AD MAIORA, Mario!

by Giandomenica Becchio

On this special birthday, I wish Mario Rizzo all the best and I praise him for being a great Austrian economist and a great scholar. I always learn a lot when reading his works. Also, a special thanks for having been always supportive and helpful to me. Tanti auguri caro Mario, best birthday wishes, dear Mario. You are a special person.

On behalf of the Roman Empire children, Let me claim: “we are proud of you.”

Mon ami, Mario…

by Frederic Sautet

I first met Mario Rizzo in 1995 while he was lecturing at a seminar in the US. I remember an evening I spent at his dinner table along with other students. I was shy and remained silent almost the entire time, listening to him talk about a variety of subjects. At the end, however, we started to chat, notably of his liking of Europe and especially of Italy and France — he has been a regular attendee of the Université d’été in Aix-en-Provence for a long time. Eventually, he encouraged me to come to NYU to study, which I did in January 1996. To make a long story short, I ended up writing my doctoral dissertation under his auspices, with the help of Pete Boettke and Israel Kirzner. I then spent another year at NYU as a post-doc.

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Happy Birthday, Mario

by Steve Horwitz

I’m not sure when I first met Mario, but it was probably when I was in grad school at GMU in the late 80s. Mario probably remembers it better than I do, mostly because, as Pete Boettke and Dave Prychitko can confirm, I was not shy about imposing myself on more senior scholars. (Frankly, neither were they, but somehow I got the bad reputation.) Whatever the circumstances under which we first met, they were not reason to shun me in succeeding years.

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Birthday Greetings from an NYU Disciple

Dear Mario,

Felicitations on your birthday. Your leadership and dedication have been a blessing to many in need of friendship and support. Your kindness and goodwill have helped our networks succeed. Your scholarship and teaching have advanced liberal understanding. You’re making a great difference, and your birthday is a great day to say: Thank you!

Warm sincere regards, Dan Klein

 

Warmest congratulations

by Israel Kirzner

Warmest congratulations to Mario Rizzo on the occasion of his 70th birthday. Having been associated with Mario for close to a half-century (ever since, as he never forgets to remind me, I arrived late to deliver a talk which he had arranged) – I count myself as one of the many who have been uplifted and illuminated by Mario’s steel-trap mind, depths and subtlety of understanding, and unswerving intellectual integrity.

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Happy Birthday, Professor Rizzo!

by Pete Boettke

I want to wish Mario Rizzo the very best on his 70th birthday. To this day, the phone call I received from him in March of 1990 remains the highlight of my professional career. Mario called me at my office at Oakland University to tell me I was going to be offered an Assistant Professorship in the Economics Department at NYU.  I ran home, rang the doorbell, and did my best Frank Sinatra impression of “New York, New York” for Rosemary and we hugged and jumped up and down.  The next 8 years of my professional life were critical in so many ways, and I owe that to Mario and Israel Kirzner, their mentorship and their guiding example. So, on a personal-professional level, my debt to Mario is very deep, and my friendship with him at an intellectual and personal level is something I cherish greatly.

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Happy Birthday

by Jerry O’Driscoll

I am writing to wish very best birthday greetings to Mario Rizzo, who will be 70 on July 6th. It is a landmark I reached last October.

Mario is my most longstanding friend. Our friendship goes back to undergraduate days at Fordham University. We met in intermediate macroeconomics. We resisted the textbook Keynesian message. Our instructor was patient, and even allowed us once to address the class in a debate format. We generally upheld a classical economic position.

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A Tribute to Mario J. Rizzo

by Andreas Hoffmann

Today is Mario J. Rizzo’s 70th birthday. There are very few economists who are as important to the development of contemporary Austrian economics as Mario.

To honor his birthday, I have received numerous messages and posts for ThinkMarkets that I will publish one after another. These posts portray Mario as a great contributor to the Austrian revival, an extraordinarily open-minded scholar and a great friend. And as is obvious by me writing this, Mario has influenced people all over the world and helped connect the international Austrian/Hayekian community with that in the U.S.

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The “New” Monopsony Argument and the Suppression of Wages

A recent issue of The Economist had an article on monopsony and the “non-compete“ agreements that some lower-paid fast-food chain workers have had to sign as a condition of employment. On the whole, The Economist doesn’t like this because it supposedly holds down wages. The Economist is not alone in thinking this. Even noted economists Jason Furman and Alan Krueger have said in The Wall Street Journal: “There is no reason why employers would require fast-food workers and retail salespeople to sign a noncompete clause—other than to restrict competition and weaken worker bargaining power.” What Furman and Krueger are thinking is that these employees have no “trade secrets” to reveal to other firms.

Does this make sense?

The fast-food low wage case has little to do with trade secrets. In this situation the usual argument in favor of such agreements turns on the provision of general human capital. When a firm provides, at a cost, a skill highly specific to its own operations it need not worry that employees will leave and use that skill elsewhere. It cannot be so used. On the other hand, if the firm provides general training that can be used elsewhere it faces a problem. It incurred a cost to provide the skill but then, having acquired it, the employee offers his services elsewhere at a premium. She can do so because she is better equipped to hold the job than others who need costly training.

Is this then evidence that a non-compete agreement holds wages down? Hardly. If this becomes the usual case, the employer will not have the incentive to train the worker or, if he did train the worker, he would have an incentive to reduce the wage by the expected lost of value due to the employee leaving. There would then be lower wages than otherwise for the job.  What if the minimum wage prevents this? In that case fewer employees would be hired at the minimum wage. What if the employers really “need” these workers? Then they might hire them at a loss for a while until they can reduce their need for such workers through computerization of the ordering process and other forms of mechanization. This is currently happening in response to rising minimum wages and the reducing costs of labor-substitution.

If fast-food and other such firms were truly monopsonies, then some of these adverse effects would not occur because wages would have been held down in the first place. But are they monopsonies?  I find it difficult to see that. In the first place, the skills the employers are providing are general which means that they can be used in many places. If there weren’t many places to use these skills then the employers would not worry enough to have a non-compete requirement. Secondly, let’s take a closer look at what is being taught. For many teenage and young workers it is simply skills most of us take for granted:  showing up on time, not staying up late the night before drinking or doing drugs, the proverbial learning the value of a dollar and so forth.  Other skills may be related to fast-food preparation, operating equipment and even making sure that the purposes are added up correctly. (We are not dealing, by and large, with rich prep school kids.) There is no monopsony buyer of these basic skills.  The case for employers holding down wages through non-compete agreements has not been made.

Postscript: (1) If schools were doing a better job of inculcating basic life skills perhaps there would be less need for non-compete clauses. (2) The monoposony argument is an old one. I remember this being discussed seriously in the 1960s and in articles dating back to the thirties and forties. At the time is was mainly to buttress pro-labor union positions. The only thing liberal about that was how “liberally” people used that tenuous argument.

Estonia’s Astonishing Development

by Andreas Hoffmann

Intellectual Takeout’s Luis Pablo has published a nice piece on Estonia’s astonishing development. You can find it here. He attributes this development to Estonia’s “market-oriented reforms” during the 1990s. Importantly, Estonia has sticked with the “market-oriented” approach. I suggest that this persistence might help explain why the country has fared better than most other countries following liberalization.

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THE TYRANNY OF METRICS, Jerry Muller, Princeton, 220 pp.

by Edward Chancellor*

Once upon a time, there was a factory in the Soviet Union that made nails. Moscow set quotas on nail production. When the quotas involved quantity, the factory churned out many small, useless nails. When Moscow realised its error and set a quota by weight instead, the factory produced big, equally useless nails that weighed a pound each.

This much repeated tale of Soviet industrial inefficiency is an urban legend. But it contains a large grain of truth. Communism failed in large measure because central planners had inadequate knowledge of conditions on the ground and their attempts at control were generally thwarted. It would be nice to think that we have learnt from the mistakes of Stalin’s Russia. This is not the case as Jerry Muller explains in his book, “The Tyranny of Metrics.” The world remains in thrall to what Muller calls “metric mania.”

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China’s Great Wall of Debt, Dinny McMahon, Houghton Mifflin Harcourt, 288 pp.

by Edward Chancellor*

China’s economy has long defied the doom-mongers. In place of their ominous critique, a more constructive view of economic management in the People’s Republic has surfaced. Beijing, we are told, has found the right balance between state and market forces, and is best positioned to exploit exciting new technologies, such as big data and artificial intelligence. Politically fractured and economically sclerotic Western nations can only look on in envy.

Dinny McMahon, a former financial journalist and mandarin speaker who spent many years reporting on the Middle Kingdom, doesn’t buy this line. In his view, China’s economy has spent years locked in continuous stimulus mode, accumulating bad debts and generating great economic imbalances along the way. This is not an original thesis. But it’s a welcome reality check on the current China hype. Of the many books that have observed the fragility and contradictions of China’s economic model, “China’s Great Wall of Debt” is the best. McMahon writes well, has a fine eye for detail and finds original stories to illustrate his argument.

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Rigidity and Flexibility: Unions in the On-Demand Economy?

by Liya Palagashvili

A couple months ago, a judge ruled in favor of Seattle’s ordinance that will allow ridesharing drivers to engage in collective bargaining agreements. The ordinance has granted the labor union, Teamsters, the right to represent drivers for companies such as Uber and Lyft. Under current U.S. labor laws, the National Labor Relations Board (NLRA) gives employees the right to unionize, but ridesharing drivers are legally classified as independent contractors, and thus outside of the purview of this legislation. The U.S. Chamber of Commerce has initiated litigation to challenge the validity of this ordinance on several grounds (e.g., preemption by NLRA, antitrust violations), though while in the appeals process, the city has begun to move forward to implement this first-in-the-nation law.

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Friedrich von Wieser, or: Against “Sidelining” Austrian Economists

by Stefan Kolev

Historians of economics must resist the temptation to put their narratives into the service of ideology. The intriguing case of Friedrich von Wieser exemplifies the grave dangers involved for history of economics as a discipline and for Austrian economics as a respectable research program – but it also provides hints on how to immunize historical accounts from the dangers of hagiography and litmus-test purity checks.

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Hayek’s Work Helps Explain the Link between Ultra-loose Monetary Policy and Political Instability

by Gunther Schnabl

The European Central Bank will increase the overall volume of its bond purchase program to 2,550,000,000,000 euros by September 2018. The main refinancing rate will remain at zero. Mario Draghi has stressed that this policy shall continue until inflation picks up sustainably (which is unlikely to happen in the foreseeable future). The works of Friedrich August von Hayek (1931, 1944, 1976) help to explain why the tremendous monetary expansion is increasingly causing growing economic and political instability in Europe.

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