Russell Roberts's Blog, page 397
July 8, 2020
Bonus Quotation of the Day…
… is from pages 74-75 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:
Politicians and policy makers insistently raise the alarm. They say that they are fixing those grievous imperfections caused by natural liberty, fixing the “problems” that every generation of politicians discerns anew. (The vocabulary of social “problems,” and their solution with “policies,” by the way, grew up in the 19th century along with New Liberalism and socialism.) Yet we wonder how the politicians and policy makers discern the problems, and opportunities, and how they know in the longer view better than stock markets specialized in making such judgments, and risking personal wealth in making them? Why would someone with no skin the game do better than people who have plenty of such skin, being holders of stock in a market in which hour by hour the future is forecasted? We wonder.
DBx: I, too, wonder. Protectionists and industrial-policy advocates talk blithely and incessantly about using government coercion to arrange for this happier outcome and to prevent that deviation from an imagined ideal. But never, ever do they reveal just how government officials will acquire the information necessary to outperform competitive market processes.
…..
Of course, protectionists and industrial-policy advocates are careful never to use the word “coercion.” Doing so would raise alarms about the true nature of their project. They wish to pass off their schemes as gentle assistance offered by the intelligent, noble, and wise few to the stupid, grasping, and imprudent many. In fact, protectionists and industrial-policy advocates get defensive when someone, such as Mike Munger, pulls back the curtain to expose the reality of their schemes. But this reality – the reality that behind every tariff and every subsidy are loaded, pointed guns operated at the command of flesh-and-blood human beings – cannot, in the end, be plausibly denied.
Pittsburgh Tribune-Review: “Wealth from wreckage?”
In my column for the January 27th, 2010, edition of the Pittsburgh Tribune-Review I wrote about wrecking balls and what I call “the Prosperity Tower.” You can read my column beneath the fold.
Some Links
The jobs argument is the last refuge of a desperate appropriator. Our last national experiment with creating jobs through massive infrastructure spending—the American Recovery and Reinvestment Act—was a flop when it came to mitigating unemployment. The academic literature on this statute and its effects shows that claims about massive job creation from infrastructure spending should be taken with a healthy serving of salt.
Infrastructure spending should be evaluated on the merits of the infrastructure being built or maintained—not on the jobs created. After all, as Milton Friedman pointed out, digging a canal with spoons instead of shovels creates lots of jobs—but not much infrastructure. Moreover, the Moving Forward Act strengthens “Buy American” provisions: good for populist politics, bad for creating value for taxpayers.
Jeffrey Tucker recommends Albert Camus’s 1947 book, The Plague.
Sarah Skwire finds economic insight in places where many people wrongly suppose it doesn’t exist.
The moral high ground cannot be retained by those who abandon it: Holman Jenkins rightly calls out the Washington Post for outright lying about the contents of a recent Trump speech. Here are Jenkins’s opening few paragraphs:
Every American, regardless of how he or she feels about Donald Trump, should read his July 3 speech at Mount Rushmore and then the Washington Post account of the speech by Robert Costa and Philip Rucker. The Post account begins: “President Trump’s unyielding push to preserve Confederate symbols and the legacy of white domination, crystallized by his harsh denunciation of the racial justice movement Friday night at Mount Rushmore . . .”
Except that Mr. Trump made no reference to the Confederacy or any of its symbols. His only reference to the Civil War was to Abraham Lincoln and the abolition of slavery as a fulfillment of the American Revolution.
Sen. Tammy Duckworth, as many commentators on the right noted, also lied when she said Mr. Trump “spent all his time talking about dead traitors.” He mentioned not a single leader or champion of the Confederacy.
In its own account, though hardly friendly to Mr. Trump, the New York Times went out of its way to counter these rampant distortions, reporting that Mr. Trump “avoided references . . . to the symbols of the Confederacy that have been a target of many protests.”
Acting as communists do, the leaders of China’s Communist Party, which is the bone and sinew of that nation’s Leninist party-state, have, less than halfway through their commitment, shredded the agreement to respect Hong Kong’s autonomy until 2047. The new law mocks the rule of law, which requires sufficient specificity to give those subject to the law due notice of what is proscribed or prohibited. The new law stipulates four major offenses: separatism, subversion, terrorism and collusion with foreign governments. These will be defined post facto, in capricious enforcements against those whose speech is not chilled by the law’s menacing vagueness. The “law” authorizing the committee to operate secretly was released at 11 p.m. Tuesday, probably to deter demonstrations on Wednesday, which was the anniversary of the 1997 handover.
Quotation of the Day…
… is from pages 11-12 of the 1969 Arlington House edition of Ludwig von Mises’s 1944 Yale University Press book, Omnipotent Government: The Rise of the Total State and Total War (available free-of-charge on-line here):
Every doctrine that has recourse to the police power or to other methods of violence or threat for its protection reveals its inner weakness.
DBx: Who can doubt the truth of this observation? Any person or group who threatens with physical violence those who offer challenging words is a person or group whose ideas and ideals are not worth defending. This fact is so regardless of the brilliance of the superficial gleam emitted by those ideas and ideals.
July 7, 2020
1776…
… was quite a year. In this essay for the Independent Institute I applaud the words of Thomas Jefferson and of Adam Smith. A slice:
It’s often said that America’s founders had “faith” in freedom. But because of Smith’s work, a better term is confidence in freedom. Smith explained how private property rights, freedom of contract, economic competition, and market prices peacefully direct each individual who is pursuing his own goals to achieve those goals only by helping countless other individuals to achieve their goals. The result is a beautiful process of mutual assistance.
In one of Smith’s most quoted passages, he observed that “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.” Businesses in free markets prosper only by satisfying consumers – and the more that businesses satisfy consumers, the more those businesses, their workers, and their customers will prosper.
And while Smith was a realist who knew that markets always work imperfectly, he argued that in most cases government intervention makes matters worse. Even if politicians were miraculously to become immune to pressure from special-interest groups, their knowledge of how best to use scarce resources is far too scant to enable them, or the bureaucrats whom they employ, to improve upon market outcomes.
In 2020, alas, this deep wisdom from 1776 is largely lost. Politicians and pundits today, from left to right, see ordinary men and women as hapless victims of forces beyond their control. These pathetic creatures, it is assumed, need not protection of their rights but, instead, provision of their sustenance.
Bonus Quotation of the Day…
… is from page 188 of Paul Johnson’s 1991 volume, The Birth of the Modern: World Society 1815-1830:
The Industrial Revolution, which first developed its irresistible momentum in the 1780s when [George] Stephenson was a little boy, is often presented as a time of horror for working men. In fact it was the age, above all, in history of matchless opportunities for penniless men with powerful brains and imaginations, and it is astonishing how quickly they came to the fore.
Work is a Means, Not an End
Here’s a letter to the Wall Street Journal:
Editor:
H.R. McMaster and Pablo Tortolero applaud the U.S. Mexico Canada trade agreement (USMCA) for, among other predicted consequences, its prospect of “returning manufacturing jobs to North America from China” (“The North American Trade Dividend,” July 7). This applause is unwarranted, for two reasons.
First, the decline in American manufacturing employment is due to rising worker productivity caused by improved techniques of production. Were this decline caused chiefly by Americans’ importation of goods from China, America would have experienced a corresponding decrease in U.S. manufacturing output. But no such decrease occurred. The real value of U.S. manufacturing output rose steadily after China joined the WTO in 2001 before falling as a result of the Great Recession. Since then (until Trump’s trade war and covid) it has increased (if more slowly than earlier).
Second and more fundamentally, trade should not be judged by its prospects of “returning jobs” to the home country. Indeed, a central point of trade is to destroy particular jobs (as it creates others). With trade, we acquire from abroad goods and services by using less labor and other resources than we would use to produce those same goods and services for ourselves. And so if the USMCA really will return certain jobs to the U.S., that outcome is cause for lamentation rather than celebration.
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
…..
To everyone who applauds trade policies that “return” jobs, I propose that you rid your homes of modern plumbing. You’ll thereby, on your own theory, enrich yourselves by once again having to empty chamber pots.
Some Links
“I betray no secret when I report that the modern litigation drive against the fossil-fuel industry is oriented overwhelmingly toward the age-old money chase rather than a concern with environmental improvement.” – So begins this new piece by Ben Zycher.
Art Carden rightly warns against mistaken perceptions about the domain of experts. On this same topic is much of Juliette Sellgren’s podcast with Peter Van Doren. And also on this topic is Pierre Lemieux.
Farmer Washington didn’t limit himself to growing wheat. In an early example of vertical integration, the master of Mount Vernon not only raised quantities of grain but ground it into flour in his own state-of-the-art automated grist mill; packaged it in sacks marked with his “G. Washington” brand; and marketed it throughout North America, the Caribbean and Britain. To secure control of the product from seed to sale, Washington made sure much of the flour left Mount Vernon’s wharf aboard his own oceangoing transports. Buyers soon learned that “G. Washington” assured consistent quality.
Shikha Dalmia warns of the latest unethical move by Trump against immigrants.
Quotation of the Day…
… is from page 308 of Matt Ridley’s splendid new (2020) book, How Innovation Works: And Why It Flourishes in Freedom:
It pays not to underestimate self-deception and noble-cause corruption: the tendency to believe that a good cause justifies any means.
July 6, 2020
An Open Letter to Zach Graves
Mr. Graves:
Presumably as a means of challenging those who, like myself, oppose industrial policy, you ask on Twitter:
Will there be a point where fiscal conservatives notice companies like Tesla and SpaceX are hugely successful and embrace @MazzucatoM-ism?
You misunderstand the core economic argument against industrial policy. This argument is not that government is incapable of coercively directing enough resources to private companies in order to enable favored firms to thrive better than they would in a free market.
Instead, this core economic argument starts with the reality that government officials who carry out industrial policy cannot possibly know which industries and firms are destroyed by their interventions. (Resources directed to SpaceX don’t fall from space; they must come from other economic activities.) This economic argument then draws attention to the fact that industrial policy intentionally overrides market prices, profits, and losses, which are the chief sources of information about what particular uses of resources are most likely to best satisfy consumer desires. To choose to have industrial policy, therefore, is to choose to economically fly blind. This choice is unwise.
Of course government can arrange for particular companies that would wither in a free market to thrive when doused in subsidies and coddled by protective tariffs. But this achievement does not signal what you take it to signal. The thriving of the likes of Tesla no more means that U.S. industrial policy gives Americans greater access to goods and services than did the thriving of Pravda mean that Soviet press policy gave Russians greater access to the news and truth. Quite the opposite.
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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