Russell Roberts's Blog, page 1475

There Ain't No Such Thing As A Free Subsidy

Here's a letter to Foreign Policy: (HT Greg Rehmke)

Gideon Rachman believes that "the normal rules about the mutual benefits of trade do not necessarily apply when one trading partner is practicing mercantilist or protectionist policies" ("Think Again: American Decline," Jan./Feb.).

He's correct, but not in the way that he thinks.  Whereas Mr. Rachman believes that mercantilist and other protectionist policies help the countries that practice these policies and harm countries that trade freely, something closer to the opposite is true.

By erecting tariffs that dampen competition, mercantilism encourages home producers to become unresponsive and uncreative.  By issuing subsidies paid for with higher taxes, government debt, or distortionary monetary policies, mercantilism helps exporters only by inflicting more-sizable damages on the nation's economy writ large.  By turning the national government into a bazaar for the buying and selling of monopoly privileges, mercantilism deflects entrepreneurial energies away from building better mousetraps and into building politically advantageous political connections.  And by raising prices in the home market, mercantilism makes consumers poorer as well as makes producers who rely upon imported inputs less efficient.

So indeed, to the extent that Americans' trades with non-Americans are conditioned by foreign-governments' mercantilist policies, the gains from these trades are not mutual: they flow exclusively to Americans.

Sincerely,

Donald J. Boudreaux

Some Links

Carpe Diem's Mark Perry wants the United States Oregon to win the future.  (But, hey, why not insist that Portland win the future against rivals such as Eugene and Salem?)

Bruce Yandle ponders Pres. Obama's alleged conversion away from rambunctious statism.  Amazing!

Here's the always-entertaining and always-even-more-enlightening Bob Higgs.  And here again.  And here yet again.

George Will on the protests in Wisconsin.  (BTW, even left-liberal Washington Post columnist Richard Cohen agrees in large measure with Will.)

Steve Landsburg ponders Scott Sumner who ponders politics.

Here's a not-to-be-missed post by EconLog's Arnold Kling.

Substances, Resources, and the Future

Here's a letter to DiscoveryNews.com:

You report that "A growing, more affluent population competing for ever scarcer resources could make for an 'unrecognizable' world by 2050, researchers warned at a major US science conference Sunday" ("Planet could be 'unrecognizable' by 2050, experts say," Feb. 21).

These scientists need a course in basic economics.  Some of what they'll learn is that

- the supply of resources (as with human wealth) is not fixed; it increases over time in response to market forces as the quest for profits sparks innovations in resource exploration and recycling, as well as in finding less costly substitutes for resources currently in use;

- if the supply of some resource does fall, the price of that resource rises, causing people to use it more frugally as they switch to using resources whose supplies are more plentiful;

- if these scientists' prediction of consistently decreasing resource supplies over the next 40 years does come true, world incomes over the next 40 years will fall rather than (as these scientists worry) rise.  Fewer resources mean less production, and less production means lower real per-capita income, not "more affluence."  Lower income, in turn, means that people over the next 40 years will reduce, not increase, their per-capita demands for goods and services.

Because any substance's status as a "resource" inherently reflects that substance's use and valuation in the economy, questions about resources' future supplies are not exclusively – or even mainly – ones of physics, mineralogy, or other physical sciences.  They are, instead, chiefly questions of economics.

Sincerely,

Donald J. Boudreaux

(HT to Mark Steckbeck for alerting me to this article.)

Acemoglu on the inequality and the crisis

In the latest EconTalk, Daron Acemoglu argues that the crisis was caused by a breakdown in political competition that allowed the elites, particularly the financial sector, to grab the policy process and steer it toward themselves. I sort of agree. Listen here.

Globalization and Cosmopolitanism

Here's an interesting paper by Nancy Buchan and several co-authors; it's entitled "Globalization and human cooperation." And here's the abstract:

Globalization magnifies the problems that affect all people and that require large-scale human cooperation, for example, the overharvesting of natural resources and human-induced global warming. However, what does globalization imply for the cooperation needed to address such global social dilemmas? Two competing hypotheses are offered. One hypothesis is that globalization prompts reactionary movements that reinforce parochial distinctions among people. Large-scale cooperation then focuses on favoring one's own ethnic, racial, or language group. The alternative hypothesis suggests that globalization strengthens cosmopolitan attitudes by weakening the relevance of ethnicity, locality, or nationhood as sources of identification. In essence, globalization, the increasing interconnectedness of people world-wide, broadens the group boundaries within which individuals perceive they belong. We test these hypotheses by measuring globalization at both the country and individual levels and analyzing the relationship between globalization and individual cooperation with distal others in multilevel sequential cooperation experiments in which players can contribute to individual, local, and/or global accounts. Our samples were drawn from the general populations of the United States, Italy, Russia, Argentina, South Africa, and Iran. We find that as country and individual levels of globalization increase, so too does individual cooperation at the global level vis-a`-vis the local level. In essence, ''globalized'' individuals draw broader group boundaries than others, eschewing parochial motivations in favor of cosmopolitan ones. Globalization may thus be fundamental in shaping contemporary large-scale cooperation and may be a positive force toward the provision of global public goods.

Paul Ehrlich, Genius?

Here's a letter to the Los Angeles Times:

Three different readers write today in praise of Paul Ehrlich and his predictions of eco-mageddon (Letters, Feb. 18).  Such praise is odd, given that not one of the many catastrophes that Mr. Ehrlich has predicted over the past 43 years has occurred.

The drying of the Aral Sea, alas, is not – contrary to reader David McClave's insinuation – evidence in support of Mr. Ehrlich's proposition that one of the greatest threats to the environment is capitalism.  Here's what the BBC reported in 1998: "correspondent Louise Hidalgo in Kazakhstan says that the most amazing thing about the disaster is that it is no accident.  'The Soviet planners who fatally tapped the rivers, which fed the seas to irrigate central Asia's vast cotton fields, expected it dry up. They either did not realise the consequences the Aral's disappearance would bring or they simply did not care.'"

How interesting that the one genuine eco-disaster mentioned as confirmation of Mr. Ehrlich's wisdom was caused by the same institution – the powerful, centralized state – that Mr. Ehrlich advises we must submit to if we are to be saved from genuine eco-disasters.

Sincerely,

Donald J. Boudreaux

More Caplan on Immigration

I don't believe that we've posted here at the Cafe (until now!) a link to this hour-plus long video of a wonderful talk that my and Russ's brilliant young colleague Bryan Caplan delivered this past September on immigration.  Enjoy!

INTERESTing

Here's a really nice paper, by Mark Koyama, on the history of usury laws. (HT Dan Houser)  The abstract:

The development of capital markets in medieval Europe was shaped for centuries by the religious ban on lending money at interest. This paper examines how this prohibition developed as the outcome of strategic behavior by religious, commercial and political elites. A model is developed to analyze this hypothesis and to examine how the usury prohibition developed over time. It suggests that an important reason for the persistence of the ban was that it created a barrier to entry that enabled secular rulers, the Church, and a small number of merchant bankers to earn monopoly rents.

Our Masters

From EconLog's David Henderson.  Just remarkable – in a words-fail-me-at-such-hypocrisy sort of way.

Progressive Bourbons

Here's a letter to the Washington Post:

Charles Krauthammer refers to the president's proposed budget as "Obama's Louis XV budget" (Feb. 18).

From Obamacare to financial-market 'reform' to its refusal to cut spending on so-called "entitlements," this administration does indeed reflect an ancien-regime-like attitude toward ordinary people.  As Alexis de Tocqueville explained in Part 2, Chapter 2 of The Old Regime and the French Revolution, France's pre-revolutionary Bourbon governments regulated, dictated, prohibited, and prescribed citizens' private affairs in suffocating detail.  "In short," observed Tocqueville, "the central power had taken to playing the part of an indefatigable mentor and keeping the nation in quasi-paternal tutelage."

Is Uncle Sam not more and more playing such a lamentable role in Americans' lives?

Sincerely,

Donald J. Boudreaux