Russell Roberts's Blog, page 1445

Hands Off!

.  The post is entitled "Keeping government hands off their benefits."

The head aches, spins, and becomes dizzy at the confusion evidenced by this title – a title that, alas, seems to describe reasonably accurately the attitude of Medicare advocates: 'Don't mess with my Medicare!'

But I can't help but ask: how can government possibly keep its hands off of Americans' Medicare benefits given that it's the very hands of government – and only those hands – that create Medicare benefits to begin with?  The process by which $$ is taken from Mr. and Ms. Young and given as Medicare benefits to Mr. and Ms. Elder necessarily involves the hands of government.  If government kept its hands off of Medicare benefits no such benefits would exist in the first place.

So I say, indeed – government hands off of Medicare!

Some Links

The Manhattan Institute's Heather Mac Donald identifies some inconsistencies among some of today's feminists.

New York Post columnist Kyle Smith writes wisely and entertainingly on politically correct vs. politically incorrect doomsaying. (Both varieties are specious.)

Speaking of predicting the future, in Salem, MA, it's illegal to work as a practicing psychic without a government-issued license.  (HT Roger Meiners)

Doug Bandow points out that the laws of economics apply to medical care.

Bryan Caplan poses some penetrating questions to supporters of a legislated minimum-wage.

And speaking of posing penetrating questions, Mark Perry has two of his own.

Finally, Frank Stephenson corrects an historical myth whose persistence can be explained only by a willful ignorance of politically inconvenient facts.

End Trade Adjustment Assistance

Here's a letter to the Wall Street Journal:

The Trade Adjustment Assistance program rests on the principle that consumers whose demands for American-made products help to create jobs for American workers should pay to train these workers for other jobs if these consumers ever shift their demands from American to foreign suppliers ("Dispute Threatens Key Deals on Trade," May 28).

The merits of this program are doubtful.  If the value to workers of this fringe benefit (for that's just what it is) were greater than its cost, it would be supplied privately on the market.  Enough employers would respond to worker demand for a 'retraining' fringe by offering, along with wages and other fringes, a promise to pay to retrain workers who lose their jobs to any import-related decline in demand for these firms' outputs.

Of course, being costly like all other fringe benefits, provision of this fringe benefits would result in lower wages and lower values of other fringe benefits paid to workers.  Also like other fringe benefits, though, if the value to employees of this benefit is greater than its cost, employers competing for workers would be obliged to offer it.

But we see very few employers offering worker-retraining fringes – strong evidence that the value of these benefits to workers falls short of the cost of supplying them.  As such, it is unjust to force taxpayers to pay for a benefit for these workers that these workers themselves, through their own actions on the market, reveal is not worth its cost.

Sincerely,

Donald J. Boudreaux

Some Links

Bloomberg profiles Tyler Cowen.

Here's Mark Perry on "anti-dumping" duties imposed by Uncle Sam on Chinese-made wooden furniture.  And stealing a page from Mark's briliant play book, I do a bit of editing on the linked report from the Washington Post:

"To help their American customers avoid a 2005 U.S. tariff on American purchases of Chinese-made wooden bedroom furniture, Chinese furniture companies moved operations to other Asian countries, thwarting U.S. efforts to curb "dumping," American consumers' ability to save money by buying Chinese-made furniture."

Writing at Forbes, Cato Institute president Ed Crane powerfully explains the perniciousness of the notion that we Americans "are all in this together." Here are Ed's concluding paragraphs:

It has been duly noted by scholars that the two great totalitarian philosophies of the 20th century, communism and fascism, had similar methodologies and similar goals, so to speak. Certainly, denigrating the importance of the individual and subsuming his or her personal interests to the greater goals of the national movement were integral to both those horrific philosophies. Yet this underlying anti-individualist, collectivist theme continues — not just on the left — in today's political environment.

Neoconservative superstar David Brooks wrote in the New York Times just this past March, "Citizenship, after all, is built on an awareness that we are not all that special but are, instead, enmeshed in a common enterprise. Our lives are given meaning by the service we supply to the nation. I wonder if Americans are unwilling to support the sacrifices that will be required to avert fiscal catastrophe in part because they are less conscious of themselves as components of a national project."

And I wonder if it has ever dawned on Mr. Brooks that the "fiscal catastrophe" we Americans face is a direct result of national projects called Social Security, Medicare, and Medicaid. Oh yes, and the national project to make every American a homeowner. Not to put too fine a point on it, but there would be no $20 trillion unfunded liability in Social Security had we allowed individual accounts. There would be huge surpluses. And limiting house purchases to individuals who could afford them would have avoided the multi-trillion-dollar disaster that national project created.

It's enough to make you want to go out and see Atlas Shrugged. Again.

Speaking of Cato, I'm eager to attend this June 15th debate on stopping government from regulating what goes into our mouths (just as we stop government from regulating what comes out of our mouths; apologies to the ghost of Milton Friedman).

The great Richard Epstein on the delusion of "fair trade."

The Problem Began When the Invention of the Spear Reduced the Price of Food

Here's a letter to the programming director of Marketplace Morning Report:

Speaking on this morning's program about prices in Japan, the BBC's Roland Buerk opined that "it really becomes a habit for people. You know, companies start to pander to people's needs to pay less.  McDonald's for example introduced a 100 yen – just over $1 – menus a few years ago.  There's a battle between companies to make jeans for the cheapest possible price.  You can buy a pair of jeans for about $5 now in Japan.  Once you're in that downward spiral, it's very hard to pull out of it."

Huh??

Mr. Buerk's knee-jerk hostility to deflation leads him to lament the fundamental source of economic growth and widespread prosperity: efficiencies and innovations driven by competition.

Deflation is harmful if caused by a contracting money supply.*  But when prices fall because competition drives firms to operate more efficiently and pass along these efficiencies to consumers in the form of lower prices, economies grow.  Resources once needed to feed and clothe people become available to produce other goods and services.  Consumers once unable to afford other goods and services can now do so.  And so it goes, and grows, as competition incessantly prods producers to "pander" (as Mr. Buerk sneeringly refers to this engine of economic growth) to consumers.

Does Mr. Buerk believe that Japan's economy will recover faster and thrive better if producers stop such "pandering"?  Do competition-sparked efficiencies really cause a "downward spiral" from which the Japanese should seek to escape?

Sincerely,

Donald J. Boudreaux

* Yes, yes – I'm aware that demand to hold larger money balances is also harmful in a world with downwardly sticky prices – but there's only so much space in a letter-to-the-editor (and the prices that this Mr Buerk points to clearly aren't sticky downward!).

"What's Chinese for Chutzpah?"

This instance of inconsistency by a vocal protectionist deserves singular mention.

The Only People Wal-Mart Should Have to Court are Consumers

Today's Washington Post offers a thoroughly sensible editorial on why the current city administration in Washington, DC., would be wrong to require (as it seems to be threatening to do) Wal-Mart to build a store in location X in order for the city to give that retailer permission to build in locations A, B, C, & D. But I was baffled by this passage in the editorial:

There's no question that a fair amount of horse-trading goes on when companies enter — or are courted by — a market. But threatening to interfere with a governmental process is nothing more than a shakedown.

More-accurate wording would be:

There's no question that a fair amount of horse-trading goes on when companies wishing to set up shop seek the permission of — or are courted by — a government. But threatening to interfere with a market process is nothing more than a shakedown.

Cowboys and Indians

Tales told about good guys battling bad guys.

The Guardian looks at the rap videos

The Guardian's podcast talks to me about the Keynes/Hayek rap videos. My part starts at the 24:53 mark.

Clearly Some People DO Believe that State and Society are Identical

Here's a letter to USA Today:

Sally Kohn advises Americans to stop worrying about Uncle Sam's gargantuan debt ("Don't believe the hype about U.S. debt," May 25).  But her explanation for why this debt is benign – namely, that successful private businesses often have high debt-to-income ratios – is deeply flawed.

First, while private firms do regularly borrow to finance productivity-enhancing investments, the same isn't true for government borrowing.  Owners of private firms must repay their debts with their own money.  Private business owners, therefore, have much stronger incentives to borrow and invest wisely than do politicians who repay whatever debts they incur by taxing other people.

Second, Ms. Kohn writes that "The United States generates approximately $14.5 trillion in GDP each year and carries, currently, $14.3 trillion in debt.  That represents a debt-to-income ratio of roughly 1-to-1."  Wrong.  U.S. GDP is emphatically not Uncle Sam's income.

U.S. GDP is income earned by, and belonging to, Americans.  To get his income, Uncle Sam annually taxes away some of this privately earned income.  Uncle Sam's income is this annual tax revenue – now about $2.2 trillion – and ONLY this tax revenue.

Even if, contrary to fact, Uncle Sam were powerful enough to confiscate all $14.5 trillion of Americans' incomes, it's as illegitimate for Ms. Kohn to count Americans' entire incomes as income belonging to Uncle Sam as it would be for me to count my neighbors' entire incomes as income belonging to me simply because I might be powerful enough to confiscate these incomes in full.

Sincerely,

Donald J. Boudreaux

I didn't have room to fit the following question into the letter: If every cent of U.S. GDP is Uncle Sam's income, what does that fact imply about the solvency of state and local governments throughout America?  (There are tons of other such questions to be asked about this absurd proposition of Ms. Kohn.)