Russell Roberts's Blog, page 419
May 6, 2020
Some Links
Pete Boettke is correct: Arrogance is far more lethal than is ignorance.
The single best line that I’ve read all day is in this post by Arnold Kling: “I say it’s just more social-engineering drunks searching under the lamppost.”
Ted Hirt reviews Richard Epstein’s new book, The Dubious Morality of Modern Administrative Law.
Nathan Pinkoski calls it “bourgeois bolshevism.”
Those who say we can offset the cost of the government mandated shutdown of productive economic activity by just giving business people and individuals money to replace their losses stemming from the shutdown fail to understand that passing out money without creating wealth, over the long run, makes everyone poorer by debasing the currency.
Quotation of the Day…
… is from pages 287-288 of the 1981 Liberty Fund edition of the 1936 J. Kahane translation of Ludwig von Mises’s masterful 1922 work, Socialism; as used here by Mises, “imperialists” encompasses also what we today call “economic nationalists”; one page earlier he calls it the “nationalist-imperialist doctrine”:
The fact, that all the arguments it [the nationalist-imperialist doctrine] used to prove the incompatibility of national interests could with equal justification be used to prove the incompatibility of regional interests and finally even of the individual’s personal interests, was quite overlooked. If the Germans suffer from consuming English cloth and Russian corn, the inhabitants of Berlin must, presumably, suffer from consuming Bavarian beer and Rhine wine….
Imperialists delude themselves fatally when they suppose it possible to strengthen the cohesion of members of a nation by rejecting cosmopolitanism. They overlook the fact that the basic anti-social element of their doctrine must, if logically applied, split up every community.
DBx: Economic nationalists scoff at this idea. They allege that those of us who hold it are unrealistic dreamers who are blind to the reality of national conflicts right before our eyes.
Economic nationalists misunderstand free-trade cosmopolitans’ position. Free traders of course recognize that there is much actual or latent conflict across borders. The vile government in Beijing, for example, often acts in ways that are counter to the interests of Americans.* But such conflict becomes less likely the more economically integrated are two economies.
Economic nationalists observe the (often very real) hostilities and conflicts that exist in a world in which governments artificially restrict their citizens’ freedom to engage commercially with foreigners. Economic nationalists then claim that these hostilities and conflicts are more or less natural and permanent features of the relations between citizens and foreigners. The conclusion drawn by economic nationalists is that these hostilities and conflicts are reason enough for the home-country government to restrict fellow-citizens’ freedom to engage commercially with foreigners.
Free traders respond by noting that the more economically integrated are two countries, the lower are the prospects for hostilities and conflicts between those two countries.
Such prospects of war never fall to zero, of course; it’s not in the nature of any government to swear off ever flexing its military muscles. Nevertheless, reducing the likelihood of belligerence is better than not reducing it. And trade reduces it.
Much is made by economic nationalists of “us” being made by trade “dependent” on “them.” Well, in most cases, when “we” trade with “them,” “they” become “dependent” on “us” to the same degree that “we” become “dependent” on “them.” If the Chinese truly are enriched by selling to us their exports, then their enrichment depends, to the degree that they trade with us, on us buying their exports. Yes, we thereby come to depend on their exports, but they thereby necessarily come to depend on our exports.
Put differently, as we Americans come to depend on goods and services produced by citizens of some other country, citizens of that other country come to depend on goods and services produced by us Americans. Remember that trade doesn’t enrich the Chinese by shoveling their way more U.S. dollars or other currencies. Trade enriches the Chinese only by increasing their access to real goods and services. If the Chinese burned or simply sat on all of the dollars they receive by selling exports to us Americans, they’d impoverish themselves as they enrich us.
The bottom line is that a great deal of observed, existing international hostilities are the consequences of trade barriers rather than good reasons to maintain or to erect trade barriers. While I don’t deny that in a handful of particular cases plausible questions might be asked about the wisdom of reducing some tariff or of maintaining no or low specific tariffs, I do insist that it’s mistaken to point to disagreeable artifacts of the absence of international economic integration as reasons to avoid international economic integration.
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* It must, though, be said that some of Beijing’s actions that are commonly interpreted in the United States as being hostile to Americans’ interests – and likely intended as hostile by Chinese-government officials – actually serve the interests of Americans and harm the interests of the Chinese people, if not necessarily those of the Chinese government. When the Chinese government subsidizes Chinese exports to America, we Americans are enriched at the expense of the Chinese people. Such is the perversity of mercantilist myths that they lead governments that are hostile to each other often to unwittingly impoverish their own economies while enriching those of foreign countries.
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Pictured above is Otto T. Mallery (1881-1956). Mallery, an American supporter of Secretary of State Cordell Hull, published a book in 1943 titled Economic Union and Durable Peace. In that book – as reported by David Hart – Mallery wrote that
Economic bargains which are likely to be kept are preferable to political agreements which are likely to be broken.
If soldiers are not to cross international boundaries on missions of war, goods must cross them on missions of peace.
Unless shackles can be dropped from trade, bombs will inevitably drop from the sky.
May 5, 2020
Pandemics and Science(s)
Complicating matters further are these two additional facts: First, society is comprised of millions upon millions of individuals and families; second, each individual’s preferences are uniquely his or her own. My preferences for safety and health almost certainly differ in their details from yours, and the preferences of each of us differ from those of Dr. Anthony Fauci, from Pres. Donald Trump, and from any television news anchor or writer for The Week. And because my preferences are best for me while yours are best for you, and because at least some of my preferences likely conflict with some of yours, there is no one collective set of preferences from which a scientifically discoverable “best” course of action can be chosen.
This latter conclusion, take note, is proven by science. Several versions of this proof exist, but the most famous and firmly established is Arrow’s Impossibility Theorem. An implication of this Theorem is that, because different individuals have different preferences, there is simply no uniquely ‘best’ government response to COVID-19. And because that which doesn’t exist can’t be discovered, even the finest scientists working with unlimited budgets could not discover the ‘best’ response.
(Note that this inability to discover “the” best response differs from – yet is made all the more indisputable by – the fact that individuals’ preferences change over time and that individuals learn. When individuals learn they frequently change their actions in ways that scientists who model their behavior find impossible to predict.)
The realities emphasized above do not mean that there is no legitimate role for government in this calamity. But they do mean, at the very least, that disputes over what are the best policy responses are possible – indeed, healthy – among men and women of intelligence and good will. Science does not reveal that any one particular response is superior to any of many other possible responses.
Yet I believe that the realities emphasized above mean also that skepticism of proposed responses should intensify the more heavily the proposals rely on top-down, one-size-forced-upon-all commands and controls. Economics, after all, itself is a science. And perhaps its most important discovery is that the amount of knowledge that is productively put to use in society decreases as more and more decision-making responsibility is taken from individuals on the ground and given to officials occupying government offices.
Some Links
An Open Letter to Julius Krein
Mr. Julius Krein
Mr. Krein:
A flood of flaws inundates your attempt to justify the tariffs, subsidies, and other interventions that comprise the industrial policy proposed by you and others who are associated with Oren Cass’s project at American Compass (“Planning for When the Market Cannot,” May 4).
Some of your flaws are relatively small, such as your use of logical fallacies to strangle strawmen. An instance of this error is your assertion that the success of South Korea’s semiconductor, shipbuilding, and auto industries is the result of that country’s “ambitious industrial policies.”
First take notice of your logical fallacy: Because all cases that you mention of successful industrial policy, including that of South Korea, occurred in the context of general liberalization of those countries’ economies, it’s fallacious to conclude that the successes of the industries that you single out, or of those economies generally, resulted from industrial policy. Indeed, economic theory – and careful studies of government intervention – give us powerful reasons to suspect that any such successes arose despite, rather than because of, industrial policies.
As Columbia University economist Arvind Panagariya notes on page 232 of his richly researched 2019 book, Free Trade and Prosperity, “once we look at the evidence carefully, Korea supports the case for outward orientation rather than protection, interventionism, and infant industry protection.”
Now let’s identify the corpse of your strawman: No economist – not even those whom you tar with the derogatory yet ill-defined term “market fundamentalists” – denies that government can, by artificially directing resources into some industries, arrange for those industries to thrive or, indeed, even for some of them to eventually operate with comparative advantages. Yet a key part of the case against industrial policy is that any and all such “successes” come at a price, namely, the destruction of other industries. Industrial policy, by artificially directing resources into politically preferred industries, necessarily directs resources away from other industries.
And so you ignore a key argument offered by industrial-policy opponents when you point to industries apparently made successful by industrial policy and declare, ‘Behold, industrial policy works!’
Your strangling strawmen with logical fallacies, however, is a flaw that pales beside a more fundamental error: never do you explain how government officials will get the knowledge necessary to successfully implement industrial policy. You spend much time clumsily – and obviously with scant understanding of the economics that you criticize – trying to explain why markets don’t always operate with complete and accurate information. (Congrats, by the way, for mowing down yet another strawman!) Yet you simply assume throughout that government officials not only have access to greater and more-accurate information than is used in markets, but also that these officials can, at the end of the day, be trusted to act on this information apolitically and in the public interest.
You make no news by noting that some lacunae remain in economists’ theory of how market prices, profits, and losses over time direct resources to their most productive uses. But at least we “market fundamentalists” nevertheless have a positive and coherent theory of – an explanation of – how markets elicit, distill, and communicate the information that must be acted on if resources are to be allocated at all ‘efficiently.’ And it’s a theory with a great deal of empirical support.
In contrast, you have absolutely nothing by way of an explanation of how government officials would, or could possibly, acquire such information. Zilch. Nada. All you offer on this front is assertion wrapped in a demand that we trust you and government officials with greater power to override the choices that each of us make as we spend and invest our own money. We’re to take as a matter of blind faith that you and those whom you advise will spend and invest our money for our welfare better than we will do so. No thanks. It would be better for all if you return to minding your own business and leave the rest of us to mind ours.
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…
… is from page 122 of George Will’s splendid 2019 book, The Conservative Sensibility (footnote deleted):
Can a federal government that acknowledges no limits to its scope, and that responds promiscuously to the multiplying appetites of proliferating factions, make choices that serve the society’s long-term interests? The answer, based on the avalanche of evidence from current governance, is an emphatic “no.” The evidence is in the rise of the administrative state and the fall of fiscal responsibility.
DBx: George Will is correct to describe the volume of this evidence as an “avalanche.” It is overwhelming. It is long in the making. It is undeniable to anyone not completely blinded by ideological bias.
And yet “Progressives” on the left and “national conservatives” on the right – mainstream intellectuals from Joseph Stiglitz to Oren Cass, and mainstream politicians from Elizabeth Warren to Marco Rubio – utterly ignore this reality. Each arrogantly offers up pet proposals to give to the national government yet more coin and power to mold society and the economy into the ideal forms fashioned in his or her head. These social engineers not only ignore the astonishing complexity of social and economic reality, they are all completely credulous about state power. Because they can imagine this power working the miracles that they wish to be worked, they conclude that we should all be willing to give this power a try. Never mind the historical record. This time it’ll work!
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Pictured above are only some of the many volumes of the United States Code of Federal Regulations (the “CFR”) – a collection of the countless extant rules promulgated over the years, and still enforced, by the many agencies of the U.S. government. It comes out annually. In 1994 I walked into the Clemson University library with a tape measure and measured the amount of library shelf space consumed by a single year this of collection. The answer: twenty-six feet, not counting the volumes kept for national-security reasons from the general public.
Surely over the intervening 26 years some of the rules that were in place in 1994 have since been repealed. Yet even more surely, a greater number of new rules have been added.
So I ask you, if you are an American: How much of the CFR have you read? If you’re a lawyer, or have studied law, you likely have read some of this gargantuan collection. Ditto if you’re a lobbyist in DC. But even you have read only a teeny-weeny fraction of it. Yet nearly every page in this dense and overwhelming collection – so large as to be practically unreadable in its completeness by any normal human being – affects the lives of ordinary Americans.
The belief of persons such as Stiglitz and Warren and Rubio and Cass is that a majority vote by 535 professional politicians along with a favorable signature by another politician who is called “Mr. (and one day Ms.) President” in support of fine words on paper – fine words that create a bevy of bureaucratic jobs to be filled by men and women who write more words – many, many, many more words to be recorded in the CFR and enforced, ultimately, with threats of coercion – will rearrange to good effect the actions of hundreds of millions of ordinary men and women going about their daily affairs. The arrogance is astonishing. The detachment from reality depressing. The naiveté breathtaking.
May 4, 2020
Some Links
Mark Perry reports new research by Jeffrey Clemens, Lisa B. Kahn, and Jonathan Meer showing that minimum-wage legislation harms many low-skilled workers. Who’d a-thunk it?!
Pierre Lemieux is rightly dismayed by the arbitrariness and dangers of antitrust regulations. A slice:
There is something ironic in the idea that the most monopolistic organization of all, the state, should be trusted to maintain competition.
Vincent Geloso helps to keep the record straight about the New Deal.
I heard Borlaug give a speech late in his career where he addressed criticism of his work. His position was simple—he had met many, many well-meaning (and well-fed) critics over the years, but had never met any willing to starve to death for their beliefs.
Here’s John Cochrane on Paul Romer on what-if-virus-tests-were-like-sodas.
Coronavirus is the health of the state.
Pittsburgh Tribune-Review: “Health care’s simple economics”
Quotation of the Day…
… is from pages xvi-xvii of Philipp Blom’s 2010 book, A Wicked Company:
Even today, the public discussion about moral and political issues is no longer framed in an explicitly religious context, but the change in terminology only conceals the all-pervasive influence of the unexamined theological ideas underlying it. Our vocabulary has changed, of course: We no longer speak about the soul but about the psyche; we have exchanged original sin for inherited, psychological guilt. But the cultural soil on which these ideas flourish has remained the same, and all too often our worldview is inherently religious without our even realizing it.
DBx: Although I am not at all religious, I fear nothing from people in commercial society who are consciously so. Aware of one’s epistemology and worldview-roots, intelligent religious people – who are many in number – discuss, think, learn, and teach. As long as no one attempts to compel others to share – or to act as if they share – his or her theology, all is well.
What is frightening is religious belief held unawares. What is dangerous are theologies that are believed by those who accept and evangelize them, and passed off to others, as if these theologies are products of science, of ineluctable reason, or of material history.
These secular dogmas are numerous. They include belief in the reality of a “will of the People” – belief in the state as both creator and savior, a being capable of working miracles and lovingly willing to do so as long as we give to it enough devotion – belief in the inherent goodness and majesty of all nature excluding modern, commercial human beings – belief that one’s nation is one’s father who deserves unquestioning allegiance and obedience. Yet because the priests, nuns, and preachers of these dogmas are unaware that they are promoting religious beliefs – because these evangelists present to the public their gospels and predictions as science – they pose a real danger.
We moderns, in most places on the globe, have thankfully come to accept that different acknowledged religions can co-exist peacefully as long as none is given special privileges by, or suffers special disadvantages from, the state. No one today thinks that Catholicism must either defeat or be defeated by Judaism or Mormonism or Scientology. The very notions of defeat and victory in this realm of acknowledged religions today seem silly. Any such theological set of beliefs may arise and thrive as long as it can persuade enough people voluntarily to adhere to it and support its earthly presence.
But very different and far more vicious is a religion camouflaged as science. Because every sensible person correctly understands that scientific truths are universal rather than personal – the laws of physics cannot operate for Stephen differently from the way they operate for Sarah – adherents of religious dogmas accepted as science will today attempt to impose their dogmas on everyone and to persecute as intolerable scourges of humanity those who dissent.
May 3, 2020
Bonus Quotation of the Day…
… is from page xv of Jagdish Bhagwati’s and Arvind Panagariya’s 2013 book, Why Growth Matters (footnote deleted):
The experience of China, India, and East Asia – whose population amounts to not quite half of the global total population – demonstrates how growth is stimulated and sustained with the policy framework that exploits the opportunities provided by integration into the world economy, and also relies on a sophisticated use of market incentives in guiding production and investment. Conversely, they also demonstrate that a shift away from such a policy framework undermines growth.
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