Russell Roberts's Blog, page 37

Quotation of the Day…

(Don Boudreaux)

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… is from page 134 of the late William Niskanen’s insightful Fall 2006 Cato Journal paper, “Limiting Government: The Failure of ‘Starve the Beast’,” as this paper is reprinted as chapter 15 of the 2008 collection of some of the best of Niskanen’s writings, Reflections of a Political Economist (emphasis added):

In sum, there is no significant evidence that a recent high deficit ever had an effect similar to that of reducing a child’s allowance; the difference is that the federal government has a credit card with no effective debt limit. Federal spending is better described as buying government services at a discount equal to the deficit, the costs of which will be borne by someone sometime in the future.

DBx: Resources are scarce. Therefore, to use resources X and Y to achieve goal A means that those particular resources are no longer available to be used to achieve goals B, C, …, N. To achieve goal A is costly. Is the achievement of goal A worth its cost? ‘Yes’ if the value of whatever option (among B, C, …, N) would otherwise have been produced is less than is the value of A.

When people spend their own money, they have strong incentives to use resources in ways that generate satisfactions that exceed their costs. When people spend other people’s money, they have strong incentives to use resources in ways that give the greatest possible satisfaction to the spenders, but with little or no regard to the satisfactions thereby denied to those persons whose money is spent – that is, those persons whose real resources are taken from them. When people spend other people’s money, in short, resources are used wastefully from the perspective of everyone in society other than the lucky ones who get to spend other people’s money.

Deficit financing of government spending allows people today to spend the money of people tomorrow, many of whom are literally not yet born. People today therefore spend wastefully. The amount of spending is higher than it would be absent the ability of government to borrow. Furthermore, the projects on which the borrowed funds are spent, while providing satisfaction to the spenders, cannot legitimately be supposed to provide net benefit over time to society – at least no more so than can it be supposed that the increased satisfaction that the burglar enjoys when he spends resources stolen from your home exceeds the satisfaction that you would have enjoyed had you yourself spent those resources.

Many people suppose that deficit financing is a source of free lunches, an economic perpetual-motion machine or fountain of youth. (People who fall for this fallacy typically do so because they forget about, or ignore, the fact that deficit financing results in reallocations of real resources.) In reality, deficit financing is not only not a source of free lunches, it’s a source of wasteful orgiastic feasts. It allows today’s citizens-taxpayers-politicians to gorge and intoxicate themselves at the expense of tomorrow’s citizens-taxpayers. Deficit financing is little short of a scam.

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(Don Boudreaux)

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The Wall Street Journal‘s Editorial Board decries “the tyranny of DEI bureaucracy.” Two slices:

Critical race theory is becoming institutionalized across American universities, and a major reason is the educational bureaucracy. Most universities now have offices for diversity, equity and inclusion, or DEI, that exercise a broad writ on campus and act as speech police within the university.

That power was on ugly display last week at Stanford Law School, where a mob of law students shouted down Fifth Circuit Court of Appeals Judge Kyle Duncan in a spectacle unfit for any institution of higher learning. (Judge Duncan relates his experience nearby.)

Heckling unpopular speakers is common on campus, but what makes this episode stand out is the role played by administrators. As the room grew unruly, Judge Duncan asked that a college official step in. The law school’s associate dean for DEI, Tirien Steinbach, took the podium. “Me and many people in this Administration do absolutely believe in free speech,” the dean said, but then went on to ask if “the juice is worth the squeeze”—that is, whether tolerating free speech is worth the pain it causes.

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DEI officials have a vested interest in ensuring that the grievances of identity politics continue lest the offices have no reason to exist. As the Stanford experience shows, they promote racial division rather than redress it, and institutions need to rethink their value.

David Henderson explains that bailing out SVB is a very bad idea. A slice:

But imagine what would have happened if the federal government had stuck to the rules. Yes, there would have been pain. Yes, several Silicon Valley companies would have had trouble meeting their payrolls. But the reason that SVB was not counted as a “too big to fail” bank was that the federal government had judged that there would not be a system-wide run on banks if SVB’s depositors had taken a large haircut. The impact would almost certainly have been regional, not national. In short, “contagion” likely would have been limited. Then banks, depositors, and others would have thought much harder in the future about what to invest in.

The FDIC, Janet Yellen, and the rest of the feds who were involved had a chance to do something good for the economy: stand firm on existing FDIC rules. They blew it.

el gato malo isn’t impressed by Janet Yellen.

Alberto Mingardi celebrates Mario Vargas Llosa’s classical liberalism.

Randy Holcombe is understandably befuddled by some of today’s befuddling social norms.

Reason‘s Christian Britschgi reports that “researchers pressured Twitter to treat COVID-19 facts as ‘misinformation’.” Two slices:

Researchers at Stanford University—in partnership with several nonprofits that have received government funding—worked with social media platforms to flag and suppress commentary on COVID vaccines, science, and policy that contradicted public health officials’ stances, even when that commentary was true.

This new information comes from yet another Twitter Files entry of screenshotted emails and reports from independent journalist Matt Taibbi that reveals the back and forth between the Stanford-led Virality Project and receptive Twitter executives about policing alleged COVID misinformation on its platform.

Beginning in February 2021, and continuing with regular reports, Virality Project researchers encouraged Twitter to expand its misinformation policies to include true reports of vaccine side effects, criticism of vaccine passport systems for their imposition on rights and freedoms, and even discussion of legitimate scientific research on breakthrough infections on natural immunity.

…..

There’s been a lot of reporting already (including from Reason) on the efforts by government agencies to pressure social media companies to police COVID speech they deemed false or misleading.

The latest Twitter Files shows that the definition of what’s considered damaging misinformation is being stretched to include true things that might cause the public to react in ways that don’t meet the approval of public health officials.

Writing in the Telegraph, Jay Bhattacharya and Mikko Packalén explain that much of today’s inflation is inflamed by lockdowns and related government interventions. A slice:

The economics profession failed to speak out in 2020 about the predictable harms of Covid lockdowns and school closures to children and those on lowest incomes. Economists believed that many people would stay home because they feared the virus, not because of lockdown. Hence, they reasoned, restrictions themselves were not responsible to any significant degree for the damage done to the economy.

Surveys suggested many economists were united in their support for draconian controls. Surveys of economists did not even ask about inflation until far too late (June 2021) and never asked about the terrible human cost of school closures.

But the fear of the virus that drove much of the behavioural change did not happen independent of lockdowns, nor did it correspond to objective facts about the disease. Surveys consistently showed that the perceived mortality and hospitalisation risks far exceeded the objective risks from a Covid infection for young and middle-aged people.

Wall Street Journal columnist James Freeman reflects on the three-year anniversary of the onset of covid derangement. A slice:

This column was a lockdown skeptic right from the start of the Covid panic and an early Fauci skeptic as well. Gov. DeSantis for his part was among the earliest governors to recognize the failings of the panicked Covid consensus and became the most forceful advocate for allowing an open society to prosper while focusing on protection of the most vulnerable.

Looking back it’s hard to believe how many media and political players bought the idea that one could shutter much of society and then try to simulate prosperity with trillions in government spending and money creation at the Federal Reserve—and then expect a positive result. Of course Joe Biden and the Fed inflamed the problem by continuing the binge of spending and money creation long after the economy had begun to rebound. This led to inflation and now to banking tumult from higher interest rates as the Fed finally started to tighten monetary policy,

But even though anyone can now recognize how bad the outcomes were for the country when policy makers listened to Dr. Fauci and experts in public health, which is a failed discipline, one could argue that Faucian economics continues.

Reality Isn’t Optional, Exhibit #79,201,096e28

(Don Boudreaux)

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Prompted by my recent reposting of a 2013 essay of mine on Henry Ford’s January 1914 more-than-doubling of the daily pay of his full-time workers, Chris Hesse sent to me the following e-mail. I share it with his kind permission.

Let’s not pass an opportunity to observe confirmation bias at its best. Those who assert that Henry Ford increased wages so that his employees could afford to purchase his cars use that assertion to justify a mandated minimum wage. Such a person would not usually quote Henry Ford, “robber baron,” as a person to cite in support of employees. For all other purposes, Henry Ford is seen by such people as evil. Would they quote Henry Ford in any other context? No. When the quote fits with a person’s preconceived notion, it is seen as accurate and evidence for their own opinion. This person would normally be skeptical of any quote from such a successful businessman. Ford knew his audience.

As you observed in 2013, his employees, newly trained in assembly line techniques, would be valuable to his competitors. He simply raised wages because it was cheaper to pay more than to obtain and train replacements. For the same reason, we don’t need a federal minimum wage. Any warm body willing to work seems to be able to find a job today, if desired. The fast food industry today has lousy service due to the lack of bodies. More tasks are turned over to the customer (computer kiosk, self-service drinks, wait at the counter for your order). Unfortunately, the job isn’t desired because welfare benefits decrease as pay increases.

An unskilled employee might have been willing to work for Ford for nothing, to obtain skills valuable to Ford’s competitors and other manufacturers who might benefit from assembly line enhancements.

Best regards,
Chris Hesse

Quotation of the Day…

(Don Boudreaux)

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… is from page 18 of the 2011 revised and enlarged edition of Thomas Sowell’s 2009 book Intellectuals and Society:

Since intellectuals have every incentive to emphasize the importance of the special kind of knowledge that they have, relative to the mundane knowledge that others have, they are often advocates of courses of action which ignore the value, the cost, and the consequences of mundane knowledge.

DBx: Indeed.

Nothing is easier for an intellectual than to bang out on his or her keyboard proposals to rearrange pre-labelled categories of the economy in ways that suit that intellectual’s fancy. The intellectual proposes, for example, to increase “manufacturing employment” and to “strengthen our national defense” by limiting imports of manufactured goods and subsidizing “industries of strategic significance.” It’s oh-so-easy to type out! And the happy prospects of the policy’s successful implementation are so gratifying to ponder!

But the intellectual never stops to realize that his or her scheme will displace the use of on-the-spot detailed knowledge of millions of individuals. The intellectual is convinced that his or her ability to describe in words just how to rearrange pre-labelled categories of the economy is sufficient proof – especially when combined with the intellectual’s excellent intentions – that the intellectual’s scheme will work as the intellectual imagines it working.

The intellectual, in this, is a damn fool. And insofar as he or she is taken seriously by politicians, also a dangerous one.

Difficult to Believe that Such An Essay Is Published In March 2023

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

In the three years since much of humanity was panicked into unprecedented lockdowns, we’ve learned a great deal about measures meant to combat covid. Tom Frieden, however, apparently missed most of this learning (“What Worked Against Covid: Masks, Closures and Vaccines,” May 17).

Claiming that lockdowns worked, he links to three supporting papers. But the most recent of these appeared in July 2021. Since then, lockdowns’ failure to work has been amply documented, not least by Joel Zinberg’s, Brian Blase’s, Eric Sun’s, and Casey Mulligan’s February 2023 study. These authors find “that more severe government interventions, as measured by the Oxford index, did not significantly improve health outcomes (age-adjusted and pre-existing-condition adjusted COVID mortality and all-cause excess mortality) in states that imposed them relative to states that imposed less restrictive measures.”

Indeed, while Dr. Frieden correctly notes that the best measure of covid’s impact is excess mortality, he fails to mention how excess mortality in Sweden – a country which barely locked down – compares to that in other countries. Such a comparison (easily doable here) reveals results that are difficult to square with Dr. Frieden’s confident assertion that lockdowns worked.

A related error is Dr. Frieden’s failure to mention the Great Barrington Declaration’s proposal of Focused Protection – a policy that, contrary to the blind shotgun blasts that are lockdowns, carefully aims resources and attention on protecting those persons most vulnerable to covid. Dr. Frieden simply assumes that the only acceptable means of reducing transmission are lockdowns and masking. His maneuver here is as legitimate as would be the assertion that the only acceptable means of reducing drunk-driving fatalities is to outlaw alcohol.

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

…..

Additional errors – and plenty of them – mar this essay by Frieden. But my letter is already too long.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is this Facebook post offered earlier today by Bob Higgs:

Modern governments have painted themselves into a corner, and the only solution they have come up with is to keep painting. Having raised their spending far in excess of their capacity to finance except by incurring debts they will never be able to repay, their only solution is to spend and borrow even more.

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(Don Boudreaux)

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My intrepid Mercatus Center colleague, Veronique de Rugy, warns of the dangers lurking in Biden’s proposed budget. Two slices:

While this budget is dead on arrival in Congress, it’s worth reviewing some reasons why this is so. The president aspires to spend around $6.9 trillion next year, a 55 percent increase over pre-pandemic levels, and $10 trillion by 2033. While Biden hopes to raise an extra $4.7 trillion over 10 years in taxes, the debt would nevertheless grow over the next decade by $19 trillion as the debt-to-GDP ratio increases from 98 percent to 110 percent. All this debt in a high interest rate environment would have Uncle Sam fork over $10.2 trillion in interest payments alone over that time.

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Even more concerning, the administration wants to impose an annual 25 percent minimum tax rate on the unrealized capital gains of individuals with income and assets exceeding $100 million. These gains aren’t income; they’re assets that have gone up in value on paper—something that might disappear overnight. More importantly for everyone else, this wealth tax would reduce the amount of capital invested in productive, job-generating projects—meaning economic growth, innovation, and wages would all decline.

The Cato Institute’s Chris Edwards surveys a century of U.S. federal-government spending: 1925-2025.

“Effective Altruist Leaders Were Repeatedly Warned About Sam Bankman-Fried Years Before FTX Collapsed.” (HT Phil Magness)

Arnold Kling writes insightfully about deposit insurance and moral hazard.

Here’s the sound conclusion of Antony Davies’s latest piece at AIER:

Politicians don’t care whether oil companies are greedy, or altruistic, or neither. Politicians care about using oil companies as a smokescreen to hide from the voters’ wrath.

Reason‘s Eric Boehm explains what shouldn’t, but what nevertheless does, need explaining: Protective tariffs impose net costs on the people of the country whose government imposes such tariffs – and America isn’t exempt from this reality.

After investigating the consequences of both Trump’s Section 232 tariffs (the supposed “national security” levies against steel and aluminum) and his Section 301 tariffs (imposed against a wide range of items imported from China), the ITC reported that in both cases, domestic price increases matched the cost of the tariffs almost exactly. “The USITC estimated that prices increased by about 1 percent for each 1 percent increase in the tariffs,” the report states.

Here’s the abstract of a very interesting forthcoming paper co-authored by my GMU Econ colleague Vincent Geloso:

Can mild forms of labor coercion generate welfare effects as large as more extreme forms? Do these effects persist over time? To answer both questions, we use Quebec’s system of seigneurial tenure (in effect until 1854) that granted landlords market power in the establishment of factories, and restricted worker mobility. This created a mild form of labor coercion as landlords had incentives to reduce employment and wage rates. To measure these effects, we rely on the Constitutional Act of 1791 which stated that all new lands had to be settled under a different tenure system. Using a regression discontinuity design, we find that seigneurial tenure significantly depressed wages. The effect on wages is as large , or larger than, causal estimates of significantly more coercive labor regimes. We also find that by 1871, seventeen years after the institution’s abolition, these effects had fully dissipated, suggesting that persistence is not an issue.

Writing at National Review, Caroline Breashears reminds us that Adam Smith was first a teacher of English. A slice:

How do great writers achieve such effects? The student notes from Smith’s Lectures on Rhetoric and Belles Lettres offer some answers. First, language has beauty “when the sentiment of the speaker is expressed in a neat, clear, plain, and clever manner, and the passion or affection he is possessed of and intends, by sympathy, to communicate to his hearer, is plainly and cleverly hit off.” As in TMS [Smith’s 1759 book, The Theory of Moral Sentiments], sympathy is central.

Speaking of Adam Smith, GMU Econ alum Erik Matson explains the continuing relevance of Smith’s “liberal plan.” A slice:

Trade restrictions worked in tandem with schemes of empire. Such schemes cashed out in colonization efforts and government-sponsored trade companies, such as the East India Company and the Hudson Bay Company, aimed at wealth extraction in foreign corners of the world. Smith, along with his friend David Hume, dismantled the logic of mercantilist philosophy and illustrated the destructive effects of its recommended policies. “The Wealth of Nations” as a whole reads, as Smith described it in 1780, as “a very violent attack upon the whole commercial system of Great Britain.”

In place of extant British policy, Smith looked to bring about his liberal plan,” which targeted reforms in such policy areas as occupational choice, domestic trade and international trade. Smith favored, for example, abolishing the Elizabethan Statute of Artificers, which controlled entry into certain trades through long apprenticeship requirements (something not unlike present-day occupational licensing requirements for, say, barbers). He believed the market provides sufficient feedback on worker quality; moreover, he judged preventing individuals from trying their hand in trades of their choosing to be a “manifest encroachment upon the just liberty both of the workman, and of those who might be disposed to employ him.”

A top epidemiologist in Norway praises Sweden’s handling of covid.

Jay Bhattacharya tweets:

The most dangerous sources of misinformation lie in the hands of those with the power to censor and suppress accurate information.

On Hayek

(Don Boudreaux)

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Thanks to Rosemarie Fike and the Fraser Institute for allowing me to expound on some of the work of F.A. Hayek.

Quotation of the Day…

(Don Boudreaux)

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… is from page 61 of F.A. Hayek’s July 1946 speech at Stanford University titled “The Prospects of Freedom,” as this speech appears – for the first time in print – as chapter 3 of Essays on Liberalism and the Economy, which is volume 18 of The Collected Works of F.A. Hayek (Paul Lewis, ed., 2022):

There is so much sloppy thinking, so much concealed inconsistency in the prevailing convictions, that a somewhat negative approach may be very wholesome.

DBx: When it comes to economics and government policy, the world doesn’t suffer from a lack of good ideas anywhere nearly as much as it suffers from a superabundance of bad ones.

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(Don Boudreaux)

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George Will is appropriately harsh in his condemnation of the uncivilized, hateful, brutish Stanford Law School students who, with the help of that School’s “diversity” dean, shouted down a speaker. Two slices:

Before reading this, watch the nine-minute video, widely available online, of last week’s mob victory at Stanford Law School. Note especially Tirien Steinbach, who, you should not be shocked to learn, is the law school’s associate dean for diversity, equity and inclusion. Pseudo-intellectual smugness and moral cowardice apparently are necessary and sufficient prerequisites for DEI careers — there are many thousands of them — enforcing campus orthodoxies.

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Larded with unstinting parental praise and garlanded with unearned laurels, these cosseted children arrive at college thinking highly of themselves and expecting others to ratify their complacent self-assessment. Surely it was as undergraduates that Stanford’s law school silencers became what they are: expensively credentialed but negligibly educated brats.

Stanford’s president and the law school’s dean jointly say they are sorry about the unpleasantness. Not, however, so sorry, as of this writing, that they have fired Steinbach — although they say she refused to do her job: “Staff members who should have enforced university policies failed to do so, and instead intervened in inappropriate ways that are not aligned with the university’s commitment to free speech.” The depth of that commitment can be gauged by this tepid rebuke, in bureaucracy-speak, of Steinbach for being improperly “aligned.” As this is written, many of Stanford’s future lawyers are demanding that the dean apologize for apologizing.

Stanford has not expelled any of the imperfectly “aligned” disruptors. The school might be improved by the departure ofthe student whose idea of intellect in the service of social justice was to shout sexual boastings and scabrous insults. Readers can find in the Washington Free Beacon the insulter’s unintended proof that there is indecent exposure of the mind as well as the body.

Todd Henderson proposes a “capitalist way to fix Social Security.” Here’s his conclusion:

The upshot of investing Americans’ futures in the stock market is not only that it would yield better returns, but that it would also alleviate Democrats’ concerns about the alleged wedge between capital and labor. If more Americans are invested in stocks—through a no-fee market index fund—they would be the beneficiaries of stock buybacks, dividends, and rising corporate profits. Instead of stoking class envy, let’s turn workers into capitalists.

GMU Econ alum Nikolai Wenzel describes Biden’s proposed budget as “smoke, mirrors, and class warfare.”

My former Mercatus Center colleague Jack Salmon reports on “the return of the wealth tax debate.” A slice:

In 2017, France eliminated its wealth tax after the prime minister acknowledged it was prompting the departure of 10,000 to 12,000 millionaires each year. This tax impeded economic growth and contributed to just over 1% of overall tax revenue, which is an inadequate return for the cost.

Sweden, which is often cited as a progressive policy model, had a wealth tax for almost 100 years before abandoning it in 2007. The tax had virtually no effect on government finances while being blamed for significant capital flight. Germany also had a wealth tax, but it was deemed unconstitutional and abolished in 1996. Wealth taxes have not proven successful worldwide, and it remains uncertain whether the U.S. Constitution grants Congress the authority to impose such a tax.

“Get your new washing machine before Biden makes them illegal” – and get also your new gas stove.

John Stossel identifies a major reason for U.S. flight delays. A slice:

Air traffic control is still a lot like it was in the 1960s. Controllers use paper strips to track flights. Instead of using computers, they move paper around manually.

Vinay Prasad defends the Cochrane study on masking from covidian ideologues. A slice:

[Zeynep] Tufecki went on to cite a bunch of low credibility studies to support masks, but this is embarrassing. It is like citing mouse model research that a drug should work after the pooled analysis of randomized, phase 3 trials is negative.

Paul Thacker unmasks Zeynep Tufekci.

Sue Julians tweets: (HT Jay Bhattacharya)

Blimey. It ain’t over yet.
If pressure was put on Cochrane to change the plain language summary by people who pushed for mask mandates, and Cochrane capitulated without consulting the authors, it’s not just the CDC who needs their processes checked for resilience and objectivity.

Fred Skulthorp reviews Toby Green’s and Thomas Fazi’s The Lockdown Consensus. A slice:

Beyond debating the efficacy of lockdowns (academic studies arguing both for and against now number in the hundreds) at times the Covid Consensus relies on a sense of moral outrage. This is most effectively conveyed when detailing the suffering of children in some of the world’s poorest countries. A March 2020 UNESCO report warned of the devastating impact on children’s wellbeing and health brought about by pursuing lockdown policies. Despite this, the policy prevailed in some of the world’s most vulnerable countries. In the Philippines, for example, children were not allowed out of their homes for twenty months, and in Angola not for seven months. Education inequality, mental health problems and child sexual abuse soared. Perhaps the biggest failure of the pandemic was the imposition of a “one size fits all” policy that led to120 million people being pushed into the most extreme form of poverty around the world, much of which Green and Fazi argue was accountable not to the virus but to the policies pushed by a global health establishment.