Russell Roberts's Blog, page 158
March 28, 2022
Some Covid Links
For example, a Feb. 23 Bloomberg Green report opened this way (emphasis added): “With President Joe Biden’s signature environmental legislation indefinitely stalled, progressive Democrats and activists are lobbying the White House to declare a ‘climate emergency’ to unlock executive powers. The tactic could allow Biden to shut down crude oil exports, suspend offshore drilling, and redirect funding for clean energy projects.” It is even regarded as a “tactic” to have their highly unpopular policy preferences forced on people.
If legislatures and courts fail to rein in this practice, the only limits to its use will soon be the extent of the unchecked executive’s imagination. A declared “gun violence emergency” could portend severe restrictions on Second Amendment rights. A “hate speech emergency” could unleash a rash of unimaginable censorship, not just against individuals but against publishers, advertisers, etc., and especially churches. Some leaders have no qualms about pressuring or colluding with banks, credit providers, social media, other businesses, even employers to compel people to act in compliance with their wishes. What about an “affordable housing emergency?” There’s nothing in the Bill of Rights that couldn’t be set aside.
So even as mandates fall and COVID recedes, we cannot slumber while government has broken out of its pen. Maybe now it’s tamely wandering about the yard, but that doesn’t mean the beast is harmless. Now is the time to return it back within its constitutional confines, check the enclosure for structural weaknesses, and fix the locks before it grows restless again.
Luke Johnson tweets: (HT Jay Bhattacharya)
Lockdowns were an egregious example of bureaucrat megalomania on the rampage. State functionaries get their thrills from such exercise of power. They gave no evidence for the effectiveness of lockdowns, no cost/benefit analysis. Now societies are paying the awful price.
Vinay Prasad decries the arrogance of Biden’s White House. Here’s Dr. Prasad’s conclusion:
In short, the White House is not your doctor, yet they have decided they will act as such. This is a dangerous precedent. The American people will soon be participating in an uncontrolled clinical trial of 4th and 5th doses, possibly with coercive mandates. Not having an advisory committee is a threat to public health. This decision does not bode well.
The straw man continues his destructive and tyrannical reign in China.
Bigotry on the part of American public health explains why it insisted on the devastating school closures. They disdain experts who do not share their narrow “leftist” (actually pro-laptop class) political views and accept ad hominem smears to dismiss valid points from critics.
Alex Washburne tweets (and, of course, means by “liberal,” “progressive”): (HT Jay Bhattacharya)
COVID has revealed to me, a lifetime liberal, the extent to which liberals occupy a moral & informational bubble of their own design.
They wonder why they can’t win on climate change or COVID, and they see the fault of partisanship as entirely the GOP’s fault.
Continuing the mandates will hobble businesses that are already struggling to fill vacant positions. The city-worker mandate has resulted in 1,430 employees, including essential workers such as police, firefighters and teachers, being laid off. Thousands more city workers await rulings on their exemption applications.
Quotation of the Day…
… is from page 186 of Joseph Epstein’s 1999 book, Narcissus Leaves the Pool:
I don’t mean to sound like a University of Chicago economist, but perhaps no better forcing house for talent exists than the marketplace.
DBx: Unquestionably so. Yet very many policies – in place and proposed – thwart the marketplace’s capacity to spark, intensify, polish, and productively channel talent.
For instance: Protective tariffs and subsidies. These policies reduce competitive pressures on entrepreneurs, investors, managers, and workers. Talent is dimmed. Many innovations that would create new goods and services, or that would that reduce the amount of resources used to produce existing goods and services, never happen, or happen later than they would have happened absent the tariffs or subsidies. This preemptive elimination or delay of innovations cannot be measured with any accuracy, for that which doesn’t happen is unseen. Visible, measurable, actual reality might then appear to ‘work’ just as the proponents of tariffs and subsidies predicted. “Look! See the manufacturing jobs?! See the high wages earned by manufacturing workers?! See here on our shores the gleaming factories churning out microchips, steel, home appliances, and automobiles?! See the fall in our trade deficit?! Isn’t it wonderful?! See how industrial policy works?! And you ideology-blinded market-fundamentalist no-think neoliberal economists said that we industrial-policy advocates are mistaken! Ha! Shows what you know!”
March 27, 2022
Bonus Quotation of the Day…
… is from page 184 of Thomas Sowell’s March 19th, 2001, essay in Capitalism Magazine – an essay titled “Forced to Volunteer” – as this essay is reprinted in Sowell’s 2002 collection, Controversial Essays:
The term “liberal” originally referred politically to those who wanted to liberate people – mainly from the oppressive power of government. That is what it still means in various European countries or in Australia and New Zealand. It is the American meaning that is unusual: People who want to increase the power of government, in order to accomplish various social goals.
Typical of what liberalism has come to mean in the United States today is a proposal by California Governor Gray Davis that the state’s colleges and universities make “community service” a graduation requirement. His plan immediately won the unconditional support of the state’s largest newspaper, the liberal Los Angeles Times. There was no sense of irony in its editorial claiming beneficial effects for “students who are forced to volunteer.”
Forced to volunteer. That is the Orwellian notion to which contemporary liberalism has sunk.
Some Covid Links
When governments and the media mislead people in order to scare the hell out of them – whenever governments and the media deceivingly insist that strangers going about ordinary affairs of life are likely to kill you and your loved ones – whenever governments and the media massively obstruct people’s ability to earn livings, to socialize, and to do all the things that people are accustomed to doing – whenever these obstructions and other panicked interventions empty store shelves, inflate inflation, and generally make life much less pleasant and much more uncertain, this outcome is predictable.
Writing at National Review, Carine Hajjar applauds MIT’s sensible approach to masks.
Dorothy Chan decries Hong Kong’s deranged pursuit of zero Covid. A slice:
The ‘Zero-COVID’ plan attempts to stop the spread of COVID-19 through strict border restrictions, social distancing rules, mandatory testing and vaccination, and lengthy quarantine times. Chief Executive Lam asserted that “existing laws would not stand in the way” of their pandemic strategy, but this relentless pursuit to eliminate COVID hinders basic freedom of movement and disrupts business operations. Meanwhile, corporate leaders and staff question if Hong Kong is still an attractive city in which to do business.
The New York Post‘s Editorial Board calls for a permanent end to all Covid restrictions. A slice:
The test going forward: As case numbers climb, the city and state should do . . . nothing.
But Adams and Hochul — taking their cue from federal health bureaucrats, despite their dismal record these last two years — still say the loosening of restrictions is conditional on future case numbers staying low. That’s precisely the wrong attitude.
Case numbers are not going to stay low. But bringing back restrictions won’t do anything.
We’re now more than two years into COVID. Over that period, New York tried every restrictive measure short of China-style “don’t leave your home” tactics to “slow the spread.” And not a one had a notable effect on our COVID outcomes.
TANSTAFPFC (There Ain’t No Such Thing As Free Protection From Covid.)
Debbie Lerman calls on Philadelphia’s art institutions to drop their Covid mandates.
The Daily Mail continues its clear-headed investigation of Covid measures. Two slices:
Today, in the final part, we talk to the growing number of experts who say that lockdowns had little benefit – a cure that was worse than the disease.
One of them is Professor Mark Woolhouse, an epidemiologist at the University of Edinburgh, who has recently published a book, The Year The World Went Mad, about the UK’s pandemic policy failures.
Speaking this week on The Mail on Sunday’s Medical Minefield podcast, Prof Woolhouse said: ‘I think that lockdown will be viewed by history as a monumental mistake on a global scale, for a number of reasons.
‘The obvious one is the immense harm the lockdown, more than any other measure, did in terms of the economy, mental health and on the wellbeing of society.
‘Clearly things needed to be done to bring waves of infection under control.
‘But many analyses suggest that lockdown itself didn’t have a huge impact on reducing the health burden. That was achieved in other ways.’
…..
A recent inquiry by officials in Sweden into the handling of its pandemic – where there was no lockdown and the population was expected to voluntarily follow ‘advice and recommendations’ – found this reliance on people’s behaviour was ‘fundamentally correct’.
Lockdowns across Europe were also neither necessary nor defensible, the report added.
Will Lloyd, writing at UnHerd, looks back on Britain’s experience (so far) with Covid and Covidocrats. Three slices:
Loo paper soon begins to disappear nationwide. [Matt] Hancock is rolled out — he was always being rolled out, like a new carpet to be trodden on — into a breakfast TV studio to deny that the Government wanted to massacre the Grannys. “Our goal is to protect life and our policy is to fight the virus.”
Then Neil Ferguson releases his controversial paper. It claims hundreds of thousands will die if Britain is left to take the virus on the chin. Sage advises the Government to embark on a full lockdown that day.
It arrives on 26 March 2020, as Covid cases double every 72- hours. Between 89% and 94% of the public support lockdown. And the Grannys? Care home deaths accounted for 40% of Covid-19 deaths in England and Wales during the pandemic.
Like other ministers, after the passage of the Coronavirus Act, Hancock develops war fever. “Our generation has never been tested like this”, he writes to a nation frantically, pointlessly washing its hands. “Our grandparents were, during the Second World War, when our cities were bombed during the Blitz… they pulled together in one gigantic national effort.” The allegory is both ugly and lazy, but Britain is a country where poppies are made to wear poppies.
Prince Charles opens the first Nightingale Hospital at the ExCel centre in London. He says the Nightingale “will be a shining light”. The hospital is constructed in nine days, and holds 500 extra intensive care unit beds. (For every hundred thousand members of the population the UK has 7.3 intensive care beds — less than Spain, Greece, and Estonia. This lack of provision will mean more deaths.)
More Nightingales open across the country. They cost the taxpayer 500 million pounds. Only three of the seven hospitals end up treating patients. They are described by one MP as a “massive white elephant conjured up by Matt Hancock to create a good headline”.
…..
Hancock always looks caught between a giggle and a sob. A new round of Covid restrictions makes casual sex illegal. Or at least that’s how Sky News’ Kay Burley interprets the guidance when she interviews him about it. “You are saying that no social distancing is needed in established relationships,” she notes. “But what about people who are not in an established relationship?”
The Health Secretary, embracing his role as national sex cop, confirms that Government rules do ban shagging someone who is not your normal partner. Apropos of nothing, he adds that, fortunately “I’m in an established relationship”.
…..
The number of children referred for specialist mental health help rises above one million for the first time in 2021. Cases involving those 18 and under increase by 26% during the pandemic. The Royal College of Psychiatrists warns it is “becoming an impossible situation to manage”.
People, including Hancock, like to talk about learning the lessons of the pandemic. So we can prepare better for the next one. They don’t realise that between the million mentally hamstrung teenagers, the NHS waiting list hitting 9.2 million within two years, an endless backlog of cases in criminal courts, and inflation, that the pandemic hasn’t ended yet. It’s barely started.
Quotation of the Day…
… is from page 387 of Lionel Shriver’s marvelous 2016 dystopian novel, The Mandibles:
After all, ever think about what the federal government does? Takes your money and gives it to someone old. That’s about it. Oh, and then the feds do expend an awful lot of energy interfering with anything you want to do.
March 26, 2022
Also Misunderstands Comparative Advantage
Pardon the wonkiness, but this point is an important one to get correct in discussions of the economics of trade and of trade policy.
Mr. W__:
You write: “Ricardo’s theory of comparative advantage is bedrock for the market fundamentalist case for free trade. But [Oren] Cass is unquestionably right that Ricardo [in explaining comparative advantage] assumed that capital stayed at home. That is a big reason why classical economists would object to the globalization we’re in today.”
I’m afraid that Oren’s and your understanding of Ricardo is no more valid than is his and your understanding of Adam Smith.
To explain comparative advantage, Ricardo did indeed assume that capital is not invested abroad. But he made this assumption to demonstrate that even when, say, Portugal can produce all goods using fewer resources for each good than is required for such production in, say, England, Portugal can nevertheless gain by importing some goods from England – and England gain by exporting some goods to Portugal. This counterintuitive result exposes the error of those who insist that the ‘more efficient’ Portuguese can’t possibly gain from freely trading with the English, and the error of those who claim that the ‘less efficient’ English, were they to trade freely with the Portuguese, would have no demand from Portugal for English exports.
What matters for trade, said Ricardo, is not how many resources are used in one country to produce wine and how many resources are used to produce cloth compared to the amount of resources used in another country to produce these outputs. What does matter (to use Ricardo’s example) is how much the production of cloth in Portugal falls when the Portuguese produce an additional pipe of wine compared to how much the production of cloth in England falls when the English produce an additional pipe of wine. If the Portuguese sacrifice less cloth to produce a pipe of wine than do the English, the Portuguese have a comparative advantage at producing wine and the English have a comparative advantage at producing cloth. Therefore, people in both countries gain from trading if the Portuguese specialize in producing wine and the English specialize in producing cloth.
Furthermore – and this point is especially important – allowing for unrestricted cross-border investment does nothing to change the essence of the matter. In Ricardo’s example, if cross-border investment were allowed, capital would flow to Portugal. Such investment might well change which country has a comparative advantage at producing wine and which at producing cloth. But as long as the amount of cloth sacrificed in England to produce a pipe of wine differs from the amount of cloth sacrificed in Portugal to produce a pipe of wine, one country will have a comparative advantage at producing wine and the other country a comparative advantage at producing cloth. And so both countries will still gain from freely trading with each other.
To be fair to Oren, he’s not the first person to be led by Ricardo’s exposition to the mistaken conclusion that a policy of free trade is beneficial only in the absence of international investment flows. As you know, in this paper from long ago I tackled some of Oren’s mistaken predecessors on this front. But that an error is commonplace doesn’t make it less of an error.
The complete case for free trade, far from prohibiting international capital flows, recommends the removal of all such prohibitions. To assert or suggest that international capital flows nullify the principle of comparative advantage and the case for free trade is to reveal a failure to understand comparative advantage and the economics of trade.
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
Some Covid Links
David Henderson reviews, in Regulation, Scott Atlas’s A Plague Upon Our House. Two slices:
Was the SARS‐CoV‑2 coronavirus so dangerous to so many people that extreme government lockdowns were justified? Did the fatality rate from COVID differ substantially according to people’s age and presence of co‐morbidities, and did governors and other policymakers systematically take account of those differences? Did it make sense to close schools to in‐person attendance for anywhere from a few months to over a year? Was mask‐wearing indoors, even by people who had no COVID symptoms, an important contributor to slowing the spread of the coronavirus? And what really went on at those meetings of the Trump White House’s Coronavirus Task Force? Specifically, were the members carefully reading the numerous studies that were being published in the United States and around the world and adjusting their advice accordingly? Did it make sense for governors and other policymakers to focus only on COVID and ignore the major costs — including the costs to health — from lockdowns?
Dr. Scott Atlas, a senior fellow at the Hoover Institution, addresses all of those questions and more in his book A Plague Upon Our House. (Disclosure: I am also a Hoover fellow and know Atlas professionally.) But he does so much more than that. He lays out how dysfunctional both the task force and the White House were in dealing with the coronavirus. Based on my own experience at interagency meetings in Ronald Reagan’s administration, I find Atlas’s many reports of people on the task force “going with the flow” completely plausible. It’s true that we have to take his word for what went on, but based on my experiences with him at Hoover, I do.
Beyond making his case with many facts, Atlas is a passionate man, and his book reads as if it were written in anger and frustration. Some readers might find that off‐putting. I like it because he almost never lets his passion override his respect for facts and reasoned argument. Indeed, his passion is largely based on his view that lockdowns led to many deaths, destroyed millions of livelihoods, and caused needless suffering — a case he makes well.
…..
If you were not scared of what unaccountable bureaucrats can do when given a platform to make recommendations for the nation, you will be scared after reading his book. Hopefully, we will never again give governors the power to close whole sectors of the economy. And if we take away that power, one person who will deserve a lot of the credit is Scott Atlas.
The coronavirus is spreading through Hong Kong, Shenzhen and other cities in China like a bush fire; tens of millions of Chinese are locked down again. It won’t work. Like a new Mercedes, the BA.2 model of the omicron variant of the Sars-CoV-2 virus is faster, quieter and 30 per cent more prolific. There is no chance of stopping it with lockdowns, mass testing or social distancing – even in Xi Jinping’s China.
…..
Two years ago, China’s lockdown strategy was being held up as the model to follow by scientists who toured BBC studios giving interviews without serious challenge. We heard plenty from Sage members like Professor Susan Michie and Professor Neil Ferguson. Dr Michie, a card-carrying member of the Communist party of Britain, wrote early in the pandemic that: ‘China has a socialist collective system (whatever criticisms people may have), not an individualistic, consumer-oriented, profit-driven society badly damaged by 20 years of failed neo-liberal economic policies.’ When not attending zero-Covid rallies as a keynote speaker, Dr Michie officially advised the government on ‘behavioural compliance’ – a policy that turned out to be all stick and no carrot.
Prof Ferguson later said that the ‘effective policy’ in China – locking down entire communities in their homes – opened his eyes. ‘It’s a communist one-party state, we said. We couldn’t get away with it in Europe, we thought… and then Italy did it. And we realised we could. If China had not done it, the year would have been very different.’ We also saw Beijing-style agitprop used by the UK government with Sage advising that: ‘The perceived level of personal threat needs to be increased among those who are complacent, using hard-hitting emotional messaging.’ The fear campaign began.
Richard Horton, editor of the Lancet and recipient of a Friendship Award from the Chinese government, went on Chinese television early in the pandemic to say: ‘I think we have a great deal to thank China for, about the way that it handled the outbreak.’ Chinese state TV then posted his interview as an advertisement on Facebook. It bought a lot of ads on Facebook in March 2020, which ran with no disclaimers.
Then there’s the World Health Organisation. On 24 February 2020 it told the world that: ‘China’s uncompromising and rigorous use of non-pharmaceutical measures [i.e. lockdown] to contain transmission of the Covid-19 virus in multiple settings provides vital lessons for the global response.’ Dr Tedros Adhanom Ghebreyesus, the director-general of the WHO, had visited China in January 2020 and congratulated the regime in even more fulsome terms: ‘In many ways, China is actually setting a new standard for outbreak response. It’s not an exaggeration.’
What does he say now that we know the Chinese government was punishing those who spoke about the disease and ordering scientists to publish nothing without state approval? Those who were quick to praise China’s strategy at the time seem in no rush to revisit the lockdown logic that they pushed as absolute truth at the time.
Vinay Prasad, writing at City Journal, warns against vaccine mania. A slice:
If the FDA authorizes a fourth dose, we can expect the vaccine mandates to follow soon thereafter. Several institutions have already mandated third doses even in ultra-low-risk populations. Colleges around the country have instituted booster mandates for students. Princeton has refused to exempt healthy students with two doses and a prior infection from its booster mandate. The University of California’s booster policy also applies to the UCLA laboratory school (a high school), mandating a third dose for students aged 12 and up. There is little reason to doubt that institutions like these would quickly mandate a fourth dose.
Most people prefer experts, of course, especially when it comes to health care. As a surgeon myself, I can hardly object to that tendency. But a problem arises when some of those experts exert outsized influence over the opinions of other experts and thereby establish an orthodoxy enforced by a priesthood. If anyone, expert or otherwise, questions the orthodoxy, they commit heresy. The result is groupthink, which undermines the scientific process. The COVID-19 pandemic provided many examples. Most medical scientists, for instance, uncritically accepted the epidemiological pronouncements of government‐affiliated physicians who were not epidemiologists. At the same time, they dismissed epidemiologists as “fringe” when those specialists dared to question the conventional wisdom.
Ivy Schmidt lost her parents to Covid brainwashing.
The New Civil Liberties Alliance tweets: (HT Jay Bhattacharya)
Yes. This is happening in our country. The U.S. Surgeon General and HHS demanded social media platforms turn over info about users the Government deems problematic and directed them to censor alleged “misinformation” about Covid-19. We’re suing them.
Miriam Cates describes the shutting of schools in Britain as “a grievous moral error.” A slice:
Two years on we are beginning to get a measure of the full impact of school closures on a whole generation of children and young people. We have seen a 77 per cent rise in acute mental health referrals for children, and a 167 per cent increase in self-generated online sexual images of 11-13 year olds. The academic impact has been substantial, especially for deprived children, and 100,000 have still not fully returned to school.
Quotation of the Day…
… is from page viii of Deirdre McCloskey’s 2021 book, Bettering Humanomics: A New, and Old, Approach to Economic Science:
Liberalism is a foundational discipline for all the modern sciences, natural or social or humanistic. It’s not an accident that science has flourished most in the more liberal societies, from ancient Athens to the modern United States. Good science – good social science most obviously – is made by good, honest, open-minded, liberal people, or else it is likely to break bad.
DBx: It’s fashionable now to criticize the United States for its historical and still-lingering imperfections (many real, many imaginary). But it wasn’t by mere chance that so many brilliant minds fled other countries to come in disproportionately large numbers to the United States.
March 25, 2022
And WHY Do They Not Know?
Do today’s enemies of free markets not know that we ordinary Americans are now arguably wealthier – in terms of what we routinely consume – than was J.D. Rockefeller and other super rich Americans a mere century ago? Do these enemies of markets not know that the amount of time the typical American worker must toil in order to earn enough income to buy most goods and services has, over the long run, been steadily falling?
Do the protestors who now demand either that capitalism end or be significantly bridled by government have any idea of the enormous complexity of the modern markets that they seek to destroy or to replace with so-called “industrial policies”? Do these people not know that modern prosperity is impossible without a deep division of labor which encourages each producer to supply highly specialized skills and to learn highly specialized knowledge – knowledge that is dispersed in countless bits across billions of minds around the globe? Without this specialization, modern prosperity is impossible. Yet no human mind can begin to know enough to ‘engineer’ complex economic systems in ways that improve their performance. Is this reality unknown to those who are dissatisfied that markets fail to produce heaven on earth?
Or perhaps these proponents of government direction of the economy don’t know the history of socialism.
Do they not know that socialism, when and wherever it has been tried, delivered not prosperity but plunder and tyranny? Do they not know of Stalin’s famines and purges? Of Pol Pot’s massacres? Of Mao’s devastation? Of the calamity in Cuba caused by Castro? Of the economic and social chaos in Venezuela created by Chavez and Maduro? Do they really believe that Che Guevara was a romantic revolutionary with saintly designs? Do they not know that this man was in reality a cold-blooded thug?
Do people who trust government officials and distrust business owners and executives not realize that, no matter how much leeway a business person might possess in a free market, that person never has the power to coerce consumers or workers? Do enthusiasts for government not realize the importance of each worker’s ability to say ‘no’ to offers of employment, and of each consumer’s ability to say ‘no’ to a merchant’s offer of some good or service? Do these enthusiasts for government believe that government officials, who do not have to take ‘no’ for an answer, will – as a result of their ability to use coercion – treat ordinary people better than ordinary people are treated by business people, who do have to take ‘no’ for an answer?
Or perhaps those now screaming for socialism don’t really know much about human nature. Do they not know that individuals given power to coerce other individuals are prone to abuse that power – and that such individuals become more prone to abuse power the longer they possess power and the more extravagant are the promises that were made in order to secure power?
Do today’s socialists, as well as advocates of industrial policy, not know that human beings given the power unilaterally to take or to alter strangers’ property rights have little incentive to take into consideration the welfare of those whose property they take or destroy? Do advocates of socialism or industrial policy not know that the greater is government officials’ discretionary power to command economic arrangements the greater is the risk that these officials will be corrupted?
More On Oren Cass’s Misunderstanding of Adam Smith
This young man should actually read Adam Smith in full.
Mr. W__:
You claim that my attempt yesterday to show that Oren Cass misunderstands Adam Smith is “weak” because all of the quotations that I offer from Smith’s Wealth of Nations “are just from one section of the book.” You thereby imply that there can be found in other parts of The Wealth of Nations evidence that Smith would indeed look favorably upon Oren’s case for government to engineer a “bounded market.”
Well. The part of Smith’s book – Book IV – from which I yesterday drew all of my quotations is the part devoted to debunking the fallacies of mercantilism. And many of Oren’s errors are rooted in his failure to rid his thinking of many of these fallacies.
But let me not be defensive. I offer below several quotations from other parts of The Wealth of Nations. Good luck trying to square these passages with Oren’s misinterpretation of Smith as an early sympathizer with the notion of a “bounded market.”
Among men, on the contrary, the most dissimilar geniuses are of use to one another; the different produces of their respective talents, by the general disposition to truck, barter, and exchange, being brought, as it were, into a common stock, where every man may purchase whatever part of the produce of other men’s talents he has occasion for. [Book I, Chapter 2] (You will find no evidence in this chapter – or anywhere else, for that matter, in The Wealth of Nations – that Smith believed that contributions to the “common stock” do or should come only, or even mainly, from fellow citizens.)
…..
As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market. When the market is very small, no person can have any encouragement to dedicate himself entirely to one employment, for want of the power to exchange all that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men’s labour as he has occasion for. [Book 1, Chapter 3] (A key to Smith’s economic case for free trade is the fact that freely trading with foreigners ‘extends’ the market and thus enables producers to take maximum advantage of what we today call “economies of scale.”)
…..
A country which neglects or despises foreign commerce, and which admits the vessels of foreign nations into one or two of its ports only, cannot transact the same quantity of business which it might do with different laws and institutions. [Book I, Chapter 9]
…..
To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it. [Book 1, Chapter 11] (I do not believe that Oren is a mercenary for rent-seeking domestic producers; I believe Oren to be sincere and well-meaning. But his ignorance of economics leads him to work unsuspectingly as a water-carrier for “an order of men … whose interest is never exactly the same with that of the public.”)
…..
Were the Americans, either by combination or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their annual produce, and would obstruct instead of promoting the progress of their country towards real wealth and greatness. This would be still more the case were they to attempt, in the same manner, to monopolize to themselves their whole exportation trade. [Book II, Chapter 5]
…..
Among all the absurd speculations that have been propagated concerning the balance of trade, it has never been pretended that either the country loses by its commerce with the town, or the town by that with the country which maintains it.[Book III, Chapter 1] (Smith argued that, just as people in towns gain from trading freely with people in the country, and people in the country gain from trading freely with people in towns, people in different countries gain from trading freely with each other.)
Other quotations contrary to Oren’s interpretation of Smith are strewn throughout The Wealth of Nations (including in Book V), as well as in Smith’s Lectures on Jurisprudence. But the above, along with those that I sent to you yesterday, are more than sufficient to make clear that Smith would be aghast at the suggestion that he would look kindly upon Oren’s proposal for government to engineer a “bounded market.”
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
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