Russell Roberts's Blog, page 407

“Empirical” ≠ “Open”

(Don Boudreaux)

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Here’s a letter to a new visitor to Café Hayek:

Mr. Wilson:

Thanks for your e-mail defending what you call “common sense tariffs.”

You argue that it’s “an empirical question if a tariff would bring the desired result.” From this premise you infer that my “strong bias is not justified against all tariffs.”

I agree that, ultimately, the question of the effects of tariffs is empirical. But I submit that the empirical record against protective tariffs is so solid that it is sophistry to treat each new tariff proposal in isolation from this history. History is worthwhile because it gives us guidance going forward. If in the past every time you’ve bashed a hammer into your shin you got a huge bruise, surely it would be pedantic of you to proclaim that it’s “an empirical question” – as in “an open question” – whether or not you’ll get a bruise if you bash a hammer into your shin today.

Further, answering even empirical questions reliably is impossible without sound theoretical understanding. I repeat here a point that cannot be too often repeated: unlike informed proponents of free trade who have a coherent theory of how free trade elicits the knowledge that must be used if there is to be economic growth, proponents of protectionism offer no such coherent explanation of the operation of protectionism. Read Dani Rodrik or Ha-Joon Chang or Ian Fletcher or Oren Cass or Henry Olsen. You’ll find no coherent explanation of how government officials will acquire the knowledge necessary to intervene in ways that promote economic growth. Indeed, in the writings of most of these and other protectionists you won’t find even the recognition of the need for such an explanation. And that’s a sad empirical fact.

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

Some Links

(Don Boudreaux)

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Brown University’s Glenn Loury pens a brilliant and reasoned letter to Brown’s senior administration. A slice:

What I found most alarming, though, is that no voice was given to what one might have thought would be a university’s principal intellectual contribution to the national debate at this critical moment: namely, to affirm the primacy of reason over violence in calibrating our reactions to the supposed “oppression.” Equally troubling were our president’s promises to focus the university’s instructional and research resources on “fighting for social justice” around the world, without any mention of the problematic and ambiguous character of those movements which, over the past two centuries or more, have self-consciously defined themselves in just such terms—from the French and Russian Revolutions through the upheavals of the 1960s.

My intrepid Mercatus Center colleague Veronique de Rugy wants unemployment benefits to expire. A slice:

For the most part, people were thrown out of work largely by the fear of this virus keeping consumers home but also by state governments commanding everyone to stay home. This unemployment was inflicted by design to cause a radical shrinkage of the supply side of the economy in the hope to fight the virus from spreading. The best thing to do is allow the economy to reopen fully and allow companies to figure out for themselves, based on their consumers’ preferences, how to best operate their businesses.

Bryan Caplan reflects on Garett Jones’s book, 10% Less Democracy.

Kathleen Parker writes intelligently about the New York Times‘s most-recent fiasco.

Speaking of the New York Times, here’s Jacob Sullum.

Radley Balko presents evidence of racial bias in America’s criminal-justice system.

I agree with Jeffrey Tucker:

The entire world economy was thrown into a deep depression (however temporarily) based on no certain knowledge about anything. And now we enter into the realm of farce in which the World Health Organization has to give press conference after press conference to clarify the mucky information mess they made in their previous conferences. Meanwhile, the politicians continue to preen and pronounce as if they are saving our lives.

Quotation of the Day…

(Don Boudreaux)

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… is from page 251 of the late Harold Demsetz’s October 1977 lecture “Social Responsibility in the Enterprise Economy,” as this lecture appears in the 1988 collection of some of Demsetz’s important works, Ownership, Control, and the Firm:

The rigidly controlled society may keep its people on the straight and narrow path, but it cannot be deduced from their taking that path that they are righteous. Ethical behavior is revealed when a person who chooses a morally superior course of action could have easily elected to follow an inferior one. The command economy, by virtue of its restrictions on choice opportunities, strips observed behavior of ethical significance.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from the just-released podcast that Juliette Sellgren did with Deirdre McCloskey; it occurs just after the 23-minute mark:

Liberalism is the theory that everyone should be an adult.

DBx: Of course, as regular readers of this blog know, by “liberalism” Deirdre here correctly means what is today sometimes called “classical liberalism.” Deirdre means true liberalism – the liberalism of Adam Smith, of Frederic Bastiat, of Harriet Martineau, of Yves Guyot, of Rose Wilder Lane, of Ludwig von Mises, of F.A. Hayek, of Milton Friedman, of James Buchanan, of Vernon Smith, of Bruce Yandle, and of Walter Grinder. Deirdre does not mean by “liberalism” the statism that for the past 100 years or so in English-speaking countries has camouflaged itself in this noble name.

And Deirdre is correct about liberalism and adults. Every other political theory holds that most people are too stupid, too ruthless, too impulsive, or too evil not to be ordered about by wise commanders. The commanders might be popularly elected, but – as every non-liberal theory holds – they are indispensable. The people – every non-liberal theory holds – cannot be trusted to be left alone each to conduct his or her own affairs as each sees fit bound only to respect the same right of other.

Liberalism, and only liberalism, respects each adult as an adult.

…..

Pictured above is Harriet Martineau.

Lighthizer Is Benighted

(Don Boudreaux)

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Here’s a letter to the editor of Foreign Affairs:

Editor:

U.S. Trade Representative Robert Lighthizer’s attempt to justify President Trump’s protectionism is filled with fallacies (“How to Make Trade Work for Workers,” July/August 2020). Not the least of these fallacies is his assertion that U.S. trade deficits “must be financed through asset sales.”

The U.S. trade deficit can be “financed” through asset sales, but it need not be, and it very often isn’t. America’s trade deficit rises if foreigners simply hold more U.S. dollars.

This deficit rises also if foreigners launch or expand businesses in America, but – contrary to Mr. Lighthizer’s fear-mongering – with no necessary net transfer of assets from Americans to foreigners. For example, the Dane in Copenhagen who earns dollars by exporting to the U.S. and then spends those dollars in the U.S. on materials to enlarge her factory in Texas causes the U.S. trade deficit to rise but without her or any other foreigner receiving assets from any American.

If the tale Mr. Lighthizer tells about U.S. trade deficits were true, America’s nearly half-century run of annual trade deficits would have by now stripped us Americans of a great deal of our net worth. But the opposite is the case. In inflation-adjusted terms, the net worth of American household and non-profits is today (at the end of 2019) nearly 350 percent higher than it was in 1975, the last year that America ran a trade surplus

This truth cannot be too-often repeated: Seeking information about trade from Trump and his trade triumvirate makes no more sense than seeking information about physics from Road Runner cartoons.

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 26 of Matt Ridley’s new book, How Innovation Works: And Why It Flourishes in Freedom (links added; ellipses original to Ridley):

Five years after [James] Watt died in 1819, there was a subscription to build a monument to him, unusual in those days when monuments were mostly to those who won wars. The editors of a journal called The Chemist had this to say, rather perceptively: ‘He is distinguished from other public benefactors, by never having made, or pretended to make it his objective to benefit the public … This unpretending man in reality conferred more benefit on the world than all those who for centuries have made it their especial business to look after the public welfare.’

DBx: Part of what is said in that portion of the article in The Chemist that Ridley, for brevity, left out of his quotation is praise for Watt for not being “a political quack, or a religious charlatan, who pretends to live and act only for others.” Indeed.

Humankind has suffered grievously, and continues to so suffer, from our childish gullibility for those who ‘pretend to live and act only for others.’ This suffering is enhanced by our related failure to recognize that persons pursuing their own chosen courses in free markets succeed only by succeeding in serving others – with success judged by the individuals who are served rather than by the individuals performing the service.

As I believe I first heard David Henderson put it, “Intentions are not results.”

Bonus Quotation of the Day…

(Don Boudreaux)

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… is the conclusion of Wall Street Journal columnist Mary O’Grady’s latest offering, titled “The Culture Wars and the Street Wars“:

The bad news is that the drip-drip-drip of an intellectual narrative aimed at destroying Western values and publicly shaming anyone who resists the ideological corrosion is here to stay.

Pittsburgh Tribune-Review: “Insurance: Health vs. real”

(Don Boudreaux)

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In my column for the November 25th, 2009, edition of the Pittsburgh Tribune-Review I do my best to explain that what Americans today call “health insurance” is no such thing. My column is available in full beneath the fold.

(more…)

Quotation of the Day…

(Don Boudreaux)

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… is from page 57 of the May 9th, 2020, draft of the forthcoming monograph from Deirdre McCloskey and Alberto Mingardi, The Illiberal and Anti-Entrepreneurial State of Mariana Mazzucato:

What made China better off was not glorious infrastructure. And it is certainly not the wretchedly managed Chinese government-owned enterprises, now busy under Xi Jinping buying up the private firms in order for the Party to control them better, for the benefit of Party members and their unemployable children. What made China better off was its massive experiment in commercially tested betterment left in private hands. The betterment was allowed by the Communist Party behaving itself moderately well (for a change), at any rate in private economic matters, by comparison with the wretched standard under Mao.

DBx: One of the many errors committed by protectionists is to assert that the more a foreign government intervenes into a foreign economy, the stronger will be that foreign economy and, hence, the weaker will be ‘our’ home economy. In reality, the reverse is true. China’s economy was in a shambles under Chairman Mao. As a result, Americans then had little to gain by having commerce with the Chinese people.

Maoism impoverished the Chinese people. Maoism also prevented we Americans from becoming as prosperous as we would have become had the Chinese economy under Mao been freer. American prosperity, of course, still increased during Mao’s reign in China, but our prosperity would have increased even more had we then had the opportunity, through trade, to tap into the resources, work effort, and entrepreneurial creativity of the Chinese people.

Only as the Chinese state stepped back, post-Mao, to allow free markets to emerge did the Chinese economy really begin to grow and many ordinary Chinese people really begin to prosper. And it was only then that extensive American trade with China became worthwhile for Americans. This trade contributed to the enrichment both of the Chinese people and of the American people.

Behind American protectionists’ harangues and fear-mongering about the Chinese economy there stands this fact: The people who suffer, by far, the most from a heavy-handed Chinese state are not us Americans but, instead, the Chinese people. For us to respond to Beijing’s return to a more centralized and mandarin-controlled Chinese economy with our own centralization and American mandarins would inflict grievous harm on us Americans. We should all unconditionally oppose any such idiotic move by the U.S. government.

Do not listen to Marco Rubio or Josh Hawley or Bernie Sanders or Elizabeth Warren or Robert Reich or Daniel McCarthy or Oren Cass. However well-intentioned these individuals are and however impressively they performed in law school or as mayors of quaint New England college towns, none has the slightest understanding of economics in general or of trade in particular. These people are no more qualified to offer advice about economic policy than is a lifelong teetotaler from the piney woods qualified to offer advice about which fine wine to have with your vegan Moussaka.

Incentives and Motives

(Don Boudreaux)

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In my most-recent column for AIER, I ponder police brutality in today’s America. A slice:

A great deal of the suspicion held by intellectuals and much of the general public about economics springs from my discipline’s focus on incentives rather than on motives. Motives – such as those that arise from racism – seem to be easy to understand; even toddlers classify people, actions, and outcomes as “good” and “bad.” And to react to motives is emotionally gratifying. Each of us loves to praise the virtuous person and to decry the wicked. We are moved, emotionally, both when we behold actions guided by admirable motives as well as when we witness actions fueled by appalling motives.

Incentives, in contrast to motives, are much less emotionally compelling. The grocer who feeds a neighbor because the grocer gets paid to do so doesn’t stir our emotions as does the kindly stranger who feeds a neighbor out of generosity. Likewise, the cop who murders someone stirs our emotions much more mightily if we interpret his actions as springing from racism or some other bad motive rather than from bad incentives.

Yet our own understandable desire to experience emotional satisfaction ought not distract us from the task of rationally examining the incentives in place that affect the actions of police officers.

These incentives today in America are atrocious. An excellent summary of them and their origins is in this new 34-minute-long podcast that the Cato Institute’s Clark Neily did with Juliette Sellgren. Whatever the amount of bigotry in policemen and policewomen – whatever the extent and depth of politicians’, prosecutors’, judges’, and juries’ naivete about race and race relations – these lamentable attitudes are likely not the chief reason for today’s police brutality.

I encourage you to listen to Juliette’s entire discussion with Neily. You’ll learn much – including, especially, just how frighteningly dysfunctional is the legal doctrine of “qualified immunity” for police officers. This doctrine was created by the U.S. Supreme Court, according to Neily, “out of whole cloth.” It effectively shields government officials, including on-duty police officers, from being held legally liable for whatever damages they have caused by violating a person’s civil rights.

This near-complete immunity from civil suits greatly lessens the incentives that would otherwise encourage police officers to act with common decency. When combined with the abominable role of police unions, along with some other defective institutions, police-officers’ incentives to behave decently shrivel to gossamer weightlessness.

The policeman, Derek Chauvin, who murdered George Floyd might well be filled with enough racism to overwhelm a convention hall swarming with KKK Grand Wizards. Or not. Being an on-duty police officer, Chauvin had every reason to believe that whatever injustice or harm that he inflicted on Floyd or anyone else would be ignored by other government officials, including by the courts.

And so Officer Chauvin – immune from the prosocial incentives that normally operate on normal people – might simply have carelessly slipped into his murderous recklessness. Thank goodness this man’s actions were caught on camera and then widely shared.