Russell Roberts's Blog, page 448
February 14, 2020
Bonus Quotation of the Day…
… is from page 7 of the late Charles Schultze’s sadly still relevant Fall 1983 Brookings Review article, “Industrial Policy: A Dissent”:
The first problem for the government in carrying out an industrial policy is that we actually know precious little about identifying, before the fact, a “winning” industrial structure. There does not exist a set of economic criteria that determine what gives different countries preeminence in particular lines of business. Nor is it at all clear what the substantive criteria would be for deciding which older industries to protect or restructure.
DBx: This point – so simple, so obvious, and so important – is nevertheless completely ignored by Marco Rubio, Oren Cass, Daniel McCarthy, and other advocates of industrial policy. Industrial-policy advocates merely assume that government officials possess (or can come to possess) such knowledge, and that these officials will be immune to the political pressures that would press them to use their power in support of special interests rather than to further (what they believe to be) the public interest. But there is absolutely no basis for either of these assumptions. In fact, each assumption is ludicrous; neither is supported either by history or theory. Yet for industrial policy to have any hope of success, both assumptions would have to hold in reality.
Anti-Antitrust
In response to Farhad Manjoo’s bizarre column in yesterday’s New York Times – a column in which Manjoo complained that Amazon serves consumers so well that the general public isn’t much interested in using antitrust to break it up – my Mercatus Center colleague Bob Graboyes sent me the following note by e-mail (which I share with his kind permission):
I knew an antitrust economist long ago who told me about a landmark case in which he had some involvement. The accusation was that Xerox was monopolizing the copier market. The investigation dragged out for a while, and by the time the government’s antitrust authorities geared up for litigation, one of the first things they did was solicit competitive bids from various copier manufacturers.
Pittsburgh Tribune-Review: “A better brew for Rwanda”
In my Pittsburgh Tribune-Review column of November 20th, 2007, I wrote about the pacifying consequences of commerce. You can read my column beneath the fold. (Other than below, this column is not available on-line.)
Some Links
David Henderson joins in in setting the record straight about Milton Friedman’s ideas and influences.
Veronique also appropriately pokes fun at Farhad Manjoo’s incredibly bizarre complaint about Amazon.
Eric Boehm reports on yet another bad idea from the Trump administration.
John Miltimore reveals the latest instance of economically idiotic ‘thinking’ about the minimum wage.
Quotation of the Day…
… is from page 74 of my late Nobel laureate colleague Jim Buchanan’s pioneering February 1962 article in Economica “Politics, Policy, and the Pigovian Margins,” as this article is reprinted in volume 1 of The Collected Works of James M. Buchanan: The Logical Foundations of Constitutional Liberty:
The almost universal neglect of the imperfections that might arise from the political attempts at applying the economists’ efficiency criteria represents a serious deficiency in the work of welfare economists and economists generally. To shy away from considerations of the politically feasible has been deemed an admirable trait, but to refuse to exams the politically possible is incomplete scholarship.
DBx: This problem with economics scholarship hasn’t much improved over the course of the 58 years since Jim offered this well-deserved criticism of his fellow economists. The standards against which the performance of real-world markets is compared are unhelpfully unrealistic; the unwillingness to see the market as a process through which market ‘imperfections’ are discovered and dealt with creatively yet feasibly (if never ‘perfectly’) remains stubbornly entrenched; and the assumptions made about the knowledge possessed by, and about the incentives facing, political actors continue to be absurdly fantastical.
February 13, 2020
Bonus Quotation of the Day…
… is one to which Oren Cass, Daniel McCarthy, and other enthusiasts for protectionism and industrial policy should pay attention; it is from pages 68-69 of Chapman University’s Bas Van Der Vossen’s and Georgetown University’s Jason Brennan’s 2018 book, In Defense of Openness (original emphasis; footnote deleted):
However, it’s one thing to say that in principle such protectionist measures could pay off. It’s quite another to say that in the real world, we should pursue them. One problem here is that we face serious epistemic barriers. While on the blackboard we can describe infant-industry protection working to a country’s advantage, in the real world we aren’t well equipped to know which infant industries are worth protecting, how much protection they should have, when those protections should be relaxed, or which forms of protectionism will realistically benefit us more than they hurt us.
Closely related to this is the problem that protectionism will enable massive amounts of destructive rent-seeking – that is, attempts at gaining private economic benefits through political means.
Pittsburgh Tribune-Review: “Society & the individual”
In my December 28th, 2007, column for the Pittsburgh Tribune-Review, I made the case for individualism – a case that you can read beneath the fold. (For some reason, this column is not available on-line.)
Quotation of the Day…
… is from page 113 of my late Nobel laureate colleague Jim Buchanan’s 1983 article “The Achievement and the Limits of Public Choice in Diagnosing Government Failure and in Offering Bases for Constructive Reform,” as this article is reprinted in James M. Buchanan, Politics as Public Choice (2000), which is volume 13 of the Collected Works of James M. Buchanan; those who are unfamiliar with, or who reject, the public-choice perspective invariably compare real-world – and, hence, imperfect – market outcomes with imagined ideal government-generated outcomes; such comparisons always find real-world markets to be inferior to idealized, imaginary government ‘solutions’; Buchanan and other public-choice scholars worked to correct this bias in the analyses of policies, a bias that runs throughout much of modern welfare economics:
By implication almost universally, and by explicit statement in many instances, these “market failure” demonstrations of theoretical welfare economics were held to offer a prima facie case for corrective measures implemented through political-governmental means. There was no consideration given to the institutional structure within which such idealized corrective measures were to take place. To the theoretical welfare economists, markets “failed” in the allocative process; “ideal” government was assumed to be the alternative.
On several occasions I have referred to Public Choice, inclusively defined and as developed largely in the 1960s and 1970s, as “a theory of government failure” that offsets the “theory of market failure” that emerged from theoretical welfare economics. Just as the latter contains demonstrations that observed market processes fail to produce results that satisfy the conditions for allocative efficiency, Public Choice theory (once labeled as “welfare politics” by Paul Samuelson) contains demonstrations that observed political-governmental processes fail to satisfy the requirements for efficiency in the implementation of corrective measures.
DBx: And yet mainstream economists – who continue to accuse Austrian/Virginia/UCLA economists of being unscientific for failing to see market failures in all the many places in which mainstream economists see (or think that they see) such failures – routinely ignore what public-choice economics exposes as the likelihood of government failure.
Nothing about such a stance is scientific. Quite the opposite.
February 12, 2020
Bonus Quotation of the Day…
… is this February 10th, 2020, Facebook post by Bob Higgs:
When you affirm that unless the state coerces people a certain good will not be produced (or will be produced in “suboptimal amounts”) you are affirming that people do not value that good enough to pay for it (or for what you allege to be “optimal amounts” of it). Arguments about how people really value certain collective goods but will not voluntarily finance them because of free-rider incentives are almost always raw assertions about unobserved valuations. In fact, people voluntarily support many collective goods. As a rule the free-rider argument serves not as a scientific proposition, but as one of the central elements of the apologetics of the state in neoclassical welfare economics.
Pittsburgh Tribune-Review: “Getting the right picture”
In my column for the May 14th, 2008, edition of the Pittsburgh Tribune-Review I boasted of how knowledge of sound, basic economics gives to all who possess it the ability to see the world very differently – much more fully and accurately – than the world is seen by the economically benighted. You can read my boast beneath the fold.
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