Russell Roberts's Blog, page 111

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from pages 249-250 of former Caltech physics professor and provost – and former Energy Department undersecretary during the Obama administration – Steven Koonin’s excellent 2021 book, Unsettled? What Climate Science Tells Us, What It Doesn’t, and Why It Matters:

But I’ve been dismayed along the way as well. First by the willingness of some climate scientists – abetted by the media and politicians – to misrepresent what the science says, and then by the many other scientists who are silently complicit in those misrepresentations. The public deserves better. By demonstrably misinforming non-experts about what we know and don’t know about the changing climate, they deny governments, industry, and individuals the right to make fully inform decisions about how to respond.

Talk About Labor-Market Power Continues to Be Cheap

(Don Boudreaux)

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Here’s a follow-up letter to a new correspondent:

Mr. D__ G__:

In your follow-up e-mail to this post you write that “The purpose of Daniel Kuehn’s point is not a defense of the labor theory of value or condemnation of [Adam] Smith. He merely is pointing out that the greater power that employers these days have over workers is the power of capitalists to exploit workers along the same lines which Marx warned about.” You conclude that Mr. Kuehn’s point is one that you “find very convincing.”

With respect, convince me that you’re convinced. Act on your conviction by going into business for yourself. If many workers in America today truly are underpaid, overworked, or both, by employers with too much labor-market power, you’ll be able to hire workers at bargain wages. You’ll then earn high profits as you bid up workers’ pay. Further, your lucrative practice of putting your time and money where your mouth is will perhaps inspire Mr. Kuehn – and others like him who insist that American labor markets are polluted with monopsony power in ways that can be countered with minimum wages and other government-imposed restrictions – to do the same. You’ll all do well by doing good.

Mr. Kuehn, alas, has for years asserted that many workers in America are exploited. Yet as far as I know he refuses to act on this alleged conviction by actually putting his money and effort where his mouth is. Because his assertion about exploited workers, if true, is pregnant with the potential for personal profit, Mr. Kuehn either doesn’t really believe his assertion about worker exploitation or, much more likely, his thoughts about the matter remain incomplete or shallow.

Again, if you’re really convinced by Mr. Kuehn’s assertion, prove it through your actions. Otherwise, don’t make a hypocrite of yourself by continuing to assert with your mouth and keyboard that you believe something to be true as you demonstrate with your time and effort that you obviously don’t hold such a belief.

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

Pittsburgh Tribune-Review: “Comparative advantage vs. China”

(Don Boudreaux)

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In my column for the April 8th, 2013, edition of the Pittsburgh Tribune-Review I did my best to bust a myth about comparative advantage. You can read my column in full beneath the fold.

(more…)

Some Links

(Don Boudreaux)

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George Will writes wisely about the FBI’s search of Mar-a-Lago. Two slices:

As this is written Thursday, there are important unanswered questions about who instigated the search of Mar-a-Lago, and why. One remarkable aspect of this debacle, however, is that vigorous disgust need not wait until we know those answers: Try to imagine a justification for this flamboyant exercise of — what? law enforcement? What was important enough to bring to a rolling boil the already simmering suspicions of tens of millions of Americans about tentacles of the “deep state” engaging in partisan skulduggery?

…..

The great and the good, a.k.a. the Democratic Party in its vanity, gave us President Trump by awarding its 2016 presidential nomination to someone who could manage to lose to the star of the “Access Hollywood” tape. Now, a Democratic administration’s Justice Department has managed to reverse the fading of that entertainer whose act is stale. With his feral cunning, Trump instantly intuited that the search of his home was a gift that will keep on giving by fueling his supporters’ animosities, and their giving.

The Wall Street Journal‘s Editorial Board reports that industrial policy in China isn’t working out as the Chinese government wishes and as many American pundits and politicians – some left, some right, and all economically ignorant – feared. Three slices:

Bloomberg this week reports that Beijing is launching corruption investigations into government ministers and business leaders involved in its semiconductor initiative, which is a cornerstone of President Xi Jinping’s Made in China 2025 plan to achieve manufacturing self-sufficiency. Corruption crackdowns are Mr. Xi’s modus operandi when things don’t go according to Communist plan.

When senior government officials last month reviewed the country’s chip-making progress, they reportedly grew dismayed that advances may have been overstated and investments weren’t paying off. Mr. Xi’s plan to throw money at the semiconductor industry, as with others, has resulted in many unproductive companies chasing government subsidies.

About 15,700 new semiconductor companies registered in the first five months of last year. As it turns out, government is a poor allocator of capital, and semiconductor handouts have spawned cronyism and graft. These problems are intrinsic to industrial policy. But Mr. Xi is blaming China’s industrialists, rather than his planning model.

…..

Meantime, U.S. technology export controls are making it even harder for China to catch up with Western computer-chip technology. This may be one reason for Beijing’s stepped up militarism with Taiwan, which manufactures many of the most advanced chips. What U.S business and political leaders don’t seem to understand is that the world, including China and Taiwan, still relies on U.S. innovation, which is a product of our capitalist system.

Mr. Biden said Tuesday that “federal research and development brought down the cost of making [chips] and built a market and an entire industry.” That’s wrong. Business consolidation, economies of scale and off-shoring reduced manufacturing costs. But the main U.S. comparative advantage continues to be technological innovation, which is driven by business research and development.

…..

China’s assets are formidable, but its politically directed economic policy isn’t one of them. The U.S. doesn’t need politicians and bureaucrats picking winners and losers. It needs economic policies that unleash the creativity and investment of people and private firms.

Here’s the latest installment of George Selgin’s important series on the New Deal and recovery. A slice:

With a few (mostly left-wing) exceptions, labor unions were also notorious discriminators. According to Colston Warne (1945, p. 203), rather than “accord women an equal place in their works,” they tended to look upon them “as interlopers and ‘wage cutters’ who undermined union standards.” Consequently, Alice Kessler-Harris (1982, p. 291) reports, despite the fact that more than three million women workers made up 22 percent of trade union membership in 1944—up from just 800,000 when the war started—”most unions unceremoniously discarded their female members at war’s end.”

Chris Edwards explains that “Congress has created a tax code at war with growth and efficiency.”

I’m eager to read my GMU Econ colleague Bryan Caplan’s forthcoming book Don’t Be a Feminist.

David Henderson shares more insight from Kevin Corcoran.

Robby Soave reports on the CDC’s welcome, if far-too-long in coming, easing of its covid guidelines. A slice:

If anyone was still waiting for official permission from the nation’s top health officials to resume life as normal, it is here. By signaling that the universal masking-and-social-distancing phase of the pandemic is now over, the CDC has conceded that the U.S.’ COVID-19 prevention strategy should now revolve around protecting those who are at heightened risk.

About the CDC’s update, Sai Medi tweets: (HT Jay Bhattacharya)

At this rate the CDC will just update its guidelines by nonchalantly reading the Great Barrington Declaration and hoping nobody notices.

And here’s a reaction by Jay Bhattacharya himself to the change in the CDC’s guidelines:

The CDC guidance to end mass asymptomatic testing is a big deal, though it comes a full 2 years too late. If your child is going on a field trip and has no symptoms and is forced to test, make sure to let the authorities know that they are violating CDC guidelines.

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

Inspired in part by Gertrude Himmelfarb, David McGrogan decries “the brutalization of compassion.” Two slices:

Statistics were therefore paramount in the process whereby the vast apparatus of governance which the state deploys came into being. More importantly, the emergence of statistics was a spur to action. The mere act of ‘knowing’ the population was then a call to improve it; once one ‘knows’ its poverty rate (or whatever) then the question which inevitably follows is what can be done to achieve statistical improvement.

One can think of this as a positive feedback mechanism in which statistical measures give rise to bureaucracies whose job is to make improvements in the underlying phenomena being measured – which causes them to generate more statistics, and thus identify further need for improvement, and so on. Thus, it became necessary to think about something called ‘the state’ because of the organic emergence of its apparatus, arising through intrinsic processes of development – something which Foucault called its ‘governmentalisation.’

Foucault’s interest was in how measuring the population gave rise to ‘biopolitics’ – the exercising of power upon the population as though it was an organism, and the concomitant growth in interest in particular in its health. Naturally enough, given the period in which he was writing, this caused his analysis to veer into the logic of raison d’Etat: he understood the biopolitical urge as essentially caught up in questions of how to make the state stronger (with a healthier and more productive population) than its rivals.

…..

In her two masterpieces, The Idea of Poverty and Poverty and Compassion, Himmelfarb sheds more light on the connection between knowledge and action, and in particular the role which compassion played in the process. She begins by telling us the story of how the problem of ‘the poor’ came into being in the early modern period, and how it went on to animate the imagination of the chattering classes of England in the 18th and 19th centuries. In the 16th century, she reminds us, the dominant view of the poor was that they would ‘always be with us’ – poverty was considered to be the normal lot of certain classes, and indeed even ennobling of their members. It was certainly not considered to be the duty of the ruler to make the poor wealthier. Yet by the late 19th century the position had totally changed: it was now considered to be one of the main, if not the main, task of the state to improve the material conditions of the population.

What had happened in the interim, of course, was exactly the process Foucault had identified. It had become possible both to conceive of the population as a thing in its own right, with characteristics (like the overall poverty rate) that could be improved, and to measure that improvement with purportedly objective and accurate statistics.

Quotation of the Day…

(Don Boudreaux)

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… is from page 241 of the original edition of Robert Higgs’s indispensable 1987 book, Crisis and Leviathan (footnote deleted; links added):

As Charlotte Twight has shown, the essence of fascism is nationalistic collectivism, the affirmation that the “national interest” should take precedence over the rights of individuals. So deeply has the presumption of individual subservience to the state entered into the thinking of modern Americans that few people have noticed – and no doubt many would be offended by the suggestion – that fascism has colored countless declarations by public officials during the past fifty years. Unfortunately, as Friedrich Hayek noted during World War II, “many who think themselves infinitely superior to the aberrations of naziism, and sincerely hate all its manifestations, work at the same time for ideals whose realization would lead straight to the abhorred tyranny.”

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 479 of the late, great Armen Alchian‘s penetrating 1975 essay “An Introduction to Confusion,” as reprinted in The Collected Works of Armen A. Alchian (2006), Volume 1 (“Choice and Cost Under Uncertainty”; Daniel K. Benjamin, ed.); this essay is Alchian’s insightful response to the Final Report of the Energy Policy Project of the Ford Foundation:

We have needs, requirements, demands – depending on the price. Anyone who ignores these facts of life is irresponsibly playing  a dangerous and expensive game. He is increasing society‘s problems. The way he conceals these facts of life is to talk of a need or requirement as if it were a natural, unique, given quantity – independent of the cost or price of getting more.

DBx: Yes. And we have here yet further insight into why attempts to bring about greater prosperity by engineering an economy are doomed to fail.

On Smith and Marx

(Don Boudreaux)

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I can’t tell if this correspondent of mine is impressed by, or skeptical of, Daniel Kuehn’s odd assertion.

Mr. D__ G__:

Thanks for your e-mail.

You ask what I think of Daniel Kuehn’s claim that it’s “weird that the labor theory of value is so central to peoples’ scoffing at Marx but doesn’t even register as a concern with Adam Smith.” (Before opening your e-mail I’d seen Mr. Kuehn’s claim as shared on Facebook by Phil Magness.)

Mr. Kuehn’s claim reflects his failure to understand why wise people today continue to find insight in the works of Adam Smith while they reject Marx’s economics.

None of Smith’s many insights that remain relevant and celebrated today depend upon the labor theory of value. The fallacious notion that value is created by labor plays no role in Smith’s case for free trade specifically, for free markets generally, for the productive powers of the division of labor, or for the reality of emergent social orders. Nor does this notion in any way underpin Smith’s brilliant criticisms of labor-market restrictions, of imperialism, of mercantilism, of slavery, of government indebtedness, of oppressive taxation, of state-sponsored religion, or of government attempts to suppress speculation in commodity markets.

In contrast, the labor theory of value is central and indispensable to Marx’s theory. For Marx, if the labor theory of value is invalid – as, of course, it is – his economic edifice collapses. But for Smith, if the labor theory of value is invalid, all of what we admire today in his work remains standing and true.

In short, there’s nothing at all “weird” about us admirers of Smith overlooking, in our praise and use of his countless insights, his labor theory of value, for this theory of value is simply unnecessary for Smith’s astute case for what he described as “the obvious and simple system of natural liberty.”

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

Some Links

(Don Boudreaux)

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Arnold Kling highlights an important difference between those persons who think like economists and those persons who don’t. A slice:

Non-economists focus on who gets taxed. Is it the rich? The middle class? The poor?

Economists focus on what behavior gets taxed. We notice that means-tested benefits penalize low-income people who work, because they lose eligibility as they earn incomes. They also are penalized for getting married. We notice that the payroll tax penalizes employment. We notice that the corporate income tax and other forms of capital taxation penalize thrift. We notice that the income tax penalizes risk-taking in investment. If you want to see people punished for working, getting married, saving, and undertaking risky investments, then you should love our tax system.

My intrepid Mercatus Center colleague Veronique de Rugy decries Republican efforts to be as fiscally reckless and as economically ignorant as are most Democrats. A slice:

For a few years, I have sounded the alarm that a growing wave of conservatives are working to make Republicans indistinguishable from Democrats on social spending. Some say that to win elections, Republicans need to pay more attention to families — by which they mean dole out ever more money to families like the Democrats do. Exhibit A for this development is the newly reintroduced New Parents Act.

The Act was recently reintroduced by Sens. Marco Rubio, R-Fla., and Mitt Romney, R-Utah. It’s a massive handout to parents, pretty much regardless of income level. If adopted, it would significantly expand the role of the federal government as it further swells the deficit and national debt.

Ron Bailey reports that a new green revolution is on the way.

Dylan Matthews talks with Jared Rubin and my GMU Econ colleague Mark Koyama about the industrial revolution. A slice:

Certainly, when we look at the ruins of the Roman Coliseum or Pompeii or indeed read about Cicero’s property investments, it looks like a sophisticated economy and one that generated considerable amounts of prosperity. And in some sense this impression is right. The work of scholars like Kyle Harper, Peter Temin, and Willem Jongman does indicate that the Roman economy was highly commercialized and urbanized (for preindustrial standards).

But this impression is also misleading. The Roman world was extremely unequal, so we can’t infer much about average living standards from reading about the consumption patterns of senators. And as Kyle Harper summarizes in his book The Fate of Rome, commercial prosperity brought with it disease, and all the evidence suggests that ordinary Romans, perhaps living in the tenement flats or insulae, died young, had bad nutrition, and high levels of exposure to epidemic disease.

Whole Foods’s CEO John Mackey tells Nick Gillespie that he feels “like socialists are taking over.”

Emma Camp reports that “there is evidence that women earn less because they prefer personally fulfilling work over highly-paid work.”

Bruce Yandle sings the praises of market prices. A slice:

The price system unrelentingly and continuously delivered a scarcity alert worldwide. Whether it was motorized-rickshaw operators in Dhaka, Bangladesh, Uber drivers in Baltimore, mothers picking up children after school in Savannah, Ga., operators of truck fleets and police departments or managers of large manufacturing plants, the signal was the same. It said to consumers, “Energy has gotten scarcer; it is time to conserve.” And to suppliers, it said, “This stuff has gotten a lot more profitable to produce; see if you can find ways to provide more.”

That’s why, though it may sound cruel, some have said that the cure for high prices is high prices.

Jeffrey Anderson rightly laments this reality: “More than two years on, the best scientific evidence says that masks don’t stop Covid—and public health officials continue to ignore it.”

Ramesh Thakur decries “the idiocy of Australia’s manic Covid protocols and the hypocrisy of its entire policy.”

Here’s some good covid news from Denmark.

And here’s some bad covid news from my hometown of New Orleans, as tweeted by Clay Travis: (HT Jay Bhattacharya)

New Orleans is requiring kids ages 5 and up have the covid shot or not allowing them to attend school. Right now half of kids haven’t gotten the covid shot and won’t be able to attend school. This is absolute madness.

Molly Kingsley rightly criticizes those who wrongly criticize parents for resisting vaccinating their children against covid. Here’s her conclusion:

It is dangerously naive to dismiss this spike in vaccine hesitancy as the deluded actions of an indoctrinated minority of crackpots who must be brought to their senses. Denouncing parents who raise reasonable questions and challenges about risk/benefit for their children as heretic anti-vaxxers, as the public health machine in the US and UK has done repeatedly, is proving equally self-defeating.

Quotation of the Day…

(Don Boudreaux)

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… is from page 166 of Deirdre Nansen McCloskey’s excellent 2022 volume, Beyond Positivism, Behaviorism, and Neoinstitutionalism in Economics:

Liberalism has always been a theory against and therefore about coercion. When my left-wing friends, of whom I have many, claim with a knowing smirk that in admiring markets I am “ignoring power,” I have a way of responding: no, dear, it is you who are ignoring power, the power of the monopoly of coercion called a government.

Two Benjamins on Export Restrictions

(Don Boudreaux)

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Here’s a letter to National Review (and note also that Franklin rather well anticipated the negative consequences that would later be identified as afflicting real-world efforts to put into practice the theory of the optimal tariff):

Editor:

Benjamin Zycher eloquently explains that banning the exportation of oil and refined products will raise, not lower, Americans’ costs of obtaining energy (“Banning Exports of Crude Oil and Refined Products Would Increase Prices,” August 9). Another Benjamin – one by the last name of Franklin – would agree. In a July 22nd, 1778, letter to James Lovell, Franklin wrote that

To lay duties on a commodity exported, which our neighbors want, is a knavish attempt to get something for nothing. The statesman who first invented it had the genius of a pickpocket, and would have been a pickpocket if fortune had suitably placed him. The nations who have practiced it have suffered fourfold, as pickpockets ought to suffer.

Franklin here decried the home-government practice of artificially restricting exports in order to compel foreigners to pay monopolistically high prices for these exports. But his logic applies also to the current attempt to get something – namely, artificially low energy prices today for Americans – for nothing. As Mr. Zycher makes clear, and as Dr. Franklin understood, such myopic chicanery always harms the people for whose benefit it is allegedly practiced.

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