Russell Roberts's Blog, page 454

Quotation of the Day…

(Don Boudreaux)

Tweet

… is from page 296 of Deirdre McCloskey’s 2019 volume, Why Liberalism Works: How True Liberal Values Produce a Freer, More Equal, Prosperous World for All:

The central duty of an academic economist is to give the news that such and such a policy beloved of politicians and journalists is bad, when it is.

DBx: Yes. And so the sound economist in practice spends much time insisting on fundamental points, three of the most important of which are these:

First, as Thomas Sowell often reminds us, reality isn’t optional. (For example, the cost of building a bulldozer isn’t zero simply because the rate of interest on funds used to finance the building of the bulldozer is driven by the central bank to zero.)

Second, economic reality is far more complex, nuanced, and changing than are the words that we use to describe this reality. (For example, “the” steel industry isn’t an objective thing in the way that the planet Mercury is an objective thing.)

Third, nearly all economic reality is invisible to the naked eye; it can be seen – although seldom in much detail – only with the use of sound economic theory. (For example, the terms of labor contracts even for low-skilled hourly wage workers include many more terms and conditions – nearly all implicit, and able to be altered – than are visible.)

The economist’s task is indeed a curious one.

Proponents of Industrial Policy and Protectionism Know No Economics

(Don Boudreaux)

Tweet

In my latest column for AIER I do my best to expose more of the economic fallacies that infect the case made by Daniel McCarthy and other ‘conservative nationalists’ against a policy of free trade. A slice:

From Adam Smith forward, economists and market liberals have explicitly addressed – patiently, repeatedly, and in countless different ways – the incessant protectionist assertion that the home country will suffer if it doesn’t impose tariffs on imports from countries whose governments impose tariffs on home-country exports. Indeed, countering this particular protectionist canard is standard fare for many students as early as ECON 101.

Informed free traders have also continually explained why market-distorting subsidies used by foreign governments justify neither subsidies nor tariffs in the home country. Similarly, we market liberals have, again and again and again, busted the myth that the home-country government should impose tariffs or dole out subsidies in order to counteract the economic damage done at home by the home-country government’s own unwise regulations and burdensome taxes.

It would, of course, be impossible to counter these protectionist excuses for tariffs and subsidies without recognizing that governments both abroad and at home do indeed often intervene in ways that distort markets.

That Daniel McCarthy knows no economics isn’t a sin. Most people know no economics, and most economists know nothing about other fields and disciplines. We’re all fortunate enough to live in a world of deep specialization.

It is, however, inexcusable for people such as McCarthy to present themselves to the public as if they know the economics that they criticize with such cocksureness. Judging from what he writes, McCarthy is as unschooled in economics as I am in the classics, which is to say almost completely. And so McCarthy’s criticisms of  the economics of trade – and of market-liberals’ support for a policy of unilateral free trade – deserve no more respect than would be deserved by any criticism that I might offer on the merits of a new translation of Ovid’s Tristia.

Pittsburgh Tribune-Review: “The ultimate scholar”

(Don Boudreaux)

Tweet

In my column for the February 13, 2008 edition of the Pittsburgh Tribune-Review, I remembered the great Julian Simon on the tenth anniversary of his too-soon death. (He died on February 8th, 1998.) You can read my remembrance beneath the fold.

(more…)

Quotation of the Day…

(Don Boudreaux)

Tweet

… is from page 7 of my late colleague Jim Buchanan’s 1971 paper “The Bases for Collective Action,” as this paper is reprinted in James M. Buchanan, Externalities and Public Expenditure Theory (2001), which is volume 15 of The Collected Works of James M. Buchanan:

In a setting where the sole function of government consists in the definition and enforcement of private personal and property rights, which include the enforcement of voluntary contracts and the policing against fraud and deceit, an orderly economic process would emerge in the natural course of events. It is important that this be recognized. So long as men differ from one another in tastes and/or basic endowments, and so long as they are free to negotiate enforceable contracts with one another, trades will be made. Individuals will find it in their own interest to exchange goods and services (including productive services such as their own labor) with each other. “In their own interest” here means simply that individuals can increase their ultimate command over real goods by trade. Exchange becomes essentially equivalent to production; it provides an efficient means of transforming less desired into more desired goods and services.

My Intrepid Mercatus Center Colleague Veronique de Rugy

(Don Boudreaux)

Tweet

I’m often asked why I regularly refer to Veronique de Rugy as “my intrepid Mercatus Center colleague.” The answer is that she is just that. Never have I met anyone as dogged as is Vero at exposing the economic fallacies and factual errors that are always to be found at the root of cronyism and fiscal irresponsibility.

My moniker for Vero occurred to me about five or six years ago when she, with remarkable determination, led the charge that nearly succeeded in permanently plugging that great geyser of cronyism, the U.S. Export-Import Bank. Although this absurd and crony agency is now again gushing out taxpayer dollars at full force, Vero’s efforts were instrumental at slowing it down for years. This tireless and deeply principled American émigré from France alone is responsible for resource savings over the past few years likely measuring in the tens of millions of dollars.

Vero writes streams of papers, columns, and letters-to-the-editor. She, seemingly without stop, speaks publicly and debates. She testifies often before Congress, despite the personal distaste that she experiences whenever she addresses those officious czars and czarinas. She eagerly appears on radio, t.v., and podcasts to make the case for free markets and against statism. And in the tradition of her native country, Vero’s home is a salon for intelligent and interesting people to try out, discuss, debate, and sharpen their ideas.

In short, Veronique de Rugy is one of today’s most important champions of liberty and of economic literacy, and opponents of cronyism and fiscal incontinence.

Now available is the long version of testimony that Vero recently gave before the Ex-Im Bank’s Board of Advisors. Here’s a slice, but do read the whole thing:

I know this reality is painful for an agency dedicated to the belief that export subsidies create economic growth and jobs. In reality, what this agency does is to shift capital toward favored export companies, which sometimes does add more jobs at these firms. However, as I mentioned earlier, this capital is diverted away from other American industries, many of them also exporters.

Quotation of the Day…

(Don Boudreaux)

Tweet

… is from page 23 of Tulane University philosopher Eric Mack’s excellent 2018 book, Libertarianism (original emphasis; the internal quotation is from David Hume):

The first principle of justice that enables us to escape from this anti-cooperative quagmire and at least achieve peaceful co-existence is “the stability of possessions,” which forbids the seizure of other people’s holdings. General compliance with this principle assures individuals that they will enjoy the fruits of their own labor and that they had better engage in productive labor because the options of seizing the fruits of others’ labor has been ruled out. The anticipation of this compliance enormously increases everyone’s incentive to live by production and not by predation.

DBx: Widespread acceptance of this principle is among the most fundamental requirement of any society whose members are to rise above subsistence – indeed, whose members are to form anything deserving the name “society.” And both society and prosperity become greater the more fully, and the more as a matter of principle (rather than of convenience), this principle is followed.

Strict adherence to this principle alone ensures that no human being lives parasitically on any other or others. And it virtually guarantees that humans spontaneously form productive, intricate, unplanned, and ever-deepening and expanding networks – “catallaxies” – of peaceful human cooperation. After all, if you want to prosper from the efforts of others, you must – under this principle – enable others to prosper from your efforts and to do so in ways that they affirm.

When you seek to prosper from the efforts of others, the productivity to you of others’ efforts is judged by you (in the form of you voluntarily paying for the fruits of those efforts) and the productivity to others of your efforts is judged by the others with whom you choose to deal (in the form of them voluntarily paying for the fruits of your efforts).

This intricate system of productive social cooperation is an outcome that is not to be sneezed at, and it cannot be brought about or sustained in the absence of widespread adherence to this principle.

Yet the vast bulk of political demands and actions violate this principle. “Punitively tax fellow citizens who buy imports!” “Seize income from some fellow citizens to better enable other fellow citizens to export!” “Smith has too much wealth: seize it and ‘redistribute’ it to Jones!” “Jackson doesn’t want to move from the town he’s lived in for many years, but he himself doesn’t wish to pay the cost of indulging this preference; he wants taxpayers to pay for his indulgence of this preference. So compel taxpayers to pay the requisite sum to Jackson! Oh, and in addition, portray the rich who pay the taxes as greedy and unproductive villains, while portraying Jackson as a noble and productive victim.”

Dangerous and deeply anti-social attitudes.

Bonus Quotation of the Day…

(Don Boudreaux)

Tweet

… is from page 6 of the original edition of James M. Buchanan’s 1960 textbook, The Public Finances (a book that isn’t included in Buchanan’s Collected Works) (typo corrected):

[In a market economy] No individual coerces any other individual; a market transaction represents a wholly voluntary exchange from which both parties expect to receive benefits. The market economy is an organized method of securing voluntary cooperation among individuals. It is essentially a system of spontaneous order which arises out of the individual participation of numerous buyers and sellers. Resources are allocated to the many possible employments; goods and services are produced and distributed without a direct central plan every having been discussed, approved, formulated, or even contemplated. The first main advantage of this sort of economy is, therefore, that it “free” or “voluntary.”

The second main advantage is that the market economy incorporates a high degree of “efficiency.” This means quite simply that the individually inspired motivation of consumers, workers, property owners, and business enterprises combine to secure an over-all economic organization which is not grossly extravagant in its usage of scarce resources available for disposition. Decisions are decentralized private decisions and, therefore, mistakes are private individualized mistakes.

DBx: Note that Buchanan lists as the market’s first main advantage the fact that, within markets, individuals are free. No one can coerce anyone. If Jones wishes something from Smith, Jones must peacefully persuade Smith to give or to do that something – a reality that means that Jones, to get what he wishes from Smith, must give to Smith something that Smith wishes to have.

Efficiency in resource use is regarded by Buchanan as being only the second main advantage.

Note also that Buchanan’s description of market efficiency is not some hyper-condition. Instead, as Buchanan describes it, market efficiency prevails when the use of scarce resources “is not grossly extravagant.”

I wish that people such as Oren Cass, Michael Brendan Dougherty, and Daniel McCarthy – people intoxicated with the notion that government should be given far more power to direct the allocation of resources – would learn some economics. They don’t have get degrees in the subject or even to take upper-level undergraduate economics courses. Instead, let them read, with careful attention, some Buchanan, some Hayek, some Alchian and Allen, some Demsetz, some Sowell, some McCloskey, some Gwartney and Stroup, some Landsburg, some Heyne-Boettke-Prychitko, some Cowen and Tabarrok. Let them read some solid economics to discover the error of their ways.

Some Links

(Don Boudreaux)

Tweet

Jeffrey Tucker rightly laments Trumpism’s swallowing of conservativism. A slice:

Meanwhile, philosopher George Will, something of a guru in conservative circles in the early part of my career, is now the outlier, an isolated dissident in the Trumpization of conservatism. His mighty treatise The Conservative Sensibility proves that the only American conservatism worthy of the name is but an elaboration of the great liberal conviction that society manages itself better than it can ever be managed by state authority. It’s a book for the ages; it has to be because it has made no dent in the march of Trumpism in our own time.

An increasingly popular style of leftist “history” features explanations that mix breathless conspiracy theories with juvenile suppositions about the role of money in order to “explain” pro-market events and ideas. My GMU colleague David Bernstein busts one such “explanation” of the origins of the scholarly law-and-economics movement.

Writing in Reason magazine, David Henderson clears up a great deal of confusion about income inequality. A slice:

I should note that while most consumer goods have been getting cheaper, education, housing, and health care have become more expensive. Interestingly, these are all areas in which governments have had a substantial influence on prices. In education, state and local governments have almost a monopoly; in housing, governments on the West Coast and in the Northeast have so restricted new construction that supply has not kept up with demand, causing prices to explode; and in health care, extensive regulation and subsidization have driven up the cost, though not always the price, of health care.

Here’s Scott Sumner on capitalism and China.

Chris Edwards busts a myth about wealth – a myth perpetrated by Elizabeth Warren.

I agree with Nick Gillespie: we need more people like Judge Andrew Napolitano.

Timothy Taylor is none too impressed with the Gray Lady’s “1619 Project.“

Quotation of the Day…

(Don Boudreaux)

Tweet

… is from page 172 of my late Nobel-laureate colleague Jim Buchanan’s 1987 paper “Man and the State,” as this paper is reprinted in James M. Buchanan, Federalism, Liberty, and Law (2001), which is volume 18 of the Collected Works of James M. Buchanan:

Failure or success has too often been measured in terms of the standard economists’ criterion of efficiency, the ability to get goods and services produced and distributed, to add to the wealth of nations. Markets may fail against the efficiency standard, even in some relative sense. But even in failure markets allow persons to retain exit options without which liberty cannot be secured.

DBx: The important point that Buchanan makes here has several implications, two of which are:

– To the extent that human beings value liberty as an end in itself – that is, apart from whatever instrumental value liberty has for increasing our material prosperity or even our happiness – the decline in liberty should be entered on the cost side of any cost-benefit analysis of government intervention. To leave it off – to fail to account the loss of liberty as a ‘cost’ – is unscientific if and to the extent that any individual values liberty. The fact that this cost is especially difficult to render in monetary terms doesn’t justify excluding it from cost-benefit calculations.

– When government intervenes to correct real or merely alleged market failures, it typically – as Buchanan notes – blocks off exit options. The Pigouvian tax must be paid. The toilets must use no more than X amount of water per flush. Plastic straws may no longer be offered for sale. Yet to block off exit options is to block off options that might have been used by entrepreneurs to devise better ‘solutions’ to the market failures than those imposed by government. The loss of the prospect of these better ‘solutions’ is also a cost of government intervention, one admittedly difficult to see and practically impossible to quantify. Yet who can deny that it’s real? (This cost of intervention would be nonexistent only if the state really were godlike.)

Bonus Quotation of the Day…

(Don Boudreaux)

Tweet

… is from page 75 of the original edition of Lee Francis Lybarger’s 1914 book, The Tariff (original emphases):

If you would understand the Motives and Philosophy of Protection, you must realize that it is simply a conflict between the Producer and Consumer. In other words, it is an effort on the part of the producer to secure by law a higher price from the consumer than he is able to obtain in the open market. The Producer is against an open market and in favor of a closed market. Therefore the Tariff causes an increase of price wholly in the interest of the Producer and at the expense of the Consumer. What it gives to one it must take from the other.

DBx: Yes.

Pedants will pounce! They’ll declare that some of the costs of tariffs are typically borne by foreign suppliers in the form of lost profits on foregone export sales. This declaration is true. But it’s also irrelevant.

Because the very purpose of a protective tariff is to artificially divert sales from imports to domestically produced goods and services sold in competition with imports, a protective tariff has its intended effect of so increasing these domestic sales only to the extent that the prices confronted by domestic consumers rise. If and insofar as foreign suppliers absorb – “pay” – the cost of the tariff, price hikes in the domestic market are lower than they would otherwise be and domestic producers who compete against those foreign suppliers aren’t helped.

In the extreme case, in which foreign suppliers absorb the entire cost of the tariff, the prices of imports don’t rise at all. As a result, no sales are diverted from imports to domestic sellers. But, obviously, such an outcome is not the one sought by industry lobbyists who plead for the protection of tariffs. Such lobbyists – and their principals, as well as the politicians who heed their pleas – want to harm domestic consumers by making them pay higher prices. That is the goal.

Every protective tariffs is by its very nature an attack by agents of particular domestic producers against domestic consumers. It is an attack no less real, no less venal, and no less unjustified – economically and ethically – than would be a seller’s threat to shoot out the brains of customers who refuse to pay higher prices for that seller’s offerings.

And apologists for protectionists are apologists for predators. Period.