The Year in Review

The Year in Review

Richard Epstein
Show Date
December 26, 2021
EconomicsRegulatory AgenciesCentral PlanningWhite House
Hoover InstitutionNew York UniversityUniversity of Chicago

Frequent guest, the erudite and always interesting Richard Epstein – aka “the Libertarian” – joins me to review the first year of the Biden Administration. We discussed the infrastructure bill, changes to the tax and regulatory code, the COVID response, and the withdrawal from Afghanistan, and more.

Last time, I spoke with Professor Epstein’s about his book The Dubious Morality of Modern Administrative Law (published by the Manhattan Institute) – a 200-page tour de force and a must-read for any student of modern American government. After providing context for the history of the administrative state pre-New Deal, it shows how case after case set dangerous precedents requiring courts to defer to agency actions when the law in question is ambiguous.

Tune in for the Professor’s report card on Biden’s handling of the economy, foreign policy, and pandemic response. Epstein has been critical of government intervention in the economy since the beginning of COVID, which he says is now clearly endemic.


Show summary:

The final show of 2021 ended up being one of my all-time favorites – @RichardAEpstein taking a look back at the year that was and analyzing events from an academic libertarian perspective. No attitude, just ideas. THREAD 🔻 

2/ Epstein says you have to dig deeper than the news headlines and go to the primary sources, because they will give you the wrong impression. Conservative media is almost as bad as liberal, except that they actually cite the sources.

The most dangerous thing is a monopoly on anything – especially on information.

3/ RECORD INFLATION - 6-7%, most we’ve seen in over 40 years

Inflation is a problem of uncertainty - monetary policymakers trying to outsmart the world. It’s a factor of two things: 1) Money Supply and 2) Velocity of Money.

Biden’s response? Investigate price-gouging using anti-trust legislation. That’s exactly the wrong kind of response, says Epstein.

4/ Tarring innocent businessman with an illegitimate brush will reduce confidence in private institutions. This is classic scapegoating.

The Vicious Cycle of Incompetence

5/ ON TRADE - Trump misunderstood the Exports-Imports equation. In fact, the only way to succeed in exports is to succeed in imports. You buy steel from Germany, incorporate it into your product, and then sell it abroad.

6/ Regime Uncertainty – As @independentinst Robert Higg’s points out, uncertainty in policy is a cost on business. It prevents them from making long-term investments and clouds the already difficult calculus for the entrepreneur.

This is one reason the Great Depression lasted so long:

7/ We’ve seen this in Biden’s handling of energy and domestic fracking. He didn’t shut it down, but made it more difficult and uncertain that the investments would pay off. Exports are way down as a result, and now Russia’s influence over Europe is growing with its exports of natural gas to Germany, etc.

Becuase energy is a global market, this also increases gas prices at home.

8/ This massive dislocation is caused by an alleged concern for global warming, for which there is only a very tenuous link to carbon dioxide emissions. Longer-term natural variations trump short-term fluctuations

Once again, we must go beneath the headlines to the actual reviews:

9/ Trump often did the right thing for the wrong reasons. He thought Climate change emissions were a “deal problem” with other nations, when in fact, we have to figure out the relative costs and benefits.

The world is a cleaner and safer place today than 20 years ago, largely because of technology that was developed in a free market – not because of the political classes.

10/ Epstein’s climate heresy: greenhouse gas emissions have built in negative feedback loops – they keep the sun out, and increase photosynthesis, which has a moderating effect on temperatures.

11/ Ironically, the press talks about inflation as if it is a natural external event, and climate change like it is firmly under our control, when in fact, the reverse is more likely true.

When it comes to making sacrifices for a hypothetical reduction in climate change, what is the moral reason for humans to, to minimize or reduce the standard of living today, in the theoretical hope that a bunch of strangers living to 500 years from now will not be inconvenience?

Try to leave the world as least as well off as you found it. Things like pollution and life expectancy have risen in the Soviet Union since they embraced free markets.

Why hasn’t the case been made to the public for the free market solutions?

In part, it’s the monopoly on information. Twitter won’t publish anything not already stated by the CDC or WHO. Sensible criticisms, like @JayBattacharya, get treated like fringe conspiracies.

There is no accounting of the costs and benefits with COVID in the mainstress press. No one gets punished for being incorrect time and time again.

SUPPLY CHAINS - What do the 114 ships outside of Long Beach teach us?

Any system of global trade will have specialization, which sometimes gets integrated into vertical supply chains, but more often gets translated into an elaborate grid with multiple linkages at multiple places. This can result in a common mode failure, where a single bottleneck like a harbor closure, has ripple effects throughout the grid.

Markets have a way of substituting - they are infinitely pliable - as long as governments don’t impose monopolistic barriers.

What likely happened this year was that production was ramping up after a down year (2020), which caused a surge in demand. Furthermore, Biden’s cash subsidies to the unemployed made it harder to hire truckers for example.

We can hope that in 2022 markets are allowed to function