Russell Roberts's Blog, page 125
July 6, 2022
Paris Will Need a New Moniker
Here’s a letter to the Wall Street Journal:
Editor:
In its effort to transition France away from fossil fuels, the French government will nationalize Electricite de France (EDF) (“France to Nationalize Energy Giant EDF to Help It Combat Europe’s Energy Crisis,” July 6).
Idée ingénieuse! The inherent inefficiencies of state-owned enterprises ensures that EDF will routinely subject its customers to blackouts. Much less fossil fuel will thus be used as Paris becomes the City of Only Sometimes Light, and the French people regularly endure the absence of electricity to light and heat their homes, to power their appliances, and to recharge their electric vehicles. Voila! Climate problem solved!
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
Over the holiday weekend, President Joe Biden discovered a new scapegoat for persistently high gas prices: Americans who own and operate gas stations.
“My message to the companies running gas stations and setting prices at the pump is simple: this is a time of war and global peril,” Biden tweeted on Saturday. “Bring down the price you are charging at the pump to reflect the cost you’re paying for the product. And do it now.”
It arguably lacks the pomposity of former President Donald Trump’s memorable tweet that “hereby ordered” American companies to stop doing business in China, but the content is equally unhinged. Biden has been aggressive about using vague executive powers to shape the economy in recent months, but that doesn’t change the fact that an American president has no business whatsoever telling gas stations how much to charge at the pump.
If the tweet merely overstepped the limits of executive authority, though, it wouldn’t be as noteworthy—that sort of thing is almost an everyday occurrence. It’s also a telling example of just how little the Biden administration seems to know about what it believes it can design.
Wall Street Journal columnist Holman Jenkins decries what he calls “the FDA’s anti-nicotine myopia.” Two slices:
Smoking causes cancer and nicotine improves mood. So guess which the Food and Drug Administration will seek to ban under a sweeping new initiative?
An ambitious rulemaking announced in recent days looks to ratchet down progressively the nicotine in cigarettes, likely causing smokers at least in the beginning to light up more often and puff harder to get the desired nicotine hit. If this weren’t weird enough, in the same week, based on the inability of its manufacturer to prove a negative (an absence of any harm), the FDA moved to drive from the market the most popular consumer product that allows people to consume nicotine without the side effects of smoking, namely Juul brand electronic cigarettes.
Nicotine doesn’t cause cancer, it pays to remember as the agency sets out on what may prove a colossal policy error. Officially regarded as a drug, nicotine may be addictive like cocaine or heroin, and produce withdrawal symptoms in many who try to quit. But unlike other controlled substances, it’s anodyne in its effects. Nicotine doesn’t intoxicate. It doesn’t addle judgment. It’s mildly stimulating and calming at the same time, relieves anxiety and sadness, improves memory and motor performance in the short term, and may have benefits for Alzheimer’s, Parkinson’s, Tourette’s and ulcerative colitis.
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Partly the problem is an ideological unwillingness to distinguish the benefits of nicotine from the harms of smoking. Decades have made a cliché out of the specialist observation that people “smoke for the nicotine and die from the tar.” In 2015, Scientific American quoted one of the world’s leading smoking-cessation researchers pleading for the need to “de-demonize nicotine.”
The FDA is headed in the opposite direction. Maybe, after thousands of years of people seeking out and consuming nicotine, they will stop because the agency says so. In public policy, examining costs and benefits fully and frankly is usually advisable to avoid unpleasant surprises. Left out of the FDA’s assessment are the benefits people get from using nicotine. Left out is the possible gift to organized crime of trying to ban it.
Arnold Kling reviews Peter Zeihan’s The End of the World Is Just the Beginning. Two slices:
Perhaps the most interesting chapters concern energy. Although Zeihan is a believer in the dangers of climate change, his analysis shows that “green energy” fails, even on its own terms. In order to generate, transmit, and store solar and wind power, we need to build solar panels, wind farms, batteries, and new transmission systems. The cost of doing so, including the carbon dioxide that will be released in that atmosphere in the process, is daunting.
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I hope that people read and come away with a better appreciation of what makes our modern world possible. We are highly specialized. We are very interdependent. Our energy production and distribution system is remarkably efficient. Those who would like to stifle global trade and/or fossil fuels should understand just how primitive we might live if their ideologies prevail.
Here are Randy Barnett’s preliminary thoughts on NYSRPA v. Bruen.
GMU Econ alum Caleb Fuller describes Frédéric Bastiat as “the Jonathan Swift of economics.” A slice:
Timelessly crafted as they are, Bastiat’s thought experiments still inspire economic communicators today. Another classic is the “negative railroad,” allusions to which he sprinkles throughout Sophisms. France builds railroads, bridges, and canals to England that yield lower transportation costs. But when those lower costs result in more trade between the countries, France “corrects” the “imbalance” with a tariff to reduce imports. A tariff, therefore, performs the reverse function of a railroad. If we think a railroad is beneficial because it enables us to consume more and better goods, what does that imply of protectionist measures that raise the costs of exchange? This thought experiment, and his numerous transportation metaphors more generally, remain staples of Econ 101 classrooms the world over.
Cathy Stein calls on colleges and universities to end all vaccine mandates.
Then, at the nearby University of York, during the same period, health and safety guidance decreed that in the event of a fire, self-isolating students should wait behind to allow ‘non-self-isolating’ colleagues to exit first. This ludicrous diktat not only displayed a profound lack of risk balancing, but also a dereliction of a fundamental duty of care and an ignorance of basic safety standards.
In January 2022, in a particularly shocking example, officers in Texas arrested a teacher for suspected child endangerment after her son was discovered in the boot of her car at a drive-through PCR testing site. The mother allegedly told officials that she had transported her child in this way so she wouldn’t be exposed to his infection.
These distressing cases testify to something deeply dysfunctional in our societal response to Covid. We have normalised the mistreatment of children, collectively justifying it against the backdrop of the pandemic state of exception.
This treatment of children should be unacceptable in any civilised society, no matter what respectability it is given by the cloak of ‘public health’. Much has been made throughout the pandemic response of the need for public health to act in the interests of an ill-defined concept of a ‘greater good’. Yet it’s striking that a now reengineered concept of ‘public health’ has barely acknowledged children as part of the ‘public’. In its name, we have not only marginalised our young people’s wellbeing, but often actively put them in harm’s way.
Blue states like California are still hampered by the looming threat of covid restrictions, asymptomatic testing, & quarantines, imposed unpredictably at the whim of the governor and mercurial public health authority. How can an economy function well under such irrational policy?
Change the Constitution?
In his latest video, John Stossel asks some Americans, including me, about the desirability of amending the U.S. Constitution. (And here’s Stossel’s accompanying column.)
Majority Rule Isn’t As Straightforward As Many People Suppose It to Be
But there looms another issue, one grounded in the fact that Dobbs does not make abortion illegal. Dobbs merely returns to state governments the authority to restrict legal access to abortion. State governments are not obliged to so restrict. If the majority public opinion to which the Post refers can be interpreted, as seems reasonable, as opposition to at least some restrictions on abortion (rather than as opposition to some train of lawyerly reasoning), then it seems that the impact of the Dobbs ruling on policy will be minimal. State legislatures—which unequivocally are political institutions—will not restrict access to abortion.
Obviously, though, this last conclusion is too simplistic. While at least some restrictions on abortion might indeed be opposed by a majority of Americans as a whole, no state legislature is elected by Americans as a whole; each state legislature is elected only by citizens of that state. Even if a majority of Americans oppose restrictions on abortion, a majority of the citizens of one or more individual states—for example, Mississippi (the state that gave rise to the Dobbs litigation)—nevertheless might support such restrictions and vote accordingly.
This reality presumably plays a key role for the pundits and politicians who insist on the significance of the fact that at least some government-created restrictions on abortion are opposed by a majority of Americans. The presumption, apparently, is that if a majority of Americans support legal access to abortion, then this majoritarian preference should trump any contrary preference of a majority of voters at the state level.
Yet why? A foundational component of the constitutional structure of government in the United States is federalism. While reasonable people can, and do, debate over the proper allocation of power between the national government and the various state governments, few people not on the far Progressive left believe that state governments are, or should be, mere administrative units beholden to Washington. According both to custom and to the Constitution—its structure and the 10th amendment—each state government retains a vast scope to exercise police powers, as well as to choose the details of this exercise. States do so largely independently of each other and of the national government. Of course, majoritarian elections in each state determine which, and how, police powers are exercised. Why should, in any state, the preference of a majority of Americans prevail on the question of abortion over the preference of a majority of that state’s voters?
Even if, contrary to fact, we Americans were in widespread agreement that the best form of government is simple and unconstrained majority rule, this agreement would not settle the question of the level at which majorities should rule. If someone insists that abortion policy should be set nationally and determined by the wishes of a majority of American voters as a whole, that person is then an opponent of majority rule from the perspective of majoritarians who believe that the relevant polity for determining abortion policy consists of citizens of each state, or perhaps of citizens of each county, city, or town.
Quotation of the Day…
… is from pages 55-56 of Jagdish Bhagwati’s 2002 book, Free Trade Today (original emphasis):
And so in the United States far too many politicians today have turned into an unfair-trade-obsessed, cynically manipulative lot. Broadly, with a few shining exceptions – such as the former senator Daniel Patrick Moynihan among the Democrats and Senator Phil Gramm, a former professor of economics, among the Republicans – they divide into two groups: the less disagreeable ones whose slogan is “free and fair trade,” and the more disagreeable ones who insist on “fair trade before free trade.”
DBx: Count on it: Whenever pundits or politicians use the term “fair trade” as if this term refers to something meaningful (beyond trade that is mutually agreeable to the individuals who spend their own money and resources trading), these pundits or politicians are either ignorant or disingenuous (or both).
July 5, 2022
Bonus Quotation of the Day…
Temporarily flatten the curve to avoid hospital overcrowding? That had become a distant memory The goalposts had long since shifted to something very different. Now, the imperative seemed to be stopping all cases, period, even eliminating positive tests in people with zero symptoms and very little risk of any serious illness. Not only was this impossible, it was also irrational. This highly contagious respiratory virus was already widely prevalent, having infected tens of millions of Americans by estimates of the CDC and others. The overwhelming majority of infected people were asymptomatic or only mildly so. And experts on pandemic preparation in the past had never advised societal lockdowns – the severe harms were easy to anticipate and long viewed as unacceptable.
DBx: Lockdowns were viewed as unacceptable, that is, until members of the zoomgeoisie selfishly, cruelly, and in a fit of derangement seized for themselves extra protection at the expense of persons unable to work from home and unable to survive without regular paychecks – and also at the expense of long-run economic performance, as well as of protections against the exercise by the state of authoritarian, tyrannical powers.
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The irrationality inherent in the single-minded focus on avoiding exposure to covid at all costs is what I meant to convey in this essay written in March 2021.
Some Links
The Wall Street Journal‘s Editorial Board should win a prize for this understatement about Biden: “The President doesn’t appear to know anything about how the private economy works.” Here are two slices from the accompanying editorial:
“My message to the companies running gas stations and setting prices at the pump is simple: this is a time of war and global peril,” Mr. Biden tweeted Saturday. “Bring down the price you are charging at the pump to reflect the cost you’re paying for the product. And do it now.” Had Donald Trump issued such a command as President, the left would have cried “authoritarian.”
It’s embarrassing for the leader of the free world to sound like he’s channeling Hugo Chávez. A Chinese state media flack praised Mr. Biden’s tweet: “Now US President finally realized that capitalism is all about exploitation. He didn’t believe this before.” Or maybe he did, and nobody wanted to believe it.
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The President’s economic ignorance isn’t a one-off. In recent months he has accused oil and gas companies of price gouging and demanded that they increase production even while his Administration threatens to put them out of business. Mr. Biden doesn’t understand that businesses make long-term decisions based on demand expectations and policy signals. Jeff Bezos called the President’s weekend tweet “either straight ahead misdirection or a deep misunderstanding of basic market dynamics.” They aren’t mutually exclusive.
Also unimpressed with the economic understanding exhibited by Biden and his administration is Michael Shellenberger. Two slices:
But US refineries are already operating at 94 percent of their capacity, with US refineries in the Gulf of Mexico running at 98 percent, which is the highest rate in 30 years. Running refineries at a higher capacity than that risks damaging the equipment. As such, Biden isn’t just wrong, he insulted some of the hardest working people operating in one of the most dangerous industries in America.
If Biden wants more American fuel, then he should allow the building of new refineries, right?
But, on May 12, Biden’s Interior Department blocked a proposal to open up more than one million acres of land in Alaska for oil and gas drilling. Two days later, Biden’s Environmental Protection Agency blocked plans to expand an oil refinery in the US Virgin Islands.
Biden and his defenders said he had to block the expansion of the Virgin Islands refinery, given how polluting it was.
But had Biden’s EPA allowed the Virgin Island refinery to expand, the owners would have poured nearly $3 billion into retrofitting the plant so it produced gasoline and other products more cleanly, while significantly increasing production at the same time.
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When oil and gas executives visited the White House in June, Biden snubbed them by refusing to attend the meeting. Instead, at the very same moment, he met with wind industry executives. A few days earlier, Biden administration officials signaled they may support a large new tax on the oil industry proposed by a Senator from Oregon.
All of this has soured the oil and gas industry on investing in production. “If you were an oil company,” a senior executive at a major US bank told me, why would you invest hundreds of millions of dollars into expanding refining capacity if you thought the federal government or investors would shut you down in the next few years? The narrative coming from the administration is absolutely insane.”
We often hear that global warming is responsible for greater and more frequent floods, and more drought. But Koonin quotes the IPCC report itself noting that climatologists have “low confidence” about whether floods will be greater and more frequent, or smaller and less frequent. Also, the IPCC report states that climatologists have “low confidence in a global-scale observed trend in drought or dryness (lack of rainfall) since the middle of the 20th century.” Translation: the IPCC isn’t even sure about what has happened in the recent past let alone what will happen in the next few decades.
Johan Norberg alerts us to this new volume, edited by Karl Wennberg and Christian Sandström, that questions the value of the so-called “entrepreneurial state” and the prospects for success of industrial policy. Here’s Johan’s description of the volume:
We forgot the 1970s, so active industrial policy is back, from Beijing to Brussels. Therefore, the new book “Questioning the Entrepreneurial State”, eds Karl Wennberg and Christian Sandström, is a blessing. 30 scholars explain the state of knowledge about industrial policy, and remind us that it usually fails, big time. The problem with picking winners is that losers are so good at picking governments.
Jay Bhattacharya is grateful for America.
One of the main grievances of the Founding Fathers that led to the Revolutionary War was the growing use by Great Britain of sketchy venues like admiralty courts to prosecute colonists for offenses such as smuggling. In these proceedings, colonists were forcibly made to go to the mother country or the then-British colony of Nova Scotia (now a Canadian province) for trials without juries and with much lower standards of evidence than normal colonial courts. These travesties of justice were a significant factor in turning a wealthy Virginia agricultural entrepreneur, who had fought as a colonel for Britain in the French and Indian War in the 1750s, into the leader of the Revolutionary War who would become the new nation’s first president: George Washington.
In a 1774 letter, Washington wrote to his longtime friend and neighbor Bryan Fairfax making the case for drastic action against Great Britain (reprinted in the appendix of my book—George Washington, Entrepreneur—and available at Founders Online). Washington identified the quasi-courts’ lack of justice as one of his primary motivations for drastic action against the mother country. In the letter, he decried the British government’s “transporting offenders into other colonies or to Great Britain for trial where it is impossible from the nature of the thing that justice can be obtained.” This letter from Washington was coincidentally—or providentially—dated July 4, 1774.
Are we now paying the price of the worldwide Covid obsession? By throwing endless resources at the pandemic response, we disrupted access to routine healthcare and crucial immunisations. The stay-at-home messaging kept patients away from appointments and convinced health practitioners that it was appropriate to postpone their services.
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The Covid pandemic saw one condition prioritised above all else, including life-saving vaccinations against childhood diseases. The return of polio could well be the latest example of how this approach created collateral damage that was entirely avoidable. It is time we acknowledged that our cure has been worse than the disease, especially for children.
In fact, we don’t know if the vaccines are safe and effective. The rushed FDA action was based on extremely weak evidence. It’s one thing to show regulatory flexibility during an emergency. But for children, Covid isn’t an emergency. The FDA bent its standards to an unusual degree and brushed aside troubling evidence that warrants more investigation.
As it initially did for adults, the FDA granted the Pfizer and Moderna vaccines for toddlers an emergency-use authorization allowing the agency to expedite access for products that “prevent serious or life-threatening diseases or conditions.” While adult Covid vaccines clearly met this standard in late 2020, the toddler vaccines don’t.
Only 209 kids between 6 months and 4 years old have died from Covid—about 0.02% of all virus deaths in the U.S. About half as many toddlers were hospitalized with Covid between October 2020 and September 2021 as were hospitalized with the flu during the previous winter. More children were hospitalized during the Omicron wave last winter, but hospitalization rates were still roughly in line with the 2019-20 flu season. None of the 5,400 or so toddlers in Moderna’s trial were hospitalized for Covid. Yet at least 15 were hospitalized for non-Covid infections.
Quotation of the Day…
… is from page 5 of Deirdre McCloskey’s hot-off-the-press 2022 volume, Beyond Positivism, Behaviorism, and Neoinstitutionalism in Economics (original emphases):
[M]uch of what passes for high-level evidence in economics looks like quantification, or at any rate mathematics, but doesn’t relevantly quantify or yield actual truths about how the economy works. And likewise, much of what passes for high-level theorizing in economics looks like insight into the world’s work but doesn’t yield that either.
July 4, 2022
Bonus Quotation of the Day…
The “piled” plunder of the crime of slavery is dwarfed by the returns of the honest commerce that might have been; Jefferson’s declaration is an economic opportunity sadly missed. Free and equal Black Americans would have generated far more wealth in America than enslaved ones did. Economic history is unequivocal: Jefferson’s slavery wasn’t the basis of America’s prosperity; Jefferson’s liberalism, so beautifully expressed in the document we celebrate today, was.
Four Amazing Differences
There was no one day or year in which humanity declared independence from the hierarchies, traditions, superstitions, fears, and prejudices that for millennia kept our ancestors mired in deep material poverty. This economic declaration of independence took more time than did – and was done unawares compared to – the political declaration of independence that happened in Philadelphia in July of 1776. Had there been, contrary to fact, such an identifiable revolutionary moment for economic freedom, it would – it should – be celebrated with even more joy and gratitude than we Americans rightly bring to the celebration of the courage and wisdom that inspired Washington, Adams, Jefferson, Franklin, and their colleagues to declare America’s political independence from Great Britain.
A third way that our lives today differ categorically from the lives of all humans who lived before the dawn of capitalism is that the sheer number of people whose knowledge, skills, and efforts are necessary to produce the goods and services that we are accustomed to consume on a regular basis is astronomical. Not only are we today utterly dependent for our survival on strangers, the number of strangers on whom we depend is mind-bogglingly large.
This reality is true for even seemingly simple goods such as pairs of jeans, oranges, and window panes. But this reality is better seen by pondering a more ‘modern’ yet still commonplace good, such as a smartphone. The glass on the phone’s face is made of materials that some strangers found by exploring and that were then processed by other strangers into glass. Yet different strangers programmed the codes that allow the phone to work, while other strangers designed the microprocessors – little marvels that were physically produced by machines made by still other strangers and then transported to the factory for assembly by yet different strangers. Each app, of course, is the product of the minds of other strangers still.
I don’t know – no one could possibly know – the exact number of persons whose efforts were devoted to producing your smartphone and keeping it operational. But I’m confident that this number is much greater than one million – in fact, it’s likely multiple times greater. When this number is added to the number of strangers whose efforts were devoted to producing your living-room couch, your HVAC system, the latest medicines that you ingested, your automobile, and the commercial-air flight that you’ll next take to visit your parents or to close that business deal, the number of strangers who routinely work for you likely numbers well over a billion.
Even more wow.
The fourth categorical difference between our lives and those of our pre-capitalist forebears is that almost everything we consume is something that no one person knows how to make or could possibly know how to make. This incredible claim warrants repetition: Nearly everything that we consume is something that no one does, or could, know how to make.
The most famous explanation of this marvelous reality is Leonard Read’s brilliant 1958 essay “I, Pencil.” The production of something as commonplace, as inexpensive, and as seemingly simple as an ordinary pencil requires the knowledge and efforts of so many different individuals that no one person – indeed, no committee of tireless geniuses – could possibly possess such knowledge. This inconceivably vast amount of knowledge is dispersed across the minds of countless specialized producers, nearly all of whom are strangers to each other as well as to the final consumers of their products. And yet we have pencils in such abundance that an ordinary American worker today need toil only 13 seconds to earn enough income – ten cents – to purchase a new pencil.
Reflect on this fact: An ordinary (“nonsupervisory”) private-sector American worker today, who earns about $27 per hour, can earn enough income in a matter of seconds to purchase something the production of which is so complex that no human being can hope to know fully all that is involved in its production and, hence, that requires the knowledge and labor of millions of strangers.
What causes the great and overwhelmingly successful coordination across the globe of the productive efforts of billions of strangers? And why is this coordination so silent and incessant that we take it for granted? We hardly notice it.
We hardly notice this vast occurrence of global cooperation and coordination, that is, until our attention is drawn to it by a competent teacher of Econ 101. That teacher’s task then becomes that of revealing the logic of how market prices, profits and losses, competition, and innovation drive the specialization and the innumerable efforts that make our marvelous world a reality.
The learning adventure is glorious!
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