Russell Roberts's Blog, page 1428

The aftermath

One of the complaints this morning after the debt deal is that we won't be able to "stimulate" the economy any more. Yet, there is no evidence that the stimulus worked. When I tweeted something similar this morning (follow me as EconTalk on Twitter here, Cafe Hayek tweets are here), someone accused me of confirmation bias, noting that the CBO had found that the stimulus created 3 million jobs. Actually, the CBO has never estimated the job effects of the stimulus other than to assume a particular relationship between government spending and job creation. That is simply assuming the results that you are trying to discover. More here if you missed it the first time.

By the way, I was careful to say that there is no evidence that the stimulus worked. We don't have very good evidence that it didn't work. But we have no evidence that it did.

A Disgraceful Instance of Orwellian Newspeak

Here's a letter to the Wall Street Journal:

F.D.A. Commissioner Margaret Hamburg writes that "Despite common criticisms that our agency impedes innovation by being slow and bureaucratic, we actually play a proactive role in promoting innovation by ushering new products through the approval process and to market – while making sure they meet the standards of safety and effectiveness that have served the American people well" ("America's Innovation Agency: The FDA," August 1).

Orwell would be impressed.

For an F.D.A. commissioner to brag about that agency's "proactive role" in "ushering new products through the approval process and to market" is like an armed troll who, having seized a bridge in order to extract tribute from all who seek to cross, brags that he plays a "proactive role" in seeing people safely to the other side of the river.

And just as that troll has no business second-guessing the reasons that inspire people to seek to cross the bridge, the F.D.A. has no business second-guessing the risks that each American chooses to bear when deciding which foods and medicines to ingest.

Sincerely,
Donald J. Boudreaux

Some Links

That vast and creative region of reality, Technologia, continues to export to us its products – and, in doing so, 'destroys' jobs.  (HT Mark Perry)  (See also this little monument to human ingenuity.)

While we're tapping in to Mark Perry's contributions to our knowledge and understanding, here's Mark's explanation for why Americans' fear of a U.S. trade deficit is misplaced.

Larry Ribstein understands the dangers of occupational licensing.

Writing in yesterday's Los Angeles Times, the always-astute Nicole Gelinas proposes a free-market fix for today's housing-market woes.

Here's Chicago Tribune columnist Steve Chapman on the debate over raising Uncle Sam's debt-ceiling.  And here's the take of Cato's David Boaz.

George Selgin justifiably finds unintended humor in the many barbs – some quite vicious – directed against him by "Rothbardians."

Doug Bandow calls out John McCain for the war-monger that McCain is.

And What Was It that Milton Friedman Said about Business People and the Free Market?

Here's a letter to the New York Times Book Review:

Reviewing Jeff Madrick's Age of Greed, Sebastian Mallaby reports that "In Madrick's telling, a cabal of conservatives [from the 1970s forward], driven first by greed and second by 'extreme free-market ideology,' gradually seized power" ("Why We Deregulated the Banks," July 31).

Although Mr. Mallaby ably exposes problems with Madrick's thesis, he misses its fundamental flaw – namely, the fact that adherence to free-market ideology undermines, rather than serves, the anti-social goals of greedy political insiders.  Businesspeople who successfully seek political influence nearly always demand protection from the free market.  They lobby for regulations and taxes (such as tariffs) that impose disproportionately heavy burdens upon their competitors and, hence, upon consumers.  In doing so, such greedy businesspeople follow a course unmistakably opposite the course they'd follow were they really free-market ideologues.

By failing to see that political power unleashes greed to be used to undermine rather than to protect free markets, Jeff Madrick is a useful, if unwitting, idiot for the 'greedy' interests that he fancies himself standing in opposition to.

Sincerely,
Donald J. Boudreaux

Happy 99th Birthday, Milton Friedman

During the second semester of my freshman year of college (Spring 1977) – the semester in which I was first exposed to economics – Bill Field (then a professor of economics at my alma mater, Nicholls State University in Thibodaux, LA) recommended that I read the writings of Milton Friedman.  Of course, as an 18-year old who'd read very little of anything beyond the sports pages of the Times-Picayune (and, back then, also the sports pages of the States-Item), I'd never heard of Milton Friedman.

"Dr. Field" – as I'd called Bill for many years – loaned me his copy of Friedman's collection of Newsweek columns, An Economist's Protest.  I was blown away by the logic, the sensibleness, and the passion channeled toward the goal of maximum human dignity.

That summer, I subscribed to Newsweek simply to get Friedman's columns (which, if I recall correctly, appeared in every third issue).  (I read Paul Samuelson's Newsweek columns, too, of course; they left me cold.)  I believe that the first column of Friedman's that I read from an actual issue of Newsweek was the one in the July 4, 1977 issue.  Its title is "Fair versus Free."  (Here's a reprint.)  It remains today just I recall it from 34 years ago: powerful and compelling.  From it I extract today's Quotation of the Day:

When "fairness" replaces "freedom," all our liberties are in danger. In Walden, Thoreau says: "If I knew for a certainty that a man was coming to my house with the conscious design of doing me good, I should run for my life." That is the way I feel when I hear my "servants" in Washington assuring me of the "fairness" of their edicts.

Quotation of the Day…

… is one that I used in this long-ago (from 3 June 2004) post here at the Cafe.  It's from page 135 of Will Durant's 1939 book The Life of Greece:

The crossroads of trade are the meeting place of ideas, the attrition ground of rival customs and beliefs; diversities beget conflict, comparison, thought; superstitions cancel one another and reason begins.

Opponents of free trade literally are unreasonable.  No matter how "progressive" they fancy themselves to be – a fancy fueled by the asinine yet apparently attractive notion that society progresses the more individuals' wills and actions are bent (with force, if necessary) to conform to the will of the state – opponents of free trade are peddlers of backwoods stupidity grounded as firmly in ignorance and inability to reason as it is in atavistic fears and superstitions still lingering from our tribal past.

The Angels Made Me Do It

Here's a letter to the Wall Street Journal:

Preferring to extract conclusions from her personal experience, San Francisco restaurateur Jennifer Piallat explicitly rejects the use of a "barrage of statistics" to analyze the consequences of legislation that mandates paid sick-leave for employees (Letters, July 30).  And in Ms. Piallat's experience, legislation mandating paid sick-leave improves firms' performances.  The anecdote she offers from her own restaurant is that, since the legislation went into effect, employees no longer report to work while sick and, hence, no longer infect fellow employees with their ailments.

I don't doubt the truth of Ms. Piallat's account.  But it begs the question: why did she not offer paid sick-leave to her employees on her own?  If paid sick-leave increases her restaurant's bottom line by, as she says, improving her staffs' performance, why did she wait to be forced by politicians to adopt that policy?

Perhaps she just didn't think of doing so, or perhaps she's a poor businesswoman.  Whatever the reason, Ms. Piallat's personal experience is hardly justification for substituting the business judgment of people who specialize in winning political office for that of people who specialize in actually running businesses in competitive markets.

Sincerely,
Donald J. Boudreaux

Doug Irwin on 19th-century Tariffs

Jason asks me by e-mail "What is the best single article you know of [to explain why] high US tariffs in the 19 century were not why the US economy grew as it did then?"

Good question – save for the fact that picking a single article is difficult.  Scholarship seldom advances both significantly and unambiguously with a single article.  Although there are exceptions in economics – Hayek's "Use of Knowledge in Society," Demsetz's "Toward a Theory of Property Rights," and John McGee's "Predatory Price Cutting: The Standard Oil (N.J.) Case" are three that leap immediately to mind – the complexity of the economy and the often-multiple plausible competing hypotheses that might explain some phenomena require, practically, that streams of research (both theoretical and empirical) be produced and absorbed before reasonably firm conclusions are reached.

With the above caveat, I'll take a shot at answering Jason's question – but with two articles rather than one; both are by Douglas Irwin:

1) "Interpreting the Tariff-Growth Correlation of the Late 19th Century"; American Economic Review (May 2002); pp. 165-169.  After presenting data from the 19th century from more than a dozen countries (including the U.S.), Doug concludes this superb – and superbly concise – paper by saying:

Rather than higher tariffs causing higher growth, the relationship could be spurious: land-abundant countries [including the U.S.] relied on customs duties to raise government revenue and also enjoyed favorable growth prospects, with little link between the two.

2) "Tariffs and Growth in Late Nineteenth Century America," World Economy (Jan. 2001), pp. 15-30.  Here's a pdf draft version

Some Links

Sunday will be the 99th anniversary of the birth of the great – the truly, deeply great and sorely missed – Milton Friedman.  Nick Gillespie and reason.tv offer this splendid tribute.

The world is getting richer.  (HT Karol)  In light of today's Quotation of the Day, I point out that I rejoice no less for the improvement in well-being enjoyed by people in, say, China, Laos, and Zambia than I do for the improvements in well-being enjoyed by people in, say, Alabama, Idaho, and Texas.

You do not want to be in a debate with my brilliant younger colleague Bryan Caplan.

Every word David Harsanyi writes is worth reading.

Here's a pdf of the late Murray Rothbard's marked-up copy of a 1975 interview with Hayek.  (HT Richard Ebeling)

Former Institute of Economic Affairs Executive Director John Blundell celebrates 20 women who loved liberty.

This new collection, edited by Mario Rizzo, looks to be filled with must-read papers.

Steven Hayward weighs in on China's alleged 'green' achievements.

Finally, Cato's Dan Griswold discovers that Ian Fletcher freely trades with the past in order to reduce toil in the present.

Default?

Here's my two-cents on the calamity du jour (namely, the possible 'failure' to raise Uncle Sam's debt ceiling).

In response, Roger Garrison sent to me the following e-mail (posted here in full with Roger's kind permission):

I enjoyed your "Capping the Debt Hyperbole."

You mention, though, that the government could "choose to default." Well, if default means that you're unable to pay, then "choosing to default" must mean that you "choose to be unable to pay." Hey, that really does sound like government-speak. But I think a more accurate and more revealing term is "renege."

Another point. Remember that the government's authority to spend rests with Congress, while the debt limit is set by Congress.  So, on the one hand (the left one), the government would allow more spending, while on the other hand (the right one), it can't exceed the debt limit.  Now, which hand do we think will win this little arm-wrestling match.

One more point. The debt limit was first set in 1917. During the 94 years since then, the limit has been raised (by the left hand) more than 100 times—more than once per year. Isn't there a close kinship, here, between debt limits and New Year's Resolutions? The main difference is that New Year's Resolutions are broken only once per year.

Only when the subject of the conversation is government do most participants in that conversation treat seriously the notion that ensuring a debtors' future solvency – and signalling to skeptical creditors that that debtor is indeed taking sensible steps to reduce its debt – requires that that debtor renege on its previous commitment to keep its borrowing from going above a certain level.

(And, btw, as Veronique de Rugy, and Richard Rahn, point out, Uncle Sam also owns lots of salable assets.)