Russell Roberts's Blog, page 19

On Wartime and Postwar Prosperity

(Don Boudreaux)

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Here’s a letter to Jonah Goldberg at The Dispatch:

Mr. Goldberg:

Thanks for your just and eloquent criticisms of National Security Advisor Jake Sullivan’s antediluvian proposal for a new industrial policy (“The Old Deal,” May 12). But you get an important detail wrong.

After correctly insisting that New Deal policies extended rather than ended the Great Depression, you say that the Depression was ended by U.S. participation in World War II. Not so.

Economic historian Robert Higgs documented convincingly that there is no good evidence of economic recovery during the war. Although massive conscription of labor and materiel creates a surface impression of economic vigor, Higgs’s careful investigation of wartime economic reality led him to conclude that “during the war the economy was a huge arsenal in which the well-being of consumers deteriorated.”* Relatedly, Alexander Field has recently shown “that both labor productivity and TFP [Total Factor Productivity] in manufacturing declined during the war in comparison with 1941 and grew relatively anemically after the war.”**

Another point is worth making here. You describe the 1950s as a time when “America had unique advantages. The industrial base of the rest of the world was flattened by war, while ours was intact and firing on all cylinders.” A common interpretation of this reality is that, because most of the immediate-post-war economies were in shambles, Americans reaped unusually great benefits by being able to supply, with virtually no competition, the rest of the world with both consumer goods and capital goods. While having their economy intact was indeed beneficial, Americans in the 1950s would have benefitted even more from international trade had the rest of the world’s economies also been intact.

Selling goods to people who can offer in exchange only little that’s of value is less enriching than is selling goods to people who can offer in exchange much that’s of value. And so while Americans in the 1950s did indeed gain by trading with non-Americans, Americans back then gained from international trade far less than do Americans today. Contrary to popular myth, it was no great boon for immediate post-war America that most of the rest of the world’s economies were severely crippled. It was a misfortune.

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

* Robert Higgs, “Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s,” Journal of Economic History, March 1992, Vol. 52, pages 41-60.

** Alexander J. Field, The Economic Consequences of U.S. Mobilization for the Second World War (New Haven: Yale University Press, 2022), page 3.

Some Links

(Don Boudreaux)

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Randy Holcombe wonders why the Fed wants to sustain an annual inflation rate of two percent. A slice:

With inflation, prices lose some of their informational content because to see the true cost of something requires adjusting its price by the rate of inflation. Because individual prices tend to change intermittently, this calculation becomes more difficult as inflation rises. If the price of something is up 5% this month, is that a real price increase, or is that price just catching up with inflation?

By this logic, the target rate of inflation should be negative.

The argument against negative inflation, aside from the one given above, is that if prices continually fall, people will put off buying goods with the hope of getting them at lower prices later. But people won’t put off buying goods forever. If we look at the computer industry, which has had prices falling for decades, that industry has not seemed to suffer from falling prices.

Furthermore, prices fell substantially in the United States from 1870 until 1913, when the Federal Reserve was created. That was a period of solid economic growth. Deflation did not appear to hurt the economy.

Speaking of the Fed, Bill Shughart decries its expanding “span of control” over U.S. banks.

Walter Olson rightly criticize the U.S. Supreme Court’s ruling in National Pork Producers Council v. Ross. A slice:

Cato had filed a brief urging the Court to grant review in this case to bring some clarity to the application of the Dormant Commerce Clause, given the highly interstate nature of the market— almost all pork Californians consume is produced in other states—and the substantial burdens of the measure, which include the prospect that California agricultural agents will travel around the country to ensure that farmers in other states comply with California law. Ilya Shapiro, writing with Frank Garrison in 2017, described the clause as “the idea that states can’t impose regulations that impede interstate commerce even if Congress hasn’t expressly forbidden them to do so.…While the commerce clause has been invoked since the New Deal as a warrant for nearly unlimited federal power, its inverse actually seems more faithful to a founding document concerned with the free flow of commerce throughout the nation.”

As Jonathan Adler writes, “the decision complicates the already questionable ‘Roberts Court is pro‐​business’ narrative, by demonstrating (yet again) that when conservative jurisprudential commitments conflict with corporate interests, the former prevail. Combined with decisions such as Virginia Uranium v. Warren, National Pork Producers shows that business groups cannot depend on conservative justices to support their challenges to state regulations.”

Also critical of the National Pork Producers Council ruling is the Editorial Board of the Wall Street Journal. A slice:

Justice Kavanaugh puts it best: California “has attempted, in essence, to unilaterally impose its moral and policy preferences for pig farming and pork production on the rest of the Nation” and “propounded a ‘California knows best’ economic philosophy” that “undermines federalism and the authority of individual States.”

Juliette Sellgren talks with Yesim Sayin about DC life and policy.

Roger Ream talks with GMU Econ alum Anne Bradley about the moral foundations of economic freedom.

David Henderson wisely recommends Margery Smelkinson’s testimony on natural immunity.

Wall Street Journal columnist Allysia Finley decries “officials’ neglect of covid vaccines’ side effects.” A slice:

Officials may worry that recognizing severe side effects will fuel vaccine opposition and hesitancy. But the lack of transparency can only feed public distrust. And the lack of recognition “has left us as further collateral damage from the pandemic,” Ms. Dressen says.

TANSTAFPFC (“There Ain’t No Such Thing As Free Protection From Covid.”)

Daniel Hadas tweets: (HT Jay Bhattacharya)

Of course, lockdowns were not kindness, but cruelty behind the mask of care. Kindness is not something that can be centrally administered and mandated.

Any form of the left which thinks otherwise will stumble from one suffocating delusion to the next.

Quotation of the Day…

(Don Boudreaux)

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… is from page 524 of F.A. Hayek’s brilliant Postscript – “Why I Am Not A Conservative” – to the Definitive Edition (Ronald Hamowy, ed., 2011) of Hayek’s 1960 volume, The Constitution of Liberty:

There are many values of the conservative which appeal to me more than those of the socialists; yet for a liberal the importance he personally attaches to specific goals is no sufficient justification for forcing others to serve them.

DBx: Beautifully said.

How unfortunate it is that so few people share this liberal attitude. From progressives on the left to “common good capitalists” on the right, the world teems with persons who feel driven to impose their notion of the good life on others.

Beware of “Common Good Capitalism”

(Don Boudreaux)

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Here’s a letter to a new correspondent:

Mr. A__:

About my criticisms of “common good capitalism,” you charge me with being “too dismissive of efforts which only stress that capitalism should be judged by how well it promotes values outside of maximal materialistic satisfaction.”

Your allegation comes from a fair place, as no reasonable person believes that human flourishing consists exclusively, or even chiefly, in the successful pursuit of ever-greater consumption of material goods and services supplied on commercial markets. But for a variety of reasons I plead innocent to your charge. Here’s the main reason:

To clamor for “common good capitalism” implies that the capitalism championed by scholars such as Adam Smith, Ludwig von Mises, F.A. Hayek, Milton Friedman, and my late colleagues James Buchanan and Walter Williams does not promote the common good. Yet I believe this implication to be mistaken. In reality, the best economic system for promoting the common good is what I, in these discussions, call “capitalism unprefixed” – that is, capitalism as understood and championed by people such as Hayek and Friedman. Not only is there no need for government to interfere with capitalism unprefixed in order to ensure that the common good is served, such interference is far too likely to bestow unearned benefits on politically favored groups, or to satisfy the particular ideological preferences of politically influential intellectuals, all at the larger expense – material and nonmaterial – of the people as a whole.

If “common good capitalism” means anything other than capitalism unprefixed, its pursuit necessarily requires government to elevate the particular preferences of some individuals over those of other individuals – a move that mocks the meaning of “common good” as understood by true liberals.

An observation offered by Hayek in his 1960 essay “Why I Am Not A Conservative” is relevant here: “To live and work successfully with others requires more than faithfulness to one’s concrete aims. It requires an intellectual commitment to a type of order in which, even on issues which to one are fundamental, others are allowed to pursue different ends.”* Unlike Hayek and other liberals, “common good capitalists” lack this commitment. They are unwilling to extend to all individuals the freedom to pursue peaceful ends that differ from the ends embraced by “common good capitalists.”

In short, “common good capitalism” implies the ability of “common good capitalists” to determine which particular ends are, and which aren’t, consistent with the common good, and the right of these ‘capitalists’ to commandeer the state to impose their determination on everyone.

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

* F.A. Hayek, “Why I Am Not a Conservative,” the postscript to the Definitive Edition (Ronald Hamowy, ed., 2011) of Hayek’s 1960 volume, The Constitution of Liberty, page 524.

Quotation of the Day…

(Don Boudreaux)

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… is from page 193 of the late Nobel-laureate economist Douglass North‘s 1961 paper “The United States in the International Economy, 1790-1950,” which is Chapter 7 of American Economic History (Seymour Harris, ed., 1961):

Imports, too, played an important role in economic development. Quite aside from their general role in permitting international specialization, during the booming periods of rapid growth 1832-1839 and 1850-1857 substantial resources of labor and capital were diverted out of consumer-goods production into canal and railroad construction, and a large increase in imported consumer goods partially offset this domestic decline. In the 1850s, we [Americans] also imported a large amount of railroad iron for construction.

DBx: Keep this historical fact in mind when you next hear someone insist that the increased scarcity brought about by high American tariffs at various times in the 19th century was the chief fuel for American economic growth back then. Insisting that a policy of obstructing people‘s access to goods and services – including many goods and services that would be inputs into production – is a means of increasing prosperity makes no more sense than insisting that a policy of obstructing someone‘s access to exercise equipment and nutritious food is a means of increasing that person‘s health.

Here’s a conclusion drawn by North, in his 1961 paper, from his review of that era of American economic history.

In Defense of My Intrepid Mercatus Center Colleague

(Don Boudreaux)

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Here’s a letter to the Imaginative Conservative:

Editor:

Veronique de Rugy’s criticism, at National Review, of Alexander Salter’s case for so-called “common good capitalism” drew Joseph Pearce’s ire (“Demonizing Distributism by Association,” May 11). Among her alleged misdeeds is Ms. De Rugy’s “abandoning reason for the reductio ad absurdum of ad hominem rhetoric.” The specific offense with which she is here charged is her “quoting some lines from Robert Reich, Secretary of Labor during the Clinton administration, to illustrate an alleged similarity of reasoning between Dr. Salter and Dr. Reich.” According to Pearce, “[t]he only similarity was that both men seem to believe that the markets impact culture. What exactly is Dr. de Rugy’s point, beyond the desire to smear Dr. Salter by association with someone with whom her readers will disagree?”

Did Pearce do more than merely skim read Ms. De Rugy’s piece? My guess is no, for Ms. De Rugy did not criticize Salter for joining Reich in believing that markets impact culture. Instead, she criticized Salter for his seeming acceptance of the argument that consumers’ patronage of large, low-cost retailers imposes a negative “externality” on the community – an argument that, Ms. De Rugy correctly observed, is identical to an argument made in 2005 by Reich about the alleged negative consequences of Amazon and Walmart.

So the answer is straightforward to Pearce’s question about “what exactly is Dr. De Rugy’s point”; it’s this: At least some of the policy proposals that are welcomed by “common good capitalists” bear an uncanny resemblance to policy proposals embraced by statist progressives.

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

Hail to Forever-Anonymous Leaders!

(Don Boudreaux)

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My latest column for AIER is a (half-) tongue-in-cheek proposal to screen for better political leaders. It was prompted by a keen observation made long ago in the Guatemalan jungle by Andy Morriss. A slice:

Another mark of a good economist is his skepticism of stated intentions. Talk is cheap. So if someone professes his great love of humanity, the economist pays little heed. (Old joke: An economist and non-economist are strolling together down Seventh Avenue in Manhattan. As they pass Carnegie Hall and hear beautiful piano music wafting out onto the street, the non-economist turns to the economist and says wistfully, “You know, I don’t play the piano, but I’ve always wanted to learn to do so.” The economist immediately replies “Obviously not.”)

Politicians, of course, incessantly assure us of their excellent intentions, and are routinely called “public servants.” Long-serving senator Jones, 18th-term representative Smith, and 67-year-old Williams who for the past 45 years held only jobs to which he was elected by the public are routinely described as having “devoted” their lives to “public service” – implying that these individuals worked sincerely for the betterment of society and, in doing so, made genuine personal sacrifices of a sort and magnitude that us ordinary mortals would not dream of making.

But how do we know that elected officials – more than the everyday men and women who vote them into office – truly put the welfare of strangers above their own welfare? Of course, all of them they say that they do so. Again, talk is cheap. So here’s a proposal to help screen those relatively few candidates for high office who have a sincere and steadfast devotion to the public welfare from those many candidates who, talking cheaply, only profess such a devotion: require that everyone seeking high-level elective government office do so anonymously.

Assign to each candidate for high office a new, sterile name – something that reads like an abbreviated VIN for an automobile. For example: 6PRKr4. In fact, call it a PIN – “Politician Identification Number.”

Each candidate, successful or not, will for the rest of his or her days and into the future mists of history be known to the public only by his or her PIN. Candidates’ and elected-officials’ faces will never be seen by the public, they will address the public from behind curtains, both real and virtual, and their voices will be electronically modified so that not even their mothers, spouses, or household pets will recognize their voices.

History will forever know each of them – the good, the bad, the indifferent – only by their PINs.

These public servants will also be required, during their time in office, to live in spartan government housing, and will be paid modestly, say, 85 percent of the US median household income.

This proposal, if adopted, would greatly increase voters’ ability to screen for truly public-spirited persons to serve in elected office, for only truly public-spirited persons would be willing to endure these terms as part of the price of seeking high elective office. When, say, 6PRKr4 proclaims his or her (we’ll not know 6PRKr4’s sex) devotion to the greater good and the public weal, that proclamation will be believable.

Boudreaux and Zywicki on Hayek

(Don Boudreaux)

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In the October 13th, 2014, edition of the Wall Street Journal, Todd Zywicki and I commemorated the 40th anniversary of the award to F.A. Hayek of the Nobel Prize in economics. You can read beneath the fold my and Todd’s appreciation of Hayek.

(more…)

Some Links

(Don Boudreaux)

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David Henderson is understandably unimpressed by Nobel-laureate economist Michael Spence’s latest plea for industrial policy. Two slices:

His case is, at best, flabby. It lacks any empirical evidence and takes as given, without argument or evidence, the idea that many government interventions have benefits that exceed costs.

…..

His first sentence is absolutely correct. But the difference between venture capitalists and governments is that venture capitalists are betting their own money while governments are betting our money. That’s a big difference. The very essence of economics is its focus on incentives. The incentives for venture capitalists and government officials are quite different. If the venture capitalists succeed, they might make a lot of money; if they fail, they lose their own money. If government officials succeed, they might get a nice promotion and $10,000 or $20,000 more annually; if they fail, they might not even get demoted.

I would have thought that the difference in incentives would be one of the first concerns that would arise in the mind of an accomplished economist.

The Wall Street Journal‘s Editorial Board rightly criticizes the Biden administration’s continuing efforts to diminish Americans’ access to energy. Two slices:

Section 111 of the Clean Air Act says the EPA can regulate pollutants from stationary sources through the “best system of emission reduction” that is “adequately demonstrated.” Yet the EPA wants to require that fossil-fuel plants adopt carbon capture and green hydrogen technologies that aren’t currently cost-effective or feasible, and may never be. Only one commercial-scale coal plant in the world uses carbon capture to reduce emissions, and no gas-fired plants do.

Even if power plants implemented carbon capture, their cost of generation would double, rendering them less competitive against subsidized wind and solar power. There’s also the not-so-small problem of permitting. Thousands of miles of pipelines would have to be built to transport carbon to geologic structures where it can be injected.

…..

The proposed rule won’t make an iota of difference to the climate as China and India ramp up coal power. Even EPA’s CO2 emissions reduction estimate over the next two decades amounts to only a third of that between 2010 and 2019 as natural gas replaced coal.

The EPA is gambling that it can sneak this through the courts. But the rule is a de facto mandate to shift to renewables from fossil fuels, which Congress never explicitly authorized. The Supreme Court’s 5-4 Massachusetts v. EPA decision that let the agency regulate greenhouse gas emissions rests on shaky ground. EPA is inviting a legal challenge that could boomerang, and let’s hope it does.

Also criticizing this new Biden administration assault on Americans’ access to energy is Justin Schwab. A slice:

In West Virginia v. EPA, the Supreme Court last year struck down the Obama-era Clean Power Plan because it asserted power Congress never gave federal regulators. The Biden administration’s plan takes a different approach, but in some ways goes even further than the Clean Power Plan, making another showdown at the high court likely.

The proposed rule is a blatant attempt to compel an energy “transition.” Until the final rule issues, the courts are unlikely to shut it down, but nonbinding observations in the West Virginia opinion strongly suggest that the EPA’s fuel-switching approach won’t pass muster when it eventually comes under review. One thing’s for sure: American households and business will pay higher rates as the utility sector scrambles to get ahead of these looming mandates.

Christian Schneider decries the increasingly warm embrace by many Americans on the right of authoritarianism of a sort that’s natural to progressives. A slice:

But the beauty of living in a free society is that I don’t get to force others to adopt my cultural tastes, nor do I have to live with theirs forced on me. One of the fundamental appeals of traditional conservatism is the tenet that how you live your life shouldn’t be dependent on who you elect as governor or president. It is a sign of collective moral sanity when politics doesn’t make much difference in one’s daily routine.

Of course, there is a great deal of satisfaction in serving up a hot plate of steaming legislation to own the libs. It is certainly less fun being the party espousing legislative and judicial humility. But life under more oppressive government regulations always stifles both liberty and the innovation that flows from that freedom.

(Or, as Ludwig von Mises said of Democrats in 1944: “They promise the blessings of the Garden of Eden, but they plan to transform the world into a gigantic post office.”)

George Will once noted, “A progressive’s work is never done because everything is progressivism’s business.” But with conservatives stealing the liberals’ vibes, now everything is everyone’s business, leaving the people who just want to be left alone without a viable voice in government.

Mike Munger explains an approach to teaching John Rawls and inequality.

Arnold Kling applauds Tiebout competition.

Bob Graboyes offers 20 job tips for the 20-somethings of the 2020s.

Fraser Nelson decries the “fact checkers.” A slice:

Some facts are seen to be too exciting to check. When the French economist Thomas Piketty claimed that inequality was certain to rise because of his formula r>g (ie: that the return on assets exceeded the rate of economic growth), it was hailed worldwide as a breakthrough. Time to tax the rich! But when the IMF produced a study showing Piketty’s claim to be nonsense, this seemed to generate no interest at all.

During lockdowns, the heretic hunters worked overtime. An outfit called Full Fact decreed that the novelist Lionel Shriver was “wrong” to claim that the Covid vaccine did not stop transmission. She is no epidemiologist, but she was right about the vaccines. The latest estimates suggest that 86 per cent of the country has had the virus, against around 20 per cent when she wrote her article. Jabs prevented serious illness, but not the spread. Where was the fact-checkers’ challenge of those who wrongly claimed otherwise? At the time, vaccine passports were very nearly introduced – on what now seems to be a false premise.

This is the problem. The rise of fact-checking is powerful and helpful in many ways, but is most needed in areas where there is a fashionable and unchallenged consensus. Whenever all parties agree (as they did on lockdown, and still do on net zero and international aid), the biggest policy errors are most likely to creep in. So it’s more important than ever that the major claims are held up to scrutiny. When fact-checkers instead target those who go against the grain, it serves to enforce groupthink.

Writing at City Journal, Jeffrey Anderson reports on a new study that unmasks the dangers of masking à la covid. Two slices:

Evidence continues to mount that mask mandates were perhaps the worst public-health intervention in modern American history. While concluding that wearing masks “probably makes little or no difference” in preventing the spread of viruses, a recent Cochrane review also emphasized that “more attention should be paid to describing and quantifying the harms” that may come from wearing masks. A new study from Germany does just that, and it suggests that the excess carbon dioxide breathed in by mask-wearers may have substantial ill-effects on their health—and, in the case of pregnant women, their unborn children’s.

Mask-wearers breathe in greater amounts of air that should have been expelled from their bodies and released out into the open. “[A] significant rise in carbon dioxide occurring while wearing a mask is scientifically proven in many studies,” write the German authors. “Fresh air has around 0.04% CO2,” they observe, while chronic exposure at CO2 levels of 0.3 percent is “toxic.” How much CO2 do mask-wearers breathe in? The authors write that “masks bear a possible chronic exposure to low level carbon dioxide of 1.41–3.2% CO2 of the inhaled air in reliable human experiments.”

In other words, while eight times the normal level of carbon dioxide is toxic, research suggests that mask-wearers (specifically those who wear masks for more than 5 minutes at a time) are breathing in 35 to 80 times normal levels.

…..

Public-health officials—and the executive-branch leaders who credulously listened to them—ignored centuries of Western norms, the best medical evidence, and common sense, deciding that their own novel and evidence-free course was the one that all of society should be forced to follow. We should never again indulge such an obvious and destructive misstep.

Jack Butler, writing at National Review, applauds heroes who resisted the covidocracy. A slice:

You’ll also find brief accounts in there of the perfidy of some of the national-level actors (Fauci, Weingarten) who drove some of the most ridiculous lockdown policies yet are now trying to rewrite their records, partly on the basis that pandemic-response decisions were made at the local level, which understates how they influenced those local decisions. You’ll also find vignettes of some local villains: Pennsylvania secretary of health Rachel (formerly Richard) Levine, who forced nursing homes in the state to readmit Covid patients but withdrew his own mother from one at the same time; and governors Gretchen Whitmer (D., Mich.) and Tony Evers (D., Wis.), who aggrandized their own power extensively during the pandemic through abuse of unilateral executive authority.

As we leave Covid behind, let’s not forget the villains — and let’s especially not forget the heroes.

Quotation of the Day…

(Don Boudreaux)

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… is from page 199 of Martin Wolf’s excellent 2004 book, Why Globalization Works (endnote deleted):

What the proponents of localization aim for is a dystopia – a world of mutually assured impoverishment, in which the poorest, who most need to trade for what they cannot make, would be the biggest losers. That these people parade themselves as the friends of the poor merely demonstrates how self-deluding people can be. With friends like these, the poor of the world need no enemies.