Russell Roberts's Blog, page 101

Bonus Quotation of the Day…

(Don Boudreaux)

Tweet

… is from page 9 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:

By removing the supposition of fixed goals, the Virginia School fundamentally altered the role of the economist. No longer was the economist to offer policy advice to attain the known goals of society. Instead, the role of the economist was a more modest one of offering suggestions for public consideration.

DBx: The “supposition of fixed goals” that Jim Buchanan and other members of the Virginia School of political economy removed is the supposition, used by mainstream economists, that individuals in society have goals that are largely exogenous to the economic and political processes of which they are a part.

Pictured here is the front page of a 1956 monograph written by Rutledge Vining, a colleague of Buchanan at the University of Virginia who helped to form Buchanan’s view of the proper role of economics and of the economist.

Some Links

(Don Boudreaux)

Tweet

George Will lets loose – appropriately so – on the ignorant and self-absorbed ‘academics’ who attacked history professor James Sweet for daring to question the merits of wokey ‘history.’ Two slices:

Sweet had threatened the fun of progressive vanity, of celebrating oneself by disparaging historical figures: Washington, Lincoln, Churchill — all were the moral inferiors of 21st century professors. Worse, from the perspective of the woke, is Sweet’s skepticism about history as progressivism’s servant, which is history “that matters.”

He criticized the New York Times’s “The 1619 Project” so delicately (it is, he said in an amusing understatement, not “primarily” a work of history) that he did not mention its most nonsensical claim: The American Revolution was primarily ignited by a British offer of freedom to persons who fled slavery and joined the British — an offer that came after the battles of Lexington, Concord and Bunker Hill, and after George Washington assumed command of the Continental Army. For his mild impertinence regarding “The 1619 Project,” he was denounced as “against social justice.”

So, in four paragraphs of self-flagellation, Sweet almost instantly apologized for the “harm” his “ham-fisted” and “clumsy” attempt to “open a conversation” has caused. What harm? He did not say. Presumably progressive historians would somehow be harmed by hearing the thoughts in this column’s third paragraph. And harmed by his sin against political solidarity: In breaking ranks regarding the sacrosanct status of “The 1619 Project,” he gave aid and comfort to Republicans. The horror, the horror.

Sweet’s abject plea (“I’m listening and learning”) to be forgiven by those he has supposedly harmed is particularly puzzling because woke academics today cultivate an aura of toughness. For example, literature professors do not just critically read, say, George Eliot’s “Middlemarch,” they “interrogate” it, like hard-bitten detectives whose eyes, which have seen too much in our fallen world, peer beneath the brims of their fedoras. These interrogators are oblivious of how their vocabulary announces their childish role-playing.

…..
Some excitable professors now histrionically regret having elected Sweet president of the American Historical Association. When their indignation subsides, and before another occasion for woke rage arrives, as surely it soon will, they might ask themselves: Why were less than 1.2 percent of bachelor of arts degrees awarded to history majors in 2019, the lowest percentage since records began being kept in 1949?

Perhaps one reason for this — and for today’s number of jobs for history PhDs being half the 2008 number — is students are not interested in learning history from professors who are less interested in history than in playing at politics. Such professors understand politics as the activity of advertising their virtue in the sandbox of today’s academia, where Sweet is crawling toward redemption.

My GMU Econ colleague Larry White explains that private currency has been quite common throughout history.

My GMU Econ colleague Bryan Caplan decries what he calls “the fakery of ‘fighting inflation.'” A slice:

Snapping the pieces together, we reach a shocking conclusion: Free markets are fundamentally deflationary. In the absence of monetary intervention, Aggregate Demand stays roughly stable*, while Aggregate Supply is growing. Per every textbook, stable demand and rising supply imply falling prices.

While then is inflation almost always positive in almost every country? Because central banks keep increasing the money supply. If they did nothing, deflation would be the norm.

It is therefore quite absurd to give the Fed or any other central bank credit for “fighting inflation.” You might as well give your hard-partying neighbor credit for “fighting loud noise” because he turned his stereo volume down from 10 to 7. Key point: If the neighbor wasn’t home to “fight loud noise,” the volume would be 0.

The most you can honestly say about any central bank is that they are trying to start causing a lot less inflation. Which sounds underwhelming. Which is why they twist the truth.

(DBx: Bryan expresses later in his post some mild support for the conventional notion that deflation, even when caused by rising productivity, is likely harmful – a notion with which I disagree, largely for reasons laid out by George Selgin.)

Antony Davies busts myths about student-loan ‘forgiveness.’ A slice:

Myth #4: Forgiving student loans is good for the economy because those students will be more able to purchase homes and cars.

It is true that student loan forgiveness will give students financial freedom they wouldn’t otherwise have – freedom to invest in starting businesses or to buy big ticket items like houses and cars. But this is only half of the truth. For every additional dollar students will be able to spend because their loans are forgiven, the rest of us will have one dollar less to spend because we must pay for the forgiven loans. In the end, there’s no positive economic effect. All the forgiveness does is augment students’ spending in exchange for diminishing the general population’s spending.

The Wall Street Journal‘s Editorial Board explains that antitrust can literally be hazardous to your health. A slice:

Antitrust regulation is running off the rails in Europe and the U.S., and their citizens could wind up as collateral damage. The latest example is the European Commission’s order Tuesday to derail gene-sequencing giant Illumina’s acquisition of cancer blood-test startup Grail.

Grail has developed a lab test that can identify more than 50 cancers at early stages with a simple blood draw. Screenings don’t exist for most cancers, so many aren’t caught until they’ve spread and are harder to treat. While Grail’s test can’t catch all cancers, it can detect the 12 deadliest with about 76% accuracy, and its false positives are less than 1%. The tests could save tens of thousands of lives a year if widely adopted.

Enter Illumina, which makes platforms that sequence genetic tests for the likes of fetal abnormalities and Covid variants. While Illumina dominates this market, its growth in recent years has slowed amid competition from China’s BGI Group. Illumina saw a growth opportunity two years ago by making an $8 billion bid for Grail.

Illumina says its experience negotiating insurer reimbursements for genetic tests could accelerate Grail’s commercial adoption. Because most insurers currently don’t cover Grail’s test, the startup last quarter generated only $12 million in revenue and ran an $187 million operating loss. This makes the EC’s order blocking the deal all the more bizarre.

John Johnson and Denis Rancourt explain that lockdowns did not save lives. Quite the contrary. Here’s their conclusion:

Similarly, Rancourt et al. (2021) found that the temporal and spatial distribution of all-cause mortality in the pandemic period is inconsistent with the effects of a viral respiratory disease. They found evidence that many excess deaths during the pandemic were misdiagnosed bacterial pneumonia infections, likely exacerbated by disruptions to the US healthcare system.

Thus, there exists strong evidence supporting the hypothesis that lockdowns placed a sudden and severe stress burden on vulnerable demographics in the US, leading to significant increases in death in those states that used lockdowns as disease control measures.

Emma Camp reports on the data that show the enormous damage that covid school closures have inflicted on children. A slice:

However, it simply isn’t true that complicated reopening procedures were required to keep American schoolchildren safe during the pandemic. Nor were lengthy closures. Thankfully, COVID-19 generally spares the young. 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.

Tyler Cowen hopes that the American Economic Association will drop its absurd vaccination-boosted-masking requirements for attendees of its January 2023 meetings.

Carl Heneghan and Tom Jefferson write about the start of the “lockdown back-peddling race.” A slice:

Then there are the advisers who may have said things they knew were wrong at the time but as part of the Government machinery they had no control over their affirmations.

Then there are the interventionists who spun their words on the imposition of fear and the need for precautionary principles – all for our good, of course.

Finally, there are those who have left the seat of power with sweeping statements on the epidemiology of respiratory viruses which were dictated by their desire to know best in the face of considerable uncertainty.

This might be entertaining and could go on for some time, were it not for the human, economic and democratic disaster it has left present and future generations to deal with.

Brendan O’Neill is correct: “The ideology of lockdown is a menace to society.” Three slices:

Remember Zero Covid? This was the idea that the only way to deal with Covid-19 was by eliminating it. Only when every trace of the virus had been scrubbed from society would it be safe to let the masses out again, insisted the Zero Covid fanatics. Zero Covid ideologues were everywhere. In the medical establishment, the political elite, the media. In early 2021 the Guardian’s leader writers were telling Boris Johnson that he should ‘[stamp] out the virus with a Zero Covid strategy’. Kill Covid to save society.

How is Zero Covid looking now? Ask China. The suffering of the Chinese people under the ideology of Zero Covid is extraordinary. Lockdown may be a mercifully fading memory for us in the West but it remains the ruthless daily reality for the Chinese. The numbers are staggering. Sixty-eight cities in China are currently in partial or full lockdown. As of last week this includes the megacity of Chengdu, where 21million people have been instructed to stay indoors. Only one person from each household is allowed out to do essential shopping. No exercise, no strolls in the park, no going to work. Briefly nipping out for food is the only civil liberty the people of Chengdu enjoy.

The Chengdu lockdown is truly dystopian. Not only have millions been placed under house arrest – others have been forced to take up residence at their places of work. Chengdu is an economic powerhouse, home to global players in the automaker and technology markets, including Volkswagen and Foxconn Technology Group. And to ensure that the lockdown doesn’t disrupt production too much, some factories are operating ‘closed loop systems’. This means ‘separating workers from the rest of the community’. The workers stay on site, in campuses, away from their fellow citizens and families, and are constantly tested for sickness. All so that they can carry on being a cog in China’s vast economic machine. Under Zero Covid you’re either a potential carrier of disease that must be sealed into your home or a machine to be separated from society so that you can carry on producing for profit. Zero Covid dehumanises all.

…..

The harms of Zero Covid are becoming clearer and clearer. As the British Medical Journal pointed out, there were even ‘reports of people [in Shanghai] dying from non-Covid causes because they [could not] access their usual medicines’. The entire oath of medicine – First, Do No Harm – is turned upside down when society devotes itself so singularly and psychotically to tackling one virus alone. Spiritual health, social health, even physical health – all have been sacrificed in China’s crusade to achieve Zero Covid. Let’s be grateful Boris didn’t heed the Guardian’s plea to pursue a Zero Covid strategy. Actually, the horrors of Shanghai seem to have changed even the Guardian’s mind. ‘Fear, paranoia, anger – this is life under China’s Zero Covid strategy’, a headline said in April.

…..

Zero Covid has been an act of self-sabotage for China. It is now having a huge impact on China’s economy and political stability. It is all an apt and depressing reminder of what happens when the state elevates ideology over reason. When citizens are reduced to vectors of disease to be managed and controlled rather than being treated as wise, good individuals who should be trusted to behave responsibly. The nightmare in China is an indictment of the regime in Beijing, and also of some of the lockdown fanatics here in the West who might have happily led us down the same path to social destruction.

(DBx: Never forget that Imperial College’s Neil Ferguson – the ‘modeler’ whose scientistic prognostications in early 2020 so impressed so many western ‘leaders’ – expressed admiration for the Chinese government’s tyrannical and deranged method of dealing with covid.)

Dan Wootton tweets: (HT Jay Bhattacharya)

I feel sick to the stomach for the poor souls in China continuing to live through the dystopian hell of Zero Covid.
Shame on Jeremy Hunt, Jacinda Ardern, Devi Sridhar, Nicola Sturgeon and every other western leader who championed such an insane philosophy.

Bellante and Picone on Card and Krueger

(Don Boudreaux)

Tweet

Until last night, I thought that I’d shared here at Cafe Hayek the excellent Fall 1999 Journal of Labor Research paper by Don Bellante and Gabriel Picone on David Card’s and Alan Krueger’s famous empirical research on minimum-wage legislation – research that is purported to show that hiking minimum wages at least sometimes has little or no negative, and perhaps even a positive, impact on the employment opportunities of low-skilled workers. But I discover that I’ve not yet shared the Bellante-Picone paper, the title of which is “Fast Food and Unnatural Experiments: Another Perspective on the New Jersey Minimum Wage,” so here it is. Unfortunately, it’s behind a high pay wall. Below the fold I excerpt some key passages. (Long-time patrons of Cafe Hayek might recall that the labor economist Don Bellante is the author also of the insightful 2007 paper “The Non Sequitur in the Revival of Monopsony Theory.”)

(more…)

Quotation of the Day…

(Don Boudreaux)

Tweet

… is from page 152 of my colleague Peter Boettke’s April 2017 talk “Don’t Be a ‘Jibbering idiot’: Economic Principles and the Properly Trained Economist,” as this essay appears as the Chapter 8 of Pete’s excellent 2021 book, The Struggle for a Better World:

Economics properly done is an invitation to inquiry, and the principles constitute a golden key that unlocks the deepest mysteries of the human experience. We live in a world of scarcity, and as a result, individuals must choose. In choosing, individuals face tradeoffs, and in negotiating those tradeoffs, they need aids to the human mind to guide them. Prices serve this guiding role, profits lure them, losses discipline them, and all of that is made possible by an institutional environment of property, contract, and consent. These are the basic principles from which we work in economics.

DBx: Pictured above is the University of Virginia’s Ken Elzinga – one of the greatest economics teachers of this or of any era.

If Labor Markets are Red Hot, Collective Bargaining Cannot Even In Theory Help Some Workers Without Harming Others

(Don Boudreaux)

Tweet

I’ve largely stopped reading E.J. Dionne, who is so predictably ignorant of economics that he usually makes me yawn. But the contradiction that infects his recent column praising labor unions is too rich not to engage.

Editor:

The headline of E.J. Dionne’s paean to labor unions says that they “unite a divided nation,” yet in the text Mr. Dionne offers evidence that unions in fact are divisive (“Unions are on a roll. And they unite a divided nation.” Sept. 6). That Mr. Dionne is unaware of the contradiction does nothing to diminish it.

Collective bargaining can raise union-members’ wages without inflicting damage on other workers only if employers have monopsony power over labor – that is, only if there are so few employers of union-represented workers that these employers need not compete for workers and, thus, have the bargaining power of monopolists over their employees. In this situation, labor unions can, without harming any workers, give their members bargaining power that these members lack as individuals.

But when labor markets are competitive, rivalry among employers for workers gives bargaining power to individual workers. Worker pay gets bid up to reflect worker productivity. In this situation, collective bargaining can raise union-members’ wages only by artificially reducing the number of workers who are able to compete for employment at unionized firms or in unionized trades. When labor markets are competitive, therefore, collective bargaining raises the pay of some workers only by artificially reducing the employment opportunities – and, hence, the pay – of other workers.

And so when Mr. Dionne (rightly) applauds today’s “red-hot labor market” as enabling workers to “feel liberated by the availability of employment,” he in fact applauds competitive labor-market conditions under which unions can ‘succeed’ only by pitting some workers against other workers.

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

Cato Journal (with Dwight Lee): “Politics As the Art of Confined Compromise”

(Don Boudreaux)

Tweet

Continuing to archive, here at Cafe Hayek, as many as possible of my writings, I share a link to my Winter 1997 Cato Journal paper, co-authored with Dwight Lee, titled “Politics as the Art of Confined Compromise.”

Bonus Quotation of the Day…

(Don Boudreaux)

Tweet

… is from pages 199-200 of the late Arthur Seldon’s The Virtues of Capitalism (2004), which is volume 1 of The Collected Works of Arthur Seldon:

There are eight main advantages of rationing by price over political rationing: it is neutral, informative, cautionary, pacific, humane, non-authoritarian, the essential missing link between supply and demand, and in any event indestructible. Pricing is imperfect, but the imperfections are out-weighed by the advantages. Political rationing, the method of socialism, is not always dissected candidly by socialist academics as the alternative they offer. Yet its defects, abuses and excesses are apparent from the history of socialism. The new form of politicized market offered by market socialists would not avoid the politicization of economic life that markets are designed to remove or minimize. And it lacks the qualities of market, private property pricing of capitalism.

DBx: Alas, I do not believe that the price system is indestructible. It can be destroyed by government coercion – especially that which comes in the form of price controls.

And of course, what Seldon says about “the new form of politicized market offered by market socialists” holds true for the interventions desired by advocates of industrial policy. All such advocates – because they advocate replacing market-determined patterns of resource use with patterns of resource use designed and imposed by the state – are in fact advocates of socializing significant portions of the economy.

Barron’s: A Review of Robert Kuttner’s ‘Debtor’s Prison’

(Don Boudreaux)

Tweet

In the October 5th, 2013, edition of Barron’s I reviewed Robert Kuttner’s book Debtor’s Prison. That review is available here (following Bill Easterly’s review of another book); you can also read my review, in full, beneath the fold, and shared here at Cafe Hayek for the first time.

(more…)

Some Links

(Don Boudreaux)

Tweet

David Henderson and Ryan Sullivan offer evidence that contradicts Fauci’s claim that school closings inflicted on children no irreparable damage. Three slices:

One possible criticism of the translation of learning losses to income losses is that it is overstated, because part of the income gain from schooling, as George Mason University economist Bryan Caplan has shown, is from its “signal” to employers rather than any real learning. But there’s also good reason to believe that the losses due to the shutdowns might also be understated. Governments canceled children’s sports, forbade them from playing in parks, and forbade them from hugging or even being around grandparents. These bans and prohibitions almost certainly reduced children’s social skills. That reduction will probably hurt future earnings when those children are adults. And this leaves out the reduction in mental health, which, according to the literature, could be substantial.

…..

How can that be? The main reason is that lost income is closely linked with lower life expectancies and death. Lower incomes cut back on how much people spend on health care, healthier foods, or safety products in general. A recent article by James Broughel from George Mason University and Kip Viscusi from Vanderbilt University found that “each loss of $1 trillion in income will lead to about 9,200 deaths.” Therefore, the $2 trillion in lost future income for American children can be associated with over 18,000 (early) deaths in the future.

Unfortunately, the 18,000 figure discussed above may just be a lower bound for how many people the lockdowns killed because school shutdowns were not the only cause of lost income. Many parents lost income because the lockdowns essentially locked them out of their jobs. This lost income hurt the children also.

…..

What makes these projected deaths even more depressing is that the school shutdowns failed to save lives on the front end. Researchers now have over two years of data to analyze the impact of the school shutdowns on community spread. A standard methodology is to compare areas that reopened (or shutdown) earlier in comparison with those that didn’t. What do these studies find? Articles in leading medical journals such as Health Affairs and JAMA show little to no impact of the school shutdowns on community spread. That’s an inconvenient truth to a society that placed so much faith in shutdown proponents at the pandemic’s beginning. So the bottom line is that school closings will cost a lot of lives, but saved few or none.

The school shutdowns will go down as one of the most misguided policy decisions in our lifetime. Dr. Fauci may believe that the shutdowns didn’t harm anyone, but the facts say otherwise.

(DBx: The lockdowns, restrictions, and hysteria of 2020-2021 – some, in some places, continuing still in 2022 – were such an unprecedented battering of society that any numerical estimates of consequence drawn from past ups and downs of real incomes are, in my opinion, likely to underestimate the long-term damage that humanity is destined to suffer as a result. I sincerely hope to be proven wrong.)

Thorsteinn Siglaugsson decries the loss, during covid hysteria, of common sense. A slice:

This was shortly after the governor of New York, Andrew Cuomo had claimed that any severity of measures against the coronavirus was worth it, if they saved just one life. Across the world, national leaders constantly repeated the mantra of “following the science,” meaning the whole of society should be managed based on the advice of experts in a narrow field of medical science, focusing on suppressing or even eradicating a single disease. An ethics professor I interviewed in late 2020 said it was morally right to brush aside all concerns of collateral damage because we were “in a pandemic.”

…..

When almost the whole world loses sight of the common goal of human society, and the elimination of a single problem, in the end a rather unimportant one, takes precedence over everything else, thus becoming the goal – a distorted and absurd one, a disastrous and ruinous one for sure – this is an indication of a fundamental loss of common sense.

A newly elected Australian MP Dai Le, who fled as a child with her family from communist Vietnam in 1979, compares Australia’s covid lockdowns to communist tyranny. A slice:

Pointing to Covid restrictions as an example, Le was critical that her western Sydney community was subjected to more harsh conditions by the state government than wealthier areas in the city’s eastern suburbs during the 2021 lockdowns.

“We weren’t allowed to travel beyond a 5km radius from our homes. We were told to get travel permits. We were forced to get tested every three days. We had helicopters flying around our area, as well as police on horseback and men in uniforms knocking on people’s doors,” she said.

“The last time I looked, a government that takes away individuals’ liberty to choose how they want to live, work and raise families was called a communist dictatorship, a political system that my family and I escaped from.”

Kevin Bardosh tweets: (HT Jay Bhattacharya)

It is not okay: lockdown proponents are going to need to come to terms with the social harms they caused. It is going to be uncomfortable & difficult.

The Wall Street Journal‘s Editorial Board applauds Chileans’ rejection of the proposed, deeply statist constitution. A slice:

Chile has been a development success story over four decades since it adopted free-market reforms and its 1980 constitution, which has been heavily amended. But that success has also made the country a target of the domestic and international left.

In this TED talk, Katherine Mangu-Ward explains what capitalism gets right and what governments get wrong. (HT Steve Hardy)

In this new essay at EconLib, my Mercatus Center colleague Rosolino Candela busts the myth that inflation can be effectively reduced with price controls.

Here’s Pierre Lemieux on the scourge of rent control.

Jeff Jacoby is justifiably persuaded by the evidence: freer countries are indeed better countries. A slice:

You don’t have to be a social scientist to notice the rough correlation: By and large, societies where economic freedom is strong are nicer places to live. Those with little or no economic freedom tend to lack civil liberties as well. When citizens’ economic rights aren’t protected, neither, as a rule, are their rights to freedom of speech, conscience, and democracy. More often than not, the poorest, saddest, dirtiest, and most dangerous places on the planet are also places with little or no economic freedom.

That, at any rate, is a layman’s take. But is it borne out by scholarly analysis?

To answer that question, economist Robert Lawson undertook a meta-survey of every research paper published in top-ranked academic journals over the past quarter-century that cited data from “Economic Freedom of the World.” There were a total of 1,303 such papers, all of which were listed in the Social Science Citations Index, a leading database for social science literature in dozens of disciplines. The papers were written by scholars from many fields, representing all points on the ideological spectrum. Lawson, a research director at Southern Methodist University and a senior fellow at the Fraser Institute, sorted the papers into a dozen broad areas of interest, such as Immigration & Travel, Income & Productivity, Economic Growth, and Human Rights & Social Development. Then he coded each paper by its findings: Were the outcomes positive, negative, or uncertain?

Results? Of the papers analyzed, “just over half, 50.6 percent, found economic freedom was related to ‘positive’ outcomes while only 4.6 percent found ‘negative’ outcomes.” (The rest were too mixed or uncertain to assess.) In one area after another, more economic freedom generated more good results: “increased immigration and tourism . . . increases in income or productivity . . . increased entrepreneurship and innovation . . . reduced conflict . . . increased investment . . . reduced unemployment . . . improved human rights . . . increased trade . . . reduced corruption . . . improved environmental outcomes . . . reduced inequality.”

Lawson’s conclusion was that whether economic freedom “works” isn’t a matter of political or national preference. It is a question with an empirical answer, and the answer is yes.

Eric Boehm is correct: Biden forgets that workers are also consumers.

Quotation of the Day…

(Don Boudreaux)

Tweet

… is from pages 98-99 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:

[G]overnment use of industrial policy undermines the market’s ability to furnish the accurate information needed by entrepreneurs, investors, and businesses to identify the most optimal economic path for each of them to follow – a process which constantly allows millions of piecemeal improvements to be made across the overall economy. By contrast, if industrial policies become a central feature of economic life, inefficiencies will grow throughout the economy as people act on the basis of increasingly bad information.

DBx: Yes.

I will repeat here that which, as long as there is afoot any enthusiasm for industrial policy, cannot be repeated too often: Proponents of industrial policy have yet to substantively explain how government officials charged with carrying out industrial policy will get all the detailed information they must possess if they are to have any hope of allocating resources in a way that outperforms the market at improving over time the economic lot of the masses. Responding, in effect, “then a miracle occurs” doesn’t quite cut it.