Russell Roberts's Blog, page 1495

Ronald Harry Coase, Happy 100th!

Today is the 100th birthday of the great scholar Ronald Coase.  Fortunately, Coase is still with us – and I'm told by friends who know him well, he's still working diligently to deepen our understanding of the role of property rights, law, and (of course) transaction costs.

My doctoral dissertation (fortunately unpublished) was on Coase's theory of the firm.  And as my dear, late friend Hugh Macaulay never tired of saying, Ronald Coase is a "genius among geniuses."  (Hugh was referring to Coase the LSE student studying under the likes of F.A. Hayek and Arnold Plant, LSE faculty members.)

PERC's Terry Anderson offers this excellent essay to celebrate Prof. Coase's centennial .  (HT Laura Huggins)

Coase's most famous articles are his 1937 "The Nature of the Firm," and his 1960 "The Problem of Social Cost."  And these articles are indeed worthy of their fame.  But Coase's much-less-celebrated 1946 article, in Economica, is my favorite: "The Marginal Cost Controversy."  Study carefully this article – absorb its wisdom – adopt its perspective – and you will be a damn good economist.

Choice

Here's a letter to the Baltimore Sun:

Howell Baum's case against school choice is an indigestible hash of pious platitudes, question-begging assumptions, and flat-wrong assertions ("School choice is bad for us," Dec. 30).

An example of the last is this claim: "if society depends on having adults who are not only intelligent but able to learn with others when problems arise, and able to get along with people of different cultures, choice doesn't serve society."

Has Mr. Baum ever visited a department store?  Going naked is surely a problem that society must solve, and department stores are monuments to that solution.  Even the most inexpensive coat or pair of pants is the result of the cooperation of millions of people, of different cultures, cooperating productively in ways that make attractive, durable, and comfortable clothing widely available.  Yet every step of the way – from producing the raw materials to purchasing the final item – involves choice.  Wool producers choose to raise sheep; engineers who design the looms choose that line of work; shareholders in Macy's or Wal-Mart choose to invest in those enterprises; and each final consumer chooses whether or not to buy a particular item of clothing.  And every time a problem arises in this chain of supply (say, when supplies of wool become unexpectedly short), intelligent people choose to work together to solve it.

Intelligent, learning individuals are constantly and creatively cooperating with people of different cultures to solve problems – not despite, but because, each of these individuals is free to choose whether or not, and how, to do so.

Sincerely,

Donald J. Boudreaux

There is so much wrong with Baum's op-ed that a sizable treatise could be written detailing each error.  But it's the holidays, so I choose to spend my time more enjoyably.  (HT John Breivogel and Nickolas Mueller)

Faux Science Parading as Science

Here's a letter to the Wall Street Journal:

FDA Commissioner Margaret Hamburg proudly notes that "What FDA requires is evidence that patients see a real benefit [from a proposed new drug or medical device], and that the benefit outweighs any risks" (Letters, Dec. 29).

Contrary to Ms. Hamburg's suggestion, because tolerances for risk differ across individuals (as do assessments of benefits), there is absolutely no scientific evidence that can be discovered by officials at the FDA on whether or not a drug's benefit – for all, most, or even many people – outweighs its risks.

Valid evidence on this front is available only by observing the voluntary actions of different individuals.  If I choose to take drug X, then that fact is solid evidence that, for me, the benefit of X outweighs any risks to me of X.  If my neighbor refuses to take drug X, then that fact is solid evidence that, for her, the benefit of X does not outweigh any risks to her of X.  And both my neighbor and I – as far as the FDA or any other third-party can discern – are correct in our assessments and, therefore, should be left unmolested by the FDA to choose which medicines to take and which to avoid.

Sincerely,

Donald J. Boudreaux

Both Sides Now

In my latest column in the Pittsburgh Tribune-Review, I discuss both sides of supply-and-demand.

Krugman Should Study Julian Simon

Here's a letter to the New York Times:

Paul Krugman argues that economic growth in "China and other emerging economies" will cause real commodity prices to trend upward from here on in ("The Finite World," Dec. 27).

It's not true that vigorous economic growth necessarily makes resources more scarce.  In fact, history shows that, because of human ingenuity, the opposite is not only possible but prevalent.

Since the dawn of the industrial revolution in the mid-18th century, available supplies of coal, petroleum, iron ore, and most other resources have increased significantly – and, as a result, their real prices have fallen.  These rising resource supplies and falling prices occurred during a time when human population increased by a factor of ten – from 700 million to nearly 7 billion today, at least 4 billion of whom are now part of industrial economies.  So the increase in the number of persons integrated into industrial economies over the past two-plus centuries – from near-zero persons 260 years ago to at least 4 billion persons today – is far larger than is the number of Chinese, Indians, and other peoples now being integrated into industrial economies.

If economic growth since the industrial revolution coincided with increasing resource supplies, why should we expect that continued economic growth will suddenly start to have the opposite, dreary effects predicted by Mr. Krugman?

Sincerely,

Donald J. Boudreaux

Why Mises matters

This week's EconTalk is an intellectual tour de force from Pete Boettke on Mises's contribution to economics.

Is Basic Health Care a 'Right'?

Here's a letter to the Boston Globe:

Ronald Pies, MD, asserts that every individual has a "right" to "basic health care" – meaning, a right to receive such care without paying for it (Letters, Dec. 26).

The rights that Americans wisely cherish as being essential for a free society require only the refraining from action.  Your right to speak freely requires me simply not to stop you from speaking; it does not require me to supply your megaphone.

Not so with a "right" to "basic health care."  Elevating free access to a scarce good into a "right" imposes on strangers all manner of ill-defined positive obligations – obligations that necessarily violate other, proper rights.  For example, perhaps my "right" to basic health care means that I can force Dr. Pies away from his worship service in order that he attend (free of charge!) to my ruptured spleen.  Or perhaps it means that I have the "right" to pay for my health care by confiscating part of his income.  If so, how much of his income does my "right" entitle me to confiscate?  Who knows?

And if Dr. Pies is planning to retire, do I have the "right" to force him to continue to work so that the supply of basic health care doesn't shrink?  If Dr. Pies should die, am I entitled – again, to keep the supply of basic health care from shrinking – to force his children to study and practice medicine?

Does my right to basic health care imply that I can force my neighbor to pay for my cross-country skiing vacation on grounds that keeping fit is part of basic health care?

Talking about "rights" to scarce goods and services sounds right only to persons who are economically illiterate, politically naive, and suffering the juvenile delusion that reality is optional.

Sincerely,

Donald J. Boudreaux

Peace and Free Trade

Peace and Free Trade – as explained by Dan Griswold.

No Potted History of the Role of Juries

Here's a letter to the Los Angeles Times:

Reporting on the increasing number of jurors who refuse to return guilty verdicts against defendants charged with possessing marijuana, you quote a government prosecutor who tells jurors "We're not here to debate the laws.  We're here to decide whether or not somebody broke the law" ("Juries are giving pot defendants a pass," Dec. 25).

This prosecutor is mistaken to assume that the law is simply that which the state declares it to be.  A great advantage of trial by jury – an advantage applauded by the likes of John Adams, Thomas Jefferson, and James Madison – is to enable the community's evolved sense of law and justice to moderate, or even to nullify, government's criminal statutes.  As Edward Gibbon observed, "Whenever the offense inspires less horror than the punishment, the rigor of penal law is obliged to give way to the common feelings of mankind."

Fortunately, more and more people understand that punishing a peaceful person simply for smoking pot is horrible.

Sincerely,

Donald J. Boudreaux

Taking a break

I'm going to go off the grid for a while. For the next ten days, at least, I'm going to try to avoid the internet and my email. Hope to be back January 3rd or so. In the meanwhile, hope to spend more time with my family, do some reading and maybe a little writing now and then. Stay warm.