Russell Roberts's Blog, page 319
February 1, 2021
The Market Makes People Pay for Their Prejudices
As Art Carden notes, today is the 77th birthday of the great economic historian Robert Higgs. One of Bob’s many pioneering books is his 1977 Competition and Coercion: Blacks in the American Economy, 1865-1914.
I thought of Bob’s research and scholarship yesterday as I watched 42, the 2013 movie, starring Chadwick Boseman, about the baseball career of the great Jackie Robinson – who would yesterday have turned 102.
I don’t know if the scene depicted here is historically accurate or not. (This scene isn’t, at the link above at “42,” listed as being among the movie’s historical inaccuracies.) Either way, this scene does capture much of the manner in which market competition actually works to impose on bigots the costs of exercising their irrational prejudices. It depicts also the fact that many bigots, unwilling to pay those costs, change their behavior for the better.
It’s beautiful to behold!
Contrary to popular belief, such competition was at work in America during the late 19th and early 20th centuries, as Bob Higgs documents in his book. Indeed, the reality of such competition is what drove state and local governments during the Jim Crow era to forcibly impose racial discrimination by enacting Jim Crow legislation.
Some Non-Covid Links
Art Carden celebrates Robert Higgs’s birthday. (Happy Birthday, Bob!) A slice:
This year is also the fiftieth anniversary of Higgs’s first book, The Transformation of the American Economy 1865-1914, a remarkable achievement for any scholar but made all the more impressive by the fact that it was published as Higgs was entering his late twenties. As he would spend his career doing, he took what “everybody” knew about exploitation, inequality, and Robber Barons during the late nineteenth and early twentieth centuries and showed that it was wrong. The book stands up well even five decades later.
In 1977, Higgs published a pathbreaking book on the economic history of race, Competition and Coercion: Blacks in the American Economy 1865-1914. Competition, Higgs argued, helped explain black economic advancement while coercion held them back.
I had never read “Capitalism and Freedom” and was renewed in my admiration for midcentury American reading audiences. The book, full of tightly reasoned arguments about the principles of economic freedom in various spheres of life, sold 400,000 copies in its first 18 years. The University of Chicago Press, which first published the book six decades ago, evidently would rather it stop selling. The new edition’s foreword is written by Binyamin Appelbaum, a member of the New York Times editorial board, who treats Friedman’s classic text as mildly interesting artifact. “Friedman’s claim that ‘widespread use of the market reduces the strain on the social fabric,’ ” Mr. Appelbaum assures us, “misapprehended the nature of society, which is more like a muscle than a fabric.” I await Chicago’s edition of J.K. Galbraith’s “The Affluent Society,” with a foreword by Larry Kudlow.
Arnold Kling reviews Kevin Vallier’s book, Trust in a Polarized Age.
J.D. Tuccille warns of the consequences of abandoning free speech. A slice:
Protections for free speech, it’s worth pointing out, aren’t some perfect counter to false and extreme ideas. Instead, they’re a recognition of core individual rights. But they’re also a pragmatic acknowledgment that putting government agencies in charge of suppressing misinformation just gives one team of bullshit artists an advantage over their less-powerful competitors.
However, it is important to note that the lack of standards of determining bureaucratic success creates impassible problems for monitoring and managing the size of bureaucracy. For example, it is likely impossible to calculate whether an agency should have 500 employees or 50,000 and it is difficult to know whether agency services are too costly, and by how much. Because bureaucrats are not limited by considerations of financial success, superiors have to provide limitations in the form of rules and regulations. The mission of the bureaucrat is to serve the public, but the incentives point toward serving one’s supervisor and their preferences for implementing the agency’s goals.
My colleague Tyler Cowen warns against raising the minimum wage. A slice:
Or consider Treasury Secretary Janet Yellen. She supports the proposed hike, as she noted in her confirmation hearing last week, yet in 2014 she endorsed the view that a minimum wage hike would lead to significant job loss. Maybe now she knows better, but if the 2014 Janet Yellen could have been so fooled, then perhaps this debate is not so settled.
Some Covid Links
Joe Davis writes wisely about humanity’s irrational reaction to Covid-19. Two slices:
Our vision has narrowed like a microscope, focusing on one small thing and with no peripheral vision. Our minds are bent to a singular purpose: preventing death from a single cause. This is understandable to a point. A new and unknown threat holds the imagination hostage. The predator grabs the attention of its prey for a reason, and one can reasonably argue that we must deal with an imminent threat above all other dangers. But the dangers in a complex society are not so stark or simple as the perils of the savannah, where you are hunted only by the lion. Even there, the lion in front of you may be a mere diversion while another creeps up on you from behind. It is hard for us to assess which threat is most pressing, because the things most dangerous to us are often not the things we are paying attention to. There is a mass fixation at the moment on the thing we think we see in front of us, and we are tracking what we believe are its movements. But it is to the dangers outside our vision, that are not being tallied and charted in red before our eyes, and to all the things that we are ignoring, weakening, or destroying because we do not really see the use of them, that I find my attention unavoidably drawn.
…..
This puts me in mind of another angle on liberty worth considering. J.S. Mill would say that my liberty ends only where it causes harm to you. This may not be a bad rule of thumb, but it accounts only for the liberty to ‘do what I like’ (as long as it harms no-one), not, for example, the liberty to participate in public and social life, the liberty to help and nourish one another with presence and contact. Much of the freedom that has been taken away from us as individuals does not benefit only us, and its removal is anything but protective of others. My liberty to visit my mother is part of her protection against loneliness and despair. Your liberty to run a business with minimal interference is protection for your family against destitution, illness and poverty. Removal of personal liberties removes not only the liberties, it removes a delicate canopy of care and protection from an entire population.
Jeffrey Tucker reports on the New York Times‘s hysterical attitude about Covid. A slice:
For example, they have this category called “very high risk level.” Red is in the text. Scary! But what is it? It means 11 or more people per 100,000 have generated a positive PCR test for the coronavirus.
Not deaths. Not hospitalizations. Not even symptomatically sick. (Yes, I know the term “sick” is old fashioned.)
We are talking about 11 positive PCR tests. This is an infection rate of 0.01%. Consider too that the NYT reports that these tests in the past have generated up to 90% false positives.
“The Science is Settled. Lefties are Fearful Scolds“.
Laura Perrins decries Boris Johnson’s cruelty. Two slices:
What Boris Johnson and his henchman are doing now is cruel and wicked. They have been aided and abetted by a propaganda media that rarely asks any tough questions, such as how accurate is the 100,000 Covid death figure, where are all the flu deaths, why did you empty the hospitals of Covid positive patients and put them in care homes, why are schools still closed when Public Heath England said it was safe to open after half term, and how many lives will be lost to lockdown conditions and recession conditions?
Pretty much every question from the media is, why didn’t you lock down earlier, and why didn’t you lock down harder? This is what counts as journalism these days, a false opposition interested only in pushing the government agenda and propaganda. What the media have done is to manufacture consent from the population for what is a needlessly cruel and wicked lockdown that we will never recover from.
…..
As I have always said, lockdowns fail on every test: they are immoral, they are unethical, they are disproportionate and they even fail on utilitarian grounds. They break families, they target the vulnerable, children and children with disabilities the most. Johnson has needlessly kept schools closed and dangled hope for reopening in the future, always the not-too-distant future that never seems to come.
If he and his henchmen followed the science they would see how damaging lockdown was. They would know how cruel and evil it was. But they don’t care. For some reason they are doubling down, probably to save their political lives and the propaganda media, many bought and paid for by the Tories, and their corporations are enforcing this wicked dictatorial regime and manufacturing the public’s consent.
Here’s an important point from Phil Magness:
Quotation of the Day…
… is from page 61 of Carlos Alberto Montaner’s 2000 essay “Culture and the Behavior of Elites in Latin America,” which is chapter 5 in Culture Matters, Lawrence E. Harrison and Samuel P. Huntington, eds. (2000):
But it is a quest for social justice that condemns the poor to permanent poverty – a true case of the road to hell being paved with good intentions.
DBx: This truth is especially important.
Intentions are not results. And, as Hayek argued, justice is an attribute of individual choices and relationships rather than something that society does or doesn’t collectively arrange and dispense.
As commonly used, the term “social justice,” with its lovely connotations and valence, is the name of the whole mix of social outcomes that those who use this term desire. And those who use this term invariably believe that their desired outcomes must be imposed with conscious direction by the state.
Are some workers paid less than social-justice advocates believe these workers deserve? Raise the minimum wage! Are some workers without paid leave? Have government arrange for such leave! Are some people poor? Redistribute income! Is income or wealth inequality too great? Redistribute income! Do some workers lose their jobs because fellow citizens choose to buy imports? Raise tariffs! Are some people unemployed? Have government guarantee employment! Are some people deeply in debt? Have government pay off these debts or simply declare the debts forgiven! Are some corporations currently quite large relative to other companies or relative to what someone’s imagination regards as ideal? Break them up or impose more proscriptions and prescriptions upon their activities! Do some people abuse drugs? Make such drugs illegal!
What could be simpler?!
Such thinking is appallingly simplistic, yet it is commonplace in elite circles no less – indeed, perhaps more so – than in non-elite circles. Such thinking is proudly endorsed by popes, politicians, pundits, and professors – all of whom believe that their good intentions carry the day, and none of whom bother to inquire with any depth into the actual consequences of the state actions that they endorse. These consequences typically are largely ill and outweigh whatever good outcomes are achieved by the state interventions.
January 31, 2021
Bonus Quotation of the Day…
… is from page 57 of Robert Higgs’s brilliant 1971 book, The Transformation of the American Economy: 1865-1914 (footnote deleted; links added):
“Institutions,” Arthur Lewis has written, “promote or restrict growth according to the protection they accord to effort, according to the opportunities they provide for specialization, and according to the freedom of manoeuvere they permit.” In all these respects American institutions were basic to the initiation of economic growth and to its sustainment.
DBx: I add only – as I believe Bob Higgs would agree – that also at work in the U.S. was bourgeois dignity.
Lewis is correct. And note that his message is counsel against industrial policy. After all, industrial policy stymies some effort with special penalties in order to stimulate other effort with special privileges; it restricts opportunities for specialization only to those tasks that government officials and their think-tank muses somehow divine are acceptable; and it has as its essence restrictions on the freedom of economic actors to choose their own maneuvers.
…..
Pictured above is the late Nobel-laureate economist W. Arthur Lewis.
Some Non-Covid Links
Gary Galles decries the distorted and distorting language used politically.
Paul Matzko reports on the so-called “Fairness Doctrine”‘s sordid history.
This excellent Arnold Kling line is reason enough to link to the post in which it appears:
The worst intellectuals to put in charge of things are the ones who think that they should be in charge of things.
Here’s a silver lining around the dark cloud of Covid Derangement Syndrome.
The great Bruce Yandle looks at the likely trade policy of the Biden administration.
Today, ideas are far from the animating force of politics. Indeed, it’s hard to name a single original or even newly refreshed idea that animated the 2020 election.
On the right, the only real question was personal fealty to President Trump. Recall that the GOP platform was simply a one-page resolution that recited grievances against the media and proclaimed allegiance to the president. Democrats were content mostly to push to expand existing spending and entitlement programs while embracing illiberal ideas of racial essentialism and ahistorical revisionism.
Ideas still matter, of course, and there’s no shortage of them coming from academics, think tanks, journalists, pressure groups, unions, business lobbies and more. It’s just that these ideas are not what animate citizens and their public servants.
We’ve seen a similar debasement in the power of words. In the 1990s, Republicans and late-night talk show hosts were afflicted by paroxysms of heartburn and howls, respectively, over President Bill Clinton’s under-oath exegesis on the third-person singular present-tense form of “to be.”
It’s now an article of faith among much of the left that “hate speech” is not constitutionally protected and that words are violence—while at the same time slogans such as “defund the police” don’t really mean what they say, and anyone who suggests they do is acting in bad faith. This summer, many ostensibly serious intellectuals of the left beclowned themselves comparing self-described antifascist activists (fact check: they were hard-left authoritarian rioters assaulting police, intimidating civilians and destroying property) to the men who stormed Normandy, defeated the Axis powers and liberated the concentration camps because both, after all, were against “fascism,” as if that word meant nothing.
Some Covid Links
AIER Contributing Authors document the calamitous impact of the tyrannical Covid-19 lockdowns. A slice:
The present Covid-inspired forced lockdowns on business and school closures are and have been counterproductive, not sustainable and are, quite frankly, meritless and unscientific. They have been disastrous and just plain wrong! There has been no good reason for this. These unparalleled public health actions have been enacted for a virus with an infection mortality rate (IFR) roughly similar (or likely lower once all infection data are collected) to seasonal influenza. Stanford’s John P.A. Ioannidis identified 36 studies (43 estimates) along with an additional 7 preliminary national estimates (50 pieces of data) and concluded that among people <70 years old across the world, infection fatality rates ranged from 0.00% to 0.57% with a median of 0.05% across the different global locations (with a corrected median of 0.04%). Let me write this again, 0.05%. Can one even imagine the implementation of such draconian regulations for the annual flu? Of course not! Not satisfied with the current and well-documented failures of lockdowns, our leaders are inexplicably doubling and tripling down and introducing or even hardening punitive lockdowns and constraints.
Emma Brockes worries that lockdowns and fear of Covid are eating like acid at human sociability. A slice:
I have watched my kids adapt, with an almost seamless ability, to online learning and no indoor playdates. We have grown accustomed to barely leaving the neighbourhood and not seeing family for over a year; and, on the rare occasions when we have a babysitter, to wearing masks inside the house. Meanwhile, we are unmoored from all but a handful of close friends. If it is fine – and it is largely fine, or at least it is this week – I also wonder if some social muscle has atrophied and we have become weird. A year ago, it was weird having to stay in all the time. Now the idea of going out, going anywhere, seeing anyone or doing anything, fills us in the first instance with dread.
Dr. John Lee writes about the uncomfortable reality of death. A slice:
It is uncomfortable to think about, but it seems quite clear to me that when you examine the “quality of life years” lost as a direct result of lockdowns, and compare them to those which would have been lost to the virus had we done nothing at all (which, for clarity, I am not advocating), the former is far greater. This is because you don’t have to die to lose quality of life. Being unable to function properly because of depression, for example, or untreated cancer, or a postponed operation, still results in loss of quality of life – as does merely being confined to your house. Surely no reasonable person can disagree that this loss must be considered when evaluating the appropriateness of society-wide measures that affect all individuals?
David Seedhouse explains that the only intelligent option is skepticism. A slice:
Quite contrary to the name-blackening from people and organisations who really should know better, scepticism IS science. Scepticism is a thoughtful, open-minded approach to life. It does not deny truth, it seeks it. It categorically refuses to accept handed-down authority, no matter how powerful the authority and no matter how personally dangerous it might be to question its validity. Scepticism is the exact opposite of carefree denial. It is faith in the importance of thinking for oneself, of coming to one’s own conclusions about the evidence, as a free person.
Here’s the third thread of Phil Magness’s fisking of the CovidFAQ.co website. Phil’s opening:
In our continued fisking of the http://CovidFAQ.co website being pushed by MP Neil O’Brien, one gets the distinct impression that its authors either (a) think “younger people” means age 55+, or (b) don’t actually read the stats they cite in support of their claims.
Quotation of the Day…
… is from page 203 of Donald Devine’s new (2021) book, The Enduring Tension:
Most of the novel ideas for regulating the market come from politicians playing the good fairy, or from intellectuals trying to perfect society, or from bureaucrats thinking they can solve every problem given sufficient power.
January 30, 2021
Industrial Policy: Obviously a Blind, Lame, and Drunk Donkey
Here’s a letter to a Café Hayek reader:
Mr. T___:
Impressed with Oren Cass’s performance against Scott Lincicome in the Soho Forum debate over industrial policy, you wonder why I, in this earlier letter, “ignore Cass’s point that market don’t account for the country’s future needs.” (I listened again to the debate. You accurately report Cass’s position, which he stated like this: “If we want to have a strong industrial base we need to make sure our economy is one that is, in peace time as well as war time, maintaining a strong domestic capacity in a whole host of areas. Obviously, that’s not something that markets are going to take into account. That’s not something price signals are going to ensure. And so if we want it to happen, there’s going to have to be a role for policy.”)
Cass is wrong. Understanding neither the role of financial markets nor of prices – and apparently ignorant of economic history – he swallows the pedestrian fallacy that markets serve only the short run while government serves the long run. The truth is the opposite.
Today’s asset prices reflect expectations of these assets’ future uses: the more productive these assets are expected to be, and the longer the time horizons over which this productivity is expected to last, the higher are the market values of these assets today. This reality explains, for example, why homeowners who know that they’ll soon move out of their current homes nevertheless often pay big money to repair and refurbish their homes. They pay these sums not out of any sense of generosity to the future buyers but because such expenditures raise the values of the homes today by making them nicer homes over the course of many years to come. These future values are captured by current homeowners in the higher prices for which they’re able to sell their homes.
Likewise, investors and entrepreneurs, seeking returns as high as possible, invest in those projects and businesses that they believe have the highest net present values – that is, the highest expected net productivity over time. They don’t always get it right, but because they spend their own resources, they have powerful incentives to do the best they can, which includes taking sufficiently long-run views.
The situation with government officials is quite different. Those charged with executing industrial policy neither spend their own resources nor have ownership stakes in the results of their decisions. Their personal wealth doesn’t rise if they make good decisions; it doesn’t fall if they make poor ones. Therefore, government officials are much more likely than are private investors to be guided in their decisions by today’s short-run political fads and fancies, or even by their own idiosyncratic whims and notions, however detached these might be from reality.
Many more errors are packed into the above-quoted remarks by Cass. Not least of these is his unsupported presumption that government officials can know what are the ‘best’ industries to support with tariffs, subsidies, and other special privileges, and can know what are the most cost-effective ways of providing such support. Remember that all resources used by industry A are resources that could have been, but aren’t, used by industries B, C, and D. By intentionally overriding the market’s price, profit, and loss signals, industrial policy – guided chiefly by political exigencies – is like a blind, lame, and drunk donkey.
A final point: This new paper by Scott Lincicome shows that many of Cass’s factual claims about the current state of the American economy are mistaken.
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
…..
The late, great Armen Alchian often wrote that the name “capitalism” comes from the fact that, in free markets, expectations of future productivity are capitalized into today’s prices of assets. As a matter of the history of the name, Alchian was mistaken; as a matter of economics, he was spot-on correct.
Some Covid Links
And see also this report from Reason‘s Billy Binion. (DBx: You must stop fooling yourself into believing that it can’t happen here. It can. The rabid wolf that is tyranny is not at first recognized as such by those who are to become its victims. This recognition comes always too late, only after the beast’s victims have its fangs dug into their throats.)
So why, then, do I feel queasy? When the UK home secretary declares she will make unnecessary foreign travel illegal, she looks as if she is enjoying herself too much. When parliament can only debate restrictions every six months, it is not holding the government to account. At the same time, many of us have got surprisingly used to doing what we’re told, even if we’re not always sure why. That is not a sentiment commonly associated with the UK, where citizens are so stroppy that Downing Street massively underestimated the levels of compliance at the crisis’s outset. True, not everyone co-operates. But the UK government has been going with the grain of public opinion. Polls consistently show that the majority are in favour of restrictions.
The strength of consensus, however, has had strange effects. Opposition parties have pushed ministers to double down on health protection — and focused less on holding government to account over the efficacy of lockdowns or the backlog of cancer cases.
Instead, debates about the trade-offs between mental health, physical health, jobs and freedom, which should have been conducted in parliament, seem to have been going on largely in the head of the prime minister.
Freddie Sayers talks to Adam Wagner about the lockdowns’ battering of human rights.
Jeffrey Tucker rightly celebrates the recent easing of some lockdown restrictions in the U.S….. But Robert E. Wright warns that this tyranny might well return.
British MP Desmond Swayne has given several passionate speeches in the House of Commons against lockdowns and the stirring up of hysteria over Covid-19. Naturally, he’s come in for criticism from pro-lockdowners. Will Jones ably defends Sir Desmond.
Jacob Sullum asks if lockdowns caused the recent decline in new Covid-19 cases. This paragraph summarizes his answer:
Did government-imposed restrictions help curb virus transmission? A comparison of California, where Gov. Gavin Newsom ordered a new lockdown on December 3, and Texas, where Gov. Greg Abbott has not imposed any new restrictions, does not provide much evidence that such measures make an important difference.
Regarding Joshua Spivak’s “The GOP Bid to Boot Gavin Newsom Could Backfire” (Cross Country, Jan. 23): Mr. Spivak recounts several recalls that eventually backfired. But in none of the examples cited had the recalled officeholder unilaterally closed businesses and kept them closed for months, a year or more. Did the previous officeholders bankrupt thousands of businesses and destroy small-business people’s lives? Did they fail to provide consistent electricity to thousands of homes? Did they fail to provide a maintenance plan to prevent scores of wildfires destroying thousands of people’s homes?
Yes, many previous officeholders have suffered recalls and then overcame them. California has more Covid cases than any other state in the union, while Gov. Newsom’s decisions have created untold financial ruin for so many people. For the sake of Californians, maybe this recall will stick.
Julian Spratt
Melbourne, Fla.
Peter Earle explains the fallacy of supposing that lockdowns foster creative destruction.
Phil Magness exposes the sloppiness and unreliability of pro-lockdowner Sam Bowman:
As part of the CovidFAQ.co website campaign, Sam Bowman has been running around for the last few weeks claiming that “most” covid hospitalizations in the UK are younger-to-middle-aged people.
In its typical usage, “most” means “a majority” or “the largest share.”
This is an easily debunked claim, as the UK publishes hospitalization stats by age. It turns out that 63% of hospitalizations are age 65+.
After being repeatedly criticized over this claim, Bowman conceded the error…and then promptly blocked the guy on twitter who discovered it. It’s good that he’s made that minor admission. But it’s also telling about the quality of “research” that went into his website. If you’re going to appoint yourself as a fact-checker-in-chief to scold others for their errors (as Bowman, Stuart Ritchie, Mike Bird, Neil O’Brien and others involved with with the covidFAQ site have attempted to do), this sort of sloppiness is inexcusable. Ditto for the juvenile approach this crew has taken when it comes to responding to unambiguous falsehoods on their site and in their public statements.
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