Russell Roberts's Blog, page 380

Quotation of the Day…

(Don Boudreaux)

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… is from pages 61-62 of Diane Coyle’s 2014 book, GDP:

Nineteen sixty-eight was an iconic year…. Liberation movements burst into flower around the world. It is not poverty and despair that cause revolutionary activity in modern times, but rather comfortable prosperity. Skipping school to hurl stones at the riot police and evade tear gas is a luxury indulged in only by young people who are not really worried about finding a job when they need one. Likewise, one can afford to experiment with drugs, free love, personal liberation, and self-discovery only in a prosperous economy. By 1968, there had been a quarter century of absolutely extraordinary growth.

DBx: The above insight is important. It does not imply that there are no just causes for protest – protest; not rioting, looting, and crowd-mad mayhem and disrespect of private property.

But worthy or not, the ability to protest – and more generally, the ability to express political opinions – is enhanced by material prosperity. And so, too (as Coyle notes) does material prosperity make possible other forms of self-expression – some of which are admirable and others of which are not.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 46 of Will & Ariel Durant’s 1963 volume, The Age of Louis XIV:

The historian, like the journalist, tends to lose the normal background of an age in the dramatic foreground of his picture, for he knows that his readers will relish the exceptional and will wish to personify processes and events.

DBx: This reality explains so much, especially today about people writing about today.

Quotation of the Day…

(Don Boudreaux)

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… is from pages 39-40 of Kristian Niemietz’s superb 2019 book, Socialism: The Failed Idea That Never Dies (original emphasis):

It is a common misunderstanding that the main role of competition is to act as a spur: we work harder when we are under competitive pressure than we do when we can take our current position for granted. But this was never the main issue: socialist economies had other (less benign) ways of spurring people on. What they lacked, however, was the knowledge-creating capacity of competition. This is the main role of competition in economic life. Socialist economies deprive themselves of the vast amount of knowledge created by competition. To a lesser extent, so do market economies that hinder the competitive process, for example, by erecting barriers to market entry.

DBx: Because this reality is often ignored, it must be often repeated: Any government-erected obstruction of the ways that people may invest and spend their own money – as entrepreneurs, investors, and consumers – destroys some amount of economic knowledge that would otherwise have been generated and acted upon. (Even when, for some non-economic reason, such an obstruction can be justified, some relevant economic knowledge is nevertheless destroyed.)

This reality makes the claim that industrial policy will actually improve the economy highly suspect. Industrial policy necessarily destroys economic knowledge, and the more extensive such a policy, the more knowledge it destroys. Until and unless advocates of industrial policy do what they have yet to do, or even to attempt to do – namely, explain how government officials will generate and acquire knowledge to replace that which their trade restraints and subsidies destroy – they should be ignored.

The fact that industrial-policy advocates are not ignored testifies only to the abysmal state of the public’s understanding of economic reality.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from this recent Facebook post by Bob Higgs:

These young people are running around pointlessly, vandalizing and destroying property, shouting, and faux-fighting when the odds are heavily on their side, dressing up their youthful folly in the transparently fake costume of a quest for social justice, rioting for the adrenaline rush and a bit of loot.

See! No Gulags! Industrial Policy Works!

(Don Boudreaux)

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Here’s a letter to the Washington Post:

Editor:

As displayed again in Jeanne Whalen’s report “To counter China, some Republicans are abandoning free-market orthodoxy” (Aug. 28), advocates of industrial policy – including Oren Cass and other conservatives – perform according to a well-rehearsed script.

Act 1: Repeat fallacies as if they’re established facts. An example, as reported by Ms. Whalen, is to assert that “U.S. businesses also aren’t investing as much as they used to on new equipment.” In reality, U.S. industrial capacity hit an all-time high in the first quarter of 2020, making it 16% greater than it was when China joined the World Trade Organization in 2001 and 156% greater than in 1976.

Act 2: Divert attention with red herrings – such as when they note that U.S. government research and development spending has since 1976 fallen as a percentage of gross domestic product. True, but unmentioned is the fact that private businesses – which are accused of being myopically focused on enriching shareholders with cash in the short-run – have steadily increased R&D spending. In 1976 business R&D expenditures were 0.8% of GDP; in 2016 business R&D expenditures were 1.8% of GDP – thus causing total R&D expenditures in 2016 to be 2.7% of GDP (compared to 2.1% in 1976).*

Act 3: Straw-man the case against industrial policy – as when one industrial-policy fan accused libertarian opponents of such policy of believing it to be “equal to” Soviet-style central planning.

Act 4: Steadfastly ignore the key question asked by industrial-policy opponents: “How will government officials get the information they need to allocate resources better than resources are allocated by entrepreneurs, investors, and consumers risking and spending their own money in competitive markets?” Industrial-policy proponents simply continue to believe, as a matter of faith, that government will somehow know what to do and how best to do it – a fact that adds irony to the error of the accusation made by another industrial-policy proponent that those of us who oppose industrial policy are “naïve.”

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

* I converted all nominal R&D dollar figures in the linked piece into 2012 dollars using this inflation adjuster, and then used this link as my source for annual U.S. GDP.

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See also Scott Lincicome’s brilliant response to this report on conservatives’ embrace of industrial policy.

Quotation of the Day…

(Don Boudreaux)

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… is from page 87 of economist Diane Coyle’s 2014 book, GDP (footnote deleted; link added):

It has been rather fashionable to claim that there is “too much” choice. The evidence points the other way. Econometric estimates of the value consumers derive from additional varieties of certain products, say of cereals, or book titles, indicate that this is large even for seemingly trivial innovations like apple cinnamon flavor Cheerios. What must be the benefit when adding together everything from minor innovations in cereals, toothpastes, and flavors of tea, through more obviously novel innovations such as Velcro fastening or hybrid cars, to those we normally think of as high-tech, like smartphone and tablet computers, genetically targeted pharmaceuticals, and new materials such as graphene?

DBx: No serious person with normal human sensibilities believes that achieving ever-greater access to material goods and services is or ought to be the be-all and end-all of human existence. Non-material, ‘higher,’ experiences – love, friendship, a sense of purpose, dignity, spirituality, self-respect – are of course deeply important.

And while sometimes the pursuit of the material comes at the expense of the ‘higher,’ this trade-off isn’t always or even typically required. Very often acquiring greater access to material goods and services better enables the achievement of the ‘higher.’ Visiting grandma is more satisfying if she’s alive, and she might well be alive because of some pharmaceutical products or because modern electronic communications devices gave her sufficiently early warning to evacuate before Hurricane Wallop came ashore.

It’s easy and oh-so-cool for people awash in modernity’s material amenities to parade their ethical sophistication by denouncing what they take to be the excessive, even animalistic, “addiction” (as they often call it) of other human beings to material goods and services. (Often such denunciations feature as examples devices that are used chiefly for entertainment, such as flatscreen TVs – as if the opportunity for escape, to be entertained, is a somewhat contemptible human desire.) But such denunciations are made by people who cast a too-shallow glance at their fellow human beings.

Sure, the Joneses seem rather too materialistic, what with mom and dad snacking on microwave popcorn as they watch “Schitt’s Creek” on their flatscreen TV, while each of the junior Joneses sits alone in his or her room texting friends or surfing the Internet. The Joneses aren’t doing what some intellectuals fancy they should be doing. They’re not at the bowling alley; they’re not sitting on the porch talking with the neighbors; they’re not at a townhall meeting; they’re doing nothing found in a Norman Rockwell painting.

Yet what are the other experiences that the Joneses enjoy because of their ready access to an abundance of material goods and services? Well, if they are typical Americans they’re healthier than they would have been even just a few decades ago because of the availability of some drugs and medical devices and procedures that only relatively recently became available. The Joneses can talk daily, without worrying about the cost, in real time face-to-face with grandma and grandpa who live hundreds of miles away. When the Joneses travel by automobile they’re less likely to be killed or seriously injured than were their parents at their age. They can acquire recorded music and many books within seconds – and thus, if they wish, elevate their tastes and improve their minds.

And they can afford to give to charitable causes, send $250 by Venmo to a struggling nephew, and volunteer on Sundays to work at a community theater – activities invisible to those who only see the Joneses perched in front of a flatscreen TV watching a silly comedy show.

Of course not everyone spends his or her time and material prosperity well. Some people are truly shallow and hyper-materialistic by any standard. But it’s untrue that greater material abundance is necessarily – or even, in practice, usually – bought at the expense of the deeper and better and higher aspects of what it means to be fully human.

Oren Cass Still Misses the Unseen

(Don Boudreaux)

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Here’s a letter to the New York Times:

Editor:

In “The Elite Needs to Give Up Its G.D.P. Fetish” (August 28) Oren Cass overstates the importance that economists attach to material goods and services as he understates the importance that workers attach to these things.

No competent economist believes that humans do or should care only, or even mainly, about outputs exchanged in markets. But economists do recognize that better access to such outputs enhances individuals’ abilities to attain non-material goals. Community involvement, education, art, and the leisure necessary to care for family and friends are prime examples of non-material ends made more accessible as people’s material desires are better satisfied.

Still, ordinary people obviously care more than Cass realizes about satisfying material desires. By agreeing to take pay cuts – that is, by agreeing to reduce their access to outputs exchanged in markets – workers facing competition from imports or technology could thereby keep their jobs and, in turn, retain the specific community connections that Cass says workers value so highly. Yet workers generally refuse to take pay cuts. They thus reveal that they value continued access to material goods and services more highly than they value the non-material experiences and community connections that they sacrifice by refusing to take lower pay.

The protectionism that Cass proposes can, at best, protect only some Americans from having to make this trade-off. And it can do so only by compelling other Americans – those who pay higher prices for consumer goods and those denied the better jobs that would otherwise be created – to suffer reduced access to material goods and services.

Avoiding such an injustice by keeping trade free is a non-material value that I and other classical liberals cherish and wish would receive greater respect from politicians and pundits.

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

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The above letter is already too long (for a letter), yet it still ignores several other fallacies found in Cass’s essay.

Some Links

(Don Boudreaux)

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Alan Reynolds writes wisely about the inevitable negative impact of minimum wages on low-skilled workers. Here’s his conclusion:

Past increases in the federal minimum wage always resulted in many more people pushed into jobs paying below minimum and usually losing whatever benefits they previously enjoyed. Far from being an effective and humane way to raise the lowest incomes the unintended consequence of increasing the federal minimum wage has, in fact, been to force hundreds of thousands more Americans into substandard jobs and make the poorest workers poorer.

David Henderson asks if China is an economic threat.

Mark Perry explains that California’s “green dream” is a nightmare.

Regardless of which of the two unambiguous evils – Biden or Trump – you regard as the lesser, understand that Trump is no champion of small government.

Tyler Cowen is correct: today’s actual rate of inflation is much higher than the official rate.

Writing in the Wall Street Journal, Bill Evers laments the curriculum in California’s government-operated schools. A slice:

Welcome to “critical ethnic studies,” which boils down to vulgar Marxism, identity politics and victimology. Ideologically blinkered designers of ethnic-studies programs miss out on knowledge and analysis from mainstream social sciences that could enhance what students are taught.

Brian Doherty recommends bourgeois libertarianism.

Peter Minowitz on Racism

(Don Boudreaux)

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Santa Clara University political scientist Peter Minowitz wrote a penetrating review essay of Ibram X. Kendi’s How To Be an Antiracist, and Robin DiAngelo’s White Fragility: Why It’s So Hard for White People to Talk about Racism. I might, if pressed, pick a tiny nit or two with this essay, but Peter’s argument is solid and clear and important and timely, and I heartily agree with his conclusion. It’s very much worth a careful read.

Here’s the opening. The remainder of the essay continues beneath the fold.

……..

How to Be a Better—and Less Fragile—Antiracist

By Peter Minowitz, Santa Clara University

When you see something that is not right, not fair, not just, you have a moral obligation to do something, to say something, and not be quiet. –Congressman John Lewis

Professors typically lament the damage President Trump has caused by exaggerating, stereotyping, and demonizing. The ones who drift into activism, however, are not immune to these discursive disorders. I shall explore this problem by scrutinizing two bestsellers: How To Be an Antiracist (One World, 2019) by Ibram X. Kendi and White Fragility: Why It’s So Hard for White People to Talk about Racism (Beacon Press, 2018) by Robin DiAngelo. The authors are already national icons, they extol each other’s work, and their books are being assigned widely within America’s campuses and businesses.

(more…)

Quotation of the Day…

(Don Boudreaux)

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… is from page 39 of Kristian Niemietz’s superb 2019 book, Socialism: The Failed Idea That Never Dies:

A market economy is a testing ground, in which different business ideas, different management styles, different organisational models and different industry structures can be tried and tested in competition with one another. For example, integrated models, where companies perform a lot of functions in-house, can compete freely with specialised models, where companies outsource many functions to external contractors. In this way, we find out where specialisation is more appropriate, and where integration is more appropriate.

DBx: Yes.

Each proponent of industrial policy would replace this on-going testing, experimentation, competition, and market-revealed discoveries with the personal fancies and preconceived designs of his or her own puny mind.

I do not arrogantly criticize the minds of industrial-policy proponents by describing them as “puny.” Every human mind – including, of course, my own – is puny. No exceptions. The human mind is far too small even to begin to comprehend the amount of knowledge that is routinely discovered and used by competitive market processes.