Russell Roberts's Blog, page 1449

The Fight of the Century is two weeks old

The Fight of the Century is two weeks old. It has been viewed about 640,000 times. Thanks for watching and please continue to share it widely. Some people have asked how it is doing relative to Fear the Boom and Bust. I'll have a reliable take on that when we hit week three.

More Pontificating, Less Producing – That's the Power of DC

Here's a letter to the Washington Post:

Andy Shallal insists that the opening of Wal-Mart stores in the District would "water down D.C.'s character" (Letters, May 11).  He's correct – but not for reasons he understands.

While Mr. Shallal agrees that "our most vulnerable neighborhoods, where the Wal-Mart stores are planned, are desperately underserved," his recipe for addressing this problem is (1) call a company that consistently serves consumers well a "bully"; (2) demand that consumers not be permitted to have such a company operate in their neighborhoods; and (3) offer, as an alternative, only a parade of empty if hip gobbledygook ("The solution is multi-tiered and drawn from a sustainable economy: innovative businesses, better tax incentives, improved infrastructure and a more prepared workforce.")

So, yes, Wal-Mart's operation in D.C. would indeed "water down" that city's characteristic tic of allowing the abstract fancies of economically illiterate elites to trump both the actual entrepreneurial doings of businesses seeking to serve consumers and the wishes of those consumers themselves.

Sincerely,

Donald J. Boudreaux

Open Letter to Mark Plotkin Regarding Professor Cornpone

Mr. Mark Plotkin, Political Analyst

WTOP Radio

Washington, DC

Dear Mr. Plotkin:

Your commentary on WTOP is always enjoyable.  But I question your claim that Newt Gingrich brings "cerebral" heft to the field of GOP presidential candidates.

While it's true that everything is relative – compared to Donald Trump, a buzzing gnat sounds like Suetonius – Newt Gingrich's alleged shining intellect seems to be merely a mirage conjured by Gingrich's acting skills.

My sense of Gingrich is the same as H.L. Mencken's sense of a previously famous "cerebral" politician: Woodrow Wilson.  Mencken criticized Wilson's 1913 to 1921 run in the nation's premier political theater for "its ideational hollowness, its ludicrous strutting and bombast, its heavy dependence upon greasy and meaningless words, its frequent descents to mere sound and fury, signifying nothing….  Wilson was their [the pundits who admired him] superior in their own special field – that he accomplished with a great deal more skill than they did themselves the great task of reducing all the difficulties of the hour to a few sonorous and unintelligible phrases, often with theological overtones – that he knew better than they did how to arrest and enchant the boobery with words that were simply words, and nothing else."*

Perhaps you'll reply that Mencken's description of Wilson applies to 99.5573 percent of all successful politicians.  And I would agree.  But I would not include Gingrich in the 0.4427 percent of politicians whose clarity and honesty protect them from being so described.

Sincerely,

Donald J. Boudreaux

* H.L. Mencken, "The Archangel Woodrow," reprinted in The Vintage Mencken, Alistair Cooke, ed. (Vintage, 1955), pp. 117-119.

Imported from Bastiatland

Here's a letter to the Washington Times:

Robert Lighthizer praises Donald Trump's call to "get tough on China" ("Donald Trump is no liberal on trade," May 10).  Here's the key paragraph:

"On a purely intellectual level, how does allowing China to constantly rig trade in its favor advance the core conservative goal of making markets more efficient? Markets do not run better when manufacturing shifts to China largely because of the actions of its government. Nor do they become more efficient when Chinese companies are given special privileges in global markets, while American companies must struggle to compete with unfairly traded goods."

Inspired by the 19th-century French economist Frederic Bastiat, I reword Mr. Lighthizer's paragraph just a bit:

"On a purely intellectual level, how does allowing God to constantly rig trade in the sun's favor – sending us lots of valuable energy, light, and warmth while unfairly refusing to purchase a single earth-made good in return! – advance the core conservative goal of making markets more efficient?  Markets do not run better when energy production is outsourced to celestial bodies largely because of the actions of God.  Nor do they become more efficient when the sun enjoys special, God-created privileges in the solar-system's markets, while American suppliers of electricity, fuel oil, light bulbs, and overcoats must struggle to compete with unfairly traded energy, light, and heat from the sun."

Until the likes of Mr. Lighthizer plausibly explains why foreign-government-subsidized exports of valuable goods and services from places such as China harm Americans while God-subsidized exports of valuable energy and light from places such as the sun do not, his and other protectionists' objections to the supposed scourge of low-priced imports should be taken for what they are: economically uninformed screeds that give intellectual cover to domestic producers seeking nothing more noble than protection from competition.

Sincerely,

Donald J. Boudreaux

The psychology of discarded statesmen

Evidently Newt Gingrich is running for President. I am reminded of what Adam Smith said about ex-politicians and celebrities in The Theory of Moral Sentiments:

To those who have been accustomed to the possession, or even to the hope of public admiration, all other pleasures sicken and decay. Of all the discarded statesmen who for their own ease have studied to get the better of ambition, and to despise those honours which they could no longer arrive at, how few have been able to succeed? The greater part have spent their time in the most listless and insipid indolence, chagrined at the thoughts of their own insignificancy, incapable of being interested i n the occupations of private life, without enjoyment, except when they talked of their former greatness, and without satisfaction, except when they were employed in some vain project to recover it. Are you in earnest resolved never to barter your liberty for the lordly servitude of a court, but to live free, fearless, and independent? There seems to be one way to continue in that virtuous resolution; and perhaps but one. Never enter the place from whence so few have been able to return; never come within the circle of ambition; nor ever bring yourself into comparison with those masters of the earth who have already engrossed the attention of half mankind before you.

600,000 Views for Fight of the Century

The Fight of the Century has been out 11 days and has 600,000+ views. Thanks for watching and please continue to share it.

The Hayek Club

In Fight of the Century, Hayek sings:

The economy's not a class you can master in college

To think otherwise is the pretense of knowledge

Here is Greg Mankiw in the New York Times:

AFTER more than a quarter-century as a professional economist, I have a confession to make: There is a lot I don't know about the economy.

Greg is the founding member of the Pigou Club. I am happy to see that he has also joined the Hayek Club.

 

Hayek on Fukuyama

Ira Stoll has uncovered a letter from the man himself. Beautifully done.

Easterly on Fukuyama

Bill Easterly does a nice job on Fukuyama's claim that Hayek's confident distrust of government made him unHayekian. Easterly sums up his argument this way:

Hayek's skepticism about government was NOT based on his certainty, as Fukuyama would have it, but on his awareness of his ignorance. (and everyone else's)

Don's reactions to Fukuyama are here and here.

Here is Fukuyama's concluding paragraph:

In the end, there is a deep contradiction in Hayek's thought. His great insight is that individual human beings muddle along, making progress by planning, experimenting, trying, failing and trying again. They never have as much clarity about the future as they think they do. But Hayek somehow knows with great certainty that when governments, as opposed to individuals, engage in a similar process of innovation and discovery, they will fail. He insists that the dividing line between state and society must be drawn according to a strict abstract principle rather than through empirical adaptation. In so doing, he proves himself to be far more of a hubristic Cartesian than a true Hayekian.

My take on this is that trial and error is indeed a great way to make progress as long as there is a mechanism for generating the trials and a mechanism for choosing which are the errors, rejecting those, and moving forward. What is the mechanism for rejecting errors in the political system? The Edsel is dead. New Coke, dead. Corfam shoes, pretty much dead. Big SUVs, pretty dead for a while until gas prices go south. Phones the size of WWII walkie-talkies, dead. Big mainframes the size of a warehouse, dead. Shirts that need ironing, on their way out. They survive because they're cheap. That's fine. Gives people a choice. The market culls losers and shunts them off to the side or keeps inferior products around if they're cheap enough to make someone happy.

How good is the political system at culling losers? Not great. Not horrible–really really bad ideas do get shunted to the side–communism isn't real popular right now. Price controls on gasoline aren't on the table. That's pretty good. But we do have price controls at the state level for items after a natural disaster. We do have price controls rampant throughout the medical system. How about ethanol? Even Al Gore thinks ethanol subsidies are a bad idea. There is talk about getting rid of them. We'll see. Or sugar quotas. Still here. They benefit a few American families and punish the rest of us.

I think it's Hayekian to be skeptical of systems where feedback loops don't work very well. "More from the bottom up or more top down?" More bottom up, please.

Unwittingly Enabling Crony Capitalism

Here's a letter to the editor of the Washington Post:

You're right that high-school graduates should know more economics ("Va. high school grads should be economically literate," May 9).  But so, too, should newspaper columnists such as E.J. Dionne who today writes "Far too little attention has been paid to the success of the government's rescue of the Detroit-based auto companies, and almost no attention has been paid to how completely and utterly wrong bailout opponents were when they insisted it was doomed to failure" ("Rescuing Detroit: No news about government's good news").

Mr. Dionne misses two fundamental economic insights: first, nothing is free, and, second, that which is unseen is as real as that which even the most myopic pundits manage to spy.

Economically literate opponents of the Detroit bailout never denied that pumping hundreds of millions of taxpayer dollars into Detroit automakers would restore those companies to health.  Instead, they argued, first, that bailing out Detroit takes resources from other valuable uses.  Because he doesn't even recognize that other valuable uses were sacrificed by this bailout, Mr. Dionne offers no reason to think that the value of saving Detroit automakers exceeds the value of what was sacrificed to do so.  No legitimate declaration that the bailout is successful is possible, however, without evidence that the value of what was saved exceeds the value of what was sacrificed.

Economically literate bailout opponents argued also that it sets a bad precedent.  By signaling to big corporations that government stands ready to pay the tab for the consequences of their poor decisions, big corporations will more likely make poor decisions in the future.  It's far too early for Mr. Dionne to conclude that this prediction is mistaken.

Sincerely,

Donald J. Boudreaux

(I thank Harrison Colter for inspiring the title of this post.)