Russell Roberts's Blog, page 132

Quotation of the Day…

(Don Boudreaux)

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… is from page 145 of the original 1960 Harvard University Press edition of Frank Knight’s collection of lectures, delivered in 1958 at the University of Virginia, titled Intelligence and Democratic Action:

The first commandment, with respect to any intelligent action is self-evident: “compare the alternatives,” beginning with understanding  what they are. But that is what people dislike doing. And the second and third are, appraise the alternatives, and then act on the basis of the best knowledge or judgment that is to be had. The basic axiom is that it is better not to act unless it can be done intelligently; as people are and as the world is, the odds are strong that bad results on balance, rather than good, will follow from acting ignorantly, at random – and acting on false knowledge is of course worse; but unhappily it is more common.

Refining the Argument

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

You nicely detail many of the reasons why prices at the pump today are much higher than they’d be in a market less burdened with the ethanol-lobby’s cronyism and less frightened by politicians’ succumbing to climate-change hysteria (“Is $6 a Gallon Gasoline Next?” June 16).

There’s at least one additional reason for high gasoline prices: the government-engineered fragmentation of the market for refined petroleum. As Andy Morriss and I explained ten years ago in your pages,

For most of the 20th century, the United States was a single market for gasoline. Today we have a series of fragmentary, regional markets thanks to dozens of regulatory requirements imposed by the federal Environmental Protection Agency (EPA) and state regulators. That’s a problem because each separate market is much more vulnerable than a national market to refinery outages, pipeline problems and other disruptions….

The role of regulators in fuel formulation has become increasingly complex. The American Petroleum Institute today counts 17 different kinds of gasoline mandated across the country. This mandated fragmentation means that if a pipeline break cuts supplies in Phoenix, fuel from Tucson cannot be used to relieve the supply disruption because the two adjacent cities must use different blends under EPA rules.

To shift fuel supplies between these neighboring cities requires the EPA to waive all the obstructing regulatory requirements. Gaining permission takes precious time and money. Not surprisingly, one result is increased price volatility.

Another result: Since competition is a key source of falling gas prices, restricting competition by fragmenting markets reduces the market’s ability to lower prices.

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 pages 180-181 of the original edition of Robert Higgs’s great 1987 book, Crisis and Leviathan:

A market system rests on an indispensable foundation of private property rights. These are the effectively enforced expectations of private citizens that they can (1) personally own property, including their own bodies and labor power, and exclude all others from deciding how the property shall be used; (2) appropriate the income and enjoy any other benefits yielded by the property; (3) transfer their rights freely to others by mutually satisfactory contractual agreements.

“A ‘Textbook Case’ of Government Overreach”

(Don Boudreaux)

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Continuing my efforts to archive at Cafe Hayek as many as possible of my writings, I post below the fold this essay that I co-wrote in the Spring of 2010, for the James G. Martin Center for Academic Renewal, with my dear friend Roger Meiners. I’d forgotten about this essay until I stumbled upon it earlier this week, quite by accident. (Roger is the author and co-author of several successful textbooks.)

(more…)

Some Links

(Don Boudreaux)

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George Will decries the muck emitted by the administrative state. Two slices:

This tendency will be made worse by Biden’s “buy American” policy. His liberal industrial policy will make the $1.2 trillion buy fewer construction materials: The Peterson Institute for International Economics estimates that buy American requirements probably cost taxpayers more than $250,000 for every job supposedly saved, and the Heritage Foundation cites a report that “deregulating procurement” would add 363,000 jobs.
…..
But perhaps the U.S. government is unusually susceptible to being made so [inefficient] because of what University of Michigan law professor Nicholas Bagley calls “the procedure fetish.” (“Inflexible procedural rules are a hallmark of the American state.”) The result is what [Philip] Howard calls “rule stupor.” All this is made in America by a homegrown chimera: the progressive aspiration to reduce government to the mechanical implementation of an ever-thickening web of regulations that leaves no room for untidy discretion and judgment. Nowadays, add “equity” and “environmental justice” to the lengthening list of ends that an infrastructure project must include.

My intrepid Mercatus Center colleague Veronique de Rugy busts the myth that Pres. Biden is fiscally responsible. A slice:

Biden’s administration did nothing to bring about the deficit’s decline. Credit really goes to large increases in tax revenues as the economy rebounded combined with the decision by Democratic Sens. Kyrsten Sinema and Joe Manchin and their Republican colleagues to block Biden’s expensive “Build Back Better” proposal. BBB would have made permanent many of the emergency programs created or expanded during the pandemic, and had it passed, government spending and deficits would be heading even higher than they are today.

That said, the still-too-close-to-$1 trillion deficit for FY 2022 is inexcusably large. More worrisome is the cost that we taxpayers must shoulder because of the pre- and post-COVID-19 deficits. According to that same Treasury report, in May, the U.S. government paid $56 billion in interest payments on its debt, up from $44 billion in April. As of now, total interest payments for this year are $311 billion. With four months still to go on this figure, we can assume a total interest cost for FY 2022 of at least $500 billion.

The Wall Street Journal‘s Editorial Board makes clear that Biden’s (and Progressives’) hostility to fossil fuels, in combination with the ethanol lobby, is a major reason for high gasoline prices. A slice:

Mr. Biden seems stunned to learn that prices rise when supply doesn’t meet demand. He’s aghast that gas prices are still rising above $5 a gallon even as oil prices have stabilized at $120 a barrel. Ergo, he says, the problem must be greedy oil companies making too much money.

At least he’s finally noticed the dearth of refining capacity to process crude, which some of us have warned about for years. The U.S. has lost about one million barrels a day of refining capacity in the pandemic. Some new refineries have opened in Asia, but the International Energy Agency recently reported that global capacity last year fell by 730,000 barrels a day.

A major culprit is U.S. government policy. Some older refineries have closed because companies couldn’t justify spending on upgrades as government forces a shift from fossil fuels. They also have to account for the Environmental Protection Agency’s tighter permitting requirements—the agency recently challenged a permit for an Indiana refinery—and steeper biofuel mandates.

My GMU Econ colleague Vincent Geloso reviews Patrick Newman’s 2021 book, Cronyism: Liberty versus Power in Early America, 1607-1849.

Reason‘s Eric Boehm explains that “instead of helping Americans battle rising prices, Biden escalates ‘Big Oil’ blame game.” A slice:

But there is one magic switch that Biden could flip tomorrow to save the average American household about $800 annually: he could repeal the tariffs imposed by former President Donald Trump on steel, aluminum, solar panels, and many other goods imported from China.

Yes, it’s fair to point out that repealing the tariffs won’t solve inflation. It’s likely that only higher interest rates or a debilitating recession will do that. But there’s no doubt that tariffs are contributing to higher prices throughout the economy.

What triggers Arnold Kling’s moral ire? A slice:

One example is wealthy career politicians. If you spent your whole life in “public service,” then how do you end up living like an investment banker?

Andy Craig argues that “gun rights are gay rights.”

Joel Zinberg: “The CDC and New York City put an end to two Covid mandates—for international travel and for toddler-masking—that stopped making sense a long time ago.” Another slice:

It has long been clear that Covid-19 poses little risk to children under five. The four-and-under age group makes up 6 percent of the U.S. population, but from March 2022 to the present it has accounted for less than 0.05 percent of Covid deaths. Total daily Covid deaths in New York City, for all ages, have been 11 or fewer since March 9. Deaths in the four-and-under age group in New York State and New York City have been minuscule throughout the pandemic.

Moreover, there is little evidence that masking students works, especially for children aged two to four, whose compliance with proper and continuous mask-wearing is doubtful. And masks likely interfere with children’s social and educational development.

Quotation of the Day…

(Don Boudreaux)

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… is from page 138 of my colleague Peter Boettke’s 2019 speech, delivered at a regional meeting of the Mont Pelerin Society, “The Role of the Economist in a Free Society,” as the text of this speech appears in Pete’s 2021 collection, The Struggle for a Better World:

Truth seeking in science is foundational to the enterprise, but the assertion of truth claims in politics is the path toward tyranny, and must be guarded against constantly.

DBx: Yes indeed. And anyone who calls for the silencing of those with different assessments of reality commits an offense against science and liberal civilization.

Some Links

(Don Boudreaux)

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Phil Magness exposes the hypocrisy – and dishonesty – of Princeton University historian Kevin Kruse. Here’s Phil’s conclusion:

Such examples suggest a recurring problem in the history profession, which traditionally relies on close textual readings and citation-heavy discussions of other historians as it scrutinizes and interprets the past. The American Historical Association’s statement on professional conduct warns that “writers plagiarize, for example, when they fail to use quotation marks around borrowed material and to cite the source, use an inadequate paraphrase that makes only superficial changes to a text, or neglect to cite the source of a paraphrase.” Even with proper footnoting, the organization notes by example, plagiarism may still be present. Repeated passages with only “cosmetic alterations indicate a lack of synthesis and original thought and represent a theft of [the borrowed] text.”

In Kruse’s case, the passages from Bayor and Sugrue may portend more serious problems in the academy. In an age of declining academic rigor, certain works seem to get a pass—provided that they promote particular ideological narratives that enjoy a following among elite academics and journalists.

Wall Street Journal columnist Jason Riley calls for more immigration into the United States. A slice:

This post-pandemic labor shortage has been driven by reckless government spending and misguided monetary policies that flooded the market with money. Covid relief measures—eviction bans, student-loan payment pauses, supplemental unemployment benefits—gave too many able-bodied workers an incentive to stay home rather than rejoin the labor force. The food-stamp work requirement was suspended in 2020, and the monthly benefit is now double what it was in 2019. The upshot is that there are more people on food stamps today than there were pre-Covid, even while the unemployment rate is close to a 50-year low and there are nearly twice as many job openings as people looking for work.

Richard Ebeling commemorates the 100th anniversary of the publication of Ludwig von Mises’s Die Gemeinwirtschaft (or when translated and published years later in English, Socialism: An Economic and Sociological Analysis.)

Here’s part 2 of Randy Holcombe’s “The Research Interests of Academic Economists.”

My GMU Econ colleague Bryan Caplan argues that cancelling student-loan debt is unforgivable.

David Beckworth talks with George Selgin.

“Why Biden’s Claim of Cutting the Deficit Is False, in a Single Chart.”

David Bell decries “the emergence of neo-fascism in public health.” A slice:

We have all seen prominent health professionals publicly vilify and denigrate colleagues who sought to restate principles on which we were all trained: absence of coercion, informed consent, and non-discrimination. Rather than put people first, a professional colleague informed me in a discussion on evidence and ethics that the role of public health physicians was to implement instructions from the government. Collective obedience.

This has been justified by ‘the greater good’- an undefined term as no government pushing this narrative has, in two years, released clear cost-benefit data demonstrating that the ‘good’ is greater than the harm. However, the actual tally, though important, is not the point. The ‘greater good’ has become a reason for the public health professions to annul the concept of the primacy of individual rights.

The thugs holding power in China continue their covidocratic tyranny in pursuit of the impossible goal of zero covid.

Quotation of the Day…

(Don Boudreaux)

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… is from page 6 of the June 2022 typescript of Deirdre McCloskey’s paper, forthcoming in the Erasmus Journal, “Most Policy is Impossible”:

Industrial policy has propped up failing industries from Japan to France, such as small-scale retailing, instead of choosing winners who actually win. Regulation of dismissal has led to high unemployment, once in Germany and Denmark, and especially still in South Africa. In the 1960s the public-housing high-rises in the West inspired by Le Corbusier condemned the poor in Rome and Paris and Chicago to holding pens. In the 1970s, the full-scale socialism of the East ruined the environment. In the 2000s, the ‘millennial collectivists,’ whether Red, Green, or Communitarian, opposed a globalization that helps the poor but threatens trade union officials, crony capitalists, and the careers of people in Western non-governmental organizations.

Thus policy.

DBx: Pictured above are French farmers during one of their countless protests – this one in 2015 – to insist that government protect them from competition.

…..

Even if, contrary to fact, government could obtain enough of the detailed knowledge necessary for it to improve the economy by supplementing and overriding market forces, this ugly reality remains inescapable: A government given the power to so supplement and override market forces will in fact use that power to appease special-interest groups.

Many of these special-interest groups will be driven by narrow, material rent-seeking motives (see, for example the economically informed but greedy French farmers pictured above); many other of these special-interest groups will be driven by sincerely held but nonetheless destructive ideological convictions (see, for example, the economically uninformed but well-meaning conservatives and Progressives who today plead for industrial policy). All of these special-interest groups will ensure that any government power to supplement and override market forces will be used in ways that promote the goals of the special-interest groups at the larger expense of the general public.

Economic Lessons from “This Old House”

(Don Boudreaux)

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I love the long-running PBS program “This Old House,” in large part for reasons that I reveal in my latest column for AIER. A slice:

While watching This Old House I’m struck throughout each episode by the indispensability to modern life of all this specialized knowledge. I’m certain that nearly everyone reading these words is, as I am, incapable of wiring a house for electricity, of arranging new piping to build a bathroom where none previously existed, or of turning an old kitchen into a living room and an old garage into a modern kitchen. And yet each of us lives in a house wired for electricity, and equipped with indoor plumbing and with a modern kitchen and living room.

Each of us, every day, benefits from the highly specialized knowledge obtained and used by the many strangers who built our homes and fitted them with these conveniences. And each of us enjoys these conveniences despite being personally incapable of producing them. Among the paramount marvels of modernity is the fact that the efforts of countless specialized producers are, every hour of every day – and today from around the globe – called forth and then coordinated to form a steady stream of goods and services that the richest potentates and poohbahs of the not-so-long-ago past could not have dreamed of possessing.

Also made abundantly clear by each episode of This Old House is the fast pace of innovation. Improvements abound in the likes of plumbing fixtures and appliances. For example, a kitchen faucet that was luxurious ten years ago is today outmoded, surpassed by ones sporting not just new designs but clever features, such as enabling users to start and stop the water flow without touching anything. There are also amazing showerheads, lightweight but sturdy bathtubs made out of resin and limestone, smart doorbells, and new alarm systems.

Yet perhaps even more impressive are incredible new building materials. Examples include slender bricks for fireplaces and chimneys that create the pleasing aesthetic of full bricks but without requiring the support of a heavy foundation; rain gutters made with extruded aluminum; and a rich assortment of advanced materials for decking.

Also attention-grabbing are many of the tools used by the carpenters and other craftspeople. Very seldom, for example, does any carpenter in This Old House wield an old-fashioned manual hammer. Pneumatic hammers are a tool of choice, allowing carpenters to drive nails in a fraction of the time required to do so manually. Construction time and costs are thus driven lower than otherwise.

Adam Smith noted that the greater is the degree of specialization, the greater is the impetus to create tools to assist workers. Tools enhance each worker’s productivity; each worker works not only faster but also in ways that result in fewer mistakes. This increased productivity, in turn – by enabling tasks that once required many workers now to be performed by fewer workers – releases workers to profitably specialize in trades that would otherwise be too costly to practice. Expertise is increased, which then further raises the quality and lowers the cost of the final product.]

It’s impossible to convey in words the amount of specialized knowledge, as well as the amazingness of modern building materials and tools, that are routinely, and entertainingly displayed in each and every episode of This Old House. If you aren’t already a regular viewer of this program, I urge you to give it a try. Like most viewers, you’ll get great ideas for how to improve your own home. More importantly, though, you’ll witness the indispensability of specialization, the value of skilled and serious workmanship, and many of the fruits of market-driven innovation.

Covid Poses No Significant Risks to Children

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

Unhappy that Jay Bhattacharya explained that covid’s risk to children is minuscule, Jeremy Faust writes “CDC surveillance indicates that Covid-19 has caused substantially higher hospitalizations and deaths in children than seasonal influenza usually does” (Letters, June 14). While true, neither this fact nor any of the other points raised by Dr. Faust weakens Dr. Bhattacharya’s argument that the risk posed by covid to children is far lower than ordinary Americans likely infer from public-health authorities’ context-free warnings.

Here’s some context. According to the CDC the total number of Americans younger than 18 killed by covid since early 2020 is 1,086. If we start our count with March 2020, that’s 40.2 covid deaths of children per month. Compare this figure to the number of young Americans who die each month from other causes. In 2020, the number of children younger than 15 who died each month, on average, of congenital anomalies was 396 – a number nearly ten times higher than covid’s monthly death toll for all children (that is, for all persons younger than 18). Similarly, the number of children younger than 15 who in 2020 died each month, on average, of unintentional injuries was, at 326, eight times higher than covid’s monthly toll for children younger than 18. Cancerous tumors killed each month at least another 92 children. And at least another 50 children, younger than 15, died each month from either heart disease, flu, or cerebrovascular complications.*

When these figures are combined with the fact that children’s overall rate of death is very low – approximately 0.045 percent of persons younger than 18 die each year** – Dr. Bhattacharya is both correct and wise to decry public-health authorities’ insistence on stoking fears that children are at high risk from covid.

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

* Calculated from this CDC page. (If the link doesn’t open, see this screenshot of the page.)

** Calculated from data available here, in which I divided by 29 (months) the figure, 81,532, for “Death from All Causes” of persons 0-17 from January 2020 through May 2022 to arrive at an annual number of deaths today in America of persons 0-17 of 33,732. (81,532/29 = 2,811 x 12 = 33,732.) According to the Census Bureau, the percentage of Americans under the age of 18 is 22.3 – meaning the number of such persons in the U.S. today is about 74,310,290. 33,732 is 0.045 percent of 74,310,290.