Russell Roberts's Blog, page 100

Schumpeter Would Not Be Surprised

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

I’m grateful to Barton Swaim for eloquently reviewing Jacob Soll’s Free Market: The History of an Idea and thereby saving me from suffering the exasperation that would come from my slogging through yet another of the many ill-informed and ideologically blinkered briefs against free markets (“‘Free Market’ Review: The Olympians v. Laissez-Faire,” September 9). I can’t tell if there’s more irony or dark comedy in the fact that the market that Soll and his audience are convinced works so poorly nevertheless unfailingly satisfies today’s intense demand for ignorant diatribes against capitalism by prompting major publishing houses to churn out a steady supply of such diatribes – and, no doubt, paying their authors handsomely.

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

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 5 of my GMU Econ colleague Mark Koyama’s, and his co-author Jared Rubin’s, 2022 book, How the World Became Rich (original emphasis):

Nor do we necessarily have to choose between economic growth and a fairer society. In fact, a lack of economic growth has serious moral downsides. Historically, it is in stagnant or declining economies that one observes the worst episodes of violence, intolerance, and political polarization. On the other hand, social mobility and greater equality of opportunity are much more likely in an economy that is growing.

Some Links

(Don Boudreaux)

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GMU Econ alum Clara Piano counsels conservatives to, first, do no harm to families. A slice:

The grand sweep of history reveals that while governments are certainly capable of messing up their demographic futures, they are much less able to remedy demographic disasters. This peculiar asymmetry (on which I have written more here) is easiest to observe in autocratic states, like Soviet Russia, China, and Singapore. Each of these countries initiated their new regimes with anti-natal policies, such as increasing access to abortion, sterilization, divorce, and the infamous One Child Policy. However, each of these countries reversed course within two generations when they discovered their policies had been “too successful,” realizing that their social programs, economies, and national security would soon be in disarray due to impending demographic decline.

Wall Street Journal columnist Joseph Sternberg warns of the coming, environmentalists-inspired “tsunamis of energy-price bankruptcies.” Two slices:

Let’s come right out and say it: Anyone who still thinks climate changeis a greater threat than climate policy to financial stability deserves to be exiled to a peat-burning yurt in the wilderness.

Lest you’ve forgotten, the world’s central banks and other regulators are in the middle of a major push to introduce various forms of climate stress testing into their oversight. The Federal Reserve, Bank of England and European Central Bank, among others, want to know how global temperature variations a century hence might weigh on Citi’s or Barclays’ or Deutsche Bank’s capital and risk weightings today. The fad is for quantifying, with preposterous faux-precision, the costs of reinsuring flood risks, or fire, or the depressed corporate profits of a dystopian hotter future.

Well, if you seek “climate risk” to financial stability, look around you. It has arrived, although in exactly the opposite manner to what our current crop of eco-financiers predicted. Europe’s plight tells a tale that could become all too familiar in the U.S. soon.

The U.K. may be facing a wave of business bankruptcies exceeding anything witnessed during the post-2008 panic and recession. Some 100,000 firms could be forced into insolvency in coming months, bankruptcy consultancy Red Flag Alert warned this week. These are otherwise healthy firms with at least £1 million in annual revenue. Business failures on this scale would dwarf the roughly 65,000 firms of any size that went under from 2008-10.

The culprit is energy prices, which the consultancy believes could account directly for around one-quarter of the possible insolvencies. These prices are rising for British businesses in intervals of several hundred percent at a time and sometimes with steep deposit requirements from utilities that fear precisely a wave of bankruptcies.
…..

Politicians are happy to blame Vladimir Putin and his Ukraine invasion for the current energy disaster. But what transformed that one-off shift in the relative price for energy into a global disaster was two decades of green-energy policy beforehand. In Europe, that includes a fixation on renewables incapable of powering industrial economies absent battery technologies that don’t exist, a refusal to tap domestic fossil-fuel reserves such as shale gas, and a deep and irrational hostility to nuclear power in many parts of the Continent.

This has created an energy system of dangerous rigidity and inefficiency incapable of adapting to a blow such as Russia’s partial exit from the European gas market. It’s almost inevitable that the imminent result will be a recession in Europe. We can only hope that it won’t also trigger a global financial crisis.

David Henderson weighs in on Brad DeLong’s “strange concept of market failure.” (Speaking of which, remember this June 2009 post by Bryan Caplan?)

George Will reflects on Britain’s monarchy. A slice:

The prime minister is head of government but not head of state. The separation of those functions inoculates Britain from the infantilism peculiar to the American republic. Here the cult of the presidency invests absurd glory and expectations in that office’s occupants, who generally are mediocrities because politicians, like lawyers and plumbers and columnists, etc., produce a bell-shaped curve.

Emma Camp reports yet further evidence that applying the descriptor “higher education” to what goes on in American colleges and universities is – increasingly – unintentionally hilarious.

“Judge orders Fauci to cough it up.”

TANSTAFPFC (There Ain’t No Such Thing As Free Protection From Covid).

Jay Bhattacharya tweets:

Dear college & university presidents,

If you mandate the new BA4/5 bivalent booster for students, you will be doing so on the basis of no clinical evidence that it stops disease transmission or protects against severe disease. Nor any human safety data whatsoever.

Yours,
Jay

Quotation of the Day…

(Don Boudreaux)

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… is from page 70 of an advance copy of Samuel Gregg’s excellent and important forthcoming book, The Next American Economy: Nation, State, and Markets in an Uncertain World:

In fact, many goods and services made in America would not be produced in the first place (or would be created at a much higher price) without imports from abroad.

DBx: Myths about imports abound. One of these myths is that imports are chiefly consumption goods. It’s an easy yet false step from this myth to the conclusion that the more we import, the more we wallow in frivolous consumption as we simultaneously fritter away our future while the countries that supply our imports become stronger at our expense.

Yet in America today most imports are inputs for the production processes of American-based business operations. And so when protectionists call for higher tariffs to “protect” American industries, recognize that such tariffs raise the costs borne by many American industries.

…..

Pictured above is a piece of electrical machinery, of which we Americans today import a great deal.

Suppression of the Market Isn’t Market Failure

(Don Boudreaux)

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Here’s a letter to the Atlantic: (For alerting me to this Atlantic essay I thank Gene Epstein.)

Editor:

Annie Lowrey’s description of the development and contents of UC-Berkeley economist Brad DeLong’s new book, Slouching Towards Utopia, makes me eager to crack it open (“The Economist Who Knows the Miracle Is Over,” September 3). But I’m puzzled by DeLong’s claim, as quoted by Lowrey, that “There’s someone in Bangladesh who would almost surely be a better economics professor than I am and is now behind a water buffalo. The market economy gives me and my preferences 200 times the voice and weight of his. If that isn’t the biggest market failure of all, I don’t know what your definition of market failure could possibly be.”

Say what?

Whatever is the best definition of market failure, surely it refers to correctible problems that arise either because of the operation of markets or because markets fail to operate despite being able to do so. Yet in Bangladesh markets are suppressed by a corrupt state and the absence of the rule of law. Because under such conditions markets can barely operate they cannot be said to fail.

Just today, the Fraser Institute released its 2022 Annual Report on Economic Freedom of the World. In this data- and detail-rich assessment of economic freedom in 165 countries, Bangladesh ranks near the bottom, at 139. It’s one of the least economically free countries on earth. The U.S., in contrast, ranks as the world’s seventh economically free country. Unlike in the U.S., property rights in Bangladesh are highly insecure, corruption is rampant, and contract enforcement is among the sorriest in the world – worse even than in Venezuela.

So, yes, tens of millions of Bangladeshis today are mired in poverty and without economic opportunity. But they are stuck in that sad condition not by the market’s failure but, instead, by the market’s absence.

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

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from Nobel-laureate economist James Buchanan’s November 8th, 1971, letter to Mancur Olson, as this letter appears on pages 19-21 of David Levy’s and Sandra Peart’s excellent 2020 volume from Cambridge University Press, Towards an Economics of Natural Equals: A Documentary History of the Early Virginia School:

Those who do not understand the market at all tend to assume that all of its results are “laid on” by those in power. The emergence of nonplanned results is incomprehensible to many persons, and this includes many of the more vocal radicals.

DBx: Yes.

Much of the hostility to free markets is rooted simply in the mistaken belief that arrangements must be designed if they are to be as useful as possible to human beings. If it were true that, say, the masses cannot prosper unless someone or some group consciously aims to bring prosperity to the masses, then anyone who expresses opposition to such a conscious effort would be either dangerously ignorant or evil. And if, further, the connection between conscious design and beneficial outcomes were so obvious to all adults as to be undeniable, then anyone who expresses opposition to conscious efforts to bring about beneficial results would be appropriately regarded as indisputably evil.

Therefore, when an economist or business person, say, rejects so-called “stakeholder capitalism” and insists that the only proper goal of a corporation is to maximize the profits of shareholders, people for whom “the emergence of nonplanned results is incomprehensible” will be convinced that that economist or business person is an ill-intentioned enemy of society. There is, for such people, no other plausible explanation for opposition to “stakeholder capitalism.” Likewise, when those of us who oppose industrial policy express our opposition, we are heard by many people as opposing a vibrant economy that provides maximum opportunity and prosperity for the masses.

Hostility to liberalism, and opposition to the individualism that liberalism requires, are rooted sometimes in differences in fundamental values, but mostly in a plethora of intellectual errors. No single error, I believe, is as responsible for fueling hostility to liberalism as is the error of believing that all social orders – or, at least, all useful and sustainable social orders – must be consciously designed and maintained.

American Law and Economics Review: Robert Cooter’s ‘The Strategic Constitution’

(Don Boudreaux)

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In the Fall 2001 issue of the American Law and Economics Review, I reviewed Robert Cooter’s impressive 2000 book, The Strategic Constitution. A Word version of this review is available, in full, beneath the fold.

(more…)

Some Links

(Don Boudreaux)

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Mark Skousen expresses, in the Wall Street Journal, his justified exasperation with the American Economic Association’s absurd decision to require that all attendees of its 2023 annual meeting be vaccinated, boosted, and masked. Here’s his conclusion:

The AEA is cagey about who planned this particular policy. When I emailed, the AEA said it was a decision made by “the AEA’s leadership.” Did someone do a cost-benefit analysis? Who knows! Why didn’t they make allowances for people with religious or health concerns about vaccines? I share the sentiments of George Mason University’s Tyler Cowen who said on his blog: “How about allowing a members’ vote on this? Or should I just be happy that the AEA is making itself irrelevant at such a rapid pace? It is remarkable the speed at which the economics profession isn’t really about economics anymore.” Peter Drucker once observed that “there are no slower learners than economists.” I never believed that until now.

Here’s the abstract of a new paper by Kevin Bardosh, Allison Krug, et al.: (HT Jay Bhattacharya)

Students at North American universities risk disenrollment due to third dose Covid-19 vaccine mandates. We present a risk-benefit assessment of boosters in this age group and provide five ethical arguments against mandates. We estimate that 22,000 – 30,000 previously uninfected adults aged 18-29 must be boosted with an mRNA vaccine to prevent one Covid-19 hospitalisation. Using CDC and sponsor-reported adverse event data, we find that booster mandates may cause a net expected harm: per Covid-19 hospitalisation prevented in previously uninfected young adults, we anticipate 18 to 98 serious adverse events, including 1.7 to 3.0 booster-associated myocarditis cases in males, and 1,373 to 3,234 cases of grade ≥3 reactogenicity which interferes with daily activities. Given the high prevalence of post-infection immunity, this risk-benefit profile is even less favourable. University booster mandates are unethical because: 1) no formal risk-benefit assessment exists for this age group; 2) vaccine mandates may result in a net expected harm to individual young people; 3) mandates are not proportionate: expected harms are not outweighed by public health benefits given the modest and transient effectiveness of vaccines against transmission; 4) US mandates violate the reciprocity principle because rare serious vaccine-related harms will not be reliably compensated due to gaps in current vaccine injury schemes; and 5) mandates create wider social harms. We consider counter-arguments such as a desire for socialisation and safety and show that such arguments lack scientific and/or ethical support. Finally, we discuss the relevance of our analysis for current 2-dose Covid-19 vaccine mandates in North America.

Russ Roberts talks with A Gentleman In Moscow author Amor Towles.

And Nick Gillespie talks with Wild Problems author Russ Roberts.

Randy Holcombe ponders tribalism and electoral politics.

Benedict Beckeld defends slippery-slope arguments. A slice:

But the slippery-slope argument often resonates as a criticism of modern progressivism and liberalism. By leaving the space open for debate and increased equality, liberalism tends to empower those who, unwittingly or not, seek to overthrow anything that can be called liberal. The race to ever-changing equality takes on a logic of its own. The slippery-slope argument is therefore plausibly applicable to progressive politics, by dint of the latter’s own nature to push onward.

Slippery-slope arguments thus deserve some respect. The mere fact that an argument follows that form is largely irrelevant to determining its veracity. Someone accused by his interlocutor of using the slippery-slope argument should reply that the debate should not focus on the notion that cause A could lead to cause B—which is unremarkable—but rather, on how likely it is that cause A could lead to cause B. If recent experience is any indication, the slippery slope against which that interlocutor had protested is likely to unfold in all its decadence as the years progress.

My intrepid Mercatus Center colleague Veronique de Rugy offers some constructive ideas to Democrats. A slice:

Others are calling to roll back local zoning and other land-use rules that restrict housing construction and drive up home prices, especially in coastal cities where ordinary people can barely afford to live. In a 2020 article for The New York Times, I explained how “modest housing deregulation, such as upzoning to allow taller structures, can substantially increase the supply of housing in the most prosperous areas of the country. This promotes economic migration to these areas, which can reduce poverty and inequality by giving lower-income workers greater access to higher-wage labor markets.”

John Stossel explains how environmentalists inflicted great harm on Sri Lankans.

Writing in the New York Times, Christy Thornton explains the failure of the U.S.-governemnt-led drug war abroad. A slice:

Ultimately, more than four decades of the U.S.-led war on drugs abroad has not only failed to reduce the supply of illicit substances, it has actually made them more dangerous. A recent U.N. report found that global drug use is up 26 percent from a decade ago. Another survey by the Drug Enforcement Administration confirmed that despite decades of these source control measures, drug prices remain steady, purity and potency remain high, drugs remain widely available, and overdoses are skyrocketing.

Dan Klein and Mike Munger warns that today’s seemingly stable democracies can indeed tip over into tyrannies. A slice:

We, the present authors, are worried that putatively upright countries today are in danger of descending into tyranny. A tyranny—once capacities for control and despotism are constructed, in some cases including expansive government employment, dependency, and largesse—can be nearly impossible to reform. The key to the descent into tyranny, and the stability of tyranny once it is achieved, is this: Tyrants use tyranny to fortify their keep and to protect themselves against the sanctions due them for their crimes.

Quotation of the Day…

(Don Boudreaux)

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… is from page 184 of Robert Ellickson’s brilliant 1991 book, Order Without Law (footnote deleted):

The stuff of a civilization consists largely of its substantive norms. These norms identify the everyday behaviors that call for the informal administration of rewards and punishments. In a well-functioning civilization, these informal rules – which have no identifiable author, no apparent date of origin, no certainty of attention from historians – are among the most magnificent of cultural achievements.

DBx: My only complaint about this splendid work of research and scholarship is with its title. The very real and productive order that Ellickson describes in the book is emergent – spontaneous – but it is not order without law; the order is governed thickly by law – by evolved, emergent law. A more accurate title would be Order Without Legislation.

No Learning Loss Among Swedish School Children

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

William Galston writes: “Unlike most of its peers, including other Nordic countries, Sweden kept its primary schools open throughout the pandemic. Without additional research comparing Swedish educational achievement with that of countries such as Norway and Denmark, we can’t know whether Sweden’s distinctive policy choice made a decisive difference” (“Owning Up to America’s Covid Pandemic Failures,” Sept. 7).

Fortunately, relevant research on this front does exist, as reported yesterday by Reason’s Emma Camp: “Sweden kept primary schools open for the entire pandemic, yet according to the Swedish Public Health Agency, COVID-19 cases among Swedish children were no higher than those in neighboring Finland, where schools temporarily closed. According to a 2022 study published in the International Journal of Educational Research, Swedish elementary schoolers suffered no learning losses during the course of the pandemic.”*

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

* Emma Camp, “New Data Show COVID School Closures Contributed to Largest Learning Loss in Decades,” Hit & Run, September 6, 2022.