Russell Roberts's Blog, page 21

Gotta Mention the Iceberg

(Don Boudreaux)

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Here’s a letter that I sent several days ago to the New York Times:

Editor:

Reporting on Whole Foods’s recent decision to close a store in downtown San Francisco, Thomas Fuller and Sharon LaFraniere correctly list shoplifting as one of the chief reasons (“In San Francisco, a Troubled Year at a Whole Foods Market Reflects a City’s Woes,” May 1). But they bizarrely describe this problem as “intractable” as they fail to mention the fact that in California theft of merchandise worth $950 or less by individuals who aren’t part of a crime ring is only a misdemeanor. According to UCLA economist Lee Ohanian, this “means that law enforcement probably won’t bother to investigate, and if they do, prosecutors will let it go…. Because of this law, California is extending an open invitation to anyone to walk in and take. Just like that – since they know that police or prosecutors won’t bother with a misdemeanor complaint.”

Reporting on the closing of this Whole Foods store without mentioning California’s effective refusal to punish shoplifters is like reporting on the sinking of the Titanic without mentioning the iceberg.

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

Some Links

(Don Boudreaux)

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In this letter-to-the-editor of the Wall Street Journal, Harvey Silverglate explains the source of teachers’-unions enormous political power:

William McGurn’s critique of the power-hungry head of the American Federation of Teachers, Randi Weingarten, is spot on (“On Randi Weingarten’s Waterfront,” Main Street, May 2). There is a reason that Ms. Weingarten has been able to accumulate all of the power she possesses. The public school boards of education with which Ms. Weingarten and the union deal are, in fact, public. In negotiation sessions between any public-sector union (teachers, law-enforcement officers, firefighters and so forth) and the political body on the other side, the latter is dealing with the taxpayers’ money, not its own

On the other hand, in the private sector, management is dealing with its own and its shareholders’ financial interests. Hence, there is an incentive to hold the line in the face of unreasonable bargaining demands. It’s that simple.

Harvey A. Silverglate
Cambridge, Mass.

The Wall Street Journal‘s Editorial Board decries yet another progressive policy that inflicts disproportionate harm on low-income Americans by reducing the supply of housing. Two slices:

The Biden Administration’s regulatory onslaught continues, with almost no media coverage about the costs or consequences. A case in point is a new Department of Energy rule due to hit on May 31 that will make manufactured homes less affordable.

Some 22 million Americans live in manufactured homes, often called mobile homes, and their median household income is $35,000 a year. The average cost of a manufactured home ranges from $72,000 to $132,000, compared to $365,000 for a traditional house. Manufactured homes were about 9% of new single-family home starts in 2021, providing more than 100,000 affordable homes.

…..

Manufactured homes already have a relatively small carbon footprint. They are manufactured with minimal waste in factories, are smaller than most site-built homes, and comply with existing HUD efficiency standards. Yet as South Carolina Sen. Tim Scott noted in a recent letter to [Energy Secretary] Ms. [Jennifer] Granholm, the low-income purchasers of these homes are being “unfairly asked to bear the costs imposed by climate alarmists.”

GMU Econ alum Dominic Pino warns of the Biden administration’s assault on automatic dishwashers. A slice:

The most common dishwashers on the market right now use less than four gallons of water per load. Even old dishwashers, which are less efficient, would be very unlikely to use more than 12 gallons per load.

As usual with environmentalist crusades, the target is poorly chosen and the “solution” is likely to aggravate people, with no benefit to the planet.

Pierre Lemieux understands the real benefit of free-trade agreements. Here’s his conclusion:

The main, if not the only justification, of a “free trade agreement” between your government and the government of somebody else is to tie the hands of your government, to chain your own Leviathan and limit its “state capacity.” In this, you stand in solidarity with your fellow human of the other country who wishes to defang his own Leviathan. When nobody, or at least nobody in power, believes in that goal, no wonder that free trade agreements have become unpopular. (See also my 2017 EconLog post “Taking Comparative Advantage Seriously.”)

The marginal cost of absorbing Bryan Caplan’s ideas is close to zero while the marginal benefit is very high.

I do not now and have never considered myself to be a Randian, but I do now believe, as I have always believed, that many of Ayn Rand’s moral arguments – as explained here by Robertas Bakula – in support of the free-market order are sound and important.

“Failing to reform Social Security means mandatory cuts,” so explains Reason‘s Eric Boehm.

Monica Gandhi tweets: (HT Jay Bhattacharya)

ERADICATION: 4 features of a pathogen that make it eradicable: 1) no animal reservoirs/ only primates like polio; 2) short period of infectiousness; 3) symptoms distinctive; 4) sterilizing immunity to infection or vax. Polio possible next. #COVID19 sadly has 0 of these features

Quotation of the Day…

(Don Boudreaux)

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… is from page 225 of Thomas Sowell’s March 22nd, 1985, column “Tom Brokaw’s ‘Patriotism’,” as this column is reprinted in Compassion Versus Guilt, a 1987 collection of some of Sowell’s essays:

Let the media discover that any of the sins that have plagued the human race for thousands of years still exist in the United States, and it becomes a special condemnation of American society. The morally anointed are constantly outraged that we have not obliterated racism, poverty, or disease. It would be fascinating to know who has – and how. But a look around the world shows that our problems in these areas are like a sprained ankle compared to cancer.

Productivity Is Flat (Thus Explaining Flat Wages) While Productivity Is Rising (Thus Explaining Unjust Worker Exploitation)

(Don Boudreaux)

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Here’s a letter to American Compass’s Oren Cass:

Oren:

This past Thursday your organization, American Compass, as part of its series meant to encourage tighter restrictions on immigration, released “A Guide to Labor Supply.” In this Guide you offer 16 graphs that are obviously meant, individually and together, to tell about the American economy a tale of woe.

Before agreeing to share your despair, however, I’ve some questions about your data.

In graph #8 (“Economy-Wide, No Evidence That Employers Are Investing to Boost Productivity”) you report that annualized productivity growth over the past decade was negative 1.8 percent. In graph #10 (“The U.S. Lags Far Behind Other Nations in Automation”) you offer data purporting to show that U.S. factories lag far behind factories in counties such as Korea, Japan, China, and Sweden at installing productivity-enhancing robotics. In graphs #11 (“Manufacturing Productivity Growth Has Slowed, and Output Growth Collapsed”) and #12 you report further on the alleged dire state in the U.S. of productivity: Graph #12 is titled “Over the Past Decade, Manufacturing Productivity Has Actually Declined.”

Yet in graph #13 (“Productivity, Profit, and GDP Have Risen in Lockstep Since the 1960s, While Wages Stagnated”) and #14 (“Something Looks Wrong: 50 Years of Economic Growth”) we’re treated to data that show that over the past several decades productivity has impressively risen; your goal with these latter graphs is to indict the U.S. economy for allegedly failing to share the fruits of productivity growth with workers.

So which is it? Has the productivity of the American economy over the past few decades stagnated (as you claim) or not (as you also claim)?

I would myself dig into your data for answers to this question, but the source information that you supply in each graph is wholly inadequate for readers to determine from where exactly you get your data and how you adjust these for inflation. You give only the names of the bureaus (for example, “U.S. Census Bureau”) from whose cites you extracted these data, but you list none of the pages at these sites. Because the number of data pages at each of these sites is gargantuan, readers wishing to check the accuracy of your data are required to spend hours searching amidst these practically countless number of pages.

Might I ask you to publish more detailed information on the sources of each graph’s data?

If you detect in my question doubts about your data’s accuracy, you detect correctly. As I discovered a few days ago about what you call “the problem of wage stagnation that has now bedeviled America’s economy for 50 years,” your carelessness with data cannot help but instill doubts about their accuracy and about your interpretation of them. These workers’ on-the-job real incomes have in fact, contrary to your claim, risen quite impressively for more than a quarter century.

Perhaps there’s a plausible means of squaring your claim that productivity is flat with your claim that productivity is rising. If so, I urge you to share it.

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

But Then Again, Washington DOES Endlessly Issue Commands

(Don Boudreaux)

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Here’s a letter to the Washington Post:

Editor:

John Feinstein makes a strong case for changing the name of Washington’s NFL franchise from “Commanders” to one more evocative of the nature of Washington, DC (“.” May 5). To this end, I second a name proposed in conversation a few years ago by my friend David Hart; it’s a name that, like no other, captures today’s essence of America’s capital: the Washington Predators.

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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(Don Boudreaux)

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Phil Gramm and Amity Shlaes, writing in the Wall Street Journal, bust myths about ‘gilded ages.’ Two slices:

Between 1870 and 1900, America’s inflation-adjusted gross national product expanded by an unprecedented 233%. Though the population nearly doubled, real per capita GNP surged by 90%. Real wages of nonfarm employees grew by 53%, and life’s staples, such as food, clothing and shelter, became more plentiful and much cheaper. Food prices plummeted by 174% and the cost of textiles, fuel and home furnishings fell by 70%, 65% and 70%, respectively. The illiteracy rate fell by 46% and life expectancy rose 12.5%. Infant mortality declined by 17%.

As American capitalism blossomed, some got rich. In 1892 there were 4,050 millionaires, with less than 20% having inherited their wealth. The rest created it and in the process reduced poverty, expanded general societal prosperity, and made it possible for millions of immigrants looking for opportunity and freedom to find both. That mattered little to progressives, who were so obsessed by the 4,050 millionaires that they turned a blind eye to the 66 million Americans whose economic well-being improved faster than any people who had ever lived on earth.

Had the Gilded Age suffered from monopolistic exploitation, as critics claim, output would have fallen and prices would have risen in the monopolized industries. In a 1985 study, economist Thomas DiLorenzo tested that hypothesis for steel, petroleum, railroads and other industries accused of being monopolistic during the debate on the Sherman Antitrust Act of 1890. He found that output in those industries actually increased by an average of 175% from 1880-90—seven times the growth rate of real GNP. On average, prices in the ostensibly monopolized industries fell three times as fast as the consumer price index.

This myth of the Gilded Age in turn produced Progressive Era regulations that proved to be an impediment to competition, as regulation became an “instrument of cartelization,” producing higher prices, poorer services and less innovation. By the 1970s the negative effect of these regulations was so obvious that Sen. Ted Kennedy and President Jimmy Carter led the deregulation of airlines, trucking, railroads, energy and communications. The benefits of overturning Progressive Era regulations included more competition, greater efficiency, more innovation and stronger growth, setting the foundations of contemporary American competitiveness and prosperity.

…..

Today’s progressive rant that income inequality is an existential threat is unpersuasive and untrue. If we counted all transfer payments such as food stamps and refundable tax credits as income to their recipients and taxes paid as income lost to taxpayers—something the U.S. Census Bureau doesn’t do—we’d find that income inequality is lower today than it was in 1947.

At its root, progressivism is based on a myth and fueled by envy—the same caustic force that has destroyed prosperity and endangered freedom from the time of the ancient Greeks.

(DBx: Yes. Yet unfortunately today it’s not only progressives who peddle economic myths and who stoke envy; today’s progressives are joined in this dangerous game by “national conservatives.”)

Also busting a myth about economic stagnation is James Pethokoukis, who explains that ordinary Americans’ standard of living is today much higher than it was 50 years ago. (DBx: Because I’m a time traveler from 50 years ago – the trip took 50 years – I can confirm that Mr. Pethokoukis’s analysis rings true.)

Arnold Kling is correct:

The New Industrial Policy is the latest fad in justifying runaway deficit spending and clumsy government intervention. I predict that, like Modern Monetary Theory, it will end up doing considerable economic damage. I have to mark down any economist who jumps aboard this train.

(Adam) Smith v. (Wesley) Jones. A slice:

If that was all people knew about the Jones Act, some would likely support it for the same rationale given in 1920, which was to guarantee a merchant marine “for the national defense and the development of the domestic and foreign commerce of the United States,” and “a naval and military auxiliary in time of war or national emergency.” As Senator Wesley Jones (R-WA) expressed it at the time, “The man…who could discourage the upbuilding of our merchant marine is fighting the battle of alien interests.”

But while the aspirations listed sound reasonable (as even completely unreasonable government policies are often made to sound), the Jones Act has actually produced a massive failure. It has provided none of those aspired-to benefits. It has done the opposite. But it has imposed very high costs, direct and indirect, that trace to the fact that it makes shipments between American ports several times more expensive than shipping not subject to those restrictions. That is, the results contradict the aspirations to the point of putting it on the side of the interests Jones said he opposed.

David Henderson advocates a move away from – rather than toward – socialized medicine.

Nick Gillespie and Zach Weissmueller talk with Jacob Siegel about how “disinformation” is “the hoax of the century.”

Jay Bhattacharya tweets:

A pandemic is a bad time to remake the world into the utopia of your imagination. The pathogen and the response will kill more as a result. And your god will fail so obviously that the whole world cannot miss it.

Quotation of the Day…

(Don Boudreaux)

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… is from page 523 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:

Like the socialist, he [the conservative] is less  concerned with the problem of how the powers of government should be limited than with that of who wields them; and, like the socialist, he regards himself as entitled to force the value he holds on other people.

DBx: The conservative that Hayek here rightly criticizes is not the American conservative in the mold of Ronald Reagan or George Will. As Hayek himself notes at the beginning of his Postscript, because the American founding was rooted in liberalism, Americans à la William Buckley and George Will who call themselves “conservative” because they wish to conserve the principles of America’s founding are really liberal (in the classic, correct sense). The conservative that Hayek here rightly criticizes is one that historically was much more common in Europe than in America.

Unfortunately, this European-style true conservativism is now staging an invasion of America. Its generals today include Sohrab Ahmari, Oren Cass, Patrick Deneen, Josh Hawley, Marco Rubio, and Adrian Vermeule. While the particulars of each of these and other true-conservatives’ programs differ from each other, every one of these conservatives rejects the liberal willingness to allow individuals to pursue whatever peaceful ends they choose. These true conservatives unapologetically propose using the power of the state to compel adherence to their particular values.

As Stephanie Slade said in her recent, excellent discussion with Juliette Sellgren, this embrace by conservatives of state power is “terrifying.”

…..

F.A. Hayek – one of history’s most articulate, insightful, and principled liberals – was born on this date in 1899.

Quotation of the Day…

(Don Boudreaux)

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… is from page 93 of Michael Strain’s important 2020 book, The American Dream Is Not Dead (But Populism Could Kill It):

Adults [in America] who were raised in the bottom quintile have a family income about 2.5 times as large as their parents did when their parents were in their 40s. And across all quintiles, adults today have higher family incomes than did their parents.

Quotation of the Day…

(Don Boudreaux)

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… is from pages 61-62 of Marc Levinson’s (uneven) 2020 book, Outside the Box:

The [cargo-shipping] container era began in April 1956, when the Ideal-X, a converted tanker left over from the war, carried fifty-eight aluminum containers on its deck from Newark, New Jersey, to Houston, Texas. No one imagined this concept would turn the world economy upside down. It was conceived with an entirely different purpose in mind: to shave a few dollars off the cost of moving trucks between North Carolina and New York.

DBx: How would such entrepreneurial experimentation and discovery be handled under industrial policy? Not well, for sure.

First, in order to ensure that the particular industrial-policy scheme not be disrupted, experimentation of this sort is likely to be discouraged or outright prohibited. After all, a new way of, say, moving trucks between North Carolina and New York would almost certainly destroy some particular jobs. If those threatened jobs – for example, blue-collar truck-driving jobs – are of the sort that industrial policyists insist must be protected, then this experiment with a new manner of moving trucks from point A to point B must be squelched in the name of keeping the industrial policy intact.

Second, the experiment itself was the result of entrepreneurial alertness (specifically, the alertness of Malcom McLean). With industrial policy in place, it’s less likely than in a free market that entrepreneurs would exhibit such alertness, aware as they would surely be that any new production or distribution plans would either be squelched outright by industrial-policy mandarins, or be approved only after a long and bothersome review process.

Third, even if this particular experiment is permitted, under industrial policy it almost certainly would not have sparked the container revolution that so dramatically reduced the costs of shipping cargo by sea. In reality, for the April 1956 voyage of the Ideal-X to have sparked the container revolution, a number of follow-on entrepreneurial discoveries and innovations had to be made. Any one of these discoveries and innovations might well have been discouraged or quashed had the U.S. then had in place a policy worthy of the name “industrial policy.”

…..

It cannot be said too often: Entrepreneurial innovation is inseparable from capitalism. It is indispensable not only for economic growth but even for the maintenance (if such were our goal) of our current standard of living. (When objective facts on the ground change, innovation is necessary to deal with these changes. If, say, a source of raw materials dries up, innovation is necessary to find new sources or sufficient quantities of acceptable substitutes.) Yet industrial policy necessarily is hostile to innovation because innovation necessarily is not part of the industrial-policy plan. The fact that industrial policyists continue to ignore this reality should embarrass them. Alas, it seems not to do so.

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(Don Boudreaux)

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The Wall Street Journal‘s James Taranto continues to expose the mix of errors and nothingness that constitute the attack on Justice Clarence Thomas. A slice:

So what’s the scandal here? It isn’t clear, and the lack of clarity is part of ProPublica’s technique, which is to imply a violation while evading the question of what standard is supposed to have been violated.

“Thomas did not report the tuition payments from Crow on his annual financial disclosures,” the troika report. That’s true, but the question is whether he was required to do so. The answer is unambiguously no: The relevant statute requires reporting gifts to a “dependent child,” a term whose definition is limited to “any individual who is a son, daughter, stepson, or stepdaughter.” The statute would have kicked in if the Thomases had adopted the boy, but they didn’t.

Even ProPublica co-founder Richard Tofel was able to figure this out. On Thursday morning he tweeted that “it’s all okay because while Thomas said he was raising the kid ‘as a son,’ and had himself appointed legal guardian, the young man is officially just a great-nephew.” Disregard Mr. Tofel’s smarmy, partisan tone, and he has provided what is missing from the troika’s report—a clear explanation of why no disclosure was required.

Also exposing the silliness of the accusations now hurled at Justice Thomas is National Review‘s Rich Lowry.

My intrepid Mercatus Center colleague, Veronique de Rugy, explains that Hilaire Belloc’s economic pronouncements do not justify any attempt to ‘realign’ capitalism with the ‘common good.’

Also from Veronique is this call for Biden to come to the debt-ceiling negotiating table.

Nick Gillespie explains that “Vivek Ramaswamy Is Wrong About the National Debt.”

Juliette Sellgren talks with Reason‘s Stephanie Slade about fusionism.

David Henderson likes my GMU Econ colleague Dan Klein’s recent essay on David Hume and war.

Here’s the abstract of a new paper – titled “Minimum Wages and Poverty: New Evidence from Dynamic Difference-in-Differences Estimates” – by Richard Burkhauser, Drew McNichols, and Joseph Sabia:

Advocates of minimum wage increases have long touted their potential to reduce poverty. This study assesses this claim. Using data spanning nearly four decades from the March Current Population Survey, and a dynamic difference-in-differences approach, we find that a 10 percent increase in the minimum wage is associated with a (statistically insignificant) 0.17 percent increase in the probability of longer-run poverty among all persons. With 95% confidence, we can rule out long-run poverty elasticities with respect to the minimum wage of less than -0.129, which includes central poverty elasticities reported by Dube (2019). Prior evidence suggesting large poverty-reducing effects of the minimum wage are (i) highly sensitive to researcher’s choice of macroeconomic controls, and (ii) driven by specifications that limit counterfactuals to geographically proximate states (“close controls”), which poorly match treatment states’ pre-treatment poverty trends. Moreover, an examination of the post-Great Recession era — which saw frequent, large increases in state minimum wages — failed to uncover poverty-reducing effects of the minimum wage across a wide set of specifications. Finally, we find that less than 10 percent of workers who would be affected by a newly proposed $15 federal minimum wage live in poor families.

Jay Bhattacharya tweets:

Rochelle Walensky’s legacy will be the shattered dreams of a generation of American kids, especially poor and minority kids, whose futures she marred by working to keep schools closed in 2021.