Russell Roberts's Blog, page 140

Pittsburgh Tribune-Review: “Deflating arguments for inflation”

(Don Boudreaux)

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In my column for the September 28th, 2012, edition of the Pittsburgh Tribune-Review, I expressed skepticism of some arguments for mild inflation. You can read my column in full beneath the fold.

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Some Non-Covid Links

(Don Boudreaux)

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This piece by George Will on abortion is brilliant. A slice:

The abortion debate that the Supreme Court’s calendar has ignited is compelling Americans to consider what abortion policy ought to be but first to recognize what the United States’ policy is: an extreme outlier. In 39 of the 42 European nations that permit elective abortions, the basic limit is at 15 weeks of pregnancy or earlier. In 32 of the 39, the limit is at 12 weeks or earlier. Worldwide, fewer than a dozen countries allow abortions after 20 weeks of pregnancy on any grounds.

In 1975, two years after Roe was decided, Archibald Cox, Harvard law professor and former U.S. solicitor general under President John F. Kennedy, said in a lecture at Oxford University: “The [Roe v. Wade] opinion fails even to consider what I would suppose to be the most important compelling interest of the State in prohibiting abortion: the interest in maintaining that respect for the paramount sanctity of human life which has always been at the centre of Western civilization.” That interest, although perhaps unintelligible to the likes of [Letitia] James, is important to the broad American majority.

This majority might soon have the dignified task of instructing their elected representatives to codify, state by state, community standards about the onset of personhood. An acorn is not an oak tree; an oak sapling is. The burden of intelligence, and self-government, is that distinctions must be drawn.

Randy Holcombe writes wisely about enemies and “enemies.” A slice:

Yet another area in which this rhetoric arises is race relations. Whites are being told that simply because of their race, they are the enemy. This editorial in the Seattle Times tells us, “We are all socialized in whiteness as a by-product of living here. The primary purpose of whiteness is to consolidate power through the value, protection and reinforcement of white western ways of knowing and being at the expense of nonwhite racial and ethnic identities via structural racism.” If whites are being told they are the enemy of Blacks, does this make Blacks the enemy of whites?

Martin Luther King hoped people would be judged by the content of their character rather than the color of their skin, but when people are not only being judged by the color of their skin but told that those of a different color are the enemy, this is a recipe for violence.

The recent supermarket shooting in Buffalo by a young white supremacist was a horrible event, and there is no possible justification or excuse for his actions. But one must wonder if the racial rhetoric saying that whites are the enemy of Blacks would not prompt the shooter to think that therefore, Blacks are the enemy of whites.

I’m not assigning blame for the shooting to anyone but the shooter. But the rhetoric of white supremacists reinforces the rhetoric of critical race theorists, which prompts a backlash by white supremacists. As the rhetoric escalates, it is natural for both sides to think, “If you tell me I am your enemy, that implies that you are my enemy.”

My intrepid Mercatus Center colleague Veronique de Rugy is no fan of newly reconfirmed Fed chairman Jerome Powell.

C.J. Ciaramella reports on yet another instance in the U.S. of the banana-republic practice of civil asset forfeiture.

John O. McGinnis writes thoughtfully about right and wrong ways to reform colleges and universities.

The Wall Street Journal‘s Editorial Board explains that the shortage of baby formula is caused by government. A slice:

Trade protectionism—including tariffs of up to 17.5%—and Food and Drug Administration labeling and ingredient requirements limit competition. About 98% of U.S. infant formula is made domestically, though it’s no safer than European or Australian products. While FDA has the authority to inspect foreign plants, tariffs make imports less competitive.

Solution: Suspend tariffs and ease labeling and ingredient requirements for trusted partners. The FDA now says it will use enforcement discretion on product labeling and provide a streamlined import entry review process for products from foreign facilities with positive inspection records. But these trade barriers shouldn’t exist in the first place.

GMU Econ alum Dominic Pino explains why those politicians who voted against increased funding for the FDA were correct in this decision.

Quotation of the Day…

(Don Boudreaux)

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… is from page 12 of the original edition of Robert Higgs’s indispensable – and now more relevant than ever – 1987 book, Crisis and Leviathan:

The welfare state has become, if it was not from the beginning, the redistributional state. Government policies for the limited purpose of saving the most unfortunate from destitution have merged into governmental policies for the purpose of redistributing income and wealth among virtually all groups, rich as well as poor.

Some Covid Links

(Don Boudreaux)

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Gigi Foster rejects the tale – recently told in the New York Times – that Australians should be pleased with their authoritarian response to covid. A slice:

Unlike the costs of COVID, the costs of lockdowns are spread far more widely across age categories, with massive losses in areas like mental well-being, physical well-being, future government expenditure, and future earnings due to decisions such as stay-at-home orders and school closures – not to mention the effects of extended lockdowns on less-measurable drivers of social flourishing like the development of anti-social habits, productivity losses, and lower levels of trust in institutions like our healthcare system that were complicit in COVID policy mismanagement.

Many of those spared death in 2020 or 2021 from COVID are succumbing now in 2022 as our borders re-open, meaning that enduring the horror of lockdowns “saved” only a couple of years of life for a large fraction of Australia’s eventual COVID victims.

Australia is now experiencing far more COVID deaths and infections than when lockdowns and other draconian restrictions were being imposed, while COVID restrictions have largely been eased on the back of triumphant politicians’ claims that the COVID injections have been the game-changer that we all needed to escape lockdowns and start to live normally again.

As we head into a federal election on May 21st, the major parties’ candidates really don’t want to talk about COVID. I wonder why?

My Mercatus Center colleague Bob Graboyes adds his clear voice to those who decry Fauci’s power-lust.

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

The Economist reports on China’s “zero-covid industrial complex.”

Writing in the Telegraph, Matt Ridley warns humanity against trusting the W.H.O. in a future pandemic.

Open Debate Is Not a Luxury Only for Calm Times

(Don Boudreaux)

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Mercifully, I received only two negative e-mails in response to my letter in yesterday’s Wall Street Journal – a letter highly critical of Francis Collins and Anthony Fauci. One of the e-mail writers asked me how much I was paid by “the Kochs” to write my letter; the second of the e-mails is answered below.

Mr. T__:

I regret that my letter in yesterday’s Wall Street Journal caused your “blood to boil.”

After asserting that “in deadly emergencies like COVID society must first save itself and can’t afford the luxury of dithering over fine points of science,” you conclude that “Doctors Fauci and Collins were justified to try and stop the flow of information which contradicted what they understood as being best for the public.”

I cannot disagree more.

First of all, the Great Barrington Declaration did not propose to halt covid-mitigation efforts in order to ‘dither’ over “fine points of science.” Instead, by proposing to reduce covid fatalities by using Focused Protection rather than lockdowns, the GBD constructively challenged the very foundation of the chief policy used to combat covid.

Second and more importantly, because emergencies fuel panic and incite rushes to judgment, an emergency is emphatically not an occasion to cut off dissenting voices and silence scientific debate. I understand that what I say here perhaps contradicts conventional wisdom. But I stand by my position. No emotion does more than fear to obstruct our rational faculties and to make us prone to follow the advice of quacks. And so at no time are we humans in greater need of hearing dissenting voices than when we are in the throes of fear – as humanity certainly was in October 2020, when the GBD was issued.

The openness of debate necessary to nurture reason and enlightenment is not a luxury to be enjoyed only when seas are calm. It is a tool indispensable for navigating through the most violent of storms. But Drs. Collins and Fauci arrogantly sought during a storm to toss this tool overboard. For this offense alone they should earn history’s ire.

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 page 116 of Thomas Sowell’s excellent 1984 book, Civil Rights: Rhetoric or Reality? (original emphasis; footnote deleted):

To say that some employers are mistaken in their criteria [of which workers to employ] is to say that other employers have special profit opportunities by hiring those workers passed over – and in a competitive market, that means that mistakes are likely to be corrected. It does not mean, however, that every difference in “representation” is a mistake, or that race, sex, or other group designations were used as criteria. Third-generation Mexican Americans earn 20 percent higher incomes than first-generation Mexican Americans of the same age, though it is doubtful if most employers seek the genealogical information necessary to make such a distinction.

Budgetary Rules and Norms Matter

(Don Boudreaux)

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Matthew Lau and I each contributed an original essay to a Fraser Institute project on deficit spending.

Here’s a direct link to Matthew’s essay, and here’s a direct link to my essay.

And here’s a slice from my essay:

Most of the debate surrounding Keynesian economics focuses on technical or theoretical questions. For example: How sticky are wages? Does government spending crowd out private spending? Is there really a tradeoff between inflation and unemployment?

But in their 1977 book, [James] Buchanan and [Richard] Wagner took a different tack. They argued that even if Keynesian theory is correct, the guidance that it offers for public policy is politically naïve. While politicians will—as Keynesianism counsels—eagerly borrow and spend during periods of unemployment, politicians will stubbornly not follow Keynesian policy prescriptions during times of full employment or inflation. During times that call for tight fiscal policy, no less than during times of unemployment, politicians will engage in debt-financed spending. The reason is that spending more today without simultaneously raising taxes is nearly always a good strategy for winning votes, for it allows citizen-taxpayers today to consume government programs today that will be paid for by future generations. As Buchanan and Wagner summarize, “the Keynesian theory of economic policy produces inherent biases when applied within the institutions of political democracy” (1977: Preface).

Buchanan’s and Wagner’s criticism of Keynes went still further. Keynes and his disciples, argued Buchanan and Wagner, undermined the moral aversion to debt-financed spending not only by actively encouraging such spending whenever a case can be made that aggregate demand is too low, but Keynesians also rejected the long-standing view of economists that debt-financed spending is paid for by future generations. Keynesians rejected this view by insisting that government debt that is “owed to ourselves” is no burden on future generations.

The Keynesian argument regarding debt that “we owe to ourselves” is that the losses to the citizen-taxpayers who must pay the bondholders are offset by the gains received by the bondholding citizens. Voila! Debt creates no net burden on future generations! But this argument, whatever its other flaws, ignores the fact that debt financing nevertheless allows some people (namely, today’s citizen-taxpayers) to spend money belonging to other people (namely, tomorrow’s citizen-taxpayers). And thus debt financing encourages excessive government spending.

But no matter. Widespread acceptance of this Keynesian argument conveyed the false impression that debt financing imposes no burden on future generations. Thus today’s citizen-taxpayers are relieved of qualms they once suffered about government spending borrowed funds. The resulting explosion of government’s net indebtedness, both in Canada and in the US, was no surprise to Buchanan, but it was a source of great worry. That worry now seems justified.

TTANSTAAFL (There Truly Ain’t No Such Thing As A Free Lunch)

(Don Boudreaux)

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In my latest column for AIER, I explain that, even starting with significant unemployment, increases in employment and output resulting from discretionary fiscal and monetary policies are not costless. Here’s my conclusion:

This summary of some of the ‘costs’ of discretionary fiscal and monetary policies ignores additional concerns expressed by Austrian economists. One such additional concern is the fact that, in practice, government stimulation of aggregate demand unavoidably raises some prices and wages before it raises others. This distortion of relative prices disrupts the market’s ability to accurately inform market participants of the best uses of their resources.

A second, related additional concern is that government stimulus can suppress nominal interest rates and thereby fuel excessive investment in projects that aren’t economically sustainable.

The above considerations don’t prove that discretionary fiscal and monetary policies aren’t worth their costs. Perhaps they are, for to the extent that these policies reduce unemployment, they yield real benefits. But these benefits are not cost-free. Whether the benefits of such policies are worth their costs is a separate, empirical question. It is a question that ought to be asked and answered. Unfortunately, however, it is a question that is thoughtlessly swept and kept off the table by the careless habit of asserting that reductions in unemployment – and the resulting increases in market outputs – brought about by discretionary fiscal and monetary policies are a free lunch. After all, there’s no point in doing a cost-benefit analysis of policies that are believed to produce benefits without costs. This belief, alas, is unwarranted.

Quotation of the Day…

(Don Boudreaux)

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… is from page 1 of the 2006 Liberty Fund edition of Ludwig von Mises’s 1956 volume, The Anti-capitalistic Mentality (available free-of-charge on-line here):

On the market of a capitalistic society the common man is the sovereign consumer whose buying or abstention from buying ultimately determines what should be produced and in what quantity and quality. Those shops and plants which cater exclusively or predominantly to the wealthier citizens’ demand for refined luxuries play merely a subordinate role in the economic setting of the market economy. They never attain the size of big business. Big business always serves – directly or indirectly – the masses.

It is this ascension of the multitude in which the radical social change brought about by the “Industrial Revolution” consists. Those underlings who in all the preceding ages of history had formed the herds of slaves and serfs, of paupers and beggars, became the buying public, for whose favor the businessmen canvass. They are the customers who are “always right,” the patrons who have the power to make poor suppliers rich and rich suppliers poor.

Elizabeth Warren Encourages Resource Waste

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

You detail many problems with Elizabeth Warren’s economically illiterate effort to fight inflation with price controls (“The Senators from Venezuela,” May 17). Here’s one more: By penalizing price increases that firms cannot prove are the result of corresponding cost increases, Warren’s scheme would block the market’s ability to pass along to producers and consumers newly discovered information about forthcoming reductions in supplies.

The moment, say, a hurricane begins to threaten to damage oil-refining capacity, economic efficiency requires that all gasoline – including that which is already in retailers’ tanks – be economized with even greater care than would be appropriate were there no hurricane. In other words, the moment the storm begins to threaten refining capacity, the gasoline in retailers’ tanks becomes more scarce and, hence, more valuable. Retailers should raise prices immediately in order to incite motorists to use gasoline more sparingly, and to incite producers to take out-of-the-ordinary steps to mitigate the anticipated supply reduction.

By preventing prices today from signaling tomorrow’s reduced supplies of goods and resources, Sen. Warren’s legislation would encourage wasteful consumption and discourage beneficial production.

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