Russell Roberts's Blog, page 1453

My take on Hayek's take on the budget mess

Here.

The Fight of the Century (with Italian subtitles)

Energized by Free Trade

29 April 2011

Mr. "Mikiesmoky"

Dear Mr. "Mikiesmoky":

I don't know how I got on your e-mail list; perhaps you wish to convert me to your protectionist creed.  If so, you'll fail as long as you write things such as the following: "When a consumer, within the U.S., expends energy by purchasing a television for $1,500, about $1,000 of that energy is transferred to China.  When this energy is transferred offshore, it results in a reduction of our national energies."

Nonsense.  Imports don't 'reduce' our 'national energies' by 'transferring' them to foreigners.  Instead, imports conserve our energies and channel them into more productive uses.

Are your 'household's energies' reduced when you buy food from Safeway rather than grow food yourself?  Do such purchases 'transfer' your 'household's energies' to Safeway?  Of course not.  By importing food into your household from Safeway, you save 'energy.'  You then have more energy available to produce other things – things whose production consumes less of your 'energy' per unit produced than would the food you'd produce yourself if you foolishly stopped importing food into your household from Safeway.

So your story is backwards.  Free trade conserves our 'national energies' so that they can be used where they are most needed, namely, producing goods and services that foreigners cannot produce as inexpensively as we can.  Protectionism wastes those energies, making us poorer.

Sincerely,

Donald J. Boudreaux

Professor of Economics

George Mason University

Fairfax, VA 22030

Hayek's influence

Some commenter on my rap video with John Papola claims that policy has "followed Hayek since Reagan" meaning that since the 1980s, we've been living in Hayekian paradise. dchris1990 responds:

Really, I had no idea we eliminated the Federal Reserve, the income tax, farm subsidies, corporate subsidies and about 5000 government agencies. Government spending is up a lot since Reagan and the number of regulations and regulatory institutions are up too. Yes, those regulators we're taken over by corporate interests… which is, of course, exactly what the free market supporter expects to happen, which is exactly why we oppose them.

Neocons' Con

Here's a letter to USA Today:

Rep. Howard "Buck" McKeon (R-CA) complains that Pres. Obama wants to cut $400 billion from the Pentagon's budget over the course of 12 years; Mr. McKeon calls this sum "jaw-dropping" ("Obama cuts would gut U.S. defense," April 28).

Perhaps Rep. McKeon will jack his jaw up off the floor when he recognizes that $400 billion in cuts spread over a dozen years amounts to an average annual cut of only $33.33 billion, or 3.7 percent of the Pentagon's annual budget.

And if that fact doesn't suffice to keep Rep. McKeon's jaw from dragging, perhaps this fact will: Pres. Obama's proposed "cut" amounts to being a proposal only to prevent the Pentagon from getting automatic increases in its baseline budget (although it will still get increases to adjust for inflation).  As Reason.com's Shikha Dalmia says, "In a sane world this would be considered lame, not radical, especially since the Pentagon's core budget has doubled since 9/11."

But politics – as practiced by conservatives no less than by "liberals" – is fundamentally insane.

Sincerely,

Donald J. Boudreaux

The Con of Neocons

Here's a letter to USA Today:

Rep. Howard "Buck" McKeon (R-CA) complains that Pres. Obama wants to cut $400 billion from the Pentagon's budget over the course of 12 years; Mr. McKeon calls this sum "jaw-dropping" ("Obama cuts would gut U.S. defense," April 28).

Perhaps Rep. McKeon will jack his jaw up off the floor when he recognizes that $400 billion in cuts spread over a dozen years amounts to an average annual cut of only $33.33 billion, or 3.7 percent of the Pentagon's budget.

And if that fact doesn't suffice to keep Rep. McKeon's jaw from dragging, perhaps this fact will: Pres. Obama's proposed "cut" amounts to being a proposal only to prevent the Pentagon from getting automatic increases in its baseline budget (although it will still get increases to adjust for inflation).  As Reason.com's Shikha Dalmia says, "In a sane world this would be considered lame, not radical, especially since the Pentagon's core budget has doubled since 9/11."

But politics – as practiced by conservatives no less than by "liberals" – is fundamentally insane.

Sincerely,

Donald J. Boudreaux

The Fight of the Century

My second rap video with John Papola is now live. Please spread it wide and far.

I Got an E-mail Today from Ritz-Carlton….

Dear Ritz-Carlton:

Thanks for your e-mail celebrating your and your employees' participation in "Give Back Getaways" – activities in which you and your employees (along with some of your customers) "give back to the community."

Have you taken something that doesn't belong to you?  If so, by all means give it back!  (But please don't applaud yourself for doing so.)  If, though, you've not taken anything that doesn't belong to you, you possess nothing that you can give back.

Being a profitable corporation, you certainly possess something that you can give; and I genuinely applaud the generosity that prompts you, your employees, and your customers to give.  (I do hope, however, that you direct your giving according to reasonable criteria rather than according to the hot winds blown by political correctness.)

Please, though, unless your profits are the product of dishonest deals or theft, please drop the rhetoric of "giving back."  This sort of talk implies that you possess something that isn't rightfully yours.  It fuels the common misapprehension that corporate profits are either ill-gotten gains or, at best, wealth subtracted from that of other persons.

Because the vast majority of market exchanges are positive-sum deals, your success at business means that you create wealth.  You value the $$$ you get for renting a hotel room by more than you value keeping that room vacant, and your guests value the opportunity to spend a few nights in that room more than they value whatever else they might have bought with the $$$ they voluntarily paid to you for the room.  You gain ("profit").  Your guests gain.  No one loses.  Wealth is created.

By all means, give if your shareholders approve.  But stop calling it "giving back."  Your profits aren't pirated booty; they're legitimate earnings.

Sincerely,

Donald J. Boudreaux

Judged by His Own Criteria

Here's a letter to the Washington Post:

Stephen Stromberg is correct that the recent run-up in gasoline prices isn't the fault of President Obama ("President Obama says that gas prices reflect supply and demand," April 27).  But Mr. Stromberg is wrong to pity Mr. Obama for nevertheless being blamed by the public for their pain at the pumps.

Mr. Obama, like so many elected officials, won office by deluding voters with a grand image of a government that, in the right hands, can fix nearly every problem that troubles the good people of this republic – a government that can fix all that is broken, can cure all social ills (and many physical ones, too), and can transform this vale of trade-offs, scarcities, chance, and imperfections into a paradise in which the only suffering is that of Evil Villains finally brought to justice for the depredations that they've for so long inflicted upon the pure, noble, all-deserving We the People.

Because Mr. Obama assured us that with him at the helm Uncle Sam's powers to "change" society would be vast and amazing, he deserves no pity for being held accountable for his inability to perform the marvels that he promised to perform.

Sincerely,

Donald J. Boudreaux

BTW, while I disapprove of existing government restrictions on drilling, and while I recognize that Obama has in place – and threatens to put into place – a plethora of policies that result in gasoline prices higher than these prices would otherwise be, I sincerely do not believe that much, if any, of the recent run-up in gasoline prices is his fault.

The Great Fact

My latest column in the Pittsburgh Tribune-Review continues my discussion of Deirdre McCloskey's compelling and (as many of my students might now say) 'majorly' important book Bourgeois Dignity.  Here are the first several paragraphs:

Economist and historian Deirdre McCloskey calls it "the Great Fact" — the humongous increase in humans' standard of living that began about 200 years ago.

And what a Great Fact it is! It's great not only in the sense of being amazingly, resplendently good for ordinary men and women, but also in the sense of being the single most surprising and astounding change that we humans have experienced in our 70,000 or so years on this planet.

For 99.7 percent of the time that we bipedal, scantily haired, language-blessed apes have trod this globe, we did so under material conditions that you and I from 2011 would find utterly intolerable. As another economist, Todd Buchholz, correctly noted, "For most of man's life on earth, he has lived no better on two legs than he had on four."

Then all of a sudden, starting a mere 200 or so years ago in northwestern Europe, boom! Material riches start pouring forth not only into the castles and manor houses of royalty and the nobility, but into the humble homes of peasants, of hoi polloi, of human creatures who, generation after generation — tracing back all the way to their single-celled ancestors — lived lives poor, nasty, brutish and short.

What did our great-great-great-great-grandparents do to suddenly deserve access to new and remarkable goods such as underwear made of tightly woven cloth that could be vigorously washed without unraveling? What did our great-grandparents do to deserve access to "Tin Lizzy" Fords?

What did our grandparents do to deserve access to antibiotics and televisions? What did our parents do to win access to air conditioning and inexpensive jet travel? What did we do to deserve access to cellular telephony, GPS driving directions and supermarkets that routinely stock 50,000 different items?