Russell Roberts's Blog, page 1510

Geniuses At Work

In today's Wall Street Journal, U.S Treasury Secretary Timothy Geithner, Singapore Finance Minister Tharman Shanmugaratnam, and Australia Treasurer Wayne Swan worry aloud that, in emerging economies, "rapid growth" increases "the risk of domestic inflation."

Baloney.

Inflation is the result of too much money chasing too few goods.  So by increasing the flow of goods (and services) produced in an economy, rapid growth decreases the risk of domestic inflation. That the finance ministers of three major world governments do not understand this fundamental fact is appalling.

Prancing, Preaching, Posing Pols

Here's a letter to the Washington Post:

I'm no admirer of Sarah Palin, but I'm annoyed by a double-standard about her that is revealed by columnist Kathleen Parker ("The Palin Paradox," Nov. 10).  Here's Parker reporting on Palin: "She recently wrote against the QE2 – 'quantitative easing' – whereby the Federal Reserve will dump $600 billion in freshly minted dollars into circulation in hopes of revving the economy.  Doubtless, this inspired critique evolved from Palin's long years poring over the Economist."

Parker is surely correct to suggest that Sarah Palin's grasp of monetary and macroeconomic theory is worse than palsied.  But I've heard no similar criticism, from Parker or from anyone else in the mainstream media, about pronouncements on QE2 made by Pres. Obama.  Why not?  There's absolutely no reason (or evidence) to suppose that Mr. Obama spent his down time – when not community-organizing, teaching constitutional law, and campaigning for office – "poring over the Economist" or otherwise mastering the broad outlines, much less the finer details and disagreements, that are part and parcel of economics.

Why treat with respect Mr. Obama's assessment of QE2 while treating with scorn Ms. Palin's?  Both of these politicians are posers, nothing more.

Sincerely,

Donald J. Boudreaux

More on the death of physical books

A number of people objected to this post arguing that books have many advantages over reading the same material on the Kindle or the iPad. They're right. Yes, the iPad and kindle are more fragile than a physical book. You can't just throw them in the truck of your car or read them carelessly at the beach. Yes, you can run out of batteries. And there is some eyestrain with the iPad. BUT.

You can take 50 books in your luggage for your vacation.

You can read easily with one hand

You can't read carelessly at the beach. But you can read carefully. And when you discover that you really liked the author of the book you just finished, you can order another book by the same author and have it in 30 seconds when there might not even be a bookstore nearby as an alternative.

You can touch a word and the meaning shows up at the bottom of the screen instantly.

You can annotate just like pen and paper.

You can highlight without ever running out of ink.

You can read sample chapters for free at your leisure without having to linger at the bookstore.

You can search effortlessly for passages you want to re-read. The biggest advantage is yet to come. The integration of text with photos, videos, audio and other resources to enhance the reading experience. Yes, I know, for some us that won't enhance our reading experience, it will just distract us. But the market will sort this out.

So while there are some advantages to physical books, I'm predicting that the advantages of digital books will crush them. And it won't take long. Kindle books are already out-selling hardcovers at Amazon. And it's not close.

And of course as many readers pointed out, books aren't going to disappear. I meant new books will disappear. There will be a thriving used market and maybe even the occasional new book the way that you can still buy LP records for your turntable. But I don't think new ideas are going to come out between covers in the future.

There will be one exception. The Jews. We will still publish prayer books and Bibles and Talmuds for use on the Sabbath when the iPad and the Kindle take a rest. But for the most part, I think that's going to be it.

This is your mind on TV

Bryan over at EconLog has an upbeat assessment of TV watching by young children:

Yesterday my baby acquired a valuable life skill: He learned how to watch television.  I'm thrilled for at least three reasons:

1. Television is fun.  I don't want my son to miss out on one of life's great pleasures.

2. Television is a cheap electronic baby-sitter that allows parents of young kids to get a much-needed break.

3. When my son is older, the threat to deprive him of television will become one of our most convenient and effective tools of discipline.  The naughty corner's usually enough, but when bad behavior persists, it's time for a night without t.v.

Won't t.v. stunt my baby's cognitive development?  Hardly.  Twin and adoption studies find zero long-run effect on IQ of all family environment combined.  Television's isn't just a drop in the bucket; it's a drop in a bucket that doesn't hold water.

Readers of my book, The Invisible Heart will remember that Sam Gordon's perspective (and mine) are a little bit different. I'll note first that you can replace the word "Television" with "single-malt scotch" and the same logic applies.

Our kids watched virtually no TV growing up and to this day as they range in age from 10 to 17, they watch no regular network televion during the week. We do watch a few quarters of football on Sunday. But that's it.

We spent a lot of hours reading to our kids. They all like to read. They also like to amuse themselves in a variety of non-TV ways. I think those are good things.

Finally I would point out that studies that relate the family environment to various outcomes (IQ, criminality, happiness) are not experiments where people parent in random ways and the results are observed. People parent as best they can. The fact that there is little relationship between parenting strategies and outcomes does not mean that ANY parenting strategy will have no effect.

Some Links

Alvaro Vargas Llosa wisely and eloquently warns us against stealth protectionism.

My colleague Walter Williams wisely and eloquently warns against the idiocy of trade-deficit hysteria.

EconLog's Arnold Kling wisely and eloquently warns against technocracy.

Speaking of EconLog, that blog's Bryan Caplan wisely and eloquently slaps down some modern-day Maoists.  (Who knew that such people still exist?)

Bob Higgs shares his wise and eloquent notes on QE2.

And I record the debate between my inner realist and my inner Pollyanna.

Red is Red…. and, Apparently, Also Green

Here's a letter to the New York Times:

In a letter to G20 leaders, President Obama noted that "the foundation for a strong and durable recovery will not materialize if American households stop saving" ("In Message to G-20 Leaders, Obama Aims to Calm Tensions," Nov. 10).  He's correct that economic growth requires savings.  But Mr. Obama's frequent bemoaning of America's trade deficit makes me wonder if he understands why this fact is so.

Savings promote growth by supplying resources used for constructing factories, funding research & development, training workers, building infrastructure, and financing all of the other investments that increase worker productivity.  It's these investments that fuel economic growth; savings, as such, simply make these investments possible.

So given that what we really want are more such investments, Mr. Obama should applaud America's trade deficit, for that 'deficit' (also known as a capital-account surplus) is the result of foreigners investing large amounts in the American economy – including, by the way, in helping to finance Uncle Sam's ginormous budget deficits.

Investments in America promote American economic growth; the nationality of the investors and savers is irrelevant.

Sincerely,

Donald J. Boudreaux

Hazlett vs. Biden

Reacting to this short video of me discussing Joe Biden's phantasmical delusion that government is the source of all good ideas of the past 300 years, my GMU colleague (and former Chief Economist for the F.C.C.) Tom Hazlett sent to me the following e-mail – posted here with Tom's permission:

It is notable that the state is very good at staking claims to 'ownership' of all sorts of innovation.  Consider one of the premier, history-changing inventions of all time, the Gutenberg press.  Its origins were claimed by the Tudor kings in England, who held that the technology came to be discovered and developed under a royal patent.  The claim was fraudulent, but provided the rationale for legal authority over printing presses which were then were then licensed — and regulated — by the Crown.

Fast forward to 1943 when, in the case of US v. NBC, the US Govt defended its licensing scheme for broadcasting — a prior restraint and a particularly severe infringement of freedom of the press — by asserting that, without licenses issued in the "public interest" under the 1927 Radio Act, there would be only a 'cacaphony of competing voices' (yes, the Supreme Court mis-spelled it).  In essence, wireless communication was an invention of the state. This, like the Gutenberg press claim, was factually incorrect — but sufficiently plausible to sneak past Mr. Justice Felix Frankfurter, who wrote a 6-3 opinion upholding broadcast licensing (and content regulation) as perfectly legal under the First Amendment.

One wonders how government asserts — in Mr. Biden's ambitious rendition — creation of the telephone,radio (did I just answer that?), television, personal computers, cell phones (that one too?), or social networking (no, DARPA did not create the networkof networks)?  Indeed, perhaps we should put together a list of suppressed technologies, like cable TV, thwarted for 15 years while the state sought to protect (licensed) broadcasters.  Of course our list will lag from the counter-factual problem, like when an august member of Congress demanded of an FCC official: "Name for me even one technology that the FCC has prevented from coming to the market?"

Sometimes those counter-factuals are tough to deliver.

Best

Go Tom!

Do 'Progressives' Understand the Necessary Conditions for Progress?

Not really – as I explain in this new essay in the Christian Science Monitor.

Not Worrying About "Unequal" Wealth 'Distribution'

Here's a letter to the Los Angeles Times:

Michael Norton and Dan Ariely surveyed us Americans and found that we "drastically underestimated the current gap between the very rich and the poor" ("Spreading the wealth," Nov. 8).  They found also that Americans' "ideal" distribution of wealth is one that is more even than is the wealth-distribution in reality.

There are many reasons why Messrs. Norton and Ariely are mistaken to conclude that their findings support "policies that involve taking from the rich and giving to the poor."  Here's just one:

That Americans "drastically" underestimate the wealth of "the very rich" compared to the wealth of "the poor" reveals that the difference in the number of dollars owned by "the very rich" compared to the number of dollars owned by "the poor" translates into a much smaller – that is, far more equal – difference in living standards.  In other words, differences in monetary wealth are not the same as differences in living standards.

Bill Gates's monetary wealth, for example, is approximately 70,000 times greater than my own, but I'm certain that he doesn't daily ingest 70,000 times more calories than I ingest in a day.  I'm also certain that the food Bill Gates eats isn't 70,000 times tastier than the food I eat; that his many homes are not 70,000 times larger than my one home; that his children are not educated 70,000 times better than is my child; that he cannot travel to Europe or to Asia 70,000 times faster or more safely than I can; that he doesn't have 70,000 times more annual leisure than I have; and that he will not live 70,000 times longer than I will live.

I'm even sure that he's not 70,000 times happier than I am.

So, really, it's incorrect to conclude that Bill Gates's real wealth is 70,000 times larger than my real wealth.  The difference isn't remotely close to being that large.

Sincerely,

Donald J. Boudreaux

(Thanks to my buddy Ross Kaminsky for alerting me to Norton's and Ariely's op-ed.)

With Apologies to Debbie

The flat-earthers are coming out of the woodwork.  Here's a self-explanatory e-mail that I sent last evening to a correspondent:

Dear Mr. P_____________:

Thanks for your e-mail responding to my blog-post on William Greider's recent article.

You recommend, as do some other patrons of Cafe Hayek, that I read Greider's book One World, Ready or Not.

I've already read it and, inferring that it's a favorite of yours, regret to report to you that my opinion of it is unfavorable.

Greider's book is to economics what "Debbie Does Dallas" is to cinema: an intensely titillating fictional tale without a single moment that demands of its audience the use of their powers of higher reasoning.

If you're really interested in understanding international economics, you should instead read such books as Russell Roberts's The Choice, Johan Norberg's In Defense of Global Capitalism, Martin Wolf's Why Globalization Works, Jagdish Bhagwati's In Defense of Globalization, Paul Krugman's Pop Internationalism, and Douglas Irwin's Free Trade Under Fire.

Sincerely,

Don Boudreaux

I must say that being advised to read anything by William Greider on trade is annoying.  When I receive such advice I feel like I imagine an astronomer feels when he or she is advised to read a modern-day effort to revive Ptolemy's theory of the solar system.