Russell Roberts's Blog, page 33

Quotation of the Day…

(Don Boudreaux)

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… is from page 98 of my late, great colleague Walter Williams’s 1982 book America: A Minority Viewpoint:

Many people claim that the free market is pro-elite and not for the common man. An examination of the evidence would not support such a claim. For example, what company owner became richer, Ford or Bentley? Where is the most money made, rock-n-roll music or classical music? To whom does commercial television cater, the common man or the elite? In the latter case, the elite get what they want on television (Sesame Street, operas, science shows) through using the coercive powers of government to tax the common man for public television. To add insult to injury, the elite lie. They call public television “listener sponsored.”

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 128 of my late, great colleague Walter Williams’s 1989 book, South Africa’s War Against Capitalism:

It is precisely these socialistic features of South African society that constitute the most important source of blacks’ grievances. To make this assertion more concrete, the author wishes to relate an experience that he had at the University of the North – a black university near Pietersburg – during a ten-week lecture tour in 1980. During the discussion period that followed the lecture, a black student rose to announce that he was against capitalism and believed in socialism. The author proceeded to ask this young man a series of questions: (1) Do you believe that you ought to be free to purchase property whenever you please, without government interference? (2) Do you believe that you ought to be free to start up any kind of business whenever you want, without government interference? (3) Do you believe that you ought to be free to work for any employer in any capacity commensurate with your skills, under mutually agreeable terms, without government interference? After the student answered yes to these and several similar questions, the author informed the student that his sentiments were actually closer to laissez faire capitalism than to socialism. The author went on to explain that it was the socialistic features – the extensive government control – of South African society that were the chief sources of black suffering.

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(Don Boudreaux)

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Writing in today’s Wall Street Journal, Richard McKenzie explains why taxing unrealized capital gains is destructive and unfair. A slice:

President Biden and Sen. Bernie Sanders attest that the share of the country’s wealth held by the very well-off is unfair and the product of a rigged economic system. They say the U.S. needs a wealth tax, starting with a levy on unrealized capital gains. These redistributionists are acting as if unrealized capital gains are stored in vaults like gold and can be collected at Congress’s will.

They don’t appreciate the ephemeral nature of stocks. A stock portfolio of $100 million is best approximated by the present discounted value of its firms’ future profit streams. Redistributionists point to wealthy people’s portfolio gains, which they call unrealized and untaxed income. But current income and capital gains are conceptually different. Firms’ future profits, the estimates of which cause portfolios to rise or fall in value, haven’t yet been realized. A tax on unrealized capital gains thus amounts to a tax on unrealized future profits that in many cases will never be realized, except at losses—especially if added taxation increases the likelihood of unrealized profits.

Current profits are only one factor investors use to appraise a company’s value. Investor expectations of future profitability often count for far more. How much more depends on the intangible: investors’ evaluations of interacting future market forces, including hunches and speculations based partially on others’ speculations. An investor’s unrealized capital gains can also be inflated by the eager bids of overly optimistic buyers, which could make a wealth tax a tax on phantom gains.

Scott Sumner warns of the return of industrial policy.

“Government-run business fails.”

Ben Zycher continues to help to cleanse the intellectual environment of fallacy pollution. A slice:

There is no evidence of a climate “crisis” in terms of temperature trends, polar sea ice, tornadoes, tropical cyclones, wildfires, drought, flooding, or ocean alkalinity. The IPCC is deeply dubious about the various severe effects often asserted as prospective impacts of increasing atmospheric concentrations of GHG. Moreover, NASA reports significant planetary greening as a result of increasing atmospheric concentrations of carbon dioxide, and data from the United Nations Food and Agriculture Organization show that global per capita food production increased 46 percent between 1961 and 2020, and 20 percent for 2000-2020.

The “crisis” narrative is derived wholly from climate models that cannot predict the actual temperature record. In particular, the suite of climate models underlying the IPCC 5th and 6th Assessment Reports overstate the mid-troposphere temperature record by factors of about 2.5. Moreover, the models are fine-tuned in such a way as to deny the importance of natural influences on climate phenomena, but that is inconsistent with a large body of evidence, in particular the substantial warming observed from 1910 to 1945, and the close correlation between the satellite temperature record and the El Niño/Southern Oscillation.

Daniel Hadas tweets: (HT Jay Bhattacharya)

No matter how often specialists and officials make claims to the contrary, it is irrefutable that locking down and mass-testing to control a novel flu-like virus was NOT the response advocated by most public health institutions before 2020.

Quotation of the Day…

(Don Boudreaux)

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… is from page 347 of my late, great colleague Walter Williams’s 2015 book, American Contempt for Liberty, which is a collection of many of Walter’s columns and essays; this quotation specifically is from Walter’s May 12th, 2010, syndicated column, “Free Markets: Pro-Rich or Pro-Poor“:

The market is a friend in another unappreciated way. In poor black neighborhoods, one might see some nice clothing, some nice food, some nice cars but no nice schools. Why not at least some nice schools? Clothing, food and cars are distributed by the market mechanism while schools are distributed by the political mechanism.

DBx: Walter (1936-2020) was born on this date, March 31st, in Philadelphia 87 years ago.

This evening, colleagues, friends, and former students of Walter will gather for a few hours in northern Virginia to celebrate his life and legacy. The celebration will include the reading of a touching and eloquent newly written remembrance of Walter by his best friend, Thomas Sowell.

Signs of Hope

(Don Boudreaux)

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In my latest column for AIER I find some reasons to temper my rising pessimism. A slice:

I recently had some significant work done on my home, mostly bathrooms remodeled and hardwood floors replaced. Much of my time since mid-January was spent shopping for items such as faucets, showerheads, toilets, tiling, and flooring that are available on the market.

The vastness of the assortment of these items floored me, no pun intended. I’m tempted to say that the size of the assortment was overwhelming, but I actually felt empowered by it. When I found, for example, a bathroom faucet that fit my budget and looked excellent in all other dimensions, I discovered that if I continued my search I almost always found an even better faucet, one more suitable to my tastes without being less suitable to my budget. Ditto for toilets, countertops, vanities, mirrors, flooring options, and the several other items that were used in the remodeling.

Eventually, final selections were made. Most items were ordered online and delivered to my home within 24 to 72 hours, including a small bathroom-vanity mirror made in – and shipped from – earthquake-ravaged Turkey. My contractor, Essam (an immigrant from Egypt) and his crew (immigrants from Latin America) accomplished in a matter of weeks what I couldn’t have accomplished in a lifetime, namely a total transformation of my bathrooms and floors from their previous shabby and relatively inconvenient selves into new beauties.

Essam’s skills at organizing his crew’s daily work tasks, and the particular skills of each of these workers, are admirable. Equally admirable is their work effort. Essam and his crew work diligently and hard. Such workers produce, and they do so honestly. Essam proved true to his word on his fees and on the quality of the final results. And although on several occasions I was not at home while the workers remained inside toiling (and tiling!), not once did I worry about theft or reckless destruction.

That the American workforce is still populated by many such people, both native born and immigrant, is cause for celebration.

I was encouraged also by the innovativeness that is evidenced in each and every one of the available products. Each faucet, each showerhead, and each toilet has features that either were unavailable ten or twenty years ago, or affordable only by the superrich. In all cases, innovative people were motivated to conceive of design improvements while others were motivated to figure out how to produce the new’n’improved products at costs as low as possible.

Other than Essam and his crew, I know none of the countless individuals whose creativity and efforts are now on display in my home. Nor do they know me. Yet those fruits are succulent and real and affordable by someone who is decidedly, by modern American standards, not close to being superrich.

Entrepreneurial innovativeness is evident also in the retailing of the products that I bought for my remodeling project. As mentioned, most of my shopping was done online – meaning here, from the comfort of my living-room couch. And for many of these products there was an online option – free of charge – of surveying them from 360 degrees. A few easy finger movements on my touchpad did the trick. Each of these products appeared on my two-dimensional laptop screen very much as if I were holding it in my hand in three-dimensional real space. Some innovative souls, by making this online feature available, made shopping much easier and less worrisome.

Ease of shopping was furthered by the smoothness of online payment. My computer (or some cyber spirit) somehow knows, as soon as I go to the payments page, the number of the credit card that I normally use. To verify that it’s really me who is using the card to purchase this toilet or that bathroom mirror, I merely put my right index finger on a small ‘button’ on my MacBook Air that then instantly reads and confirms my fingerprint.

Usually within a day or two, the purchased product is delivered to my front door, at which time I receive a text message alerting me to the delivery. And if, as happened more than once, the item that I ordered turned out not to be optimal, returning it either for a refund or a replacement was in every instance surprisingly quick and easy. (Thank you, Home Depot and Floor & Decor!)

I could spend several thousand more words describing in admiring tones the innovative and affordable products and procedures that I took advantage of for my remodeling project. But by now you get the picture. Reflecting on the amount of human creativity and effort that came to my assistance for this project is a source of amazement and optimism. Entrepreneurs continue to innovate. Workers continue to work. The trust that undergirds complex market economies such as ours continues to facilitate commerce. As long as our economy is marked by sufficient entrepreneurial gumption and a bourgeois work effort and commercial ethic, there is hope.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 114 of Ludwig von Mises’s 1938 paper titled “The Disintegration of the International Division of Labor” as this paper appears in Money, Method, and the Market Process: Essays by Ludwig von Mises (Richard M. Ebeling, ed., 1990):

The theory of foreign trade as stated by Ricardo has proved in an irrefutable way that free trade only ensures the highest productivity of the economic efforts and that every kind of protectionism must necessarily result in a reduction of the output of capital and labor. For a hundred and twenty years a flood of books and pamphlets has endeavored to invalidate the teachings of this theory and to show that some good might be reaped from protection. They have all failed. They could not disprove that as far as the supply of the consumer with commodities and services is concerned free trade is more efficient than any other system. Never has any proposition been brought forward that could shake the foundations of the free trade doctrine.

DBx: Of course, protectionists deny that all arguments for protectionism have failed. But their denials reveal only their preternatural inability to grasp the most basic elements of economic logic.

Someone who is utterly convinced that lead can be turned into gold will never accept the reality that such a transformation is impossible. This person will falsely (if sincerely) assert that such transformations have occurred and can occur again if only more people believe in, and practice, alchemy. This person gets haughty when others refute the nonsense that he passionately peddles, and he becomes downright furious when this nonsense is treated with the full measure of disrespect that it deserves.

The same is true for someone who is utterly convinced that the leaden burden of artificially intensified scarcity can be turned into the gold of greater abundance. Protectionism is economic alchemy.

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(Don Boudreaux)

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GMU Econ alum Alexander Salter explains that the banking system is made fragile, not by markets, but by politics obstructing markets. A slice:

The fractional-reserve fragility hypothesis makes a prediction that is largely falsified by banking history. Inherent fragility implies runs should be largely random. But this isn’t so. Runs usually occur at banks where depositors have a rational basis to question the health of the balance sheet. The most recent round of failures, including Silicon Valley Bank and Signature Bank, didn’t happen at sound institutions beset by bad luck and depositor hysteria. They happened at unsound institutions with foolish capital structures.

Public policy, not market forces, makes banking unstable. US banking history is case in point. Contrary to the popular impression of unregulated “cowboy capitalism” in the republic’s early years, banking has always been heavily controlled by the state. Two especially costly restrictions imposed on banks were (a) limits on note issue based on government bond holdings and (b) limits on branching. The first rendered the money supply inelastic to the needs of trade. Money demand shocks needlessly threatened balance-sheet integrity. The second overexposed banks to location-specific risk. Shocks to agriculture and industry, sectors largely underwritten by nearby banks, could have been absorbed had banks been permitted to branch. It also meant that notes traded at a discount when circulating far from the issuing bank, reflecting the cost of redemption, and that money demand was somewhat less stable, since note-traders would gather notes up in one location, transport the notes back to the issuing bank, and then present them all at once for redemption.

Writing in the Wall Street Journal, Jeanne Allen makes clear that “[a]n argument against educational choice falls apart when you follow where the funding goes.” Here’s her conclusion:

Rather than “holding schools harmless” when students choose to leave, or double-counting students to generate more money for school systems, we should take all the money dedicated to education, divide it by the number of students—living, breathing students—and give each the same amount.

My intrepid Mercatus Center colleague, Veronique de Rugy, reports that “China’s cities [are] learning the price of overspending.”

“Newsom pulls a Nixon.”

Telegraph columnist Allister Heath is correct: “Net zero is a Trojan horse for the total destruction of Western society.” A slice:

Given enough time, a seamless transition to zero-emissions cars that don’t impact a person’s quality of life or their pocket is eminently possible. The same cannot be said of the proposed shift to heat pumps, or decarbonised air travel, or low-carbon construction, or reduced meat diets. These are likely to end up being explosively expensive and unpopular. We will eventually crack a new way of powering planes, but not a commercially viable one by 2050. The public will go wild if every home is forced to stump up a five-figure sum to retrofit a heating system that doesn’t even work properly when it gets really cold, or if foreign holidays are effectively banned.

Jay Bhattacharya tweets:

Do you notice how advocates for censorship focus on examples of ‘misinformation’ that only the most credulous believe (“5g chips!”) to justify censoring true facts that it would be inconvenient for the censors that everyone believe (“immunity after covid recovery”)?

Writing at Law & Liberty, James Allan reviews Toby Green’s and Thomas Fazi’s The Lockdown Consensus. Two slices:

There is no debate. The authors’ answer is unambiguous, and no reader of this book will die wondering what they think. Not about how governments responded to the Covid-19 pandemic (barring a Sweden here or a Florida there). Nor about the authors’ own left-wing principles, both economic and political, and how they bear on recommendations for the future. The authors bring swathes of data and evidence to bear to argue that lockdowns were a public policy disaster of gargantuan proportions. They weaponized the police and flew in the face of data that was, in fact, available early on in the crisis. There was censorship, bans, shadow bans, fake and politicized “fact checking,” and the stifling of dissenting views, some directed at the most credentialed epidemiologists in the world. Not least among these were the three authors of the Great Barrington Declaration, which argued for focused protection on the elderly and vulnerable and for leaving everyone else to get on with life and make his or her own choices; this was the gist of every pandemic plan before the start of 2020. What happened in six or seven weeks from late 2019, you might ask, other than an authoritarian government in China welding people into their homes?

Green and Fazi look at Sweden, which came in for huge criticism from the mainstream press, along with the doctorly caste and social media. Sweden was widely castigated for going against the lockdown zeitgeist that demanded widespread business closures, masking, mandates, isolation of many from their loved ones even when death was in the offing, and a myriad of inane rules. The whole Swedish approach was pilloried by the great and the good because it served as a control case, a counter-example, to what virtually every government on earth opted to do to its own citizens.

As I write this review in March 2023, Sweden has the lowest cumulative excess deaths in the entire OECD from the start of the pandemic till now. Governments and cheerleaders of the orthodox response might be able to game the question of who died from Covid (as opposed to something else) but it is much harder to game excess deaths. Sure, there is a bit of wiggle room about when to start counting and what prior years to look at to set the benchmark to measure excess deaths, but this really is the gold standard. If more people died with lockdowns than without them, they clearly didn’t work.

In Australia, where I live, excess deaths are currently running at about 15 to 17 percent above pre-pandemic expectations. The US, Britain, and continental Europe are all likewise bad on this measure—the ungameable one. But the same press that trumpeted every octogenarian’s death and a relatively meaningless “case count” is, well, deathly silent now. The Swedes’ chief epidemiologist Anders Tegnell— who says “I only followed the pre-pandemic existing plans by the WHO and by Britain and did not panic”—should win a Nobel Prize for medicine, not to mention everyone’s gratitude for bravery. Of course, he will not.

Quotation of the Day…

(Don Boudreaux)

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… is from pages 61-62 of the 2011 revised and enlarged edition of Thomas Sowell’s 2009 book Intellectuals and Society:

[T]here are few things in politics as unmistakable in its implications as red ink on the bottom line is in business. In politics, no matter how disastrous a policy may turn out to be, if the causes of the disaster are not understood by the voting public, those officials responsible for the disaster may escape any accountability, and of course they have every incentive to deny having made mistakes, since admitting mistakes can jeopardize a whole career.

DBx: Oceans of ink have been spilt over the years by economists on describing every imaginable way in which markets might fail. While much of what is imagined has no counterpart in reality, it is nevertheless true that markets aren’t – and will never be – perfect by textbook standards. Sometimes incentives are such that Jones can impose costs on Smith without Smith’s informed consent. But this perverse incentive is minimized in private-property markets. Not only does Smith himself or herself have incentives to discover and avoid such an imposition, entrepreneur Jackson can profit if he or she discovers Smith’s predicament and devises a way for Smith to escape.

In a contrast that couldn’t be larger or more stark, this perverse incentive is baked into the nature of politics. Whatever is the true amount of market failure, and whatever are its negative consequences in reality, the amount of government failure is magnitudes greater and its consequences far, far worse.

And yet, despite this reality, very many people obsess over real or imagined market failures and press the government to ‘solve’ these. It’s akin to being horrified at a first-grade teacher who one day shows up five-minutes late for the start of the school day and then insisting that she be replaced by a thrice-convicted child molester who promises that he’ll never be late to meet his students.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 114 of Ludwig von Mises’s 1938 paper titled “The Disintegration of the International Division of Labor” as this paper appears in Money, Method, and the Market Process: Essays by Ludwig von Mises (Richard M. Ebeling, ed., 1990):

The most famous objection [to free trade] once was the infant industry argument. But everything that could be said about the inability of newly established industries successfully competing with old and well-established producers holds good in both cases whether the competitors are of the same or of different nations. That nobody likewise ventured to demand protection for new firms starting a new business against the overwhelming competition of older firms working in the same town, district, or country can already be considered as a proof that the argument is not economic but political.

DBx: Protectionism as a means of enriching the ordinary people of a nation has always been, remains, and will always be economic alchemy. Attempting to create greater abundance by intensifying the bite of scarcity is as likely to succeed as is the most whackadoodle attempt to create gold out of lead, leather, or legumes.

I’m Sick of Having My Intelligence Insulted

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

You accurately describe as “hilarious” Commerce secretary Gina Raimondo’s attempt to justify the strings the administration is attaching to subsidies dispensed under the Chips Act (“Gina Raimondo, Social Policy Planner,” March 29). As you note, Ms. Raimondo’s explanation isn’t merely a lie, it’s a lie that insults Americans’ intelligence.

Why, I wonder, do so many Americans nevertheless continue to take politicians and bureaucrats seriously. Not only do these officials routinely lie and spin tales, too often the lies and tales they tell reveal their belief that ordinary people have intellects the equivalent of preschoolers. Ms. Raimondo’s remarks would be no more credible had she instead said “We’re imposing these requirements at the request of Santa Claus.”

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