Russell Roberts's Blog, page 366

There’s No Substitute for Market Competition

(Don Boudreaux)

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My regular correspondent Nolan McKinney defends Brink Lindsey and Sam Hammond from my criticism of their proposal for “development policy.” Here’s my reply:

Mr. McKinney:

You accuse me of being “guilty of neglecting [Brink] Lindsey’s and [Sam] Hammond’s proposal to use competition for determining what industry ideas are good and which are bad.”

I plead innocent.

The competition to which you refer that Lindsey and Hammond endorse is competition for government funding. Whatever its merits, the requirement that persons seeking taxpayer funds compete against each other to impress government officials with business, research, or “development” ideas is not the kind of competition that actually discovers which industry ideas are sound and which are unsound. Unlike private entrepreneurs and investors, government officials spend other-people’s money. Even worse, these officials – by the logic of industrial policy – must coercively obstruct entrepreneurial investments and consumer expenditures that are inconsistent with government’s industrial-policy plans.

The only kind of competition that truly discovers good ideas is market competition – the kind that exists when entrepreneurs and investors need no permission from the state to offer goods and services to consumers, and when consumers are free to spend their incomes as they see fit. Industrial policy by its very nature displaces this competitive process with static blueprints schemed up by arrogant politicians, bureaucrats, and intellectuals.

Industrial policy substitutes the irreducible ignorance of a handful of puny individual minds for the vast knowledge that can be discovered, meaningfully tested, and refined only when as many minds as are willing are free to interact with each other as each deems best.

In short, to choose industrial policy over free markets is to choose ignorance over information, stupidity over knowledge, folly over wisdom, irresponsibility over responsibility. Changing its name to “development policy” changes nothing of this reality.

Sincerely,

Don

Some Links

(Don Boudreaux)

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J.D. Tuccille documents another of the awful realities of covid lockdowns. A slice:

And maybe parents who are desperate to see their kids resume their interrupted educations, and worshippers eager to find some solace during tough times, should place more weight on their own decision-making skills than on those of politicians. They, after all, are struggling to do their imperfect best by themselves and their families. They’ll make mistakes, of course, but those mistakes will be on a small scale, and made in the course of attempting to do the right thing.

By contrast, Cuomo seems best-skilled at consuming camera time while inflicting widespread pain and engaging in political combat. His track record necessarily casts a shadow over every word he utters and each new mandate he gives.

Also writing eloquently on the same manifestation of lockdown tyranny is the Wall Street Journal editorial board. A slice:

When asked about the double standard in June, Mr. de Blasio called protests and religious services “apples and oranges” and said the former are more important and deserve privileges denied to the latter. That’s how he and Mr. Cuomo could allow and praise huge protests against the police this summer, but bar 11 Jews from praying together today.

Why are so many people afraid of the Great Barrington Declaration?

Michael Barone laments Americans’ hysterical overreaction to covid – and this reaction’s disproportionate impact on the poor.

Norbert Michel, rightly refusing to fall for the fallacy of American middle-class secular stagnation, warns against harmful  policies proposed to ‘solve’ this non-problem.

Here’s a short essay that my intrepid Mercatus Center colleague Veronique de Rugy and I wrote several weeks ago, but published only a few days ago, on the Payroll Protection Program.

Juliette Sellgren’s podcast with Rachel Greszler on paid leave is well worth a listen.

Mark Jamison continues to expose the faulty economics of the new attempt to batter so-called “Big Tech” with the wrecking ball of antitrust.

Quotation of the Day…

(Don Boudreaux)

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… is from page 189 of Steven Pinker’s 2018 book, Enlightenment Now:

Humanity’s conquest of everyday danger is a peculiarly unappreciated form of progress.

DBx: So true. Yet one downside of this progress is that all remaining sources of danger loom, in our minds, relatively larger than they loomed earlier. Unaware of this progress against threats to our lives and vigor (for it is so commonplace today that we take it for granted), we fail to put today’s risks in proper perspective. A result is unwarranted panic.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 59 of Ronald Bailey’s and Marian Tupy’s beautiful, important, and new (2020) volume, Ten Global Trends Every Smart Person Should Know:

The Four Horsemen of Pestilence, War, Famine, and Death usher in the Apocalypse in Christian tradition…. [D]eaths from infectious diseases are way down; wars are rarer and kill fewer people; and malnutrition has steeply declined. Finally, the crude annual death rate is a common way to benchmark the toll of mortality. And by that measure, it turns out that death itself is also in retreat.

DBx: One of the (many) problems that I have with the still-raging hysterical overreaction to covid-19 begins with the absence of historical perspective: Even with covid’s ravages, we remain today healthier and more long-lived than were our parents, grandparents, great-grandparents – going back to Adam enjoying Eve’s apple.

This reality, of course, doesn’t mean that no precautions should be taken against covid. But I’d have more confidence in politicians and public-health officials if they were to show some sense of perspective. Instead, even the sainted Dr. Anthony Fauci reveals his ignorance of the relevant history.

This history is relevant largely because those who know it are naturally led to ask: What caused this enormous and historically unprecedented decrease in mortality and morbidity rates over the past few centuries? People who ask this question seriously, in turn, cannot help but notice that these happy trends were accompanied by increased market-directed innovation, increased specialization and trade, and increased globalization. And to understand the connection between market activity and improved health is to understand that economic activity cannot be arbitrarily obstructed without putting people’s health in greater peril over the long run.

…..

The traditional Four Horsemen have been increasingly corralled until 2020. But this year, a fifth and far more ominous horseman suddenly rode in, shouting that we are all in danger unless we obey, without question or hesitation, his every command. This horseman is Tyranny, and he continues to gallop destructively across the land. Pestilence, War, Famine, and Death can only stare with envy at Tyranny’s ravages.

Some Links

(Don Boudreaux)

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The Wall Street Journal’s James Freeman reports on the effort of Phil Magness and other genuine scholars to persuade the Pulitzer Prize committee to strip faux-scholar Nikole Hannah-Jones of the prize she won for her fraudulent lead essay in the New York Times‘s infamous “1619 Project.” A slice:

Historian Phillip Magness, among the signers of this week’s letter, noted recently that the Times has quietly edited its material again to remove the claim that 1776 is not the true American founding—and amazingly the Times’ prize-winner is now saying that she never made the claim.

My intrepid Mercatus Center colleague Veronique de Rugy continues to speak out against airline bailouts. A slice:

Sadly, as long as demand for air travel remains so deflated, there’s no way to avoid airlines restructuring and slimming down their payroll. Subsidies provided through the cover of payroll programs aren’t necessary to protect an industry that could restructure through bankruptcy. Airline bankruptcies aren’t the equivalent of an airline collapse. They can continue to fly safely during the process where a judge imposes a stay on creditors’ claims and gives the airlines breathing room until consumers are ready to come back.

Jenin Younes defends the great Great Barrington Declaration from its critics. A slice:

Critics of the Great Barrington Declaration correctly observe that we will not be able to prevent every death from coronavirus among the vulnerable. But their argument rests on the false assumption that preventing coronavirus deaths is more important than anything else, and while efforts can be made to mitigate collateral damage, in the end all must give way to this overarching goal.

Walter Olson reports on yet another instance of how the reality of politics makes a mockery of the belief that government officials can be trusted to use lockdown powers wisely and in the public interest.

Wall Street Journal columnist Danial Henninger is, sadly, correct that Joe Biden is very likely “the shutdown candidate.” Here’s his conclusion:

As of Wednesday, some 3,700 medical and public-health scientists had signed the Great Barrington Declaration calling for a more balanced approach, which would allow “those who are at minimal risk of death to live their lives normally to build up immunity to the virus through natural infection, while better protecting those who are at highest risk.”

Donald Trump and most Republican governors would sign that declaration. Joe Biden and the Democrats would not, ever. If Mr. Biden wins—throwing in as well his intention to raise taxes amid the pandemic should Democrats gain control of the Senate—the return of the U.S. to economic and social normalcy is going to take a very, very long time.

George Will understandably applauds Matt Ridley’s 2020 book, How Innovation Works. A slice:

It is serendipitous that the new book by Ridley, who has a keen sense of serendipity’s role in scientific and (hence) societal advances, arrives during the pandemic. “The main ingredient in the secret sauce that leads to innovation,” he writes, “is freedom. Freedom to exchange, experiment, imagine, invest, and fail.” The vast and lingering damage done by the global lockdown will include governments’ opportunistic expansions of their controls of almost everything, and an increased tendency of people to look to government for shelter from all uncertainties.

Quotation of the Day…

(Don Boudreaux)

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… is from pages 224-225 of the 2015 Fourth Edition of Dartmouth economist Douglas Irwin’s superb volume, Free Trade Under Fire:

Still, the best and most direct way to raise wages and labor standards is to enhance the productivity of the workers through economic development. Trade and investment are important components of that development, and therefore efforts to limit trade or to shut down factories are counterproductive.

DBx: Doug here is writing specifically about developing countries, but the point applies equally well to developed countries. (If economic growth continues, the level of development of the American economy today is less than will be the level of development of that economy tomorrow. America’s is still a ‘developing economy.’)

Wage and income growth for ordinary workers as a whole in a country are not created by labor unions, by seizing income or wealth from ‘the rich,’ by government mandating higher paid and more fringe benefits, by the use of protectionist measures to create artificial scarcities, by paying foreigners to buy more of our outputs, by the government sending out more checks, by the monetary authority printing more money, or by any of the other schemes commonly peddled by people who can’t see past their noses or who mistake the fallacy of composition as being a recipe for rational action.

Growth in income per capita, and enjoyed by all, requires an increase in real output per capita. And such an increase, in turn, depends overwhelmingly upon market-tested innovation and more tools – more “capital” – per worker.

Because increases in a country’s trade deficit – more accurately here, increases in a country’s current-account deficit – mean that that country is a net recipient, during that period, of global capital, it’s incorrect to assert that rising trade deficits for a country dampen that country’s prospects for economic growth. While tales can be told in which a rising trade deficit is a symptom of economic decline, rising trade deficits are themselves never a cause of such decline. (Is the bank that lends money to a homebuyer who buys too much house the cause of that homebuyer’s coming financial woes?)

But the far more realistic account of a country’s trade deficits is that they are a symptom of economic promise – at least relative to the promise of other countries. And the realism of this account rises the longer is the string of trade deficits. (The person who took out an imprudently large mortgage is unlikely to be able to continue to do so.)

When the likes of Donald Trump, Peter Navarro, Peter Morici, Oren Cass, Sherrod Brown, Chuck Schumer, or you name the protectionist, complain about the U.S. trade deficit, they should be heard as complaining, in part, about non-Americans helping to equip American workers with more and better tools. They should be heard as complaining, in part, about non-Americans helping Americans become more productive. They should be heard as complaining, in part, about non-Americans helping to raise the real wages and incomes of American workers.

They should be heard, in short, as being economically illiterate on a topic that they mistakenly presume to understand.

Bonus Quotation of the Day…

(Don Boudreaux)

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..… is from page 27 of Arthur Diamond, Jr.’s excellent 2019 book, Openness to Creative Destruction: Sustaining Innovative Dynamism:

The innovative entrepreneur often has less theoretical (formal) knowledge than scientists, managers, or “experts.” But the innovative entrepreneur often has more non-theoretical (informal) knowledge. The informal knowledge can be articulable knowledge of local facts; or hard-to-articulate (tacit) knowledge of observed general patterns or of how to do something; or initially inchoate inarticulate “slow hunches” that sometimes can be developed over time into articulate facts or theories. The methods would include serendipitous discovery, the clarification of slow hunches, and trial-and-error experimentation.

DBx: Indeed.

Here are a few questions for those who believe that they know something about the reality of political and legal processes: Can you imagine that politicians and bureaucrats charged with carrying out industrial (or “development”) policy would be able to act, as can private entrepreneurs, on non-expert hunches? How about on hard-to-articulate, or tacit, knowledge? And with “development policy” being directed from the capital, how much use would be made of the local knowledge that would, in the absence of such a policy, be acted upon by entrepreneurs on the spot?

Proponents of industrial (or “development”) policy invariably ignore these straightforward questions. Oren Cass, Brink Lindsey, Sam Hammond, Marco Rubio, Elizabeth Warren, and other enthusiasts for industrial policy seem to think that because they can pronounce or compose grammatically correct sentences describing in general terms the happy outcomes that they fancy, that they have therefore proven the workability of their schemes. But, of course, they’ve done no such thing.

It’s as if I were to write “It’s such a drag that humans cannot yet fly unaided by machines. But don’t despair! If we put our minds to it, we can achieve lift-off and soar gloriously through the air by flapping our arms really, really, really quickly! And pay no attention to the naysayers who deny my claim. These naysayers are tired old fools, their feeble minds stuck in well-worn ruts, and repeating over and over again their shop-worn objections and simplistic absolutisms. The future is with arm-flapping flight and not with the close-minded ideologues who are content to have us humans fail to achieve our eagle-like potential!”

Adam Smith on Retaliatory Tariffs

(Don Boudreaux)

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Here’s the fourth in my series of short videos on Adam Smith’s views on trade and the economy. The topic of this one is retaliatory tariffs. (As always, I thank my Mercatus Center colleague Matt Beal for producing these videos.)

Some Links

(Don Boudreaux)

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The editors of the Wall Street Journal rightly praise the Great Barrington Declaration. A slice:

The virus isn’t going away even if Joe Biden wins the election and perhaps not even with a vaccine. Better treatments and protocols have improved outcomes enormously for high-risk individuals—of which Mr. Trump may turn out to be a textbook case.

The shame is that Covid has become so politicized that the calm reasoning of the Great Barrington scientists is drowned out by the fear and loathing of those who want to blame Donald Trump for every new infection. But it is the best advice for how we should cope with Covid.

Wall Street Journal columnist Holman Jenkins continues to be one of the relatively few sane voices amidst the Covid hysteria. A slice:

If we are missing 90% of cases in the U.S. and 95% in the world, this has obvious implications for the death risk from Covid—it is flu-like. And yet responsible news organizations and institutions like Johns Hopkins continue to invite their audiences to compare Covid’s death tally against a “confirmed” case count devoid of systematic meaning. This is the statistical equivalent of sampling subjects at the morgue and in kindergartens to estimate the fatality rate of people involved in car accidents. You will certainly find individuals who survived and didn’t survive car accidents, but your computed rate will be nonsense. I have news for Americans: All of our data about the prevalence and deadliness of the flu are estimates, except for pediatric deaths, which are actually counted. If, as we do with Covid, we relied on “confirmed” flu tests for how many are infected and what percentage die, we would be wildly and catastrophically misinformed about the flu’s real prevalence and its real deadliness.

“The remedy for this self-imposed economic harakiri, this desperate and destructive attempt at self-harm that is governments’ pandemic response, is exactly that: end it. Abolish. Abandon. Cease and desist. Have governments get out of the way and individuals make choices of their own, choices adjusted to their own risks and risk tolerance – not a mindless one-size-fits-all solution that takes very little account of real people’s lives.” – so writes Joakim  Book.

Mark Jamison rightly condemns the “faulty faith” that people have in the ability of government officials to use antitrust wisely.

Trump is so ironic.

Arnold Kling reviews Helen Pluckrose’s and James A. Lindsay’s Cynical Theories.

Scott Lincicome continues to bust myths about the economic plight of ordinary Americans.

Quotation of the Day…

(Don Boudreaux)

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… is from a passage in John Milton’s 1660 tract, The Ready and Easy Way to Establish a Free Commonwealth, as found on page 231 of Will & Ariel Durant’s 1963 volume, The Age of Louis XIV:

Should one entrust the commonwealth to those to whom nobody would entrust a matter of private business?

DBx: Milton here warned against the danger of democracy giving to people the power to govern the affairs of their fellow human beings – power that those fellow human beings would not voluntarily entrust to those who exercise it. And this general point implies this more specific one: If Jones cannot persuade enough of his fellow human beings to voluntarily entrust their funds to him for his business enterprise, there is no good reason to believe that Jones’s business idea is sound.

Put differently, there is every reason to believe that if the only way Jones can acquire the resources he needs for his business enterprise is to seize them from others, Jones’s idea stinks and he should be ridiculed for his impertinence and for his disrespect for the rights of others.