Russell Roberts's Blog, page 271

Quotation of the Day…

(Don Boudreaux)

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… is from page 490 of the 1988 collection of Lord Acton’s writings (edited by the late J. Rufus Fears), Essays in Religion, Politics, and Morality; specifically, it’s a note – date unknown – drawn from Acton’s extensive papers at Cambridge University:

Liberty: Power over oneself. Opposite: Power over others.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 23 of Scott Lincicome’s excellent, data-rich January 2021 study, “Manufactured Crisis: ‘Deindustrialization,’ Free Markets, and National Security“:

Protectionism often undermines national security by weakening a country’s economy and manufacturing sector, thus making it less resilient in the face of war or other shocks. Restrictions on international trade and investment not only reduce economic growth (and thus tax revenue)and output but also can distort the economy and divert resources from sectors (e.g., high-tech, high-productivity industries such as information technology) that are also essential to national security.

Some Non-Covid Links

(Don Boudreaux)

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Wall Street Journal columnist Jason Riley praises some books – including one by Phil Magness – pushing back against the idiotic “1619 Project.” A slice:

Mr. Magness’s book examines the 1619 Project’s assertion that slave labor powered the U.S. economy, an argument that rests on “dubious statistical claims and shoddy research practices,” which have been refuted empirically in peer-reviewed journals. “The thrust of these exaggerations is to recast slavery as a distinctly capitalist enterprise, which, in turn, services the 1619 Project’s political message,” Mr. Magness writes. “The worthy historical task of documenting the horrors of American slavery has been cynically repurposed into an ideological attack on free-market capitalism.”

The 1619 Project is not an intellectual exercise in search of truth. It’s a political exercise in search of power. More scholars could and should be calling out this false history, but let’s be grateful to the ones who have risen to the occasion.

And Phil Magness reviews – with appropriate harshness – Edward Baptist’s The Half Has Never Been Told. A slice:

Baptist’s book has come under additional scrutiny for a widely-cited passage in which he purports to show the cotton sector’s singular centrality to the antebellum American economy. Using a “back of the envelope” calculation of “second order” and “third order” effects of cotton production, transport, shipping, and finance, he eventually arrives at a stunning statistic asserting that “more than $600 million, or almost half of the economic activity of the United States in 1836,” as measured by Gross Domestic Product (GDP), could be traced to slave-produced cotton (321–22).

Far from showing that cotton truly was the economic king, these figures are the result of an elementary accounting error. GDP, by definition, only measures finished goods, under the assumption that their final price reflects intermediate stages of production. By including what he calls second- and third-order effects, however, Baptist effectively double-counts cotton’s intermediate stages in the numerator while failing to similarly adjust the GDP-based denominator. In at least one instance, he further confuses shipping and insurance, which fall on the cost side of the balance sheet, for outputs, thereby artificially increasing the value of cotton production. The result haplessly inflates cotton’s share of national economic output from roughly six to eight percent to an astounding fifty percent (Jason Brennan, Why It’s OK to Want to be Rich, Routledge, 2020, pp. 130–31).

Scott Lincicome would have been surprised if special-interest-group politics did not intrude into Washington’s latest spasm of “industrial policy.” A slice:

Industrial policy advocates have expressed shock and dismay at the various Senate Committees’ “logrolling” efforts, but their surprise is unwarranted. Indeed, this kind of behavior is exactly what the literal dictionary definition of public choice tells us will happen:

The logic of collective action explains why farmers have secured government subsidies at the expense of millions of unorganized consumers, who pay higher prices for food, and why textile manufacturers have benefited significantly from trade barriers at the expense of clothing buyers. Voted on separately, neither of those legislatively enacted special-interest measures would pass. But by means of logrolling bargains, in which the representatives of farm states agree to trade their votes on behalf of trade protectionism in exchange for pledges of support for agricultural subsidies from the representatives of textile-manufacturing states, both bills can secure a majority. Alternatively, numerous programs of this sort can be packaged in omnibus bills that most legislators will support in order to get their individual pet projects enacted. The legislative pork barrel is facilitated by rational-voter ignorance about the adverse effects of legislative decisions on their personal well-being. It also is facilitated by electoral advantages that make it difficult for challengers to unseat incumbents, who, accordingly, can take positions that work against their constituents’ interests with little fear of reprisal.

And we’ve known for months now that every industry group and lobbyist in town was gearing up for this moment. Throw in the fact that this is (supposedly) must-pass, bipartisan “China legislation,” and it’d be shocking if all the logrolling and pork didn’t happen.

George Will rightly celebrates American innovativeness (although he seems to be more optimistic than am I – and more optimistic than is Scott Lincicome [see above] – about the likely outcome of Congress’s current effort to further spur such innovativeness).

My intrepid Mercatus Center colleague Veronique de Rugy argues against expanding the child tax credit. A slice:

For starters, the lack of federal money to fight poverty isn’t the issue with child poverty. As Robert Rector of the Heritage Foundation noted recently, “before the COVID-19 recession, the U.S. spent nearly $500 billion on means-tested cash, food, housing, and medical care for poor and low-income families with children. This is seven times the amount needed to eliminate all child poverty in the U.S., according to Census figures.”

One reason for that anomaly is that most of these benefits aren’t counted as income in official government poverty reports. But the most profound reason is that no country gets out of poverty through redistribution of income. To make a noticeable improvement on the poverty front, people need to improve their ability to earn and move up the income ladder. Unfortunately, built into this tax credit expansion (with no requirement to work or look for work) is a disincentive to work that could put the brakes on this process—as we saw before in the bipartisan welfare reforms of 1996.

Who’d a-thunk it?: “Teen Cigarette Smoking Went Up Following Flavored Tobacco Ban.”

Wise writing from Anthony Gill. A slice:

But is there an alternative to the long shadow of the state? Yes! That alternative is civil society and it has a long history of governing human relations. We form voluntary clubs. We live in communities. Sometimes these associations develop formal bylaws that govern our behavior, but they also include “unstated rules” amongst friends and infrequent acquaintances. Most importantly, civil society involves its participants in the creation, propagation, and maintenance of the daily rules we live by, and in doing so creates a shared culture that helps bring cooperation, coordination, and peace.

Juliette Sellgren talks with Sally Satel about addiction.

Here’s my GMU Econ colleague Larry White on the origins of U.S. government paper money and the end of private banknotes. Here’s his conclusion:

The imagined benefits of centralized control rested on wishful thinking. Few economic historians today would give a passing grade to the Federal Reserve’s conduct of monetary policy in the decade before or in the decade after 1935. The Fed’s post-Depression performance has also left a lot to be desired, but not for lack of control over the currency.

Some Covid Links

(Don Boudreaux)

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Here’s an in-depth interview of Phil Magness on lockdowns.

And here’s an interview with A State of Fear author Laura Dodsworth.

James Bovard understandably worries about the precedents that were set by the lockdowns. A slice:

One year ago writing for AIER, I asked, “Will the Political Class Be Held Liable For What They’ve Done?” Lockdowns at that point had already destroyed more than ten million jobs without thwarting the virus – a debacle that “should be a permanent black mark against the political class and the experts who sanctified each and every sacrifice.” No such luck. The article warned that “sovereign immunity… almost guarantees that no politician will face any personal liability for their shutdown dictates.”

The political class is coming out of the pandemic with far more power and prerogatives. Biden’s stimulus windfalls for lockdown governors is like giving $100,000 bounties to drunk drivers who crashed their cars. Government employees have been the ultimate privileged class during Covid-19, collecting full paychecks almost everywhere while many of them stayed home and did little or no work.

Ethan Yang challenges Michael Hiltzik’s assertion that lockdowns “saved lives without harming economies.” A slice:

This is congruent with a study published by a team of Stanford researchers that compared 8 lockdown countries with two counterfactuals, South Korea and Sweden. The study found that there are certainly benefits to implementing policy interventions but the benefits of aggressive policies such as lockdowns compared to less intrusive policies undertaken by South Korea and Sweden are minimal. This is without factoring in the collateral damage and the fact that in some contexts, lockdown policies may actually increase caseloads because they force people to gather in private residences, which are often less well-ventilated and more cramped.

This brings us to what is hopefully an emerging consensus that lockdowns, for whatever isolated marginal benefits they provide, are essentially swinging a sledgehammer to kill a spider.

(DBx: Hiltzik, by the way, has long displayed a remarkable inability to understand economics and to interpret facts reasonably. See, for example, here and here.)

And here’s Noah Carl on Hiltizik’s case for lockdowns. A slice:

He begins by claiming that “lockdowns played a significant role in reducing infection rates” and that “they had a very modest role in producing economic damage”. He then argues that “evidence for both propositions has been expertly compiled by Noah Smith”, linking to a recent article by Smith.

However, as I noted in a previous post, Smith doesn’t discuss any of the evidence contradicting his thesis, of which there is plenty. See here, here, here, here, here, here and here.

The author moves on to the comparison between California and Florida, noting that “California now boasts among the lowest case, hospitalisation and death rates in the nation, as well as a recovering economy”. However, the fact that its case and death numbers are currently “among the lowest” is more-or-less irrelevant, given that the virus is in retreat across the entire country.

Jonathan Sumption is buying none of former Boris Johnson advisor Dominic Cummings’s arguments that British lockdowns came too late and were too mild. A slice:

There is a moral dimension to all of this, to which Cummings turns a tin ear. He criticises ministers for not following the Chinese example faster than they did. He forgets that there were moral and not just pragmatic reasons for that. China is one of the most oppressive totalitarian states in the world. It treats people as mere instruments of state policy. We should have higher values. Interaction with other people is basic to human nature and to the functioning of our societies. Criminalising it impoverishes everything that makes life precious.

That brings us to the heart of the Cummings problem and the Johnson problem.

The Cummings problem is his contempt for democracy and liberal values. He is at heart a ruthless totalitarian. What we needed, he told us, was “a kind of dictator with kingly power”, who would “push out the boundaries of legality”. “This is war,” he said. “Any rules – forget it.”

The Johnson problem is the opposite one. He is weak. Cummings reveals that the Prime Minister really was concerned about the collateral effects of the lockdown, and at one point regretted ever having ordered one. Cummings said this with a curl of the lip and a rasp of contempt. But was Johnson not right to be concerned? And was he not wrong to allow himself to be pressed into the shape of the last backside that sat on him?

CJ Hopkins reports on Germany’s despicable covidocracy.

“Mild COVID-19 induces lasting antibody protection.”

A straw man appears set to again stomp through a part of Australia.

Ramesh Thakur reports:

Americans’ trust in public health institutions has slipped from over 80 to 52 per cent since the start of the pandemic. A big reason for the fall is the constantly mutating variants of the official narrative on the do’s and don’ts of the pandemic, with no better example than Dr Anthony Fauci. In the bestseller Faucian Bargain, Steven Deace and Todd Erzen describe the director of the US National Institute of Allergy and Infectious Diseases (NIAID) and senior adviser to President Joe Biden as ‘the most powerful and dangerous bureaucrat in American history’. Fauci has been a health bureaucrat his entire professional life and never practised medicine. He joined the NIAID on completing his medical residency in 1968 and became its director in 1984. The long tenure as CEO is a violation of a core tenet of institutional good governance. The spirit of Washington is so deeply infused in him that he’s learnt to duck, weave, evade and deflect like the most skilful politicians in swamp city.

Quotation of the Day…

(Don Boudreaux)

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… is from page 83 of Daniel Oliver’s essay, “Protectionism,” which is Chapter 18 in the 1987 collection Trade Policy and U.S. Competitiveness (edited by Claude E. Barfield and John H. Makin):

To sum up, protectionism is not justified by a trade deficit, and protectionism does not save jobs. Trade restrictions will always be special-interest policy, the sacrifice of the general welfare for the benefit of a politically powerful minority.

DBx: Pictured here is Dan Oliver.

Wen Will She Stop Her Fear-Mongering?

(Don Boudreaux)

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Here’s a letter to the Washington Post:

Editor:

Leana Wen warns that “The pandemic isn’t over – especially for our children” (May 26). Yet as in previous columns, she here again stokes fears of Covid-19 only by presenting data utterly out of context.

After her pro forma acknowledgment that “children are unlikely to become severely ill from covid-19,” Wen slips into her familiar fear-mongering mode by noting that “some children have become seriously ill, with more than 16,000 hospitalizations reported from a database of 24 states and New York City. The Centers for Disease Control and Prevention documents more than 3,700 instances of multisystem inflammatory syndrome in children.”

The implication is that, nationwide, Covid caused about 32,000 children to be hospitalized, and that even for children Covid’s side effects are serious and significant.

Sounds frightening – until context is provided. According to the CDC, in 2019 alone 6.7 percent of all Americans under the age of 18 had at least two visits to hospital emergency rooms. That is, the number of American children who in 2019 at least twice suffered injuries or illnesses serious enough to warrant visits to emergency rooms was about 4.1 million.* Even if a mere one percent of these children required overnight hospitalization on just one of their visits, the resulting number of these non-Covid hospitalizations – 41,000 – was 28 percent higher than is the number of children hospitalized for Covid.

Also note, for comparison, that the number of children who’ve so far died from Covid – according to Wen, “just more than 300” – is a mere one tenth of the number of Americans ages 19 and younger (3,219) who died in 2019 as a result of motor-vehicle crashes.

As for the more than 3,700 instances of (typically quite treatable) multisystem inflammatory syndrome in children, the number of Americans ages 0-19 who in 2017 were diagnosed with cancer was three times higher. The number of American children who in 2018 suffered from asthma was about 1,200 times higher, and the number of American children who in 2018 suffered from respiratory allergies was about 1,600 times higher.

For someone boasting a medical degree and a regular column in prestigious newspaper, Leana Wen is frighteningly incompetent at interpreting statistics.

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

* 4.1 million is roughly 6.7 percent of the 61,175,933 Americans under the age of 18.

Some Non-Covid Links

(Don Boudreaux)

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Eric Boehm reports that “American consumers are bearing nearly 93 percent of the costs of the tariffs applied to Chinese goods, according to Moody’s Investors Service.” A slice:

Prior to 2018, the average American tariff on imports from China was just 3.1 percent, according to data from the Peterson Institute for International Economics. But after Trump hiked tariffs on a wide range of imports covering everything from industrial goods to toys, the average tariff on imports from China is now 19.3 percent. Retaliatory tariffs imposed by China hiked its duties on American-made goods from 8 percent to 20.7 percent.

So what does the Biden administration do in the face of soaring prices for lumber? Why, make lumber even more scarce in order to drive prices up even further. (HT Phil Magness)

Richard Ebeling warns of the officious instincts of central planners. A slice:

What really may be behind such a “wanting” for political office is never stated directly or openly. That being: arrogance and power-lusting, with a wish to privilege some (those who have supplied the campaign contributions and votes that have won that politician the election) and to plunder others (those who will provide the taxed funds and bear the regulatory burdens to supply those special benefits). How many of us want to be told to our face that the candidate wants to play many of us for suckers so he can have the political position he craves, and to bestow those special favors and redistributed gains to his supporters through the fiscal and interventionist policy tools of government? Instead, it invariably gets candy-coated with amorphous rhetoric about the “common good,” the “general welfare” or the “national interest.”

David Boaz has evidence to support Ebeling’s warning.

My GMU Econ colleague Bryan Caplan reminds us to remain realistic about politics and politicians.

Thank goodness we have the Fed! – Not.

Insight from Steve Landsburg:

The next time somebody encourages you to “buy local” so you can “keep the money in the community”, try asking how they feel about the federal income tax, which is designed to facilitate the largest geographic redistribution of income ever conceived.

My GMU Econ colleague Dan Klein discusses Tocqueville’s “gumptious American.”

Colin Grabow thoughtfully examines the case for subsidizing shipbuilding.

Here’s George Leef on Gail Heriot’s and Maimon Schwarzschild’s new edited volume titled A Dubious Expediency: How Race Preferences Damage Higher Education.

Chris Edwards summarizes some myth-busting about R&D.

GMU Econ alum – and my Mercatus Center colleague – Liya Palagashvili busts four myths about the so-called ‘gig economy.‘ A slice:

Second, the majority of workers using online labor platforms are using it as a supplemental, not a primary job. Collins’s tax study concludes, “we find that the exponential growth in labor [online platform economy] work is driven by individuals whose primary annual income derives from traditional jobs and who supplement that income with platform-mediated work.” This is corroborated by several other studies, including one by the Economic Policy Institute.

The Only Surprise Is That Such Realities Continue to Spark Surprise

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

Your criticisms of industrial policy are spot-on (“Industrial Policy, Same Old Politics,” May 26). Yet the absurdity of now throwing 54 billion of taxpayers’ dollars at an allegedly on-the-ropes U.S. semiconductor industry runs more deeply than you had space to mention.

It’s true, as you note, that “American companies dominate in design (52%) and chip-making equipment (50%).” But the good news about this industry doesn’t stop there. Consider this recent summary, by the Cato Institute’s Scott Lincicome, of the healthy state of America’s semiconductor industry:

“The United States is also a top‐​five global exporter of semiconductors and related equipment, shipping almost $47 billion of those goods in 2019. These and other data led the SIA [Semiconductor Industry of America] to conclude in its 2020 State of the U.S. Semiconductor Industry report that ‘the semiconductor manufacturing base in the United States remains on solid footing.’

“The SIA also reports that the U.S. industry has ‘nearly half’ of all global semiconductor sales – a market share that has been steady (ranging from the mid‐​40s to low 50s) since the late 1990s – and is the top seller in every major regional market, including China. Sales by U.S. semiconductor firms also grew from $76.7 billion in 1999 to $192.8 billion in 2019 – a compound annual growth rate of almost 5 percent.

‘Beyond output and sales, the U.S. semiconductor industry has been a global leader in capital spending (capex) and R&D.”*

Subsidies are always suspect. But when showered on industries that are thriving they are beyond doubt inexcusable. What further proof do we need to conclude that politicians cannot be trusted to allocate resources wisely?

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

* Scott Lincicome, “Manufactured Crisis,” Cato Institute Policy Analysis, January 27, 2021, page 19.

Quotation of the Day…

(Don Boudreaux)

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… is from pages 204-205 of Jason Riley’s new and splendid intellectual biography of the great Thomas Sowell, Maverick (footnote deleted; first set of brackets original to Riley):

“I’m old-fashioned enough to be against [affirmative action] simply because it is wrong,” he [Sowell] said in a 1986 letter to a Reagan administration official who had asked him for his thoughts on racial-preference policies. “Having been forced by birth to be on the receiving end of discrimination for many years, I cannot find the cleverness to justify discrimination now, either to others or to myself. And if I now reduce this issue to a pragmatic question of whose ox is gored, then what right did I have to be indignant before?”

Beware of Efforts to Repatriate Supply Chains

(Don Boudreaux)

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In my latest column for AIER I discuss a small handful of the very many problems with efforts to repatriate so-called “supply chains.” A slice:

Looking at national security, consider the fact that there are more than 3,500 different grades of steel. Whatever grade of steel is now used by, say, the private producer, BAE Systems, to construct the outer shell of M1A2 Abrams battle tanks has that distinction in part because of its availability. But another term for “its availability” is “its cost.” If this grade of steel were less available – that is, if it were more costly – chances are high that some other grade of steel would instead now be in common use for this purpose and, thus, be identified as a type of steel that is ‘critically important’ for national defense.

So if tariffs are used to restrict the importation of the types of steel currently used in tank construction, the availability of such steel types in the U.S. will shrink – that is, their costs will rise. Tank producers will thus, at least in some cases, switch to substitutes that are less costly than are the newly tariff-ladened ‘critically important’ types of steel. Tariffs on critically important grades of steel might well result in such steel being proven to be not so critically important after all. Some other types of steel – formerly not identified as critically important – will instead be used.

In short, whether or not some good is ‘critical’ to national defense (or to health care, or to food security, or to infrastructure, or to you-name-the-desired-state-of-affairs) is not exclusively a question of that good’s physical properties. Nor is it a question exclusively of the extent of its current use for national-defense purposes. Whether or not some good is ‘critical’ to national defense is also a question of economics, not the least of which is this: What is the current cost of using that good compared to the cost of using one or more different goods that can achieve similar outcomes? And in all cases this cost will be higher or lower depending on how scant or abundant are available supplies of that good relative to available supplies of other goods.

A tempting ‘solution’ to the problem of identifying which goods are ‘critical’ to national defense is to include in the classification of ‘critical’ all obvious substitutes of the goods currently used for purposes of national defense. In the case of steel, for example, simply declare all steel to be strategically important.

But steel itself has substitutes, such as aluminum and, potentially, carbon fiber. So the ‘critical’ classification can logically be extended to include all metals and other substances that can potentially substitute for steel.

Again, there is no engineering answer to the question of which goods are ‘critical’ to national defense. And once the inescapable economic properties of this question are taken into account, there are, in most cases, no obvious and objective criteria that allow some goods and services to be classified as ‘critical’ while others are not so classified.

The challenge of devising some practical means of distinguishing ‘critical’ from not-critical goods and services looms large. First, the imprecision – the ‘non-objectiveness’ – of the criteria for making such distinctions means that all such distinctions will require judgment calls on the part of government officials. But government officials, being incessantly under pressure from special-interest groups, will be tempted to make such distinctions in an overly inclusive manner. Goods and services with no real claim to being critical for national defense will be wrongly classified as critical.

Several years ago I encountered a small piece of evidence in support of the claim that politicians are shameless in using national security as an excuse for special-interest privileges. I was present at a speech in which Sen. Marco Rubio – who represents Florida – defended sugar and other crop subsidies with the assertion that these subsidies are essential if America is to enjoy “food security.” And “food security” is essential, so the Senator assured his audience, to America’s ability to resist foreign military threats.

The audience applauded.

…..

Here’s why above I preface “supply chains” with “so-called.”