Incentive Misalignment in Communism: the case of Vietnam

Rainer Zitelmann writes in How Capitalism Beat Communism in Vietnam in Reason Magazine,

The state collectives did not reward members for the amount of rice they produced, but instead counted how many days they had worked. If you worked 30 days, you got 30 points, which gave you the right to a defined share of the harvest. If you worked 20 days, you got 20 points and correspondingly less.

Days worked is cheap to verify, hard to dispute, immune to weather. But it was not what the country needed, which was rice. Output was the right target, but no individual's contribution was measurable, so the Collectives graded attendance instead.

Farmers responded rationally — they showed up. Real effort migrated to private plots where they could keep what they made. While cooperatives absorbed 40 percent of state agricultural funding, over 60 percent of cooperative members' income came from the 5 percent of land left in private hands. In 1980 the country grew 14 million tons of rice against the 16 million it needed.

Private Property (under the Doi Moi reforms) fixed the problem: households leased land and kept what they produced. Vietnam is now among the world's largest rice exporters.

BOTTOM LINE: People will optimize whatever you count; and Private property aligns incentives and makes the proverbial pie bigger.  

Use It or Lose It: The Perverse Incentives Draining the American West

If you wanted to design a property rights regime that guaranteed the waste of a scarce resource, you could hardly do better than Western water law's doctrine of prior appropriation. It requires rights holders to put water to "beneficial use" or—after five consecutive years of non-use—forfeit the right. [1] The result is a textbook perverse incentive: a farmer who irrigates more efficiently risks losing the conserved portion of her right, so the private return to conservation is negative even when the social return is big.

Oregon tried to eliminate the perverse incentive with its 1987 Instream Water Right Act that made instream flow a beneficial use. [2] On the Deschutes, conservancies now lease and buy water for the river. [3], but legalizing the trade didn't create a liquid market. Rights are mostly held by irrigation districts rather than individual farmers, so every deal needs board approval, and transaction costs run high: quantifying how much water actually reaches crops through leaky, century-old canals is expensive, and farmers still fear that proving they can conserve invites a future challenge to their right.

In the Colorado River, states face the same problem. If an Upper Basin state conserves, the saved water flows downstream to be consumed by someone else which creates the risk of becoming the baseline for future cuts. [4] Instead, the feds pay farmers billions to fallow fields—a costly government subsidy trying to address the perverse consequences of another government policy. [5]

BOTTOM LINE: any rule tying an asset's ownership to its continuous consumption—budget lines that vanish if unspent, headcount that shrinks if unfilled—will be consumed regardless of value. 

NOTES

[1] Schwabe, Williamson & Wyatt, "Oregon Water Law Questions and Answers" — beneficial use requirement and five-year forfeiture rule. https://www.schwabe.com/publication/oregon-water-law-questions-and-answers/

[2] Oregon Legislature, "Background Brief on Water Rights" — the 1987 legislation adding instream water rights as a beneficial use. https://www.oregonlegislature.gov/lpro/Publications/2004HM_Water_Rights.pdf

[3] University of Oregon School of Law, "Evaluating Instream Flow Programs" — Oregon's 1,100+ instream leases and transfers, including the Deschutes River Conservancy's role. https://law.uoregon.edu/sites/default/files/ai61_ch._22_with_legend1.pdf

[4] High Country News, "Why Colorado River negotiations are so difficult" — prior appropriation dynamics and the interstate stalemate. https://www.hcn.org/articles/why-colorado-river-negotiations-are-so-difficult/

[5] Congressional Research Service, "Management of the Colorado River" (R45546) — federally compensated conservation, including 2.3 million acre-feet paid for with congressionally approved drought funds. https://www.congress.gov/crs-product/R45546

HT:  Claude Fable

What you never learned about Thanksgiving in school

Peter Klein gives us the real story behind the first Thanksgiving:

In 1620 Plymouth Plantation was founded with a system of communal property rights. Food and supplies were held in common and then distributed based on “equality” and “need” as determined by Plantation officials. People received the same rations whether or not they contributed to producing the food, ... Because of the poor incentives, little food was produced.

Faced with potential starvation in the spring of 1623, the colony decided to implement a new economic system. Every family was assigned a private parcel of land. They could then keep all they grew for themselves, but now they alone were responsible for feeding themselves. While not a complete private property system, the move away from communal ownership had dramatic results.

 This year I am giving thanks for private property. 

Related:  Good short video on the how private property saved the Pilgrims, China and Vietnam from our friends at MarginalRevolution University

Why the US leads China, EU in economic dynamism

QUESTION TO CLAUDE 3:  The EU and China lag behind the US in economic dynamism, measured by start-up activity, number of unicorns, age of unicorns (younger indicates more rapid innovation), and in productivity growth. Can you document this and tell me why?

ANSWER:  Here is the data to document the economic dynamism gap between the US, EU, and China, along with some key reasons behind it:

Start-up Activity:

• The US had over 63,000 startups in 2020, compared to around 37,000 in the EU and 25,000 in China. The US accounted for over 50% of global venture capital investment.

Unicorns (private companies valued at $1B+):

• As of 2023, the US has 704 unicorns, China has 258, and the EU has 139. The total value of US unicorns is $2.4 trillion vs. $862 billion for China and $449 billion for the EU.
• The US represents 51% of the world's unicorns by number and 65% by valuation. China and the EU lag significantly behind.

Age of Unicorns:

• The median age of US unicorns is 7 years vs. 9 years for Chinese unicorns, indicating more recent startup success in the US. [Claude 3 unable to find data on EU unicorns]

Productivity Growth (average annual labor productivity growth 2010-2019):

• US: 1.0%
• EU: 0.7%
• China: 7.1% (but from a much lower base)

Key Reasons for the US Lead:

1. Larger, more developed venture capital and private equity industry in the US fueling more startup investment. US VC deal value was 5-7X higher than China and the EU in recent years.
2. US equity markets provide better exit opportunities for startups via IPOs. US represented over 60% of global IPO proceeds in 2021.
3. Huge US domestic market enables startups to scale quickly. EU is fragmented across countries and China's market is difficult for foreign firms.
4. Top US universities and companies attract global talent. Over 50% of US unicorn founders are immigrants.
5. Historically strong intellectual property protections, rule of law, and business-friendly regulations in the US encourage innovation and risk-taking.
6. Deeply rooted culture of entrepreneurship and risk-taking in the US compared to more risk-averse cultures in the EU and China's state-led system.

While China leads on productivity growth, this is largely due to catch-up growth from a low base. On most measures of economic dynamism, especially in the innovation economy, the US maintains a substantial lead over the EU and China as of 2023. But the gap has been narrowing over time.

Economist: America is in the midst of an extraordinary startup boom

Why shale-oil drilling in the US, but not in Europe?

If you give people secure property rights, they have the incentive to move the property to its highest valued use:

'Whoever owns the soil, it's theirs up to Heaven and down to Hell." So goes the ancient common-law principle. Today, however, almost no major country recognizes full subsurface private property rights, except for the United States.

Is NY City the canary in the recession coal mine?

 From NY Times:

Three years into the pandemic, floors of office buildings throughout Manhattan have been emptied by tenants who have shrunk their footprint and employees who work from home.

Now, there is another problem.

Rapidly rising interest rates have intensified concerns that the New York City office market, the largest in the country and a pillar of the city’s economy, could be at grave risk. That one-two punch could be worse than anything corporate landlords have experienced before, experts on the sector say, leading major banks and real estate analysts in recent weeks to warn that languishing properties along with falling property values and higher borrowing costs could increase the odds of a recession nationally and a budget crisis for the city.  ...

Office workers in the city make about 75 percent more in annual salaries than the rest of the private sector, according to the Office of the State Comptroller, and their absence from the office every day deprives a host of businesses of their spending.

Is ChatGPT a good substitute for Professor Froeb?

RA Jack Underwood trained ChatGPT using the first three chapters of Managerial Economics, and the blog, tests, and lectures.  

The lecture was boring, too general, and the Amazon example misses the real story of the company, e.g., see post Why was Bezos such an extraordinary manager.  

Some test questions were good, but others "borrowed" jargon I don't use, like "deadweight loss." 

The blog post used jargon and ideas from standard textbooks, but not from ours. [ours: Costs are defined by decisions:  when making a decision, consider all benefits and costs that vary with the consequence of a decision (if you miss some that is the hidden cost fallacy), but only benefits and costs that vary with the consequence of a decision (if you include those that don't, that is the fixed or sunk cost fallacy).]

LECTURE:

Good morning everyone, and welcome to today's lecture on capitalism, business, and wealth creation. This lecture is designed for MBA students who want to gain a deeper understanding of the principles and practices that drive the modern business world. So, let's dive in.

Capitalism is an economic system characterized by private ownership of the means of production and the creation of goods and services for profit. The system is based on the principles of supply and demand, competition, and the pursuit of profit. Businesses play a key role in this system, as they drive economic growth and provide goods and services that meet the needs and wants of consumers.

In a capitalist economy, businesses must compete with one another to succeed and generate profits. Competition forces companies to be innovative, efficient, and responsive to customer needs and wants. This, in turn, drives economic growth and improves the standard of living for consumers.

Wealth creation is the process of generating financial resources that can be used to meet personal or business goals. It involves increasing income, reducing expenses, and making wise investments. Businesses play a critical role in wealth creation by providing employment opportunities and generating profits that can be reinvested in the company or used to support personal financial goals.

To succeed in business, companies must understand the importance of effective strategic planning, efficient operations, and sound financial management. They must also understand the needs and wants of their customers, as well as the competitive landscape in which they operate.

Let's take a look at three real-world examples that illustrate the principles of capitalism, business, and wealth creation.

Example 1: Amazon. Amazon is a leading e-commerce company that has disrupted traditional retail businesses. The company's success is due to its focus on customer needs and wants, its innovative business model, and its ability to leverage technology to increase efficiency and reduce costs. Through its commitment to customer satisfaction, Amazon has become one of the most valuable companies in the world and has created wealth for its shareholders.

Example 2: Tesla. Tesla is a leading producer of electric vehicles and clean energy products. The company's success is due to its focus on innovation, sustainability, and customer experience. Tesla's mission to transition the world to sustainable energy has attracted customers who value environmental responsibility. The company's focus on customer needs and wants, as well as its commitment to innovation, has made it one of the most valuable automotive companies in the world and has created wealth for its shareholders.

Example 3: Airbnb. Airbnb is a leading provider of short-term rental accommodations. The company's success is due to its innovative business model, which leverages technology to connect travelers with home and apartment owners who have extra space to rent. Airbnb's commitment to customer satisfaction, combined with its efficient operations, has made it one of the most valuable travel companies in the world and has created wealth for its shareholders.

In conclusion, capitalism and business are closely intertwined, with businesses playing a key role in driving economic growth, creating wealth, and providing goods and services that meet the needs of consumers. To succeed in the modern business world, companies must have a deep understanding of their customers, be innovative and efficient, and have sound financial management practices.

As aspiring business leaders, it is essential that you have a solid understanding of these concepts, as well as the skills and knowledge needed to succeed in the modern business world. The examples we've discussed today illustrate the importance of understanding customer needs and wants, leveraging technology and innovation, and having a focus on wealth creation.

I hope this lecture has provided you with valuable insights into the principles and practices of capitalism, business, and wealth creation. Thank you for your attention, and I look forward to answering any questions you may have.

MULTIPLE CHOICE QUESTION: What is the key difference between capitalism and socialism as economic systems?

A. Capitalism values private property and free markets, while socialism values collective ownership and central planning.

B. Socialism values private property and free markets, while capitalism values collective ownership and central planning.

C. Capitalism values individualism, while socialism values collectivism.

D. Socialism values individualism, while capitalism values collectivism.

Correct answer: A. Capitalism values private property and free markets, while socialism values collective ownership and central planning.

SHORT ANSWER QUESTION:

Describe how wealth was created in the case of Amazon's growth as a company. Be sure to include specific examples and economic concepts.

Answer:

Amazon's growth as a company is a prime example of wealth creation through business. The company started as an online bookstore and has since become one of the largest e-commerce companies in the world.

Wealth creation at Amazon can be attributed to several factors, including its focus on customer satisfaction, innovation, and efficient operations. By understanding the needs and wants of its customers, Amazon was able to offer a unique and convenient shopping experience. Additionally, the company invested in technology and innovation, allowing it to streamline its operations and reduce costs.

Another key factor in Amazon's wealth creation is its focus on financial management. The company has a strong commitment to profitability, which has allowed it to reinvest in the business and grow over time. For example, Amazon has used its profits to develop new product categories, such as groceries and home goods, which have contributed to its continued growth.

In summary, wealth creation at Amazon can be attributed to its focus on customer satisfaction, innovation, efficient operations, and sound financial management. These factors have allowed the company to generate profits, grow its business, and create wealth for its shareholders.

SHORT ANSWER QUESTION:

Explain how taxes can destroy wealth by using the economic concept of deadweight loss.

Answer:

Taxes can destroy wealth by causing deadweight loss. Deadweight loss is a loss of economic efficiency that occurs when an action, such as taxation, distorts the market and leads to reduced economic activity.

In the case of taxes, the deadweight loss occurs because taxes reduce the incentive for individuals and businesses to produce and invest. This reduction in economic activity leads to lower output and fewer opportunities for wealth creation. Additionally, taxes can also discourage entrepreneurship and innovation, further reducing opportunities for wealth creation.

In summary, taxes can destroy wealth by causing deadweight loss. This loss of economic efficiency results from a reduction in the incentive for individuals and businesses to produce and invest, leading to lower output and fewer opportunities for wealth creation.

BLOG POST:

Benefits, Costs, and Decisions in Economics: An Overview for Business Leaders

In economics, decision-making is driven by a careful evaluation of benefits and costs. Whether you are an entrepreneur starting a new business, a CEO making strategic investments, or a consumer choosing between different products, understanding the relationship between benefits and costs is essential for making informed decisions.

Benefits are the positive outcomes or gains that result from an action. For example, if a business decides to invest in new technology, the benefits might include increased efficiency, lower costs, and improved customer satisfaction. Understanding the benefits of a decision is critical because they provide insight into the potential rewards of taking a particular action.

Costs, on the other hand, are the negative outcomes or losses that result from an action. In the example of the business investing in new technology, the costs might include the initial investment in the technology, any associated training costs, and the potential for temporary disruptions in operations. Understanding the costs of a decision is equally important because they provide insight into the potential risks and challenges of taking a particular action.

In making decisions, it is essential to consider both benefits and costs. For example, a business might weigh the potential benefits of investing in new technology against the associated costs to determine whether the investment is a good decision. A consumer might weigh the benefits of purchasing a premium product against the associated costs to determine whether the product is worth the investment.

One important concept in economics is the idea of opportunity cost. Opportunity cost is the value of the next best alternative that must be given up in order to pursue a particular action. For example, if a business decides to invest in new technology, the opportunity cost might be the potential benefits that could have been gained from investing in other opportunities, such as marketing or research and development. Understanding opportunity cost is critical because it helps to ensure that decisions are made based on a comprehensive evaluation of all potential outcomes.

In conclusion, benefits, costs, and decisions are central to the study of economics and are critical for business leaders. Understanding the relationship between benefits and costs is essential for making informed decisions, and considering opportunity cost is critical for ensuring that decisions are based on a comprehensive evaluation of all potential outcomes. By carefully evaluating benefits, costs, and opportunity costs, business leaders can make informed decisions that drive growth and success.

Time to run for the exits in China?

The Financial Times reports that wealthy Chinese are trying to:

“Now that ‘the chairman’ is firmly in place . . . I have already received three ‘proceed’ instructions from various ultra-high net worth Chinese business families to execute their fire escape plans,” Lesperance said. ...

China’s rich, he said, are not only worried about rumours of an official wealth tax that would replace informal “common prosperity” donations. They are also increasingly concerned for their personal safety, even once they have left. ...

“The family motto has always been: ‘Keep a fast junk in the harbour with gold bars and a second set of papers’. The modern equivalent would be a private jet, a couple of passports and foreign bank accounts,” Lesperance says. “That is the world we are in . . . it is tough stuff.”

Gold bars show up on scanners at the airport. Maybe use crypto instead. 

BOTTOM LINE: If this article is right, look for a devaluation of the yuan, and an appreciation in Bitcoin. 

 RELATED: China’s property crash: ‘a slow-motion financial crisis’

...the slumping property market, the sputtering investment engines of local governments and a hefty burden of national debt signals the end for a model of growth that has not only transformed China but also been the biggest generator of global economic expansion for well over a decade. ...

In the free markets of the west, financial crises can erupt suddenly, taking governments and investors by surprise. But in China’s state-driven economy, infirmities metastasise more slowly as Beijing deploys political and financial capital to battle against the turning tide. This gives proceedings a more stately aura, but it does not mean that underlying problems are any less severe, analysts say.

Will markets thwart Xi's plans for China?

Economist lead article on President Xi's "rejuvenation," and efforts to  "maintain authority",

When Mr Xi took over in 2012, China was changing fast. The middle class was growing, private firms were booming and citizens were connecting on social media. A different leader might have seen these as opportunities. Mr Xi saw only threats.

[Xi has] reasserted state control over the economy and hobbled some of China’s most successful firms. His plan to tame the property market lies in tatters and bad loans weigh perilously on the economy.

Ironically, he is forgetting the lessons of Xiaogang village, and harming his own economy much faster than he is harming ours (see post below).

Is Chinese Capitalism an oxymoron

I begin my management course by telling students how Xiaogang villagers defied their Communist rulers in 1978 by secretly instituting a system of private property.  By the time the authorities found out, it was too late as the system had already spread to neighboring villages due to its tremendous success.

China adapted and allowed the institution of private property to spread.  At the time, many people predicted China would continue to reform and they were let into the WTO. However, "...as even the most ardent defenders of China’s WTO accession now acknowledge, that did not happen." Today we are left with an integrated world with two very different systems. To explain the effect, we can use the metaphor of A/B testing:

...imagine that the Department of Justice randomly assigns half of U.S. corporations to be A-corps and half to be B-corps. For A-corps, nothing changes. But B-corps now enjoy special privileges and rules. They are exempt from laws governing intellectual-property theft. They receive more-favorable tax incentives. They are recipients of sizable subsidies, including some to buy their A-corp rivals. They are able to enlist the DOJ to win capricious legal claims against A-corp rivals.

The result of such an experiment would be dire: The best, most innovative A-corp firms would lose market share; A-corps would be loath to invest in research and development, given that B-corp rivals would be able to purloin it; and there would be massive waste as inefficient B-corp firms expanded more than market forces required. Now extrapolate that to the global economy and you get a sense of the harms the Chinese system has imposed on capitalist economies.

I did a search on all my posts in China and I came across this one from 2007: "Market Socialism" and China's new antitrust laws  in which I argued that unless China developed "... the kinds of Democratic institutions that provide checks and balances on state power," their economy could stagnate under the what i called "regulatory miasma."  It turns out that, I needed the caveat I closed with:

But China's oxymoronic "socialist market economy" has surprised us before. In the words of Deng Xiaoping, "I don't care if the cat is black or white as long as it can catch mice."

China gives the poor a bigger slice of the proverbial pie, but if it affects incentives...

...it will also make the pie smaller.  

The Economist reports on the efforts of the Chinese government to redistribute income from rich to the poor.  Chairman Xi has pronounced, “We must not allow the gap between rich and poor to get wider.” He seems to be channeling Confucious whose writings he frequently quotes, "a wise leader worries not about poverty but about inequality." 

 If this sounds familiar, it may be because the top 1% in China own 30.6% of household wealth; close to the US figure of 31.4%. The trick will be to redistribute income without muting the incentives that have made China so successful. 

[See earlier posts about the incentive aligning effects of private property in China]

Will Democratic Socialists give us "a humane social order?"

A news story about Democratic socialism rising in the age of Trump, most notably 29 year old Alexandra Ocasio-Cortez:

the group’s constitution describes its members as socialists who “reject an economic order based on private profit” and “share a vision of a humane social order based on popular control of resources and production, economic planning..."

OK, they obviously ignored all of lessons of Chapter Two, showing the incentive aligning effects of private property and profit, and how incentives lead to inequality because they reward productivity.  

Evidence on how private property creates wealth

How did property rights save China, the Pilgrims, and Vietnam?

Private property saved early settlers

What they don't tell you about Thanksgiving in school

Markets vs. Mother Theresa: who has done more for the world's poor?

Why shale-oil drilling in the US, but not in Europe?

Did the government cause the affordable housing crisis?

"Yes," says the Washington Post, for three reasons:

1. Restrictive zoning reduces the profitability and therefore the supply of housing:

The White House’s calls for local policymakers to expand by-right development (where allowable building projects can proceed administratively, without years-long public hearing processes) and accessory dwelling units, to repeal or reduce minimum parking requirements, and to rezone neighborhoods for greater possible density all amount to restoring landowners’ rights to develop property as they and the market see fit. As the tool kit notes, inappropriate parking requirements, in particular, can raise the expected rent in a new development by as much as 50 percent, while depriving towns of socially and commercially productive land.

2. Regulatory delays and requirements raise costs to the point where only high-end apartments are profitable (Nashville's problem):

Establishing by-right development and streamlining local permitting processes will allow developers to respond nimbly to market demands and will relieve the “guilty until proven innocent” status of new building development, which depresses construction starts across the country by delaying and inhibiting housing projects. What’s more, adopting leaner codes would remove obstacles to the countless smaller developers and would-be builders who want to invest in strengthening their local communities, but currently can’t afford to navigate the vast regulatory burdens and uncertain futures awaiting anyone who tries to build in America today. Trulia economist Ralph McLaughlin found that these regulatory delays may have an even bigger impact on housing production than zoning restrictions.

3. FHA loans prohibit mixed use, further reducing the profitability and supply of housing:

To this day, FHA standards for loans, which set the market for the entire private banking sector, prohibit any but the most minimal commercial property from being included in residential development. As a groundbreaking report by New York City’s Regional Plan Association found, these standards are “effectively disallowing most buildings with six stories or less.” And depending on the program, a building could have to reach to 17 stories before it is eligible for participation in the normal housing markets. Without the FHA’s blessing, projects are granted the “nonconforming” kiss of death unless their developers can persuade a local bank to write an entirely customized loan for them, one whose risk the bank would have to keep entirely on its own books.

REPOST: the Real meaning of Thanksgiving

What they don't tell you about Thanksgiving in school

Peter Klein gives us a more complete story of the first Thanksgiving:

Faced with potential starvation in the spring of 1623, the colony decided to implement a new economic system. Every family was assigned a private parcel of land. They could then keep all they grew for themselves, but now they alone were responsible for feeding themselves. While not a complete private property system, the move away from communal ownership had dramatic results.

This year I am giving thanks for private property.

How did property rights save China, the Pilgrims, and Vietnam?

Good short video on the incentive aligning effects of private property at our friends at MarginalRevolution University

Supremes take on FDR's raisin cartel...

...and win:

Here's a concrete example. In 2003–04, the RAC demanded 30 percent of the crop, which amounted to more than 89,000 tons of raisins. It gave away 2,312 tons to school lunch and other government programs and it sold 86,732 tons for export. The RAC pocketed $111,242,849 from that sale, or $1,249.30 per ton. It then spent all of the proceeds on its own operations. In return, raisin growers got nothing.

From the feds' point of view, this might make sense. Raisins are kept off the domestic market, prices are tightly controlled, and a government agency makes a few bucks along the way. But there's a major problem with the government's approach. According to the Fifth Amendment to the U.S. Constitution, the government must pay just compensation when it takes private property for a public use. And as far as Marvin and Laura Horne were concerned, the raisin marketing order was nothing less than an uncompensated taking of their valuable property. "It was a theft," Marvin Horne told Reason TV in July 2013. "The reserve was nothing but highway robbery."

Justice Kagan seemed to understand this:

"Mr. Palmore," asked Justice Elena Kagan, "would anything be wrong—with a—with a disposition of this Court that went something like this: Everybody agrees that this is not a jurisdictional issue, including the government, so [the 9th Circuit] got that wrong....And now the 9th Circuit can go and try to figure out whether this marketing order is a taking or it's just the world's most outdated law."

HT:  Larry

Film premiere: India awakes

We have blogged about the renaissance in India, driven by the institutions of capitalism: markets, free trade, private property, and de-regulation. Now the good people at CATO have a documentary about it.

India Awakes Documentary Preview and Discussion Friday, August 14, 2015 12:00 – 1:30PM Featuring Johan Norberg, Film host and Senior Fellow, Cato Institute. Moderated by Ian Vasquez, Director, Center for Global Liberty and Prosperity, Cato Institute. For many centuries, only the politically connected and elite prospered in India, while the rest of the population lived in poverty. Since 1991, however, 250 million people have been lifted out of poverty and are finding new ways of unlocking their potential. India Awakes explores an inherited British bureaucracy, which created layers of rules and regulations, and it shows how globalization and economic liberalization are leading to social change. Join us to see a segment of the documentary from the Free to Choose Network. Film host Johan Norberg will discuss how individuals from different parts of India are breaking down the centuries-old caste system through new opportunities, entrepreneurship, and by obtaining property and other legal rights.  or Watch online Aug 14

Why are some countries so poor?

Planet Money is making me re-think my opposition to subsidies for NPR with this episode on Peruvian Economist Hernando de Soto, who discovered that Peru was so poor due to over-regulation--it takes over a year's worth of work just to get the permits to open up a business in Peru--and the lack of respect for private property rights.

Interestingly, they uncover what I consider a scandal at the World Bank who ranks countries on the ease of doing business:  in response to lobbying by labor organizations, the Bank stopped measuring the time it takes to fire a worker as an indicator of the ease of doing business.

As readers of this blog know, if you make it hard to fire a worker, you also make it less likely that they will be hired.  That the World Bank changed an economic indicator suggests that they are willing to trade academic integrity for political support.

Why am I so disappointed when I discover economists behaving exactly in the way our models predict?

REPOST: The real meaning of Thanksgiving

What they don't tell you about Thanksgiving in school

Peter Klein gives us a more complete story of the first Thanksgiving:

Faced with potential starvation in the spring of 1623, the colony decided to implement a new economic system. Every family was assigned a private parcel of land. They could then keep all they grew for themselves, but now they alone were responsible for feeding themselves. While not a complete private property system, the move away from communal ownership had dramatic results.

This year I am giving thanks for private property.