Restrictive Covenants
Over at Cato Unbound Sheldon Richman writes what strikes me as a very unpersuasive (short) essay (HT2 Bryan Caplan). I’m just going to comment briefly on a few excerpts:
Many concerns could be raised about racially restrictive deed covenants and the State, including:
1) the risk of defining “private action” out of existence;
2) the risk of the slippery slope (what other agreements might the State decide not to enforce?)…
Sheldon might just be covering his bases in #2, but for the record I want to reiterate that anarchist libertarians shouldn’t ever be worried about the State not enforcing something. (See my unraveling of the standard–and I think, wrong–libertarian complaint that the State doesn’t protect the property of drug dealers, or the rights of “scabs” to cross picket lines.)
I should think that in a fully free society restrictive covenants in deeds would be unenforceable because they are feudal in nature and thus violate fundamental libertarian principles. A restrictive covenant constitutes a prohibition that “runs with the land” in perpetuity, permitting rule by the dead hand of the past.
Does Sheldon object to wills?
Many years ago I got into a huge argument with a guy on this very topic. I was saying that you could obviously include contractual provisions when selling something that limited its use, and that in principle you could say, “Sure I’ll sell you my dog, but only if you agree to keep up with his shots.” Or: “Sure, I’ll sell you my house, but only if you agree not to cut down the oak tree in the backyard. My mom planted that when I was little and then we lost her to cancer. I have to leave town to take a new job, but I don’t want to sell this place unless I know the tree won’t be cut down.”
The guy arguing with me, though, took Sheldon’s tack. He pointed out that I could be dead for 50 years and yet everybody would have to deal with this stupid oak tree. He started citing Thomas Paine’s critique of hereditary monarchy and things were getting heated (seriously).
The eventual resolution we reached was that if no one in the whole society wanted the property with its eccentric stipulations, then it would revert to unowned property and could be homesteaded in standard libertarian fashion. But the catch is, the great grandson inheriting the estate can’t just say, “I don’t want to go to college with this money like the will says, so I’ll ‘not accept’ it, wait two seconds, then claim the unowned pile of money with no strings attached.” No, the will would have clauses to get around that kind of thing, like, “If my good for nothing heirs don’t want to go to college, then the money goes to…” And then only if literally no one on earth wants to accept the money with the strings attached, does it revert to unowned property. And even then, there wouldn’t be a presumption in favor of the grandson getting it.
Back to Sheldon:
I acknowledge that in throwing out the bathwater of racially restrictive covenants, I may also be throwing out some desirable babies. But my hunch is that the constructive things we might get from covenants could be achieved other ways. The virtue of my approach to invalidating racially restrictive covenants is that we would both strike another blow against racism and rid ourselves of the last vestiges of feudalism.
Sorry but that last sentence seems rather irrelevant and flashy to me. The point isn’t to take positions on rights that yield the outcome you want. If that’s what you’re doing, then you might as well just say, “I don’t like racism, so that’s why you can’t have racially restrictive covenants, and it’s why you can’t write racist books.”
Maybe someone like Gene Callahan is right, and it’s a waste of time to try to use general principles when solving questions of legality in specific cases. But Sheldon isn’t going that route; he is trying to use libertarian principles to get rid of something that strikes him as yucky, it seems to me.
Carlin and Hicks
Whoa I’ve never heard this particular Hicks routine. Some kids at the Des Moines C4L event know that after I get two drinks in me, my views are quite similar. (Careful some naughty words sprinkled throughout this. HT2 LRC.)
Economists Winning Hearts and Minds, Again
I have diversified into other occupations because I think within the next three years the public will start lynching economists. For example, take this CNBC story:
The US unemployment rate could start falling later this summer, but not necessarily for the right reasons.
Economists say the Senate’s rejection last week of yet another extension of jobless benefits could actually cause more people to quit looking for work, adding to the already record high numbers that have left the labor force since the economic downturn began in 2007.
It could also further slow the economic recovery because of the loss of income for the millions of American who have been receiving jobless benefits.
Let’s put aside the Keynesian garbage, and consider the fact that the way our system is currently set up–and economists definitely played a large role in this–when people give up on looking for work, the unemployment rate goes down.
If this were a little quirk that got a one-sentence mention, OK fair enough. But it is the foundation of the entire news story.
In contrast, the possibility that ceasing to pay people who don’t have jobs, might actually cause some of them to get a job, receives one sentence in the article. (Really, go look.)
Actually I think the public will lynch economists and financial reporters.
An Impressive Carlin Routine
I saw this at LRC. I am not sure when this is from, but I am pretty sure my wife and I saw Carlin working this routine out in Ann Arbor, Michigan in 2003 or 2004. (I was teaching at Hillsdale and we drove up to see him.) It was a little weird because he pulled out a sheet of paper and started reading from it. So I think he would memorize it over time in front of live audiences, and by the time he was on HBO (or whatever) he didn’t need the crutch.
More Sniping at Sumner (and Cochrane)
[UPDATE below.]
As longtime readers know, I initially loved Scott Sumner but then came to regret my early praise. Yes, he is the smart, consistent, logical, and funny blogger that I identified early on. But unfortunately, he uses his gifts to promote the idea that Bernanke just needs to start writing more checks, and everything will soon be fine.
Anyway, normally I grapple with Scott on technical matters, or on his interpretation of historical events. But today I caught him making (what sure seems to be) a silly error, goaded by John Cochrane:
The same point [that you can’t gauge monetary tightness or looseness from interest rates–RPM] is made in Mishkin’s textbook. And Mishkin is a respected “scientific economist” by anyone’s standards. So why is it that 90% of the respected scientific macroeconomists don’t understand this? Why do most keep insisting that the Fed has conducted an “accommodative” or “easy” money policy since 2008? Maybe they think that doubling the base is easy money, and are unaware that the Fed started paying interest on base money in October 2008. As Cochrane pointed out, this means that reserves are now effectively bonds, not money.
Here’s my question to Scott: If–in some alternative universe, let’s say–commercial banks paid positive interest rates on checking deposits, would that turn $20 bills into bonds, not money?
This is yet another point where, I hate to say it, that Keynesians make a lot more sense than the “free market” inflationists. People like Brad DeLong have been pointing out that when interest rates get pushed to zero, then Treasury bonds effectively become money. But that’s quite a different thing from saying that positive interest rates paid on money kept on deposit, turns money into bonds.
UPDATE:Scott emails me to say:
Thanks Bob, My view is that people can define money in any way they want. But in monetary models of liquidity traps, or anything else, money is a non-interest brearing asset. If they start paying interest on cash, then we need to change the models, but in that case there will be no liquidity traps, because nominal interest rates can go below zero.
I don’t consider checking account balances to be money–but lots of economists do.
Inverted Yield Curve
When I’m not interviewing authors, I actually think about economics. I am writing a paper for a Liberty Fund colloquium and part of my task is to discuss the yield curve in light of Austrian business cycle theory.
One of the stylized facts is that since at least 1960, every recession has been preceded by an inverted yield curve. Moreover, except for one debatable false positive (where there was a slowdown that didn’t quite get classified as a recession), an inverted yield curve has always been followed by a recession.
So here’s my point right now: If in fact we are entering a “double dip,” then that means this will be the first recession since 1960 that wasn’t preceded by an inverted yield curve, right?
(Let’s stipulate for the sake of argument that “recession” is exactly how the mainstream economists define it, meaning that the “Great Recession” ran from about December 2007 through about July or August of 2008. I of course think this has been one slow-motion train wreck since 2007, and will only get worse.)
Update on Nullification
Last I checked, Tom’s new book had reached #37 on Amazon, which is very impressive for not being on the major outlets (thus far). On the one hand I’m disappointed that right-wing places aren’t lapping this up (it might be too radical, and I’m just stating a fact not judging them), but on the other hand it’s amazing that basically with LRC, Twitter, and hey let’s not forget Free Advice, the little blog that could, Tom has managed to get this high.
For comparison, I think the highest I ever saw the Politically Incorrect Guide to Capitalism get was on its launch day, and it peaked at #91 on Amazon. But these things are like the Richter scale; the difference between #91 and #37 is enormous.
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