Russell Roberts's Blog, page 1524

On Just and Unjust Obligations

This essay by Richmond Times-Dispatch columnist Bart Hinkle is one of the most thoughtful and thought-provoking that you'll ever read.  I promise.

An Open Letter to Sen. Sherrod Brown

28 September 2010

Senator Sherrod Brown (D-Ohio)

United States Senate

Capitol Hill

Washington, DC

Dear Sen. Brown:

Pleading for restrictions on American consumers' abilities to spend their money as they judge best, you proclaimed yesterday in the Senate that you "would love to go anywhere in the United States and have a public debate to show the public and show the American people how much this [international trade] has undermined our sovereignty, our wealth, our manufacturing base."

I'll be happy to debate you.  You name the time and place.

You talk about our sovereignty.  Your policies are a direct attack on consumer sovereignty – the right of each of us to spend our money as each of us chooses, as long as our ends are peaceable.  Consumer sovereignty is essential to competitive markets, for only if consumers are free to switch their patronage from one seller to another will sellers work hard to serve consumers rather than to exploit them.

You talk about our wealth.  Your policies would reduce our wealth.  The evidence is overwhelming that freer trade means higher and ever-improving standards of living for ordinary men and women – and that the anti-competitive policies that you champion result in low and stagnant living standards for all but the privileged few.  For just one review of this evidence, see Dartmouth economist Douglas Irwin's book Free Trade Under Fire, 3rd ed. (Princeton University Press, 2009).

This evidence makes sense.  How can policies that restrict output, reduce competition, shrink the size of markets, and intentionally raise the prices of consumer goods, as well as of inputs, in the domestic market not reduce our wealth?

You talk about our manufacturing base.  Look at the evidence, Senator.  That base is doing just fine.  Just before the current downturn – in 2008 – inflation-adjusted manufacturing output in the U.S. was 13 percent higher than it was in 2000, 52 percent higher than in 1990, 84 percent higher than in 1980, and 133 percent higher than in 1970.

Your party claims to be "reality-based."  I challenge you to live up to that claim by looking at the evidence and abandoning your commitment to a thoroughly discredited 16th-century 'theory' that asserts that national wealth is enhanced by monopoly privileges.

Sincerely,

Donald J. Boudreaux

Professor of Economics

George Mason University

Fairfax, VA 22030

A Convenient Myth

Here's a letter to The Hill:

You report that "House Majority Leader Steny Hoyer (D-Md.) will tout the Democratic Party's domestic manufacturing agenda, including a bill that could lead to tariffs on Chinese goods.  In the speech to be delivered at the National Press Club, Hoyer will lament the decline in homemade goods during the last three decades and highlight Democratic efforts to promote 'Make It in America' policies as the November midterm elections draw closer" ("Hoyer to tout manufacturing agenda," Sept. 28).

It's shameful that a person with such a strong grasp on power has such a weak grasp on reality.  In 2008, the value of U.S. manufacturing output – measured in inflation-adjusted dollars – was 84 percent percent higher than it was in 1980.  In 2009, despite the severe recession, the real value of U.S. manufacturing output was still nearly 60 percent higher than it was three decades earlier.

Mr. Hoyer and the many other politicians and pundits who keep insisting that U.S. manufacturing is dying remind me of the soldier in Stephen Crane's The Red Badge Courage who warned his fellow troops with great assurance, but with no evidence, that the army was finally to decamp the following morning: "He came near to convincing them by disdaining to produce proofs."  The next morning the army remained in camp.

In fairness to these fictional soldiers, however, they – unlike Mr. Hoyer – had no access to overwhelming data that disprove their hallucinations.

Sincerely,

Donald J. Boudreaux

Some Links

Cato's Dan Griswold and Sallie James cogently explain that the so-called 'consumer-safety' bill "could boomerang against manufacturers.

Truth on the Market's Larry Ribstein, writing at Forbes.com, discusses the face of the financial crisis.

Susan Dudley (one of my favorite policy analysts) discusses the FDA and Sumo salmon.

In Econ Journal Watch, Jon Diesel explores economists' attitudes toward liberalized sales of human body organs.

Reason's Radley Balko does important work.

Those unintended consequences

Laws against texting while driving may lead to more accidents. (HT: Nick Delong)

People, Not Nations, Trade

Here's a letter to the New York Times:

The illustration accompanying Anatole Kaletsky's op-ed on the alleged inadequacy of market forces to govern international trade shows U.S.-bound Chinese and Japanese cargo ships loaded down with multitudes more goods than are being carried by the much smaller Asia-bound U.S. ship ("Blaming China Won't Help the Economy," Sept. 27).  The insinuation, supported by Mr. Kaletsky's essay, is that this pattern of exchange is both undesirable and will persist unless Washington intervenes more actively in international markets.

Please tell me why such a pattern of trade – with Americans routinely getting lots of imports in exchange for relatively few exports – is something to fear.  Shouldn't we celebrate it?  If as workers we strive to exchange each hour of work for the greatest possible number of goods and services – that is, strive to import ever-more goods and services into our households for each hour of work that we export from our households – why shouldn't we also want to get as many goods and services from foreigners in exchange for each dollar's worth of goods and services that we sell to them?

Exports are the price of imports, just as hours worked are the price workers pay for household income.  Why should we want to pay higher prices for the goods and services that we consume?

Sincerely,

Donald J. Boudreaux

Grinding Away at Protectionism

Here's a letter to the Washington Post:

Robert Samuelson joins the mob out to lynch Americans who buy Chinese products ("The makings of a trade war with China," Sept. 27).  This mad mob insists that taking advantage of good deals offered by Chinese producers is unwarranted because the Chinese renminbi is (allegedly) undervalued.

Suppose Bill Gates subsidizes his children's coffee shops, allowing the younger Gateses to charge prices for their java lower than they could otherwise profitably...

Home Runs at the WSJ

Here are three especially good items from the last two issues (Saturday's and today's) of the Wall Street Journal.

The first is Richard Rahn's eloquent explanation of supply-side economics; in it, Richard debunks several myths peddled by the likes of Paul Krugman.  A large slice:

Those of us who argued in the late 1970s and early 1980s for lower tax rates were often characterized as "radical supply-siders" and criticized for claiming that all tax-rate reductions lead to higher tax revenues...

Would You Really Shoot Someone for Smoking a Joint?

Kevin Williamson's brief essay on the legitimacy of force is beautiful and brilliant.  (HT Arnold Kling)

El Hombre

Here's a letter to the New York Times:

Your report on Venezuela's new state-owned cafes overlooks the many ill economic consequences that will be unleashed by these government enterprises and by the below-market prices that they so proudly charge ("Political Flavor Infuses Venezuela's New Cafes," Sept. 26).

For example, while it might be true that "The prices are intended to offer a respite from the country's rampant inflation," in fact these below-market prices will fuel Venezuela's inflation...