Category Archives: ECAEF | CEPROM


Blackboard Economics: On the Root of Public Interest Evil

Blackboard Economics: On the Root of Public Interest Evil. Essay by Terry L. Anderson*

Anyone who has taken an economics course has been dazzled by the graphs that professors like to draw on the blackboard (or whiteboard in more modern times). There is no more dazzling example of these graphs than an article published in the American Economic Review (March 1957) by Francis Bator titled “Simple Analytics of Social Welfare Maximization” (thought it did not seem “simple” to me when I was a graduate student). In it he provides a “rigorous” graphical rendition of how neo-classical principles could lead to maximizing social welfare and justifies his analytics saying, “It appears, curiously enough, that there is nowhere in the literature a complete and concise nonmathematical treatment of the problem of welfare maximization in its ‘new welfare economics’ aspects.

It is the purpose of this exposition to fill this gap for the simplest statistical and stationary situation.” Bator describes the analysis as “a rigorous diagrammatic determination of the ‘best’ configuration of inputs, outputs, and commodity distribution for a two- input, two-output, two-person situation, where furthermore all functions are of smooth curvature and where neoclassical generalized diminishing returns obtain in all but one dimension-returns to scale are assumed constant” (p. 22).

The article begins with the “efficiency locus” of isoquants (seem simple?), transits to a “production possibility frontier,” then to a “grand utility possibility frontier,” which assumes knowledge of individual preferences, then to a “welfare function,” for which “ultimate ethical valuations are involved,” and finally to “Ω,” the “constrained bliss point.” What could be more enticing than understanding how to take society to its bliss point, and what could lead more to public interest evil?

The “root” of public interest evil, however, goes back much farther than Bator to A.C. Pigou’s The Economics of Welfare in 1920. Therein he leads economics down the pernicious road of externalities by distinguishing between “two varieties of marginal net product” which he named respectively social and private. The marginal social net product is the total net product of physical things or objective services due to the marginal increment of resources in any given use or place, no matter to whom any part of this product may accrue. It might happen, for example, , , , that costs are thrown upon people not directly concerned, through, say, uncompensated damage done to surrounding woods by sparks from railway engines. All such effects must be included – some of them will be positive, others negative elements – in reckoning up the social net product of the marginal increment of any volume of resources turned into any use or place. (134)

The upshot of his argument is that individuals acting on the private costs and private benefits they face will over-produce products with negative externalities and under produce those with positive externalities …

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Blackboard Economics (PDF)

* Terry L. Anderson has been a senior fellow at the Hoover Institution since 1998 and is currently the John and Jean De Nault Senior Fellow. He is the past president of the Property and Environment Research Center in Bozeman, MT, and a Professor Emeritus at Montana State University where he won many teaching awards during his 25 year career. Anderson is one of the founders of “Free Market Environmentalism,” the idea of using markets and property rights to solve environmental problems, and in 2015 published the third edition of his co-authored book by that title.

Inflation, High Debt and the Public Interest

Inflation, High Debt and the Public Interest – Essay by Veronique de Rugy*

Veronique de RugyA growing number of economists hold the view that the U.S. government’s growing debt should not worry us. Real interest rates are not only much lower than in the past but are also forecast to stay at current low levels for a long time. As such, the government can carry much higher debt levels without worrying about debt sustainability. In addition, some economists argue that in countries where real interest rates and the interest rate-minus-growth differential is sustained over time, the government can increase primary deficits without worrying about future costs.

While this new fiscal paradigm is interesting, it rests on assumptions that don’t apply to the fiscal issues facing the US. It also requires immense faith in the willingness of legislators to spend money in ways that produce high and consistent economic growth. Yet a review of the literature on the impact of government spending on growth reveals that, generally, such spending crowds out private-sector spending. The same is true of the relationship of debt to growth. In other words, even if interest rates stay low forever, growth could slow so much as to make the starting assumption moot. Finally, it is simply imprudent to count on low interest rates lasting forever.

However, there is a deeper fact that should worry economists more than it now does – namely, it is hard to have good policies when government swells to be so large that it has little practical choice but to depend on annual deficit financing. In particular, if inflation ever gets out of control, it’s more difficult to deal with in a high rather than low debt environment. Furthermore, most of the discussion about the risk of inflation focuses on the risk posed by the Federal …

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Inflation, High Debt and the Public Interest

*Veronique de Rugy is George Gibbs Chair in Political Economy and a senior research fellow with the Mercatus Center at George Mason University. Her essay ‘Superstitions, Conjectures and Refutations: Inflation, High Debt and the Public Interest’ she gave as a speech at the 2021 CEPROM/ECAEF Conference in Monaco.

On Zeitgeist and Public Interest

Speech “On Zeitgeist and Public Interest” by Johan Norberg, held at the 5th CEPROM/ECAEF Conference in Monaco, 9. Dec 2021

“The public good is not to be considered if it is to be purchased at the expense of the individual.” Lord Acton (1834-1902)

On Zeitgeist and Public Interest Johan NobergOn Zeitgeist and Public Interest | The idea of some sort of common good or public interest as the goal of and guide for practical politics is as old as statehood itself. In various guises it is used by politicians and administrators as a source of legitimacy. But there is no clear definition of public interest, and its meaning keeps shifting with the intellectual winds, with the Zeitgeist. Therefore, a term that once had a restrictive function now has taken on a permissive function. A conceptual shield against what Aristotle and Locke saw as tyrannical government, is now wielded as a weapon, to authorise any kind of government intervention.

What is in the public interest?

“The public interest”, wrote David Hume, “becomes the source of great dissentions, by reason of the different opinions of particular persons concerning it”. F. A. Hayek concluded that “common welfare or the public good has to the present time remained a concept most recalcitrant to any precise definition and therefore capable of being given almost any content suggested by the interest of the ruling group.”

And not just classical liberal thinkers worry about its vagueness. As a modern guide to the concept for public administrators puts it …

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On the Zeitgeist and the Public Interest

What the future of small states in Europe looks like

The 5th CEPROM/ECAEF Conference took place on 9 December 2021 at the Musee Oceanographique in Monaco.

Big size is often propagated as an answer to globalization. The success of Liechtenstein, Monaco or Switzerland, on the other hand, points in a different direction. But these small countries do not act alone in an empty space.

Does technological progress make borders disappear, and does this mean that the future belongs to the big players? No doubt small countries face big challenges. This perfectly explains why the Princely Houses of Liechtenstein and Monaco jointly organized a conference in Monte Carlo. CEPROM (Center of Economic Research for Monaco, MC) and ECAEF (the liberal think-tank European Center of Austrian Economics Foundation) teamed up to find answers to what future small states in Europe still have.

ecaef ceprom conference 2021
“People who intend only to seek their own benefit are led by an invisible hand to serve a public interest which was no part of their intention. I say that there is a reverse invisible hand: People who intend to serve only the public interest are led by an invisible hand to serve private interests, which was no part of their intention”. Milton Friedman (1912-2006)

In view of the current pandemic, yet again the subject of this year’s conference was highly topical. Can, should or must a state mandate its citizens to get vaccinated against Covid-19 in the Public Interest? Is it in the Public Interest to restrain a person’s freedom by infringing on some fundamental constitutional rights? Should governments finance the purchase of a rare painting, subsidize the export of wine or rescue a national airline in the Public Interest but at the taxpayer’s expense? Is the funding of higher education serving the Public Interest or is it more self-serving than altruistic? In other words, is the Public Interest always in the public’s interest?

Read the following introduction that Prof. Kurt Leube gave at this year’s CEPROM/ECAEF Conference (download PDF, 46kb) ->

What is the Public Interest and What does it Mean?
A brief introduction to the V. CEPROM/ECAEF Conference

V. ECAEF/CEPROM Conference, Monaco 2021

9 December 2021

ecaef ceprom conference 2021
“People who intend only to seek their own benefit are led by an invisible hand to serve a public interest which was no part of their intention. I say that there is a reverse invisible hand: People who intend to serve only the public interest are led by an invisible hand to serve private interests, which was no part of their intention”. Milton Friedman (1912-2006)

Principality of Monaco, 9 December 2021:

V. International

(An Academic Conference in honor of Jacques Rueff, 1896-1978)

by invitation only


“Is the Public Interest
really in the public’s interest?”

– with some Allusions to the Political Accountability –

Locally Organized and Hosted by
Center of Economic Research for Monaco (MC)

Conception, Arrangement and Academic Supervision:
European Center of Austrian Economics Foundation (LI)

Musee Oceanographique de Monaco
Principality of Monaco

Academic Director: Kurt R. Leube (
Admin. Director, CEPROM: Emmanuel Falco ( and
Media Contacts:
Conference Date: December 9, 2021
Location: Musee Oceanographique de Monaco, Principality of Monaco
Conference Languages: English/French; simultaneous translation.

Conference Program

9 December, 2021, 09:00-9:30: Registration
09:30-9:45, Welcome: H.S.H. Prince Albert II and H.S.H. Prince Michael of Liechtenstein

Session I (9:45-12:00)
On the Public Interest Concept: As a Method to judge Government Actions and Political Accountability.
09:45-10:00, Chair: Carlos A. Gebauer (D)
10:00-10:30: Free Markets, Economic Governance and the Public Interest – Michael Wohlgemuth (D)
10:30-10:45: Discussion
10:45-11:15: Coffee break for all participants
11:15-11:45: A false Dichotomy? The Public Interest and Inequality – Axel Kaiser (CL)
11:45-12:00: Discussion

12:00-13:45: Break

Session II (13:45-15:30)
On the Public Interest Concept: On its Meaning as an Economic Policy Function
13:45-14:00, Chair: Peter A. Fischer (CH)
14:00-14:30: Black Board Economics: The Public Interest and the Road to Leviathan – Terry L. Anderson (USA)
14:30-14:45: Discussion
14:45-15:15: In the Name of the Public Interest? Excessive Government Debt and ‘Unconventional’ Monetary Policies – Lars P. Feld (D)
15: 15:15-15:30: Discussion
15:30-16:00: Coffee break for all participants

Session III (16:00-18:00)
On the Public Interest Concept: As a Guide to and a Fact-Check on Public Policy Measures
16:00-16:15, Chair: Peter A. Fischer (CH)
16:15-16:45: Superstitions, Conjectures and Refutations: Inflation, High Debt and the Public Interest – Veronique de Rugy (USA/F)
16:45-17:00: Discussion
17:00-17:30: On the Zeitgeist, Political Accountability and the Public Interest – Johan Norberg (S)
17:30-17:45: Discussion
17:45-18:00: Closing Remarks – Kurt R. Leube (A/USA)
18:00: End of Conference

Please note: Some titles may change.
In the lobby and in the conference hall (Musee Oceanographique
de Monaco) you may be asked to wear a mask.