Russell Roberts's Blog, page 32

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 107 of Thomas Sowell’s July 3rd, 1981, column “Social Security: A Fraudulent Pyramid Club,” as this column is reprinted in Compassion Versus Guilt, a 1987 collection of some of Sowell’s essays:

As long as we keep expecting politicians to give us something for nothing, we should also continue to expect financial crises….

Some Links

(Don Boudreaux)

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Wall Street Journal columnist William McGurn writes about “Milton Friedman’s school choice revolution.” Two slices:

The Nobel Prize-winning economist has been dead for nearly two decades. But the moment has come for the idea that may prove his greatest legacy: Parents should decide where the public funds for educating their children go. Already this year, four states have adopted school choice for everyone—and it’s only April.

The most recent is Florida, which just extended school choice to every child in the Sunshine State. When signing the bill into law a week ago, Gov. Ron DeSantis rightly called it a “monumental day in Florida history.” State education dollars will follow the student instead of simply going to the public schools.

Florida is the most populous state to embrace full school choice. It follows Iowa, Utah and Arkansas, which passed their own legislation this year. These were preceded by West Virginia in 2021 and Arizona in 2022.

…..

No one is more aware of the threat the Friedman Revolution spells for politics as usual than Randi Weingarten, president of the American Federation of Teachers. In a speech last Tuesday at the National Press Club, she warned that this year 29 states are considering school-choice measures. As the vampire fears garlic, teachers unions fear giving parents any say in public education.

Max Eden credits Randi Weingarten for inadvertently drumming up support for school choice.

“‘TikTok Legislation’ Is a Blank Check for Government Encroachment Upon Americans’ Wealth, Privacy, and Safety.”

GMU Econ alum Rosolino Candela reflects on Ludwig von Mises’s 1940 book Interventionism: An Economic Analysis.

April Fools from David Henderson.

Scott Lincicome and Ilana Blumsack separate the wheat from the chaff in discussions about Chinese ownership of farmland in the United States. A slice:

For starters, recent increases in foreign and Chinese ownership need to be put into proper perspective. While the amount of U.S. agricultural land owned by foreigners doubled between 2009–2019, the latest federal government data (for 2021) show that these parcels still account for just 3.1 percent of all private farmland in the United States (see Figure 1). The United States Department of Agriculture (USDA) defines foreign ownership as both land owned solely by foreigners, as well as land jointly owned by American and foreign investors.

Of this sliver of private U.S. agricultural land, moreover, Chinese entities remain a tiny player. As Figure 2 shows, in fact, Chinese entities own less than 1 percent of all foreign‐​owned farmland, while most of the land is owned by companies and individuals located in nations closely allied with the United States, such as Canada (30 percent), the Netherlands (12 percent), Italy (6 percent), the U.K. (6 percent), and Germany (6 percent). Including Hong Kong in China’s totals doesn’t much change these results – it’s still just 1.2 percent of all foreign‐​owned farmland. As Tori Smith of the American Action Forum notes, China ranks tenth among foreign nations in the value of their U.S. farmland, behind Japan and Sweden, and well behind Canada, the Netherlands, and Germany.

GMU Econ alum Alex Nowrasteh, writing with Sarah Eckhardt and and Michael Howard, describe the fiscal impact in the U.S. of immigration. They summarize their findings:

With some variation and exceptions, the net fiscal impact of immigrants is more positive than it is for native‐​born Americans and positive overall for the federal and state/​local governments.

Martin Gurri is correct: “Elites are using the threat of “disinformation” to stifle debate and curtail freedom.” A slice:

The Biden White House, the federal bureaucracy, the NGOs, the media and the digital oligarchs can today be found dancing around the same Maypole, all amazingly in sync about the need to control the web. Michael Shellenberger calls this the “censorship-industrial complex” but it’s really more like a protection racket than an industry. There are no smokestacks rising above factories, churning out anti-disinformation tanks and aircraft. Money changes hands, to be sure, but all that gets produced is a torrent of words bristling with dull-witted menace.

Quotation of the Day…

(Don Boudreaux)

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… is from page 101 of William F. Buckley, Jr.’s 1975 paper “The Road to Serfdom: The Intellectuals and Socialism,” as this paper appears in Essays on Hayek (Fritz Machlup, ed., 1976):

The social success of freedom requires something of an extra-ideological devotion to analytical rigor and to the integrity of language.

DBx: Indeed.

Almost 50 years after Buckley wrote these words we today are drowning in a tsunami of not only abused language and analytical sloppiness, but also of analytical malpractice. Examples abound, not the least of which is Nancy MacLean’s horrendously deformed ‘research’ on James Buchanan and W.H. Hutt.

A Review of Elizabeth Popp Berman’s “Thinking Like an Economist”

(Don Boudreaux)

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Here’s my just-released review, for EconLib, of Elizabeth Popp Berman’s Thinking Like an Economist. Here’s my conclusion:

Berman should be commended for treating those with whom she disagrees fairly and with respect. Unlike too many scholars today, she doesn’t put words in her adversaries’ mouths or accuse them of moral depravity. She writes as a true scholar. Nevertheless, my disagreements with her are many.

The most fundamental of these disagreements is that, while I agree with Berman that the decision to reject policies the costs of which exceed the benefits reflects a value judgment, I disagree that this value judgment is either dubious or at odds with basic liberal, democratic norms. Instead, this value judgment is one to which nearly everyone subscribes, if most people do so only unconsciously. Nearly everyone is led to do so by the inescapability of scarcity and the corresponding need to make trade-offs.

Legitimate debates rage over just what counts as costs and as benefits, as well as over how to weigh each of the entries in the cost-benefit ledger. But because a widespread commitment to pursuing certain benefits in disregard of the costs would leave too few resources available for the pursuit of other benefits—and do so without any weighing of the benefits gained versus the benefits foregone—the consequence of a complete casting aside of economic considerations would be a society immensely more poor, dangerous, and unjust than is even the dystopian America that exists today in the minds of many progressives. It’s the odd person whose system of values tolerates such an outcome.

On Dollars In Global Trade

(Don Boudreaux)

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Here’s a letter to a new correspondent; pardon the wonkiness:

Mr. K__:

Thanks for your kind words about my 2008 book, Globalization. Thanks also for your reasonable question about my argument that all dollars spent by Americans on imports will eventually return to America either as demand for American exports or as investments in America. Specifically, you write:

What I failed to understand is this: Why should the foreigners receiving US dollars spend those dollars only in the US? Since dollars are accepted globally, they can spend them on buying goods or services in other countries. Most countries hold US dollars as foreign reserves to fund their imports. So, dollars don’t have to be spent in the US.

The simple answer is that this worldwide willingness to accept dollars ultimately rests on worldwide confidence not only that these dollars can be spent or invested in America, but also that the global demand for American exports and investment opportunities is sufficiently high that these dollars eventually will be spent or invested in America.

Suppose that Hans, in Norway, exports $1 million worth of fish to Steve in America. Steve pays Hans in dollars. Suppose further that Hans himself wants nothing whatsoever from America. Are his dollar holdings then worthless to him? Of course not. Hans goes to his Norwegian bank and converts his one-million dollars into kroner, which he then spends or invests in Norway.

We must now ask: Why is Hans’s bank in Norway willing to hand over to Hans one-million dollars worth of kroner in exchange for one million monochrome portraits of George Washington? The answer must be that the owners of Hans’s bank – or, more likely, other customers of Hans’s bank – want to spend or invest at least one million dollars in America.

Now change the example a bit. Suppose that no one in Norway wants to buy or invest in America. Would Hans’s dollar holdings then be worthless to him? No. Hans will still be able to convert his dollars into kroner as long as (1) someone somewhere on the globe wants to spend or invest at least $1M in America, and (2) Norwegians want to buy at least $1M of imports from some country other than America.

Suppose, specifically, that Juanita in Mexico wants to invest $1M in a factory in Texas. To do so she needs one million U.S. dollars. To get this $1M Juanita exports $1M worth of tomatoes to Norway, which Norwegians happily purchase. She receives full payment in U.S. dollars – here, the same U.S. dollars that Steve earlier paid to Hans for the latter’s fish. Juanita now has the one-million dollars that she then invests in Texas.

In both examples, if a moment after Hans accepted payment of $1M of U.S. currency for his exports to America everyone outside of the U.S., including Hans, developed such an aversion to anything American that under no circumstances would any non-American want to spend or invest as much as a cent on anything American, Hans would find his $1M to be worthless. And had Hans anticipated this development, he of course would have refused to accept U.S. dollars as payment for his fish exports.

But in reality non-Americans continue willingly to accept U.S. dollars – practical proof that people worldwide continue to want to spend and invest in America.

The story gets somewhat more complicated – too complicated to explain here – when we recognize that the high global demand for U.S. dollars can result in large numbers of dollars remaining, either ‘circulating’ or stuffed figuratively into mattresses, outside of the U.S. indefinitely. In this case the purchasing power of those dollars nevertheless returns to the U.S., but it does so in the form of increased purchasing power of the dollars that remain in circulation in the U.S. The essence of the matter remains unchanged: We Americans need not fear that that our economy will suffer a deficiency of aggregate demand if we increase our imports and the particular foreigners from whom we import don’t immediately spend or invest all of those dollars in the U.S.

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

Quotation of the Day…

(Don Boudreaux)

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… is from page 41 of Fritz Machlup’s 1974 paper “Hayek’s Contribution to Economics,” as this paper is reprinted in Essays on Hayek (Fritz Machlup, ed., 1976) (references deleted):

The cause of liberty, he [Hayek] finds, rests on our awareness that our knowledge is inevitably limited. The purpose of liberty is to afford us an opportunity to obtain something unforeseeable; since it cannot be known what use individuals will make of their freedom, it is all the more important to grant freedom to everybody. Liberty can endure only if it is defended not just when it is recognized to be useful in particular instances but ratter continuously as a fundamental principle which may not be breached for the sake of any definite advantages obtainable at the cost of its suspension.

DBx: Freedom allows for, and encourages, innovation. Innovation is the application of creativity, and creativity by its nature cannot be predicted in any detail. Also, creativity and innovation necessarily disrupt.

Our options, therefore, boil down to three. One is to completely eliminate creativity and innovation. Doing so would, of course, completely eliminate economic growth. (In practice, doing so would reduce standards of living, but this reality can here be put aside.) Doing so would also require the elimination of freedom – all freedom. A second option is to ensure that the creativity and innovation lead over time to increases in living standards. A third option is to suffer the consequences of creativity and innovation decreasing living standards.

Markets fuel the second option. Creative and innovative actions in free markets are done by individuals spending their own, and only their own, money. And consumers – also spending their own, and only their own, money – get to choose, through their voluntary market choices, which innovations they value highly enough to pay for them and which they do not value so highly. This on-going, never-ending market process incessantly introduces new options that consumers judge against each other and against familiar options. The ability of consumers and suppliers to say ‘no’ to contractual offers ensures that, on the whole and over time, ever-better options become widely available.

In option 2, the “creative” in “creative destruction” outweighs the “destruction.” Evidence for this reality is supplied by history.

The third option is fueled by government interventions into the economy. The designer of an industrial policy, for example, might well be truly creative. He or she might well dream up a new output or a heretofore unheard of method or pattern of production. Imposing this new idea by force disrupts existing patterns of economic activities. But unlike the disruption that occurs in option two, industrial policy practically ensures that the “creative” in “creative destruction” is outweighed by the “destruction.” This unfortunate outcome arises both because government officials get to spend other people’s money, and because industrial policy necessarily shrinks the options available to individuals as consumers, as input suppliers, and as producers.

And although industrial-policy advocates seem not to realize it, the only creativity allowed under their scheme is that of the industrial-policy designers. Once the industrial policy is designed and implemented, all other creativity and innovation must be squelched; the creativity of all other individuals in the economy must be prohibited. The reason is that any creativity and innovation allowed once the industrial policy is underway will disrupt the industrial policy. Because the very point of industrial policy is to impose on the populace the detailed economic vision of the industrial-policy designer(s), anything that interferes with the pursuit of that vision cannot be allowed. And creativity and innovation necessarily interfere with the pursuit of that vision.

In short, every proponent of industrial policy should be asked – and expected to answer substantively – “Why do you believe that obliterating all creativity and innovation in those parts of the economy that fall under your industrial policy will improve the well-being of ordinary people?”

If you put this question to an industrial-policy proponent, he or she is highly likely to deny – and to deny sincerely – that the industrial-policy scheme that he or she envisions will obliterate all creativity and innovation. But this denial reveals only that the industrial-policy proponent hasn’t thought through the implications of his or her scheme. It would be akin to encountering someone who boasts of his ability to turn part of a pig into a kosher ham sandwich, and then – when being told of the actual meaning and implications of ‘kosher’ – nevertheless insists that his ham sandwich will be kosher.

…..

Pictured above is a kosher ham sandwich – or, it could also be an industrial policy that permits creativity and innovation.

Some Links

(Don Boudreaux)

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This letter in tomorrow’s (April 3rd’s) print edition of the Wall Street Journal is brilliant:

In “It’s Destructive and Unfair to Tax ‘Unrealized Capital Gains’” (op-ed, March 31), Richard McKenzie observes that President Biden and Sen. Bernie Sanders would like “a levy on unrealized capital gains.” Their thinking would be OK if the future were known and the reasoning were consistent.

Consistency demands that taxpayers could take deductions for unrealized capital losses as well. Follow the logic further and reach unrealized deductions for future dependents. Pregnant women could even deduct for the life in utero, along with unrealized child-care and educational expenses.

For that matter, if older people are likely to become dependents, a deduction for them could be made by those who anticipate their future dependent status. And why not deduct unrealized but anticipated, i.e., future, costs of doing business? Maybe, on second thought, the unrealized future is better left out of tax policy.

Richard McGowan
Green Bay, Wis.

My Mercatus Center colleague Alden Abbott co-authored a nice piece at CAP X on the United Kingdom joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

GMU Econ alum Bryan Cutsinger makes the case for abolishing the FDIC.

Juliette Sellgren talks with Nico Perrino on individual rights and free expression.

Wall Street Journal columnist Allysia Finley warns of “the coming Biden bailout of blue states and cities.” A slice:

Take San Francisco’s 1.7-mile Central Subway, which opened in January at a cost of $1.95 billion, three times as much as initially estimated. The subway is drawing fewer than 3,000 daily riders, no doubt because the design doesn’t make sense: Riders have to walk the equivalent of three football fields to connect to other transit lines and take three escalators to reach platforms 12 stories underground. That didn’t stop Rep. Nancy Pelosi, other San Francisco Democratic power brokers and their union friends from championing the project. When borrowing is dirt cheap, why not max out the taxpayer credit card?

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

Wow! Who’d a-thunk that Fauci lied?!

Matt Ridley favorably tweets a statement from Washington Post columnist Josh Rogan:

“A lot of my colleagues have totally failed because they got caught up in the narrative that Fauci is the good guy and Trump is the bad guy.”

MIT’s Retsef Levi tweets: (HT Jay Bhattacharya)

Loneliness has dramatic negative impact on humans, especially young and old ones. One has to wonder how many people died of COVID in hospitals because they were isolated from supporting family and could not see human faces? How much the impact of COVID was worsened by lockdowns?

Quotation of the Day…

(Don Boudreaux)

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… is from page ix of Georgetown University philosopher Jason Brennan’s 2019 book, When All Else Fails: The Ethics of Resistance to State Injustice:

Philosophy brings our hidden ideas to the surface and exposes unseen contradictions. What we think is obvious is not so obvious on reflection. Philosophical inquiry often shows that our core beliefs are a jumbled mess.

DBx: Indeed.

And note that if “Econ 101” is substituted for “philosophy” and “philosophical inquiry,” this statement retains its full measure of truth and relevance.

Some Links

(Don Boudreaux)

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George Will decries the current state of the city of Chicago. A slice:

Since Chicago’s population peaked in 1950 at 3.6 million, a million have fled (while the nation’s population has increased 120 percent). Since 2010, almost 90,000 students — more than 20 percent — have left the public school system, whose annual spending has increased $2.5 billion, and in fiscal 2021 included operational spending of $20,465 per pupil.

Progressive policies— e.g., Cook County State’s Attorney Kim Foxx in 2016 essentially decriminalizing shoplifting of less than $1,000 — have demoralized the police force, which experienced a net loss of 2,641 officers between 2020 and August 2022. This year, car thefts are up 151 percent, sexual assaults and robberies up 23 percent each, and major crime reports are up 104 percent above this point in 2021.

George Leef describes the baleful consequences of federal-government involvement in higher education.

My intrepid Mercatus Center colleague, Veronique de Rugy, explains that “progressive politicians are regulating their own projects into oblivion.” A slice:

The same will be true of any industrial policy objectives that politicians pursue, such as the CHIPS Act with its $52 billion in subsidies to build microchips. Factories will have to be built in an already overregulated environment, and President Joe Biden’s administration just added mandates that subsidy beneficiaries provide child care, buy American, cease stock buybacks, and more.

The administration claims it’s doing this for workers, but it’s not considering ramifications like, for example, how subsidizing companies’ child care centers could exacerbate provider shortages in nearby centers, which, due to state regulations, cannot hire capable workers without college degrees.

My GMU Econ colleague Vincent Geloso usefully updates the history of John Cowperthwaite’s governance of Hong Kong.

Here’s Bjorn Lomborg, writing at National Review, on climate change. Two slices:

The global discussion about climate change has become quite hysterical. Some 60 percent of people living in the rich world think it is likely to bring an end to humanity. This is not only untrue; it is also harmful, because fear makes people embrace bad policies and ignore many other urgent challenges facing the world. Consider, for example, how the World Health Organization declared climate change the defining public-health issue of the 21st century in 2014, but perhaps should have been more focused on pandemics, like Covid. Or take the World Economic Forum participants who in January 2020 found the greatest policy risk of the next ten years to be climate-action failure — ignoring the rapid spread of Covid. Or consider how development institutions increasingly focus on helping poor countries with climate-change responses, often at the expense of other things those countries urgently need, such as growth and development, stronger health-care systems, better education, and a more plentiful energy supply.

…..

These days, every weather phenomenon is turned into instant climate news, with smartphone cameras immediately sharing pictures of the damage and campaigners blaming climate change for it all. Hurricanes are a key part of this narrative. But that does not mean hurricanes are actually battering our coasts any more frequently than before, as is often implied or stated outright.

Indeed, the hurricanes of 2022 were close to unprecedented — but only in their weakness. Globally, 2022 had the second-weakest batch of hurricanes in the era of satellite data (beginning in 1980). It also had the fourth-fewest strong hurricanes (category 3 and above) in the same period and the eighth-fewest hurricanes overall. Moreover, despite what we hear, hurricanes have not been getting stronger globally. The average energy per hurricane has remained constant in the satellite era.

The same is true if we focus on the United States. Contrary to what is commonly asserted, the frequency of hurricanes hitting the continental U.S. has not increased over the past 122 years. The best-fit line actually trends slightly downward. (Counting landfall hurricanes is the most consistent way of having a measure that goes back to 1900, whereas the number of named hurricanes — which includes those that do not hit land — steadily increases because we have ever-better technologies to detect even very short-lived hurricanes.)

Writing in the Wall Street Journal, Daniel Halperin decries the fact that “the media keep stifling the covid debate.” A slice:

Now that the Covid pandemic is behind us, you’d think scientists and the media could have an honest conversation about what they got wrong and what lessons they’ve learned. Think again.

On Jan. 30, the Cochrane Collaboration, highly regarded for its rigorous systematic reviews, published an update of its meta-analysis of masking and other physical methods to prevent respiratory illnesses. It found no strong evidence for masking, and the initial media response was silence. After conservative media covered the study, the mainstream press went on the attack. The Washington Post, the New York Times, the Atlantic and others piled on.

As an epidemiologist, I hoped the review might dent the politicized discourse surrounding masks and other prevention measures. I sent an article to Time magazine, which had recently published my work. My editor appeared positive, requesting some reasonable modifications and focusing. He wrote me on Feb. 23 that the piece would be “published overnight.” The next day, instead of the article link, he forwarded me a tweet by Michael Mina, a medical researcher. Dr. Mina’s tweet complained that Cochrane reviews “are becoming dangerous tools of ‘scientists’ w agendas.” He cited an earlier review “attempting to discredit rapid tests.” Dr. Mina is an executive at eMed, a rapid-test company.

Jay Bhattacharya tweets:

Government scientists do not have a monopoly on the truth. Government scientists who think and act like they have such a monopoly harm the public.

A Note from a Reader

(Don Boudreaux)

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I share the following note with the kind permission of its author.

Dear Mr. Boudreaux,

Your AIER essay on optimism vs. pessimism triggered a wish to share my own experience with you. If you think it might be of any interest to you, please keep on reading, otherwise, I won’t know anyway.

I am French and, contrary to you, do not count myself as one of the high-optimism people you embody. I even used to be an ur-pessimist: when 2008 burst, I recall having a conversation about the war that would ensue, this being the only option left to sort out the mess (note that this remains an option)!

That’s when I had just moved to Hong Kong. I recall that I later mentioned to a friend I did not plan to have children given the world they would live in.

Then, I discovered how the market worked in Hong Kong at the time. And I discovered liberalism. Cafe Hayek is a great part of it and helped me discover essential readings like Hayek (obviously), Mises, Sowell, Friedman (both Milton and David), [Leonard] Read and other American economists as well as Frédéric Bastiat (whom the French mostly ignore, unfortunately). Also directed by yourself to read The Rational Optimist, I started to see the world differently and have a better understanding about the beauty of freedom.

Obviously, I am seeing it disappear as much as you do but I am starting to believe, as Bastiat did, that “monopoly, like any form of injustice, carries within itself the seed of its own punishment.”

I am not an ur-pessimist anymore and even have a daughter since May 2021.

Best regards,
Andre Durand