Carpe Diem

Every year the National Committee on Pay Equity (NCPE) publicizes “Equal Pay Day” to bring public attention to the gender earnings gap. According to the NCPE, “Equal Pay Day” fell this year on March 14 based on an approximate 20% difference in unadjusted, raw median annual earnings according to the Census Bureau. This year’s “Equal Pay Day” therefore allegedly represents how far into 2023 women will have to continue working to earn the same income that their male counterparts and co-workers earned in 2022, supposedly for working side-by-side with men doing the exact same job working the exact same number of hours per week with the same education and the exact same number of years of continuous, uninterrupted work experience. 

Inspired by Equal Pay Day, I introduced “Equal Occupational Fatality Day” in 2010 to bring public attention to the huge gender disparity in work-related deaths every year in the United States. “Equal Occupational Fatality Day” tells us how many years and days into the future women will be able to continue to work in relative safety before they experience the same number of occupational fatalities that occurred for men in the previous year.

Last December, the Bureau of Labor Statistics (BLS) released final data on workplace fatalities in 2021, and a new “Equal Occupational Fatality Day” can now be calculated to complement “Equal Pay Day.” As in previous years, the top graphic above shows the significant gender disparity in workplace fatalities in 2021: 4,741 men died on the job (91.4% of the total) compared to only 448 women (8.6% of the total). The “gender occupational fatality gap” in 2021 was again considerable—nearly 11 men died on the job for every woman who died while working.

Based on the BLS data for 2021 for workplace fatalities by gender (and assuming those figures will be approximately the same in 2022), the next “Equal Occupational Fatality Day” will occur almost ten years from now—on September 18, 2032. That date symbolizes how far into the future women will be able to continue working before they experience the same loss of life that men experienced in 2022 from work-related deaths. Because women tend to work in safer occupations than men on average, they have the advantage of being able to work for almost a decade longer than men before they experience the same number of male occupational fatalities last year.

Economic theory tells us that the “gender occupational fatality gap” explains part of the “gender earnings gap” because a disproportionate number of men work in higher-risk, but higher-paid occupations like iron and steelworkers (99.0% male), roofers (97.1% male), construction trades (90.0%) and logging workers (96.0%); see BLS data here. The bottom chart above shows that for the 10 most dangerous US occupations in 2021 based on fatality rates per 100,000 workers by industry and occupation men represented more than 90% of the workers in nine of those 10 occupations (all except “Farmers and Ranchers”) and 96% or more male in six of the 10 most dangerous occupations (see data here and here).

On the other hand, women far outnumber men in relatively low-risk industries, sometimes with lower pay to partially compensate for the safer, more comfortable indoor office environments in occupations like office and administrative support (72.2% female), education, training, and library occupations (73.7% female), and healthcare practitioners (74.3% female). The higher concentrations of men in riskier occupations with greater occurrences of workplace injuries and fatalities suggest that more men than women are willing to expose themselves to work-related injury or death in exchange for higher wages. In contrast, women on average, more than men, prefer lower-risk occupations with greater workplace safety and are frequently willing to accept lower wages for the reduced probability of work-related injury or death. The reality is that men and women demonstrate clear gender differences when they voluntarily select the careers, occupations, and industries that suit them best, and those voluntary choices contribute to differences in earnings that have nothing to do with gender discrimination.

Bottom Line: Groups like the NCPE use “Equal Pay Day” to promote a goal of perfect gender pay equity, probably not realizing that they are simultaneously advocating a significant increase in the number of women working in higher-paying, but higher-risk occupations like roofing, construction, farming, and mining. The reality is that a reduction in the gender pay gap would require gender parity by occupation, and would therefore come at a huge cost: several thousand more women will be killed each year working in dangerous occupations.

Further, the proponents of “Equal Pay Day” are promoting a statistical falsehood by suggesting that women working side-by-side with men in the same occupation for the same company are making something like 20% less than their male counterparts, which causes them to have to work an additional three months to achieve “equal pay.” The NCPE’s statement that “because women earn less, on average than men, they must work [20%] longer for the same amount of pay,” implies that gender wage discrimination is the only factor behind the gender pay/earnings gap. Of course, that would imply that some corrective action by the government is necessary to address the gender pay gap, even though most studies find that there is no gender earnings gap after factors like hours worked, child-birth and child care, career interruptions, and individual choices about industry and occupation are considered. For example, a 2009 study by the Department of Labor concluded:

This study leads to the unambiguous conclusion that the differences in the compensation of men and women are the result of a multitude of factors and that the raw wage gap should not be used as the basis to justify corrective action. Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female
workers.

Conclusion: I hereby suggest, that after adjusting for all factors that contribute to gender differences, “Equal Pay Day” actually fell during the first week of this year. Or maybe the second week of January…. but NOT the third week of March. Women should be embarrassed by the statistical fairy tale that is annually promoted on their behalf by NCPE’s “Equal Pay Day.” The annual “Feminist Victimology Day” suggests that widespread and unchecked gender discrimination in the labor market burdens them with three months of additional work to earn the same amount as their male counterparts earned in the previous year—when that’s not even remotely true.

Finally, here’s a question I pose to the NCPE every year: Closing the “gender earnings gap” can really only be achieved by closing the “occupational fatality gap.” Would achieving the goal of perfect earnings equity really be worth the loss of life for thousands of additional women each year who would die in work-related accidents?

Related: From the Wall Street Journal‘s editorial in 2019 “Equal Death Day“:

Last Tuesday was “Equal Pay Day.” This unofficial holiday was first declared in 1996 to protest the “wage gap” between the sexes. In the latest data, according to proponents, American women who work full time earned only 80 cents for each $1 earned by men. Hence, to catch up with a man’s pay from 2018, a woman must keep working until roughly April 2.

The problem with comparing this raw, aggregate data is well documented. Women on average go into lower-paying fields, such as education. Mothers are likelier than fathers to choose flexibility over career advancement. Men tend to work slightly more hours on the job.

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The broader point is that humanity is complicated. Millions of men and women make their own choices about which careers, jobs and family structures will work best for them. Who but a committed social engineer could demand that their median pay precisely match?

Related: Here’s a quote from Camile Paglia in 2013 writing in TIME (“It’s a Man’s World and It Always Will Be“) about men’s important, but mostly underappreciated role in the labor market and the importance of their willingness to do the dangerous work that makes us all better off:

Indeed, men are absolutely indispensable right now, invisible as it is to most feminists, who seem blind to the infrastructure that makes their own work lives possible. It is overwhelmingly men who do the dirty, dangerous work of building roads, pouring concrete, laying bricks, tarring roofs, hanging electric wires, excavating natural gas and sewage lines, cutting and clearing trees, and bulldozing the landscape for housing developments. It is men who heft and weld the giant steel beams that frame our office buildings, and it is men who do the hair-raising work of insetting and sealing the finely tempered plate-glass windows of skyscrapers 50 stories tall.

Every day along the Delaware River in Philadelphia, one can watch the passage of vast oil tankers and towering cargo ships arriving from all over the world. These stately colossi are loaded, steered and off-loaded by men. The modern economy, with its vast production and distribution network is a male epic, in which women have found a productive role—but women were not its author. Surely, modern women are strong enough now to give credit where credit is due!

Related: “The ’77 Cents on the Dollar’ Myth About Women’s Pay,” my Wall Street Journal op-ed with Andrew Biggs in 2014:

While the BLS reports that full-time female workers earned 81% of full-time males, that is very different than saying that women earned 81% of what men earned for doing the same jobs, while working the same hours, with the same level of risk, with the same educational background and the same years of continuous, uninterrupted work experience, and assuming no gender differences in family roles like child care. In a more comprehensive study that controlled for most of these relevant variables simultaneously—such as that from economists June and Dave O’Neill for the American Enterprise Institute in 2012—nearly all of the 23% raw gender pay gap cited by Mr. Obama can be attributed to factors other than discrimination. The O’Neills conclude that, “labor market discrimination is unlikely to account for more than 5% but may not be present at all.”

These gender-disparity claims are also economically illogical. If women were paid 77 cents on the dollar, a profit-oriented firm could dramatically cut labor costs by replacing male employees with females. Progressives assume that businesses nickel-and-dime suppliers, customers, consultants, anyone with whom they come into contact—yet ignore a great opportunity to reduce wages costs by 23%. They don’t ignore the opportunity because it doesn’t exist. Women are not in fact
paid 77 cents on the dollar for doing the same work as men.

and “Equal Pay Day Commemorates a Mythical Gender Pay Gap” my Real Clear Markets op-ed with Andrew Biggs in 2017:

Proponents of the gender pay gap myth would have you believe that any difference in earnings between men and women is the result of gender pay discrimination. The reality is that men and women are different—they gravitate to different college majors, they have different levels of work experiences, they play different family roles, and they often work in very different types of jobs. It would be inexplicable to imagine that despite those many differences men and women would earn precisely the same amounts. It would also be completely unrealistic to suggest that the 20% difference in annual earnings is exclusively or even largely the result of gender discrimination. But to celebrate Equal Pay Day, those are some of the statistical fairy tales that you have to accept.

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My latest animated “bar chart race” visualization above (click the arrow to start) shows the format shares of recorded music sales annually from 1973 to 2022 based on new mid-year sales data that were released today by the Recording Industry Industry Association of America (RIAA) for the first half of 2022. The RIAA reports this summary for music sales during the first half of this year:

U.S. recorded music revenues in the first half of 2022 rose 9% to $7.7 billion at estimated retail value, building on the strong growth experienced the prior year. The number of paid subscriptions grew to a record high of 90 million, with revenues up 10% to $5.0 billion and comprising almost two-thirds of the first half total. At wholesale value, revenues grew 8% to $4.9 billion.

In the visualization above you can see the following:

• the dominance of vinyl records from 1973 through the early 1980s with more than a 50% market share in every year until 1984, and at least a two-thirds market share until 1980.
• the remarkable resurgence of vinyl record sales in the first half of 2022, which have exceeded the market share of CDs for the first time in 2020 (5.4% vs. 4%), 2021 (6.6% vs. 2.9%), and the first half of 2022 (7.4% vs. 2.6%). The 7.4% format share for vinyl records in the first half of this year was the highest share for LPs since 1988.
• the fall of 8-track tape sales from about a 25% market share between 1973-1976 to 0% by 1982 as cassette tapes entered the market.
• cassette tapes outsold 8-track tapes for the first time in 1980 and then outsold LPs in 1984 for the first time and maintained at least a 50% market share between 1984 and 1989.
• the gradual rise of CDs starting in 1983 when they were only 0.50% of recorded music sales, overtaking LP sales in 1987 and then cassette sales in 1991 before reaching a peak market share of 95.7% in 2002. This year CDs sales represented only 2.6% of recorded music sales, the lowest share since 2.4% in 1984, and CDs only accounted for 26% of physical sales revenues, while vinyl accounted for nearly 3/4 of physical format revenues.
• the rise in the market share of downloaded music (singles and albums) from 1.5% in 2004 to a peak market share of 41% in 2012 when it surpassed the CD market share for the first time. Through mid-year 2022, the market share for downloaded music fell to 3.3%, the lowest since a 1.5% share in 2004 when iTunes were first available
• the rise in the market share of paid digital subscription/streaming services starting from only a 1.2% market share in 2005 to surpassing the market share for CDs in 2014 (by 27.4% to 26.6%) and then surpassing the digital download music share (34.7% to 33.7%) the following year on the way to a majority market share in 2016 (52.4%) and then the new 84.2% record-high market share this year through June.

The rise and fall of music formats over the last half-century for vinyl records, 8-track tapes, cassette tapes, CDs, digital downloads, and now streaming music is a good example of the economic concept of “creative destruction” in the recorded music business. According to economist Joseph Schumpeter the “gales of creative destruction” describe the “processes of industrial mutation that continuously revolutionize the economic structure from within, incessantly destroying the old ones, incessantly creating new ones.” Physical music formats (LPs, tapes, CDs) have been “destroyed” and have now pretty much all been replaced with streaming music. And in each successive destruction and mutation, the music formats got better, cheaper, more widely available, and more convenient.

Record music sales are on track to reach $15.4 billion by the end of the year, which is just a little more than half of the peak music sales of $26 billion (in constant 2022 dollars) in 1999. What that means is that consumers today spend much less out-of-pocket today for recorded music than consumers in decades like the 1970s (when vinyl records dominated) and the 1990s and 2000s (when CDs were more than 90% of recorded music sales) with one remarkable difference: Consumers today have convenient, low-cost streaming access to almost the entire collection of music that has ever been recorded with a Spotify subscription that costs only $4.99 per month for students, $9.99 for individuals and $15.99 for families, or even free with ads (with no price increases since last year). And music listeners today aren’t burdened with large collections of physical LPs or CDs that take up lots of physical space and are time-consuming to keep organized. Nor do they have to buy expensive stereo equipment (turntables, amplifiers, CD players, and speakers) like in the past.

It’s another example of why it’s such an amazing time to be alive, especially if you’re a music lover. Recorded music today is cheaper, more abundant, and more convenient than ever before in human history. For $9.99 per month, you can conveniently access an unlimited amount of high-quality music. Think about it — for about 30 cents a day, the world’s entire music library is at your fingertips — what a tremendous bargain! (The great what?)

Related: The abundance of low-cost (almost free) music also illustrates one of the shortcomings of traditional GDP accounting when it comes to measuring our economic well-being or standard of living. Americans’ “music well-being” is clearly at an all-time high for the reasons discussed above. But according to official GDP statistics that include retail music sales, the nation’s “music well-being” today (measured by $15.4 billion in projected sales this year) is about half of what it was in 1999 when music sales were $26 billion (in 2022 dollars)! According to official GDP accounting, the “Golden Age of Music” was back in 1999 during the era of CDs, when it’s obvious that we’re experiencing the most miraculous music renaissance in history with streaming music that isn’t remotely being captured by national income accounting.

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Today (September 12) is H.L. Mencken’s birthday. The “Sage of Baltimore” (pictured above) was born on September 12 in 1880 and is regarded by many as one of the most influential American journalists, essayists, and writers of the early 20th century. To recognize the great political writer on the 142nd anniversary of his birthday, here are 17 of my favorite Mencken quotes:

1. Every election is a sort of advance auction sale of stolen goods.

2. A good politician is quite as unthinkable as an honest burglar.

3. A politician is an animal that can sit on a fence and yet keep both ears to the ground.

4. Democracy is a pathetic belief in the collective wisdom of individual ignorance.

5. Democracy is also a form of worship. It is the worship of jackals by jackasses.

6. Democracy is the art and science of running the circus from the monkey cage.

7. Democracy is the theory that the common people know what they want, and deserve to get it good and hard.

8. Every decent man is ashamed of the government he lives under.

9. If a politician found he had cannibals among his constituents, he would promise them missionaries for dinner.

10. For every complex problem, there is an answer that is clear, simple, and wrong.

11. The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.

12. As democracy is perfected, the office of the president represents, more and more closely, the inner soul of the people. We move toward a lofty ideal. On some great and glorious day, the plain folks of the land will reach their heart’s desire at last, and the White House will be adorned by a downright moron.

13. The urge to save humanity is almost always only a false face for the urge to rule it. Power is what all messiahs really seek: not the chance to serve.

14. No democratic delusion is more fatuous than that all men are capable of reason, and hence susceptible to conversion by evidence.

15. Communism, like any other revealed religion, is largely made up of prophecies.

16. The one permanent emotion of the inferior man is fear – fear of the unknown, the complex, the inexplicable. What he wants above everything else is safety.

17. When a new source of taxation is found it never means, in practice, that the old source is abandoned. It merely means that the politicians have two ways of milking the taxpayer where they had one before.

You can find more great Mencken quotes here.

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Yesterday marked what would have been trade economist Henry George’s 183nd birthday; he was born on September 2 in Philadelphia in 1839 and he died on October 29, 1897. To honor Henry George’s legacy and his significant contributions to advancing the principles of free trade and warning about the dangers of protectionism, this is my annual tribute to one of the greatest trade economists of all time, Henry George!

The seven excerpts below are from Henry George’s 1886 book Protection or Free Trade, which was Milton Friedman’s favorite book on trade, according to Cato Institute‘s Jim Powell, who wrote about the Henry George classic in his 2016 Wall Street Journal op-ed “Milton Friedman’s Favorite Book on Trade.” Friedman called it the most rhetorically brilliant book ever written on trade, and it was also the first book to be read entirely into the Congressional Record. According to Powell, Protection or Free Trade was probably the best book on trade written by anyone in the Americas and compared it to Adam Smith’s Wealth of Nations. George Mason economist Tyler Cowen wrote in 2009 that George’s 1886 book “remains perhaps the best-argued tract on free trade to this day.”

Some of the Henry George quotes below (italics added) were featured in Jim Powell’s 2016 Wall Street Journal op-ed but I’ve expanded on those by including some additional quotes from the full text of Protection or Free Trade, available online here from The Liberty Fund. As I wrote last year, this book should be required reading for Donald Trump, Peter Navarro, and all other protectionists/scarctityists who think that trade is win-lose, and who foolishly, mistakenly, and naively advocate tariffs and protectionism as a way to make the United States better off economically.

1. Maximize Imports, Not Exports. If foreigners will bring us goods cheaper than we can make them ourselves, we shall be the gainers. The more we get in imports as compared with what we have to give in exports, the better the trade for us. And since foreigners are not liberal enough to give us their productions, but will only let us have them in return for own productions, how can they ruin our industry? The only way they could ruin our industry would be by bringing us for nothing all we want, so as to save us the necessity for work. If this were possible, ought it seem very dreadful?

2. Voluntary Trade is Mutually Beneficial. Trade is not invasion. It does not involve aggression on one side and resistance on the other, but mutual consent and gratification. There cannot be a trade unless both parties agree to it.

3. Exposing Protectionist Fallacies. In a profitable international trade the value of imports will always exceed the value of the exports that pay for them, just as in a profitable trading voyage the return cargo must exceed in value the cargo carried out. This is possible to all the nations that are parties to commerce, for in a normal trade commodities are carried from places where they are relatively cheap to places where they are relatively dear, and their value is thus increased by the transportation, so that a cargo arrived at its destination has a higher value than on leaving the port of its exportation. But on the theory that a trade is profitable only when exports exceed imports, the only way for all countries to trade profitably with one another would be to carry commodities from places where they are relatively dear to places where they are relatively cheap. An international trade made up of such transactions as the exportation of manufactured ice from the West Indies to New England, and the exportation of hot-house fruits from New England to the West Indies, would enable all countries to export much larger values than they imported. On the same theory the more ships sunk at sea the better for the commercial world. To have all the ships that left each country sunk before they could reach any other country would, upon protectionist principles, be the quickest means of enriching the whole world, since all countries could then enjoy the maximum of exports with the minimum of imports.

4. Exposing Tariff Fallacies. To every trade there must be two parties who mutually desire to trade, and whose actions are reciprocal. No one can buy unless he can find someone willing to sell; and no one can sell unless there is some other one willing to buy. If Americans did not want to buy foreign goods, foreign goods could not be sold here even if there were no tariff. The efficient cause of the trade which our tariff aims to prevent is the desire of Americans to buy foreign goods, not the desire of foreign producers to sell them. Thus protection really prevents what the “protected” themselves want to do. It is not from foreigners that protection preserves and defends us; it is from ourselves.

5. On the Fallacy of Protecting Infant Industries. What are really infant industries have no more chance in the struggle for governmental encouragement than infant pigs with full-grown swine about a meal-tub. Not merely is the encouragement likely to go to industries that do not need it, but is likely to go to industries that can be maintained only in this way, and thus to cause absolute loss to the community by diverting labor and capital from remunerative industries.

6. Protectionism = Force. Trade does not require force. Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do. Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same—to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war.

7. On the Fallacy of Trade Retaliation. And in the same way, for any nation to restrict the freedom of its own citizens to trade, because other nations so restrict the freedom of their citizens, is a policy of the “biting off one’s nose to spite one’s face” order. Other nations may injure us by the imposition of taxes which tend to impoverish their own citizens, for as denizens of the world it is to our real interest that all other denizens of the world should be prosperous. But no other nation can thus injure us so much as we shall injure ourselves if we impose similar taxes upon our own citizens by way of retaliation.

Happy Birthday to Henry George — his brilliant and timeless insights about international trade, protectionism, and trade retaliation are just as fresh and relevant today as in the late 1800s, maybe even more so today than ever before given the resurgence during Trump’s presidency of the popularity of the discredited trade “theories” of protectionism, mercantilism, and scarcityism.

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British mathematician John Venn (pictured above, click to enlarge) was born on August 4, 1834, so last Thursday marked the 188th anniversary of his birth in Hull, England. John Venn is most known for creating and introducing the Venn diagram in 1880, which has been used in the fields of set theory, probability, logic, statistics, and computer science according to his Wikipedia page. Interestingly, Venn himself did not use the term “Venn diagram,” instead he referred to his diagrams as “Eulerian Circles.” It wasn’t until 1918 that Venn’s invention was referred to as a “Venn diagram” by Clarence Irving Lewis in his book “A Survey of Symbolic Logic.”

Sorry for my delay to belatedly recognize the anniversary of John Venn’s birthday last week, I present 20 of my Venn diagrams below, which have all appeared on CD, Facebook and/or Twitter. Thanks to John Venn, I now have a part-time job as a Venn diagram graphic artist/specialist — they are a very effective way to illustrate graphically the intellectual inconsistencies that are widespread and commonplace among the public, especially with our left-leaning friends. Over the years, I have created more than 200 Venn diagrams and some are available here at this link: Venn Diagram Archives.

1. Venn Diagram of the Day I (above) on those who once supported MLK’s philosophy of judging individuals by their character without considering their melanin or genitals but who today promote identity politics with primary attention to an individual’s skin color and sex.

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2. Venn Diagram II (above). If America is so inflicted and infected with intractable racism and toxic white supremacy then why do so many people of color want to come here?

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3. Venn Diagram III (above) on the double-standard some people on Title IX prohibition of sex discrimination. I’m not sure this will actually translate to uniform enforcement of Title IX violations, but President Biden recently issued an “Executive Order on Guaranteeing an Educational Environment Free from Discrimination on the Basis of Sex,” where he stated unequivocally that “It is the policy of my Administration that all students should be guaranteed an educational environment free from discrimination on the basis of sex.”

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4. Venn Diagram IV (above) on those who fail to understand that international trade is just a form of innovative technology that raises our standard of living, lowers prices, and increases net jobs.

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5. Venn Diagram V (above) on those who celebrate International Women’s Day but believe that womanhood is an arbitrary, oppressive social construct.

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6. Venn Diagram VI (above). Where are they now? Anybody, anybody? Sen. Sanders? AOC?

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7. Venn Diagram VII (above). On those who understand the economic benefits of job-creating tax cuts while failing to understand that increases in tariffs are job-killing tax hikes.

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8. Venn Diagram VIII (above). On those who fail to understand that voluntary trade is win-win and mutually beneficial regardless of whether the buyer and seller are on the same side, or different sides, of imaginary lines called national borders.

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9. Venn Diagram IX (above). On those who selectively claim that discrimination is the main explanatory factor when there are differences in earnings between two groups.

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10. Venn Diagram X (above). On those who support government grants for women but support Biden’s efforts to erase women and girls as a category in the law.

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11. Venn Diagram XI (above). On those who love diversity and hate diversity at the same time?

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12. Venn Diagram XII (above). On the double-standard for racial discrimination and racial equity for Asian-Americans.

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13. Venn Diagram XIII (above). On those who support relaxed academic standards for preferred minority groups, not realizing that means those groups must be less qualified and proficient on average.

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14. Venn Diagram XIV (above). On the inconsistency regarding IDs for voting vs. buying products and services.

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15. Venn Diagram XV (above). On those who understand that market forces determine wages in the labor markets…. but only sometimes.

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16. Venn Diagram XVI (above). On the double-standard for Chinese racism.

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17. Venn Diagram XVII (above). If climate science is settled, why the endless need for funding to confirm the settled “consensus”?

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18. Venn Diagram XVIII (above) on progressive/liberal inconsistency when it comes to “tax cuts for the rich.”

19. Venn Diagram XIX (above). On the selective support/condemnation of embargoes/boycotts.

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20. Venn Diagram XX (above) on equal treatment by race vs. the new “racial equity” (more accurately “racial inequity”).

Happy Birthday, John Venn!

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An important event takes place tomorrow that is recognized annually on CD. Every year on July 31 we celebrate the birthday of Milton Friedman — he was born on that day in 1912 and would have been 110 years old this year. Unfortunately, Milton died on November 16, 2006, when he was 94 years old. In an editorial in the Wall Street Journal following Professor Friedman’s death, they reported his loss with the same tribute Milton used when Ronald Reagan died, saying “few people in human history have contributed more to the achievement of human freedom.” In honor of his legacy and birthday this week, here are 20 of my favorite Milton Friedman quotes, along with a bonus video and some special birthday graphics:

1. There is nothing as permanent as a temporary government program.

2. Many well-meaning people favor legal minimum-wage rates in the mistaken belief that they help the poor. These people confuse wage rates with wage income. It has always been a mystery to me to understand why a youngster is better off unemployed at $15 an hour than employed at $7.25 (updated). The rise in the legal minimum-wage rate is a monument to the power of superficial thinking.

3. First of all, the government doesn’t have any responsibility to the poor. People have responsibility. This building doesn’t have responsibility. You and I have responsibility. People have responsibility. Second, the question is how can we as people exercise our responsibility to our fellow-man most effectively? That’s the problem. So far as poverty is concerned, there has never been a more effective machine for eliminating poverty than the free enterprise system and the free market. The period in which you had the greatest improvement in the lot of the ordinary man was the period of the 19^th and early 20^th century.

4. In the international trade area, the language is almost always about how we must export, and what’s really good is an industry that produces exports, and if we buy from abroad and import, that’s bad. But surely that’s upside-down. What we send abroad, we can’t eat, we can’t wear, we can’t use for our houses. On the other hand, the goods and services we import, they provide us with TV sets we can watch, with automobiles we can drive, with all sorts of nice things for us to use.

When people talk about a favorable balance of trade, what is that term taken to mean? It’s taken to mean that we export more than we import. But from the point of view of our economic well-being and our standard of living, that’s an unfavorable balance. That means we’re sending out more goods and getting fewer in return. Each of you in your private household would know better than that. You don’t regard it as a favorable balance when you have to send out more goods to get less coming in. It’s favorable when you can get more by sending out less.

5. There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.

6. I’m in favor of legalizing drugs. According to my values system, if people want to kill themselves, they have every right to do so. Most of the harm that comes from drugs is because they are illegal.

7. Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.

8. The government solution to a problem is usually as bad as the problem.

9. The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.

10. The high rate of unemployment among teenagers, and especially black teenagers is both a scandal and a serious source of social unrest. Yet it is largely a result of minimum wage laws. We regard the minimum wage law as one of the most, if not the most, anti-black laws on the statute books.

11. Industrial progress, mechanical improvement, all of the great wonders of the modern era have meant relatively little to the wealthy. The rich in Ancient Greece would have benefited hardly at all from modern plumbing: running servants replaced running water. Television and radio? The patricians of Rome could enjoy the leading musicians and actors in their home, could have the leading actors as domestic retainers. Ready-to-wear clothing, supermarkets — all these and many other modern developments would have added little to their life. The great achievements of Western capitalism have redounded primarily to the benefit of the ordinary person. These achievements have made available to the masses conveniences and amenities that were previously the exclusive prerogative of the rich and powerful.

12. President Kennedy said, “Ask not what your country can do for you — ask what you can do for your country.”… Neither half of that statement expresses a relation between the citizen and his government that is worthy of the ideals of free men in a free society. “What your country can do for you” implies that the government is the patron, the citizen the ward. “What you can do for your country” assumes that the government is the master, and the citizen the servant.

13. If you look at the drug war from a purely economic point of view, the role of the government is to protect the drug cartel. That’s literally true.

14. “Fair” is in the eye of the beholder; “free” is the verdict of the market. The word “free” is used three times in the Declaration of Independence and once in the First Amendment to the Constitution, along with “freedom.” The word “fair” is not used in either of our founding documents.

15. What most people really object to when they object to a free market is that it is so hard for them to shape it to their own will. The market gives people what the people want instead of what other people think they ought to want. At the bottom of many criticisms of the market economy is really a lack of belief in freedom itself.

16. The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from grinding poverty, the only cases in recorded history are where they’ve had capitalism and largely free trade. If you want to know where the masses are worst off, it’s exactly in the kinds of societies that depart from that, so that the record of history is absolutely crystal clear: that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.

17. The problem of social organization is how to set up an arrangement under which greed will do the least harm; capitalism is that kind of a system.

18. With some notable exceptions, businessmen favor free enterprise in general but are opposed to it when it comes to themselves.

19. If you and your fellow citizens continue on moving more and more in the direction of socialism, not only inspired through your drug prohibition but through your socialization of schools, the socialization of medicine, the regulation of industry, I see for my granddaughter the equivalent of Soviet communism three years ago. (Note: This was from a 1991 interview with Milton Friedman.)

20. The government has no more right to tell me what goes into my mouth [including illegal drugs] than it has to tell me what comes out of my mouth.

Happy 110th Birthday Milton Friedman!

Bonus 1 (video below): In his 1979 appearance on the Phil Donahue Show, Milton Friedman demonstrates his quick wit and intellect when he schools Donahue on greed, self-interest, and the superiority of the free enterprise system over socialism.

Bonus 2: You’ll find a great collection here of more than 30 Milton Friedman videos (the “Milton Friedman Speaks” lectures) on a variety of topics including “What is America?”, “Is Capitalism Humane?”, free trade, energy policy, the role of government in a free society, education and vouchers, the rights of workers, consumer protection, equality and freedom, and the future of our society.

Bonus 3: Hosted by the Hoover Institution, the Collected Works of Milton Friedman website contains more than 1,500 digital items by and about economist, Nobel Prize winner, and Hoover fellow Milton Friedman. The site features hundreds of Friedman’s articles, op-eds, speeches, lectures, television appearances, and more.

Bonus 4: Below are some graphics created by graphic designer Olivier Ballou to honor Friedman’s birthday:

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As I wrote in the summer of 2018 on CD, I’ve probably created and posted more than 3,000 graphics on CD, Twitter, and Facebook including charts, graphs, tables, figures, maps, and Venn diagrams over the last 15 years. Of all of those graphics, I don’t think any has gotten more attention, links, re-Tweets, re-posts, and mentions than previous versions of the chart above, which was once referred to as “the Chart of the Century.” Here are some examples of the attention that past versions of the chart above have gotten:

• Marketwatch has featured the chart twice here and here and made this comment “When this chart’s creator, econ professor Mark Perry and the man behind the Carpe Diem blog, first posted it on Twitter, it was hailed as “stunning” and “one of the most important charts about the economy this century.”
• Barry Ritholz has featured various versions of the chart three times on his Big Picture Blog here, here, and here.
• Bloomberg published an article in July 2018 titled “Chart of Century Gives Powell Gloomy Glimpse of Trade-War World,” with this opening:

A multi-colored graphic that’s made the rounds at the Federal Reserve hints at what Chairman Jerome Powell could face if President Donald Trump succeeds in throwing globalization into reverse: Higher prices for many goods and potentially faster inflation.

Plugged as possibly the chart of the century by economist and originator Mark Perry, it shows that prices of goods subject to foreign competition — think toys and television sets — have tumbled over the past two decades as trade barriers have come down around the world. Prices of so-called non-tradeables — hospital stays and college tuition, to name two — have surged.

• That report was followed by a CBS MoneyWatch article “Inflation risks, trade war costs, make Fed’s job much harder.”

A chart that has been making the rounds at the Fed from economist Mark Perry shows how falling prices for trade-sensitive things like TV sets and toys have helped offset rising costs for things like medical services, housing and education.

• Clemson University economist Bruce Yandle featured the chart in a March 2019 Washington Examiner op-ed titled “Rising prices, global competition, and the chart of the century“:

American Enterprise Institute economist Mark J. Perry is highly and justifiably respected for his ability to convey complicated economic relationships by way of rather simple charts and graphs. The most famous example of this, shown here, is called by some the “chart of the century.” The high praise comes about because the chart is loaded with information regarding the types of challenges faced by the Fed and other Washington policymakers. Perry’s most recent version reports price increases from 1998 through 2018 for 14 categories of goods and services along with the average wage and overall Consumer Price Index.

Based on last week’s BLS report on CPI price data through June 2022 I’ve updated the chart above with price changes through the middle of this year. During the most recent 22.5-year period from January 2000 to June 2022, the CPI for All Items increased by 74.4% and the chart displays the relative price increases over that time period for 14 selected consumer goods and services, and for average hourly wages. Seven of those goods and services have increased more than the average inflation rate of 74.4%, led by huge increases in hospital services (+220%), college tuition (+178%), and college textbooks (+162%), followed by increases in medical care services (+130%), child care (+115%), food and beverages (82%) and housing (80%). Average hourly earnings have also increased more than average inflation since January 2000 — by nearly 100% — indicating that hourly wages have increased 25% more over the last two decades that the average increase in consumer prices.

The other seven price series have been flat or have declined since January 2000, led by TVs (-97%), toys (-72%), computer software (-70.5%), and cell phone service (-41%). The CPI series for new cars, household furnishings (furniture, appliances, window coverings, lamps, dishes, etc.), and clothing have remained relatively flat for the last 22 years while average consumer prices increased by 74.4% and wages by 99.6%, although all three series (TVs, toys, and software) have

Various observations that have been made about the huge divergence in price patterns over the last several decades displayed in the chart include:

a. The greater (lower) the degree of government involvement in the provision of a good or service the greater (lower) the price increases (decreases) over time, e.g., hospital and medical costs, college tuition, childcare with both large degrees of government funding/regulation and large price increases vs. software, electronics, toys, cars and clothing with both relatively less government funding/regulation and falling prices. As somebody on Twitter commented:

Blue lines = prices subject to free-market forces. Red lines = prices subject to regulatory capture by government. Food and beverages are debatable either way. Conclusion: remind me why socialism is so great again.

b. Prices for manufactured goods (cars, clothing, appliances, furniture, electronic goods, toys) have experienced large price declines over time relative to overall inflation, wages, and prices for services (education, medical care, and childcare).

c. The greater the degree of international competition for tradeable goods, the greater the decline in prices over time, e.g., toys, clothing, TVs, appliances, furniture, footwear, etc.

d. From Twitter comments this week (2022).

*Thank goodness the government doesn’t subsidize TVs or toys, or toy TVs.

*Almost every line that went up, has had some type of government involvement, while the lines going down have more to do with capitalism.

*And as always, the more regulated, the more expensive things become.

What’s New?

d. The price series that has shown the greatest change recently is the CPI for Educational Books (mostly college textbooks). Textbook prices rose an average of nearly 6% annually between January 2000 and December 2016, nearly three times the average annual inflation during that period of just over 2%. But starting in early 2017, the CPI for Educational Books flattened for the first time ever and started trending downward. On an average annual basis, the CPI for Educational Books increased by 1.4% in 2021, following declines in both 2019 (-1.5%) and 2020 (-1.1%). The two consecutive annual decreases in 2019 and 2020 and the small increase in 2021 have been an unprecedented departure from a half-century of increases in educational book prices that averaged more than 6% between 1968 and 2018.

We can expect future declines in the prices of college textbooks, as the traditional textbook market faces increasingly tough and disruptive competition from alternative options including hundreds of “open textbooks” that have been funded, published, and licensed to be freely used, adapted, and distributed. The University of Minnesota’s Center for Open Education maintains an “Open Textbook Library” website that lists hundreds of textbooks in more than 40 academic subjects that are available for free online or as a PDF file, or as a print copy at a low-cost ($33.50 for print copies from OpenStax). Just in the field of economics, there are 27 free open textbooks for Economics courses including Principles of Microeconomics, Principles of Macroeconomics, International Economics, Money and Banking, Economic Analysis, and Principles of Political Economy.

Based on the evidence in the chart above showing stagnating and now falling college textbook prices following half a century of rising prices, Hurricane Joseph (Schumpeter) appears to be hitting the college textbook market with a very large, tsunami of creative destruction called “The Open Textbook Effect.”

e. The annual increase in college tuition and fees of only 0.90% last year was the smallest annual increase in the history of the CPI for college tuition and fees going back to 1978, and the only annual increase ever below 1%. That increase is far below the average annual increase in college tuition of nearly 7% over the last 42 years. So perhaps the “higher education bubble” is finally starting to show signs of deflating? And we can expect that bubble to continue to deflate as a result of the new pressure from the coronavirus pandemic on higher education that has accelerated the downward trend in college enrollment that has been ongoing for the last decade.

MP: I’ll continue to update the price chart every six months, look for the next version in January 2023 with data through December 2022.

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On Independence Day you can test your knowledge of America’s Declaration of Independence Day with this 14-question CD quiz. You need six correct answers to pass!

You’ll find the correct answers and more facts here, here, here and here.

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One of my two all-time most favorite economists—Dr. Thomas Sowell— turns 92 tomorrow, he was born on June 30, 1930. Here is Thomas Sowell’s webpage and here is his Wikipedia entry. Milton Friedman (my other all-time favorite economist) once said, “The word ‘genius’ is thrown around so much that it’s becoming meaningless, but nevertheless I think Tom Sowell is close to being one.”

In my opinion, there is no economist alive today who has done more to eloquently, articulately, and persuasively advance the principles of economic freedom, limited government, individual liberty, and a free society than Thomas Sowell. In terms of both his quantity of work (49 books and several thousand newspaper columns) and the consistently excellent and crystal-clear quality of his writing, I don’t think any living free-market economist even comes close to matching Sowell’s prolific record of writing about economics. And as I’ve mentioned previously on CD, as a writer Thomas Sowell is truly the “Master of Idea Density”—he has the amazing talent of being able to consistently pack more ideas, insight, and wisdom into a single sentence or paragraph than what typically takes an entire essay or book for even the best writer!

Even in his 80s, Thomas Sowell remained active and was writing two syndicated newspaper columns almost every week for the last 25 years until he “retired” from those weekly deadlines at the end of 2016 (see CD post here). On his birthday last year at the age of 90, Thomas Sowell released his 49th book “Charter Schools and Their Enemies” which amazingly was his 11th book since 2010 and his 24th book since the turn of the century! To honor Thomas Sowell’s 92nd birthday tomorrow, I present below 15 of my favorite quotations from Dr. Thomas Sowell and three bonus videos of the great economist:

 1. Knowledge. “The cavemen had the same natural resources at their disposal as we have today, and the difference between their standard of living and ours is a difference between the knowledge they could bring to bear on those resources and the knowledge used today.”

2. Obamacare. “If we cannot afford to pay for doctors, hospitals, and pharmaceutical drugs now, how can we afford to pay for doctors, hospitals, and pharmaceutical drugs, in addition to a new federal bureaucracy to administer a government-run medical system?”

3. Economics vs. Politics I. “Economics and politics confront the same fundamental problem: What everyone wants adds up to more than there is. Market economies deal with this problem by confronting individuals with the costs of producing what they want and letting those individuals make their own trade-offs when presented with prices that convey those costs. That leads to self-rationing, in the light of each individual’s own circumstances and preferences. Politics deals with the same problem by making promises that cannot be kept, or which can be kept only by creating other problems that cannot be acknowledged when the promises are made.”

4. Economics vs. Politics II. “The first lesson of economics is scarcity: There is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics. When politicians discover some group that is being vocal about not having as much as they want, the “solution” is to give them more. Where do politicians get this “more”? They rob Peter to pay Paul. After a while, of course, they discover that Peter doesn’t have enough. Bursting with compassion, politicians rush to the rescue. Needless to say, they do not admit that robbing Peter to pay Paul was a dumb idea in the first place. On the contrary, they now rob Tom, Dick, and Harry to help Peter.”

5. Predicting the Future. “Economists are often asked to predict what the economy is going to do. But economic predictions require predicting what politicians are going to do—and nothing is more unpredictable.”

6. Politicians as Santa Claus. “The big question that seldom—if ever—gets asked in the mainstream media is whether these are a net increase in jobs. Since the only resources that the government has are the resources it takes from the private sector, using those resources to create jobs means reducing the resources available to create jobs in the private sector.

So long as most people do not look beyond superficial appearances, politicians can get away with playing Santa Claus on all sorts of issues, while leaving havoc in their wake—such as growing unemployment, despite all the jobs being ‘created.’”

7. Health Insurance. “Whatever position people take on health care reform, there seems to be a bipartisan consensus—usually a sign of mushy thinking—that it is a good idea for the government to force insurance companies to insure people whom politicians want them to insure, and to insure them for things that politicians think should be insured. Contrary to what politicians expect us to do, let’s stop and think.

Why aren’t insurance companies already insuring the people and the conditions that they are now going to be forced to cover? Because that means additional costs—and because the insurance companies don’t think their customers are willing to pay those particular costs for those particular coverages.

It costs politicians nothing to mandate more insurance coverage for more people. But that doesn’t mean that the costs vanish into thin air. It simply means that both buyers and sellers of insurance are forced to pay costs that neither of them wants to pay. But, because political rhetoric leaves out such grubby things as costs, it sounds like a great deal.”

8. Diversity. “If there is any place in the Guinness Book of World Records for words repeated the most often, over the most years, without one speck of evidence, “diversity” should be a prime candidate. Is diversity our strength? Or anybody’s strength, anywhere in the world? Does Japan’s homogeneous population cause the Japanese to suffer? Have the Balkans been blessed by their heterogeneity—or does the very word “Balkanization” remind us of centuries of strife, bloodshed and unspeakable atrocities, extending into our own times? Has Europe become a safer place after importing vast numbers of people from the Middle East, with cultures hostile to the fundamental values of Western civilization?

“When in Rome do as the Romans do” was once a common saying. Today, after generations in the West have been indoctrinated with the rhetoric of multiculturalism, the borders of Western nations on both sides of the Atlantic have been thrown open to people who think it is their prerogative to come as refugees and tell the Romans what to do—and to assault those who don’t knuckle under to foreign religious standards.

It has not been our diversity, but our ability to overcome the problems inherent in diversity, and to act together as Americans, that has been our strength.”

9. Greed. “Someone pointed out that blaming economic crises on “greed” is like blaming plane crashes on gravity. Certainly, planes wouldn’t crash if it wasn’t for gravity. But when thousands of planes fly millions of miles every day without crashing, explaining why a particular plane crashed because of gravity gets you nowhere. Neither does talking about “greed,” which is constant like gravity.”

10. The Anointed Ones. “In their haste to be wiser and nobler than others, the anointed have misconceived two basic issues. They seem to assume: 1) that they have more knowledge than the average member of the benighted, and 2) that this is the relevant comparison. The real comparison, however, is not between the knowledge possessed by the average member of the educated elite versus the average member of the general public, but rather the total direct knowledge brought to bear through social processes (the competition of the marketplace, social sorting, etc.), involving millions of people, versus the secondhand knowledge of generalities possessed by a smaller elite group.

The vision of the anointed is one in which ills as poverty, irresponsible sex and crime derive primarily from ‘society,’ rather than from individual choices and behavior. To believe in personal responsibility would be to destroy the whole special role of the anointed, whose vision casts them in the role of rescuers of people treated unfairly by ‘society.’”

11. There’s No Free Red Tape/Obamacare. “Do you seriously believe that millions more people can be given medical care and vast new bureaucracies created to administer payment for it, with no additional costs?

Just as there is no free lunch, there is no free red tape. Bureaucrats have to eat, just like everyone else, and they need a place to live and some other amenities. How do you suppose the price of medical care can go down when the costs of new government bureaucracies are added to the costs of the medical treatment itself?

And where are the extra doctors going to come from, to treat the millions of additional patients? Training more people to become doctors is not free. Politicians may ignore costs but ignoring those costs will not make them go away. With bureaucratically controlled medical care, you are going to need more doctors, just to treat a given number of patients, because time that is spent filling out government forms is time that is not spent treating patients. And doctors have the same 24 hours in the day as everybody else.

When you add more patients to more paperwork per patient, you are talking about still more costs. How can that lower medical costs? But although that may be impossible, politics is the art of the impossible. All it takes is rhetoric and a public that does not think beyond the rhetoric they hear.”

12. Helping the Poor. “It was Thomas Edison who brought us electricity, not the Sierra Club. It was the Wright brothers who got us off the ground, not the Federal Aviation Administration. It was Henry Ford who ended the isolation of millions of Americans by making the automobile affordable, not Ralph Nader.

Those who have helped the poor the most have not been those who have gone around loudly expressing “compassion” for the poor, but those who found ways to make industry more productive and distribution more efficient, so that the poor of today can afford things that the affluent of yesterday could only dream about.”

13. Income Mobility. “Only by focusing on the income brackets, instead of the actual people moving between those brackets, have the intelligentsia been able to verbally create a “problem” for which a “solution” is necessary. They have created a powerful vision of “classes” with “disparities” and “inequities” in income, caused by “barriers” created by “society.” But the routine rise of millions of people out of the lowest quintile over time makes a mockery of the “barriers” assumed by many, if not most, of the intelligentsia.”

14. Giving Back. “All the high-flown talk about how people who are successful in business should “give back” to the community that created the things that facilitated their success is, again, something that sounds plausible to people who do not stop and think through what is being said. After years of dumbed-down education, that apparently includes a lot of people.

Take Obama’s example of the business that benefits from being able to ship their products on roads that the government built. How does that create a need to “give back”? Did the taxpayers, including business taxpayers, not pay for that road when it was built? Why should they have to pay for it twice?

What about the workers that businesses hire, whose education is usually created in government-financed schools? The government doesn’t have any wealth of its own, except what it takes from taxpayers, whether individuals or businesses. They have already paid for that education. It is not a gift that they have to “give back” by letting politicians take more of their money and freedom.

When businesses hire highly educated people, such as chemists or engineers, competition in the labor market forces them to pay higher salaries for people with longer years of valuable education. That education is not a government gift to the employers. It is paid for while it is being created in schools and universities, and it is paid for in higher salaries when highly educated people are hired.

One of the tricks of professional magicians is to distract the audience’s attention from what they are doing while they are creating an illusion of magic. Pious talk about “giving back” distracts our attention from the cold fact that politicians are taking away more and more of our money and our freedom.”

15. Government Assistance. “Do people who advocate special government programs for blacks realize that the federal government has had special programs for American Indians, including affirmative action, since the early 19th century—and that American Indians remain one of the few groups worse off than blacks?”

Bonus Video I (below): In 1990, Thomas Sowell was honored as the recipient of the American Enterprise Institute’s Francis Boyer Award and gave a lecture titled “Cultural Diversity: A World View” as part of the event in his honor, see video below. Other recipients of AEI’s Francis Boyer Award from 1977 to 2002 included Gerald Ford, Henry Kissinger, Jeanne Kirkpatrick, Paul Volcker, Ronald Reagan, Alan Greenspan, Antonin Scalia, Clarence Thomas, George Will, and Michael Novak.

Bonus Video II (below): Thomas Sowell discusses the premise behind his 1996 book, “Vision of the Anointed: Self-Congratulation as a Basis for Social Policy.”

Bonus Video III (below): On June 2, Wall Street Journal columnist and senior Manhattan Institute fellow Jason L. Riley joined my AEI colleague Jonah Goldberg and me to discuss Jason’s new book “Maverick: A Biography of Thomas Sowell.” You can watch the video above, and here’s the event description below.

“When you want to help people,” wrote Thomas Sowell, “you tell them the truth.” In “Maverick: A Biography of Thomas Sowell” (Basic Books, 2021), Manhattan Institute’s Jason L. Riley explores the life of an African American intellectual who overcame racial and class boundaries to become one of the most remarkable economists of the modern age. Yet despite his career spanning half a century, critics on the left have not acknowledged Dr. Sowell’s scholarship, due to his willingness to speak uncomfortable truths about social inequality, political theory, and racial issues. Please join AEI for a conversation with Mr. Riley and AEI’s Jonah Goldberg and Mark J. Perry on how we should think about Dr. Sowell’s contributions to our evolving debates on economics, race, and culture.

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Tomorrow, June 30, marks the 221st anniversary of the birth of the great French classical liberal economist Frédéric Bastiat (born June 30, 1801) whom economist Joseph Schumpeter called the “most brilliant economic journalist who ever lived.” According to the Library of Economics and Liberty Bastiat’s biggest contribution to economics was “his fresh and witty expressions of economic truths made them so understandable and compelling that the truths became hard to ignore.” Celebrating Bastiat’s birthday has become an annual tradition at CD, and below I present some of my favorite quotes from the great liberty-loving, influential French economist!

1. One of Bastiat’s most famous and important writings was “The Candlemakers’ Petition,” which is such a clear and convincing satirical attack on trade protectionism that it often appears in textbooks on economics and international trade. Here’s an excerpt from that famous 1845 essay (emphasis added):

We [French candlemakers] are suffering from the intolerable competition of a foreign rival, placed, it would seem, in a condition so far superior to ours for the production of light that he absolutely inundates our national market with it at a price fabulously reduced. The moment he shows himself, our trade leaves us — all consumers apply to him; and a branch of native industry, having countless ramifications, is all at once rendered completely stagnant. This rival, who is none other than the sun, wages war mercilessly against us.

We ask you to pass a law requiring the closing of all windows, skylights, dormer-windows, outside and inside shutters, curtains, blinds; in a word, of all openings, holes, chinks, clefts, and fissures, by or through which the light of the sun has been in use to enter houses, to the prejudice of the meritorious manufactures with which we flatter ourselves that we have accommodated our country — a country that, in gratitude, ought not to abandon us now to a strife so unequal.

2. In 1845, as a solution to counteract job losses in some French domestic industries (like textiles) due to free trade, Bastiat proposed to the King of France that he “forbid all loyal subjects to use their right hands.” Bastiat predicted that:

…as soon as all right hands are either cut off or tied down, things will change. Twenty times, thirty times as many embroiderers, pressers and ironers, seamstresses, dressmakers and shirt-makers, will not suffice to meet the national demand. Yes, we may picture a touching scene of prosperity in the dressmaking business. Such bustling about! Such activity! Such animation! Each dress will busy a hundred fingers instead of ten. No young woman will any longer be idle. Not only will more young women be employed, but each of them will earn more, for all of them together will be unable to satisfy the demand.

3. Here’s Bastiat’s famous quote on legal plunder (now frequently referred to as “crony capitalism”), from Bastiat’s book The Law:

Legal plunder can be committed in an infinite number of ways. Thus we have an infinite number of plans for organizing it: tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit, and so on, and so on. All these plans as a whole—with their common aim of legal plunder—constitute socialism.

But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.

4. Four days before his death in 1850, Frederic Bastiat sent this message to a friend:

Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.

5. When a new railroad line was proposed from France to Spain, the French town of Bordeaux lobbied for a break in the tracks so that “all goods and passengers are forced to stop at that city,” which would, therefore, be “profitable for boatmen, porters, owners of hotels, etc.” Using reductio ad absurdum, Bastiat proposed that if a break in the tracks provided economic benefits and jobs for one town and served the general public interest, then it would be good for breaks in the tracks at dozens and dozens of other French towns, to the absurd point that there would be a railroad composed of a whole series of breaks in the tracks, so that it would actually become a “negative railway.”

6. In his famous essay “What Is Seen and What Is Not Seen,“ Bastiat was one of the first economists to make the very important distinction between the immediate, concentrated and visible effects of legislation, trade protection or regulation and the delayed, dispersed and invisible effects:

In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.

To illustrate the principle of “what is seen and what is not seen,” Bastiat told a story that became known as the “The Parable of the Broken Window,” which was modernized in the 1940s by Henry Hazlitt in his book “Economics in One Lesson.” Here’s a quick summary:

A baker has saved $50 to buy a new suit, but then a young hoodlum throws a brick through the shop owner’s window and the baker now has to spend $50 to replace the window and forgo the purchase of the new suit. If one ignored the invisible effects of the broken window, one could then argue that the hoodlum was, in fact, a public benefactor by stimulating business for the window company that now receives $50 to replace the window. But instead of the baker having $50 for a new suit and a window, he now only has the window and no suit. And the invisible unseen party in the parable is the tailor, who would have benefited $50 from selling the baker a new suit, but now loses that business. Observers will see the visible new window but will never see the invisible new suit, because it will now never be made.

Here’s how Bastiat explains the unseen, invisible effects of the shopkeeper spending six francs to replace the broken window:

It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.

7. “The State [government] is the great fiction, through which everybody endeavors to live at the expense of everybody else.”

~The State in Journal des Débats (1848).

8. “When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.”

~Economic Sophisms, 2nd series (1848)

9. “Everyone wants to live at the expense of the State. They forget that the State lives at the expense of everyone.”

~Source unknown

10. “Trade protection accumulates upon a single point the good which it affects [for domestic producers], while the evil inflicted is infused throughout the mass [of consumers]. The one strikes the eye at a first glance [benefits to producers], while the other becomes perceptible only to close investigation [losses to consumers].”

~Source unknown

Bottom Line: Bastiat was truly an economic giant and deserves credit for his many significant and important intellectual contributions to economic thinking that are as relevant today as they were in France in the mid-1800s when Bastiat was writing, including a) Bastiat was one of the first economists to warn us of the dangers of legal plunder, crony capitalism and trade protectionism, b) he helped us understand the importance of looking at both the unseen and delayed effects of legislation and regulation in addition to the immediate and visible effects, c) he was one of the most eloquent and articulate defenders of individual freedom and liberty who ever lived, d) he was probably the strongest advocate for the consumer in human history, and e) his use of wit, parody, and satire to convey economic wisdom and insights was unparalleled!

Happy 221st Birthday Frederic Bastiat!

Related: For lots of additional Bastiat resources, some never before translated and only released recently, see the Liberty Fund’s “Bastiat Project.”

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Here’s my latest animated “bar chart race” visualization above showing the world’s top ten billionaires in every year from 2000 to 2022 based on data from business magazine Forbes’ annual lists of the World’s Billionaires via Wikipedia for 2000 to 2022 and also via Forbes’ World’s Billionaire List for 2022. The billionaire wealth estimates by Forbes are based on stock prices and exchange rates in mid-March of every year (March 11, 2022 for this year).

A few observations:

1. Bill Gates was the world’s wealthiest person in 13 of the years from 2000 to 2020, No. 2 in seven years, No. 3 in one year (2008), and No. 4 this year (and last year), his lowest ranking ever going back to 2000.

2. Mark Zuckerberg and Jeff Bezos appeared in the world’s top ten billionaires for the first time in 2016, and Jeff Bezos very quickly rose to become the world’s richest person in 2018 with a net worth that year of $112 billion—24% more wealth than Bill Gates ($90.0 billion) and 33% more than Warren Buffett ($84.0 billion). Bezos has retained the No. 1 position in each year from 2018 to 2021, but Elon Musk rose to No. 1 this for the first time, while Zuckerberg fell off the top ten list this for the first time since 2015. Over the last five years, Bezos’s wealth has increased by a factor of four times from $45.2 billion in 2016 to $171 billion this year, which is an average annual compound return of 24.8%.

3. The Koch brothers (Charles and David) first appeared on the top ten billionaire list in 2013 and stayed on the list for the next five years through 2018 but haven’t made the list since then.

4. Various members of the Walton family appear on the top ten list in many of the years (2001 to 2005, 2011, 2014, 2015, and 2020) thanks to the success and profitability of Walmart.

5. Brothers Karl and Theo Albrecht are the German entrepreneurs who founded the discount supermarket chain Aldi and one or both of them were on the top ten list in nine of the years from 2000 to 2012. Ingvar Kamprad is a Swedish entrepreneur who founded Ikea in 1943 when he was 17 years old and he made the top ten list every year from 2005 to 2009.

6. American billionaires are the dominant nationality in most years, especially in the early and later years of the time period. In the early 2000s Americans represented 8 or 9 of the world’s top ten billionaires from 2000 to 2004 and then the group became more internationally diverse throughout that decade, as more billionaires from countries like India started making the top ten list. In 2008, three of the world’s top ten billionaires were from India. In recent years from 2014 to 2022, Americans represented seven or eight of the world’s top ten billionaires, including eight this year joined by non-Americans No. 3 Bernard Arnault (France) and No. 10 Mukesh Ambani (India).

7. You can see the large decline in the billionaires’ net worth in 2009 during the Great Recession as the combined wealth of the top ten billionaires fell by $142 billion (and by 36%) from $396 billion to $254 billion.

8. Elon Musk joined the world’s top ten billionaires last year for the first time at the No. 2 position with a net worth of $167.3 billion and this year ranked No. 1 at $211.5 billion. Forbes also reports updated daily real-time wealth estimates and Musk’s net worth has risen to $218 billion as of today (May 19, 2022).

9. The combined wealth of the world’s top ten billionaires appreciated by 11% during the last year, rising from $1.17 trillion a year ago to $1.30 trillion this year. The nine billionaires who made the top ten list in both 2021 and 2022 had the following year-over-year gains:

• Jeff Bezos: -5.3%
• Elon Musk: 34.9%
• Bill Gates: 7.0%
• Warren Buffett: 22.5%
• Bernard Arnault: -1.3%
• Larry Ellison: 18.2%
• Sergy Brin: 24.1%
• Mukesh Ambani: 11.6%
• Larry Page: 24.9%

Bottom Line: Many of the world’s richest billionaires are successful self-made entrepreneurs who accumulated large fortunes by providing low-cost goods at brick-and-mortar retailers like Aldi, Trader Joe’s, Walmart, and Ikea, and through online retail e-commerce platforms like Amazon, and in the process have generated cost savings and value for consumers (especially low and middle-income households) in amounts that are collectively far in excess of their personal wealth. Other successful billionaires/entrepreneurs like Bill Gates and Elon Musk created entire new industries that also generated value for consumers that far exceed the personal wealth of innovators like Gates and Musk. It could maybe be described as a kind of reverse/perverse, soak-the-rich Marxism that consumers have actually “exploited” the billionaires above by “extracting” more value, cost savings, and wealth collectively from those entrepreneurs than the value of their personal fortunes. And it’s arguably not even close — the wealth and value generated for society by successful entrepreneurial billionaires dwarf their personal fortunes, which were only made possible because they made the lives of millions of consumers, many of them living in low-income households, better off.

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Between 1998 and 2021 prices for “Medical Care Services” in the US (as measured by the BLS’s CPI for Medical Care Services) more than doubled (+132.2% increase) while the CPI for “Hospital and Related Services” (data here) more than tripled (+230.4% increase), see the bottom two rows of the table above. Those increases in the costs of medical-related services compared to only a 66.2% increase in overall consumer prices over that period (BLS data here). On an annual basis, the costs of medical care services in the US have increased 3.6% per year since 1998 and the cost of hospital services increased annually by 5.1%. In contrast, overall inflation averaged only 2.1% annually over that period. The only consumer product or service that has increased more than medical care services and just slightly less than hospital costs over the last several decades is college tuition and fees, which have increased nearly 5.0% annually since 1998 for four-year public universities.

One of the reasons that the costs of medical care services in the US have increased more than twice as much as general consumer prices since 1998 is that a large and increasing share of medical costs are paid by third parties (private health insurance, Medicare, Medicaid, Department of Veterans Affairs, etc.) and only a small and shrinking percentage of health care costs are paid out-of-pocket by consumers. According to government data, almost half (47.1%) of health care expenditures in 1960 were paid by consumers out-of-pocket, and by 2020 (most recent year available) that share of expenditures has fallen to only 9.4% (see chart above). It’s no big surprise that overall health care costs have continued to rise over time as the share of third-party payments has risen to more than 90% and the out-of-pocket share has fallen below 10%. Consumers of health care have significantly reduced incentives to monitor prices and be cost-conscious buyers of medical and hospital services when they pay less than $1 themselves out of every $10 spent, and the incentives of medical care providers to hold costs down are greatly reduced knowing that their customers aren’t paying out-of-pocket and aren’t price sensitive.

How would the market for medical services operate differently if prices were transparent and consumers were paying out-of-pocket for medical procedures in a competitive market? Well, we can look to the $14.6 billion US market for elective cosmetic surgery for some answers. Every year since 1997, the American Society for Aesthetic Plastic Surgery has issued an annual report on aesthetic procedures in the US (both surgical and nonsurgical) that includes the number of procedures, the average cost per procedure (starting in 1998), the total spending per procedure, and the age and gender distribution for each procedure. The 2021 report was released in April and is available here.

The table above (click to enlarge) displays the 16 cosmetic procedures that were available and reported in both 1998 and 2021, the average prices for those procedures in each year (in current dollars), the number of each of those procedures performed in those two years, and the percent increase in the average price for each procedure between 1998 and 2021. The procedures are ranked by the number of cosmetic procedures last year. Here are some interesting findings from this year’s report and the table above:

• Only four of the 16 most popular cosmetic procedures (tummy tuck, eyelid surgery, facelift, and male breast reduction ) increased more than the overall 66% increase in the CPI between 1998 and 2021, while the other 12 procedures increased less than overall consumer prices. That means that four of the procedures increased in real inflation-adjusted dollars and the other 12 decreased in real, inflation-adjusted constant dollars.
• For four of the most popular nonsurgical procedures in 2021 – botox injections, laser hair removal, laser skin resurfacing, and chemical peel — the nominal prices in current dollars have actually fallen over the last 22 years, by 3.5% for botox injections (from $424 to $409), by 24.7% for chemical peel (from $821 to $618), by 63% for laser hair removal (from $452 to $167) and by 47% for laser skin resurfacing (from $2,276 to $1,199). When a price in nominal, current dollars is lower in 2021 than in 1998, that means that the real prices of those procedures have decreased significantly. For example, the cost of laser hair removal in 1998 ($452) expressed in 2021 dollars ($753) means that the price last year of only $166 was 78% lower adjusted for inflation. Likewise, the real price of botox injections fell by 42.1% in inflation-adjusted dollars, laser skin resurfacing fell by 68.4%, and the price of chemical peel fell by 54.8%.
• The unweighted average price increase between 1998 and 2021 for the 16 aesthetic procedures displayed above was 31.3%, which is less than half of the 66.2% increase in consumer prices in general over the last 23 years. When the average procedure prices are weighted by the spending on each procedure last year, the average price increase since 1998 was 38.2%.
• And most importantly, none of the 16 aesthetic procedures in the table above have increased in price by anywhere close to the 132% increase in the price of medical care services or the 230% increase in hospital services since 1998. The largest aesthetic procedure price increases since 1998 is the 86.5% increase for facelifts, which is still way below the more than doubling of prices for medical services overall and the more than three-fold increase in the CPI for hospital services.
• The Aesthetic Society doesn’t provide a detailed breakdown of aesthetic procedures by gender, but it did provide the number of procedures for the top six most popular procedures for women (liposuction, breast augmentation, tummy tuck, breast lifts, breast implant removals, and eyelid surgery) that totaled just under 1.5 million and the top six procedures for men (liposuction, breast reduction, eyelid surgery, nose surgery, tummy tuck, and face lift) totaling 94,844. Based on those figures, women accounted for about 94% of aesthetic procedures and men only 6%, which is consistent with the gender breakdown in past years based on more comprehensive data (and also consistent with the gender shares highlighted in the report).

MP: The competitive market for aesthetic plastic surgery operates differently than the traditional market for health care in important and significant ways. Cosmetic procedures, unlike most medical services, are not usually covered by insurance. Patients typically paying 100% out-of-pocket for elective aesthetic procedures are cost-conscious and have strong incentives to shop around and compare prices at the dozens of competing providers in any large city. Providers operate in a very competitive market with transparent pricing and therefore have incentives to provide cosmetic procedures at competitive prices. Those providers are also less burdened and encumbered by the bureaucratic paperwork that is typically involved with the provision of most standard medical care with third-party payments. Because of the price transparency and market competition that characterizes the market for cosmetic procedures, the prices of most cosmetic procedures have fallen in real terms since 1998, and some non-surgical procedures have even fallen in nominal dollars before adjusting for inflation. In all cases, cosmetic procedures have increased in price by far less than the 132% increase in the price of medical care services between 1998 and 2021 and the 230% increase in prices for hospital services. In summary, the market for cosmetic surgery operates very much like other competitive markets with the same expected results: falling prices over time for most aesthetic plastic surgery procedures.

Question: If aesthetic plastic surgery procedures were covered by third-party payers like insurance companies, Medicare, and Medicaid, what would have happened to their prices over time? Basic economics tells us that those real prices would have risen over time, possibly somewhere close to the same 132% increase in the prices of medical services in general between 1998 and 2021. The main economic lesson here is that the greater the degree of market competition, price transparency, and out-of-pocket payments, the more constrained prices are, in health care or any other sector of the economy. Another important economic lesson is that the greater the degrees of government intervention, opaque prices, and third-party payments, the less constrained prices are, in health care or any other sector of the economy. Some important economic lessons to keep in mind as we consider various reforms for national health care, including proposals by Bolshevik Bernie Sanders for single-payer “Medicare for All” because “health care is a human right, not a privilege.”

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