Russell Roberts's Blog, page 463
December 31, 2019
Fritz Machlup on J.M. Keynes
Larry Glenn, who studied economics at NYU, sent to me earlier today an e-mail with this recollection of the late, great economist Fritz Machlup (who was my international-trade professor in the Spring of 1981). I share here with Larry’s kind permission.
When I was a grad student at NYU a young genius chose to argue with Professor Machlup. The discussion had to do with imperfect competition. The wizard, unhappy, with what he was told, rambled inanely about Keynes. Eventually, Professor Machlup said (I am quoting exactly because his words were burned into my mind): “Enough, ach rubbish, the only thing Keynes ever accomplished was to put an intellectual veneer on the politics of Tammany Hall.” The young wizard dropped the class.
‘The People’ Is Not a Sentient Creature
It’s fair to suspect that I’m making too big a deal about not calling the outcome of any election “the will of the people.” But I insist. To talk of a “will of the people” is to imply the existence of a creature who is greater than each of the individuals who comprise ‘the people’ – a creature to which each individual’s will and well-being are subservient. It’s the tiniest of steps from a belief in such a creature to the conviction that no individual is an end in himself or herself but is, instead, merely a means to serve this creature. And from this false belief in such a higher-order creature, all manner of tyranny has ensued.
Pittsburgh Tribune-Review: “Discovering your inner economist”
My column for the September 26th, 2007, edition of the Pittsburgh Tribune-Review was inspired by Tyler Cowen’s then-newly published book, Discover Your Inner Economist. You can read my column beneath the fold.
Quotation of the Day…
… is from page 73 of the original edition of James M. Buchanan’s and Richard E. Wagner’s important 1977 book, Democracy in Deficit: The Political Legacy of Lord Keynes:
The ultimate danger in such situations as that which we are coming to confront, one that has been confirmed historically all too frequently, is that we will come to see our salvation as residing in the use of power. Power is always sought to promote the good, of course, never the bad. We are being bombarded with increasing intensity with calls for incomes policies, price and wage controls, national planning, and the like. Each of these aims to achieve its objectives by the imposition of new restrictions on the freedom of individuals.
DBx: In many ways we humans are indeed advanced, at least by any realistic standards available to us for comparison. Yet in what domains have we achieved true and large advances? I believe that the answer is this: mostly – only? – in those domains in which we interact with each other peacefully and without one party able to initiate force against the other.
Art is an example. Is it conceivable that George Eliot could have written Middlemarch were she commanded at knife point to do so? That Mark Twain’s genius was uncorked by the threat of being shot had he not produced the likes of Huckleberry Finn? That Dr. Seuss used words and drawings as he did to teach and to entertain because some Secretary of This or That bridled him to do so? That Cézanne’s brilliance with a brush was the product of superintendence by French bureaucrats? That the creation, performance, and spread of the music of Bach, Louis Armstrong, and the Beatles were made possible by state planning and diktats? Not remotely. Art – art that is genuine and worthwhile – is one of the many sweet fruits of commercial society.
Or think of these achievements, ones made all the more spectacular because they are – to most of us in the 21st century – so hum-drum routine that apparently serious people write about these marvels as if their creation and provision are ordained by nature: commercial air travel; automobiles; telephony; radio; television; refrigeration; skyscrapers; air-conditioning; antibiotics; contact lenses; music streaming; supermarkets; Wal-Mart, Ikea, and Amazon.com; Google; blueberries in Boston in the bleak winter; Paris fed daily; pencils. All of these magnificent achievements – including their widespread availability (that is, affordability) – are the product of peaceful commerce largely unconstrained by political borders and guided by market prices.
It’s beyond sad that so many people today – all of whom swim in this ocean of material prosperity and globe-spanning voluntary human cooperation – continue to be entranced by the imaginary power of power.
Describe to a second-grader some situation and present it to the child as a intolerable problem – for example, some people have lots more money than other people; people in some countries are much poorer than are people in other countries; people continue to get killed and maimed in automobile accidents, while other people die young from diseases such as cancer and tuberculosis; this group of persons feels slighted by what was said or written by some speaker or blogger. Whatever the problem, the second-grader is likely to propose that it be solved by force: forcefully transfer money from those who have more of it to those who have less of it; order that automobiles be made even safer; seize more resources to be used to cure diseases; command people to be nicer to each other while threatening the not-nice with punishment.
Resort to force is childish and primitive. Not only does it involve no creativity, it hardly taxes the intellect. Only the most primitive parts of our brains are used to devise ‘solutions’ based on force. Those who resort to force see only the immediate in time and place. “Richard is richer than Paul, so we can make Paul richer by seizing much of what belongs to Richard!” Those who resort to force typically do not have hindsight that is 20/20 – for example, they have no idea why Richard is richer than Paul – and have foresight that sees nothing beyond the next moment.
What is often called “Progressivism” – the politics, for example, of Elizabeth Warren, Bernie Sanders, Andrew Yang, Joe Biden, and Jeremy Corbyn – is, despite the self-flattering fancy of “Progressives,” a politics that emerges directly and almost exclusively from the brain stem and amygdala. A far-more appropriate name would be “Primitivism.” Such people cannot fathom the fact that intentions are not results and that results very often do not reflect intentions. The complexity of society and the economy are lost on them. What they see they suppose is all that exists. And although they often ‘see’ disorder where in fact order reigns, when they do see order they mistakenly suppose that that order is the result of conscious design and implementation.
The politics of most conservatives is no better. They, too, believe that force is a grand tool for fashioning society into the fancied form.
Politics in practice is no more intellectually advanced than the typical school-yard fracas.
December 30, 2019
Bonus Quotation of the Day…
… is this Facebook post by Matt Ridley:
If there is one dominant myth about the world, one huge mistake we all make, one blind spot, it is that we all go around assuming the world is much more of a planned place than it is.
DBx: Indeed so. This core lesson of the Scottish Enlightenment – the lesson of the reality of complex and useful emergent orders, designed by no one yet beneficial to everyone – remains far too little known and accepted.
Some Links
Jeffrey Tucker very much likes the movie Little Women (if not much of the commentary on it).
Here’s Max Gulker’s list of the ten worst ideas of 2019.
Megan McArdle wonders how long America’s current booming economy can boom.
If that woman-of-system Elizabeth Warren has her way, the boom will come to an abrupt halt.
What are Russ Roberts’s five/(six) favorite novels?
Jeffrey Miron and J.J. Rich offer another good reason to make marijuana legal.
Quotation of the Day…
… is from Butler Shaffer’s July 1st, 2013, essay “‘The Extremists Are Coming; The Extremists Are Coming!’“:
If, on one occasion, a police officer brutalizes a harmless individual, does that mean that a police-state has arisen? No, but intelligent minds should recognize that such totalitarian consequences are implicit in such an act, and should respond accordingly. I am reminded of that powerful scene at the end of the movie, Judgment at Nuremberg. Judge Haywood (played by Spencer Tracy) has been called to the jail cell of the Nazi judge (played by Burt Lancaster) who has just been given a life sentence for his crimes. The convicted judge tells Judge Haywood: “Those people, those millions of people. . . I never knew it would come to that.” Judge Haywood replies: “it ‘came to that’ the first time you sentenced a man to death you knew to be innocent.”
DBx: Butler Shaffer passed away yesterday. Emeritus Professor of Law at Southwestern Law School in Los Angeles, Butler was an eloquent champion of society ordered by peaceful accommodation rather than by coercion. Some would call him an extremist; I call him deeply principled.
I didn’t know Butler well, but I very much enjoyed the handful of times that I spent in his company. (I first encountered his work through his insight-filled 1975 article “Violence as a Product of Imposed Order.“) He will be missed.
December 29, 2019
Quotation of the Day…
… is from page 473 of my late Nobel-laureate colleague Jim Buchanan’s 1994 paper “Economic Theory in the Postrevolutionary Moment of the 1990s,” as this paper is reprinted in Economic Inquiry and Its Logic (2000), which is volume 12 of the Collected Works of James M. Buchanan:
My purpose here is not to bore you with a summary of first-week elementary economics. But I should insist that those of us who are professionals in the discipline often neglect these elementary principles at our peril, and especially when we recognize that only a very small minority of nonprofessionals possesses even a generalized understanding of how the economic order works.
DBx: The principal job – certainly the first job – of the economist is to explain to the general public how economic order arises spontaneously, guided largely by market-determined prices. This job, I believe, is a high calling. Without a correct understanding of the emergence and maintenance of economic order, the typical person supposes that the economy is created and run consciously, and the only question then being whether the conscious directors of the economy are to be private parties or government leaders (with the former always acting only to promote their own narrow interests, while the latter at least have the potential to act to promote the public interest).
Along with this false supposition comes a large number of fatal conceits, such as that prices, wages, and other contractual terms can be changed at will without causing any change other than in the distribution of wealth, and that trade patterns – domestic and foreign – can be altered through state coercion in ways that reliably improve the well-being of people in the home country.
Those people who hold such a view and who also sincerely wish to promote the general good are naturally led to look with suspicion upon anyone who advocates that government be kept small and its powers strictly limited. To such people – we might call them “economic designerists” – calls to limit the scope and reach of government are calls to limit the scope and reach of the only available source of order and improvement. And why, asks economic designerists, would anyone wish to stifle the operations of the only available source of order and improvement? The obvious answer is that those who issue such calls to keep government limited are deeply ignorant, terribly narrow-minded and greedy, or mercenary operatives of the super-rich (or some combination of these three anti-social maladies).
The normative differences that separate economically informed advocates of free markets from modern-day progressives and conservative nationalists are rooted in very different positive understandings of the source and nature of economic order. For a well-meaning person to understand spontaneous, or emergent, order is for that person to understand that attempts to consciously alter that order inevitably bring in their wake unanticipated ill-consequences that very likely outweigh whatever good might emerge from the altering. And so such a person warns against most government interventions. In contrast as stark as contrasts get, a well-meaning person who does not understand spontaneous, or emergent, order is almost inevitably impelled to warn of the opposite – namely, of the injustice, chaos, and calamity that seem to such a person to be inevitable absent the detailed attention and direction of a caring state.
December 28, 2019
There’s Nothing Unique About Competition from Imports
I’ll stop repeating economic facts when protectionists stop repeating economic fallacies.
Mr. McKinney:
You assert that I “drop the ball totally” when I write, as I did here, that “Free trade alone subjects [domestic] companies to maximum competitive pressures to operate in the public interest, while tariffs allow them to profit by snubbing the public interest.” In your view, because free trade allows domestic producers to import inputs “made by low wage foreign workers,” free trade “frees corporations to act AGAINST the public interest by destroying American jobs.”
Not so. Contrary to your belief, competition that prompts firms to economize on labor employed domestically promotes the public interest every bit as much as does competition that prompts firms to offer goods and services that consumers value. Put differently, the public interest is served by any practice or policy that rewards firms for reducing costs relative to the value of the outputs offered for sale to consumers.
If you truly believe that competitive forces work against the public interest whenever they prompt existing firms to economize on labor employed domestically, then your gripe is with far more than the competition that comes from imports. Your gripe is with competition itself. After all, competition incessantly drives firms to reduce the amounts of inputs used while increasing the value of outputs produced, and incites entrepreneurs to introduce new goods and services that ‘destroy’ some existing firms and jobs.
With the same energy that you regularly expend railing against imports, you should rail also against delivery firms that replace smaller vans with larger ones – airlines that upgrade their fleets so that less maintenance and repair are required – tire manufacturers that introduce tires that last longer and are less likely to be punctured – new toothpaste that reduces the incidence of cavities and gum disease – video-streaming services that reduce consumers’ demand to watch movies in theaters – people who discourage others from consuming tobacco, alcohol, and fatty foods – yoga instructors and exercise websites that shrink the demand for physical therapists – improved food-packaging that reduces the damage to foods being shipped to market – pharmaceutical products that reduce the risks of unwanted pregnancies and STDs and, thus, reduce the demand for condoms – our increasing wealth that enables more of us to vacation abroad – the growing popularity of beards which lowers the demand for razorblades…. This list is practically endless.
Until and unless you offer a compelling reason why the job churn regularly caused by all competition and economic change is harmful, you have no basis for asserting that competition from imports is not in the public interest.
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…
… is from page 37 of Steven Landsburg’s superb and hot-off-the-press The Essential Milton Friedman (original emphasis):
The reason capitalist societies have a chance of achieving political freedom is that in capitalist societies, economic power is dispersed. There’s always someone else to appeal to.
DBx: This point is one that Friedman brilliantly emphasized in his 1962 book, Capitalism and Freedom. This point is also made by Hayek in The Road to Serfdom. And of course, when Steve writes that “There’s always someone else to appeal to,” he – echoing Friedman and Hayek – refers to suppliers of the inputs necessary to exercise such freedoms as those of speech, the press, and assembly.
….
Steve’s volume is the latest in the Fraser Institute’s Essential Scholars series. Do check out the wide range of resources available with Steve’s book.
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