Economist Writing Every Day

From Warren Nutter’s “The structure and growth of Soviet industry: A comparison with the United States.” The Journal of Law and Economics 2 (1959): 147-174.:

“Let us acknowledge at once that all statistics contain faults and errors. Let us also acknowledge that no government or other agency resists the temptation to stretch figures to its own account if it feels it can get away with it. Representative government, competitive scholarship, and free public discourse are the Western institutions that have counteracted error and misrepresentation in statistics, imperfectly to be sure, but at least to some degree.

The peculiar difficulties with Soviet statistics stem, in the first instance, from the system of authoritarian, centralized planning-from what has been called a “command economy.” Published statistics come from only one source: the state. There are no independent sources to restrain each other or used as checks against each other, except to the extent that related figures published by different state agencies might not be fully coordinated before publication. At the same time, the suppliers of data to the central authorities -the economic and administrative units- have a stake in the figures they report, since their performance is judged on the basis of them. The Soviet statistical authorities do not hide their concern over the misreporting that results from this feature of the economic system. A second set of difficulties stems from the crusading nature of Soviet communism. Statistics are grist for the propaganda mill. Knowing the ideological views of Soviet leaders, one cannot expect them to dispense facts in a passive and detached manner.”

As many of you likely know, the President fired the director of the Bureau of Labor Statistics because he didn’t like that the newest employment numbers painted an unflattering portrait of the US labor market. Fortunately, the US continues to benefit from alternative to government statistics, but make no mistake, the BLS produces the absolute best labor market measurements the world has ever known.

It’s telling that while Soviet data seemed to often fool outsiders at the time (despite the occasionally raising of doubts), there was no such delusion within the Soviet Union, where provincial leaders would consistently look to outside sources for accurate economic reports.

Nutters is credited with co-founding the “Virginia School of Political Economy” at the University of Virginia with future Nobel Laureate James Buchanan. The Virginia school is most associated with public choice economics, something which by the 70s was often construed as an intellectual counterbalance to the modeling of government as infallible corrective to market failures that was particularly enticing to those favoring a socialist planned economy. That an administration and political coalition that loves to rail against omnipresent socialist threats is demanding that the US embrace a Soviet-style data apparatus is a reminder that history is never without irony.

While DOGE is advertising their new deregulation AI (HT MR) with promises of “trimming 100,000 of those rules“, the reality is that the administration is ushering in the most profound layer of government involvement into our lives since the introduction of the income tax.

It defies the opportunity cost of my time to try to recap the crappy-policy-via-executive-order blunderbuss that has been the last 6 months, but it is sufficient to focus on two dimensions: immigrant targeting and tariffs. ICE is pulling people off of the street and detaining them for hours for “based on their physical appearance” in what can only be described as a dedicated effort to remove current immigrants, denaturalize past immigrants, and deter future immigrants. While these travesties play out one raid and immigration court ambush after another, tariffs are being introduced rapidly and haphazarly, always at the expense of the economy, and sometimes even in opposition to their stated goals of reshoring manufacturing. The prospect for (relatively) frictionless commerce across borders is quickly becoming unobtainable.

So what’s going to happen, now? Is America going to become a Whiter, autarkic island that steadily de-growths itself into a quieter state of nostalgic bliss, cheerfully accepting a shorter, sicker, less opulent life than before? Sure, the food will be worse and more expensive, our electronics obsolete and more expensive, our cars older and made from inferior materials (and more expensive), but that’s just the way things have to be, right? People will live and do as they’re told, right?

Have you met people?

People adapt. They find every workaround, every crack. Their lives will change, in many ways for the much worse, but they will work with what they have to make the best that they can. And this case, the best way to adapt will be to become just a little more criminal. Not fully criminal, just a little more. More aspects of our lives will become akin to driving 10 mph over the speed limit because that’s just what everyone does.

Daily life will, slowly and at times imperceptibly, move underground. More jobs will pay in cash. Fewer exchanges will be made absent a personal relationship. More goods will arrive in suitcases at the luggage return. Friends will ask friends to pick up a phone/earbuds/tablets for them when visiting less economically restricted countries, while also reminding them to delete their messaging apps before heading through security. More goods will be altered from their true, optimal consumable form to qualify for a lower tariff. The advantage of physical over digital media will widen again. Where exchange exists outside of the law, trust needs to be found outside of contract. At the margin, business will become just a fraction of a percent more nepotistic. More employees will be found somewhere in the family tree. Everyone will just become a bit more crooked and, in doing so, expect everyone else to be a just a little more crooked. The US is a shockingly high trust society because it pays to be trustworthy. This is how such things unravel.

More immigrants will live within arrangements that hide them from not just the authorities, but from observation in general. Curtains and blinds covering windows at all hours. Dinner will taken at home rather than the restaurant. Clubs and concert gatherings that appeal to immigrant crowds, or even just less White crowds, will advertise less, relying on word of mouth. Workers will move more often, rather than garner attention. The sick and injured will not be taken to the emergency room. The gaps in an already fractured society will become a little wider.

Employers will keep more people off the books. Off health insurance and workers compensation. Employees will, perversely, be grateful for the lower exposure. Insurance companies will find new ways to audit liability without exposing their clients personnel. Predatory human trafficking will find larger herds of underground populations to hide their practices within. Fewer people will trust and rely on the law. Fewer people will enjoy it’s protections.

What about compensating wage differentials? On the one hand, labor supply will be reduced as it is pushed underground, reducing their numbers and safely available hours. On the other hand, the necessity for employers to reduce the visibility of their workers while incurring the risk of legal punishment will reduce demand. The net effect on equilibrium wages is uncertain. However, those employers who manage to guarantee longer and safer tenured employment will capture greater rents from those they employ. Getting to work more consistently and going to sleep feeling safer is quite the fringe benefit, one that employers may find to be a more a profitable form of compensation than just simple wages.

I’d keep writing, but I already sound like a paranoid crank. I’m not sure I am comfortable, anonymous reader, with this level of intellectual vulnerability in such a public forum. Papers, please.