Russell Roberts's Blog, page 406

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(Don Boudreaux)

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My intrepid Mercatus Center colleague Veronique de Rugy joins forces with GMU Law professor and bankruptcy-law expert Todd Zywicki to explore the pros and cons of allowing state governments to declare bankruptcy. A slice:

Ideally, states would try to right their fiscal conditions. Legislatures and governors would make the hard budget adjustments necessary for states to meet their obligations to the public, retirees, and bondholders. But it is apparent, especially for the most financially overburdened states, that doing so is neither politically feasible nor economically possible without severe cuts to public services. Like General Motors and Chrysler a decade ago, both of which descended into bankruptcy after decades of mismanagement, excessive labor and retiree costs, and poor performance, decades of mismanagement and short-term political decision-making by state governments have finally collided with economic reality.

Phil Magness looks back at the genuine racism that was central to the notions of the founders of the American Economic Association.

The editors of the Wall Street Journal continue to put the lethality of covid-19 in useful perspective. A slice:

The good news is that most people over age 65 who are in generally good health are unlikely to die or get severely ill from Covid-19. Data from Spain’s national antibody study show that about 92% of those infected from ages 60 to 79 have mild or no symptoms, and only about 6% are hospitalized. Three-quarters of people older than 90 have mild or no symptoms and fewer than 10% die.

Wall Street Journal columnist Daniel Henninger decries the media’s rejection of freedom of expression. A slice:

It is impossible not to recognize the irony of these events. The silencers aren’t campus protesters but professional journalists, a class of American workers who for nearly 250 years have had a constitutionally protected and court-enforced ability to say just about anything they want. Historically, people have been attracted to American journalism because it was the freest imaginable place to work for determined, often quirky individualists. Suddenly, it looks like the opposite of that.

Scott Sumner writes sensibly about police brutality (although what Scott calls “laws” I, following Bruno Leoni and F.A. Hayek, call “legislation”).

Arnold Kling is unimpressed with Brink Lindsey’s out-of-context criticism of libertarians. Here’s Arnold’s spot-on conclusion:

Every day the news brings us stories of Progressives on the march, tramping out of college campuses and into the larger society, bringing their cancel culture and their contempt for capitalism and freedom with them. Meanwhile, Trump-era Republicans reject free trade and fiscal responsibility. Is this the time for libertarians to berate themselves?

Careful self-criticism is welcome. But coming when liberty in America is at the lowest point in my lifetime, reading an essay [by Lindsey] that merely echoes the Progressives’ anti-libertarian slogans and slanders left me disgusted.

Quotation of the Day…

(Don Boudreaux)

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… is from page 24 of Matt Ridley’s wonderful new (2020) book, How Innovation Works: And Why It Flourishes in Freedom:

Innovation seems so obvious in retrospect but is impossible to predict at the time.

DBx: As Deirdre McCloskey persuasively argues, economic growth of the sort that we denizens of modern, prosperous countries enjoy requires an orgy of innovation. McCloskey calls it “innovism.” For economic growth of this sort humankind needs more than mere ‘efficient allocation of resources’ in the static sense that continues to be a top feature of mainstream economics. Humankind needs more than mere capital accumulation, although tools and their financing are indeed necessary inputs into modern economic growth.

Humankind needs innovation, and plenty of it.

But the details of innovation, being unpredictable, cannot possibly be planned or planned for. Every time I encounter the phrase “the industries of the future” or “the technologies of tomorrow,” I roll my eyes. No one knows what industries and technologies will be important tomorrow. If someone did know such a thing, that person could very quickly become the world’s first multi-trillionaire. And such an unprecedented seer would deny both himself and his fellow human beings enormous material prosperity by working as a politician, think-tank scholar, or Professor of This and That at Prestigious Univ.

Yet we have no shortage of people posing as such seers.

Oh, these costume-party seers are sufficiently clever to deny that they know what the future economy will look like in detail. Perish the straw-man thought! What these seers instead boast is that they’ll use the power of government to clear the way for the advance of technologies, and for the thriving of industries, that are better than those which would otherwise arise in free markets.

These seers are perhaps really so unreflective about their own pronouncements as to miss the fact that success of their schemes requires that government officials be invested with the miraculous power to predict not only which sorts of technologies and industries would arise on competitive free markets, but also which sorts of different technologies and industries would be an improvement over those that would emerge in markets. Assurances, in effect, that the Ministry of Industrial Policy would never be so bold as to predict the optimal colors of the Gadgets of tomorrow – “Choices such as those we’ll leave to the market!” – in no way excuse the seers from the obligation of informing us of how the Ministry will know which sorts of as-yet-to-arise technologies and industries must be avoided, and which as-yet-to-arise technologies and industries can and should be ‘arranged for.’

In short, advocates of industrial policy might be more sincere than are peddlers of get-rich-quick-by-flipping-houses brochures, but they are peddling schemes no less ridiculous.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 42 of the May 9th, 2020, draft of the superb forthcoming monograph from Deirdre McCloskey and Alberto Mingardi, The Illiberal and Anti-Entrepreneurial State of Mariana Mazzucato:

We don’t say that every private investment is wise. Remember the failure rate. But at least it is voluntary, and correctible by failure, which the State can always avoid with additional coerced taxation and the corresponding subsidy to its good friends.

DBx: Described here is yet another pesky reality that is consistently ignored by proponents of industrial policy.

Some Links

(Don Boudreaux)

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My intrepid Mercatus Center colleague Veronique de Rugy ponders Tariff Man and his newly coronated Lobster King. A slice:

As a recent dataset sent to me from Bryan Riley of the National Taxpayers Union shows, this trade fight caused a 65 percent drop in American lobster sales to China from its 2018 peak. And according to the Financial Times, the E.U. took a page from the Chinese playbook and imposed an 8 percent duty on American live lobsters while letting Canadian lobsters in duty-free. Now the president is apoplectic at the situation and has crowned Navarro, who pushed him into this trade war in the first place, the Lobster King.

David Henderson rightly laments the American Economic Association’s economically uninformed political correctness.

Also on political correctness – and on the absurd ironies and mad tyranny lurking in wokeness – is Robby Soave. A slice:

UCLA recently suspended a lecturer, Gordon Klein, after he declined a demand that he make a final exam “no-harm”—that is, it could only boost grades—for students of color traumatized by the events in Minneapolis. Klein refused, in accordance with guidance from UCLA’s administration not to give students much leeway on exams. In response, the activists launched a change.org petition to get Klein fired, and the school suspended him. His irritated reply to the activists—that he would not give preferential exam treatment to students because of their skin color—has prompted UCLA to investigate him for racial discrimination.

The editors of the Wall Street Journal put into perspective the fears of a second wave of covid fatalities. A slice:

Democrats cite a spike in cases in Florida, Arizona and Texas as evidence of a virus resurgence. But more testing, especially in vulnerable communities, is naturally turning up more cases. Cases in Texas have increased by about a third in the last two weeks, but so have tests. About a quarter of the new cases are in counties with large prisons and meatpacking plants that were never forced to shut down.

Karl Dierenbach argues that the covid lockdown is itself fatal to human life. (HT Lyle Albaugh)

Here’s wisdom from Joakim Book.

George Will writes perceptively about Trump, the U.S., and China. A slice:

In the 2010s, the U.S. stock market rose 250 percent, almost quadruple the average gains of other national stock markets. (China’s rose 70 percent.) “By 2019,” [Ruchir] Sharma writes, “the United States accounted for 56 percent of global stock market capitalization, up from 42 percent in 2010. The value of the U.S. stock market, relative to all others, was at a 100-year high.” Today, “seven of the world’s 10 largest companies by total stock market value are American, up from three in 2010.” Globally, 75 percent of loans to individuals and companies are denominated in dollars, up from 60 percent before the 2008 crisis.

Quotation of the Day…

(Don Boudreaux)

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… is from pages 106-107 of GMU law professor Ilya Somin’s newly published (2020) book, Free to Move: Foot Voting, Migration, and Political Freedom:

Consistent libertarians should be the last to accept any argument implying that governments should have the same sort of authority over their territory as private property owners have over their houses or clubs. Any such theory would authorize the state to trample all of the rights libertarians hold dear.

DBx: Yes. A nation is not a house. A nation is not a household or a family. A nation is not a club. A nation is not a private business. A nation is not an organization. A nation is an order.

Enormous amounts of misunderstanding would be avoided if Hayek’s distinction between organizations and orders were better known and reflected upon. People who understand this distinction realize that a nation has no preferences – and cannot possibly have preferences – akin to the preferences had and acted upon by a person or a household. Unlike a person and an organization, a nation has no purpose or purposes in the sense of a set of goals that it pursues.

Likewise, while a person, a household, a club, a business, and a government each has a budget, a nation and an economy do not. Unlike a person and an organization, a nation cannot enter into contracts, it cannot borrow money, it cannot lend money, it cannot be indebted, it cannot owe anything. A nation and an economy do not and cannot possibly earn money or spend money. An economy does not allocate resources, although within a well-functioning economy individuals – sometimes individually and sometimes acting in groups – each makes resource-allocation decisions in ways that are informed, mostly through market prices, by the knowledge and preferences of others.

If more people understood the distinction between order and organization more people would comprehend the deep danger of thinking of the state as an agency to carry out “the will of the people.”

What portion of economic misunderstanding and ideological disagreement stems from the failure to grasp the distinction between order and organization? My sense is that this portion is huge. The distinction isn’t very difficult to grasp. Anyone who understands that, say, language is useful yet undesigned is well on his or her way toward grasping this distinction. But the great majority of economic and policy commentary is offered on the unstated presumption that all good order in human affairs must be consciously designed and carefully superintended.

Very many political and ideological disputes are disputes merely over which particular conscious minds will carry out this designing and superintending. Classical liberals (including those who call themselves “conservative”) and libertarians are the only people who understand that among the most vital challenges humans confront is not to choose or to stumble upon the most appropriate persons to design and superintend social order. This challenge, instead, is to protect humankind from the hubris and errors of such designers and superintendents in order (!) to maintain as much space as possible for the spontaneous emergence of genuine economic and social order.

Scary Signs

(Don Boudreaux)

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Reading David Henderson’s recent EconLog post titled “Why Don’t People Speak Up?” prompts me to offer a more general yet personal point, which is this:

These are, at least for me, especially scary times. I refer here not principally to the covid lockdown (although that, too, is scary in its own way). Instead, I refer to the tsunami of virtue signaling now drowning the country in the wake of the death of George Floyd. Frank and honest disagreement with any parts of the narrative that dominates the mainstream media is treated by too many people as proof of evil intentions or, at best, of indifference to evil.

Underway now is something far more extreme than a mere loss of nuance. The world is now painted exclusively in the darkest black and brightest white. (Please, do not interpret my use of “black and white” as referring to anything other than the traditionally used example of the starkest of distinctions.) Failure to blame all problems suffered by minorities on racism – failure to denounce loudly and angrily American bourgeois society’s allegedly inherent bigotry, greed, and rapaciousness – failure to acknowledge that America today is a brutal and cruel place for all but the elite, and hellish especially for blacks, women, and gay, bi, and transgender people – is frequently interpreted as sympathy for dark-ages-like superstition and prejudices.

Equally bad, in the eyes of the Virtuous, are attempts at offering historical perspective. Even if accompanied by a sincere and express acknowledgement that serious problems remain, the mere suggestion that at least some of these problems were more widespread and worse in the past – the slightest hint that over time there’s been some real improvement for anyone but white, heterosexual, high-income Christian males – is treated as evidence of blindness or malignant bias.

Groupthink must be fun for many people. Emoting without as much as a thread of a connection to knowledge of history and careful consideration of the facts is the practice of very many people today. And it’s de rigueur now to treat one’s emotions – along with rioting-crowds’ outrage and passions – as sources of understanding and knowledge more reliable than an actual understanding of history and economics.

Sadly, but unsurprisingly, this irrationality centered in the political left spawns irrationality on the right. I’ve heard it said that George Floyd wasn’t killed by Derek Chauvin, or that Floyd deserved his fate. I hear it said that any success at reforming government police departments would undermine law and order. Nonsense, of course. Pure nonsense.

But what today most scares me – a true liberal to my marrow – is the rabid mobthink on the political and ideological left. My fear is neither my forgiving nor tolerating the many prejudices and idiocies rampant on the right. I despise these unconditionally. But today – June 12th, 2020 – I fear more the prejudices and idiocies rampant on the left, if only because these seem to me to be today more widespread and socially encouraged.

Seldom have I been as distraught as I am now.

The Economic Impact of the Lockdown is Regressive

(Don Boudreaux)

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In the local-opinion pages of the Washington Post, my friend Lyle Albaugh and I have an op-ed on the regressiveness of the covid-lockdown’s economic impact. A slice:

The reason for the lockdown’s regressive effect is no mystery. Although there are exceptions to this rule, a disproportionately large number of highly paid workers, compared with lower-paid workers, have jobs that allow them to work from home.

For example, one of us (Boudreaux) is a college professor who continues to teach his classes online from home using Zoom. He remains employed with no cut in his income. Many architects, accountants, lawyers, financial planners and other upper-income workers enjoy similar opportunities.

In contrast, the other of us (Albaugh) co-owns and works full time at a small retail business in the heart of the District — a business that for more than 30 years has depended for the bulk of its sales on foot traffic. With his D.C. store shuttered by government decree, not only is he unable to work and earn income, but his commission-based employees are in the same sinking boat.

Pittsburgh Tribune-Review: “‘Jobs’ a misnomer”

(Don Boudreaux)

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In my column for the December 9th, 2009, edition of the Pittsburgh Tribune-Review I did my best to sweep away some confusion that arises from the common use of the word “jobs.” This column remains especially timely, given the rise of Trumpian protectionism and of calls by people such as Oren Cass for policies that directly aim at protecting jobs rather than allowing the creation of value-creating opportunities.

You can read my column beneath the fold.

(more…)

Quotation of the Day…

(Don Boudreaux)

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… is from page 498 of George Will’s superb 2019 book, The Conservative Sensibility:

The concept of human dignity is indissolubly linked to the fact of human agency, which is linked to each person taking responsibility for his or her life. 

Orwell Knew of What He Wrote

(Don Boudreaux)

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Here’s a letter to Axios:

Editor:

You report, seemingly in agreement, that “looting is not violent” and that “[e]conomically speaking, looting can have positive effects. Rebuilding and restocking stores increases demand for goods and labor, especially during a pandemic when millions of workers are otherwise unemployed.”

Okay then. When can I and a few of my friends show up at your place to non-violently steal your stuff, smash your car, and burn your house to the ground? Surely you would not be so pharisaical as to complain of your personal hardship given the “positive effects” for the economy that my friends and I will generously unleash.

In fact, the public spirit that motivates my friends and me is so powerful, so loving, so magnificent that we wouldn’t dream of confining our benevolent service to your property only. We’ll peacefully pillage and destroy your entire neighborhood!

If you are sufficiently inspired, as I’m certain you will be, to nominate us for the world’s first joint Nobel Prize in Peace and Economics, we will be sure, upon accepting our Prize, to credit you with supplying us with the inspiration for our peaceful and productive beneficence.

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