Russell Roberts's Blog, page 447

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(Don Boudreaux)

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In a new paper, my Mercatus Center colleague Dan Griswold busts several myths about American workers, globalization, and automation. Here’s the abstract:

It is often asserted that, for most American workers, real wages and incomes have been “stagnant” for decades, but evidence shows that the large majority of US workers are better off today than in past decades. Increased trade, globalization, and technological innovation have helped to raise wages and incomes. US economic policy should not aim to regulate or slow a dynamic labor market, but instead to help the minority of American workers who have been displaced or more permanently disconnected from the labor force. Policy initiatives should focus on upgrading the skills of US workers, promoting mobility, eliminating government-created barriers to employment and disincentives to work, reducing addiction and unnecessary incarcerations, and other policy reforms—with the goal of equipping US workers to thrive in a more open and technologically advanced economy.

Also busting myths about American workers is James Pethokoukis.

Terence Kealey busts some myths about government’s role in promoting economic growth.

My Mercatus Center colleague Michael Farren busts some myths peddled by  Trump.

Jeffrey Tucker celebrates the creativity behind TikTok.

Deirdre McCloskey makes the case against government-created intellectual properties.

Quotation of the Day…

(Don Boudreaux)

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… is from pages xv-xvi of Geoffrey Brennan’s, Hartmut Kliemt’s, and Robert Tollison’s “Foreword” to The Logical Foundations of Constitutional Liberty (1999), which is volume 1 of The Collected Works of James M. Buchanan (original emphasis):

More specifically, public choice stands in vivid contrast both to the naively optimistic “benevolent despot” model of politics that implicitly inhabits most conventional economic analysis of public policy and to the tradition in political theory that views politics as the search for the “true,” the “good,” the “beautiful” in total isolation from the feasible. Public choice is an attempt, quite literally, to conduct political analysis in a way that is shorn of romantic illusion.

Americans’ Shocking Prosperity

(Don Boudreaux)

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In my latest column for AIER I return again to the theme of the extraordinary material wealth of ordinary Americans, with a specific application near the end to the so-called “China shock.” A slice:

Consider, for example, the much-noted reduction over recent decades in Americans’ geographic mobility. This reduced mobility is said to be a major reason why increased trade with China inflicted on Americans what is now known as the “China shock” – namely, a slower than expected adjustment of American workers to increased imports of goods from China. (There is, by the way, some confusion about exactly what the “China shock” finding is. Some people interpret this finding in the manner in which I describe it in the previous sentence. Yet other people interpret it to be a finding that increased trade with China caused a permanent reduction in net American employment. The “China shock” researchers themselves are unclear on this matter. For purposes of my essay here, however, nothing much turns on which interpretation is correct.)

While Americans’ reduced geographic mobility might reflect real problems – such as housing costs in booming cities made artificially high by land-use restrictions – it might also, at least in part, reflect increased prosperity.

Most people prefer to live in some locations over other locations, but to satisfy such ‘locational preferences’ is costly. And so just as when we become richer we are more likely to satisfy our preferences for nicer automobiles and larger homes, as we become richer we also are more likely to satisfy our preferences for living in our favorite locations.

A blue-collar resident 50 years ago of Allentown, PA, might have had a strong attachment to that locale but, having lost his job, couldn’t afford to keep living there. His best economic option was to move. But suppose that today we see a blue-collar worker remain in Allentown despite being unemployed. What should we conclude? The conclusion leapt to by many pundits is that today’s unemployed worker is so much less likely than was the typical worker in the past of finding a new job elsewhere that today’s unemployed worker sees no point in moving. Out of despair, today’s unemployed worker simply stays put.

Perhaps. But given that there’s been no long-term uptick in the national rate of unemployment, this pessimistic conclusion is likely mistaken. A more plausible conclusion is that unemployed Americans today can better afford to stay put in their preferred locales and wait for new jobs to come to them rather than them move to different locales in search of new jobs.

This increased affordability of staying put might come in the form of greater purchasing power of workers’ savings, or in the form of more generous family, private, and public assistance for unemployed workers. Regardless of the source of this increased affordability of locational preferences, such increased satisfaction of locational preferences is evidence that ordinary Americans are today richer than were ordinary Americans in the past.

Pittsburgh Tribune-Review: “Heat and light”

(Don Boudreaux)

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In my January 28th, 2008, column for the Pittsburgh Tribune-Review I responded to a criticism by Joe Kennedy of this earlier column of mine. You can read my response to Mr. Kennedy beneath the fold. (This column, and the Kennedy piece to which I respond, are not available on-line.)

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Quotation of the Day…

(Don Boudreaux)

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… is from page 109 of my late Nobel laureate colleague Jim Buchanan’s 1980 paper “Rent Seeking and Profit Seeking” as this paper is reprinted in volume 1 of The Collected Works of James M. Buchanan: The Logical Foundations of Constitutional Liberty:

Rent-seeking activity is directly related to the scope and range of governmental activity in the economy, to the relative size of the public sector.

DBx: And, therefore, the larger the government, the larger are rent-seeking’s distortions and wastes.

…..

When anyone calls for any extension of government’s role in the economy, that person necessarily is calling for more resource-allocation decisions to be made by the state and correspondingly fewer such ‘decisions’ to be made by the spontaneous order of markets. Yet unlike economic actors in even the most ‘imperfect’ market, government officials can coerce: when government allocates resources, there is no presumption of mutuality of gains – quite the opposite. Only in instances for which mutual gains from trade are not present is the use of coercion necessary to bring about the particular change in the pattern of resource allocation.

Yes, yes, yes: scenarios can be imagined in which coerced changes in the pattern of resource allocation turn out to be mutually beneficial, or at least beneficial to the group of persons whose aggregate welfare is deemed to be relevant. The fruits of such imaginings have adorned countless blackboards, whiteboards, and PowerPoint slides over the decades. “Pigouvian taxes” that make resource allocation optimal can be described; “optimal tariffs” that raise national income can be shown using graphs; single-payer-health-care schemes that, on paper, work out beautifully can be designed; industrial-policy interventions that protect against this or that predicted calamity are easy to imagine.

Yet because all such proposal involve giving Jones the power to coerce Smith, proponents of all such proposals must answer a question that almost none of them bother even to ask: empowered to coerce, what reason is there to believe that Jones will not abuse this power? No one imagines that a conventional armed robber attempts to ply his trade in ways that ensure mutual gains from trade between himself and each of his victims. The armed robber resorts to coercion precisely because he either cannot, or is unwilling to go to the trouble, to persuade his victims to trade with him to each party’s mutual advantage. So why should we believe that when government-official Jones resorts to coercion against peaceful people that the results of Jones’s coercion will be mutual gains?

The move typical in the circles of policy-wonks, pundits, and professors is to describe a real (or, too often, merely imagined) “market failure” that can be shown on a chalkboard as being ‘solved’ by coercive intervention. Yet even if the market failure is real by some reasonable standard, this condition is merely a necessary one for coercive intervention; it’s not a sufficient condidtion. The mere existence of market failure does not guarantee – or even create the high probability of – government success.

And so – to Buchanan’s point above – as coercion displaces voluntary trade as the means of allocating resources, political considerations loom ever-larger in allocating resources. Those who seek gains are more and more likely to seek those gains through use of the state apparatus of coercion and to avoid the bother of discovering how to make mutually advantageous bargains.

When the above reality is grasped, the notion that in practice the likes of tariffs and industrial policy will strengthen a nation’s economy is exposed as absurd. And no difference is made if such proposals are offered by the likes of Oren Cass or Julius Krein for conservative reasons, or by the likes of Robert Reich or Elizabeth Warren for “Progressive” ones.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from Deirdre McCloskey’s “penultimate” contribution to her Pairagraph exchange – titled “Milton Friedman and the Liberal Promise of Broad Prosperity” – with Binyamin Appelbaum:

Mr. Appelbaum says, “the marketplace is not a state of nature.” Yes it is. All humans trade, from about age eight on. The earliest evidence of trade comes from the Blombos Cave in South Africa, 70,000 years ago.

The market, he says, “is an artifact of society.” Sure, but so is art and language and journalism.

“There is no ‘spontaneous order,’” he asserts—with sneering scare-quotes against the absurdity of the very idea that free adults could accomplish anything without coercion—as though art and language and journalism were not also spontaneous orders.

“Markets must be constituted, the rules must be enforced,” by implication, by a state. Wrong again. Markets arise as spontaneous orders on the analogy with language in all societies, in prisons, in medieval market fairs, in the rough justice of exchanging books and snow-blowers and cups of flour among neighbors.

DBx: A great deal of misunderstanding – such as that in which Appelbaum is mired – springs from the simple failure to understand the reality and complexity of social orders that are (to use Hayek’s summary of Adam Ferguson’s phrase) “the results of human action but not of human design.”

Some Links

(Don Boudreaux)

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My intrepid Mercatus Center colleague Veronique de Rugy laments the U.S. government’s on-going fiscal shenanigans. A slice:

Now there is nothing historic about Mr. Trump’s making his budget look good by using fantastical assumptions. All presidents perform this theatrical trick. For instance, no president ever projects that the economy will experience a slowdown in the next ten years of the budget window even though, on average, the economy slows down every 7 years.

“The Battle to Feed All of Humanity Is Over. Humanity Has Won” – So writes Marian Tupy.

Alberto Mingardi is rightly dismayed by Pope Francis’s appalling economic ignorance. (I’m not a Roman Catholic – or, indeed, a believer in any religion – but if I were a member of the Pope’s church I would pray fervently that Francis’s knowledge of economics is no reflection of his knowledge of theology.)

This past August I was honored to be interviewed by Keith Knight.

A blast from the past: here’s George Selgin on Fedophilia.

George Will writes insightfully about NAFTA, USMCA, and the self-degradation of the United States Senate. Here’s his conclusion:

The president’s institutional vandalism is partially explained, although not excused, by the breadth and depth of his ignorance concerning the manners and mores of a republic. The Senate’s self-degradation is even more depressing.

On February 13th great Israel Kirzner turned 90. Peter Boettke celebrates.

Quotation of the Day…

(Don Boudreaux)

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… is from page 51 of my late Nobel-laureate colleague Jim Buchanan’s 1978 paper “From Private Preferences to Public Philosophy,” as this paper is reprinted in James M. Buchanan, Politics as Public Choice (2000), which is volume 13 of the Collected Works of James M. Buchanan; the original published version of this paper is available here):

Little or none of the empirical work on regulation suggests that the pre-public choice hypotheses of regulation in the “public interest” is corroborated.

DBx: More than four decades later this observation remains descriptive.

This reality is – or ought to be – unsurprising. Everyone who graduates from kindergarten understands that incentives matter: if the ease of gaining at the expense of strangers rises relative to the costs of seeking such gains, we expect that more people will attempt to gain at the expense of others. Widespread understanding of this reality is why there is universal support for laws against slavery, theft, fraudulent conveyance, and other attempts to gain at the expense of those who do not consent to being exploited. Put differently, no one would be surprised to learn that empirical studies of a society in which people are free to steal each other’s stuff will be a society filled with an unusually large number of attempts by people to steal each other’s stuff.

And yet very many people toss this common sense aside when pondering regulation by government. (Many people who do this tossing aside of common sense call themselves “progressive.” Strange, that.) Empowered to proscribe and to prescribe actions by strangers, government officials should be expected routinely to exercise this power in ways aimed at seizing private benefits for themselves at the expense of the strangers whom these officials ‘regulate.’ Why is anyone surprised by this reality? Why do so many people assume that the holding of office called “public” or “government” somehow changes individuals fundamentally?

Or perhaps even more realistically: why are so many people blind to the fact that if there are available in society opportunities to gain at the expense of others, individuals who are especially interested in, and adept at, gaining at the expense of others will generally succeed in filling those positions?

By telling ourselves the tale that government, if it is democratic, is at least semi-divine, we dupe ourselves into being duped and pillaged by others. The fact that we humans can imagine matters turning out otherwise – that we can imagine public officials somehow gathering godlike knowledge and then using that knowledge as angels would us it – is not (contrary to popular presumption) a sufficient reason to trust government officials with a great deal of power to “regulate” the affairs of peaceful people.

Pittsburgh Tribune-Review: “Joe & Hugo: Oily characters”

(Don Boudreaux)

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My Pittsburgh Tribune-Review column for January 13th, 2008, was inspired by hearing a radio ad featuring Joe Kennedy praising Hugo Chavez. This column appears in full beneath the fold. (Other than below, this column is not available on-line.)

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Quotation of the Day…

(Don Boudreaux)

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… is from page 54 of Razeen Sally’s excellent 2008 book, New Frontiers in Free Trade: Globalization’s Future and Asia’s Rising Role (footnote deleted; link and emphasis added):

The naysayers, from the hard and soft Left, and the conservative Right, hold that liberalization has not delivered the goods. They argue for various forms of government intervention, at national and international levels, to tame “market fundamentalism” and “neoliberal globalization.” Interventionist ideas on trade (and aid) are not new; they hark back to pre-Adam Smith, “preanalytic” mercantilism (as Schumpeter called it). What they have in common is an age-old distrust of markets and faith in government intervention – what David Henderson calls “New Millennium Collectivism.” Such collectivist thinking is on the rise again. But it is still wrong and dangerous. It glosses over the damage done by interventionist policies in the past and misreads the recent and historical evidence.

DBx: Indeed so.

Today’s intellectual proponents of protectionism and of industrial policy – from the likes of Elizabeth Warren and Bernie Sanders on the left to Oren Cass and Daniel McCarthy on the right – seem to think of themselves as cutting-edge thinkers courageously exposing weaknesses and flaws that even the best proponents of free trade have until now somehow mysteriously overlooked. But I say again: protectionism has been around so long, and the forces that support it have been so unrelenting, that there is no argument against a policy of free trade – or in favor of protectionism – that competent scholars of trade have not yet heard, and in almost all cases have heard ad nauseam.

The vast majority of these apologists for protectionism – or for what Jon Murphy calls “scarcityism” – know just enough economic jargon to come across to unsuspecting audiences as sufficiently learned in the economics of trade to be worthy of being heard. But while I believe that most of these apologists for protectionism have good intentions – that is, they don’t intend to help special-interest groups seize unearned riches at the greater expense of their fellow citizens – these apologists for protectionism nevertheless peddle destructive nonsense.