Russell Roberts's Blog, page 3

Wise Reflections on China

(Don Boudreaux)

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A friend in Houston, Ron Farmer, owns US LED – a lighting-supply company. After reading my recent letter warning against rash decoupling from China’s economy, he sent to me the following e-mail. I share Ron’s e-mail here with his kind permission.

Don,

All of our contract manufacturers are Chinese. Until recently all of our lighting manufacturing has been done in China. In an effort to compete with each other, many of the Chinese lighting manufacturers have opened additional factories in Thailand, Vietnam, Mexico and elsewhere in reaction to the 25% tariff that was added during the Trump years. I need not tell you that the cost of the tariffs has been borne by American buyers.

However, the Chinese are paying a very high price for the movement of their manufacturing to other lands. The layoffs of the low end workers is massive and will only get worse. This will have a negative effect on China but it is unclear how this will help Americans.

I don’t like the Chinese government’s policies just as I do not like ours. But I am dismayed when I see the advancement in the quality of life for the common person in China being reversed.

What will Xi do to employ the unemployed? Sell off our bonds to finance their unemployment? Have them manufacture something else for domestic use? Munitions? Or just let them go hungry?

A weakening and destabilized China is not good for anyone.

Ron

Some Links

(Don Boudreaux)

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Government-school teacher Vann Prime, writing in the Baltimore Sun, offers the lowdown on teachers unions. A slice:

Independent educators who disagree with even a portion of the unions’ agenda need to realize they are funding a megalithic, authoritarian entity working against their consciences, insulting their professionalism, and damaging their students’ interests.

Benoît Malbranque writes about the proud tradition of French liberal economics, 1695-1776.

Alison Somin ponders the U.S. Supreme Court’s ruling in Students for Fair Admissions v. Harvard. Two slices:

What comes next? Some universities have already signaled an intent to circumvent the Students for Fair Admissions holdings, likely via proxy discrimination, or using characteristics that correlate with race so closely that they are basically proxies for race. Southern state and local governments infamously used similar strategies to maintain Jim Crow, such as grandfather clauses, literacy tests and (though it’s now prohibited by constitutional amendment for federal elections) the poll tax. In Village of Arlington Heights v. Metropolitan Housing Development Corp, the Supreme Court developed a test for sussing out such cases of proxy discrimination.

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Individuals should be treated as individuals and not on the basis of the color of their skin. The Students for Fair Admissions opinion is a ringing endorsement of this constitutional, legal and moral principle and deserves to be celebrated accordingly.

Kevin Yuill explains that “the end of affirmative action is a victory for racial equality.”

My intrepid Mercatus Center colleague, Veronique de Rugy, argues yet again for government to restrain its spending. A slice:

The literature on austerity reveals that the most effective way to reduce the debt-to-GDP ratio without affecting the economy too much or for long is to adopt fiscal adjustment packages that consist mostly of spending cuts. Packages based on entitlement reforms are more politically challenging but also yield much better results. Considering that Medicaid, Medicare, and Social Security are the drivers of debt growth, reforming these programs must play a significant role.

My GMU Econ colleague Dan Klein talks with Juliette Sellgren about “Hayek and the band man.”

Tony Gill asks: “Why do we rescue when all hope is lost?”

GMU law professor – and former Chairman of the FTC – Tim Muris warns of the hubris and lawlessness of current FTC Chairwoman, Lina Khan. A slice:

The FTC has abandoned antitrust law’s long-standing focus on protecting consumers and radically expanded the scope of its authority to police “unfair methods of competition” — now effectively defined in terms of a “we know it when we see it” standard. The agency has become the proverbial bull in the china shop, ignoring the bipartisan legal and economic consensus that, over recent decades, helped create a stable legal environment to encourage unprecedented innovation and technological progress.

Mergers can facilitate innovation — just look at Amazon’s recently closed acquisition of One Medical, which will leverage the e-commerce giant’s reach to expand people’s access to a new model of high-quality and convenient healthcare. Likewise, Johnson & Johnson’s acquisition of Abiomed is poised to bring Abiomed’s breakthrough technologies for heart, lung, and kidney support to many more patients.

There is perhaps no better example of the new FTC’s aggression than its continued assault against Illumina, which has begun its appeal of the FTC’s decision ordering the company to divest its acquisition of GRAIL. This deal is another important example of the dynamism that drives American innovation and is now in jeopardy. At bottom, the FTC puts convoluted theories of antitrust ahead of the significant benefits that the acquisition would likely create, including the ability to scale healthcare innovation and help patients around the world.

Illumina, a leading provider of next-generation DNA sequencing platforms, acquired GRAIL, developer of the groundbreaking Galleri multicancer early detection test. Galleri examines fragments of DNA in a patient’s blood sample to identify cancerous cells in asymptomatic patients. It is a generation-defining breakthrough against cancer, and no similar tests are on the horizon. To analyze the DNA in the blood samples, GRAIL uses Illumina’s sequencing platforms. Illumina notes in its opening appeal brief that had the FTC approved the merger, commercialization of GRAIL’s award-winning test would have greatly progressed today, reducing the cancer burden in the United States and worldwide while saving thousands of lives.

Despite all these benefits, the current FTC ordered Illumina and GRAIL, companies that do not compete, to unwind their merger by alleging possible harm to competition in a market that does not exist. In doing so, the FTC overturned its own administrative law judge’s 200-page opinion holding otherwise and ignored the remedy proposed by Illumina and GRAIL to address the FTC’s concerns. Rather than a “careful, intense factual investigation” of possible competition problems, the opinion paradoxically finds harm based on scant evidence while setting an unattainable standard for recognizing the merger’s likely benefits.

Reason‘s Stephanie Slade writes insightfully about the U.S. Supreme Court’s ruling in 303 Creative LLC v. Elenis .

The Editorial Board of the Wall Street Journal rightly applauds the U.S. Supreme Court’s invalidation of Biden’s lawless student-loan ‘forgiveness.’ Two slices:

No President in memory has exceeded the powers of his office more than Joe Biden, and the Supreme Court keeps telling him he can’t get away with it. The latest rebuke arrived Friday when a 6-3 majority cancelled his unilateral decision to cancel $430 billion in student debt in Biden v. Nebraska.

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Specifically, in claiming he can spend $430 billion without Congress’s assent, Mr. Biden is hijacking Congress’s power of the purse, which the Constitution expressly reserves for the legislature in Article I. If a President can do that, he can spend money on anything. Imagine what Donald Trump would do with that precedent if he returns to power.

Jay Bhattacharya tweets:

The @WHO would have more credibility “standing up for science” if it would plainly explain why it redefined herd immunity in Oct. 2020 to exclude immunity after covid recovery and include solely vaccine-derived immunity. And apologize for the lockdowns and school closures.

Quotation of the Day…

(Don Boudreaux)

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… is from page 314 of the 2004 Liberty Fund edition of David Ricardo’s 1817 treatise, On the Principles of Political Economy and Taxation:

The sole effect of high duties on the importation, either of manufactures or of corn, or of a bounty on their exportation, is to divert a portion of capital to an employment, which it would not naturally seek. It causes a pernicious distribution of the general funds of the society – it bribes a manufacturer to commence or continue in a comparatively less profitable employment. It is the worst species of taxation, for it does not give to the foreign country all that it takes away from the home country, the balance of loss being made up by the less advantageous distribution of the general capital.

DBx: Attempting to enrich the people of the home country by imposing protective tariffs and dispensing export subsidies makes no more sense than attempting to enrich the people of the home country by routinely destroying a portion of the goods purchased by households for consumption along with a portion of the materials and tools used by businesses for production.

Protectionism is the illogical assertion that 10-3=15.

On Today’s Ruling On Student-Loan ‘Forgiveness’

(Don Boudreaux)

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With rare exceptions, the reporting on this Supreme Court decision has been shockingly bad.

Programming Director, WTOP Radio
Washington, DC

Sir or Madam:

Around 2:05pm today one of your reporters interviewed some people off the street about today’s Supreme Court ruling that Pres. Biden’s student-loan forgiveness is unconstitutional. Every interviewee disapproved of the ruling. Could your reporter not find a single person who agrees with the Court that the emergency powers authorized by the HEROES Act do not include unilateral student-debt forgiveness by the executive branch? After all – and as noted in Chief Justice Roberts’s majority opinion – even Nancy Pelosi, as Speaker of the House, said in July 2021 that “People think that the President of the United States has the power for debt forgiveness. He does not. He can postpone. He can delay. But he does not have that power. That has to be an act of Congress.”

Also, why was your reporter so utterly uncritical about the policy of such loan forgiveness? I could hardly believe my ears when I heard the first interviewee complain that his now having to repay his student loan will delay his plans to buy a house. Why didn’t your reporter ask this person why he believes that taxpayers should subsidize his purchases of real estate? And why didn’t your reporter interview a college graduate who took out no loans to pay for college? Or a graduate who has already repaid his or her loans? Or a worker who never went to college? Are these people’s voices and opinions unworthy simply because they likely are grateful to learn that they now aren’t required to help pay off student loans voluntarily undertaken by strangers disappointed at the news that they are unable to freeload?

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

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from the First Series, Chapter 5 (“Our Products are Burdened With Taxes“) of the FEE edition (Arthur Goddard, trans.) of Frédéric Bastiat’s great work Economic Sophisms (original emphasis):

Do what you will, gentlemen; you cannot give money to some without taking it away from others. If you absolutely insist on draining the taxpayer dry, well and good; but at least do not treat him like a fool. Do not tell him: “I am taking this money from you to repay you for what I have already taken from you.”

DBx: Joyeux anniversaire Bastiat!

Some Links

(Don Boudreaux)

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Here’s George Will on the U.S. Supreme Court’s ruling in Students for Fair Admissions v. Harvard. Two slices:

In the 231 years since its first ruling, the Supreme Court has never sown more confusion than in the 45 years since it first ruled on the subject of race-based decisions in university admissions. On Thursday, the court found Harvard and the University of North Carolina guilty of doing what the court’s earlier rulings have repeatedly given universities muddled semi-permission to do: ignore the 14th Amendment’s guarantee of “equal protection of the laws.”

The court did not “end” affirmative action. The court cannot stifle, by minutely policing, academia’s determination to continue administering racial preferences (and hence, necessarily, racial disadvantages). Thursday’s decision usefully affirms the principle of racial neutrality at a moment when public- and private-sector institutions are rejecting it.

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Progressives will struggle to ram Thursday’s ruling into their current narrative about the court jeopardizing its legitimacy with rulings counter to majority opinion (e.g., last June’s Dobbs decision overturning Roe v. Wade). Leave aside the fact that the court, like the Constitution, is not a majoritarian device. But notice this: Racial preferences starkly divide academia from the public, 74 percent of which (including majorities of Democrats and Black Americans) opposes them.

Also writing about Students for Fair Admissions v. Harvard is the Wall Street Journal‘s Editorial Board. A slice:

No resistance can change the Court’s watershed declaration putting the country back in harmony with the principle of equal treatment at the heart of America’s founding promise. Notwithstanding the paean to equality in the Declaration of Independence, the Constitution was flawed owing to slavery. The 14th amendment was passed in 1866 to extend the protections of the law to Americans of all races.

Ward Connerly has thoughts about the ruling in Students for Fair Admissions v. Harvard. A slice:

Now that the Supreme Court has ruled in favor of equal rights and against race-based affirmative action in college admissions, it is realistic to anticipate some pushback. Change after 60 years rarely comes easy. For my part, and that of the majority who believe in the ideal that has guided America since its inception, this is a time to rejoice, as America will come closer to living in accordance with its creed.

GMU Econ alum Dominic Pino applauds Justice Neil Gorsuch’s criticisms – expressed in a concurring opinion in Students for Fair Admissions v. Harvard – of racial classifications. A slice:

In the Supreme Court’s decision in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, Neil Gorsuch devoted a portion of his concurrence to skewering the absurdities of classifying humans by race.

He notes that college applicants could choose between “American Indian or Alaska Native; Asian; Black or African American; Native Hawaiian or Other Pacific Islander; Hispanic or Latino; or White” as their race. “Where do these boxes come from?” Gorsuch asks. “Bureaucrats. A federal interagency commission devised this scheme of classifications in the 1970s to facilitate data collection.”

There is nothing preordained or scientific about these categories — which the creators of the classification scheme were careful to point out in the 1970s, as Gorsuch notes. But their warnings have been ignored. As a result, absurdities abound.

Kevin Schmiesing bust myths about what Milton Friedman really wrote in his September 1970 New York Times Magazine essay on the proper role of corporate management. A slice:

Friedman also admits the possibility of even public corporations having charitable aims as their reason for being: “A group of persons might establish a corporation for an eleemosynary purpose—for example, a hospital or school. The manager of such a corporation will not have money profit as his objective but the rendering of certain services.” Friedman writes, “In either case, the key point is that, in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them.” This passage demonstrates that Friedman was not opposed to corporations fulfilling what many today would call “social” purposes; his central point was that executives—as employees entrusted with the well-being of the company—are not free to establish and pursue aims independent of those established by their employers (shareholders).

James Hanley warns of “the tyranny of the vanguard”…

… and Charles Oliver reports on an example of such a tyrannical tendency.

Quotation of the Day…

(Don Boudreaux)

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… is from page 89 of Thomas Sowell’s 1993 book, Inside American Education (original emphases):

Everyone wants education to be relevant. It is hard even to conceive why anyone would wish it to be irrelevant. Those who proclaim the need for “relevance” in education are fighting straw man – and evading the crucial need to define what they mean by “relevance,” and why that particular definition should prevail.

Beginning in the 1960s, insistence on “relevance” became widespread and the particular kind of “relevance” being sought was typically a relevance judged in advance by students who had not yet learned the particular things being judged, much less applied them in practice in the real world. Relevance thus became a label for the general belief that the usefulness or meaningfulness of information or training could be determined a priori.

DBx: One of the truly most-relevant scholars of the past 60 years is Thomas Sowell, who today celebrates his 93rd birthday. May he have many more!

I Was Mistaken…

(Don Boudreaux)

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… in my recent criticism of Jared Bernstein’s explanation of why he uses the cropped labor-force participation rate of 25-54 year olds (rather than that of all persons 16 years of age and older). I thank Bill Conerly for identifying my error – an error that I’m chagrined to have made, but that I cannot deny and am, therefore, happy to acknowledge. I share below Bill’s e-mail correcting my error.

Don,

I almost always agree with you, and not with Jared Bernstein, but …

Labor force participation varies by age and sex. Here’s men in 2019:

[image error]

Imagine that for every age and sex, labor force participation was steady over time. Suppose the baby boom generation was causing a greater proportion of the population to be in older age brackets. The 16+ participation rate would trend downward because of the greater weight given to us older folks.

Bernstein’s look at ages 25-54 is a simple attempt to account for that. There is not a lot of age-related variation in that age range, but there is some.

I have spent a lot of time on demographics of the labor force, and I (like many others) calculate an age-adjusted labor force participation rate; this is what the rate would be if the underlying population was not changing.

[image error]

I have not looked at the monthly data, and this chart of annual data only goes through 2022. Maybe it has fully recovered.

High labor force participation is what you would expect in the early years of excessive stimulus, before people figure out that inflation makes nominal wage offers look better than they really are.

Other than this quibble, I enjoy Café Hayek; read it daily.

Bill Conerly

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 171 of Israel Kirzner’s 1990 paper “Comments on the Debate Between Professors Leontief and Stein on National Economic Planning,” as this paper is reprinted in Competition, Economic Planning, and the Knowledge Problem (Peter J. Boettke and Frédéric Sautet, eds., 2018), which is a volume in The Collected Works of Israel M. Kirzner (original emphasis):

The crux of the matter is that every opportunity for entrepreneurial profit arises from the existence of two market prices for essentially the same product or the same bundle of inputs. This price divergence, which offers the opportunity for profit is, therefore, at the same time, evidence of an earlier failure of coordination among members or sectors of the economy. The drive to capture profit is, then, a drive to locate pockets of inefficiency. The successful capture of prime entrepreneurial profits occurs only through action which tends to eliminate the price spread and the inefficiency which was its cause. The ceaseless agitation of the market is thus not propelled by an undirected force, but by an extraordinarily sensitive detector of gaps in coordination. This agitation consists, therefore, in a continuing tendency to coordinate economic activity in the face of ceaseless changes in consumer preferences, resource availabilities, and technological knowledge.

DBx: In short, the free market is not akin to a drunk donkey.

Some Links

(Don Boudreaux)

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GMU Econ alum Adam Michel and Scott Lincicome chart some of the opportunity costs of industrial policy. A slice:

As Figure 1 shows, the industrial policy spending is as much as four times as costly as a pro‐​growth tax reform package, and even the more conservative industrial policy estimate exceeds the more aggressive expensing estimate by more than $300 billion. Of course, this isn’t really a fair comparison because, at best, the subsidies will just reallocate existing resources, whereas pro‐​growth tax cuts would expand the pool of total private investment and, just as importantly, put private investors—not politicians—in charge of determining where new investments should go.

Vance Ginn is very critical of the arguments in Oren Cass’s new book. A slice (spelling of Hayek’s first name corrected):

But the crux of Cass’s theory is that he believes markets must be molded, even referring to work by the father of modern economics Adam Smith. Conveniently, he fails to cite the economist Friedrich Hayek, who built on Smith’s ideas, to identify spontaneous order, the basis of free-market capitalism that argues economic growth and prosperity arise from voluntary transactions by free people, not government guidance and control.

This “new right” idea was debunked long before Cass came along by Hayek (and others), who also highlighted the “knowledge problem” associated with central planning. He argued that no central authority can possess the information necessary to make efficient decisions for an entire economy. The complexity of economic interactions and the constant flux of information require decentralized decision-making and market mechanisms to aggregate and incorporate local knowledge effectively.

Hayek’s insights emphasize the limitations of top-down control and the importance of allowing market forces and individual actors to shape economic outcomes based on their localized knowledge and preferences from the bottom-up. But Cass would have it that government is heralded as the keeper of knowledge and the arbiter of good decisions rather than encouraging freedom and liberty in individuals, i.e., the essence of capitalism.

The Wall Street Journal‘s Editorial Board reports on yet one more real-world example of the dangers that lurk in government seizing the power to subsidize industries. Two slices:

Bureaucrats excel at pushing their policy agendas through gaps in the law, and the Commerce Department is showing how it’s done. The agency is expanding a subsidy to dictate social policy, pushing progressive causes on companies in many more industries.

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Yet now Commerce is expanding the program along with the strings. Grants originally meant for chip makers will also be made available for suppliers, Ms. [Gina] Raimondo says. That includes producers of chemicals, silicon, custom tools and more—a much larger cross section of the economy. The aid will be hard to decline for companies eager to keep a competitive edge, but they’ll have to join their chip maker customers in submitting to administrative social diktats to get the cash.

Richard Reinsch isn’t impressed with Patrick Deneen’s new book.

Phil Magness, on his Facebook page, gives a detailed exposé of how Nancy MacLean and her co-authors slice and dice quotations to deceive their readers about the meaning of passages written by authors who they wish to discredit.

Jeffrey Miron makes the case against ‘forgiving’ student-loan debt.

Mike Munger explains that the trolley problem was discovered and solved by Adam Smith.

Christian Britschgi notes that “rent control 2.0 looks a lot like rent control 1.0.”

Dominic Pino wrote about Mel Brooks, who turned 97 yesterday.