Russell Roberts's Blog, page 157
March 30, 2022
Bonus Quotation of the Day…
… is from page 141 of the late Stanford University economic historian Nathan Rosenberg’s 1991 paper “Critical Issues in Science Policy Research,” as this paper is reprinted in Rosenberg’s 1994 book, Exploring the Black Box: Technology, Economics, and History:
An important source of scientific progress, in advanced industrial societies, has derived from the attempt to deal with difficulties, unexpected problems, or anomalous observations that first arose in connection with new product designs or novel productive processes.
DBx: Yes.
Much of this scientific progress would have not occurred had the U.S. government followed the advice offered decades ago by the likes of Barry Bluestone, Robert Reich, and Felix Rohatyn to implement “industrial policy.” The reason is that government administrators in charge of designing and implementing industrial-policy schemes would have very often directed resources away from firms pursuing new product designs or novel productive processes, and toward firms producing familiar – or officially approved – products, and doing so using familiar or officially approved processes. The reason is that new products and novel productive processes are likely to be inconsistent with the industrial policy. Or, at least new products and novel productive processes – by their nature unfamiliar and having especially unpredictable consequences – would be viewed with suspicion by the mandarins charged with enforcing the industrial policy.
As noted in an earlier post, proponent of industrial policy will of course deny that their schemes are inconsistent with innovation and genuine economic change. And I suspect that these denials will be sincere. But these denials are the equivalent of someone who denies the impossibility of making a kosher ham sandwich. (Apologies to Russ Roberts.) The very essence of industrial policy is to give government officials the power to override the decisions of consumers, entrepreneurs, and investors in order to (attempt to) ensure that the resulting pattern of economic activities conforms to the pre-conceived vision and plans of the industrial-policy designers. A pre-conceived vision put in the form of a plan and coercively imposed simply cannot admit much, if any, genuine innovation.
Industrial-policy proponents will protest. “No!” they’ll insist. “We’ll permit innovations, but only those that will contribute to the furtherance of our vision.” Well, first, any such protest concedes that some innovation will be suppressed. Second, there is no way for industrial-policy advocates or government officials to predict the full consequences of any genuine innovation.
Suppose that in the mid-20th century the U.S. had in place an industrial policy meant to ensure no loss of manufacturing jobs in the U.S. Malcolm McLean then comes along with his innovative idea for container shipping. Containers are big metal boxes that must be manufactured. And so it’s quite plausible that the industrial-policy mandarins would have looked favorably upon this innovation and allowed it to move forward. So far, so good.
But of course one consequence – a consequence the magnitude of which wasn’t fully appreciated when McLean’s idea first arrived – turned out to be dramatically reduced costs of ocean shipping. The resulting lower cost of importing goods and component parts from abroad would in my hypothetical – as it did in reality – greatly increase the profitability of outsourcing much low-wage manufacturing processes from the U.S. to foreign countries. For the industrial policy to continue, government would have to squelch pursuit of these profits. The resulting political tensions would be great, not least because other countries with more reasonable governments would soon overtake the U.S. in being able to manufacture, export, and import at much lower costs.
Even if the industrial policy eventually wound up being ‘protected’ from the consequences of the earlier decision to allow Americans to manufacture large numbers of shipping containers, I suspect that surprise experiences such as this one would have put industrial-policy mandarins on high alert in the future against innovations. And as Nathan Rosenberg would predict, one unfortunate result would have been a decline in the U.S. of scientific progress.
Some Covid Links
The New York State Health Department’s large database shows the effectiveness of full vaccination (that is, at least two mRNA doses) remained above 90% against hospitalization, including during the recent Omicron surge. A study from Sweden found the same. Studies from Qatar and California showed no decline in protection against severe disease with Omicron.
Booster advocates point to other studies that show declining vaccine effectiveness over time, especially against Omicron. But these appear unreliable, reporting a range of results for vaccine efficacy against symptomatic disease from as high as 40% to 50% to as low as negative 40%.
Also advising skepticism of a fourth shot is Vinay Prasad. A slice:
In short, you cannot infer 4th vs 3rd dose reliably from these sorts of studies. Also there are downsides to more doses of the old, ancestral mRNA, such as original antigenic sin, which may hurt people when the Omicron on novel mRNA sequence booster comes out. Such people may keep mounting strong immune response to original spike, and not the modification.
Karol Markowicz sings the praises of Florida governor Ron DeSantis. A slice:
DeSantis was right and other governors were wrong. We could not hide from COVID. We could not pause living because of COVID. It was freedom he was championing, yes. But it was also life. The acceptance of that rightness, even acknowledging it, has been reluctant at best. Even as other states followed Florida’s lead, in similar or worse COVID circumstances, recognition of DeSantis being correct all along has been hard to find.
The governor of Florida made tough decisions in opposition to common thinking. In our era of conformity, this was not an easy call. His policies exposed how other states deeply hurt themselves and damaged their residents, children in particular, for no reason at all.
(DBx: I do not agree with everything that DeSantis does or says. I do not agree with all that DeSantis’s supporters do or say. But I believe that DeSantis was largely – and largely alone, among politicians, in being – correct on one of the biggest public-policy issues of my lifetime: Covid lockdowns, mandates, and other restrictions. In my book, Ron DeSantis’s refusal to join in the Covid hysterics – his wise decision to seek and take advice from Scott Atlas, Jay Bhattacharya, Sunetra Gupta, Martin Kulldorff, and Joseph Ladapo – forgives many sins.)
Aaron Kheriaty warns of the “bio-fascist state.” Here’s his conclusion:
Furthermore, these measures would require (1) law enforcement to enforce arbitrary, capricious, and often unscientific public health measures mandated by unelected bureaucrats, such as indoor masking requirements, (2) schools to become medical centers that routinely administer medical tests to your children without consent and share that private information with third parties without your knowledge, (3) the state to track and share private health information across government agencies, (4) the state to force novel medical interventions on all competent adults as a condition of working.
In these proposed laws we see the features I’ve sketched in previous posts on the Biosecurity Surveillance Regime unfolding around us: the welding of public health, digital technologies, and the police powers of the state into an invasive model of surveillance and control.
Philip Cowley decries Hong Kong’s Covidocratic tyranny. A slice:
If your goal has ever been to get locked in a room for weeks on end, then Hong Kong has become the place to be. The authorities would lock you up if you had Covid. They’d lock you up if you’d been close to someone who had Covid. At one point, they’d even lock you up if you’d been close to someone who’d been close to someone who had Covid.
You also got locked up just for getting into the country. You paid for the flight and the Hong Kong authorities would do the rest. Actually, that last bit wasn’t quite true: you had to book and pay for your room as well. But you get the point.
Brutal as it was — caring little for minor things like family separation or childcare — this system worked relatively well by its own standards until earlier this year. For extended periods there were no Covid cases at all and overall deaths remained low. But then Omicron broke through, as almost everyone knew it would: ironically, as the result of a cross-infection in a quarantine hotel, something the government had been warned about repeatedly.
During the Covid-19 pandemic, tribal politics have pushed scientific discourse into the back seat. Scientists who provide their honest assessment of medical and public health data have often been subject to ad hominem attacks and slander.
When Left-leaning journalists defend the government’s pandemic strategies by falsely classifying opponents as Right-wing, it hurts the Left while boosting the Right. The latest example is an article in the New Republic with one of the most far-fetched personal attacks we have seen since March 2020 — a true accomplishment during a pandemic filled with logical somersaults.
…..
The New Republic article is called ‘Why Is This Group of Doctors So Intent on Unmasking Kids?’ The straightforward answer is that the doctors concluded that there is no reliable scientific evidence that masks on children reduce disease spread alongside a strong presumption that they may harm some children. The New Republic dismisses this possibility, claiming that “the science is strong” that masks help to “quell the pandemic”, and that there is “‘little scientific disagreement”. The last point is self-evidently untrue given the participation by many eminent scientists in the Urgency of Normal itself.
The essay then goes full ad hominem, attempting to link Dr. Prasad to “libertarian” efforts by the Koch family to unmask children via a convoluted chain of supposed associations, each of which is weak and the combined effect of which is simply conspiracy (see below). It appears that the New Republic, once a fierce critic of Sen. Joe McCarthy, has now embraced McCarthy’s guilt-by-association techniques.
Dr. Prasad is an excellent epidemiologist, but to paraphrase the New Republic, it seems “that the days of listening to the epidemiologists are over”. They are not alone. The Daily Poster/Lever and Jacobin magazine have used similar ad hominem arguments to falsely “connect” lockdown opponents with the Koch network, falsely claiming that the two of us are “connected to Right-wing dark money”. Our closest and only financial “connection” to the Koch Network is to have worked for universities, Stanford and Harvard, which have received millions of dollars from Koch foundations, although unrelated to any of our own work.
…..
Views on pandemic strategies do not map onto a simple Left/Right binary. In the United States, Dr Anthony Fauci’s lockdowns were implemented by both Republicans and Democrats, generating enormous collateral damage toeducation, cancer, cardiovascular disease, vaccination rates, mental health, and hunger, to name a few malign outcomes. More often than not, members of the working class were the hardest hit. In Europe, the social democrats in Sweden chose not to copy Fauci’s response to the pandemic. One contributing factor may have been that its prime minister came from the working class, having started his career as a welder.
Classifying those like Dr Prasad as “Right-wing” for taking different views on pandemic restrictions is only damaging to the Left. Instead of permitting the Right to claim full credit for opposing misguided Covid policies, the Left should rightly claim some of that credit — Dr Prasad is, after all, on the Left himself. Instead, publications like the New Republic seem intent, not merely on smearing scientists instead of learning from them, but on driving reasonable men and women to the Right.
Quotation of the Day…
… is from page 20 of Deirdre McCloskey’s 2021 volume, Bettering Humanomics: A New, and Old, Approach to Economic Science:
Some definitions and their corresponding theorems are wise and helpful, some stupid and misleading. The humanities, and the humanistic step in any science, study such questions, offering more or less sensible arguments for a proposed category being wise or stupid, in advance of the counting or comparison or other factual inquiry into the world. The humanities are the study of the human mind and its curious products, such as John Milton’s Paradise Lost or Mozart’s Concerto for Flute and Harp (K. 299) or the set of all prime pairs or the definition of GDP. The studies depend on categories, such as enjambed/run-on lines or single/double concerti or prime/not-prime numbers or marketed/unmarketed products, such as we humans use. God doesn’t tell us. We do.
DBx: In no science do “the data” ever speak for themselves, and in the social sciences “the data” standing alone are especially prone to utter only unharmonious gibberish. As Deirdre says, we humans must make judgments about how to classify phenomena. If such classifications are unwise, all the data and number crunching will be, at best, pointless, and often positively menacing.
What, for example, is the meaning of “manufacturing jobs”? Jobs classified as “manufacturing” are counted very precisely. Is a truck driver employed by the steel-maker Nucor Corp. a manufacturing worker? Is this truck driver still a manufacturing worker if Nucor decides to no longer produce in-house its own delivery services but instead to purchase such services from another firm who then hires this driver to help it satisfy its contractual obligations to Nucor? Same flesh-and-blood human being performing the same physical tasks.
What about measures of economic inequality? What is income? Does it include fringe benefits? If so, what are fringe benefits? Are well-stocked employee kitchens a fringe benefit? What about company-sponsored happy hours on Friday evenings? And whatever we choose to classify (and not classify) as income, should we measure income difference across flesh-and-blood individuals? Families? (What’s a family?) Households? (What’s a household?) Why not only measure income differences of workers of the same age? (And who, exactly, should be classified workers?) How relevant are income differences within countries? Or across countries?
And why is income – or wealth – measured in money so important? Why not measure instead actual consumption by individuals or households of goods and services? (“Oh, monetary incomes – or differences in monetary wealth – you see, are easy to measure and quantify. Doing so is much easier than measuring actual consumption of goods and services.” Well, yes. And while ease of measurement is an important consideration, surely classes of phenomena don’t become relevant or helpful simply because they are easily measured.)
Measure, count, calculate – by all means. These processes are vital tools for improving our knowledge and understanding. But don’t do so mindlessly. Don’t suppose that just because you’ve laid your hands on a large – a “Big” – data set, and then processed and regressed those data to generate calculations out to six numerals to the right of the decimal point, that you are necessarily doing science and that your results are meaningful and important. Your results might be meaningful and important, but, if so, they are not made so of their own accord. To do science correctly, serious theorizing is required. Required also is the exercise of good judgment. And to develop good judgment one must do far more the ponder data and methods of data processing.
March 29, 2022
Some Non-Covid Links
Samuel Gregg ponders the influence of classical liberalism. A slice:
On the left, illiberalism reigns in the form of cancel culture, wokeness, disdain for the Western civilization from which classical liberalism emerged, the propagation of junk history like the 1619 Project, disinterest in rule of law, and an ongoing desire to use the state to engage in extensive social engineering. Meanwhile on the right, there has been serious regression towards forms of economic interventionism not so different from policies long advocated by the left. Some conservatives also want to use government power in ways that indicate an illiberal impatience with due process and constitutionalism’s checks and balances.
In a way, these conditions represent a return to normalcy. Classical liberalism’s influence has always been uneven during the best of times. One reason for this is classical liberalism’s longstanding difficulty in sustaining the type of mass support that translates into political power in democratic systems.
The Wall Street Journal demystifies California’s high gasoline prices.
Clifford Thies reports on land ownership by blacks following emancipation. A slice:
Yes, following emancipation, black land ownership increased in the rural South, in some states dramatically. This history was first developed by Robert Higgs in his magnificent work Competition and Coercion: Blacks in the American Economy 1865-1914 (Cambridge, 1977). Higgs examined the pattern in Georgia. Robert Margo examined several other states (but see Higgs’ rejoinder regarding certain details).
The pattern is actually quite general, and not only in this country but in other places where sharecropping emerged. When land is rented via sharecropping (in which rent is paid with a fraction, often one-half, of the crop), the more diligent farmers do well (as do their landlords). These more diligent farmers tend to come to be owners of land (not necessarily the land they had worked as tenant farmers); and, it was not unusual for the pattern to repeat itself from one generation to the next. That is, for the tenant farmers of one generation to become the landlords of the next generation.
Eric Boehm reports on the Buffalo Bills bilking taxpayers.
Peter Suderman describes Biden’s new proposed tax on wealth as “a desperate policy gimmick by a White House struggling with low approval numbers on the economy.” Here’s Suderman’s conclusion:
Biden is willing to make an obvious phony of himself, embracing a policy he knows is punitive, divisive, unworkable, and virtually certain not to pass—and he’s willing to do so simply to get attention. Not only is Biden not a moderate, he is evidently not trustworthy either.
Also unimpressed with Biden’s proposed wealth tax is economist Allison Schrager. A slice:
Textbook economics argues that wealth taxes are the most distortionary and least efficient of all taxes. Governments need to raise revenue somehow, ideally via taxes that are relatively easy to collect and don’t alter behavior too much by, for example, discouraging people from working or investing. It follows that consumption taxes are efficient, since consumption (spending) is easy to observe, and people need to do it. Income taxes have become relatively easy to collect information on, since most employers need to share pay data with the IRS, and they don’t discourage work at low to moderate income levels. But it’s hard to observe wealth: the IRS does not collect information on it, many assets held by rich people are tricky to value (such as fine art), and the value of wealth can be volatile (consider the Bitcoin millionaire). Taxing wealth also encourages people to shift their assets abroad or into difficult-to-value assets, or simply to understate what their wealth is worth. Many European countries have given up taxing wealth, and those that do impose wealth taxes derive only a small share of revenue from them.
But the Biden administration is undeterred. Its Billionaire Minimum Income Tax would force households worth more than $100 million to pay a 20 percent tax on all their income, including unrealized capital gains on at least their liquid assets. For example, if your stock portfolio went up $100,000 last year, you’d pay $20,000 on that increase, whether or not you sold any stock. How the IRS will determine which households are worth $100 million is unclear; the agency does not have the capabilities or manpower to do such a thing. And considering the volatility of markets, on what day would this income be assessed? If you lose money, do you get a credit? Why is it called a “billionaire’s tax” when it applies to millionaires, too? What types of assets will be subject to it? So far, no answers have been given to these questions, likely because no good ones exist.
Randy Holcombe asks if voters make poor choices.
Bryan Caplan gets to the root of ineffective altruism.
Barton Swaim reviews William Novak’s New Democracy. A slice:
That point has been made before, most recently in David Bernstein’s “Rehabilitating Lochner” (2011), and it is a fair one. Conservative jurists differ sharply over whether Lochner was rightly decided. (Antonin Scalia, for example, thought it a dreadful decision, however stupid the law it struck down.) Mr. Novak’s description of the case itself, though, suggests a broader failure to query his own optimistic assumptions about state power. “The New York Bakeshop Act,” he writes, “was a quintessential state police power regulation and progressive reform aimed at ameliorating sanitary and health conditions in fetid bakeries and establishing maximum hours for laborers at a ten-hour day and sixty-hour workweek.” Was it, though? The Bakeshop Act had been backed in the state legislature by large bakeries and their unions as a way to cripple smaller family-owned competitors. The law’s public-safety packaging was strategic, as such regulations so often are.
Pittsburgh Tribune-Review: “Serfdom looms”
In my column for the May 22nd, 2012, edition of the Pittsburgh Tribune-Review I decried the U.S. government’s greedy hand and its attempt to treat Americans as its serfs. You can read my column in full beneath the fold (link added).
Some Covid Links
Writing in Spiked, Martin Kulldorff and Jay Bhattacharya decry the “tragic folly of lockdown.” Four slices:
The media have also been tripped up by several significant variables. For example, the pandemic arrived and surged at different times in different countries, and even within countries – as you would expect from any pandemic. During the first wave in 2020, some countries were praised for their strict lockdowns and low Covid mortality, but subsequent waves hit some of them so badly that they now have among the highest mortality numbers in the world.
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Extreme Covid restrictions, such as those imposed by Australia, Hong Kong and New Zealand, certainly kept the virus at bay for a while. But that just postponed the inevitable. All countries have to work their way through the pandemic sooner or later.
Moreover, the focus on Covid cases, death counts and so on, ignores the collateral public-health damage from Covid restrictions. These have contributed to deaths from other diseases, and such deaths are just as tragic as Covid deaths. A basic public-health principle is that one should never focus on one single disease but consider public health as a whole. Even if the lockdowns reduced Covid mortality, for which there is scant evidence, one must also consider the harm that the lockdowns caused on other health conditions such as worsening cardiovascular-disease outcomes, missed cancer screening and treatment, lower childhood-vaccination rates, and deteriorating mental health.
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In Western Europe, the Scandinavian countries had the lightest Covid restrictions while they tried to protect their older high-risk population. Sweden was heavily criticised for this by the international media. The Guardian, for instance, reported in 2020 that life in Sweden felt ‘surreal’, with ‘couples stroll[ing] arm in arm in the spring sunshine’. Many journalists, politicians and scientists expected that the lighter Scandinavian touch would lead to disaster. That did not happen. Sweden has among the lowest reported Covid mortality numbers in Europe. Of the European countries with more than one million people, Denmark (94), Finland (81), Norway (7), and Sweden (91) are four of only six countries with excess mortality less than 100 per 100,000 inhabitants, the other two being Ireland (12) and Switzerland (93).
What about the UK, with its more heavy-handed Covid restrictions? Compared to the Western European average of 140 excess deaths per 100,000, England had 126, Scotland 131, Wales 135, and Northern Ireland 132.
In the US, South Dakota imposed few Covid restrictions, while Florida tried to protect older people without too many restrictions on the general population. Did that result in the predicted disaster? No. Compared to the national average of 179 excess deaths per 100,000, Florida had 212 while South Dakota had 156.
…..
The biggest weakness of excess-mortality statistics is that while they count Covid deaths, they do not fully capture the deaths, not to mention the collateral public-health damage, that come from Covid restrictions themselves. Missed cancer screenings and treatments do not lead to immediate deaths, but a woman who missed her cervical cancer screening may now die three or four years from now instead of living another 15 or 20 years. The mortality statistics do not reflect non-fatal collateral damage such as increasing mental-health problems or missed educational opportunities, either. Those harms need to be tallied and addressed in the years to come.
Politicians argued that the draconian lockdowns were needed to protect lives. From the excess-mortality data, we now know they were not. Instead, they have contributed to the enormous collateral damage that we will have to live with for many years to come. It is tragic.
In her classic book, The March of Folly, historian Barbara Tuchman describes how nations sometimes pursue actions contrary to their interests. She starts with Troy and the Trojan horse and ends with the US and the Vietnam War. By ignoring basic, long-standing principles of public health during the pandemic, most nations marched down the path of folly together. The leaders of those nations will be fine, except for some early retirements. The devastation on children, the poor, the working class and the middle class, on the other hand, will take decades to repair.
We argue that the policy response to the COVID-19 pandemic by all levels of government around the world is not consistent with recommendations from standard welfare economics. Thus, it is important to ask why such policies have been adopted. That opens the door to examining the political economy of the COVID-19 pandemic. This requires examining the incentives and information that confront policymakers and voters and the institutional environments that shape their incentives and information. This lead article frames questions addressed in the remainder of the symposium.
Here’s a slice from the paper:
One of [Ronald] Coase’s fundamental contributions in the Problem of Social Cost (1960) was to illustrate the reciprocal nature of externalities.6 The activities of the young and healthy impose a negative health externality on the old and infirm. But it is equally true that if the activities of the young are restricted because of the presence of the old and infirm, this latter group has imposed a negative externality on the young and healthy. If transactions costs were low, the Coase theorem would dictate that it would not matter to which party the rights to activity or restriction were assigned, as bargaining would reach the efficient outcome. However, in the case of COVID-19, and large populations, it is quite clear that transactions costs of bargaining would be prohibitive. Thus, the standard law and economics approach would recommend assigning rights such that the least cost mitigator bears the burden of adjusting to the externality. In the case of COVID-19, it is clear that the low opportunity cost mitigators are the old and infirm. Thus, Coasean economics would recommend allowing the activities of the young and healthy to impose externalities on the old and infirm, not the other way around. Lockdowns and stay at home orders get the allocation of rights exactly backwards and result in large inefficiencies because costs are disproportionately borne by the high cost mitigators. However, a welfare economist would not stop the analysis at this point, because there remains a large externality causing an inefficient outcome. Standard welfare economics just does not recommend correcting the externality by locking down and issuing stay at home orders as governments around the world did in March and April 2020 and are doing again in the winter months.
And here’s the conclusion drawn by Noah Carl from Pete’s and Ben’s paper:
In the short-term, therefore, politicians and public health officials were pursuing their own interests when they decided to lock down. They didn’t want to be punished by the voters for ‘not acting’, and recognised that the costs of lockdown would come later, by which time they’d be out of office – a textbook case of government failure.
A society grounded on “social distancing” is a contradiction—it’s a kind of anti-society. Consider what happened to us, consider the human goods we sacrificed to preserve bare life at all costs: friendships, holidays with family, work, visiting the sick and dying, worshipping God, burying the dead.
“The French are rebelling against petty Covid mask rules.”
Susan Julians, writing in the BMJ, questions the wisdom of lockdowns. (HT Jay Bhattacharya) Here’s her wise conclusion:
If we [in Britain] had not locked down for as long in the first wave, chasing an impossible zero covid dream, I would suggest that our most vulnerable to covid would have been less affected by the increase of frailty, and some would not have suffered the torture of dying alone. For our children, an earlier return to school may have helped prevent the loss of 100,000 ghost children, the huge rise in mental and physical ill health (as seen in the control group of the CLoCk study) in addition to limiting learning loss.
The largest assumption, that Zero Covid was a valid strategy, at any point, needs to be thoroughly and forensically challenged.
Quotation of the Day…
… is from pages 53-54 of the late Stanford University economic historian Nathan Rosenberg’s excellent 1992 paper “Joseph Schumpeter: radical economist,” as this paper is reprinted in Rosenberg’s 1994 book, Exploring the Black Box: Technology, Economics, and History:
It is, of course, difficult to imagine a more profound rejection of neoclassical economics than is embodied in Schumpeter’s forceful assertion that the most important feature of capitalist reality – innovation – is one to which rational decision-making has no direct application. The nature of the innovation process, the drastic departure from existing routines, is inherently one that cannot be reduced to mere calculation, although subsequent imitation of the innovation, once accomplished, can be so reduced. Innovation is the creation of knowledge that cannot, and therefore should not, be “anticipated” by the theorist in a purely formal manner, as is done in the theory of decision-making under uncertainty. In Schumpeter’s view, it would be entirely meaningless to speak of “the future state of the world,” as that state is merely unknown, but also undefinable in empirical and historical terms.
DBx: Schumpeter’s insight that entrepreneurial innovation is part of the essence of capitalist reality is, I believe, indisputable. But if you’re tempted to dispute this insight, take stock of your immediate surroundings – your clothing; the roof, floors, and walls that surround you and that hide dozens of feet of wires and pipes that bring electricity and potable water, and whisk away filth; the nearby appliances; the very device you’re now using to read my words. These and nearly everything else that you encounter throughout the day in modern society are the results of innovation. Lots of innovations. Creative insights tested in markets.
Proponents of industrial policy mistakenly fancy that they, or the government officials in charge of industrial policy, can either see the future or can craft a future that works better than the future that emerges through competitive market processes. Yet neither of these fancies is realistic. Innovation by its nature is creative; it cannot be anticipated in meaningful detail. Nor can innovation be planned. To the extent that industrial policy is used, innovation must be crushed, for to allow innovation would be to allow disruptions to the industrial-policymakers’ plans. And given that the whole purpose of industrial policy is to turn the economy into what is envisioned by industrial-policy advocates, such a policy is inherently hostile to genuine innovation – and, hence, industrial policy is inherently hostile to the principal source of modernity’s high standard of living for the masses.
There is simply no way to have both industrial policy and innovation. Industrial-policy advocates will, of course, deny the truth of the previous sentence. They will say that innovation will be permitted – indeed, perhaps even accelerated – by their schemes. But these protests will be mere words, grammatically correct and perhaps soaring in their expressed aspirations. But just because someone can say “two plus two equals ninety-eight” does not mean that that someone can arrange for two plus two to equal anything but four.
March 28, 2022
There Is No Saving the Case for Industrial Policy
Mr. W__ alleges that my opposition to industrial policy “must be explained only by [my] dogmatic faith in the magic of imaginary free market forces.”
Mr. W__:
You write, in support of industrial policy, that “[t]here is no guarantee that we’ll get optimum comparative advantage under the free market.”
Of course not. Nothing in life, save death, is guaranteed. That standard is inappropriate because meeting it is impossible. The relevant question here is this: Under which policy – free markets or government direction – are individuals as producers most likely to discover, and be able to take advantage of, opportunities to specialize in ways that maximize their prospects for leading lives that are as fulfilling as possible?
I submit that the answer to this question is free markets (with, of course, free trade). My reasons are many. Here are only two.
First, no one is in as good a position as is each individual to judge well for himself or herself what sorts of productive talents are best for him or her to develop and use. What makes you think that mandarins charged with designing and implementing industrial policy know, or can possibly know, what are the ‘optimum’ jobs and professions for each of hundreds of millions of workers?
Second, what makes you think that even if these mandarins were blessed with the knowledge of gods that they’d use this knowledge as would angels? I’m aware that Oren Cass does not find public-choice arguments to be compelling, but I’m at a lost to understand why he – and, I assume, also you – think this way. The fact that we can imagine government officials and voters sacrificing their own welfare for the sake of the general welfare is true but trite, for we can also imagine private business persons and consumers making such sacrifices. Yet I doubt that you’d find compelling any plea for laissez faire grounded in the claim that business people and consumers will generally act in ways that promote the public good even when doing so runs counter to their own self-interest.
I trust people in the market to act in pro-social ways because, being unable to coerce others, they can improve their own well-being only by helping others improve their well-being. But I distrust these same people to act in pro-social ways if they are given the power to coerce others. “Do as I demand or I’ll shoot you” conduces to far fewer mutually beneficial outcomes than does “Do as I ask and I, in return, will do as you ask.” My conclusion here relies on no belief in magic.
It won’t do here to recite grade-school declarations about how democratic voting binds government officials to the task of carrying out the will of the people. It doesn’t, not least – yet not only – because there is no meaningful “will of the people.” Read Kenneth Arrow. Read James Buchanan. Read Anthony Downs. Read Gordon Tullock. Read George Stigler. Read Bill Niskanen. Read Bob Tollison. Read Richard Wagner. Read Dwight Lee. Read Bob Higgs. Read Bruce Yandle. Read Randy Holcombe. Read Geoff Brennan and Loren Lomasky. Read Bryan Caplan. Read Christopher Achen and Larry Bartels. The notion that regular, fair elections with a wide franchise are sufficient, even when supplemented with an honest and independent judiciary, to ensure that politicians and bureaucrats can be trusted to use discretionary power to promote the public interest is, frankly, bonkers.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
Pittsburgh Tribune-Review: “Cleansed by capitalism”
In my column for the May 9th, 2012, edition of the Pittsburgh Tribune-Review, I struck one of my favorite themes: Capitalism cleans rather than dirties the environment. You can read my column beneath the fold (link added).
Some Non-Covid Links
Judge Ketanji Brown Jackson may not be an originalist, but she sounded like one in her confirmation hearings this week. “I believe that the Constitution is fixed in its meaning,” she said on Tuesday. “I believe that it’s appropriate to look at the original intent, original public meaning, of the words when one is trying to assess because, again, that’s a limitation on my authority to import my own policy.”
Even a nominee chosen by a Democratic president and facing a Democratic Senate felt it was necessary to say that she would adhere to the original public meaning of the text. To appreciate the significance of this development requires a bit of history.
Robert Bork described himself explicitly as an “originalist” when President Reagan nominated him to the high court in 1987. Democratic senators characterized originalism as a dangerously reactionary philosophy that would “turn back the clock” on civil rights and liberties. After the Senate rejected Bork, no Republican nominee adopted the label “originalist” until Neil Gorsuch, 30 years later. Since 2017, however, Brett Kavanaugh and Amy Coney Barrett also explicitly identified as originalists.
Caroline Breashears offers a helpful guide to 2022 Newspeak. A slice:
Capitalism: This word is the magic eraser of arguments. It wipes away any opposing argument by evoking images of bankers wearing top hats and monocles, all the better to see their filthy lucre. If your teachers’ union wants a raise, just yell, “Our fight is against capitalism.” No one will realize that you’re the one after money.
Justice: This word is the butter of arguments. It makes any demand palatable because it is accompanied by something everyone knows is pleasing. When an educator uses the term “grading justice,” we know it’s fabulous. Why assess learning with uniform standards when you can achieve political goals using children?
I was very happy to be again a guest on Amy Jacobson’s and Dan Proft’s radio show.
David Henderson reviews the revised edition of Steven Rhoads’s The Economist’s View of the World. A slice:
One of the first principles I taught my students in my economics courses was the power of “thinking on the margin.” Appropriately, Rhoads has a chapter titled “Marginalism.” He points out that many people think of medical care as something that everyone needs and they fail to think about the components of health care. Few would deny that a person with acute appendicitis needs an appendectomy, but many other forms of health care are not so clear‐cut. Do I “need” to have two checkups every year or would one do? People’s answers to such questions, notes Rhoads, depend on how much of the cost they bear. He describes one experiment in which a group of beneficiaries of Medi‐Cal (California’s Medicaid program) had to pay $1 for their first two office visits each month. Another group did not have to make this small co‐pay. The result? Office visits for the first group were 8% lower than for the second group. Time costs matter, too, because those are borne totally by beneficiaries. Rhoads notes that when one college’s health facility was moved so that it took students 20 minutes to get there rather than the previous 5–10 minutes, student visits fell by almost 40%! What Rhoads doesn’t say but clearly must be thinking is that when people cut back on their health office visits, they are cutting back on the least important visits — that is, the marginal ones.
He ends the chapter by noting Nobel economics laureate James Buchanan’s claim that you can distinguish between economists and non‐economists by their reaction to the statement, “Anything that’s worth doing is worth doing well.” Economists point out that we don’t need to do everything well. So‐so works in many instances. I don’t completely sweep around our two kitty litter boxes every morning, for example. Sometimes I wait a day, and that’s good enough.
(DBx: I believe that the economist who most famously disputed the wisdom of the ‘Anything that’s worth doing is worth doing well’ aphorism is Gordon Tullock, not Jim Buchanan – although Buchanan certainly agreed.)
Here’s Robby Soave on Vladimir Putin on J.K. Rowling.
Juliette Sellgren talks with Lauren Hall about the medicalization of birth and death.
Arnold Kling’s understanding of human rationality and decision-making is deep. Here’s his rational – and wise – conclusion:
But when economy-wide inflation breaks out, there is disagreement even among credentialed economists over its causes and treatments. I believe that the inflationary course was set by President Trump’s policies. But that does not mean that those who voted for Mr. Trump in 2016 will say to themselves “Aha. I was wrong.” Perhaps they would say that, all things considered, they still think that Mr. Trump was the right choice. And even if they were to view their 2016 vote as an error, what correction should they make now? When it comes to inflation, switching to the Democrats, whose policies probably made inflation worse, is hardly the answer.
In short, I believe that collective choice means bad choice. We treat voting as a sacred ritual. Then we elect officials who scare us into handing more decisions over to government. We put unwarranted faith in our right to vote, while letting too many of our other rights get taken away.
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