Russell Roberts's Blog, page 40

Quotation of the Day…

(Don Boudreaux)

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… is from page 2 of Jonathan Israel’s 2017 book, The Expanding Blaze: How the American Revolution Ignited the World, 1775-1848:

The [American] Revolution commenced the demolition of the early modern hierarchical world of kings, aristocracy, serfdom, slavery, and mercantilist colonial empires, initiating its slow, complex refashioning into the basic format of modernity.

DBx: Yes. And note how this assessment by Israel is rather at odds with the assertion that the American Revolution was chiefly about the maintenance of slavery.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is this comment by my emeritus Nobel-laureate colleague, Vernon Smith (pictured here), on my Facebook post where I shared some of Great Barrington Declaration co-author Martin Kulldorff’s recent testimony before the House Select Subcommittee on the Coronavirus Pandemic:

The House Select Committee needs thorough training in Opportunity Cost. But that is where you find better decisions, not necessarily more votes.

Some Links

(Don Boudreaux)

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Mike Munger – reviewing some history surrounding Milton Friedman’s and George Stigler’s great 1946 pamphlet, Roofs or Ceilings? – persuasively advocates “directionalist” (rather than “destinationist”) libertarianism.

Dave Seminara, writing in the Wall Street Journal, reports on a new study that finds that the rise of wokeism in corporate America is being driven by middle managers. A slice:

A new paper by researchers from Baylor University and the Copenhagen Business School helps shed light on why.

Wokeness, the authors conclude, typically originates from power-seeking middle managers looking to carve out areas of responsibility that enhance their job security. Think of career fields that tend to attract more Democrats, like the human-resource bureaucrats who manage diversity-training programs or advertising teams that design social-justice marketing campaigns. Lower-status employees are somewhat expendable to a giant company, but rather less so if they specialize in wokeness. The diversity, equity and inclusion jargon alone makes such initiatives “difficult for outsiders, including top managers, to understand” and thus to “challenge,” the study explains. The result is that middle-management bureaucrats play an “outsized” role in spreading this leftwing ideology to corporate culture.

After critically detailing Trump’s bonkers pronouncements on trade, Ramesh Ponnuru concludes that, while the economics of protectionism are indeed bonkers, the politics of protectionism are brilliant. A slice:

Biden prides himself, however, on maintaining solidarity with labor unions, and they remain keen on restrictions on trade. He also wants to avoid being called soft on China. Both parties seem to have decided that protectionism appeals to a crucial group of up-for-grabs voters — White people from industrial states without college degrees — and is therefore a winning rhetorical stance.

George Leef argues that the legal arguments against Biden’s student-loan ‘forgiveness’ are “too strong for the Court to ignore.”

Matthew Crawford is angered by “the corruption of California.” A slice:

I grew up in California, moved away in the early Nineties, and moved back in 2019. One of the new things I noticed upon my return was small signs stuck to the side of a car, or printed on posterboard and erected on a street corner, advertising “DMV services”. After some intercourse with a few of these, always conducted in halting, heavily accented English, I came to understand that these entrepreneurs are “fixers”, a species that most Americans are unacquainted with. If you want to get something done in the developing world, you often need to engage the services of a fixer. This is someone who has connections in the bureaucracy, often by virtue of kinship. Being a naïve visitor without connections, you couldn’t possibly know whom to bribe, how to approach them, or what forms must be observed. These things must be accomplished with delicacy. You, brainwashed to believe in the Weberian version of bureaucracy as impersonal rationality, are too naive to navigate a real one in most parts of the world. Too European.

Ben Zycher rightly complains that “Biden’s Interior Department keeps dragging its feet on offshore leasing.”

“NYC police want shoppers to remove masks before entering stores.” [DBx: Covidians truly made the world topsy-turvy. I recall just how strange I felt when, sometime in 2021, I had banking business that required an actual physical visit to a branch of my bank. I was admitted into the bank only on condition that I wear a mask. My thought at the time was that, had I entered the bank in this manner before March 2020, I would have been immediately accosted by armed guards and likely slammed to the ground – or worse.]

Paul Gigot talks with Marty Makary about the origins of the covid virus.

Covidians in power were deeply depraved.

Decrying the politics of fear, Brendan O’Neill explains that “[t]he elites’ doom-mongering over Covid was an insult to our intelligence and our rights.” Two slices:

So now we know, they did seek to terrorise us. They did set out to scare us into compliance. It’s there in black and white in the latest Matt Hancock WhatsApp messages revealed by the Daily Telegraph as part of its Lockdown Files. We should ‘frighten the pants off everyone with the new [Covid] strain’, Hancock said to his media adviser, Damon Poole. ‘Yep that’s what will get proper behaviour change’, Poole chillingly replied. And then came what must be one of the most dire and cynical utterances made by a public figure in recent times. ‘When do we deploy the new variant’, Hancock asked.

When do we deploy the new variant. They were openly talking about using information as a weapon, about ‘deploying’ horror stories on Covid to petrify the public into social obedience. This unnerving chat about manipulating the masses took place in December 2020 when the Kent strain of Covid-19 was spreading. Worried that Brits were tiring of abiding by social-distancing rules, Hancock, then health secretary, looked to his team for ideas on how to re-engineer us all back into a state of unquestioning deference. And their big idea was fear. Fear would be ‘vital’, they agreed, in making us bend the knee once more to the ideology of lockdown.

It is the breezy nature of the conversation that feels most disquieting. It is testament to how much the power had gone to their heads that they could so blithely chat about spreading dread among the people. It is a sign of how imperious the political class became during the pandemic years that they could so casually talk about dropping a bomb of fear on what they haughtily viewed as the unruly populace. We were no longer their fellow citizens, to be engaged with as sensible, free-thinking adults. We were marionettes whose strings had to be pulled; child-like creatures to be swayed this way and that by horror stories from on high. As then cabinet secretary Simon Case said to Hancock in January 2021, ‘ramping up messaging’ will be the only way to ensure lockdown compliance – ‘the fear / guilt factor [is] vital’, he said.

…..

Fear has consequences. It is a debilitating, demoralising force. Often it is used – deployed – for precisely that reason: to induce apprehension among the public in the hope that we’ll be more likely to do as we’re told. We see this in everything from the politics of ‘nudge’ to the ceaseless doom-mongering about the climate apocalypse, all of which circumvents normal democratic politics in favour of socially re-engineering us to think and behave in the ‘correct’ way. ‘Proper behaviour change’, as they tyrannically call it.

The politics of fear is the lowest form of politics. In fact, it isn’t really politics at all. It is the antithesis of democracy. Where democracy entails reasoned discussion, the politics of fear prefers emotional manipulation. Where democracy treats us as citizens whose views matter – or it is meant to, at least – the deployment of fear reduces us to morally inanimate matter to be ‘nudged’ and reshaped and improved by those who know better. And where democracy involves the coming together of citizens to talk and make decisions, the climate of fear atomises us, alienates us, encourages us to dread our fellow man, whose spittle might be diseased and whose daily behaviour might be contributing to the coming heat death of our planet. Democracy requires solidarity; the culture of fear cannot abide solidarity.

Quotation of the Day…

(Don Boudreaux)

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… is from page 268 of Thomas Sowell’s 1999 book, Barbarians Inside the Gates:

Environmentalism is not about the environment. It is about ego trips for busy bodies.

DBx: Pictured here is one such busy body.

Statement of Commitment to Academic Freedom and to Intellectual Merit

(Don Boudreaux)

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I thank my GMU Econ colleague Dan Klein for taking the lead in drafting this Statement of Commitment to Academic Freedom and to Intellectual Merit, which is signed by 19 of my GMU Econ colleagues, current and emeritus. (Also sharing this Statement at their blogs are Bryan Caplan, Robin Hanson, and Alex Tabarrok.)

The undersigned members of the GMU Department of Economics express their commitment to academic freedom and to intellectual merit.

~~~

American universities have professed allegiance to two ideals. First, the ideal of academic freedom – the right of students and faculty to express any idea in speech or writing, without fear of university punishment, and secure in the knowledge that the university will protect dissenters from threats and violence on campus.

Second, the ideal of intellectual merit – the right and duty of academic departments to hire and promote the most brilliant, creative, and productive faculty in their fields, and admit the most intellectually promising students, without pressures from the administration.

These ideals are the cornerstones of liberal education. They protect faculty and students who hold views unpopular on university campuses.   Academic freedom protects existing students and faculty who dissent from current dominant academic opinion and ideology.  No matter how unpopular their views, they know the university will protect them. As stated in the University of Chicago Statement on freedom of expression and as quoted in GMU’s “Free Speech at Mason” Statement:

[We must hold a fundamental commitment to] the principle that debate or deliberation may not be suppressed because the ideas put forth are thought by some or even by most members of the University community to be offensive, unwise, immoral, or wrong-headed.

Intellectual merit protects prospective students and faculty who speak and write against current dominant viewpoints.  No matter how unpopular their views, they know that university administration will not obstruct or prejudice their admission, hiring, or promotion.

Recently, both of these ideals have come under attack.  Pressure for conformity has intensified and universities have increasingly interfered with departments’ personnel decisions. For example, at some universities, one of the more egregious new practices is the requiring of written “diversity” statements by prospective students, staff, or faculty, then used to discriminate among candidates, often by quarters of the university with interests other than those of the department or unit. Such methods recall arrogations of the past, such as The Levering Act of 1950, used against radicals.

We strongly believe the attacks on academic freedom and intellectual merit are deeply mistaken.  The classic rationales in favor of these ideals are sound. To protect them, viewpoint diversity must be celebrated and academic departments must maintain their ability to select, hire, and promote students and personnel based on intellectual merit. We insist that the degree of institutional autonomy that the GMU Department of Economics has traditionally enjoyed is vital to the health of viewpoint diversity not only within the university but within the academy writ large.

It is vital that every department in a university enjoys independence, so it can dare to be different and keep viewpoint diversity alive. George Mason University has excelled in supporting viewpoint diversity with a variety of diverse departments, centers and organizations. Viewpoint diversity at George Mason has benefited the university, the United States, and the wider intellectual world.

Indeed, some of the Department’s chief contributions have taught that all forms of authority can exert power to excess, and that guarding against such excess calls for the very ideals affirmed here, respect for dissent and intellectual merit.

We, the undersigned members of the GMU Department of Economics, look forward to continuing our independence to do good economics according to our judgment, guided by the ideals of academic freedom and intellectual merit.

Signed by the following GMU Department of Economics faculty (full-time & emeritus):

1.      Jonathan P. Beauchamp

2.      James T. Bennett

3.      Donald J. Boudreaux

4.      Bryan D. Caplan

5.      Vincent J. Geloso

6.      Timothy Groseclose

7.      Robin D. Hanson

8.      Garett Jones

9.      Daniel B. Klein

10.  Mark Koyama

11.  David M. Levy

12.  Cesar A. Martinelli

13.  John V.C. Nye

14.  Thomas C. Rustici

15.  Vernon L. Smith

16.  Alex T. Tabarrok

17.  Karen I. Vaughn

18.  Richard E. Wagner

19.  Lawrence H. White

Some Links

(Don Boudreaux)

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My former Mercatus Center colleague Adam Thierer has this letter in today’s Wall Street Journal:

If there is one timeless truth about industrial policy, it is that handouts always come with handcuffs. As your editorial “Biden’s New Industrial Social Policy” (March 1) notes, it is almost impossible to pass a massive industrial policy bill without extensive political meddling coming into play.

Congress had a chance to minimize some of that damage with a more narrowly drawn effort focused on basic R&D, which is somewhat less susceptible to the sort of gaming now being imposed by the Biden administration. Unfortunately, politics as usual prevailed and Congress made the Chips Act into a political Christmas tree with a present underneath for every special interest.

Sen. John Kennedy (R., La.) described an early version of the measure as an “orgy of spending porn.” Hundreds of billions of dollars and thousands of pages later, the political demands that will make the effort even more costly and inefficient over time are now arriving. The only winners will be those vacuuming up the political largess. The losers, as always, will be the taxpayers.

On top of all the waste, no one bothered asking how American competitiveness was going to be enhanced by adding even more to a $31 trillion debt—more than $1 trillion of it held by China—and expanding the federal regulatory leviathan through technocratic market meddling and industrial micromanagement. We won’t beat China by becoming China.

Adam Thierer
Senior fellow, R Street Institute
Washington

Robert Thornett writes wisely about equality, inequality, and wokeism. A slice:

Citizens of democracies are therefore torn by the simultaneous pursuit of both equality and inequality. On one hand, they are unrelenting in their pursuit of social equality, which removes the barriers of class and thus unlocks energy propelling “restless activity” across society. But on the other hand, universal competition drives citizens to struggle to pursue social distinction, to stand out from the pack, to be unequal. And the more equal a society becomes, the more energy citizens must put into standing out.

Amid the universal competition of democracy, wokeism is a misguided attempt to achieve these simultaneous twin aims of social equality and social distinction. On one hand, wokeism’s solution to the difficulty of distinguishing oneself amid universal competition is not to help citizens better contribute to society and thus gain recognition, but to change the criteria for honors from social contributions to unearned group markers, like certain “oppressed” races and genders. Put differently, wokeism co-opts the trophies and medals that mark distinction in a competitive society, but it awards them without regard for the criteria that ensured that competition is useful and productive for society. Thus, wokeism leaves society incompetent and uncompetitive and renders its trophies meaningless.

Reason‘s Eric Boehm wonders what chiefly motivates Ron DeSantis.

David Henderson’s new biographical entry, in his invaluable Concise Encyclopedia of Economics, of the late Mancur Olson is now on-line.

Bartlett’s new edition – to quote David Boaz – “has a decided ideological bent.”

The Wall Street Journal notably quotes from some of the Telegraph‘s Lockdown Files – files that show just how deceptive and tyrannical – I would say downright evil – were the covidians in Britain:

From a March 4 report by London’s Daily Telegraph:

The Lockdown Files—more than 100,000 WhatsApp messages sent between ministers, officials and others—show how the Government used scare tactics to force compliance and push through lockdowns. . . .

Simon Case, the Cabinet Secretary, said that “the fear/ guilt factor” was “vital” in “ramping up the messaging” during the third national lockdown in Jan 2021.

The previous month, Matt Hancock, the then health secretary, appeared to suggest in one message that a new strain of Covid . . . would be helpful in preparing the ground for the looming lockdown. . . . In a WhatsApp conversation on Dec 13, obtained by The Telegraph, Damon Poole—one of Mr Hancock’s media advisers—informed his boss that Tory MPs were “furious already about the prospect” of stricter Covid measures and suggested “we can roll pitch with the new strain”.

Mr Hancock then replied: “We frighten the pants off everyone with the new strain.”

Mr Poole agreed, saying: “Yep that’s what will get proper bahviour [sic] change.”

Nick Dixon reports on the mainstream media’s ridiculous attempts to do damage control in light of the release of the Lockdown Files.

“Matt Hancock rejected advice to cut Covid isolation as it would ‘imply we’ve been wrong’.”

Fraser Nelson writes in the Spectator on the Lockdown Files. A slice:

My takeaway from spending all that time with the Lockdown Files was not the stories – extraordinary and appalling though they are – but by what we do not see. Mainly, where are the voices of caution in the fear messaging? Where is the person in the room saying: hang on, what about the unintended consequences? We know that Rishi Sunak was deeply alarmed by this, thinking no one else in Europe was doing such fear messaging –and this would make the economy harder to revive. Then there are the vulnerable people, who really were scared to death. Today’s Sunday Telegraph interviews the mother of a 15-year-old boy saying he was so scared of Covid that he came to fear the air itself. She says she tried to shield him from the news, but the gloom was everywhere. Tragically, he took his own life.

David Zweig tweets: (HT Jay Bhattacharya)

Govt officials conducted a multi-faceted surveillance program–including stakeouts and tracking cellular mobility data–to spy on churchgoers who broke Covid rules

An extraordinary story with wide-ranging implications

Read my explosive investigative report

More On American Workers’ Opportunity Costs, On Wages, and On the Harms of Protectionism

(Don Boudreaux)

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Cafe Hayek patron Mark Camp, after reading this earlier post (“An Open Letter to a Protectionist“), e-mailed me to ask how we know it to be true – as I said in that post – “That [the fact that low-wage] foreign workers can perform this task [of final assembly of the laptops we buy] at a lower cost than can we Americans means that we Americans have better job alternatives than do those foreign workers.”

Here’s the reply that I e-mailed as an answer to Mark’s sensible question:

Because otherwise businesses would find it worthwhile [even absent protectionist measures in the U.S.] to employ Americans to do those tasks.

If American workers’ alternatives were not better than those of foreign workers, they – American workers – would be willing to perform those tasks at wages equal to or lower than are the wages demanded by foreign workers to perform those tasks. The fact that American workers demand wages too high to make it profitable for businesses to employ them to perform those tasks means that American workers’ alternative employment options are superior.

Don

Mark wrote in response – again, quite understandably – a second e-mail, wondering why I apparently believe that protectionism benefits no one. I assured Mark that I hold no such belief, but also that I understand his confusion. My original post and my e-mail were insufficiently clear.

I share below a slightly modified version of my follow-on e-mail to Mark in response to his second e-mail:

Mr. Camp,

I owe you an apology for being unclear – as well as for the length of what follows.

You’re absolutely correct that protectionism yields net benefits to the particular producer groups, including the workers, who are protected. That these benefits are lower than are the costs that protectionism imposes on the citizens of the country as a whole (not to mention on the larger, global economy) does not make the benefits received by protected producers any less real.

The number of workers and other inputs used in an unprotected industry (say, steel) is greater the greater is the volume of output per period of time that that industry has a comparative advantage at producing. Likewise, the number of workers and other inputs used in a protected industry is greater than would be the number of workers and inputs used in that industry without protection. But only in the former case – the case without protection – are all the workers and inputs used in ways that maximize (using language from Adam Smith) the wealth of the nation. In the latter case, some workers and inputs are used inefficiently – that is, not in ways that maximize the their contribution to the value of total output. (From here on in I’ll write only about “workers,” but recognize that workers aren’t the only inputs.)

I’m just making up numbers here for purposes of illustration, but suppose that the U.S. has a comparative advantage at annually producing a maximum of 10 tons of steel. By the nature of the case, for U.S.-based factories to produce 11 tons would be too costly. The reason is that the higher wages that would have to be paid to attract more workers into steel production (in order to produce the additional ton of steel) would not be fully covered by the revenues earned from the sale of that additional ton. So steel producers don’t employ these additional workers.

And the reason those wages would be too high is that those workers can sell their labor services to other producers (say, of farm equipment and lumber) at wages higher than steel producers can afford to pay in order to employ those workers to produce the 11th ton of steel.

If – contrary to fact – the wages paid by other employers were lower, the steel producers could then afford to employ those workers to produce the additional ton of steel. In this case, the U.S. would then have a comparative advantage at producing 11, and not just 10, tons of steel. So the fact that those additional workers aren’t employed to produce steel implies that their opportunity costs of producing other outputs – farm equipment and lumber – are too high. The wages paid to these workers by producers of farm equipment and lumber are greater than are the wages that steel producers are willing to pay in order to employ these workers to produce an 11th ton of steel.

Put another way, these additional workers have a comparative advantage at producing whatever quantities of farm equipment and lumber they are employed to produce and, hence, a comparative disadvantage at producing the extra ton of steel. It is these workers’ comparative advantage at producing farm equipment and lumber that ‘gives’ them a comparative disadvantage at producing the extra ton of steel.

Now let a tariff be imposed on steel imports. As a result, the price of steel sold in the U.S. will rise. (The tariff will achieve its proponents’ goal only if the price of steel rises.) Indeed, the price of steel will probably rise high enough to make it profitable for steel producers to raise the wages they pay in order to entice more workers into steel production – to produce an extra ton of steel – and away from producing farm equipment and lumber. U.S. steel producers will continue to produce 11, rather than just 10, tons of steel annually for as long as this tariff is in place. Owners of U.S.-based steel factories and steel workers obviously benefit from this tariff, even though the costs of this tariff to Americans at large are greater than these benefits.

When the tariff is removed – and assuming that nothing else has changed – the price of steel sold in the U.S. falls; it returns to its previous, lower level. U.S. steel producers would continue to produce 11 tons of steel only if workers agree to work at lower wages – specifically, wages low enough to justify the production and sale of 11 (rather than 10) tons of steel annually. But wages paid by producers of farm equipment and lumber beckon. Workers will refuse to take the pay cut required to keep them employed in steel factories for the production of 11 tons annually. Workers will pursue the higher wages paid by producers of farm equipment and lumber.

The wages paid by producers of farm equipment and lumber are not as high as were the wages paid by protected steel producers – which is why protected steel producers were able to entice these workers away from producing farm equipment and lumber. But the wages paid by producers of farm equipment and lumber are higher than are the wages that the now-unprotected steel producers can afford to pay if these producers were to continue to produce 11 tons annually.

So as steel-worker wages fall, workers will begin to leave their steel-making jobs for these other jobs. Because we’re assuming that nothing has changed other than the removal of the tariff, at the now-lower price of steel, U.S. steel producers will continue, as they did before the imposition of the tariff, to find it profitable to pay wages sufficiently high to attract enough workers to produce 10 tons annually (but not more). The opportunities available in other industries to workers who remain in (unprotected) steel production pay wages lower than are the wages paid by (unprotected) steel producers – so these workers remain in steel production even though their wages are now lower than were their wages when the tariff was in place.

In contrast, the additional workers used to produce the 11th ton during the duration of the tariff find that the wages they can earn elsewhere – by working to produce farm equipment and lumber – are higher than are the wages they’d have to accept in order to entice steel producers to continue to employ them.

In the above account, the workers who were lucky enough to be employed by protected steel producers enjoyed being paid wages higher than they would have earned in the absence of the tariff. They did indeed benefit from the tariff (and they ‘lose’ when the tariff is abolished). But all other Americans were net losers from the tariff, not only because the steel tariff reduced the abundance of steel for use in America, but also because some workers were diverted away from producing other outputs – namely, farm equipment and lumber. Without the tariff, Americans have both more steel and more farm equipment and lumber. With the tariff, Americans have less steel and less farm equipment and lumber.

…..

The above account ignores many additional factors that are often in play in reality – factors such as changes in the scale of production of both protected and non-protected industries, the consequences on wages of team production and of other ways in which workers complement each other rather than substitute for each other, the time required for producers to adjust to changes in trade policy, and the effects of industry or firm-specific human capital. These (and some other ‘additional factors’) are what explain the genuine distress that workers experience when their jobs are threatened by imports. But such distress is not uniquely caused by imports; it is caused by almost all sources of economic change.

I hope against hope that the above explanation is sufficiently clear to answer your question.

Don

Quotation of the Day…

(Don Boudreaux)

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… is from page 54 of the 2008 Third Edition of the late Vincent Ostrom’s 1973 book, The Intellectual Crisis in American Public Administration:

Producer efficiency in the absence of consumer utility is without economic meaning.

DBx: The truth of this point was emphasized as far back as Adam Smith, yet it remains elusive. There abound today politicians and pundits who, fancying themselves to possess a fuller understanding of human nature than is possessed by economists, point out that people find dignity in work. These politicians and pundits offer this observation as if they are nobly informing the public of a reality that economists naively deny or dismiss as irrelevant.

But of course no serious economist either denies that people find dignity in work or dismisses this fact as irrelevant.

What serious economists do deny is that jobs that exist only because the state obstructs voluntary and peaceful consumer expenditure choices are jobs that workers can justly find dignity in holding. Serious economists understand that “to produce” means “to use labor and materials to satisfy as well and as fully as possible the demands of consumers.”

The reason there is dignity in work is that work is productive in this sense. The productive worker not only supports himself or herself and his or her family, but also contributes to the material prosperity of fellow human beings – that is, of society. In contrast, there is no dignity – or should be no dignity – in toiling in ways that harm fellow human beings. A successful burglar might well work creatively and hard and, as a result, provide a good living for himself and his family. But if this burglar were to inform us that he finds dignity in his occupation, we’d conclude not only that he’s unethical because of his deeds, but also deluded about the true meaning and nature of dignity. The burglar drains society of wealth; he doesn’t add to it. The burglar has no business feeling dignified. He should instead feel shame.

And so it is with workers whose jobs are supported by tariffs or subsidies. These interventions allow some people to toil at tasks for which they get paid, but the interventions that enable payment for this toil are a net drain on society’s wealth.

Why should Sam and Sarah find dignity in holding jobs that exist only because their fellow citizens are coerced into supporting those jobs? Sam and Sarah should be embarrassed – indeed, ashamed or even mortified – to hold such jobs.

We can, alas, forgive Sam and Sarah. They likely know no economics and so are easily gulled by politicians and pundits who mistakenly assure them that the protectionist policies that are alone responsible for their jobs are a net benefit, rather than a net cost, to their fellow citizens. But regardless of Sam’s and Sarah’s – or the politicians’ and pundits’ – economic and ethical ignorance of this matter, the underlying reality doesn’t change: Jobs that exist because of protectionist policies represent plunder of fellow citizens. Sam and Sarah should derive no more dignity from holding such jobs than burglars derive from holding theirs.

On Jobs and Economic Dynamism

(Don Boudreaux)

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In my latest column for AIER I write about jobs and misguided efforts to protect particular ones. A slice:

When, decades ago, the prospects of earning a good living on the farm fell, the farmer wondered anxiously how his grandchildren would earn their living. He could not have known that some would work for companies called Apple, Google, FedEx, and Ikea, while others would be freelance web designers working out of their lofts in SoHo. (Fifty years ago, all web designers crawled on eight legs.) These jobs would never have existed had not human creativity and energy been freed from older occupations — which gets us to the most important thing that economists know about jobs.

In a free economy, we have jobs that we don’t want to lose only because we are free to lose the jobs that we have.

The great majority of jobs that permeate the modern economy are created by our freedom as consumers to spend our incomes as each of us sees fit – including our freedom to change how we spend our incomes – combined with our freedom as entrepreneurs to create new spending opportunities for consumers.

If this dynamic process of consumer freedom and entrepreneurial experimentation were stopped, in an effort to freeze all existing jobs into place, the very logic of our economy would go haywire. Rewards to entrepreneurs would disappear and consumers would at best be locked forever into an unchanging pattern of buying the same things year after year, decade after decade.

A much more likely outcome, however, of a regulatory regime that attempts to prevent economic change is that living standards would actually fall. Such a regime would suffocate entrepreneurship. Economic creativity and alertness to new opportunities would be killed. The reason is that entrepreneurship is necessary even to maintain the economy at a steady level of prosperity.

When existing sources of inputs start to run low, entrepreneurship is required to find adequate replacements. When consumers’ tastes change, only entrepreneurs can successfully discover – in competition with each other – how to reallocate resources in ways that don’t result in a decline in living standards. Ditto when there are changes in demographics. Entrepreneurship, though, can’t be awakened only when needed to ensure that living standards remain steady, and kept comatose whenever it might spark economic change that results in economic growth.

Determined efforts by the government to protect existing jobs by preventing economic growth would almost certainly turn out to be efforts that result in severe economic decline. And every job in such an economy – possibly excepting those of government bureaucrats – would wind up paying much lower wages in exchange for much harder work.

No job for economists is more vital than making this truth widely known.

Bad Economics

(Don Boudreaux)

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I very much enjoyed Marc Levinson’s 2007 book, The Box – a volume about the rise and several consequences of container shipping. I’m reading now Levinson’s 2020 book, Outside the Box: How Globalization Changed from Moving Stuff to Spreading Ideas. I’ll likely finish reading it, but a passage on page 19 reveals that Levinson’s interpretations of economic events, patterns, and outcomes must be approached with a discouraging amount of caution. Here’s the passage (emphasis added); it occurs during a discussion pre-industrial-era trade:

The ubiquitous role of middlemen added to the cost of trade. Manufacturing migrated to rural areas, where costs were lower than in crowded cities and farmers had ample free time in the winter to tend hearths and looms, but most goods were produced by very small workshops. In Venice, a law from 1497 – not always observed – prohibited a silk manufacturer from employing more than six weavers. Two centuries later the eighteen textile establishments in Clermont-de-Lodève, in the south of France, had only twenty-nine looms among them. Carriage makers in New England was the work of small shops and independent craftsmen even in the late 1830s; a factory with on hundred workers proved too large to manage profitably. Manufacturers operating at this minuscules scale had no hope of exporting on their own. At best, they could supply a trader in the nearest village, who could sell the goods onward to a merchant in a larger town, who might know a merchant in a port city who consolidated shipments for export. Each dealer, of course, collected a commission that added to the price charged to customers abroad.

DBx: No. The commission charged by each dealer was the price paid to cover the cost of that dealer’s efforts to transport the goods from one place (or owner) to another place (or owner). Absent each dealer’s (“middleman’s”) effort, the goods either would not have been transported to their final destinations or would have been transported the full distance by their manufacturers. In either case, the final costs of the goods to consumers – the goods’ final prices – would have been higher.

If the goods wouldn’t have been transported at all, the supplies of such goods at their final destinations would have been lower, consisting only of those units produced near the location of consumers – thus causing these goods’ prices to be higher. If the goods would have been transported and marketed by their manufacturers, manufacturers would obviously, no less than the middlemen, have to be compensated to perform these transportation and marketing services. They would perform these services only if and insofar as the final selling prices justified the extra effort.

It’s possible (although unlikely) that, were there no such middlemen, these manufacturers would have undertaken the ordeal of transporting and marketing the goods themselves (and thus, as so many advertisements scream, “avoiding the middleman mark-up!”). But because the option to so transport and market their goods themselves presumably was always present, there must be some good reason why manufacturers nevertheless chose to use these “middlemen” – why manufacturers chose to ‘hire’ these middlemen to perform those services. And there is a good reason: Transporting and marketing these goods as described above by Levinson was the lowest-cost way of getting these goods across the long distances for sale to their final consumers. Were it not so, if the goods were to be transported and marketed across those distances at all, the manufacturers would have performed these tasks themselves.

That the manufacturers chose the lowest-cost way of transporting and marketing their outputs to final consumers, the ‘optimal’ amount of those outputs were produced for export and so transported and marketed for final sale, causing their final prices to be lower, not higher. The middlemen whom Levinson accuses of raising consumers’ costs of acquiring these goods were in reality paid to supply services that lowered the cost of getting goods to final consumers.

Contrary to the opening and closing sentences of the above-quoted passage, therefore, the ubiquitous role of middlemen lowered the cost of trade. Each dealer, of course, collected a commission to perform a valuable service that lowered the price charged to customers abroad.

…..

It’s discouraging to encounter, in a book about the history and economics of trade, passages such as the one that I quote above – a passage that reveals a misunderstanding of trade and economics that’s fundamental. Everything that I read by Levinson from here on in will be read with an extra dollop of doubt about the accuracy of his analysis.

I will tentatively continue to trust that the book overall will supply a worthwhile read. But the operative word here is “tentatively.”