Russell Roberts's Blog, page 1463

Special Edition

Here's a letter to the Wall Street Journal:

NPR anchorman Steve Inskeep contends that "NPR's audience keeps expanding because Americans want more than toxic political attacks" ("Liberal Bias at NPR?" March 24).

Excellent news!

So I trust that, given their successful formula for pleasing listeners and winning expansive market share, Mr. Inskeep and his NPR colleagues no longer require further subsidies from taxpayers.  All things considered, products that are genuinely valued by consumers (intensely enough to justify the costs of producing these products) survive in competitive, unsubsidized markets.  Suppliers of these products do not need to receive corporate welfare.

Sincerely,

Donald J. Boudreaux

Trade and Borders

Here's my latest column in the Pittsburgh Tribune-Review.  A key 'graf:

Fact is, we modern Americans regard free trading within the United States as legitimate because we've come to accept that our "natural" trading partners include all persons who live in America and not just those who live in Pennsylvania or Pittsburgh or Shadyside. Modern Europeans, in contrast, have not accepted that their natural trading partners include all persons living in Europe.

Preferences and Policy

At today's New York Times's "Room for Debate," Chrystia Freeland writes that

The right likes to argue that income inequality as an issue doesn't win elections because Americans don't begrudge the rich so much as they want to join them.  The Norton and Ariely study suggests otherwise.  Given a choice, the authors find, Americans would prefer to live in a society more equal than even highly egalitarian Sweden.

Freeland commits a non sequitur.  Contrary to what she presumes, someone can – and, apparently, many an American actually does – prefer to live in a society with greater income equality while at the same time opposing government actions to redistribute incomes.

Sensible people understand that a mere preference for a particular outcome is an insufficient reason to empower government to pursue that outcome.

Made on Earth

Writing in the Finanical Times, Gillian Tett muses on the meaningless of "Made in…." labels.  Here's the concluding half of Tett's excellent essay:

But if you peer into the trade statistics, there is another, more subtle, shift under way: the real story behind these "made in" labels is not just that some items are no longer entirely "American"; instead, the bigger issue is that they are now produced in so many places, with such convoluted supply chains, that it is hard to tell where they are "made in" at all.

Take a look, for example, at a fascinating paper recently produced by the Asian Development Bank, which looks at where an iPhone is made. In this case, the company – Apple – is American; however, components for the iPhone are variously assembled in China, Korea, Taipei, Germany and the US, involving almost a dozen companies which are hard to pigeonhole with any ethnic label.

And it is not just in the world of electronics that these labels blur. Two decades ago, Sylvia Yanagisako, a Stanford University anthropology professor, went out to Italy to study the Italian textile and fashion trade – only to realise that so many of the key processes had moved to China that she shifted her research to Shanghai. She also found that Italian fashion designers are now tying themselves up in knots about what being an "Italian" designer really means. After all, the "Made in Italy" label carries cachet among consumers (including, ironically, wealthy Chinese shoppers). Many Italian designers insist that the concept of italianità (Italian-ness) is almost sacred. What, in other words, does italianità really mean if a product is partly made in China? The cultural contradictions on this new "21st-century Silk Road" – as Yanagisako dubs it – are intense.

The challenge for economists is even more profound. In the old days, they typically measured the output of an economy by watching where goods were "made"; but which country should claim the "value" for an iPhone (or an Italian suit or an American Girl doll)? Where does the real "output" come, in a world where companies can shift profits around?

Indeed, such is the complexity that Pascal Lamy, the head of the World Trade Organisation, recently voiced the seemingly heretical idea that economists should stop paying so much attention to "import" and "export" statistics. Thus, instead of trying to measure what is now "made in America" – or "China" – what economists should do is focus on the global economy as a whole, he insists. "It no longer makes sense to think of trade in terms of 'them' and 'us'," he argues; 20th-century-style trade statistics can be too arbitrary in the 21st-century world.

In rational terms, Lamy is absolutely right. But it is unlikely to cut much ice in political terms – or in a world where American unemployment is rising and politicians are muttering about currency wars. So the next time I pop into the American Girl store, I will look for the "Made in China" labels – and both chuckle and fret. This new, 21st-century Silk and Plastic Road is full of artifice on all sides; but, sadly, that does not prevent it from being a potential future flashpoint.

By the way, I first encountered the idea credited by Tett to Lamy in the writings of the indispensable Dan Ikenson.

Highly Recommended for Students

Sleep Less, Think More at an Institute for Humane Studies Summer Seminar: Apply by March 31st.  The Institute for Humane Studies is hosting 12 free seminars on economic freedom and individual liberty this summer.

For graduate students, they offer Scholarship & a Free Society, a workshop on incorporating and advancing liberty through your academic work. June 15–19 or July 23–29 at Bryn Mawr College, outside Philadelphia, PA.

For recent graduates and undergraduates, they offer seminars throughout the summer on a range of topics and issues including public choice, morality and capitalism, and market failure.

There is no cost to attend.  IHS covers meals, housing, and tuition.  Details available here.

Application Deadline: March 31

A Conflict of Visions Different than the One Sowell Identified

Here's a letter to the Washington Post:

George Will's wise skepticism of Uncle Sam meddling both in the domestic economy and in foreign affairs distinguishes him as one of today's very few pundits who isn't schizophrenic about the perils of power ("Is it America's duty to intervene wherever regime change is needed?" March 22).

Most modern "liberals" believe that domestic economic problems are caused chiefly by unsavory characters – "business people" – who impose their destructive rule on masses of innocent workers and consumers yearning for more prosperity, and that the best solution to these problems is government force deployed using armies of regulators to subdue these bad guys and to keep close watch over them and their successors.  Failure to intervene is immoral.  These same "liberals," though, believe that foreign problems are typically the result of complex forces that can be understood only poorly by American-government officials; it is naïve to suppose that even well-intentioned foreign intervention by Uncle Sam will not have regrettable unintended consequences.

Most modern conservatives believe that domestic economic problems are typically the result of complex forces that can be understood only poorly by government officials; it is naïve to suppose that even well-intentioned economic intervention by Uncle Sam will not have regrettable unintended consequences.  These same conservatives, though, believe that problems in foreign countries are caused chiefly by unsavory characters – "dictators" or "tyrants" – who impose their destructive rule on masses of innocent people yearning for more democracy, and that the best solution to these problems is government force deployed with armies of soldiers to subdue these bad guys and to keep close watch over them and their successors.  Failure to intervene is immoral.

Talk about a conflict of visions.

Sincerely,

Donald J. Boudreaux

Speaking in Charleston, SC

I'll be giving a talk on Adam Smith and the financial crisis as part of Adam Smith Week at the College of Charleston. The talk is this Wednesday, March 23rd at 3:30 at the Wachovia Auditorium at the School of Business Beatty Center located on 5 Liberty Street in Charleston. I'll be talking for an hour. If you're in the neighborhood, stop on by and say hello.

Some Links

National Review's John Miller just published this splendid article on my great GMU colleague Walter Williams.

Here's the Center for Freedom & Prosperity's Dan "Bulldawg" Mitchell in the first in a series of videos on central banking and its alternatives.

Bill Easterly interviews Deirdre McCloskey on the theme of Deirdre's newest book, Bourgeois Dignity.  (I'm reading this book closely now; it's packed with phenomenally important insights.)

My GMU Econ colleague Pete Boettke has this very interesting discussion of the popularity of economic ideas.

What wonderful news that Paul Rubin is now blogging, at Truth on the Market!

Arnold Kling and Paul Krugman are having an argument.  Arnold wins this one, IMHO.

Perry, Fletcher, and Poverty Reduction Worldwide

Carpe Diem's Mark Perry has telling data on trends in world poverty.  Mark was inspired to uncork these data by a recent head-scratching assertion by Ian Fletcher.

I Presume He'll Accept My Offer

Mr. Larry DeWitt

Dear Mr. DeWitt:

Arguing in today's Washington Post that the U.S. Treasuries in Social Security's Trust Fund are genuine assets that the government can redeem to help it meet its future Social Security obligations, you proclaim that "The Treasury owes the workers of America the value of the funds in the same way it owes the debt held by the wider public."

I've got a great deal for you, Sir!  In exchange for $10 million in cash from you today (every cent of which I'll burn through over the next 12 months as I treat myself to lavish, extravagant high-living) I'll promise to repay you $15 million in one-year's time.  That's a fifty percent rate of return – and it's guaranteed!

Now I must tell you that my current net worth, including the income that I'll earn over the next year, is less than even $1 million.  But don't you worry, for upon receipt of your $10 million in cash I'll write an I.O.U. to myself, promising to pay to me $15 million in one-year's time.  My redemption of that I.O.U. will enable me to repay you, principal and interest, in full.

So you see, with your $10 million loan to me secured by my solemn promise to pay to myself $15 million in one-year's time, you need not worry that I'll not have sufficient funds on hand to pay to you what I owe you.

Please make your $10 million check payable to "Donald J. Boudreaux," and mail it to me at the address below.  When I receive your check I'll send you a copy of the I.O.U. in which I promise to pay myself enough to enable me to repay you.

Sincerely,

Donald J. Boudreaux

Professor of Economics

George Mason University

Fairfax, VA 22030

P.S.  On second thought, I think I'll make my I.O.U. to me worth, not $15 million, but $150 million.  The extra cash will come in handy.