Russell Roberts's Blog, page 1508

From 'Free to Choose' to 'Choose to Obey'

Here's a letter to the Washington Post:

Hoping to revive the 'Progressive' agenda, Katrina vanden Heuvel calls on surviving Democrats in Congress to "sharply define choices for the American people" ("Amid losses, some ways for House Democrats to gain," Nov. 17).

Curious choice of words, for 'Progressives' aren't noted for their love of choice (save on the issue of abortion).  This is a political movement infiltrated by protectionists eager to restrict Americans' choices to buy foreign-made products.  It's a political philosophy dedicated to the proposition that all men and women are created equally stupid and gullible – so stupid and gullible that individuals cannot be trusted to choose what wages to work for (see 'Progressive' support for minimum-wage and 'equal-pay' legislation); to choose what to ingest (see 'Progressive' support for bans on certain foods and their ceaseless crucifixion of tobacco companies); to choose how to arrange their own financial affairs and to provide for their own retirements (see 'Progressive' support for regulations on consumer credit and for Social Security); and to choose how best to educate their children (see 'Progressive' hostility to reforms that promote school choice).

Ms. vanden Heuvel and her ilk want Americans to choose only to be 'nudged,' fettered, and otherwise denied the right to choose for themselves.

Sincerely,

Donald J. Boudreaux

Exporting Fables

Here's a letter to a mysterious e-mailer known to me only as "Exporter":

Dear "Exporter":

You object to my recent letter in which I argue that there is nothing special about American producers selling to foreigners as compared to selling to other Americans.  "Foreign buyers," you say, "pay us with money earned there [presumably, in foreign countries] and not here."

Not quite.  Money spent by foreigners on U.S. exports can be dollars originally earned in the U.S.  For example, Sony might buy legal advice from a New York law firm using dollars that Sony earned by selling consumer electronics in the U.S.

More importantly, though, foreigners buy American exports ultimately with goods and services they produce and then exchange for the dollars demanded by American sellers.  In this way, foreigners are identical to non-foreigners: they earn the income they need to buy U.S. output only by producing valuable output of their own.

For this reason, it makes no more sense to applaud (or to lament) a greater volume of sales made to foreigners than it does to applaud (or to lament) a greater volume of sales made, say, to people with blue eyes or to people who drive red cars.  In all cases, these people will buy more U.S. output only if they themselves produce more output in exchange.  And the American producers who make these additional sales are no better off if these sales are made to the British or to the Koreans rather than to the Blue-Eyedish or to the Red-Careans.

Peace & Free Trade,

Don Boudreaux

Is Mercantilism in Humans' DNA?

Here's a letter to the New York Times:

In midst of sensibly analyzing the recommendations of President Obama's fiscal commission, Glenn Hubbard trips over a slab of mercantilist malarkey when he writes "To meet the nation's fiscal challenges, we need to refocus our economic activity – primarily with less reliance on consumption and more on investment and exports" ("Left, Right and Wrong on Taxes," Nov. 16).

Vigorous economic growth does indeed require investment, but the nationalities of the consumers to whom the fruits of this growth are directly sold – no less than the nationalities of the persons whose savings fund the investment – are irrelevant.  In principle, economic growth sufficient to "meet the nation's fiscal challenges" requires no increase in exports.  What is required are policies that spur entrepreneurs and investors to produce more goods and services demanded by consumers; whether the persons who directly consume the increased outputs of American firms live in Jakarta or in Jacksonville is of little significance.

In practice, economic growth is indeed likely to lead to more exports – which is perfectly fine – but government officials need not design policies to achieve this outcome.  Quite the contrary, for policies aimed at increasing exports inevitably become vehicles for erecting trade barriers.

Sincerely,

Donald J. Boudreaux

Unbalanced Hysteria

Here's a letter sent to the New York Times:

Complaining about America's trade deficit, Robert Lighthizer claims that foreign investments in the U.S. necessarily "will leave our children dependent on foreign decision makers" ("Throwing Free Trade Overboard," Nov. 13).  What jingoistic jabber!

When, for example, Ikea builds a store in Milwaukee, America's trade deficit rises.  But this investment in America by foreigners doesn't make our children more "dependent on foreign decision makers."  Ikea cannot force Americans to shop or to work at Ikea; it must compete against other retailers and employers.  Ikea has the same power over Americans and over "our children" as does Levitz and La-Z-Boy – which is to say, zilch.

In addition, Americans who supply the land and labor Ikea employs to build this store can use their proceeds to start their own firms or to invest in existing American businesses.  To the extent that they do so, not only are both America's trade deficit and capital stock thereby increased, but whatever decision-making 'power' Ikea gains in the U.S. by opening a store here is offset by the additional decision-making 'power' and prosperity Americans gain because Ikea's operations in the U.S. enabled these Americans to make investments that would otherwise have not been undertaken.

Sincerely,

Donald J. Boudreaux

Yeah, Yeah, Yeah, Yeaaaahhh!

It's as if it's my birthday!!!

Greedy capitalism vs. the beauty of collective action

Does commercial life enhance our civilization or does civilization thrive despite commercial dealing? Does being in business degrade our human sensibilities or enhance them? Adam Smith argued that being in business enhanced fellow-feeling forcing one to put oneself in the shoes of the customer. Others argue that this is romance, that it is collective action through the political process that calls to our higher instincts.

Michael Lewis, in a recent piece for Vanity Fair, wrote about the destructive impact of using the political process:

The Greek state was not just corrupt but also corrupting. Once you saw how it worked you could understand a phenomenon which otherwise made no sense at all: the difficulty Greek people have saying a kind word about one another. Individual Greeks are delightful: funny, warm, smart, and good company. I left two dozen interviews saying to myself, "What great people!" They do not share the sentiment about one another: the hardest thing to do in Greece is to get one Greek to compliment another behind his back. No success of any kind is regarded without suspicion. Everyone is pretty sure everyone is cheating on his taxes, or bribing politicians, or taking bribes, or lying about the value of his real estate. And this total absence of faith in one another is self-reinforcing. The epidemic of lying and cheating and stealing makes any sort of civic life impossible; the collapse of civic life only encourages more lying, cheating, and stealing. Lacking faith in one another, they fall back on themselves and their families.

The structure of the Greek economy is collectivist, but the country, in spirit, is the opposite of a collective. Its real structure is every man for himself. Into this system investors had poured hundreds of billions of dollars. And the credit boom had pushed the country over the edge, into total moral collapse.

This echoes the point Don made here.

Nudie Scan Bootlegger

I've always wondered about the political pull of the people who make the equipment at the airport.

A Subsidized Spokesman

This CNBC interview of a subsidized farmer, along with my friend Sallie James of Cato, is interesting for a number of reasons.  The one I wish to flag here is the farmer's insinuation that Sallie's (and Cato's) opposition to farm subsidies and tariffs is questionable because that opposition allegedly reflects nothing more that Cato's funding.

I love Sallie's retort to the farmer when she notes that Cato, unlike him (the farmer), is supported financially only by persons who choose to contribute their own funds.  No one is compelled to pony up money to buy anything from Cato that they don't wish to purchase voluntarily.  No one will be jailed for refusing to hand over a portion of his or her income Cato.

Also – I simply can't resist – this farmer later in the interview trots out the 'we need free trade but it must be fair trade' canard.  Whenever anyone utters that line, always hear him or her as saying "we don't need free trade; we need protection.  I'm just too cowardly to say so."

The Fed, the Ben Bernank, and the William Dudley

This is special. Enjoy. HT: Alan Mead

Open Letter to Sen. Lindsey Graham

15 November 2010

Senator Lindsey Graham (R-SC)

Capitol Hill

Washington, DC

Dear Sen. Graham:

Yesterday, The Hill reported on your disappointment that Pres. Obama failed to persuade Beijing to raise the value of China's currency.  In response to this 'failure,' you proclaimed that "They [the Chinese] already have enough advantages."

Given your belief that a currency whose value is lower than you think it should be confers "advantages" upon its holders, I hereby offer to confer such advantages upon you and your family.  Before you or anyone else in the Graham household spends dollars, contact me first.  I will give you a fifty-cent coin in exchange for each dollar that you would otherwise have spent on your purchases.  You will then make your purchases using only the 50-cent coins.  That is, you will have a lower-valued currency unit to spend rather than be burdened by the heavy yoke of having to spend a higher-valued currency unit.

I will also act as your agent to demand that your employers (and anyone else who purchases goods and services from the Graham household) pay to the Grahams only 50-cents on the dollar.

I promise to do this exchange for each and every dollar that you and yours wish to spend – and to act as your agent to ensure that you are paid no more than 50 cents on the dollar – for as long as you wish.  In this way, you will effectively devalue the currency used and earned by the Graham household and, I presume (because you are a knowledgeable and thoughtful U.S. Senator who has divined that lower-value currency is a blessing), earn for your family great riches and other "advantages."

Do we have a deal?

Sincerely,

Donald J. Boudreaux

Professor of Economics

George Mason University

Fairfax, VA 22030