Russell Roberts's Blog, page 1438

Quotation of the Day…

… is from page 71 of Richard Epstein's incisive 2003 book Skepticism and Freedom: A Modern Case for Classical Liberalism:

Reformist zeal is often a thin cover for partisan legislation.

(BTW, I reviewed this book in the Spring 2004 issue of Regulation.)

Otteson at a bargain price

This coming Monday's EconTalk is a conversation with James Otteson talking about Adam Smith. His superb book, Adam Smith's Marketplace of Life explores how the author of The Wealth of Nations (which focuses on self-interest) could also write The Theory of Moral Sentiments (which focuses on virtue and benevolence). This is one of the main topics of the podcast. Amazon is currently selling the paperback for a mere $7.27.

On C-Span this Sunday

John Papola and I are scheduled to be on C-Span THIS Sunday, the 26th at 8 pm ET (and again at 11 pm), for an hour with Brian Lamb on the program Q and A. We will be talking about the Keynes-Hayek rap videos. John does a spectacular job. It will also air on C-Span Radio.

The Clinton Years

Steve Henke on the implications of the Clinton years for Keynesianism (HT: Tim Townsend):

Nothing contradicts the fiscalists' dogma more conclusively than former President Clinton's massive fiscal squeeze. When President Clinton took office in 1993, government expenditures were 22.1% of GDP, and when he departed in 2000, the federal government's share of the economy had been squeezed to a low of 18.2%. . . . And that's not all. During the final three years of the former President's second term, the federal government was generating fiscal surpluses. President Clinton was even confident enough to boldly claim in his January 1996 State of the Union address that "the era of big government is over."

President Clinton's squeeze didn't throw the economy into a slump, as Keynesianism would imply. No. President Clinton's Victorian fiscal virtues generated a significant confidence shock, and the economy boomed.

My only disagreement is with the first line. I think the success of the post-WWII economy when government spending collapsed and the Keynesians predicted disaster is more conclusive. But that's a nit-pick.

Quotation of the Day…

… is from Methinks1776 (commenting on this post):

The problem is that some women would like to force the culture to change to suit their whims rather than change themselves to fit the existing culture. The existing culture results from the demands of the business. Changing it would mean the business doesn't work. I'm not a fan of breaking things that work just fine to suit the whims of people who don't think that personal preferences require personal sacrifice.

Ludwig Lachmann on Income 'Inequality'

At lunch yesterday, Tom Palmer mentioned to me a 1956 essay by the late Ludwig Lachmann entitled "The Market Economy and the Distribution of Wealth."  It's in a collection of Lachmann's essays, edited by Walter Grinder, that I've owned now for more than 30 years and read cover-to-cover long ago – but, I confess, I had no recollection of the essay when Tom mentioned it to me yesterday (and none when I re-read it just now).

But, oh my, what a splendid piece of analysis!  Here again is a link to it, with my strong encouragement that you read it carefully.  It's quite short, yet original and deeply profound.

In this essay Lachmann argues that the market is constantly redistributing wealth far more productively and fairly than any government efforts on this front.  But that's not the really profound part.

What's most profound is Lachmann's clear and compelling explanation of just why it's the case that wealth in a market economy has constantly to be created and re-created; that it's never fixed – never an inexhaustible fund that pays out goodies to lucky passive owners.

I'll perhaps write more about Lachmann's 1956 essay later; for now I want to further reflect on it, digest it more completely, and share it with you.

Some Links

Bryan Caplan has been most appropriately and eloquently singing the praises of Jose Antonio Vargas, an undocumented immigrant to America.  (And I love Bryan's apt term "meritocracy without borders.")  (I add also that Bryan and I are both undocumented immigrants; neither Bryan nor I personally received prior official approval from the government of the state of Virginia to move here – me from Louisiana via New York, Bryan from California via New Jersey.)

George Selgin ponders the advantages and disadvantages of formal (here meaning, mathematical) modeling in economics.  Here's a key paragraph:

The point is that both mathematical economics and the verbal kind have their place; neither is intrinsically better than the other; and each can serve as a useful test of the other. A formal model can reveal deficiencies or omissions in a verbal argument; but a few well-chosen words are just as capable of exposing an absurd argument or false assumption lurking in some seemingly innocent equation. The claim that "it takes a model to beat a model" would be just plain goofy were it not so effectively employed by mathematical economists anxious to insulate their work from criticisms by persons who know less math—but perhaps more economics—than they do.

Division of Labour's Art Carden reviews Nelson Lichtenstein's book on Wal-Mart.

Lots of excellent stuff in the Summer 2011 issue of PERC Reports.

Papering over what Arnold Kling might call patterns of unsustainable specialization and trade is not good policy – a truth that Robert Lenzner reminds us that Hayek pointed out.  (HT Matt Cheney)

My Canadian friend Gerry Nicholls has a great new website: FreedomForum.

Here's Independent Institute President David Theroux on Nicholas Kristof's infatuation with organizing society much as the military is organized.

My GMU colleague (over in the School of Public Policy) Jack High reflects on the role that the rise of big business in late 19th- and early 20th-century America played in the development of economic theory.

Smitten with Monopoly Privileges

Here's another letter to the Washington Post:

Applauding the NLRB's attempt to stop Boeing from buying lower-priced labor in South Carolina, Kate Bronfenbrenner writes that "If the NLRB did not take on such cases, it would cede to employers unilateral control over a large swath of the U.S. workplace" ("A good case against Boeing," June 23).

Craziness.

Does the absence of a government agency empowered to stop grocery shoppers from buying lower-priced groceries at competing supermarkets cede to grocery shoppers unilateral control over a large swath of U.S. supermarkets?  Of course not.

In a dynamic market with tens of thousands of employers competing for labor, the notion that even a large employer such as Boeing has "unilateral control" over the labor market unless reined in by government bureaucrats is ridiculous.

Sincerely,

Donald J. Boudreaux

'Progressives' Should Cheer

Here's a letter to the Washington Post:

Re Kate Bronfenbrenner's claim that Boeing's plan to build some jetliners in South Carolina violates federal regulations ("A good case against Boeing," June 23): whatever is Boeing's motivation for expanding its operations in lower-wage South Carolina rather than in higher-wage Washington state, its expansion in South Carolina would modify a trend that you frequently insist is unraveling America's social fabric – namely, growing income 'inequality.'

By increasing the demand for lower-wage non-unionized workers while decreasing the demand for higher-wage unionized workers, the difference between the annual incomes of each of these groups of workers shrinks.  Incomes in America thereby become less 'unequal.'

As if led by an invisible hand, Boeing is helping to reduce income 'inequality.'

Sincerely,

Donald J. Boudreaux

Quotation of the Day…

… is from page 107 of Jacob Viner, Studies in the Theory of International Trade (1937):

A constant note in the writings of the merchants [in early- and mid-18th-century Britain] was the insistence upon the usefulness to the community of trade and the dignity and social value of the trader, and in the eighteenth century it appears to have become common for others than the traders themselves to accept them at their own valuation.

Here we have more evidence for Deirdre McCloskey's thesis of the "bourgeois revaluation" as explained in her 2010 book Bourgeois Dignity.