Russell Roberts's Blog, page 116

Quotation of the Day…

(Don Boudreaux)

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… is from page 129 of Deirdre McCloskey’s splendid 2022 volume, Beyond Positivism, Behaviorism, and Neoinstitutionalism in Economics:

Slave societies are slow to  innovate if slavery is big there. Liberal societies innovate because no one is a slave, at any rate in theory and in eventual outcome.

Inflated with Motivated Reasoning

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

A serious contradiction lurks in Jason Furman’s argument that “the Schumer-Manchin bill will ease inflation and climate change” (July 29).

On one hand, Mr. Furman insists that raising taxes will help reduce inflation in large part because “[d]emand reductions resulting from tax increases … are much larger and more immediate than any impact they have on future supply.” On the other hand, he asserts that it “isn’t at all clear” that raising corporate taxes will reduce business investment – which is another way of saying that it isn’t at all clear that demand reductions will result from corporate-tax increases.

Mr. Furman misses this contradiction by immediately shifting his focus to the allegedly similar effects on business investment of raising corporate taxes and of raising interest rates. Yet the contradiction nevertheless looms: If it isn’t at all clear that raising corporate taxes will reduce business investment, then it isn’t at all clear that raising corporate taxes will help ease inflationary pressures.

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 208 of former Caltech physics professor and provost – and former Energy Department undersecretary during the Obama administration – Steven Koonin’s superb 2021 book, Unsettled? What Climate Science Tells Us, What It Doesn’t, and Why It Matters (emphases original):

The could question is very different from the question of “What should we do?” Any discussion of how the world should respond to a changing climate is best informed by scientific certainties and uncertainties. But it’s ultimately a discussion of values – one that weighs development, environment, and intergenerational and geographical equities in light of imperfect projections of future climates.

DBx: This point is vitally important and, because it’s frequently overlooked, must frequently be repeated. There is no ‘objective,’ scientifically determinable ‘optimal’ collective response to climate change that exists independently of the subjective value judgments, preferences, and expectations of each of the nearly eight billion people alive today. Professor Jones, pundit Smith, or politician Snort can write, talk, and pontificate until their hair falls out about what ‘should’ be done, but even the best-intentioned and best-informed person can at best make only an educated guess about what ‘should’ be done. A practical implication of this reality is that the range of disagreement among reasonable people about what ‘should’ be done is very wide.

My position on this matter is that to ‘combat’ climate change very little should be done collectively, that is, by governments. While the climate is heating, and while human industrial activity is indeed contributing to this heating, we simply know too little about, among other variables, (1) what changes in human industrial activity will do and when to the climate, (2) what government-engineered changes in economic activity will do to the economy (and, hence, to human well-being), (3) how both the costs and the benefits of centralized, government-directed adjustments to climate change compare to the costs and the benefits of decentralized, market-directed adjustments to climate change – decentralized changes many of which centralized, government-directed changes will either make impossible or unattractive to pursue.

The above uncertainties reveal not only that the precise rates at which carbon taxes “should” be set are impossible to determine ‘scientifically,’ also impossible to determine in practice is whether or not we should use carbon taxes at all as opposed to not intervening at all.

Contrary to the claims of too many people, including economists, there is no clean-cut case for taxing carbon emissions (or, I say for the record, for any other intervention to ‘address’ climate change).

Some Links

(Don Boudreaux)

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Texas Tech economist – and GMU Econ alum – Ben Powell says about the CHIPS Act that “the U.S. is serving up pork to semiconductor manufacturers.” Here’s his conclusion:

The $52 billion subsidy bill is just a pig dressed up in high-tech clothes. There is nothing special about the semiconductor industry that justifies subsidies. This is just wasteful pork-barrel politics as usual. Unfortunately, wasteful pork-barrel spending is the one thing that seems capable of getting bipartisan support in Washington these days.

George Will applauds the practical wisdom of last year’s U.S. Supreme Court ruling in Mahanoy Area School District v. B.L. A slice:

Unfortunately but actually, no reasonable person thinks that the kind of people running American education today know — or, in the unlikely event that they do know, that they care — what constitutional law says about speech protections. Furthermore, Joe Biden’s Education Department, like Barack Obama’s, is pressuring institutions of higher education — which hardly need pressure — to conduct ersatz courts in which people accused of sexual misbehavior are denied due process rights (e.g., the rights to counsel, to confront their accusers, and to not to be convicted by a mere “preponderance” of evidence rather than evidence beyond a reasonable doubt).

My Mercatus Center colleagues Andrew Mercado and Giorgio Castiglia detail some of the distortions introduced by government into the market for baby formula.

John Berlau and Josh Rutzick, writing in the Wall Street Journal, call for the repeal of the Sarbanes-Oxley Act. A slice:

The costs of Sarbanes-Oxley are responsible for much of this shift in the size of newly public companies. Academic studies and annual reports show that the law has caused auditing costs to double, triple or even quadruple for many companies. A 2009 study by the Securities and Exchange Commission found that smaller public companies have cost burdens more than seven times those of large ones.

The disproportionate burden on small and midsize companies has spurred bipartisan criticism of Sarbanes-Oxley. As the Obama administration council noted: “Regulations aimed at protecting the public from the misrepresentations of a small number of large companies have unintentionally placed significant burdens on the large number of smaller companies.”

One of Sarbanes-Oxley’s most onerous mandates stems from the two brief paragraphs that constitute Section 404, which requires that public companies have effective “internal controls.” The Public Company Accounting Oversight Board, a quasipublic rule-making agency created by Sarbanes-Oxley, has interpreted this section to mean full-blown audits of any company process that could enable “a reasonable possibility of a material misstatement in the financial statements.”

David Henderson explores the roots of blacks’ recent economic progress. Two slices:

My independent check of the data shows that Riley is right. Each year the US Census reports comprehensive survey data on incomes of various ethnic groups. Its latest report shows that between 2017 and 2019, median income for black households rose from $40,594 to $46,073, a rise of 13.5 percent over just two years. Adjusted for inflation, the increase was a respectable 8.8 percent. For Hispanic households, median income rose from $61,372 in 2917 to $68,703 in 2019, an 11.3 percent increase; inflation adjusted, the increase was 7.3 percent.

How does that compare with progress for white households over those same two years? Their median income rose from $65,273 in 2017 to $72,204, an increase of 10.6 percent. Adjusted for inflation, their median income rose by 6.1 percent.

Notice something interesting: black and Hispanic household incomes rose by a higher percentage than white household incomes.

…..

A case can be made that what’s good for black people is good for the nation. And what’s good for both is economic growth.

We know, and have known since Adam Smith’s 1776 opus, The Wealth of Nations, how to get economic growth: deregulate or keep regulation limited, cut marginal tax rates or keep them low, have relatively free trade, and restrain government spending. Let’s not forget the roots of black and, indeed, all economic progress.

Fiona Harrigan: “55% of America’s Top Startups Were Founded by Immigrants. Why Won’t Congress Let in More?”

Michael Lucci reports that Gavin Newsom is out of touch with reality. Here’s his conclusion:

Newsom wants Americans to believe that he has it figured out in California, and that the new American model for freedom is a progressive one. Yet his state’s aggressive population pivot has coincided almost precisely with his tenure as governor, making Newsom the first California leader to preside over a shrinking state rather than a growing one.

No amount of political rhetoric can mask California’s reality under Governor Newsom. Low-income students are being left behind, the rule of law is eroding, and residents are leaving in record numbers. The many former Californians watching Newsom’s ads in Texas and in Florida can only marvel at the hubris of the man.

Thorsteinn Siglaugsson concludes:

Considering the aforementioned study which found serious complications from Covid-19 in children to be practically non-existent, this raises serious doubts about the continued push for child-vaccination.

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

Jay Bhattacharya tweets:

During the pandemic, public health messaging stigmatized:
➡️kids as disease vectors
➡️the unmasked as unempathic & unpatriotic
➡️the unvaxxed as unclean
➡️the poor & working class who couldn’t comply with lockdowns as irresponsible
Only the compliant laptop class was spared.

Vinay Prasad talks with John P.A. Ioannidis. (HT Jay Bhattacharya) Two slices:

JPAI: The mechanism of action of SARS-CoV-2 vaccines suggested upfront that they would probably not be very effective to halt transmission. The rapid development of vaccines that were apparently very effective for decreasing the risk of serious disease was an amazing success and it could have been a wonderful opportunity to showcase the power of science and to build more trust in public health that had suffered over the years from attacks from the anti-vax movement.

Unfortunately, this opportunity was lost, to a large extent by trying to push an inflated narrative that COVID-19 vaccines are perfect, the ideal silver bullet to put an end to epidemic waves, and having no side effects at all.

…..

VP: Early in the pandemic you were viciously attacked for expressing a policy viewpoint and intuition that is different from others. In a number of ways your core thesis was: in an effort—well intentioned—to control the coronavirus, we may inflict great damage on ourselves. That lesson appears to be borne out in a number of historical and recent events. How do you judge you original intuition?

JPAI: I wish I had been wrong on this point. Unfortunately, I am afraid I might have been correct.

Quotation of the Day…

(Don Boudreaux)

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… is from page xi of the 1996 Johns Hopkins University Press edition of H.L. Mencken’s immensely enjoyable 1941 autobiographical volume, Heathen Days:

Indeed, I seem to have been born without any capacity for envy, and to the fact, no doubt, is due a large part of my habitual tranquility, not to say complacency.

DBx: Mencken was unusual among human beings, but in a good way. Most of us, alas, are emotionally equipped to experience envy. But while envy, perhaps, occasionally serves a useful purpose, it is, I am sure, overwhelmingly one of the most antisocial and uncivilized emotions that humans in modern society are prone to suffer.

The decent man or woman works diligently to overcome the natural proneness to envy. And to the extent that success in this noble endeavor is met, that person is indeed rewarded with a greater likelihood of tranquility.

Unfortunately, we live in an era in which envy is encouraged. The media, politicians, and intellectuals stir it up. Making matters worse, this stirring-up of envy is regarded as enlightened and “progressive,” while resistance to the attempts to stir up envy are treated as the product of a character both benighted and greedy. We are incessantly being told that those individuals who have more material wealth than we have do not deserve what they have. We’re counseled to support redistributive taxation.

Thomas Piketty, Paul Krugman, Bernie Sanders, Elizabeth Warren – these and many other “Progressives” are merchants of envy, which is to say that they are merchants of an exceedingly antisocial sentiment, one both childish and destructive.

Orwell Nailed It

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

Lance Morrow is correct: The immunity that politicians and media personalities – and also, let’s acknowledge, professors – too often enjoy from the ill on-the-ground consequences of their actions, words, and flights of theorizing encourages many of these people to behave far more irresponsibly and fanatically than ordinary Americans going about their daily affairs (“Public Life Is Crazy, but Americans Aren’t,” July 28). In turn, as George Orwell succinctly observed, “the intellectuals are more totalitarian in outlook than the common people.”

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 238 of the original edition of Robert Higgs’s marvelous 1987 book, Crisis and Leviathan:

Once the fundamental barriers of a restrictive ideology and the old Constitution had been battered down, persistent political forces pushing toward Bigger Government could exert themselves virtually without limit.

DBx: Yes.

By “restrictive ideology,” Bob here means an ideology that restricts the growth of government. This ideology was dominant in the United States certainly through the 1880s, and probably until WWI. Ever since, this pro-market, pro-liberty ideology has been beaten further and further back – sometimes quickly (as during WWII), other times less quickly (as during much of the last quarter of the 20th century). But this healthy, liberal ideology has for more than 100 years now always been beaten back by the combined forces of collectivist superstition, irrational or exaggerated fears, and interest-group politics.

Strong evidence in support of the claim that Bob makes above is found in the covidian tyranny that swept most of the land starting in March 2020.

Some Links

(Don Boudreaux)

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My intrepid Mercatus Center colleague Veronique de Rugy explains that the CHIPS Act is simply another spasm of corporate welfare. Two slices:

Industrial policy is making a comeback. For those of you under the age of 50, this is just another term for corporate welfare—a lovely name for the unlovely practice of a government granting subsidies, protective tariffs, and other privileges to politically influential industries or companies. It’s often done in the name of some lofty goal such as strengthening national security or ensuring that America is a leader in the “industries of the future.” But the outcome is always the same: wasteful, unfair, unsuccessful, and unjustified. Oh, and it invariably grows the budget deficit.

The latest form of industrial policy is Congress’s CHIPS Act of 2022, a bill meant to subsidize the semiconductor industry by channeling taxpayer money to build up domestic production capacity and combat feared Chinese computer-chip supremacy.

…..

What about the argument that China is subsidizing its chip producers and thus threatening our technological leadership? Yes, China subsidizes its chip industry, but this doesn’t guarantee their subsidies will work. If U.S. politicians could for a moment stop treating every Chinese action as a threat, they would see that the Chinese semiconductor industry is both quantitatively and qualitatively weak. In fact, many of the companies subsidized would go under without the government’s help. That’s hardly the sign of a vibrant industry. These subsidies are more like life support than super-vitamins.

China not only imports somewhere around 84 percent of its chips, but its civilian sector is dominated by those made in America. Chinese-made chips are used mostly by the military; these chips are absent from nearly all the high-value industry segments. In other words, Beijing’s efforts to create a powerful chip industry have failed for two decades. We can safely assume that this failure will continue for decades to come.

By contrast, the U.S. chip industry is extremely profitable. These firms invest massive amounts of money in research and development—18 times the dollar amount of their Chinese-subsidized competitors.

AIER’s Phil Magness, writing in the Wall Street Journal, cuts through the politicized confusion over the definition of a recession. Here’s his conclusion:

While recognizing its limitations, the traditional definition of a recession provides a functional rule of thumb to interpret events as they unfold. The NBER determination is a rigorous and reputable historical indicator for dating the beginning and end of business-cycle troughs, but it isn’t suitable for real-time policy determinations.

The president’s economic team should think twice before discounting the risk of a recession. After all, they stumbled into the current inflationary crisis after a year of trying to manipulate the language: Inflation was “transitory” and therefore of little concern until it eventually topped an annualized 9%. Let’s not stumble into a recession because the White House has political priorities that conflict with economic reality.

Also writing in the Wall Street Journal, PERC’s Jonathan Wood explains how environmental ‘activists’ and America’s regulatory raj make wildfires worse. A slice:

Projects to clear out fire fuel often face substantial delays. New research from the think tank where I work, the Property and Environment Research Center, found that it takes an average of 3.6 years for efforts to clear downed, unhealthy and too densely grown trees to move from the required environmental review to on-the-ground work. For prescribed burns, the delay is even longer, 4.7 years. And these are the averages. Many urgently needed projects take much longer.

While many bureaucratic, technical and fiscal obstacles affect these delays, red tape and lawsuits are substantial contributors. Fuel-reduction projects are more likely to require an environmental impact statement, the most extensive level of review under the National Environmental Policy Act, than other projects that are covered under NEPA. The process exhaustively analyzes a project’s environmental impact and requires that potential impact be compared with many other hypothetical projects. It can take more five years to complete.

Eric Boehm reports on this bad news: “Schumer, Manchin strike deal to raise taxes, cut the deficit, spend billions on climate change.” (DBx: To be clear, cutting the budget deficit is good, although it’s much better done by cutting spending rather than by raising taxes.)

David Henderson reminds us of the realities of the Marshall Plan and Germany’s post-WWII economic recovery.

GMU Econ alum Alex Nowrasteh reports that “U.S. labor demand explains most of the rise in illegal immigration.”

Matt Ridley isn’t impressed with attempts to discredit the lab-leak theory of covid’s origins.

Ian Miller decries the unscientific and cruel ‘official’ covid narrative. A slice:

There’s simply uncritical acceptance that what he [high-level U.S. covidocrat Ashish Jha] says is fact, because he is the one saying it. Data, science and evidence are unnecessary when it comes to authorities repeating inaccurate talking points.

The straw man – pronounced dead nearly two years ago – is newly terrorizing Wuhan. A slice:

Wuhan, the central Chinese city that was the epicenter of the early Covid-19 outbreak, locked down a district of about 1 million people due to four asymptomatic cases, as the nation’s leaders maintain their zero tolerance toward the virus, a policy that has cast a shadow over both the national and global economies.

Looking back on the piece on the insanity of zero covid that he and I wrote last summer for the Wall Street Journal, Jay Bhattacharya tweets:

Don Boudreaux and I wrote this piece for the WSJ a year ago. How on earth are there still people who harbor the dangerous and expensive fantasy that is zero covid?

Jeffrey Tucker recalls the day that Fauci wrecked American freedom. A slice:

What began as two weeks turned to a presidential election decided by mail-in ballots (safer that way, they said), closed schools, Grandma locked in a retirement community alone, no weddings or funerals, ruined small businesses, destroyed educations, the rise of massive substance abuse, some $10 trillion in government spending and $6 trillion in money creation that generated historic inflation, vaccine mandates that cost millions of jobs and still didn’t end the pandemic, and legal chaos in which judges and legislators themselves seemed powerless as the administrative bureaucracy of the country ruled every town.

el gato malo is rightly critical of the lying, arrogant, and authoritarian Fauci.

Allie Beth Stuckey talks with Jay Bhattacharya.

Quotation of the Day…

(Don Boudreaux)

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… is from page 233 of the 2016 second edition of Thomas Sowell’s important volume Wealth, Poverty and Politics:

In a world largely free of slavery today, it may seem hard to realize that slavery was an almost universal institution for thousands of years. Despite widespread misconceptions in the United States today that the institution of slavery was based on race, for most of the millennia in which slavery existed around the world, it was based on whoever was vulnerable to enslavement and within striking distance.

Not to Mention the Grotesque Immorality of Such a Ban

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

Kyle Isakower identifies several sound reasons why banning exportation of refined fuels would be counterproductive (“Export Ban Would Mean Higher Gas Prices for Americans,” July 27). But he misses the most fundamental economic reason – namely, by cutting American refiners off from global customers, banning exports would reduce the long-run stream of profits anticipated from building new refining capacity, and even from improving and maintaining existing capacity. And so even if an export ban, by somehow not triggering the issues identified by Mr. Isakower, would result in lower fuel prices today, the long-run result of denying American refiners’ access to global customers would be reduced investment in refining capacity and thus higher fuel prices over the long haul.

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