Russell Roberts's Blog, page 420
May 3, 2020
Some Links
My GMU Econ colleague Dan Klein eloquently makes the case for human-challenge trials.
While the removal of these import duties is great news, we have miles of regulatory roadblocks to remove before we sleep. Companies need approval from the National Institute of Virology regarding the efficacy of the testing kits and an import licence from the Drugs Controller General of India. Many companies have the approval or the licence, but not both. Once again, the unseen effect of cumbersome regulation has become visible, as government hospitals cannot procure tests for covid-19. Now that it has been seen that these regulations can threaten lives, the government has to clear many such thickets of regulation.
Joakim Book applauds the WHO for recognizing that diseases can be mitigated by individual freedom.
David Henderson is correct, and more than just marginally so.
I just ordered a copy of my Mercatus Center colleague Adam Thierer’s new book, Evasive Entrepreneurs.
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Quotation of the Day…
… is from page 309 of my late Nobel-laureate colleague James Buchanan’s 1980 paper “Procedural and Quantitative Constitutional Constraints on Fiscal Authority,” as this paper is reprinted in Choice, Contract, and Constitutions (2001), which is volume 16 of The Collected Works of James M. Buchanan (original emphasis):
The need for additional fiscal restraints did not become apparent until the empirical-historical record began to suggest that the nonfiscal constraints had failed. Nineteenth- and twentieth-century political thought, as expressed by scholar and citizen alike, embodied a blind faith that, somehow, the competitive pressures of electoral politics made explicit consideration of further constitutional constraints unnecessary. That is to say, the prevailing mythology about politics was that so long as politicians and political parties were required to submit their record to the voters periodically, the overall results could not really be out of bounds….
The very notion of what I have elsewhere called the “constitutional attitude” – the vision of the Founding Fathers of a society in which government, too, would be kept strictly within constitutional limits – was lost to the consciousness of the dominant American political mind.
DBx: Every society has notions that are accepted as indisputably true without any need for investigation. Some of these notions are beneficial – that is, these contribute to the flourishing of individuals and families within society. Other of these notions are harmful, while others are neither harmful nor beneficial. But the lower is the portion of beneficial notions to harmful ones, the greater is the danger to society.
One harmful notion that has long been around, but which seems to be gaining ever-more adherents, is that there is something meaningfully called “the will of the People,” that this “will” is revealed by majority-rule outcomes (assuming that elections are conducted according to rules deemed ‘fair’), and that nothing should prevent the pursuit of this “will’s” current whims.
Rational-choice theory generally, and especially its Virginia School version of public-choice scholarship and research, have scientifically shown that the first two prongs of this harmful notion are fallacies. There is no “will of the people” any more than there is a “will of the moon” or a “will of a box of Froot Loops.” Each person in a group, however that group is defined, has a will. And each person’s will is obviously influenced by his or her interactions with others persons in the group. But the group itself, because it isn’t a sentient creature, has no will.
In addition, outcomes of majority-rule elections are unavoidably influenced by arbitrary circumstances that every devotee of classic, romantic democratic principles must agree ought to play no role in affecting elections’ outcomes. I write here not of circumstances such as whether election day is cold and rainy rather than warm and sunny (although circumstances such as these clearly influence electoral outcomes). Instead, I write of more foundational features of elections that most people seldom pause to ponder. How are the candidates or options for an election chosen? Who or what, when more than two options are on the ballot, decides on the rules for determining how a winner will eventually be singled-out? If it’s a majority-rule election, the plurality winner cannot be declared the election winner, so how to arrive at a final outcome in which the winner is the option that has secured a majority of votes? What are the voting rules?
And can today’s majority vote to enshrine itself as the ruler forever by preventing future elections and changes in who holds power? Surely a negative answer to this question implies that the majority is not all-wise, all-knowing, and unquestionably trustworthy. Hence, a negative answer to this question implies that today’s majority ought not be trusted with powers unlimited. But if this reality be understood, isn’t it likely that there are other actions that today’s majority should be prevented from performing?
Recognizing that today’s majority should not be entitled to permanently enshrine itself is sufficient to prove that the third prong of this fallacy – namely, that nothing should prevent the full pursuit of the “will” of today’s majority – is a very bad idea indeed.
May 2, 2020
Some Links
Woodstock occurred during a pandemic.
Samuel Gregg reviews – largely favorably – Michael Strain’s new book, The American Dream Is Not Dead.
Pierre Lemieux writes about the abominable $1,200 “gift.”
Peter Calcagno asks if an upside of the covid-19 crisis might be some permanent deregulation.
George Leef reports on yet another instance of the tyrannical mindset of many academics.
Ian Vásquez remembers Deepak Lal. And here on Deepak is John Taylor.
Antitrust Law Obstructs Beneficial Market Forces
Here’s a letter to the Wall Street Journal:
Editor:
Holman Jenkins correctly argues that among the ways that competitive markets efficiently prepare for the long-run is to encourage, during slack times, price-fixing among firms with high fixed costs (“Government Punts to Business,” May 2). Large capacity is costly, and when customer demand is temporarily weak, prices that cover only the additional costs incurred to supply the relatively few units demanded contribute too little toward covering the cost of maintaining larger capacity that would prove useful over the long-run.
But since the late 19th-century privately arranged price-fixing among rival firms is, in the language of antitrust law, illegal per se – that is, always and without exception. Economist George Bittlingmayer, in a series of pioneering studies, rightly criticized this prohibition on price fixing. He showed that, in addition to encouraging otherwise inefficient mergers, this prohibition of price-fixing blocks the market’s ability to maintain optimal capacity over the long run.
Antitrust-law’s blanket prohibition of price-fixing among rival firms – a prohibition unfortunately endorsed by mainstream economics’ much too narrow and mechanical definition of competition –is thus one way that government obstructs markets’ disposition to attend to the long-run.
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 215 of Deirdre McCloskey’s excellent 2019 book, Why Liberalism Works: How True Liberal Values Produce a Freer, More Equal, Prosperous World for All:
Socialism is all of a piece with nationalism, substituting coercion for agreement, ranging from central planning in the USSR to building permits in Chicago.
May 1, 2020
The Covid-19 Crisis and Leviathan
As crisis followed crisis—World War I, the Great Depression, World War II, the multifaceted turmoil of the Johnson-Nixon years, the 9/11 attacks, the Great Recession that began in 2008—the ratchet effect ensured that government’s growth trajectory was displaced upward, time after time. The displacement was not always transparent or immediate, but precedents established in particular episodes reappeared again and again, sometimes after a lag of decades. In this way, government responses to short-run difficulties became lodged in the process by which rapid long-run growth of government became the norm.
People sometimes regretted actions taken hastily during a crisis but found that reversing them was diabolically difficult. As many observers have recognized, nothing is so permanent in government as a temporary agency or an emergency bill. Crises bring into operation new government activities and new scales of spending, taxing, and regulating; they were not intended to be permanent, yet became so by virtue of entrenched special interests and bureaucrats, often backed by congressional sponsors. Act in haste, repent at leisure.
If…
Trump’s wish to compel the Chinese to pay damages for their role in the coronavirus calamity prompts me to ask this question: If governments could be successfully sued by citizens seeking payment for economic damages inflicted upon them by governments – damages inflicted sometimes negligently, sometimes recklessly, sometimes intentionally – how many trillions of dollars would plaintiff Americans recover in court from defendant U.S. government?
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More Trump Trade Inconsistency
Here’s a letter to the Washington Post:
Editor:
Pres. Trump, wishing to punish the Chinese for the covid-19 pandemic, is “demanding billions in compensation” from them (“U.S. officials crafting retaliatory actions against China over coronavirus as President Trump fumes,” May 1.) Whether or not such punishment is justified, I can’t help but laugh at the hilarious inconsistency in Trump’s policy positions.
Having long complained that we Americans are harmed by the Chinese selling to us goods at prices allegedly too low, Trump now demands either that the Chinese hand over to us goods for free or that they liquidate their investments in America. Of course, being profoundly ignorant of trade, Trump is unaware of the nature of his demand.
For the Chinese to pay Americans “billions in compensation” the Chinese need billions of U.S. dollars. One way to get these dollars is for the Chinese to export billions-worth more goods, accept payment in dollars, and then turn these dollars back over to Americans – meaning that we would thereby get billions of dollars worth of imports for free.
The only other path available for the Chinese to get the billions of dollars needed to pay the damages that Trump seeks is for them to liquidate billions of dollars of their investments in dollar-denominated assets. Not only were these investments made possible by earlier Chinese exports – exports that Trump routinely declares to have harmed Americans – their liquidation would, as a practical matter, further lower the value of stocks and other assets in America and drive up interest rates. Punishing the Chinese in this way would thus also damage Americans.
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
…..
The deeper point of the above letter is that the only way that any entity – a person, a company, a country – can meaningfully pay another entity is by supplying that other entity with real goods or services valued by that other entity.
If Americans had never enjoyed increased imports because of Chinese exports – imports from the Chinese directly or from other countries indirectly as a result of Chinese exports to those other countries – the Chinese could never have invested in dollar-denominated assets. Having no dollar-denominated assets to liquidate, the Chinese today – to pay the punitive billions demanded by Trump – would thus have to increase their exports by this amount (either directly to Americans or indirectly to Americans via other countries increasing their exports directly to America).
And so any demand by Trump (or anyone else) that China ‘pay’ Americans for its role in spreading covid-19 boils down to an acceptance of the reality that imported real goods and services are actually good. Although those who accept this reality might be unaware of their acceptance of it, the fact remains that for the Chinese, ultimately, to pay us Americans anything requires either that they arrange for us today to import more goods and services or that they had arranged for us in the past to have imported at least an equivalent value of goods and services.
Pittsburgh Tribune-Review: “Ask the protectionist”
In my column for the April 25th, 2009, edition of the Pittsburgh Tribune-Review I put some questions to protectionists. You can read my questions – with one obviously inspired by the brilliant Bastiat – beneath the fold.
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How A Couple Social Distances in One Home
My friend Frayda Levy sent this e-mail. I share it here with her kind permission.
Like many America, we are working at home. At first my husband and I went about our work. We talked to each other whenever we had something “interesting” to say. Or at least one of us thought it was “interesting”.
This quickly became too disruptive. So I created “Interruption Cards” We each received two. The plan was simple, if one of us wanted to interrupt the other — we gave up one of our cards.
As with so many regulations — it was not simple at all.
We quickly learned we needed some rules. For examples what type of interruption required the use of a card? Did my telling my husband his lunch was ready require a card? What about his asking me if he could use the printer in my office?
How long did an interruption card last? Just a few minutes or until the person who played the card decided his/her turn was up.
We soon bickered over whether or not we could raise a new topic when the other had used an interruption card. Or if one of us interrupted the other without a card — what would the punishment be? My husband wanted a much more salacious punishment than did I.
While that experiment with home regulations was fun, we quickly realized the interruption cards were causing more interruptions than without. We returned to the old self regulation system albeit with some admonitions about being considerate of each other. Hopefully, America will soon follow.
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