I. Atlas Shrugged in Brazil

In 1988, when I was 27 years old, I read Ayn Rand for the first time. It was her novel Atlas Shrugged, in its just-released Portuguese edition. At that time, I already considered myself a sort of classical liberal, but my superficial knowledge of political philosophy, among many other gaps in my education, made my convictions not very convincing. It was only after reading her that I gained the libertarian worldview I more or less hold to this day. Mind you, I was already in business and volunteering in the classical liberal movement in Brazil, but that was more of an irreflective reaction to being raised under a military dictatorship and then being governed by a left-leaning populist than the result of any deep thought.

Brazil was enduring at that time the consequences of the 1986 “Cruzado” economic plan under which price controls were imposed on everything, which resulted in immense economic discoordination, forcing the government to intervene more and more on business decisions. In other words, economic chaos.

Reading Atlas Shrugged, it was impossible not to identify the similitude between what I was living and the policies adopted in that fictional United States in which the novel was set, with seizures of steel mills and patents, and with price, wages, and rent controls, among other interventions in the economy. 

Not long after that, in early 1990,  under the “Collor” plan, the Brazilian government froze all the bank assets in the country: checking accounts, savings accounts, everything. All citizens were left with the equivalent of 50 USD each to restart their lives.

Again, that immediately reminded me of the freeze of railroad debentures in Atlas Shrugged.

If there is a lesson to learn from those years it is that the politically induced economic discoordination that seems unimaginable in a prosperous society like the United States becomes conceivable once interventionism acquires its own momentum.

Worth mentioning also is that Rand understood something that many of her critics missed: the villains in Atlas Shrugged are rarely ideological socialists. They are pragmatists. They intervene not because they seek collective ownership of everything but because they regard every problem as requiring another discretionary exercise of power. The enemy is not merely socialism. The enemy is the belief that no sphere of social life should remain beyond political management.

The Brazilian government overreached into social life so far that when they finally reached rock bottom in terms of economic mismanagement, they were forced into a wave of privatizations, deregulation, fiscal discipline, and monetary prudence that created the conditions for business conditions to recover and endure even when faced by bouts of populism, corruption, and increased interventionism. The strike of wealth creators described in Atlas Shrugged worked in real-life Brazil!

II. What I Didn’t Know About Atlas Shrugged

It was much later that I learned that during the early 1950s years, when Ayn Rand was writing that novel about a “dystopian future,” the United States had an Office of Price Stabilization (OPS) enacting price controls, and a Wage Stabilization Board (WSB) limiting wage increases for workers. That culminated with the 1952 seizure of the steel mills by the Truman administration, and the 1958 Transportation Act which federalized the regulation of rail and led in 1971 to the de facto nationalization of most of it with the creation of Amtrak.

For me, reading the novel in the late 1980s in Brazil and without knowledge of the circumstances in which Ayn Rand was writing, it all seemed futuristic, but in fact, she was writing about the United States of her time.

Americans made many sacrifices to win World War II. Aside from the obvious sacrifices of life, limb, and treasure, they accepted changes to their way of life that originated during the Progressive era, accelerated with the Great War and the Great Depression, truly consolidated during WWII, and were mostly still in force in the 1950s. Many are still with us today.

Federally mandated rent controls in New York started in 1943, employment-linked health care started in 1942, the current iteration of withholding income tax started in 1943, and the subordination of monetary policy to the fiscal needs of the Federal Government started in 1942 and only formally ended with the 1951 accord. I leave it to you to judge whether we ever overcame that.

III. The Real Puzzle

The United States started to move away from limited and representative government as enshrined in the American Constitution, arguably, during the Civil War. The costs of keeping the Union and solving the contradiction between the principles of the American Republic and slavery were tremendous. However, adherence to the same principles established at the Founding reversed most, if not all, of the encroachments on freedom of contract and private property that were required to fund that war. The same cannot be said about the institutional changes introduced with the creation of the Fed in 1913, all the way to the fiscal fiasco we are currently experiencing and socialist legislation being imposed by state and local government around the country. Glaring examples of that are progressive income taxes (in Massachusetts), expropriatory rent freezes (in New York City), and “wealth” taxes (in California and Washington).

That invites us not to question why governments intervene during crises, but why interventions survive the crises that created them.

IV. The Ratchet

It is true, once the existential threats of Nazi-fascism and international Communism were defeated during WWII and the Cold War, some of the most intrusive government regulation of economic activities was paired down and private enterprise was allowed to flourish.

A case in point was the reduction of public spending and the federal debt as a percentage of GDP early in the post-war period, opening room for private investment to happen.

However, confirming Robert Higgs’ thesis, as can be seen from the chart above, once temporarily drastically reduced to about 12% of GDP in the late 1940s, federal spending “ratchet up” and gradually doubled to today’s levels, while the federal debt, after the WWII surge (1941–1946), and a long postwar decline (1946–1980), began a sustained rise in the 1980s and accelerated after 2008 and 2020.

That, of course, describes only the share of everything that is produced in the country (the GDP), that is directly controlled by the Federal Government. If you want to measure how much the state controls economic life in America, we need to add the state and local government expenditures, which average about 10.8% of the GDP since the 1970s. 

On top of that, obviously, we need to consider how much of our economic life the state controls indirectly. For instance, think about sectors of the economy that are heavily regulated, where freedom of contract is almost nonexistent, such as health care. The country’s total expenditure on health care represents about 18% of GDP and the private portion of that is about half, that is, 9% of the GDP.  Think about other heavily regulated sectors, such as real estate development, car manufacturing, etcetera. Along with this increased politicization of our economic life, a reduction of our protected sphere of personal autonomy took effect. That is, private property rights have been proportionally reduced.

Of course, in the limited space of this essay, I cannot report on all the evolution of interventionism in the United States since the end of WWII. It suffices to highlight that the same pattern has operated since then. The first stage is an “Emergency,” such as a war, depression, financial crisis, or pandemic. As a result, an intervention is introduced as temporary. The next stage is “Institutionalization.” Agencies, regulations, subsidies, monetary arrangements, entitlement programs become permanent. After that, we experience a third and final stage, “Normalization.” A generation grows up assuming these arrangements are natural. At that point the debate is no longer about whether government should intervene. The debate becomes only about how the intervention should happen.

I hope with this essay not just to point out the partial retreats after the Civil War, the Progressive Era, the New Deal, World War II, or, more recently, the Financial crises and the COVID pandemic. That the baseline of state intervention keeps rising was already well attested by Higgs in Crisis and Leviathan.

V. Why the Ratchet Works

The fact is that America in the postwar suffered a cultural transformation. That sapped the popular support for limited government. The ideals of individual freedom and responsibility started to be perceived as less important than other values by a significant part of the population.  Specifically, they longed for the impossible to achieve ideal of equality of results and the requirements of equity. Equity, or isonomy, means, originally, equality under the law. That, however, was abandoned by the left side of the political spectrum in order to mobilize political support.  

That brings us today to a political environment in which from the right, we see initiatives, by carrots and sticks, to acquire shares in private enterprises. 

From the left, we see all sorts of infringement on private property rights, a case in point, rent controls.

At the same time that interventionism has, with ebbs and flows, gradually increased amid apathetic opposition or open support by large swathes of American voters, it has suffered a push back from different perspectives. 

The law and economics critique about the lack of alignment between personal incentives and results in the public sector offers one explanation for the permanence of inefficient arrangements. The public choice critique about the unitary nature of economic agents, that is, we should not expect politicians, bureaucrats, and corporate interests to be less selfish than people who have chosen to work in the private sector. The only difference between them is that the set of incentives motivate them to maximize their personal benefit in different ways. It is not realistic to expect them to have a strong interest in the common good. That is a second possible explanation for the continuation of bureaucratic structures once their raison d’être has passed. The Austrian economics critique of the limits of knowledge of public planners is perhaps one of the most damning. The information about the most efficient allocation of resources is not one that can be reduced to statistics for the simple reason that such information does not exist until the economic agents operating under free market arrangements are allowed to interact. People arriving at the farmer’s market on Sunday morning don’t know what they may find, and therefore, they don’t know in advance what will be the best use of their resources. Multiply that to the entire economy and you realize that this is not a problem that computing power or good intentions or socialist doctrinaire rigidity can overcome. The information simply does not exist and will not be created until and unless free markets are allowed to operate. Lack of understanding about this “epistemological” problem so thoroughly explained by Hayek is one of the most important reasons, in my judgment, why people ignorant of its implications, in the left and the right still advocate, in some cases, with sincerity, for interventionism. 

Finally, there is the political and moral critique offered both by Christian doctrine and by Neo-Aristotelian philosophy such as the philosophy of Ayn Rand. Human beings are required by their nature to provide for themselves and their loved ones. In order to obtain what they require, they can loot or produce. Looting is a zero-sum game. You can only loot, or tax, which is, in some cases, the same thing, if someone has previously produced. Whether you depart from Imago Dei conceptions about mankind, or a pure naturalistic one, the ultimate justification for state coercion is to protect people in their right to provide themselves and their loved ones with their material needs, and for that, protection against violence and fraud are established collectively with the creation of a political society. Marxists, and many others who claim to know better what is good for others and find in such claims justifications to try to impose their will on others, don’t like those moral arguments, and have tried to create, over the ages, collectivist rationales for their desire to grab power.

In this sense, the arguments in favor of a classical liberal order as they can be derived from public choice, law & economics, Austrian economics, and perfectionist moral defenses of individual autonomy offered by both Christian and Neo-Aristotelian philosophy, are not separate but complementary explanations for why liberty is the best organizing principle for society.

VI. Why It Now Comes from Both Left and Right

Coming to the close of this essay, we can now realize that the defining political tendency of the last century has been the gradual transformation of temporary emergency measures into permanent institutions. Because political power may legitimately direct economic life whenever sufficiently important goals are at stake, both the left and the right find justifications to reduce the sphere of individual autonomy and continue to reduce it. Their disagreement concerns goals, not methods. That seems to me to explain the persistence of emergency measures after emergencies end and why interventionism now comes from both sides. 

VII. Conclusion

Let us return to Brazil for a moment. Growing up in Brazil allowed me to see what many Americans no longer notice. Policies that appear normal in one generation were extraordinary innovations in another. From that historical perspective, we can ask whether these institutions serve a free society or merely persist because they have become familiar.

The danger to liberty is not merely intervention during crises. It is society’s tendency to forget that the intervention was ever extraordinary in the first place.

I came to America because it remained the country most committed to liberty and private initiative. The challenge today is not merely resisting new interventions, it is to start questioning old ones. The United States, despite the gradual abandonment of the ideals of a free society by a significant part of its population, reflects in the institutional arrangements developed in the last 80 years, the last best hope for individual human flourishing, and I hope that in the year of its 250th anniversary, the trend against the civic ideals of its Founding could be reversed. I came here from Brazil to enjoy freedom. If the United States fails in providing that, there is nowhere else to go.

Leonidas Zelmanovitz is a Senior Fellow at Liberty Fund, and teaches part-time at Hilldale College.

The post Atlas Shrugged and Interventionism appeared first on Econlib.

People conspire all the time. Firms collude. Politicians bargain behind closed doors. Militaries deceive their enemies. But other conspiracies are detected, or they do not last long. Why do some remain secret while others are revealed?

A simple game theory model can help illustrate that the probability of a conspiracy being revealed depends on the number of independent choosing individuals whose cooperation is necessary, and the incentives those individuals face. The basic intuition of what makes it hard to keep a conspiracy a secret is not new. But there are interesting implications for institutional design.

Insights from game theory can help us think more clearly about election administration. Those insights can help us see why and how the decentralized structure of American elections dramatically increases the number of independent actors who would have to coordinate to manipulate a national election. That decentralization is one reason to trust U.S. election results.

The decentralization of election administration was a deliberate choice by the constitutional framers. They envisioned that the federal government would retain power to intervene to ensure the survival of the government, but the actual running of elections would remain in the hands of the states (see Federalist 59). While Alexander Hamilton argued for decentralization as necessary to preserve the freedoms of both the states and the federal government, it also has the happy effect of making election fraud much harder to accomplish at a national level.

An Institutional Model of Conspiracy

Let us consider a simple model of a conspiracy. I am using “conspiracy” here in a deliberately broad manner. By “conspiracy,” I simply mean two or more people working together to achieve some goal in secret. Discretion is key to the conspiracy—it will be detected if somebody reveals what they’re trying to accomplish or how. We can model this as a simple probability model:

P_d=1 – (1 – p)^N

Where:

P_d = the probability the conspiracy is disclosed

(1 – p) = the probability the conspiracy is not disclosed

N = the number of people in the conspiracy

Right away, we can see a key relationship: as the number of people involved in the conspiracy, N, rises, the probability of the conspiracy being disclosed increases exponentially. For the sake of numbers, let us assume a 95% probability that the conspirators stay silent. Additionally, we assume each conspirator’s probability of disclosure is independent of each other and identical. (These are simplifying assumptions and not realistic ones, but they help demonstrate the core insight, and that insight isn’t changed by the particulars.)

Having two conspirators results in a 9.75% chance of the conspiracy being exposed:

With 10 people, that chance jumps to 40.1%.

With 50, the probability of exposure is 92.3%.

More generally, we can write the model as:

lim
n → ∞
  [1 − (1 − p)^N] = 1

In other words, as the number of people involved in a conspiracy increases, the probability that the conspiracy is exposed approaches 100%. Even a small number of conspirators greatly increases the probability of the conspiracy being exposed.

Decentralizing the U.S. election system greatly increases the number of independent decision makers whose cooperation is required: each state, county, and polling place has election officials, commissioners, reviewers, etc. That means that by decentralizing election administration across states and local jurisdictions, the Constitution dramatically increases the number of independent actors whose cooperation would be required for coordinated manipulation. Any conspiracy to alter U.S. federal elections would require coordination of thousands, if not hundreds of thousands, of individuals over a vast geographic and political area. In short, the transaction costs of a conspiracy to alter elections rises substantially. The model here predicts that such a conspiracy is theoretically possible, but extraordinarily unlikely.

Now, that is just for a single election. In the case of persistent fraud, then time becomes a factor as well. We can rewrite our model to include time:

P_d(T)=1 – (1 – p)^NT

All the variables are the same, except for T, which is the number of time periods the conspiracy must remain hidden. Again, the problem remains but becomes compounded by the time variable.

What is important to note is that this model does not tell us conspiracies are impossible. Just the opposite: it helps us understand when conspiracies are likely to succeed. To succeed, either the timeframe or the number of conspirators (T or N) need to shrink or the probability of breaking silence (1–p) needs to increase. Conspiracies have succeeded, at least where “success” is defined as “the goal of the conspiracy is accomplished.”

For example, consider Bleeding Kansas. This story provides further evidence that the model is predictive of real life events. Bleeding Kansas did result in electoral fraud, but 1) it was localized and 2) almost immediately detected, which in turn led to the violence. It accomplished short-term goals, but was still detected.

Another example is the Manhattan Project. Some 130,000 people worked on what would become the creation of the atomic bomb. This project was carried out with absolute secrecy. (In fact, many “conspirators” did not know what they were working on until the bombs were dropped.) The N for this project was substantial, and that created risk. So, the federal government and the army worked to reduce the probability that any individual would divulge the secret. Reducing time was inherent to the project: there was a war on and there was pressure to finish the bomb before the Germans. What about (1–p)? We can think of p as a function of economic and social variables: incentives, monitoring, commitment to the cause, etc.

The federal government paid everyone working on the project, from the janitor to the top scientists, extremely well: sometimes four to five times what they could get in the private sector. This was especially true for minorities, who faced substantial discrimination outside the Manhattan Project. Furthermore, World War 2 had a strong patriotic component attached to it. Coupled with strong monitoring, the secrecy of the conspiracy remained.

The Manhattan Project demonstrates just how expensive large conspiracies are to maintain. That project alone consumed about 1.4% of GDP. We can think of that, partially, as the cost of secrecy. And that sort of expenditure is hard to hide. The Germans and Soviets knew we were up to something.

Here are the central insights from this model:

1. As always, institutional design matters. By decentralizing elections, the United States makes it exponentially more difficult to manipulate election results on a large scale, especially at the national level. And, if such manipulation did happen, it would be much easier to detect or uncover
2. Secrecy is a scarce resource just like any other. It is costly to “purchase” through incentives, enforced through monitoring, and so on. The transaction costs of a conspiracy rise rapidly as more people are involved
3. Given 1. and 2., we should ask for strong evidence when we hear allegations of large conspiracies.

A conspiracy is an equilibrium, not a mystery. Like any equilibrium, it survives only if the incentives of its participants support it. When someone alleges a conspiracy, the first question to understand how likely the conspiracy is to be a real one should not be “Could these people coordinate?” but “What incentives kept them coordinated and silent?”

On the flip side, to prevent conspiracies and prevent fraud, we can apply lessons from this model to create institutions that increase the transaction costs of undermining the system: create incentives that make secrecy all the more expensive. Of course, this is easier said than done. If designing incentives were easy, we’d not have these problems in the first place. But what I discuss here does provide a blueprint to help think through these incentives.

The post The Cost of Conspiracy appeared first on Econlib.

I first came across French writer Jean Raspail’s infamous novel The Camp of the Saints while I was reading Douglas Murray’s The Strange Death of Europe back in 2017. Raspail’s novel imagines the invasion of Europe by large groups of unsanitary and ravenous migrants from the Global South led by a coprophage (“shit-eater”). Despite his own firmly anti-immigration views, Murray declines to defend the book’s inflammatory contents, but he is nonetheless struck by Raspail’s descriptions of Western passivity in the face of an unsustainable wave of immigration. The book’s overt racism notwithstanding, it has attracted some attention in recent years for this apparent prescience.

Even so, getting hold of a copy can be difficult, as I discovered after my interest was piqued. “Despite being a best-seller in France,” Murray remarks, “a cordon sanitaire was imposed around the novel by French critics, and so The Camp of the Saints sank in plain sight. … Yet in spite of its nearly unreadable luridness, something about the book stuck in the subterranean portion of the European conversation.” Without that cordon sanitaire, I would probably have discovered it sooner. But the “undeniable power” that the New York Times’ critic reluctantly attributed to it upon its publication in English in 1975, and the fact that its reputation is so at odds with its unavailability, lent the novel an air of irresistible mystique—and so I tried to find a copy. The English translation was long out of print, and the second-hand copies circulating online were being listed for eye-watering prices. In the end, I decided it would be cheaper and more character-building to just purchase a copy in its original language and learn French.

The Camp of the Saints is sometimes mentioned when the topic of literary censorship arises. But the book has never, strictly speaking, been banned. No government to my knowledge has forbidden the sale of the novel, which was published seven years after the Vatican’s Index Librorum Prohibitorum was abolished. No school library has taken it off the shelves in a fit of righteous indignation (if only because they never stocked it in the first place). The reluctance of mainstream publishers to reissue it is not the same as a ban. Nor was Amazon’s decision to delist the latest English language edition of the novel for “offensive content” earlier this year.

According to the American Library Association, “A book is banned when it is entirely removed from a collection in response to a formal or informal challenge.” The trouble with this definition is that it is generously inclusive; all it takes for a book to be classified a victim of institutional censorship—and for pundits across the world to raise a chorus of condemnation—is for it to be removed from one school library, as we saw in the case of a secondary school in Manchester late last year. The ALA definition does not include texts that booksellers refuse to stock, or the publication of which has been halted or made impossible by social pressures. Nor does it account for all the bold, daring, “unborn books” that will never see the light of day owing to the risk-averse—if not outright censorious—nature of modern publishing. In reality, book-banning in schools is generally an (ill-judged) attempt at safeguarding, not dissimilar to age-gating films, video games, or social media. That is very different to making a book unavailable to adults and children alike. By shifting the blame on to governments and educational authorities, publishers and bookshops are deflecting from their own role in narrowing the range of “acceptable” literature.

Dua Lipa’s latest project, the Manifesto Library, appears to perpetuate a similar misunderstanding of “banned books.” The collection is a partnership between Service95, Lipa’s online book club, and Livraria Lello, the bookshop in Porto where a hundred selected books will be displayed and sold. The Manifesto Library is described as:

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Here’s a letter to Semafor. (I add that I nevertheless doubt that Trump understands what he’s saying.)

Editor:

Quoted in “Vance takes his first economic punch in the 2028 primary” (August 21), American Compass’s Oren Cass describes people who don’t share J.D. Vance’s wish that the U.S. dollar lose its role as global reserve currency as members of a “bizarre kind of rump-libertarian right.”

Well now.

Here are six notable people who write or speak favorably of the dollar’s role as global reserve currency. All are prominent, half are center-left, and only one is libertarian.

– Larry Summers (former Secretary of the Treasury under Bill Clinton), testified that “if a country or countries decide to adopt the dollar, the United States can expect to benefit in a number of ways.”

– Jason Furman (Chairman of Obama’s Council of Economic Advisors) said in an interview that the dollar’s reserve-currency status is a “good thing” from which “we get some benefits from that in terms of lower interest rates, cheaper borrowing, and, you know — and some other benefits in terms of ability to, you know, have a higher living standard.”

– Kenneth Rogoff (Harvard professor and former chief economist at the IMF) declared that “the dominance of the dollar – that it’s used in everything, it’s the lingua franca of the global financial system – benefits us a lot of ways.”

– Milton Friedman (Nobel laureate, 1976) asked rhetorically: “Can you think of a better deal than our getting fine textiles, shiny cars, and sophisticated TV sets for a bale of green printed paper? Or for some entries on the books of banks?”

– Kevin Hassett (Director of the National Economic Council under Trump) testifying before Congress in 2013 noted “that we are in a situation where we can print dollars that cost us nothing, really, to make and then give them to people, and they give us BMWs, say, and because they really want to hold the dollars, and that that is an advantageous position for us to be in.”

– Donald Trump (President of the United States) said in July 2025 that “the reserve currency is so important. You know, if we lost that, that would be like losing a world war.”

This list could easily be extended.

Mr. Cass should do his homework before offering commentary.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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