Russell Roberts's Blog, page 1454

Mencken on 1848…. and on 2011

Here's a letter to the Washington Times:

Richard Rahn ("Risky unrealism") and Wayne Allyn Root ("The Marxist in the mirror"), each in his respective column today, tempts even the most optimistic amongst us to the precipice of pessimism.  From Mr. Obama's soak-the-rich class warfare through his demonization of speculators to his continued insistence that economic growth is best achieved when big government spends big bucks on big plans drawn up by Really Smart bigshots (such as Jeff Immelt), the president's hostility to free markets is rampant and dangerous.

What H.L. Mencken wrote about the dirigiste economic 'planning' and interventions uncorked in France in 1848 by that country's best and brightest geniuses applies to America today: "Every day they announced some new and grander scheme to bring in the millennium, and every day they abandoned some busted one.  Meanwhile, the plain people went on looking for jobs, and not finding them….  Its goat was the French taxpayer.  He had to pay, in the end, for all the crazy building of gaudy railway stations, and all that frantic dredging of rivers and digging of canals.  Starting out with the thesis that the Rotten Rich were scoundrels and ought to be squeezed, the Brain Trust proceeded easily to the thesis that any man who had any property whatsoever was a scoundrel, too, and ought to be squeezed equally.  The rich, in the main, managed to escape, but the little fellow could not get away, and squeezed he surely was."*

Plus ca change, plus c'est la meme chose.

Sincerely,

Donald J. Boudreaux

* H.L. Mencken, "New Deal No. 1," in Mencken, ed., A Mencken Chrestomathy (New York: Knopf, 1949), pp. 212-213.

Land

I'm on a listserv called "FLOWidealism," which I believe is the brainchild of my friend Michael Strong.  On the Flow listserv there happen to be a number of Georgists (although I do not count myself in those ranks; I confess that I've read very little of Henry George's work).

One of the Georgists on the Flow listserv took issue with my claim that people can produce more land.  He asked me, I believe sarcastically, if there is a "land factory" located somewhere.

Well, no, there is no physical land factory, but land can most certainly be produced.  Some of the following phenomena increase the volume of land physically, and all of the following phenomena increase the volume of land economically:

- Draining or filling-in swamps and other areas currently submerged beneath water for some or all of the year;

- Multi-storied buildings and advances in architectural design that reduce the amount of land necessary for any given number of people to work and reside; on this front, air-conditioning (by reducing the minimum necessary height of ceilings) and elevators are innovations that effectively increase the economic stock of land;

- Agricultural advances that reduce the amount of land required to produce any given amount of food;

- Economies of scale in production that reduce the amount of land required to produce any given amount of manufactured outputs;

- even teleworking and advances in shared-office-space practices, by reducing the amount of land required for office space, effectively increase the supply of land economically (if not physically).

- [other possibilities?  Please suggest some in the Comments section]

….

I don't wish to get into a tussle over semantics.  Only the first for sure in the above list, and possibly the second, increase the actual quantity of land (or real estate).  But economically the concern that I gather Georgists have about land being some 'thing' that is largely fixed in amount is mistaken.  The owner of, say, the world's greatest pineapple-growing land might today be reaping huge Ricardian rents (some would say 'monopoly profits') from owning that land and using it to grow pineapples.  But let a cost-efficient hothouse be developed in which wonderful pineapples can be grown at a cost equal to, or lower than, the cost of growing pineapples on that piece of land, and the landowner no longer has the stream of rents (or 'monopoly profits') that he once did.  The effective supply of land for growing pineapples has been increased.

There Ain't No Such Thing As Free Currency Manipulation

Here's a letter to the Foreign Affairs:

Joseph Gagnon and Gary Hufbauer want Uncle Sam to tax incomes on Chinese holdings of U.S. financial assets ("Taxing China's Assets," April 25).  The goal is to punish the Chinese for devaluing the renminbi by buying lots of U.S. assets, especially U.S. treasuries.

Never mind that it would be gallingly hypocritical for Uncle Sam, who continues to borrow untold sums of money, to scold and punish a willing creditor.  Instead, recognize that any attempts by Beijing to devalue the renminbi unavoidably come with their own built-in punishing tax: inflation.  And as the New York Times reported a couple of weeks ago, China's inflation rate is indeed now rising ominously.

Inflationary increases in the supply of renminbi might or might not be due to a decision by Beijing to keep the exchange rate of the renminbi artificially low.  But one thing's for sure: the increased supply of renminbi necessary to carry out the alleged exchange-rate manipulation needs no further taxes or penalties from Uncle Sam in order for the Chinese to be taxed for their interference in the market; the resulting inflation performs that punitive function just fine.

Sincerely,

Donald J. Boudreaux

I Want Sustainability (which is why I support free markets)

I recall hearing Bill Clinton, I believe during the 1992 presidential campaign, promise to rein in "wasteful spending."  Of course.  Everyone – even the most glossy-eyed Keynesian-socialist-welfare-statist 'Progressive' – wants to rein in spending that is wasteful.

Politicians (of all parties and persuasions), pundits, ordinary men and women in their everyday conversations, slip too easily into platitudes and into the habit of using words that smuggle in conclusions wrapped in blankets of presumptions.  As a result, conversation is made more difficult.

No word currently in vogue among Very Smart and Oh-So-Concerned People smuggles in more mistaken presumptions wrapped in a sentiment that no one in his or her right mind can disagree with than "sustainability."

Who wants the earth and the economy to be on an unsustainable path?  A few sociopaths, perhaps.  But only a few.

David Friedman has been having some good and educational fun with "sustainability" advocates, as EconLog's David Henderson highlights.  Check out also these links to several useful exposés of the 'sustainability' confusion.

A Sad Anniversary

Two years ago tonight, almost to the hour, my father died.  Adrian J. "Buddy" Boudreaux was about six weeks shy of his 74th birthday when he departed this vale of scarcity and imperfections and trade-offs and awful inevitabilities.

I loved him dearly and miss him very. very much.

Will Wilkinson on Paul Krugman

Agree with him or not (I nearly always do agree with him), the Economist's Will Wilkinson is unfailingly worth reading and pondering.  .  It's on Paul Krugman's bizarre (at least for an economist) lamentation that many people think it good that health-care provision be consumer-driven – or, as Krugman describes it, that health-care provision be "more responsive to consumer choice"  (HT Tyler Cowen).

Predatory Pricing, Product Improvements, and Wal-Mart

Back in 1996 I contributed this article to a collection of antitrust essays assembled by the F.T.C.'s Malcolm Coate and Andy Kleit (now at Penn State). In it, I discuss a mid-1990s case (in Arkansas courts) against Wal-Mart for allegedly pricing "predatorially" in the Faulkner County, Arkansas, retail pharmaceutical market.  More generally, I lay out some reasons why investments in a predatory-pricing campaign are highly unlikely to be a sensible strategy even for the most egregious monopolist-wannabe.

The Fight of the Century

The next rap video that John Papola and I have created, The Fight of the Century, should go live this Thursday. Keynes and Hayek debate whether government spending helps the economy recover.

We're in the home stretch of editing and polishing. It has been an incredible creative journey. I'm very blessed to be able to work with John on a project with so many facets–the lyrics, the music, the visuals. To see it come together as a finished project is exhilarating.

I'm so excited to see what you in the audience out there think of it. Is it as good as the first one? Worse? Better? I have my own priors but that doesn't matter. On Thursday, we'll get feedback and find out what you think.

If you're a teacher, this should make great end of the semester or end of the year viewing. Hope your students like it.

When it's live on Thursday, I'll post it here.

Grocery School

Suppose that we were supplied with groceries in same way that we are supplied with K-12 education.

Residents of each county would pay taxes on their properties.  A huge chunk of these tax receipts would then be spent by government officials on building and operating supermarkets.  County residents, depending upon their specific residential addresses, would be assigned to a particular supermarket.  Each family could then get its weekly allotment of groceries for "free."  (Department of Supermarket officials would no doubt be charged with the responsibility for determining the proper amounts and kinds of groceries that families of different kinds and sizes are entitled to receive.)

Except in rare circumstances, no family would be allowed to patronize a "public" supermarket outside of its district.

Residents of wealthier counties – such as Fairfax County, VA and Somerset County, NJ – would obviously have better-stocked and more attractive supermarkets than would residents of poorer counties.  And, thanks to a long-ago U.S. Supreme Court decision, families would be free to shop at private supermarkets that charge directly for the groceries they offer; such private-supermarket families, though, would get no discount on their property-tax bills.

When the quality of supermarkets is recognized by nearly everyone to be dismal, calls for "supermarket choice" would be rejected by a coalition of greedy government-supermarket workers and ideologically benighted collectivists as attempts to cheat supermarket customers from out of good supermarket service – indeed, as attempts to deny ordinary families the food that they need for their very survival.  Such 'choice,' it would be alleged, will drain precious resources from the public supermarkets whose (admittedly) poor performance testifies to the fact that these supermarkets are underfunded.

And the small handful of people who call for total separation between supermarket and state would be criticized by nearly everyone as being, at best, delusional and – it would be thought more realistically – more likely misanthropic devils who are indifferent to the malnutrion and starvation that would sweep the land if only private market forces governed the provision and patronizing of supermarket.  (Some indignant observers would even wonder aloud at the insensitivity of referring to grocery shoppers as "customers"; surely the relationship between suppliers of life-giving foods and the people who need these foods is not so crass as to be properly discussed as being 'commercial.')

….

Does anyone believe that such a system for supplying groceries would work well, or even one-tenth as well as the current private, competitive system that we currently rely upon for supplying grocery-retailing services?  To those of you who might think so, pardon me but you're nuts.

To those of you who understand that such a system for supplying grocery-retailing services would be a catastrophe, why might you continue to count yourself in the ranks of those who believe that government schooling (especially the way it is currently funded and supplied) is the system that we should continue to use?

Other People's Money

Here's a letter to the New York Times:

Wisely warning against the folly of government-subsidized high-speed rail, Stanford University historian Richard White notes that "Without bond guarantees, private investors, which so far seem more prone to due diligence than the California High-Speed Rail Authority, have yet to put up money" ("Fast Train to Nowhere," April 24).

Yep; people spend their own money more prudently and astutely than they spend other people's money – a fact that Mr. White usefully documents for both 19th- and 21st-century rail subsidies.  Which raises the question: why does Mr. White open his op-ed by complaining that "It is hard for liberals like me to find good news in the latest agreement to cut the federal budget"?

Because Mr. White is correct that irresponsibility and cronyism are unleashed by giving politicians power to spend other-people's money on glitzy choo-choos, we have no reason to believe that irresponsibility and cronyism aren't unleashed by giving politicians power to spend other-people's money on ventures such as education, health-care, social 'safety nets,' or the heaps of other programs and projects that politicians today undertake.

Sincerely,

Donald J. Boudreaux

Speaking of spending other-people's money, Charlie Frey reminds me of this video of Milton Friedman.