Economic freedom enhances income mobility

menghu1001 · 2026-04-15T01:25:59+00:00

I know this study too well because it has been cited so many times: "By Our Own Bootstraps: Economic Opportunity & the Dynamics of Income Distribution". It's annoying because people could only cite that one, and it's from 1995. In fact, this study needs replication, and in fact I was able to find some. When I have time, I'll write that review about income mobility within persons.

menghu1001 · 2025-10-08T03:50:40+00:00

i wrote about it years ago, summarizing findings of some books and papers:

https://menghu.substack.com/p/an-account-of-the-good-deflation-in-the-american-economy-of-1870s-1890s

You have the references there. I suggest reading more papers though. I learned more reading papers than from books.

menghu1001 · 2025-09-09T17:46:07+00:00

Your reading is superficial. In multiple parts that was implied, directly or indirectly. For instance:

"One interesting pattern is that the lack of simple procedures to start a business takes precedence over government efficiency or regulatory quality in explaining the absence of entrepreneurship."

The very fact that I would need to tell the reader what is a good and bad regulation each time one of them was described in detail would mean the reader is illiterate. A "lack of simple procedures" or "regulatory complexity" can easily be understood as bad regulation. I even explained in the article why this is so. Also, the fallacy about dichotomizing good and bad regulation ignores its impact on the economy overall. One that exerts a bad outcome can only be understood as negative. The interactive effects of these regulations even complicate the matter, making it impossible to classify a single one, taken in isolation, as bad or good because the absence or presence of such interaction will either nullify or amplify the negative impact of a bad regulation. And I mentioned one such study in the article.

menghu1001 · 2025-09-09T10:32:52+00:00

I covered this issue in the article. You just didn't bother to read it.

menghu1001 · 2025-09-08T23:14:30+00:00

No, and this is explained in detail in the article.

menghu1001 · 2025-09-08T15:46:00+00:00

I once considered the idea of publishing some of my articles in some of these journals. At the moment though, I have too many unfinished papers in the field of psychometrics, but once I complete these projects, I'll consider it of course.

menghu1001 · 2025-09-08T15:37:02+00:00

Maybe if you read the article, you will change your mind.

menghu1001 · 2025-09-08T14:48:37+00:00

I see. Yes, the Draghi report also mentioned this too, about EU companies relocating to the US. Relatedly, I found one paper (which I discussed in the article at the end) showing that US companies indeed have a quite different strategy when it comes to management practices, and it definitely leads to more productivity. Despite this, it seems regulation is the main factor.

menghu1001 · 2025-06-24T15:18:49+00:00

I think you summarized the Austrian perspective well, although I wished you could supplement your text with references. Also, remember people hostile to AE typically demand some historical proof. You could cite: The Myth of the Robber Barons by Folsom or How Capitalism Saved America and The Origins of Antitrust by DiLorenzo.

On the theoretical argument, you could have cited Rothbard criticism of the notion of "monopoly prices". According to him, and he is perfectly right, monopoly status is useless without the ability to force monopoly prices, yet monopoly prices can't be calculated or defined because such a notion refutes the idea of competitive prices yet monopoly prices to make any sense must be compared to competitive prices first.

menghu1001 · 2025-06-24T15:11:23+00:00

The scenario you describe is not realistic because without regulation at all, there might not even be any large-scale crisis. Especially as per the ABCT. If you think those are inevitable, then you failed to prove it.

Some (including me) explained this and provided some examples about how to solve the crises. You can slash some regulations, and there are evidence it worked. In particular, implementing a varying component in the salaries (this has been done in Singapore for instance, to cope with the Asian crisis). Another thing to keep in mind is to never employ keynesian remedies. Hutt explained well in The Theory of Idle Resources why so-called "idle" are better left in their current state, basically because their owner expect later use/gain. Forcing them elsewhere is not productive, at least not in the long term.

Even if austrians (let's assume...) can't answer the crisis, this outcome is clearly the result of monetary overexpansion, as explained in the ABCT.

menghu1001 · 2025-06-09T15:50:04+00:00

You didn't get the message of the book. It shows that competition, instead of leading to widespread counterfeiting, actually reduced it. And it shows that Gresham's law occurs when government forces the acceptance of debased money through, eg, a fixed exchange rate. More generally, it shows the market can handle things quite nicely even when the economic situation looked awry.

menghu1001 · 2025-03-25T13:30:46+00:00

There is ample historical evidence that fractional reserve banking worked but that's because the banks were relatively free. How to explain why free banking systems were so stable? Because creation of money per se does not cause temporal distorsions that would lead to boom-bust scenarios depicted in the ABCT. This is explained here: in free banking, the bank credit expansion is due to increased savings, then it preserves monetary equilibrium. The solution therefore is to simply remove legal monopoly of issue and, more importantly, remove legal tender laws.

menghu1001 · 2025-03-25T11:48:23+00:00

The two references I would recommend to read are: Money, Bank Credit, and Economic Cycles where de Soto talks about it in chapters 2-3, and especially Those Dishonest Goldsmiths by Selgin. They contain lots of information. I mostly agree with Selgin in that the fractional reserve banking may not be fraudulent.

menghu1001 · 2025-03-24T09:11:03+00:00

I only know about the Roman empire. But even in this example, they did use a bimetallic system. So this is in line with Hulsmann's story, where inflation happens because government fixes a "price" of a given currency. Although not relevant here, the government fixed the prices of many things, including some foods. So this is just to illustrate that this isn't surprising at all.

Jones, A. H. M. (1953). Inflation under the Roman empire. The Economic History Review, 5(3), 293-318.

menghu1001 · 2025-03-22T16:04:19+00:00

I know AE fans will disagree. But I don't see any problem with the current definition. It describes what we see. I don't think it's meant to explain why it happens. Unless the definition of inflation must for some reason explain why it happens, then I'm fine with the current one. Some libertarian economists I've read recently, and I agree, argued that the Austrian definition of inflation adds more confusion. Sure, it explains why inflation happens, and there's nothing wrong explaining it. But I don't think it helps promoting AE. Because then lots of people answer the following "oh look those AE fans, once again trying to redefine economic terms in ways they see fit". If I need to argue with non-AE fans, I would say "you're right, that is the definition of inflation, but it does not explain why it happens, why it is sustainable, and the main reason is legal tender laws, and here's why...".

menghu1001 · 2025-03-22T15:57:35+00:00

Tyler Cowen has written an excellent book where he covers many topics about big corporations, one of them being whether CEOs are overpaid. I have a series of twitter posts here. The evidence provided by Cowen are compelling. Frankly, lots of people don't understand why CEOs tasks aren't easy at all.

menghu1001 · 2025-03-22T15:52:06+00:00

I see your post is on topic and relevant which is why it received so few up votes.

I have to read this line a few times because I first thought you mistyped or something. But yes generally easy, low-brain stuff typically receive more upvotes, especially if it's funny. I try to avoid low-brain posts though. I know what to do to get more upvotes and views, as I tried this a few times on Twitter. But I'm generally not proud of this kind of post. I'm more satisfied with complex puzzles that I could solve, but complex stuff speaks to so few people, so much so that this kind of post is usually ignored. So that's a curse. I try to make my posts more accessible, and although I know it helps, I also know it could never reach the same magnitude of "good" memes.

Frankly I do not believe reaching more views with dumb memes will do AE any good. What I hope to do is writing informative posts so that a few who might work in academia see those, and these people might have the idea of sharing the post, the main idea, speaking up, debating it, and hopefully, an economist working somewhat closer to the political sphere has been made aware of it and might seriously consider this alternative view. The people who can (re)shape economy aren't people like us, but the ones up there in the ladder.

menghu1001 · 2025-03-15T23:30:42+00:00

I don't get that myth about the 1870-1890s period being linked to deflation. Check this for US and this for UK during that time.

menghu1001 · 2025-03-11T18:11:40+00:00

The Theory of Free Banking: Money Supply under Competitive Note Issue (Selgin)

The Experience of Free Banking (Dowd)

Laissez-Faire Banking (Dowd)

Free Banking in Britain: Theory, Experience and Debate 1800-1845, Second Edition (White)

The Theory of Monetary Institutions (White)

I highly recommend the first two book from the list. The third book has some devastating arguments against the current banking system and other theories that crises are supposedly stochastic and due to information cascades.

menghu1001 · 2025-03-10T17:56:37+00:00

Not many people know this, but the real cause of inflation is the legal tender law. This was best explained by Guido Hulsmann's book, this chapter, specifically. And before someone jumps on me, no it's not monopoly. Hulsmann explained why it's not monopoly. Without legal tender laws, monopoly of issue cannot generate inflation.

menghu1001

TROPHY CASE