Russell Roberts's Blog, page 139

Covid Tyranny Is Not Rooted in True Liberalism

(Don Boudreaux)

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Matthew Crawford’s essay, on the whole, is superb and important. (For alerting me to it, I thank Russ Roberts.)

Editor, UnHerd

Editor:

Matthew Crawford rightly decries covid fear-mongering and restrictions, yet he too quickly blames this dystopian turn on flaws inherent in liberalism (“Covid was liberalism’s endgame,” May 21).

It’s true that one branch of liberalism, embracing the notion that humankind can be perfected through reason and science, leads logically to the tyranny of society being treated – as it has so terribly been treated since March 2020 – as a science project. This branch is more accurately called “Progressivism.”

But another, truer branch of liberalism rejects this folly. The liberalism of Adam Smith, Tocqueville, Lord Acton, and F.A. Hayek – the wise liberalism of the American revolution rather than the conceited liberalism of the French – features at its core a steadfast fear of centralized power. Alongside this fear is an equally steadfast tolerance for individuals to be as free as possible in choosing the ends they pursue as well as in choosing the means for these pursuits.

Among the greatest fears of true liberals is the hell that awaits humanity at the end of every utopian quest. And so the promise of true liberalism never was heaven on earth. Instead, it’s the obtainable, much more modest – yet supremely important – goal of ensuring for each individual maximum possible scope to peacefully live as he or she chooses, with no ‘nudging’ allowed and with coercion used only to counter coercion. As summarized by Thomas Sowell, freedom under a truly liberal order “is, above all, the right of ordinary people to find elbow room for themselves and a refuge from the rampaging presumptions of their ‘betters.’”*

True liberalism would never have countenanced the tyranny wrought over the past two years by those who presumed themselves to be our ‘betters.’

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

* Thomas Sowell, Knowledge and Decisions (New York: Basic Books, 1980), page 383.

Pittsburgh Tribune-Review: “Beware some economic commentary”

(Don Boudreaux)

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In my column for the October 9th, 2012, edition of the Pittsburgh Tribune-Review, I warned against the commentary of Peter Morici. You can read my warning, in full, beneath the fold.

(more…)

Quotation of the Day…

(Don Boudreaux)

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… is from page 41 of F.A. Hayek’s February 23, 1944, speech to the Students’ Union of the London School of Economics, “On Being An Economist,” as this address is printed in the 1991 collection, The Trend of Economic Thinking, which is Vol. 3 in The Collected Works of F.A. Hayek:

[I]t requires much greater strength and independence of mind to take a critical view of what you have been taught to be progressive than merely to accept them.

Some Non-Covid Links

(Don Boudreaux)

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Phil Gramm and Mike Solon, writing in the Wall Street Journal, explain that “stakeholder capitalism” springs from a rejection of the values of the Enlightenment. A slice:

The pre-Enlightenment world was dominated by the powerful, who defined the public interest to benefit themselves and imposed their will on productive members of society. When labor and capital are forced to share what they produce with stakeholders, the reward for working and savings is plundered.

In the post-Enlightenment world, people were empowered to pursue their own private interests. Private interests and free markets accomplished what no benevolent king’s redistribution, no loving bishop’s charity, no mercantilistic protectionism, and no powerful guild ever did—deliver broad, unending prosperity.

Remarkably, amid the recorded successes of capitalism and failures of socialism rooted in Marxism, pre-enlightenment socialism is re-emerging in the name of stakeholder capitalism. These stakeholders claim that “you did not build your business” and that your labor and thrift should serve their definition of the public interest.

The initial target of this extortion is corporate America. Stakeholders argue that rich capitalists who own big businesses already get more than they deserve. But since roughly 70% of corporate revenues go to labor, the biggest losers in stakeholder capitalism are workers, whose wages will be cannibalized. And of course, the idea that rich capitalists own corporate America is largely a progressive myth. Some 72% of the value of publicly traded companies in America is owned by pensions, 401(k)s, individual retirement accounts, charitable organizations, and insurance companies funding life insurance policies and annuities. The overwhelming majority of involuntary sharers in stakeholder capitalism will be workers and retirees.

Nate Hochman reports the happy news of some increased resistance in corporate America to wokism.

I’m always pleased to be a guest of Amy Jacobson and Dan Proft.

Megan McArdle warns against taking at face value “the data on American right-wing violence.” A slice:

After all those reports on the threat of right-wing violence, any new case with a tenuous link to the alt-right or the Aryan Brotherhood seems like part of a trend meriting wall-to-wall coverage. Meanwhile, a Black man driving into a parade after making anti-White remarks on Facebook is seen as a sick individual. There’s some danger that this becomes the policy equivalent of a self-licking ice cream cone: Media primed by nongovernmental-organization reports play up even glancing connections to racist or militia groups, which in turn guarantees that the next such report will feature a disproportionate share of cases coded as “right-wing violence.”

T.J. Rodgers sits “on the boards of four solar energy companies that are being harmed badly by existing U.S. tariffs and threats of new ones.” A slice:

Silicon Valley prospers because it invents and then moves on quickly from yesterday’s technologies, such as the assembly of personal computers and cellphones. My next-generation solar technology companies are Enphase Energy (solar power electronics and storage), FTC Solar (utility-scale solar trackers), SunDensity (solar quantum concentrators) and Solaria Solar (complete residential solar and storage systems). All these companies enjoyed the benefits of cheap Chinese solar panels because low prices drove higher sales volume—as Adam Smith and David Ricardo would have predicted.

Eric Boehm weighs in against the nitwitted attempt to use government to outlaw high fuel prices. Here’s his conclusion:

Price controls are lies—pleasant ones, perhaps, but lies just the same—and the government ought not to be in the business of forcing businesses to lie to consumers for political reasons.

GMU Econ alum Ryan Young makes clear that today’s baby-formula shortage is made worse by cronyism.

Alberto Mingardi remembers Independent Institute founder David Theroux. A slice:

The books that the Independent Institute has published are remarkable: their catalog includes some “classics”, at least within the boundaries of our movement (I think of Dominick Armentano’s Antitrust and Monopoly, Bruce Benson’s To Serve and Protect, Dowd and Timberlake’s Money and the Nation State, the excellent The Voluntary City edited by Beito, Gordon and Tabarrok); some provocative pamphlets (like Alvaro Vargas Llosa’s The Che Guevara Myth) and a good number of titles which would deserve to be better known (our own Scott Sumner’s The Midas Paradox or The Economies of Immigration edited by Ben Powell, for example). The Independent Review is even more extraordinary. Its founding editor, Robert Higgs, is a remarkable (and much underrated) economic historian and left his impression in the journal. Besides Crisis and Leviathan, Higgs wrote a number of important works, my favorite being perhaps Depression, War, and Cold War. Challenging the Myths of Conflict and Prosperity, a genuine eye-opener. In many ways, he is that rare bird: a scholar who is both outspoken and rigorous.

His successors as editors of the Independent Review (Chris Coyne, Mike Munger and Robert Whaples) are doing a splendid job. “Independent scholarship developed by independent minds” sounds a bit like an advertisement quip, but in this case is a fair description.

His long time association with Higgs signals that David had a clear vision for his think tank, the philosophy (the kind of libertarianism, if you prefer) it should advance and the means by which it should promote it – and kept to it, for some 35 years. Not bad. His legacy is of great relevance, for classical liberal all over the world.

Quotation of the Day…

(Don Boudreaux)

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… is from page 1 of the late William Baumol’s 2002 book, The Free-Market Innovation Machine:

Under capitalism, innovative activity – which in other types of economy is fortuitous and optional – becomes mandatory, a life-and-death matter for the firm.

DBx: Indeed so. And so, all efforts by government to determine the specific firms, outputs, and jobs that will be created and survive in a market economy are inherently inconsistent with a market economy.

By its very nature, innovation is creative; it can neither be planned nor predicted. Therefore, if an industrial-policy scheme is pursued, innovation must be suppressed, for otherwise the scheme will be upset. If, instead, innovation is allowed, then industrial policy must be abandoned.

Most proponents of industrial policy will deny the above. They’ll insist that their industrial policy not only welcomes, but encourages, innovation – as long as, of course, it’s the correct sort of innovation. But as I and others have written elsewhere, all such denials merely reveal the unseriousness of the thought of these industrial-policy proponents. Such denials indicate a failure to understand what innovation is and what its existence in an economy entails. Anyone issuing such a denial should not be taken seriously when he or she discusses economic matters.

Some Non-Covid Links

(Don Boudreaux)

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The Wall Street Journal‘s Editorial Board applauds the U.S. Fifth Circuit’s ruling that reins in administrative-agencies’ propensity to conduct star-chamberish trials. A slice:

Merits of the case aside, the constitutional problem is that the SEC acted as prosecutor, judge and jury. The Dodd-Frank Act lets the SEC decide whether to bring charges in its own tribunal or federal court. The agency usually chooses the former, as do other agencies such as the Federal Trade Commission.

Enter the Fifth Circuit, which held in Jarkesy v. SEC that the SEC’s tribunals, as currently structured, violate the Seventh Amendment’s right to trial by jury. As Judge Jennifer Walker Elrod explains for the 2-1 panel majority, the jury guarantee applies to all suits of “common law,” as understood at the time of the founding. This includes fraud prosecutions.

The Fifth Circuit also ruled that Congress’s delegation of legislative power to the SEC to decide where to bring fraud enforcement actions violates the Constitution’s separation of powers. Congress may grant agencies prosecutorial discretion to decide what cases to bring, Judge Elrod noted, but it cannot give them free rein to decide their judicial forum.

Also writing in the Wall Street Journal about the Fifth Circuit’s excellent ruling is Mario Loyola. Two slices:

Now the U.S. Court of Appeals for the Fifth Circuit has taken what could be a historic step toward restoring the Constitution’s checks and balances, in the case of Jarkesy v. SEC. The Securities and Exchange Commission acts as rulemaker, prosecutor and judge for America’s securities laws. It may have a solid case for fraud against investor George Jarkesy, but the powers and perks the agency has accumulated pose the constitutional problem.

The Constitution vests legislative power in Congress, executive power in the president, and judicial power in the federal courts. But today the executive branch does most of the legislating and adjudication in the federal government, while, paradoxically, administrative agencies beyond the control of the president (or anyone else) wield much of the executive power. Checks-and-balances are dissolving in all directions, with the executive branch absorbing the powers of the other branches into an administrative leviathan, even as executive power become shielded from democratic control.

In the case of Mr. Jarkesy, the SEC used a provision in the Dodd-Frank law that allowed it to seek civil penalties for fraud either in normal federal courts or in internal proceedings before its own administrative law judges. Those ALJs are civil servants who can only be removed for good cause by the commissioners of the SEC, who themselves can only be removed for good cause.

…..

The Fifth Circuit held that because Dodd-Frank’s grant of authority to the SEC to decide which cases to bring in traditional court and which to try in its own tribunals wasn’t supported by any intelligible principle, it was an unconstitutional delegation of the legislative power vested in Congress. Crucially, the court referred to the dissent by Neil Gorsuch in Gundy v. U.S., which lays the foundation for significant limits on the rule-making authority that Congress can delegate to agencies.

The Fifth Circuit also observed that because agency officials exercise executive powers only in the name of the president, in whom that power is constitutionally vested, such officials must remain accountable to the president. That means the president must be able to remove them at will. For most of the past century it was assumed that if an executive official exercises quasi-legislative or quasi-judicial functions in addition to executive ones, then that official may be shielded from removal at will by the president; hence the existence of “independent agencies.”

In the past decade, however, the Supreme Court has ruled in cases such as Free Enterprise Fund v. PCAOB and Seila Law v. CFPB that there are limits to how much any official exercising executive authority can be shielded from presidential control. The Fifth Circuit took these decisions to their next logical step, holding that because the SEC’s ALJs exercise executive powers in addition to other functions, the restrictions on their removal by the president are unconstitutional.

That could severely crimp administrative adjudications, and not just at the SEC. Hence the decision will almost certainly be appealed to the Supreme Court. The decision heralds a potentially significant curtailment of the administrative state. A century after bowing to FDR’s court-packing threat, the federal judiciary may be recovering the self-confidence to enforce the Constitution’s limits on government power.

Harald Uhlig explains that academic freedom is under assault at Princeton.

Walter Olson rejects the case for mandatory voting.

Writing in the Wall Street Journal, Scott Lincicome and Emily Ekins ask why the FDA is seizing baby formula. A slice:

Parental demand led to American mom-and-pop vendors selling European formula because the manufacturers wouldn’t make the effort. They even provided translated instructions. But the FDA in the past year has cracked down on these sellers. Without notice, thousands of families were left scrambling to find more formula. Parents who tried to purchase directly from Europe had hundreds of dollars of formula seized by U.S. customs agents. One parent reported that she had nearly $700 of formula destroyed at the border—in the middle of a national formula shortage.

The FDA’s actions have exacerbated the problem they were trying to solve. The agency cites concerns about storing and transporting powdered formula to avoid bacterial contamination or product deterioration. But by shutting down trusted vendors who had built a reputation on importing and selling high-quality products, the FDA drove desperate parents to untested sellers, creating the storage and handling concerns that caused the FDA to distrust European products. The difficulty finding preferred baby formula brands also increased the likelihood of inauthentic products and unscrupulous sellers taking advantage of parents in need.

James Pethokoukis points to evidence that we free traders still have much work to do to disabuse the public of fallacies about trade.

My intrepid Mercatus Center colleague Veronique de Rugy warns against supposing that Emmanuel Macron is a liberty-loving liberal. A slice:

That sounds eloquent, but it is hard to reconcile with his first-term record. The executive in France enjoys far more concentrated and unchecked powers than in the United States. But in the name of security, Macron pushed a series of controversial laws that massively boosted the powers of both the police and the military while reducing their accountability.

A 2017 law ended the state of emergency that was put in place after the 2015 terrorist attacks, but it made permanent many of the emergency measures that were embraced at the time. It continued to allow the search, seizure and house arrest of people that the Interior minister identifies, with little to no judicial review. That same minister can also close religious establishments, which mostly means mosques.

Juliette Sellgren talks with Brian Knight about woke capitalism.

Damon Root writes eloquently about the great Zora Neale Hurston’s “inconvenient individualism.” A slice:

Some of Hurston’s contemporaries, such as Richard Wright, made their names by writing about race and racial injustice with a left-wing bent, an approach that is still plenty fashionable today. Hurston did not. In fact, Hurston denounced Communism’s demeaning influence on writers like Wright. (Wright was a member of the American Communist Party for several years before breaking with his old comrades and becoming a prominent left-wing anti-Communist.) “Mr. Wright’s author’s solution,” Hurston scoffed in a 1938 review of Wright’s short-story collection, Uncle Tom’s Children, “is the solution of the [Communist] Party—state responsibility for everything and individual responsibility for nothing, not even feeding one’s self.”

Her dissents from mainstream progressivism could be equally caustic. “Throughout the New Deal era,” Hurston wrote in 1951, “the relief program was the biggest weapon ever placed in the hands of those who sought power and votes.” More to her taste was the approach of Republican Sen. Robert A. Taft of Ohio, a libertarian-leaning conservative whose credo, as Hurston favorably summarized it, was “the people and the individual retain true liberty.” Thanks to views like that, Hurston found herself increasingly out of step in elite literary and publishing circles.

Quotation of the Day…

(Don Boudreaux)

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… is from page 300 of the late, great UCLA economists Armen A. Alchian’s and William R. Allen’s Universal Economics (2018; Jerry L. Jordan, ed.); this volume is an updated version of Alchian’s and Allen’s magnificent and pioneering earlier textbook, University Economics:

Waste or inefficiency is only what can be avoided at a cost less than the waste. If the cost of avoiding some seeming waste is greater than the waste, it’s not really a waste.

DBx: One of the many advantages of what my Mercatus Center colleague Adam Thierer calls “permissionless innovation” – that is, of refusing to use government restrictions to protect industry incumbents or politically favored cronies from competition – is that it incessantly transforms efficient uses of resources into wasteful uses.

This wording sounds odd, but it’s accurate. Innovation renders uses of resources that yesterday were the ‘best’ possible – uses of resources that yesterday were efficient – into uses that today are inefficient in light of newly discovered knowledge. For example, in the 19th century efficiency was served by using labor and transportation vessels to harvest ice from ponds and lakes in New England for shipment to New York and Philadelphia. The widespread availability of electrification and household refrigeration renders such ice harvesting today inefficient.

The profit motive obviously propels entrepreneurs to identify existing wasteful uses of resources and to eliminate such wastage. But the profit motive also, and more importantly, propels entrepreneurs to innovate in ways that transform today’s ‘efficient’ uses of resources into tomorrow’s inefficient uses – and then to eliminate the newly ‘created’ waste.

Quotation of the Day…

(Don Boudreaux)

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… is from page 465 of F.A. Hayek’s profound and important 1964 article “Kinds of Order in Society” (available without charge on-line here) as it appears in Liberty Fund’s 1981 single-volume collection of New Individualist Review:

We have it in our power to assure that such an overall [social and economic] order will form itself and will possess certain desirable general characteristics, but only if we do not attempt to control the detail of that order. But we jettison that power and deprive ourselves of the possibility of achieving that abstract order of the whole, if we insist on placing particular pieces into the place we wish them to occupy. It is the condition of the formation of this abstract order that we leave the concrete and particular details to the separate individuals and bind them only by general and abstract rules. If we do not provide this condition but restrict the capacity of the individuals to adjust themselves to the particular circumstances known only to them, we destroy the forces making for a spontaneous overall order and are forced to replace them by deliberate arrangement which, though it gives us greater control over detail, restricts the range over which we can hope to achieve a coherent order.

Unprofitable Analysis

(Don Boudreaux)

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The blog post by Bivens reads like something written by a clever sophomore who’s too lazy to do real thinking; it’s filled with many errors in addition to the one mentioned below.

Mr. K__:

Thanks for sharing with me Josh Bivens’s blog post in which he blames inflation on high corporate profits. Unlike you, however, I’m unimpressed with Bivens’s thesis.

Profits are a residual. They’re that portion of revenue that’s left to firm owners after they pay all expenses to workers and other input suppliers. Therefore, Bivens’s argument that inflation is caused by profits must rest on the implicit assertion that firms reap higher profits simply by raising the prices of their outputs. But Bivens’s argument illegitimately assumes the existence of that which must be explained – namely, some change in economic phenomena that allows firms successfully to raise prices.

Bivens is silent about what this change might be, but the theory currently in vogue among Progressives identifies it as “greed.” Yet for at least three reasons this ‘greed’ theory is laughable.

First, there’s no reason to suppose that firms have recently become more greedy. Second, “greed” is at least as likely to push prices down as up; after all, the most obvious way for firms that are greedy for more customers to satisfy their lust is to cut prices. Third, even if producers have mysteriously and suddenly become more greedy, and even if this greed incites producers to try to raise prices, prices will not actually rise unless higher prices are able to be paid by consumers. More intense producer greed does not generate the increase in consumer spending power required to sustain the price hikes.

If we’re to coherently explain the sustained rises in many prices, we must reject Bivens’s lazy practice of simply assuming the existence of that which must be explained – namely, producers’ ability to charge, and consumers’ ability to pay, higher prices. We must identify some plausible change in underlying economic realities that incites firms today to raise prices and allows consumers to pay these higher prices. The only plausible change that I’m aware of is the injection into the economy over the past few years of gargantuan amounts of additional purchasing power.

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

Quotation of the Day…

(Don Boudreaux)

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… is from pages 226-227 of my colleague Peter Boettke’s 2017 paper “Rebuilding the Liberal Project,” as this paper appears in Pete’s 2021 book, The Struggle for a Better World:

True liberal radicalism has always pulled on the nostril hairs of the pretentious and arrogant in positions of power who thought they could choose better for others than they could for themselves.