Russell Roberts's Blog, page 438

Quotation of the Day…

(Don Boudreaux)

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… is from pages 243-244 of George Will’s excellent 2019 book, The Conservative Sensibility (original emphasis; footnote deleted; link added):

Hayek was enthusiastic about markets, but not because of utopian expectations. He was enthusiastic because markets comport with what he called the Tragic View of the human condition. Human beings are limited in what they can know about their situation, and governments composed of human beings are limited in their comprehension of society’s complexities. The simple, indisputable truth is that every one knows almost nothing about almost everything. Fortunately – yes, fortunately – this is getting more true by the day, the hour, the minute. As humanity’s stock of knowledge grows, so, too, does the amount that, theoretically, can be known but that, practically, cannot be known. As Hayek wrote, “The more men know, the smaller the share of all that knowledge becomes that any one mind can absorb. The more civilized we become, the more relatively ignorant must each individual be of the facts on which the working of civilization depends.” So, in a sense, ignorance really is bliss because so many other people, who are also ignorant of almost everything, are knowledgeable about something, and we can make use of their knowledge. People who travel by air as routinely as earlier generations traveled by bus do not need to know anything about how planes are built or flown or, for that matter, why they fly. Advancing scientific and technological sophistication constantly multiplies the number of things we do not need to think about because others are doing this for us. This division of labor into ever more minute bits liberates us to get on with our lives.

DBx: It’s worth emphasizing that this division of knowledge and of labor is, as George Will says, not a source of perfection. It paves no path to utopia. Problems – sometimes very scary ones – arise, as problems have always arisen and will continue to arise.

What was understood by Hayek (and by other classical-liberal thinkers through the ages) is that there is no utopia, but that the ever-present human impulse to create one consciously will only worsen the human condition. And the more fanatical the attempt to consciously move and steer human society toward utopia the more likely will the result be humanity driven down a road to serfdom.

Government officials do not gain super-human knowledge, and are not transformed into angels, just because they’re elected democratically or because they’re appointed by democratically chosen representatives. Graduating from Ivy League law schools, sporting doctoral degrees from – or faculty positions at – prestigious academies, writing long and celebrated books, boasting Nobel Prizes, and being sincerely super-charged to the marrow with the finest of intentions are also absolutely useless at giving anyone anything remotely close to enough knowledge to improve the lives of millions of strangers through top-down interventions enforced, ultimately, at gunpoint.

It’s easy to imagine the state being god-like. People imagine such a thing all the time. And one reason for this great ease is that those who do the imagining – including those who build lovely formal theories of how the state will intervene in social-welfare-improving ways – ignore the fact that the amount of minute and ever-changing details that would have to be learned by state officials to enable them to design processes that stand any chance of improving human well-being are so enormous and dispersed as to be impossible for state officials ever to possess.

When a Christian or other religious person prays to God for something – to be cured of some illness, to have one’s children be better-behaved, to find a way out of challenging financial straits – the prayerful person simply assumes that God knows, or can easily discover, all the relevant knowledge needed for him to intervene from on high productively and in ways that avoid unforeseen ill-consequences. Given the theology of such religious people, this assumption is plausible: their God does indeed have such intellectual capacity (and also, of course, can be trusted to use this knowledge in non-self-serving ways and for the greater good).

But regardless of your theology, no one today admits to believing that human beings are godlike, or can be transformed by the holding of political office into divine creatures. Yet many of the people who summon the state to do their bidding in fact assume, without realizing it, that the state is indeed akin to the God to whom they offer their nightly prayers. No need to sweat the details; the state-god will figure them out and act on them wisely and well.

Many are the people who profess to not believe in miracles but who really do believe in miracles.

Don’t Be So Quick to Conclude that Supply Chains are Public Goods

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

William Galston writes that “Resilience in the face of unexpected shocks is a public good, and experience is confirming what economic theory predicts: In the relentless quest for increased efficiency, which remains a key source of competitive advantage, the decisions made by individual market actors will produce, in the aggregate, a less-than-optimal supply of resiliency, a public good. To solve this collective-action problem, government must act as a counterweight” (“Efficiency Isn’t the Only Economic Virtue,” March 11).

Not so fast. Each company has powerful incentives to strike what is for it the optimal balance between keeping its current production costs as low as possible and ensuring against disruptions of its supplies of inputs. Equally important are these two additional facts. First, each company has better access than do government bureaucrats to the detailed knowledge necessary to strike this balance optimally and, second, the optimal balance for one firm differs from the optimal balance for other firms.

In short, nothing about striking this balance optimally fits economists’ criteria for being a public good.

Mr. Galston thus too quickly concludes that the coronavirus’s disruption of supply chains ‘confirms’ that the market produces less-than-optimal levels of resiliency. Today’s disruptions are no more evidence of market failure than are the supply-chain disruptions routinely sparked by hurricanes and earthquakes. Even less is the coronavirus’s disruption of supply chains evidence that government officials could and would ensure better than do private companies against excessive disruptions of supply chains.

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

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 360 of my GMU Econ colleague Larry White’s excellent 2012 volume, The Clash of Economic Ideas (original emphasis):

The logic of embracing free trade unilaterally, that is, no matter what policy any other national government adopts, is well expressed in an adage attributed to the economist Joan Robinson: Even if your trading partner dumps rocks into his harbor to obstruct arriving cargo ships, you do not make yourself better off by dumping rocks into your own harbor.

Some Links

(Don Boudreaux)

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Steve Davies writes wisely about the concern that we should indeed all have about the coronavirus – and about destructive policy responses to it. A slice:

What is quite possible though is that we will panic and react in the wrong way at the level of policy in a way that means future historians will be able to speak of how an era of globalisation and world growth was brought to an end except that this time it would not be the illness itself but an ill-judged response to it.

David Boaz reflects on the collapse of Bernie Sanders’s campaign to obtain presidential power.

Here are the opening remarks delivered by my GMU Econ colleague Bryan Caplan in his recent debate, against Brian Leiter, on markets versus socialism (and “social democracy”). A slice:

Given all this, I predictably deny that “ultimately America will need to move towards a socialist system.”  Full-blown socialist systems make social democracy look great by comparison.  Indeed, once you draw the distinction between social democracy and socialism, it’s very hard to find to find any socialist regime that isn’t a tragic, despotic disaster.  If Sweden is the jewel of social democracy, what’s the jewel of socialism?  Cuba?  Nor is there any sign that socialism somehow becomes “more necessary” as countries progress.  The main reason governments have gotten bigger over the last thirty years is just the aging of the population.

Finally, let me underscore what I’m not saying.  I’m not saying that life in the U.S. or Sweden is terrible.  In fact, human beings in both countries enjoy close to the highest quality of life than human beings have ever achieved.  My claim, rather, is that even the most successful countries in history could do far better.  I know that social democratic policies are emotionally appealing.  That’s why they’ve won.  Yet objectively speaking, market capitalism should have won because market capitalism offers much better results.

Irwin Stelzer remembers Gertrude Himmelfarb.

Colin Grabow explains how Louisiana’s coastline is threatened by protectionism.

Mark Perry loves the Babylon Bee.

Pittsburgh Tribune-Review: “Changing times”

(Don Boudreaux)

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In my column for the October 23rd, 2008, edition of the Pittsburgh Tribune-Review, I reflected on changing attitudes toward markets and intervention by the state. You can read my reflections beneath the fold.

(more…)

Quotation of the Day…

(Don Boudreaux)

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… is from page 59 of AIER’s just-published collection – Historical Impromptus – of many of Deirdre McCloskey’s articles and essays (available on page 55 here) specifically, it’s from Deirdre’s “Thurow’s The Zero-Sum Solution,” a review that she published in the January 9th, 1986, edition of the Des Moines Register:

The trade of soybeans for Toyotas is similarly cooperative. The danger is that sports talk might persuade Iowans that subsidizing the U.S. auto industry with more than $100,000 annually for each job saved will indirectly help American farmers, as the other members of the “American team.” But Iowans are not interior linemen for running backs in Detroit.

The other danger is worse than protectionism. The sports talk encourages an attitude of Us vs. Them (remember the Iowa/Iowa State game?) We’ve fought a lot of real wars in this century that started with such talk, about the Huns and the Yankee Imperialists.

DBx: The late Lester Thurow was quite popular in the 1980s and 1990s for his incessant warnings that America was losing at the game of trade with other countries. Most ominous, Thurow (and others) warned, was our failure to compete effectively against the clever Japanese who, unlike us naive and complacent Americans, had the foresight to practice industrial policy, including the use of tariffs targeted skillfully and with precision. Trade, you see, said Thurow (and others) is indeed a contest in which the gains of the ‘winners’ are the loses of the ‘losers.’ Denials of this alleged reality come only from those who are bewitched by free-market ideology or blinded by economic orthodoxy.

And so – advised Thurow (and others) – we Americans really should step up our game by taking many production and consumption decisions out of the hands of short-sighted and selfish entrepreneurs, businesses, investors, and consumers and putting these decisions into the hands of the Potomac-residing wise and genius-filled faithful stewards of Americans’ interest.

Sound familiar? It should. While some of the details from decades ago of the news-making proponents of protectionism and industrial policy differ from the details harped on by today’s proponents of protectionism and industrial policy, the essence of the hostility to free trade and free markets of decades ago is, in most – maybe all – essential respects identical to the hostility that reigns today.

Markets in which prices, profits, and losses guide the decisions of producers and consumers were then – as they are today – asserted to be stupid, akin to a drunk donkey, while government officials (from the correct party, of course) alone have the knowledge, capacity, willpower, and power to allocate resources efficiently and in the national interest.

Nothing much changes but the names. Three or four decades ago protectionism and industrial policy in the name of the national interest was peddled by people with names such as Lester Thurow, Barry Bluestone, and Felix Rohatyn. Today protectionism and industrial policy in the name of the national interest is peddled by people with different names. Three or four decades ago the myriad fallacies that infect the case for protectionism and industrial policy in the name of the national interest were exposed by scholars such as Milton and Rose Friedman, Thomas Sowell, Don Lavoie, Charles Schultze, Jim Miller, and Deirdre McCloskey. Today, McCloskey thankfully is still at it and is joined by other, younger scholars such as Arvind Panagariya, Adam Thierer, Ryan Bourne, and Veronique de Rugy.

It is dismaying that today’s champions of protectionism and industrial policy write in what appears to be complete ignorance of the scholarly case against such policies. Today’s champions of protectionism and industrial policy slay only straw men; they expose fallacies believed by no serious scholar and debunk myths swallowed only by poorly schooled sophomores, excessively schooled graduate students, and lazy pundits.

Globalization and the Lethality of Diseases

(Don Boudreaux)

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In this short but brilliant video – which I hope goes viral – Johan Norberg busts a widespread myth about disease and globalization.

Some Links

(Don Boudreaux)

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My intrepid Mercatus Center colleague Veronique de Rugy beautifully explains the beneficial role of rising prices during emergencies. A slice:

Government officials (and pundits) never seem to learn (or remember) that in times of crisis, naturally rising prices are necessary to guarantee that goods, services and inputs are used to maximum social advantage. When governments prevent price hikes, they unwittingly createshortages of vital supplies. Unfortunately, such government intervention makes it harder for people to recover from disasters or, today, to protect themselves from the coronavirus.

Speaking of the coronavirus, the rational optimist – Matt Ridley – isn’t so optimistic.

Jeffrey Tucker makes clear that, in a panic sparked by a disease such as the coronavirus, the market is humanity’s friend.

Also writing wisely on markets and disease is Scott Sumner.

George Will is rightly dismayed by the idiotic superstitious worship, in today’s academy, of “diversity, equity, and inclusion.”

George Leef reviews my GMU Econ colleague Jim Bennett’s new book, Intercollegiate Athletics, Inc.

Jeff Jacoby reports on just how far to the left Joe Biden has moved.

John Goodman isn’t impressed with Paul Krugman’s latest book. A slice:

Reading Krugman on corporate taxation, you would never know that both theory and evidence suggest that workers, rather than rich people, bear the burden of the income tax and that corporate taxes actually suppress worker wages both in this country and abroad.

Quotation of the Day…

(Don Boudreaux)

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… is from page 147 of my colleague Richard E. Wagner’s superb 2017 intellectual biography of Jim Buchanan, James M. Buchanan and Liberal Political Economy:

The relative volume of market and politics nodes in the transactional nexus within a society may have significant implications for moral belief within a society. An expansion in politically generated nodes and connections might promote drift in the character of a regime, due to systematic differences in the types of moral instruction that are embedded in the institutions and practices of different regimes. Rectitude would seem to be a casualty of an expansion in the relative significance of political enterprises within a society. To the extent property shifts from the private to the communal domain, the injunction to avoid taking what is not yours becomes vacuous…. There is no right and wrong, as demarcated by the distinction between mine and thine. There are simply contending desires over how to use communal property.

DBx: Yes.

All proponents, conservative and “Progressive,” of industrial policy – a policy that necessarily transforms some private property rights into communal property rights – should reflect more seriously than I suspect they currently do on the important point here mentioned by Wagner.

A Bleg

(Don Boudreaux)

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My GMU Econ colleague Dan Klein, after reading this letter of mine, e-mails to me this suggestion:

Maybe you should put out a bleg asking for anyone to identify a single quotation of someone saying that maximizing income/material possessions is all there is to the good life.

Name one. NAME ONE!!!

Dan’s suggestion is excellent. I hereby so bleg.

I don’t doubt – and I doubt that Dan doubts – that a handful of hack pundits or weirdo extremists sometime in history have said such a thing. No proposition, no matter how bizarre, is without some champion at some time and somewhere. And so I ask that anyone who answers this bleg to identify precisely the person who asserted that maximizing income or material possessions is all there is to the good life, or that rising share values is a sufficient condition for causing human welfare to be as high as is humanly possible.

I’m quite confident that, if anyone has ever said or written such a thing, that person has neither garnered nor deserves the respect of anyone outside of a narrow range of benighted fanatics.