Russell Roberts's Blog, page 370

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(Don Boudreaux)

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According to David Henderson, “yes” answers to the following questions are evidence of a policy fit for a banana republic:

Does the government prevent people from practicing their occupation and shut down huge parts of the economy based on the idea, not that people are sick and might spread their sickness to others, but that people might be sick, even though most of them aren’t, and might spread their sickness to others? And relatedly, does it threaten people who could easily prove themselves not to be sick with fines and/or jail sentences for not complying?

Also, related, does the government keep changing its rationale for the shutdowns.

Speaking of banana-republic policies, Zuri Davis rightly criticizes civil asset forfeiture.

Max Gulker praises the initiative exhibited, and local knowledge used, by some enterprising businesses in western Massachusetts to survive amidst the madness of the covid lockdowns and centrally planned ‘phased reopenings.‘ A slice:

In May and June, as state governments began proposing and then implementing their plans to gradually roll back shelter-in-place orders and business shutdowns implemented earlier in the spring, it became clear that the worst of the economic damage from misguided government policy was far from over. The conventional approach that emerged, and Massachusetts followed with gusto, were “phased” reopenings where crack teams in state capitols placed different kinds of businesses into different buckets with different reopening dates.

There would be no local input, no taking into account the complex ecosystems in which small businesses exist, and little room for the unique insight and creativity of business owners themselves.

Razeen Sally is understandably worried about the rise of “malign mercantilism” and the economic nationalism that fuels it. A slice:

Mercantilism – the exercise of state power to control markets domestically and internationally – existed after 1945, but was constrained by the expansion of markets: it was relatively benign. But malign mercantilism governed the preceding decades, shattering domestic economies, shrinking individual freedom, destroying the world economy, and so poisoning international politics as to culminate in global war. Today’s emerging mercantilism is still far from that reality, but it risks heading in that direction.

My old undergrad professor Oscar Varela, now at U.T.-El Paso, has this nice letter in today’s Wall Street Journal:

Fundamentally, education cannot be free. The time and energy required in education and the associated opportunity costs of lost income or leisure make it impossible for someone to obtain a free education. Indeed, these opportunity costs can be substantially high relative to the nominal tuitions at many state colleges and universities.

This essay by GMU Econ alum Alex Salter is a superb primer on the indispensable and awe-inspiring role, in the modern economy, of money, money prices, and economic competition.

Quotation of the Day…

(Don Boudreaux)

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… is from page 277 of Israel Kirzner’s insightful November 1980 lecture titled “The Morality of Capitalist Success,” as this lecture is reprinted in the 2019 collection of some of Kirzner’s papers (edited by Peter J. Boettke and Frédéric Sautet), Reflections on Ethics, Freedom, Welfare Economics, Policy, and the Legacy of Austrian Economics:

Defenders of capitalism are justifiably quick to reject criticisms of it which denounce the many kinds of consumption goods produced by capitalism that fall short of the ideals of high quality and noble purpose. The market system is not to be blamed, it is properly pointed out, for the crassness of tastes demonstrated by consumers. To blame the market for faithfully catering to these preferences, would be equivalent, to use George Stigler’s delightful metaphor, to blaming the waiter for obesity.

Quotation of the Day…

(Don Boudreaux)

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… is from page 105 of Michael Strain’s important 2020 book, The American Dream Is Not Dead (But Populism Could Kill It):

The common experience over the past several decades has been that jobs are readily available for those who want them, and for quality of life to improve. The populist argument that typical workers have been at a standstill for decades – victims of an elite that has “rigged the system” against them to help itself, or of immigrants – is incorrect.

DBx: Yes.

As I said in my Pairagraph debate with Branko Milanović, because I was born in 1958 and raised in the suburbs of New Orleans – where my father, after quitting his job as a bus driver, worked as a pipefitter in a shipyard – I’m a time-traveler from a thoroughly working-class American family of the 1970s. I remember that decade well. And while (of course) one’s personal experiences and recollections are hardly sufficient evidence to establish the validity of any proposition about economic changes for a country as a whole, such experiences and recollections aren’t wholly without information-content.

During my decades-long journey from the 1970s to 2020 I had much time to study the historical record – to examine the data, such as those that appear throughout Michael Strain’s book. The data powerfully confirm what my personal experience tells me: Anyone who asserts that ordinary Americans today are no, or only modestly, materially better off than were ordinary Americans in the 1970s or 1980s is mistaken. Deeply mistaken.

Nostalgia for, and misty-eyed myths about, a long-gone past are understandable. We humans are prone to such lazy indulgences. But I guarantee that if any of you ordinary Americans were suddenly projected back to, say, 1975 and found yourself living as ordinary Americans then lived, you’d feel desperately deprived. The reason is that, by the standards of today, you would be desperately deprived.

No cell phones, let alone smartphones. “Long-distance” charges for telephone calls to and from outside of the local area – calls that were made, in many cases, with rotary dials. No caller ID. Very few Americans had access to call-waiting. (You young’uns, look this latter up; you can use Google, which in 1975 was still more than 20 years in the future.) Costly air travel that was less safe than is air travel today. No personal computers. No home printers. No internet. No e-mail. No Bluetooth. No Zoom or Skype. No YouTube. No blogs. Of course no wi-fi. No podcasts. No PowerPoint. No e-books. No texting. No making reservations at restaurants or hotels on-line. No satellite radio. No on-line shopping or on-line banking. No direct deposit. No Venmo. No Yelp. No debit cards. No overnight delivery. No Uber or Lyft or Airbnb. Coffee choices bad and few. Beer choices bad and few. Wine choices poor and few. Spirits choices fewer than today. Scratchy polyester clothing. No Keurig machines and brew-pods. Supermarket choices pathetic by the standards of today. Only film cameras, most of which were of poor quality. Home movies were silent. Automobiles were far less reliable and safe than are automobiles today. No GPS navigation. No back-up cameras. No keyless entry. Food more expensive. Fresh-cut flowers a relative luxury. Microwave ovens a relative luxury. No Forever stamps. Contact lenses so pricey that wearers often bought insurance on them. No Lasik surgery. No Flonase. No MRI machines. Intraocular lenses still relatively rare, and of poorer quality than today. No Viagra. Far fewer varieties of ethnic cuisines readily available. Television repairmen making house-calls (really)! Only noisy automatic dishwashers (for ordinary Americans fortunate enough to own such a device). Vinyl records, 8-tracks, or cassette tapes – none of which permit music to stream. A half-dozen television stations at most, and viewable only in low-def. Electronic calculators still a novelty for many people. No Gore Tex. Much smaller homes (with more more people living in them).

Fuel shortages.

Life expectancy at birth was in 1975 more than nine percent lower than it is in 2020.

It’s easy and tempting to dismiss many of the above-listed features of 45 years ago as insignificant. (“No Keurig coffee pods! Really?! How insignificant! Only a materialist philistine would dare count such a triviality as relevant for a good and meaningful life!”) Forget that one unheralded output of devices such as Keurig machines is not only the physical outputs they produce, such as brewed cups of coffee, but also time saved – time that is thus freed up for other uses. It’s true that life today without any specific one of most of the countless advances since the 1970s would be only mildly less enjoyable and rich than life today actually is for ordinary Americans. But imagine life today without, say, even as little as one-third of the advances signaled in the above list. What’s your assessment of the quality of that life?

Now imagine life today with none of the advances signaled in the above list.

We time travelers from the 1970s don’t have to imagine such a life; we experienced it. We weren’t then – when Gerald Ford toiled in the Oval Office – conscious of our relative poverty, for we were relatively rich compared to Americans of only a decade or two earlier, who themselves were richer than their parents and grandparents. But were we today to be sentenced, for some heinous crime, to life in 1970s America, we would – as you would – plead desperately for mercy and a quick release from our unpleasant, dangerous, and dreary prison.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 216 of Roger Koppl’s important – and today especially relevant – 2018 book, Expert Failure:

Truth is only one of many things demanders [of ideas] want from ideas. And sometimes truth has nothing to do with it. Often, demanders in the market for ideas want magical thinking. By “magical thinking” I mean an argument with one or more steps that require something impossible. Unfortunately, experts often have an incentive to engage in magical thinking.

Some Links

(Don Boudreaux)

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Inspired by a recent concurring opinion written by Arizona Supreme Court Justice Clint Bolick, George Will warns of the dangers lurking in the sort of judicial deference to legislatures long advocated by many conservatives. A slice:

In Federalist No. 78, Alexander Hamilton wrote that “the courts were designed to be an intermediate body between the people and the legislature, in order, among other things, to keep the latter within the limits assigned to their authority.” However, the presumption of statutory constitutionality has this practical consequence: Although the members of all three branches of government swear constitutional oaths, legislatures enjoy practical primacy.

But as Bolick says, only the courts can be the ultimate arbiters. Otherwise, legislatures will be the judges of the scope of their own authority. The presumption of constitutionality means that individuals “face a judicially manufactured uphill battle any time they challenge an infringement of their rights.” And the presumption permits “the legislature’s self-interested determination of its own constitutional authority.”

Also writing on the problem of conservative judicial deference is Damon Root.

Writing in the Wall Street Journal, John O. McGinnis and Michael Rappaport praise Trump for the high-quality of his judicial appointments. A slice:

Mr. Trump’s judges are self-conscious originalists and textualists, and they will gradually change the jurisprudential weather. Even many of the president’s opponents concede that his appointees are some of the brightest and best-credentialed jurists appointed by any president.

My intrepid Mercatus Center colleague Veronique de Rugy exposes more of the hypocrisy that gushes from, and surrounds, that great geyser of cronyism, the U.S. Export-Import Bank.

Speaking of cronyism, Scott Lincicome writes wisely and informatively about the unwise and uninformed applause, from the right and left, for U.S.-government subsidies doled out to American manufacturers of semiconductors.

And Simon Lester writes wisely and informatively about U.S. policy toward today’s China. A slice:

Along the same lines, we could engage in more trade liberalization with countries that share our core values. Penalties directed at China are confrontational; a trade liberalizing agreement among other countries is less so. Importantly, we should not characterize such an initiative as an effort to “constrain China.” It is about moving ourselves forward, not holding others back. In essence, this would be the Transpacific Partnership model, but it would be less focused on China, in terms of its geography and its content. It would include a renewed effort to liberalize trade with the European Union, as well as a trade agreement with the newly independent United Kingdom.

Here are 20 lessons that Jeffrey Tucker has learned in 2020.

Ron Bailey calls for the deregulation of pharmacies.

Quotation of the Day…

(Don Boudreaux)

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… is from page xx of Roger Michener’s Foreword to the 1982 Liberty Fund edition of Albert Venn Dicey’s soaring 1885 Introduction to the Study of the Law of the Constitution (emphasis added):

By the rule of law he [A.V. Dicey] means: 1) the absence of arbitrary or discretionary power on the part of government; 2) every man is subject to the ordinary law of the land administered by ordinary and usual tribunals; 3) the general principles of law, the common law rules of the constitution, in contradistinction to the civil law countries of Europe, are the consequences of rights of the subject, not their source.

DBx: Contrary to today’s near-unanimous consensus, neither law nor legislation creates human rights; instead, law recognizes and protects natural human rights. (The contradictory belief is nonsense on stilts.) Increasingly, these rights are threatened by legislation masquerading as law.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from pages 87-88 of the May 9th, 2020, draft of the important forthcoming monograph from Deirdre McCloskey and Alberto Mingardi, The Illiberal and Anti-Entrepreneurial State of Mariana Mazzucato (emphasis original to McCloskey and Mingardi; link added):

Private companies, according to a lovely diagram, are said to never, ever to provide for public goods (this despite massive empirical evidence à la the first female Nobelist in economics, Elinor Ostrom, that companies and other supposedly selfish institutions dominated by the Prisoner’s Dilemma do so, routinely). In getting public goods and solving externalities, the crucial disability of the State is precisely the “scale and . . . the tools not available to businesses (i.e. taxation, regulation)” – which is to say massive, politically guided coercion without a test actual or imagined of profit paid by consumers.

DBx: This point is vital. Mariana Mazzucato – who is quoted in the above by McCloskey and Mingardi – serves up a standard trope that every economics student learns in Econ 101. This trope continues to be repeated in nearly all economics courses through the end of graduate studies. And yet this trope, by its very own logic, devours itself: Precisely because government officials get to spend other people’s money and to unilaterally order other people around, government officials have very little incentive to promote allocations of resources that are as efficient as possible from the perspective of the public at large.

Yes, of course, no real-world free market will ever operate as efficiently as it would were it designed and superintended by god. But operation-by-god is not the appropriate standard, despite it being the standard that is typically used. The appropriate standard of comparison for real-world market outcomes is the set of outcomes likely to emerge when resource-allocation decisions are in the hands of real-world government officials.

What is never adequately explained is just how the giving of power to some individuals to initiate coercion over other individuals will reduce the number and severity of instances in which some individuals act without taking due consideration of the interests of other individuals.

Pittsburgh Tribune-Review: “Your sovereignty & trade”

(Don Boudreaux)

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In my column for the October 13th, 2010, edition of the Pittsburgh Tribune-Review, I did my best to explain the importance of leaving consumers free to spend their incomes as they choose. You can read my column beneath the fold.

(more…)

Quotation of the Day…

(Don Boudreaux)

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… is from page 96 of George Will’s wonderful 2019 book, The Conservative Sensibility:

What moderation, what temperance, what restraint can there be in government animated by the idea that freedom, understood as emancipation from necessity, is the gift of comprehensively compassionate government? Such government has metastasized recklessly, and one of conservatism’s missions is to temper such government’s hubris and overreaching. This can be accomplished only by shifting the winds of public opinion.

DBx: Of course, by “conservatism,” George Will here means what most readers of Cafe Hayek understand to be classical – that is, true – liberalism.

…..

Statists of the right no less than statists of the left are mystics. Each and every one of them believes that the state possesses supernatural powers.

Of course, none of these statists today think of themselves as believing such nonsense. But the only way to make sense of their proposals is to realize that nearly all such proposals can be carried out successfully in reality only if the agent charged with carrying them out – the state – has superhuman access to knowledge and information, and has superhuman magnanimity.

All statists – from Trump to Biden, from Cass to Krugman, from Corbyn to Orbán to Maduro, from the editors of the New York Times to the editors of First Things – believe the state to be a supernatural entity.

That’s Not How It Works

(Don Boudreaux)

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Here’s a letter to someone who “increasingly sympathize[s] with the case for industrial policy”:

Mr. Kiner:

Thanks for your e-mail.

You write that there’s a “clean answer” to my question of how government officials charged with implementing industrial policy will get the knowledge they need to allocate resources in ways superior to the allocations brought about by free markets. This answer, you say, is to “observe what industries have high percentages of high paying jobs, and expand those.”

I’m afraid that this approach won’t work. The reasons are several, but here’s one that’s key: An important reason for high pay is unusually great scarcity of particular kinds of workers relative to the demand for the goods or services those workers produce. If government artificially expands the number of such jobs, there’s no guarantee of a supply of workers sufficiently skilled to fill those new jobs. And even if such a supply of workers does exist, the additional production will push the prices of those workers’ outputs lower, and in turn reduce their wages. 

A government that followed your advice would, upon observing that the average wage of players in the National Basketball Association is very high, commence to subsidizing the creation of hundreds of additional professional basketball teams. But obviously the players – that is, the workers – employed by these new teams would never be as productive as are the players currently in the NBA. And so the market wages of workers drawn into these jobs through the machinations of government wouldn’t be anywhere near as high as are the wages now paid to LeBron James and other current players. 

The same logic that applies to a government-engineered expansion of the professional-sports industry applies, if perhaps less vividly, to a government-engineered expansion of any other industry you care to name.

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