Russell Roberts's Blog, page 440

Quotation of the Day…

(Don Boudreaux)

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… is from pages 3-4 of Michael Strain’s excellent new (2020) book, The American Dream Is Not Dead (But Populism Could Kill It):

A country as large as ours, in which citizens have such varied experiences, makes generalizing difficult. But today’s prevailing narrative is so stark that the task of generalizing becomes much easier. The narrative is wrong. America is upwardly mobile, particularly for those nearer the bottom of the income distribution. Incomes aren’t stagnant. Workers do enjoy the fruits of their labor. The argument that life hasn’t improved for typical households in decades borders on the absurd.

DBx: Yes. And yet because those seeking to increase the power of the state often are more likely to achieve this goal if acceptance of the absurd is widespread, the absurd is never in want of peddlers from across the political and ideological spectrum. (It must be admitted that many of the people who insist on the truth of the absurd seem to be sincere.)

On Oren Cass’s Response to (Some of) His Critics

(Don Boudreaux)

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Here’s a letter to Medium:

Editor:

Oren Cass deserves applause for his detailed response to some of the many criticisms leveled at his Cost-of-Thriving Index (“The Cost-of-Thriving Index: A Reply,” March 5). And I’m sure that the critics to whom he responds will come back with their own replies. I look forward to the continuing conversation.

But three general points now seem worth making about Cass’s defense of his COTI.

First, the most detailed and thorough criticism of the COTI was offered in three long Twitter threads – here, here, and here – by Scott Winship. It’s surprising that Cass ignored Winship’s comprehensive critique.

Second, Cass misses the mark by taking issue with Mark Perry’s “methodological adjustment … to switch from one worker’s earnings to household earnings, claiming credit for the added income of converting a stay-at-home parent into a wage earner.” Cass accuses Perry of assuming, in effect, that a parent who stays home “just sits around eating bon-bons.” This accusation is uninformed. Perry assumed no such thing.

It’s true, as Cass notes, that stay-at-home parents work hard and produce. But it’s untrue that what stay-at-home parents – let’s be clearer: stay-at-home moms – contributed “is all lost when the extra income is gained” by the parent entering the workforce. Among the most important reasons why many more women today, compared to in the past, work for market incomes is that laundry, cooking, house-cleaning, and much else of what once was most efficiently produced by stay-at-home women is now most efficiently produced by specialists suppliers outside of the home and then purchased for the home. Households today still get most of the goods and services that stay-at-home moms once produced plus whatever other goods and services are purchased with working-women’s incomes.

Cass, by the way, gets no points here for pointing to the “utility” and “fun” that he imagines women would get by staying home and that they thereby sacrifice by choosing to work in the market. The reason he gets no points is that, because the women who choose to work in the market actually choose to do so, they thereby reveal that the value to them of this stay-at-home “utility” and “fun” is less than the gains they enjoy by working in the market.

Third, and most fundamentally, it remains utterly mysterious (as I believe Michael Strain pointed out somewhere) why we should be surprised – and much less worried – by the fact that, since 1985, median male income has fallen relative to major household expenditures. The very fact that a greater portion of women today, compared to 35 years ago, work in the market naturally results in households’ real monetary expenditures today being higher than they were in 1985 relative to the earnings of men. Cass’s now-(in)famous chart shows nothing more startling than the obvious reality that a typical two-income household would have trouble covering its expenditures if the income of one of the earners is assumed away.

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

Some Links

(Don Boudreaux)

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GMU Econ alum Adam C. Smith laments the existence of Elizabeth Warren’s ridiculous Consumer Financial Protection Bureau.

Also writing on the dangers of Elizabeth Warren’s appalling hubris is Max Gulker.

Robby Soave has more on that fictional tale paraded as factual reporting, the New York Times‘s “1619 Project.”

Eric Boehm reports on why stimulus spending is no vaccine against the coronavirus.

Pierre Lemieux – here and here – writes with economic wisdom about emergencies, prices, shortages, and the state’s role. Here’s a slice from the second piece:

[W]e learned, thanks to Reason Magazine, that eBay stopped allowing sales of coronavirus supplies out of fear of “anti-price-gouging” laws. It seems that Amazon, for the same reason, stopped its third-parties from letting customers bid up prices of such supplies, otherwise generally unavailable. There is too much top-down benevolence and not enough free self-interest in America and the world. Why not try free enterprise?

Sally Satel makes the case for compensating donors of kidneys and other transplantable body organs.

Here’s Deirdre McCloskey’s Preface to the Korean edition of her book, Why Liberalism Works. Her opening:

Liberalism is the theory, by now only about two centuries old, that people should not be slaves—not Koreans as slaves to Japanese, not wives as slaves to husbands, not citizens as slaves to the State. A slave cannot say No. You can be a 100 percent slave, bought and sold, or merely a 14 percent slave, taxed at that rate. Being a slave to the State only on 14 percent of the days, only on Mondays, say, unable to say No, and beaten or imprisoned if you do, still means you are a (partial) slave. Liberalism makes everyone equal in permission to buy and sell, vote and protest, move and venture. No slaves.

Quotation of the Day…

(Don Boudreaux)

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… is from page 51 of Columbia University economist Charles Calomiris’s 2002 monograph, A Globalist Manifesto for Public Policy (footnote deleted; link added):

A recent study of financial-sector development over the past century by Raghuram Rajan and Luigi Zingales finds that international openness tends to constrain the wasteful rent-seeking activities of domestic banks and other firms that would otherwise retard financial and economic development.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from George Will’s March 6th, 2020, column, titled “Nikki Haley picks a worthy fight with anti-capitalist Republicans” (links original):

She [Nikki Haley] did not need to specify Florida Republican Sen. Marco Rubio’s aspiration for “common-good capitalism,” or Missouri Republican Sen. Josh Hawley’s even vaguer capitalism that does not encourage “Pelagianism” and the “Promethean self.” Really. Such conservatives inevitably advocate, in effect, government “industrial policy,” socialism’s essential ingredient.

DBx: True dat.

Let’s be clear: industrial policy truly is a variety of socialism. And socialism does not become either unworkable or tyrannical only when it is pursued in its most extreme form.

Yes: socialism does, of course, become worse and more tyrannical the grander the scale upon which it is pursued. But government officials’ inadequacy of knowledge – and their abilities (and incentives) to abuse power – kick in the moment they assume the authority to override the outcomes of private market processes. Although no proponent of industrial policy admits this truth – and even granting that most such proponents are too naive to grasp this truth – this truth isn’t rendered null and void by its widespread invisibility.

If you wish to be a cog in a machine designed (necessarily poorly) and operated (equally poorly) by the commentariat, the professoriat, or the political elite, by all means sign up for industrial policy. Have a blast. But please, leave alone those of us who have no wish to be either pawns or lab rats in your heroes’ social-engineering schemes.

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Protected Workers Work In Unproductive Jobs

(Don Boudreaux)

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Here’s a letter to a frequent correspondent:

Mr. Dye:

You argue that the “terminal flaw” of my letter (to American Compass’s Wells King) is that I “overlook that workers protected with tariffs manufacture output which people willingly buy.” I am, you therefore reckon, mistaken to insist that workers protected by tariffs work in unproductive jobs.

Hmmm.

Suppose I point a gun at your head and demand from you $10,000 for every economics course that you or your children take at any school other George Mason University. As I wave my weapon I proclaim in all sincerity that economics taught at GMU is generally superior to economics taught elsewhere but that, without more enrollment, GMU Econ might nevertheless disappear. My punitive tariff on you, you see, is for the greater good. Further suppose – not unreasonably, given my threat of violence – that you and your children enroll in more classes taught by me and my GMU Econ colleagues.

Would you infer from your and your children’s increased enrollment in GMU Econ courses that my colleagues and I deserve to be described as productive economics professors who produce outputs that you “willingly buy”? And would you conclude that my colleagues and I, being protected from the competition of economics departments inferior to our own, would thereby up our game at teaching economics?

Of course not. You’d see my threat of violence for what it is: thuggery. And you’d have many good reasons to describe us as unproductive. Productive workers don’t need threats of violence to drum up demand for their outputs.

Your note, Mr. Dye, prompts me to a conclusion even stronger than the one that I expressed in my letter of yesterday: protecting jobs with tariffs is worse than government cutting unemployment checks to workers displaced from particular jobs by imports. Precisely because people who remain in tariff-protected jobs are less likely than are workers who receive unemployment checks from the state to realize that they are living at the expense of others, it’s better – because it’s more honest – for government to send money to unemployed workers than to resort to protectionism to keep these workers wastefully employed.

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 249 of the late Harvard historian Richard Pipes’s excellent 1999 volume, Property and Freedom:

[W]elfare programs have made citizens more concerned with what the state gives than with what it takes.

DBx: And this dangerous truth holds for tariffs, export subsidies, and other forms corporate welfare – even when camouflaged by the name “industrial policy” – as it does for cash handouts to low-income individuals and households.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 11 of my late Nobel-laureate colleague Jim Buchanan’s January 10th, 1997, lecture, “Has Economics Lost Its Way?” (original emphasis):

Only if individuals are free to interact, one with another, can they achieve their own values. Informed with this elementary principle, the economist can “earn her keep” many times over by forestalling, even in a limited way, the effectiveness of the interest-motivated arguments of politicians, often advanced through easily-refutable fallacies.

Masking Parasitism Doesn’t Make It Productive

(Don Boudreaux)

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Here’s a letter to Wells King, Research Director for American Compass, which is the new organization founded by Oren Cass:

Mr. King:

Interviewed at National Review by Daniel Tenreiro, you rightly observe that, for workers who lose particular jobs to imports, “[i]t is incredibly demeaning and demoralizing to suggest that a check in the mail [from the government] is an appropriate response.” Living at the compelled expense of others is indeed contemptible.

But your preferred alternative, protectionism, is equally demeaning and contemptible. Workers whose jobs exist only because of high tariffs – which are punitive taxes on fellow citizens who buy imports – are not productive members of society. This reality is shown by the fact that fellow citizens must be taxed to support these jobs no less than fellow citizens would be taxed to supply funds for unemployment checks.

The fact that jobs that exist only because of punitive taxes called “tariffs” appear to be ones at which workers are productive members of society does not change the underlying reality that these jobs unnecessarily waste valuable, scarce resources – including labor – and, thus, workers who hold these jobs are parasitical rather than productive.

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

Know the Importance of “No”

(Don Boudreaux)

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In my most-recent column for the Pittsburgh Tribune-Review, I point out the importance of the right to say “no.” A slice:

The right to say “no” features also a beautiful component of equality. Amazon CEO Jeff Bezos, with his vast fortune, must nevertheless persuade each of his customers to deal with him. Because they can refuse his offers, he must find ways to make them better off if he is to profit from having them as customers.

It’s true that, in Bezos’s case, his having to persuade each and every person with whom he deals to say “yes” to his offers resulted in his monetary wealth growing disproportionately large compared to that of almost everyone else. But so what? Individuals’ right to say “no” motivated Bezos to figure out ways to entice people to say “yes” to do business with him. The fact that, in consequence, Bezos became one of the world’s wealthiest people means only that he was especially successful at persuading people to say “yes.”

Shouldn’t we applaud rather than bemoan or begrudge such success?

Also, although Bezos today is magnificently rich, in the economic market his power to compel people to do business with him remains equal to that of the poorest immigrant motel maid: neither person has any such power. The poor motel maid can say “no” to any offer from the tycoon Bezos that she believes will not improve her well-being. Bezos has no power over her.

Matters are the opposite in politics. Government’s nature is to threaten force to do whatever it does. And so because government can force each person to do its bidding, no one has a right to tell it “no.” There is, therefore, no good reason to expect that the outcomes of political processes will be widespread human betterment.