Econlog post on kidney sales.  Alex Tabarrok points out that New Zealand is moving part way towards financially compensating kidney donors.

HT:  Frank McCormick