Russell Roberts's Blog, page 382

Quotation of the Day…

(Don Boudreaux)

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… is from page 136 of George Will’s important 2019 book, The Conservative Sensibility:

The administrative state, so inimical to conservatism’s aspiration for government limited by a constitutional structure of rival branches, depends on something conservatives too frequently and reflexively praise. It depends on judicial deference to the majoritarian institutions of Congress, even when Congress delegates its legislative powers to unaccountable agencies.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 305 of 2006 Nobel laureate Edmund Phelps’s 2013 book, Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change:

These visions of an alternative to the modern-capitalist economy all evoke magical thinking – a belief that for any worthy goal there is always a way.

DBx: Yep. Politics is a setting seething with mysticism. It encourages detachment from – even denial of – reality. And ironically, many of those persons who are most prone to fall for the absurd fantasies peddled by politicians and intellectuals go about publicly boasting of their commitment to science and reason.

Again Asking: If They’re So Smart….

(Don Boudreaux)

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Here’s another letter to Scott Rose:

Mr. Rose:

I am indeed serious when I write that politicians and pundits who truly believe that large numbers of Americans are underpaid – that is, paid wages below the value of what they produce for their employers – should stop preaching about this problem and instead do something about it by launching their own private firms. Underpaid workers are underpriced assets that creative, profit-seeking entrepreneurs can bid for. If America really is swollen with legions of such workers, these entrepreneurs will earn profits by productively employing these workers while these workers will enjoy higher wages.

But you protest my “superficial advice.” You assert that “its hard to start businesses from scratch which will hire enough workers to make a difference.”

Not so.

According to the Census bureau, in 2015-2017 the number of new businesses – ones projected to have payrolls – that formed each quarter in the U.S. was about 75,000. (And in 2015, for example, startup firms created 2.5 million jobs.) Surely individuals who are clever enough to win high political office or to launch thinktanks and write papers on market failure are at least as smart as are any of the tens of thousands of people who routinely launch new businesses.

But if, as you suggest, these politicians and pundits are not up to the task regularly performed by hordes of other men and women – if they’re unable peacefully even to persuade more-competent persons to act on their profit-promising information about the availability of underpaid workers – we should fear government policy designed to implement their ideas coercively.

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

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 (reference deleted):

Another indispensable feature of market economies, which no socialist economy has yet been able to replace, is the fact that market competition is an ongoing trial-and-error process, coupled with extensive feedback mechanisms. We do not know, from the outset, how to organise a successful enterprise or industry (let alone an entire economy). We find out by trying lots of different things, with most of them failing, but some succeeding, and the latter ones getting more widely adopted.

DBx: Advocates of industrial policy, along with other protectionists, are blind to this reality. They mistakenly suppose that, because they can conjure in their imaginations a lovely state of the world, that government can create this lovely state if only it is given enough power to coercively override the peaceful choices of millions of ordinary men and women.

Do American Workers Need Labor Unions?

(Don Boudreaux)

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In my latest column for AIER I do my best to debunk the economically uninformed notion that American workers need labor unions and collective bargaining to ensure that they are paid fairly. Here’s my conclusion:

Proponents of labor unions correctly insist that workers need bargaining power to ensure that they are paid fairly. But these proponents incorrectly believe that individual workers have no bargaining power. In nearly all cases in fact, each worker’s freedom to quit a job and to search for and to accept another job – combined with employers’ freedom to employ whomever they choose – gives to each worker the bargaining power necessary to keep his or her pay equal to the value of his or her productivity.

In short, the surest source of bargaining power for workers is not collective bargaining but, rather, other and better employment options. Therefore, if America really is filled with underpaid workers, before letting politicians and pundits who express this belief put other people’s money where their mouths are, let them put their money where their mouths are by launching new businesses that can profitably employ today’s underpaid workers. If these politicians and pundits are correct, they have nothing to lose and – along with American workers – everything to gain.

Pittsburgh Tribune-Review: “Puzzling complexity”

(Don Boudreaux)

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In the June 16th, 2010, edition of the Pittsburgh Tribune-Review I used a jigsaw puzzle to explain the unplanned formation of complex and productive economic order. You can read my column beneath the fold.

(more…)

Some Links

(Don Boudreaux)

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The Wall Street Journal editors calmly but convincingly explain why we Americans should be very much disturbed by Joe Biden’s recent declaration that he would shut down the economy if so advised by “the scientists.” A slice:

Ah, the resort to scientists. But which scientists? The truth is that the experts have been wrong numerous times in this pandemic, and they often disagree. They first said masks don’t help but now say they do. They said ventilators were vital but soon learned other clinical methods worked better. Most of all, they counseled strict lockdowns, but we’ve learned the hard way that shutting down the country can be more costly than the virus.

Jeffrey Tucker argues that older Americans should oppose the covid lockdowns.

Megan McArdle eloquently unpacks the economic insanity in California’s AB5 legislation – the one that forces employers in that state to reclassify many independent contractors as “employees.” A slice:

When AB5 was debated, its backers asserted that it would benefit gig workers, because it would mean that many would suddenly have secure jobs with — cue the trumpets — employee benefits! They apparently didn’t realize that not everybody wanted such jobs; that some valued the flexibility of working only when they wanted to. Perhaps they did not know many companies generally can’t offer such flexibility to employees who are entitled to all manner of benefits, from mandated breaks and a comfortable chair, to paid sick leave and health insurance. Which is why employers of hourly workers require regular shifts instead of saying, “Show up when you have a few minutes to spare.”

“The Politicization of the Post Office was Inevitable” – so explains Vincent Geloso.

Also writing on the U.S. post office is Eric Boehm.

David Henderson reviews some important principles of capital-gains taxation.

Juliette Sellgren talks with my Mercatus Center colleague Adam Thierer about innovation.

Quotation of the Day…

(Don Boudreaux)

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… is from page 216 of Virginia Postrel’s superb and still-relevant 1998 book, The Future and Its Enemies:

David Hume was right: Reason has always been the slave of the passions. That makes the cultivation of life-enhancing moral sentiments, like the cultivation of better crops, both an exercise of artifice and an essential goal of civilization.

Scott Atlas on the Irrationality of the Response to Covid

(Don Boudreaux)

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Watch. This. Video. It is the single best video – and one of the single best sources of information of any sort – that I’ve encountered about covid and people’s reaction to it. Although more than 50 minutes long, watching it is well worth your time.

This video was taped on June 18th, but I learned of it only a couple of days ago (from Tulane University philosopher Eric Mack – thank you, Eric, so much!). It’s produced for the Hoover Institution’s Uncommon Knowledge project (with host Peter Robinson).

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 206 of my colleague Bryan Caplan’s great 2007 book, The Myth of the Rational Voter (original emphasis):

In common-pool situations, economists usually fear the worst. Heedless of the aggregate effect, people will foul the waters. The main reason that they are complacent about democracy, I suspect, is that the pollution is hard to visualize. It is not run-of-the-mill physical pollution. Democracy suffers from a more abstract externality: the mental pollution of systematically biased beliefs.

DBx: In a democracy in which government has broken loose of many of the constitutional restraints that are necessary to keep the private – the voluntary – sphere reasonably free of state intrusion, two kinds of negative externalities are routine. First, voters in the majority impose their preferences on non-consenting others. Second, because each voter rationally understands that his or her vote will have no significant impact on the outcome of any election, each voter, being rational, has inadequate incentives to gather knowledge about what’s at stake and to rationally assess the knowledge that he or she does have.

Turning to government to ‘correct’ collective-action problems that are believed to arise in markets and in other private settings is like hiring a serial child-molester as a baby-sitter.