Russell Roberts's Blog, page 408
June 8, 2020
Some Links
Writing the book to “defend” an immense list of left-wing spending policies destroys what’s left of her argument. If you could only feel her singular empathy for the downtrodden, if you could, as she does, view the federal budget as a “moral document,” if you could just close your eyes and need it to be true as much as she does, your “Copernican moment” will arrive. Logic and evidence will no longer trouble you.
My GMU Econ colleague Dan Klein warns of a misleading use of the term “second wave.”
Jeffrey Tucker asks why the New York Times denies the obvious.
Clark Neily is brilliantly persuasive in his recent podcast with Juliette Sellgren.
Tim Carney exposes the hypocrisy of many in the media over protests.
Damon Root identifies three upcoming Supreme Court cases to watch.
Jeff Jacoby writes movingly about the week the looters came.
Quotation of the Day…
… is from page 403 of the 2014 collection, The Market and Other Orders (Bruce Caldwell, ed.), of some of F.A. Hayek’s essays on spontaneous-ordering forces; specifically, it’s from Hayek’s previously unpublished lecture at the University of Virginia titled “Economics and Technology,” which is the third of four lectures that Hayek delivered in UVA’s Newcomb Hall during the Spring 1961 semester; the title of this lecture series by Hayek is “A New Look at Economic Theory” (comma added between “production” and “technological” for clarification):
That the practical man does not clearly distinguish between the two kinds of problems is not really surprising. In the actual direction of production, technological and economic considerations so constantly interact that they are hardly felt to be separate and different. But though they are not always psychologically separable, logically they are distinct and in certain connections it is rather important that we clearly distinguish between them. The danger is probably not that the importance of the technological considerations will ever be overlooked. But there is undoubtedly some danger that the technological considerations may be regarded as alone decisive and that the economic aspects are simply disregarded. Some people at least seem to believe that the organization of production is entirely a matter of technology, and in particular, that technological knowledge alone and unambiguously decides what is the best way of obtaining a given output.
DBx: Proponents of industrial policy, blind to the unfathomable complexity of the details of market processes, quite naturally conceive of economic problems as technical ones – as problems solvable by the same mental processes used by an engineer to carry out his or her assigned task. Yet even if (grossly contrary to fact) a counsel of government officials could somehow learn the order in which different consumer goods and services are ranked in relative importance by all individuals in their capacities as consumers, this question remains unanswered: What is the least-costly means of producing each of the these many outputs?
To ‘solve’ this economic problem is not the task of an engineer or of state officials playing the role of social engineers. The reason is that state officials charged with the task of producing these outputs – or, indeed, of any array outputs – cannot possibly know which manner of production is most economical. These officials cannot know, without prices set on markets, the relative scarcities of the many different alternative resources that can be used in production. Without this knowledge, the government allocator of resources acts with no more direction and good sense than does a drunk donkey. This official’s actions perhaps appear to be scientific and rational. But appearances here are deceiving. To the extent that this official makes resource-allocation decisions in ignorance of relative resource scarcities – for example, how scarce is this kind of low-skilled labor relative to that kind of higher-skilled labor – this official acts in ignorance of crucial facts that must be taken account of if the resulting allocation of resources is to come within a million miles of improving human well-being as much as it can possibly be improved.
June 7, 2020
Bonus Quotation of the Day…
… is from Stephen Gold’s article in the November 1992 Freeman, “The Rise of Markets and the Fall of Infectious Disease” (footnotes deleted):
Even so, the United States at the turn of the century – far from being the simple, rustic country envisioned by Americans today – was in fact a nation under siege by infectious diseases. In 1900 over 500 Americans out of every 100,000 died from them, or the often inevitable complications resulting from such illnesses. To put this kind of health threat into perspective, cancer, the scourge of modern America, kills about 200 of every 100,000 Americans each year.
Quotation of the Day…
… is from pages 524-525 of George Will’s excellent 2019 book, The Conservative Sensibility:
Compassion does indeed involve the desire to prevent or ameliorate pain or distress. Because there is never a shortage of those things, compassion is steady work. So, as a political imperative, compassion as an animating force of government can mean expanding government without end. Hence the contradiction between compassionate conservatism and constitutionalism.
DBx: I suspect that when many people encounter an expression of the reality conveyed in this quotation they leap to the mistaken conclusion that the person expressing this reality opposes compassion. Fact is, government is not the only source of compassion, either actual or potential. Indeed, as a source of genuine compassion, government’s record is rather poor; it is, after all, history’s greatest source of oppression.
Some of these oppressions committed by the state are on a grand scale. Think, for example, of the experience of the U.S.S.R. But most state oppressions are on smaller scales. Think, for example, of the tyrannies committed today in the United States by many government police officers who enjoy, courtesy of the U.S. Supreme Cost, the absurdity of “qualified immunity.” (By the way, a must-listen is Juliette Sellgren’s recent podcast, with Cato’s Clark Neily, on the dysfunction in America’s criminal-justice system.)
The greatest – some would plausibly argue the only true – source of compassion is individuals. Family members taking care of each others. Neighbors watching out for each other. Friends helping each others. Small and large privately organized efforts to alleviate the worst pain and suffering and anguish and distress. “Progressives” and other statists deny that private people are sufficiently willing or able to offer appropriate kinds and amounts of compassion – a denial that is not only contradicted by history, but is practically impossible to square with the accompanying presumption that the governments elected by these very same indifferent and incompetent people are somehow willing and able to offer compassion in the requisite varieties and quantities.
And don’t forget this fact: Even the most compassionate government is incapable of unlimited compassion. Our world is one of inescapable scarcity. More compassion here means less of something valuable there – perhaps less science funding, less courtroom space, even less compassion extended in some other direction.
June 6, 2020
Pittsburgh Tribune-Review: “Calif-ornery”
In my column for the November 13th, 2009, edition of the Pittsburgh Tribune-Review, I – using a bit of 17th-century history – took aim at brazen armed robbery carried out by the government (so-called) of the State of California. You can read my column beneath the fold. (Alas, I am no longer confident that my concluding sentiment is correct.)
Quotation of the Day…
… is from page 410 of the 2014 collection, The Market and Other Orders (Bruce Caldwell, ed.), of some of F.A. Hayek’s essays on spontaneous-ordering forces; specifically, it’s from Hayek’s previously unpublished 1961 lecture at the University of Virginia “Economics and Technology,” which is the third of four lectures that Hayek delivered in UVA’s Newcomb Hall during the Spring 1961 semester; the title of this lecture series by Hayek is “A New Look at Economic Theory”:
Where we want to make use of more knowledge of particular concrete facts than can be concentrated within a single agency, where we want to utilize knowledge widely dispersed among many people, we can do this only by a decentralization of decisions combined with an impersonal mechanism of co-ordination such as the market provides.
DBx: Among the many individuals who are blind to this inescapable reality are proponents of run-of-the-mill protectionism as well as proponents of more extensive schemes of obstructing ordinary people’s buying and income-earning choices – more-extensive schemes cloaked with the comforting name “industrial policy.”
The foundational case against industrial policy is not that the outcomes that industrial-policy proponents desire are undesirable in comparison to the outcomes that emerge on free markets. Industrial-policy proponents desire faster economic growth and greater and more widespread economic well-being, broadly defined to include not just more goods and services for consumption but, also, better and more satisfying jobs, lovelier communities, and increased prospects for people to thrive as they choose. Who with any modicum of civility doesn’t desire these things? The problem is not only that industrial policy offers no hope of achieving these desirable outcomes, but also that the use of industrial policy makes these outcomes less likely.
It is simply impossible for human beings to use coercion to grab an arbitrarily large chunk of property rights over resources and then to allocate those resources in ways that will in the long-run result in a higher standard of living than would have been generated by leaving those resources in private hands to be allocated according to the rules of private property, contract, and tort, and by the resulting market prices that arise from economic exchange. Markets use more knowledge than can possibly be processed consciously by the human mind or by a committee of genius human minds aided by 31st-century information-processing techniques.
What industrial policy can achieve are superficial outcomes that can be falsely passed off to the general public as desirable. Industrial policy can result in more manufacturing jobs in the home country. It can raise the real wages of workers in a select number of firms. It can reduce the home-country’s trade deficit. It can ensure that buyers in the home country purchase no inputs or outputs of a certain description from foreigners. It can decrease the home-country’s “dependence” on foreign countries.
What industrial policy cannot do is to raise overall living standards. Each of the above “achievements” of industrial policy must come at a cost that exceeds its benefits. But because these costs are spread out while these benefits are concentrated, the costs are unseen and the benefits seen. Industrial-policy proponents can then pound their chests triumphantly. And their many victims, sadly, will think this chest-thumping to be justified.
In the above, in order to highlight what industrial policy cannot achieve, I describe the best that industrial policy can possibly achieve. Yet in practice industrial policy is likely to fail even on its own superficial terms. Many of the outcomes, such as those listed above, that industrial policy can achieve are ones that industrial policy as carried out in the real world by necessarily uninformed and politically biased human beings will fail to achieve.
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Pictured above is UVA’s Newcomb Hall, where Hayek delivered the lecture from which the above quotation is taken.
June 5, 2020
Bonus Quotation of the Day…
… is this comment, offered on this post, by frequent Cafe Hayek commenter Richard Fulmer:
Someone who believes he can steer the economy is like a flea who believes he can steer a dog. While the flea can make the dog miserable, the dog is unlikely to end up where the flea intends.
DBx: Yes.
And – quite seriously – anyone who supposes that he, she, or a collection of government bureaucrats can possibly have access to enough information to outperform competitive market processes over time is delusional. Any such achievement is less likely than is the brain of a literal flea to grasp the theory of general relativity.
Some Links
But there are additional concerns surrounding UBI, which are deal breakers for me. Without a strong guarantee that all anti-poverty measures would be terminated—and that they will not be brought back to life later—UBI is a terrible idea. Under such circumstances, UBI won’t live up to one of its chief selling points, namely, to serve as a more efficient substitute for the highly inefficient welter of existing welfare programs and to do it in a simple and uniform manner.
Wall Street Journal columnist Daniel Henninger laments America’s new nihilism. A slice:
The new nihilism says no matter how many reform police commissioners are appointed or black mayors elected, “nothing has changed.” That is the definition of hopelessness.
It is not hopeless.
One could, for example, give people a better chance at home ownership and home equity, as HUD Secretary Ben Carson has proposed, through reforms of the mortgage-lending market and reducing regulatory hurdles to urban housing construction. Get rid of those godawful public-housing prisons. But no, the public housing authorities are patronage mills, so it can’t happen.
George Will rightly warns of the increasingly casual use of the military.
David Henderson makes the case for saying ‘no’ to state- and local-government bailouts.
Tarnell Brown explains why we need to keep talking about George Floyd.
The always-wise George Melloan writes wisely about the lockdown. A slice:
Chucked into the wastebasket along with the Bill of Rights was fiscal restraint. Modern Monetary Theory, actually an ancient pie-in-the-sky notion recently resurrected by State University of New York at Stony Brook professor Stephanie Kelton, marched into the House of Representatives and took over, giving Nancy Pelosi and her followers permission to spend unlimited amounts of borrowed money to relieve the misery caused by the lockdowns.
The Care Act was the result, and $2.7 trillion was added to the federal budget deficit. Ms. Pelosi, thus unchained, proposed to spend yet another $3 trillion, which began to stir some belated uneasiness among Republicans, including Trump, who had previously offered little resistance to this wild flight from fiscal reality.
Another Open Letter to Robert Lighthizer
Mr. Robert Lighthizer
United States Trade Representative
Washington, DC
Mr. Lighthizer:
You call for the U.S. government to adopt industrial policy. And of course you insist that such a policy would result in splendid outcomes. Yet nowhere do you indicate how you and other government officials would get the information necessary to enable your schemes to outperform the competitive market processes that you propose to displace. This omission is fatal to the intellectual credibility of your case.
To see why, you could consult classic arguments by economists on the idiocy of industrial policy – arguments, for example, offered in this article by Charles Schultze and in this book by Don Lavoie. But, frankly, I doubt that you’ll bother reading these materials that you – given your position and your policy proposals – really should read. And so, because today is the 297th anniversary of the birth of Adam Smith, I simply leave you with a passage from The Wealth of Nations – a passage in which Smith eloquently warns against the pretenses of persons such as you:
What is the species of domestick industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.
To give the monopoly of the home-market to the produce of domestic industry, in any particular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must, in almost all cases, be either a useless or a hurtful regulation.*
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
* Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (1776 [1981]), page 456.
Quotation of the Day…
… is today a repeat, but a repeat that is warranted because a herd of intellectuals and politicians, left and right, is now grazing on some psychotic substance that creates the delusion that government officials are sufficiently informed and benevolent to be trusted with the power to override market processes with industrial policy; this timely quotation is from Book IV, chapter 2, paragraph 10 of Adam Smith’s magisterial 1776 work, An Inquiry Into the Nature and Causes of the Wealth of Nations:
The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.
DBx: The very same arrogance, of course, is found in intellectuals who insist that politicians be given this dangerous power.
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June 5th is given on Adam Smith’s grave as the date of his birth in 1723.
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