Russell Roberts's Blog, page 103
September 2, 2022
Bonus Quotation of the Day…
… is from page 121 of the 1903 3rd edition of Edwin Cannan’s Elementary Political Economy:
But as a rule Protection is established and maintained in consequence of complete misconceptions as to what constitutes the advantage of foreign trade.
DBx: Alas, what was true over a century ago – and, indeed, over two centuries ago – remains no less true today. Whenever the typical 21st-century politician, regardless of political party, speaks of trade, he or she talks as if the benefits of trade are the exports sent abroad by people of the home country, while imports received in exchange are an unfortunate if unavoidable cost that people of the home country must bear in order to enjoy the great privilege of producing goods and services for foreigners. Such nonsense talk is commonplace today from the mouths also of pundits, reporters, and interest-group rent-seekers (such as the one pictured here).
Tech Central Station: “Dobbs’s Disciples (Why America is Growing Richer, Not Poorer, From Free Trade)”
On April 17th, 2006, I contributed this essay to Tech Central Station – an essay critical of Lou Dobbs, Paul Craig Roberts, and several others who back then predicted that Americans would soon be be deeply impoverished by free trade. (I cannot now find a link to the Tech Central Station version; the link here is to my essay’s reappearance at Free Republic.) You can read the essay in full beneath the fold.
Some Links
Lionel Shriver asks: Why didn’t more people resist lockdown? Two slices:
Last week’s Spectator interview with Rishi Sunak conveyed the anti-science ‘science’, the paucity of even fag-packet cost-benefit analysis and the ideological lockdown of Boris Johnson’s cabinet that brought forth calamitously extensive lockdowns of everyone else. Ever since, numerous politicians and institutions implicated in this rash experiment have had a vested interest in maintaining the myth that putting whole societies into standby mode, as if countries are mere flatscreens that can be benignly switched on and off by governmental remote, saved many millions of lives.
As it will take years for culpable parties to retire, I once feared that a full generation would need to elapse before we recognised lockdowns for what they were: the biggest public health debacle in history. Yet everywhere I turn lately, still another journalist is decrying the avoidable social, medical and economic costs of this hysterical over-reaction to a virus, while deriding lockdown zealots for having vilified sceptics of a policy that may well end up killing more people than it protected. The Covid revisionism is welcome – though it’s a good deal easier to publish these opinion pieces now than it was two years ago, and I speak from experience.
I’m all for holding officialdom accountable for mistakes from on high that continue to generate dire consequences, not least today’s soaring inflation. Yet it’s worth pressing more uncomfortably: should the public not also be held accountable? After all, the professional naysayer Neil Ferguson notoriously assumed that democracies would never ‘get away with’ lockdowns in Europe – ‘and then Italy did it. And we realised that we could.’ What facilitated sending entire populations to their room like naughty children? Not merely draconian laws, but widespread public eagerness to obey them. Johnson’s heavy hand was forced in part by British opinion polls.
What was wrong with people – individual people, and in many instances this means you, reader – yes, you – who’d never even heard of a ‘lockdown’ outside a prison or an American school-shooting drill, yet who overnight embraced as inevitable a method of suppressing communicable disease never before tried at scale, never recommended in public health literature and first used to ‘successfully’ quell Covid by lying, authoritarian China? Why didn’t more independent thinkers say: ‘Hold on a minute. Have you thought this through? Might nationwide house arrest be just a tad over the top? And have you pols never heard of unintended consequences?’ Why didn’t more enterprising citizens hit the internet and note: ‘Wow! We’ve had pandemics before’ – and some older folks would have lived through the contagions of 1957 and 1968 themselves – ‘and we didn’t close so much as a betting shop. Why can’t we be trusted to act like grown-ups and behave in our own self-interest?’ Why didn’t more members of the public get angry?
…..
Members of the throng never seem to notice that none of these passing intoxications was their idea, or to wonder what this blowing-in-the-wind suggestibility says about their vulnerability to, er, you know, fascism. So you’ve really got to worry what comes next.
The National Assessment of Educational Progress (NAEP) scores for 2022 were released Thursday, and by any standard they are a calamity. An unprecedented decline in reading and math scores is the first national measure of the damage done by school closures to America’s children.
The 2020 NAEP tests were administered shortly before pandemic lockdowns and school closures, so this year’s results provide a snapshot of how students have weathered those two years. It’s not pretty. Average nine-year-old scores declined the most on record in math (seven points) and in reading since 1990 (five points). Two decades of progress have been erased in two years.
…..
You’d think this would be cause for reflection by our education elites, but no such luck. Media headlines blamed “the pandemic,” as if Covid-19 ran America’s school districts and decided to force students to sit at home in front of screens for more than a year. Educators—as they call themselves—did that.
Following this Twitter thread begun by Jason Furman, Mikko Packalen tweets:
Year ago @DrJBhattacharya and I wrote about economists’ silence on lockdown and school closure harms. Discussion spurred by this thread by @BarackObama chief economist shows that we were right.
Consequences of this silence have been catastrophic for kids.
The scheme’s flaws have been well chronicled. It’s regressive, rewarding the well-to-do at the expense of the less fortunate. It’s grossly unfair to those who repaid what they borrowed or never went to college. It’s grotesquely expensive, adding hundreds of billions to a federal debt that already threatens our safety-net programs and national security. Like so much of what government does, it’s iatrogenic, inflating college costs as schools continue to pocket the subsidies Uncle Sam showers on them. And it’s profanely contemptuous of the Constitution, which authorizes only Congress to spend money.
When the federal government took over the loan program in 2010, President Obama claimed it would turn a profit of $68 billion and that “we are finally undertaking meaningful reform in our higher education system.” Credit where due: a dead loss of hundreds of billions of dollars and tuition costs that continued to soar can fairly be described as “meaningful.”
(DBx: Please do recall Obama’s confident claim from 2010 whenever you encounter some politician or pundit confidently claiming that government can be trusted to profitably allocate resources through industrial policy.)
GMU Econ alum Peter Jacobsen tells the tale of why Warner Bros. sank Batgirl.
Days after releasing a plan to phase out new gas-powered cars, Ben Zeisloft of the Daily Wire reports that California officials are “asking residents to avoid charging their electric vehicles in the interest of not overwhelming the power grid.”
Also writing about this California fiasco is Scott Shackford.
Quotation of the Day…
… is from page 97 of an advance copy of Samuel Gregg’s forthcoming book, The Next American Economy: Nation, State, and Markets in an Uncertain World:
No government department [charged with carrying out industrial policy] – let alone a single technocrat – can know if the forgone alternatives might have been more profitable; or might have produced even more growth, innovation, or spillover effects for a greater number of businesses and consumers; or even have helped a region or social group overcome some of its economic challenges. No legislator or expert can consequently claim with any meaningful degree of certainty that a particular industrial policy will produce more such benefits than would have resulted if the state had not implemented the policy. They simply do not know what might have otherwise occurred.
DBx: Yes. And thus advocates of industrial policy – in order to escape the fundamental problem posed by government-officials’ inescapable ignorance – must assume that miracles occur.
September 1, 2022
Maybe Covid Loves the Blue-State Scene
Washington University economics professor Ian Fillmore, after reading this recent report in the New York Times, sent to me the following e-mail, which I share here in full with his kind permission:
Hi Don,
You probably saw this NYT article.
I was struck by the shameless blame-shifting. The headline tells us that “The Pandemic Erased Two Decadesof Progress in Math and Reading.” In the article itself, we learn that “Then came the pandemic, which shuttered schools across the country almost overnight.” Apparently, policymakers had no control over policy. Curiously, “In some parts of the country, the worst of the disruptions were short lived, with schools reopening that fall. But in other areas, particularly in big cities with large populations of low-income students and students of color, schools remained closed for many months, and some did not fully reopen until last year.” No word yet on why the pandemic closed schools in some places longer than others. I guess Covid is one tricky virus. Perhaps, the CDC and NIH could do some research on that question?
Ian
Wall Street Journal: Bankruptcy Doesn’t Equal Death
Some Links
Mark Mills realistically assesses the CHIPS Act. A slice:
Moreover, the CHIPS Act ignores the rest of the labyrinthine semiconductor supply chain. Silicon chips, once fabricated, must be put into packages, an industry the U.S. no longer has onshore. Similarly, an array of chemicals and components are critical inputs for chip fabs, and most are not found in America. For example, with over 60 percent of global supply, China dominates the mining of fluorspar, which is used to produce critical chemicals for chip fabs. Two Ukrainian companies produce over half of the worlds semiconductor-grade neon, another critical input for fabs. U.S. production of such materials has declined in recent decades because America’s policies have been hostile to chemical refining and mining industries. The CHIPS Act does nothing to ameliorate that.
The regulatory state, not any lack of subsidies, is the principal reason that it’s so hard to build big, industrial, supply-chain-critical projects of any kind in the U.S. In the 1970s, filing an environmental-impact statement took only a few years. Now it takes over eight years, on average. It took five years to get a permit merely to expand the Bayonne Bridge in New York. Completing the environmental review process to dredge the supply-chain critical Port of Savannah took 14 years.
Building a business, especially an innovative business in a complex environment, requires many, many decisions. You can be lucky with any one decision, but to get enough decisions right to make the business work takes much more than luck.
However, few of these proposals do anything to address the underlying driver of high child-care costs — namely the dwindling supply of care providers. Instead of throwing money that we just don’t have at the problem, policy-makers would do better to remove the regulatory hurdles that are keeping prices high and potential care workers jobless.
For example, child-care costs are significantly higher in cities and states that mandate low child-to-staff ratios — the maximum number of children one staffer can supervise. A 2015 Mercatus Center study found that raising the ratio by one reduces costs by up to 20 percent.
Licensing burdens also play a big role in limiting the supply of child care and driving up costs. An analysis by the Institute for Justice found that 44 states require a license to start a child-care business, and 24 states require staff to hold a high-school diploma. Some states charge up to $300 in licensing fees, and it can take a year or longer to get a license. Parents don’t need a government mandate to tell them they need to be able to trust the people caring for their kids while they’re away. Those who are willing and able can pay a premium to send their children to a center where staff have college degrees. But what about people who need a more affordable option? They ought to be able to hire a nanny or an experienced care provider, regardless of whether that person has finished high school. Mandates and requirements limit these options, shut out workers, and increase prices.
Here’s the latest installment in George Selgin’s superb history of the Great Depression.
If you had any doubts that those in power have dropped the pretense of fighting for the working class, you can dispense with them after the Biden administration’s latest concessions to the laptop class. From student loan forgiveness to subsidies for people who drive pricey electric cars and profitable semiconductor company CEOs, this administration is working hard to shower its friends with handouts paid for by hardworking lower-wage Americans.
We learned of the most outrageous handout of them all, of course, when Biden announced that he will — unilaterally, mind you, and for no apparent reason that I can see — extend the pause on student loan payments until the end of the year and forgive up to $10,000 for those persons making less than $125,000 a year. This generosity with other people’s money extends up to $20,000 for Pell Grant recipients.
As David Stockman, a former director of the Congressional Office of Management and Budget, reported recently, “Only 37% of Americans have a 4-year college degree, only 13% have graduate degrees and just 3% have a PhD or similar professional degree. Yet a full 56% of student loan debt is held by people who went to grad school and 20% is owed by the tiny 3% sliver with PhDs.”
Covid derangement still afflicts some institutions of “higher learning” (so-called).
Toby Young writes about how science became politicized. A slice:
Take Anthony Fauci, for instance, who recently announced he’s stepping down as chief medical adviser to Joe Biden. Even though he once claimed to ‘represent science’ in the eyes of the American people, he misled them about the likely duration of the lockdowns (‘15 days to slow the spread’), overstated the efficacy of the Covid vaccines when they were first rolled out, refused to countenance the possibility that Covid-19 leaked from the Wuhan Institute of Virology (it later emerged that the National Institute of Allergy and Infectious Diseases, under his leadership, had given a grant to the EcoHealth Alliance, which helped fund ‘gain of function’ research at the Chinese lab) and conspired with other prominent scientists, such as Francis Collins, to besmirch the authors of the Great Barrington Declaration (‘There needs to be a quick and devastating published takedown of its premises,’ Collins told Fauci in an email). A recent editorial in the Wall Street Journal concluded: ‘His legacy will be that millions of Americans will never trust government health experts in the same way again.’
Mark Oshinskie is rightly outraged at what he calls “coronamania.”
American children, especially poor and minority kids who suffered the worst learning losses, will be paying for the harms of pandemic school closures for the rest of their lives. Every state should have followed Sweden’s example and kept schools open.
Quotation of the Day…
… is from page 331 of F.A. Hayek’s October 1973 Wincott Memorial Lecture – titled “Economic Freedom and Representative Government” – as the text of this lecture appears as chapter 24 in the hot-off-the-press Essays on Liberalism and the Economy (2022), which is volume 18 (expertly edited by Paul Lewis), of The Collected Works of F.A. Hayek (footnote deleted):
Legal positivism, the most influential current theory of jurisprudence, particularly represents this sovereignty of the legislature as logically necessary. This, however, was by no means the view of the classical theorists of representative government. John Locke made it very clear that in a free state even the power of the legislative body should be limited in a definite manner, namely to the passing of laws in the specific sense of general rules of just conduct equally applicable to all citizens. That all coercion would be legitimate only if it meant the application of general rules of law in this sense became the basic principle of liberalism. For Locke, and for the later theorists of Whiggism and the separation of powers, it was not so much the source from which the laws originated as their character of general rules of just conduct equally applicable to all which justified their coercive application.
August 31, 2022
Internalized Costs Are Not Evidence of Market Failure
Here’s another letter to an aggressive young opponent of “free market fundamentalism”:
Mr. Fosse:
You label as a “cheap shot” my criticism of Robert Orr’s argument that free markets fail families. In your opinion, I should have, as you write,
focused on the substance of his [Orr’s] critique of the market which comes out where he says “exposed to market pressures, people who want children face an ugly dilemma: either accept a lower standard of living, or sacrifice family life (whether by delaying childbirth or spending less time with the children you do have).”
I’m sorry, but the passage that you quote in Mr. Orr’s essay doesn’t salvage his case. Quite the opposite, for it reveals that what Mr. Orr is griping about is inescapable reality.
Of course children are costly. So too are nearly all desirable and worthwhile things. Yet by calling the need to make the trade-offs and sacrifices entailed in having children an “ugly dilemma,” Mr. Orr attempts to create the false impression that when it comes to parenting, we humans should be freed from this reality. But why?
Because someone must care for children, the only way to free parents from this responsibility is to impose it on others. But even if we grant the dubious proposition that most people who would be decent parents wish to be freed of the necessity of making the trade-offs traditionally required of decent parents, where’s the justice in compelling those who aren’t parents of the children to be cared for to absorb the cost of caring for these children? If it’s an “ugly dilemma” for people who want children to have to sacrifice to care for these children, it’s a far uglier injustice to compel other people to pay for the care of these children.
Markets are said to fail when they allow some people to free ride on the efforts and resources of other people. And those who can free ride ride excessively. I believe that sightings of such alleged market failures are mostly mirages, but I accept the logic of the case and the legitimacy of complaining about, and wishing to correct, such cases when they arise. Yet here Mr. Orr argues that the market fails precisely because it does not allow free riding! His complaint with the market is that works – that it internalizes on the individuals who make choices the costs of those choices. His argument is perverse. It’s an argument that might be expected from someone untutored in economics; that it comes from someone with an economics degree is utterly bizarre and baffling.
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
And Again, Then A Miracle Occurs
Advocates of industrial policy are among the chief offenders. Seemingly without exception, these advocates assume that the government officials charged with carrying out industrial policy are, when they take office, miraculously transformed into apolitical angels who have access to all the detailed knowledge that must be known for them to replace the market’s allocation of resources.
Other officials who are assumed to work miracles are politicians with the power to implement minimum wages. Economists, ever-clever and recollecting their undergraduate course in labor economics, recall that it’s possible to draw on a whiteboard a pretty picture that reveals conditions under which a minimum wage will raise the wages of low-skilled workers without pushing any of them into the ranks of the unemployed. Mirabile dictu! Actual politicians who impose minimum wages somehow discover these conditions in reality and, with no thought of political advantage to themselves, impose minimum wages that are scientifically and precisely calibrated to these theoretical conditions.
Miracles are also performed by bureaucrats at agencies such as the Food and Drug Administration and the Federal Reserve. Never so venal as to concern themselves with the sizes of their budgets, or with their future employment prospects, these officials are concerned always and only with improving the well-being of their fellow citizens. FDA scientists, to perform their duties as advertised, need to know the different risk-preferences of hundreds of millions of Americans in order to decide which pharmaceuticals and medical devices are sufficiently “safe and effective.” How do they come to possess such knowledge? Why, by some miracle!
Fed savants, to perform their duties as advertised, must have knowledge of just how and when to manipulate the supply of money so that maximum economic growth is fueled. Many of these savants insist that while ‘optimal’ supplies of the likes of machine tools, mangoes, steel, and stilettos can only be discovered through the competitive market process, the ‘optimal’ quantity of money must be divined by them as they confabulate in a majestic office building. Such divination is miraculous!
Miracles are also assumed to be at work whenever economists advise governments on how to protect the environment. The same clever economist who is enchanted with diagrams showing optimal minimum wages is similarly enthralled by the ability of carbon taxes to reduce carbon emissions. This economist is indeed correct that higher taxes on emissions of carbon result in reduced carbon emissions. This outcome is the stuff of ECON 101; it requires no miracle. The miracle occurs when the economist concludes that government officials can know in practice, with sufficient certainty, that carbon emissions ‘should’ be reduced and by how much. (Another, more-minor miracle is assumed to occur when the economist divines the exact impact on carbon emissions of proposed higher taxes on such emissions. But I’ll here ignore this minor miracle.)
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