Russell Roberts's Blog, page 415

Quotation of the Day…

(Don Boudreaux)

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… is from page 34 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 (link added):

The statists do not appear fully to appreciate in particular the astounding scale of little, bottom-up innovations. They tend to think of innovation as big, dramatic items such as the Manhattan Project, and to overlook the myriad of small improvements, and often enough pretty big ones (containerization is one), coming to the market daily. They do not realize that almost every object they buy, for example, is designed by someone under the guidance of profit.

DBx: Everyone who calls for “industrial policy” – conservatives such as Oren Cass and Marco Rubio no less than “Progressives” such as Robert Reich and Elizabeth Warren – base their case on a foundation that features ignorance of economics and of history. These industrial-policy proponents simply haven’t studied economics or history with sufficient care. (Most of them are lawyers. This distinction is unobjectionable, but it is also one that explains these pundits’ and politicians’ frequent failure to understand the economics about which they write – and about which they write in such lawyerly fashion.)

Among the most basic historical realities to which these industrial-policy proponents are blind is the source of so very much of what they take for granted in their everyday lives. Deirdre and Alberto above point to containerization – an astonishingly revolutionary if hardly mind-blowingly high-tech innovation that dramatically reduces the costs of transporting goods to market. (If Malcolm McLean had taken his idea for “the box” to a U.S. industrial-policy directorate, it’s almost certain that he would have been tossed out summarily. Not only is his idea wholly unsexy, its adoption would have been correctly seen as the destroyer of countless jobs for longshoremen.)

Our daily lives are filled with unnoticed marvels that are the results of innovators even less heralded that Malcolm McLean. Go into your kitchen. Look in the pantry. Who is responsible for the soup and cola cans being so light weight? Who designed their ingenious tops? Who invented the little packets of preservatives that keep your peanuts fresher longer?

Look at and into your refrigerator. Who are the many individuals who creatively came up with the stream of ideas that result in today’s bottom-of-the-line new refrigerator being a monument of marvels compared to a top-of-the-line new refrigerator of 1960? Who invented self-defrosting freezers? Who figured out how to enable a home freezer to dispense ice? (Would you prefer crushed or cubed?)

What’s in your fridge? Did you just this morning buy fresh blueberries at the supermarket? (How did that happen, by the way – “that” being a reliable supply of fresh blueberries year-round?) Look at the plastic container. Notice at the corners the notches that allow you easily yet surely to close the package to avoid spillage. Whose idea is that? And what about that brilliantly designed plastic bottle that securely holds a full gallon of milk yet enables you to pour its contents with ease. Whose idea is that? Or, rather, whose complex set of ideas are those?

Oh, look there, in a meat drawer in your fridge. You’ve got some chicken and tarragon sausages. When you grill them this evening they’ll be yummy! Whose idea was it to make that particular kind of sausage, and to enable it to be produced you-know-not-where and shipped safely to your favorite supermarket (you’ve got a choice of several!) in a package that doesn’t leak yet allows you to visually inspect what you’re buying?

You – you modern person you! – used the self-checkout lane and scanned your sausages, along with the other items in your particular selection of groceries that you chose from the tens-of-thousands of items that sit on the supermarket’s shelves. Who invented the scanner? Who designed the ingenious metal arms that hold the amazingly lightweight but equally amazingly strong plastic bags into which you’ll put your groceries – bags that you’ll discard the moment you tote your grocery haul into your kitchen?

Hey, the temperature outside is getting higher. Summer is finally on its way! Let’s turn on the air-conditioner. A flick of your finger et voila!: chilled air streams into your home. (Hmmm. 71 degrees f. is a bit too cool. Let’s raise the temperature to 71.5 degrees f. That’s better!) Who designed the thermostat – the very modern thermostat that you take for granted but that would have blown Howard Hughes’s mind in 1970 had he been rich enough to own one? Who figured out how to make the ductwork through which the chilled air flows into every room in your home?

For answers to these questions, you flip open your laptop – or maybe call to life your iPad. Or perhaps your smartphone. Or maybe, instead, you ask your Google smart speaker. Who figured out how to make wi-fi affordable to ordinary people? Who designed the search engines? Who enabled Google or Alexa to recognize your voice?

Who? Who?? Who???! How? How?? How???!

Each of us, every day, is the beneficiary of the creative and innovative efforts of millions of people whose efforts are coordinated – not perfectly (duh), but nevertheless with amazing effectiveness – by the prices, profits, and losses of market processes.

Industrial-policy advocates somehow miss all of this awesomeness. They see only ‘imperfections,’ heedless of the significance of these deviations from a divinely imagined ideal relative to the significance of what the market daily, actually achieves. Even worse, though, is the sorry fact that these advocates of industrial policy see unavoidable features of market processes and economic growth – I speak here of creative destruction and job churn – and mistakenly imagine that the state can eliminate these features without simultaneously destroying the economy.

Industrial-policy advocates are blind to the everyday marvels of market processes yet believers in the ability of the state to work impossible miracles.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 482 of the 1981 Liberty Fund edition of the 1936 J. Kahane translation of Ludwig von Mises’s masterful 1922 work, Socialism; here Mises laments what he called “statolatry”:

The dogma that the State or the Government is the embodiment of all that is good and beneficial and that the individuals are wretched underlings, exclusively intent upon inflicting harm upon one another and badly in need of a guardian, is almost unchallenged. It is taboo to question it in the slightest way. He who proclaims the godliness of the State and the infallibility of its priests, the bureaucrats, is considered as an impartial student of the social sciences. All those raising objections are branded as biased and narrow-minded.

Some Links

(Don Boudreaux)

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Jeffrey Tucker tells the bizarre tale of the calamitous lockdown of the global economy that began in March 2020. A slice:

What’s truly surprising is just how recent the theory behind lockdown and forced distancing actually is. So far as anyone can tell, the intellectual machinery that made this mess was invented 14 years ago, and not by epidemiologists but by computer-simulation modelers. It was adopted not by experienced doctors – they warned ferociously against it – but by politicians.

(Yesterday I read carefully the 2006 paper that Jeff mentions and that is co-authored by the late Dr. D.A. Henderson. It’s a calamitous shame that this paper’s recommend approach was ignored.)

Also writing wisely about this calamitous lockdown is Robert Higgs. A slice:

They and their ideological supporters will claim, of course, that what they have done has saved us all. Don’t believe this implausible, fear-fed claim. There was a better way, a way that would have respected and employed the people’s freedoms and knowledge, but that way would not have satisfied the rulers’ lust for power. Indeed, it would have revealed that the less power they exercise, the better off is the general public.

My intrepid Mercatus Center colleague Veronique de Rugy never tires of pointing out in print and in personal conversation the following: even government agencies that should, in principle, be of some use to humankind never avoid in practice pursuing tasks that make these agencies destructive. For evidence that Vero is correct, see this piece by Eric Boehm.

Mark Perry skillfully uses the work of Richard McKenzie to debunk the protectionist ignorance of Robert Lighthizer.

The great Thomas Sowell has a new book due out on his 90th birthday – this coming June 30th. It’s a birthday present to us all.

Pittsburgh Tribune-Review: “Socialize medical care?”

(Don Boudreaux)

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In my June 30th, 2009, column for the Pittsburgh Tribune-Review I lament the socialization of medical care. You can read my lament beneath the fold.

(more…)

Quotation of the Day…

(Don Boudreaux)

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… is from page 7 of Bas Van Der Vossen’s and Jason Brennan’s excellent 2018 book, In Defense of Openness:

Knowing what actually has a history of making a difference helps one appreciate what’s morally appropriate to demand of others. And flawed moral principles often look attractive because they match flawed empirical views.

DBx: A person commits neither a crime nor a sin by remaining ignorant of history or of economics. But that person becomes a danger to others when he or she – remaining ignorant of history and economics – calls for the use of force to obstruct peaceful commerce among adults. All sincerely made assertions that economic growth of the domestic economy will be promoted by protectionism reveal ignorance of history and of economics. This fact is so for calls for piecemeal protectionism no less than for protectionism as part of so-called “industrial policy.”

In nearly all cases, the pleader for protectionism thinks himself or herself to possess adequate knowledge of history and economics. But investigation of the substance of such pleas always uncovers a great deal of ignorance of key realities. This ignorance is often masked by the use of economic jargon – the meaning of which the protectionist pleader clearly doesn’t understand – and by out-of-context or misunderstood quotations from scholars such as Adam Smith and F.A. Hayek. Making matters worse, the protectionist unfailingly serves up the case for protectionism on a platter of logical fallacies.

…..

As I often tell my students, if Adam Smith were resurrected today from his grave in Edinburgh and given a few hours to survey the current state of the debate pitting free trade against protectionism, he’d be surprised by almost nothing. All of the common arguments used today by protectionists were used in Smith’s day. These arguments are today no more advanced in substance than they were in the mid-18th century (although today’s arguments might be presented in murkier jargon or even in mathematical symbols). As in Smith’s day, protectionists see only what they want to see – which is at most only half of the picture. And the half of the picture that they do see, they see through distorted analytical lenses.

Protectionists think themselves to be genuinely clever and cutting-edge. They are neither. They are peddlers of economic magic crystals, no more intellectually respectable than are late-night “info”-mmercial hawkers of face creams that wipe away decades of wrinkles and of free pamphlets that guarantee easy and risk-free riches by flipping houses. Alas, though, because there will always be a large audience of people willing to be gulled by promises of miracles, there will always be an audience for the nonsense that is protectionism.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 5 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:

She [Mazzucato] has parachuted herself into the center of the debate about the role of state planning as against private profit-making for innovation and allocation. It is not because she is innovative herself (though that is what her brave rhetoric suggests), but because she is, market-style, giving people what most of them want: magical thinking, mythical certitude, free lunches all around, wise and loving parents guiding the people in a coerced routine from on high. Modern “statism.” Her theory is the illiberal one that has dominated economics since John Maynard Keynes eight decades ago spoke out loud and bold.

My Challenge to Josh Hawley Remains Unmet

(Don Boudreaux)

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Here’s a follow-up letter to “proud Trump man” Nolan McKinney:

Mr. McKinney:

I recently challenged Sen. Josh Hawley “to explain why jobs lost as a result of Americans choosing to save labor by using technological innovations are different than are jobs lost as a result of Americans choosing to save labor by trading with non-Americans.”

You’re “stunned” that I “miss the obvious answer” to my challenge. In your view, the obvious answer is that “the innovators of labor saving products mentioned” in my  letter “are all Americans.” And these Americans, you go on to say, “spent more because their inventions made them millions.”

It’s true that the innovators mentioned in my letter are all Americans. But I’m stunned at what you find to be relevant about this fact.

Contrary to your claim, the gains that we Americans enjoyed because of labor-saving innovations from the likes of Cyrus McCormick, Thomas Edison, Bill Gates, and Steve Jobs did not arise from the resulting increase in the spending power of these men. These men’s contributions to economic growth are their innovations, not the additional incomes they were able to spend as a result of their successes.

Americans would have benefitted from these innovations no less had each of these successful men been misers and spent not a cent more than they would have spent had they been unsuccessful. (Actually, Americans would have benefitted even more had these successful men been misers. I leave it to you to figure out why.)

Note also this important fact: the benefits that McCormick, Edison, Gates, and Jobs bestow on humanity are not limited to Americans. Among the beneficiaries are people across the globe. And non-Americans benefit for the very same reasons that Americans do – reasons that include the enormous saving of labor that such innovations make possible.

If your claim were correct, then you must also believe that no one outside of the U.S. ever benefitted from the innovations of these (or any other) Americans. And you must further believe that no Americans ever benefitted from, say, the printing press. Gutenberg, after all, wasn’t an American and he never spent money in America. Ditto for the wheel, the lever, the pulley, the bucket, the axe, and the domestication of horses, oxen, and dogs. The now-unknown inventors of these amazing labor-saving techniques weren’t American and they spent no money here.

Likewise, you must believe that the only benefits Americans enjoyed from the likes of the invention of the steam engine, the flush toilet, and the electric battery came from whatever American exports their non-American inventors might have bought rather than from the great saving in labor made possible by their creativity.

My challenge to Sen. Hawley remains unmet.

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 10 of Roger Koppl’s 2018 book, Expert Failure:

We should not think of the division of labor as driven somehow by a grand purpose. It embodies no unitary hierarchy of values. The division of labor has no purpose and serves no particular hierarchy of ends. It is, rather, the emergent and unplanned result of a variety of persons pursuing a variety of potentially inconsistent goals. We can get along, so many of us so well, precisely because we do not have to agree on values. Believers buy Bibles from atheists and the system bumps along tolerably well, all things considered.

DBx: This passage contains a great deal of important truth – truth typically unknown to, or cast aside by, so many people on the “Progressive” left, the nationalist conservative right, and, frankly, even by many perched in the ‘pragmatic’ center.

The economy as such has no purpose. A well-functioning economy enhances the prospects of each of its participants of fulfilling as many as possible of his or her individual purposes, whatever these might be. Implicit in this achievement of a well-functioning economy is the prohibition on any participant of fulfilling his or her purposes by violating the rules that enhance the prospects of as many as possible others fulfilling their purposes.

One key rule that enhances as many as possible individuals fulfilling as many as possible of their goals is what economists call “consumer sovereignty.” This term is short-hand for the economic rule that producers have no right to consumer patronage. If you earn income, you have a right to spend, save, and invest that income as you choose. Your having previously bought your groceries from Safeway does not give to Safeway a right to compel you to continue to buy your groceries from Safeway. Nor does it give to Safeway a right to obstruct – or to hire thugs to obstruct – your efforts to shop at Whole Foods or at Wegman’s.

When the rule of consumer sovereignty is obeyed, each of us must earn our incomes by meeting the demands that our fellow human beings express as consumers. As producers, each of us competes for consumer demand. (Of course, this competition typically is most effective when many individuals consciously cooperate with each other in productive efforts, most commonly by forming and working in firms.) Only success in such competition reveals which of the relatively few of the uncountably large number of possible ways to ‘produce’ are actually productive – which of the ways actually create value for our fellow human beings rather than being a waste of human time, effort, and other resources.

Yet when government erects tariffs for the purpose of protecting existing jobs, particular individuals are excused from the rule of consumer sovereignty. These protected workers, as well as the owners of the protected firm, are excused from having to abide by an important rule of a market economy. These ‘protected’ individuals are given a right – a right to consumer patronage – that unprotected individuals do not have.

In large and dynamic economies, such as that of the United States, excusing relatively few individuals from the rule of consumer sovereignty does not bring the entire economy crashing down. The economically harmful consequences of such rule-breaking are masked by the larger churn and productive process of the economy. But as more and more people get to break this rule, the economic damage deepens and spreads.

Economically ignorant protectionists, from the likes of Bernie Sanders on the left to Donald Trump on the right, do not understand that, if the government attempted to excuse everyone from the rule of consumer sovereignty the economy would collapse. All producers would be guaranteed jobs and markets. Although there would also be an attempt to guarantee wages, this latter attempt would literally be impossible to carry out successfully. Producers, no longer having to compete for consumer patronage, would not only lose incentives to produce goods and services that satisfy consumers, they would also lose any ability to know what goods and services consumers most want. Prices in such an economy would become meaningless because no one would be allowed to change his or her spending.

Protectionism looks good to those who refuse to look at anyone other than the immediate receiver of income. To such a person a tariff appears to increase national well-being in the same way that to such a person armed robbery appears to increase national well-being: in both cases, some identifiable individuals’ incomes rise. End of story (or so protectionists insist). (Of course, protectionists deny the similarity of tariffs with armed robbery. Protectionists believe that because the people who are robbed by the tariff don’t actually see the weapons at the disposal of customs officers, these weapons – and the threats these weapons exist to enforce – are not real.)

Some Links

(Don Boudreaux)

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My intrepid Mercatus Center colleague Veronique de Rugy joins with Mercatus’s Executive Director Dan Rothschild to make the case for keeping government limited and markets free and open. A slice:

Lilla’s claims about globalization are likewise mistaken. Yes, the international order is imperfect, but on balance, economic liberty, global trade, and the internationalization of ideas have by far done more to stop global misery and poverty than has any other system. Yes, China has not joined that international order and adopted liberal values and democracy as many predicted a decade ago, and, yes, it maintains a gulag archipelago reminiscent of the worst abuses of Soviet totalitarianism. But the international economic order is far from being a threat to national self-determination (a deeply flawed and utterly illiberal concept) and blaming it for our problems merely deflects blame from our own internal political pathologies.

Also from Veronique is this lament of sprawling government.

Recently, I was again a guest of the always-insightful Dan Proft.

Don’t miss Russ Roberts’s page featuring materials on so-called “price-gouging.”

Art Carden explains why we don’t need One Big Plan to end the lockdown.

Alberto Mingardi is always worth reading.

Quotation of the Day…

(Don Boudreaux)

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… is one of the very few that I consciously reprise; first quoted here in late 2014, this wise observation is, at the moment, simply too relevant not to repeat; it’s from page 16 of Nobel-laureate economist Angus Deaton’s 2013 book, The Great Escape:

The need to do something tends to trump the need to understand what needs to be done.