Russell Roberts's Blog, page 472

Who’d a-thunk It?

(Don Boudreaux)

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Every day the media produce hundreds upon hundreds of howlers. Why this one (quoted below) from last Friday’s Washington Post strikes me as especially amusing I can’t quite say, but it does. The howler in question appears in a report by Erica Werner and David J. Lynch on the on-going negotiations to replace NAFTA with the United States-Mexico-Canada Agreement (USMCA):

NAFTA was meant to expand trade among the United States, Canada and Mexico by removing tariffs and other barriers on products as they were shipped between countries. The pact did open up trade, but it also proved disruptive in terms of creating new manufacturing supply chains and relocating businesses and jobs.

So… when people become more free to trade with each other new trading relations arise. Some domestic firms export more, as well as import more inputs, while other domestic firms confront more competition from foreign rivals – all encouraging resources in the more-freely-trading nations to move from inefficient uses to efficient uses.

Wow! Freer trade results in changes in the pattern of trade! Freer trade, by uncorking more competition, causes some producers to change the manner of their operations and gives buyers new options that many buyers actually take! Just wow! Who’s a-thunk it?!

….

Seriously, what misconception would lead journalists to write such a passage as the one quoted above? Apparently, some journalists hold the view that reality harbors the possibility that patterns of trade can change without causing any actual change – without causing some producers to lose market share, without cause some workers to lose jobs, without causing some sellers to have to cut prices. In brief, some journalists believe that it is possible for trade patterns to change and at the same time not change.

In what universe to such people reside?

Quotation of the Day…

(Don Boudreaux)

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… is from page 195 of Steven Landsburg’s 2009 book, The Big Questions:

Princeton Professor Alan Blinder has recently estimated that 30 to 40 million Americans face the prospect of losing their jobs to lower-paid foreign competitors. Or in other words, all Americans face the prospect of lower prices for the output of 30 to 40 million workers. That’s good, though of course 60 to 80 million would be better.

Pitchfork Protectionism

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

Attempting to excuse Pres. Trump’s economically misguided protectionism, Bobby Jindal – like a rabble-rousing populist from central casting – bellows out fallacies and slays straw men (“Trump Wins the Populist Patriots,” Dec. 3).

Consider this concoction of confusion: “Automation and foreign competition led to layoffs, and while some new higher-paying domestic jobs were created in value-added advanced manufacturing, they weren’t distributed evenly by geography or skill level. Cheaper products at Walmart weren’t sufficient compensation for lower wages and fewer hours.”

First, all economic change destroys some particular jobs. Automation and foreign competition are hardly unique on this front. Jobs were destroyed by the polio vaccine, the Atkins diet, Home Depot competing with locally owned hardware stores, and Aunt Edna buying a pet goldfish rather than another dog when beloved Fido died. Does Mr. Jindal wish to stop all economic change?

Second, economic change occurs only if masses of ordinary consumers voluntarily embrace the new products and sellers. Why doesn’t Mr. Jindal wave his rhetorical pitchfork menacingly at middle-class and poor Americans and accuse them of unpatriotically selling out the U.S. to their own narrow material interests?

Third, economic gains are never “distributed evenly by geography or skill level,” and nothing in economic theory suggests that they should – or even could – be so distributed.

Fourth, wages were not “lower.” And if there was a fall in work hours, it was almost certainly caused by workers chosing to work fewer hours – a happy outcome made possible by ordinary Americans’ increasing prosperity.

Although you’d never guess it from reading Mr. Jindal, the percentage of all American households earning annual incomes of at least $100,000 (measured in 2018 dollars) is, at 30.4, today at an all time high.* This figure is more than double what it was during the mid-1970s – that period just before America started running trade deficits, deregulating industries, cutting marginal tax rates, and falsely identified by peddlers of the middle-class-stagnation myth as marking the peak of middle-class American prosperity.

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

* See Table H-17 here.

Has “Neo-liberalism” Failed?

(Don Boudreaux)

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Johan Norberg – citing research from the great William Easterly – busts another myth.

Pittsburgh Tribune-Review: “On the nature of politics”

(Don Boudreaux)

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In my column for the January 20th, 2007, edition of the Pittsburgh Tribune-Review, I was inspired by David Haddock’s “the sovereign’s paradox” to riff on the nature of politics. You can read my riff beneath the fold.

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Quotation of the Day…

(Don Boudreaux)

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… is from page 158 of Deirdre McCloskey’s insight-filled 2019 book, Why Liberalism Works: How True Liberal Values Produce a Freer, More Equal, Prosperous World for All:

[Thomas] Piketty downplays the main reason that we are so much better off than our ancestors. The reason is not the character of distribution, but the ingenuity encouraged by letting people run their farms or their factories the way they want, taking the risk of failure and the rewards of success. We all agree that creative destruction is good in science and art and journalism and football, yes? Why not also in the economy?!

DBx: Here’s a simple, if ideologically unwelcome, reality: In a market economy wealth is created by human ingenuity, effort, risk-taking, and cooperation arranged by voluntary contracting – all within a competitive structure in which consumers are free to spend their incomes as they choose (implying that no producer has a right to consumer patronage). In this market order – the only system that has proven itself in practice as being able to sustainably enrich everyone, especially the masses of ordinary people – the only path to individual prosperity is to help others to achieve greater prosperity. And the more a person helps others to achieve greater prosperity, the greater is that person’s own prosperity.

Great fortunes earned in market economies are evidence not of negative- or zero-sum exploitation of others – not of unfairness – not of unsavory behavior – not of a ‘broken’ or unjust method of taxation – not of cronyism – not of anything other than the success of those who earn great fortunes to please to unusual degrees unusually large numbers of their fellow human beings. And so to discourage the earning of unusually large fortunes is to discourage people from being of unusually great service to their fellow human beings.

Many will think the above paragraph to be oh-so-bourgeois lame. “How predictable! How uncritical!” faux sophisticated folk – on the left and the right – exclaim. Yet I stand by it. Overwhelming support for the truth of the above paragraph is supplied by economic history. The great wealth of Rockefeller, of Swift, of Carnegie, of Ford, of Kroc, of Walton, of Jobs, of Gates, of Winfrey, of Bezos, of Zuckerberg, of you-name-the-person-who-became-fabulously rich in the market was earned; it was, indeed, created by them. And the typical among them, at least if the second half of U.S. history is any guide, was obliged by market competition to enrich his or her fellow human beings to the tune of about 45 times more than that entrepreneur enriched himself or herself.

Hostility to such entrepreneurship and to the lures that encourage it, and to the price and profit signals that direct it, come from children, fools, sociopaths, and tyrants. Informed, well-meaning, civilized adults applaud such entrepreneurship and do not succumb to the destructive (personally and socially) sentiments of envy and covetousness of what belongs to others.

Oh, and by the way to all of you who have a warm spot for the false promises of industrial policy: the success of none of the entrepreneurs mentioned above – nor the products and economic processes they helped to make possible – was the result of government design or policy.

If I Could Draw…

(Don Boudreaux)

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… I’d draw a picture meant to convey the inconceivable complexity, dynamism, and vastness of the modern economy.

As I imagine it, my picture would give the viewer the impression of looking, from the perspective of eye-level, at the surface of an ocean, with that which is above the surface presumably visible to anyone who looks and that which is below the surface invisible to all but the privileged viewer of the picture.

Above the surface is a cornucopia of goods and services – goods and services the existence of which is made possible by what is beneath the surface. The goods and services above the surface, available for people to consume, are all connected in intricate ways to the materials, machines, efforts, and processes that churn beneath the surface. Although the quantity of goods and services above the surface is immense, it is minuscule compared to the gargantuan amount of economic inputs and activities beneath the surface – inputs and activities, including creative entrepreneurship and risk-taking and on-the-spot problem-solving – connected to each other and to the goods and services above the surface in a web so complex as to be inconceivable to the human mind.

…..

It’s easy to see that which in reality is, so to speak, above the economy’s surface: the huge amounts food, drink, and other household goods that are always available in every supermarket throughout the modern world – the automobiles whizzing up and down boulevards and autobahns – the seemingly endless menu of choices at Amazon.com – the army of oncologists, cardiologists, neurologists, podiatrists, obstetricians, pediatricians, and other medical specialists – the blogs, books, movies, streaming music, movies-on-demand, guided tours, and sports-league television networks to entertain or challenge your mind – the jetliners to carry you home for holidays or away from home on job assignments – the high and rising life-expectancy, the infants not dying (nor their mothers), the parents not grieving – the artificially cooled indoor air during the summer and artificially heated indoor air during the winter – the new app for smartphones – smartphones! – goods and services galore, from the gaudy to the glorious and each and every one the fruit of an inconceivably complex and spontaneously ordered web of economic relationships and processes, a mix of peaceful competition and cooperation, that works so silently and invisibly that almost no one knows of its existence.

It’s not at all easy to see the productive processes that make this cornucopia a reality. Indeed, it’s easy to deny, or to trivialize, its existence despite its enormousness.

…..

The portion of an iceberg looming silently beneath the surface of the water is nothing as compared to the portion of the market economy that is beneath the economy’s ‘surface’ – the supply chains, the financial flows, the incredible specialization, the engineering talent, the marketing skills, the management genius, the gumption and drive and determination of ordinary men and women. And the complexity of the iceberg is non-existent compared to the complexity of the modern economy.

People such as Trump, Sanders, Rubio, and Warren – or Gabriel Zucman, Oren Cass, George Monbiot, and Tucker Carlson – and those who are enchanted by the sorts of things that such people say and write, are utterly ignorant of what percolates and hums so productively beneath what the eyes of such myopic people perceive.

I wish, oh how I wish!, that I had artistic talent enough to paint such a picture!

Some Links

(Don Boudreaux)

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Shikha Dalmia argues that Trumpism increases Americans’ likelihood of embracing policies of the sort peddled by Bernie Sanders and Elizabeth Warren. A slice:

Socialism subordinates the interests of individuals in the name of a utopian egalitarianism, producing terrible results wherever tried. And yet it manages to seduce people because it purports to advance a just society. But America First dispenses with notions like justice. It has a zero-sum Hobbesian view of the world where one group’s benefit is the other’s loss. Socialists want to unite the world behind a problematic conception of the common good. But America First divides the world into us versus them, insiders versus outsiders — and then uses the full power of the state to advance the interests of the former without much regard for fairness toward the latter. It’s a fundamentally tribal approach to politics where (state) might makes right.

Art Carden remembers Gary Becker. A slice:

In my opinion, one of the more interesting empirical analyses of this phenomenon is a 1989 article by Donald Cox and John Nye in the Journal of Economic History. In a study of 19th-century French manufacturing  — when gender attitudes were far less progressive than they are in modern times and when, therefore, people had less of an incentive to misreport the data  — Cox and Nye found that men and women were paid according to their productivity rather than according to their gender. Is market competition a panacea that will eliminate all discrimination? That’s doubtful; however, Becker helped us understand how a competitive marketplace can punish discriminators.

Matt Ridley exposes the inhumanity of Greenpeace.

Richard Rahn celebrates the increase in consumption equality.

And Arthur Brooks celebrates the improving state of humanity.

Interviewed on the World Socialist website, the celebrated historian Gordon Wood makes clear his disdain for the New York Times‘s “1619 Project.”

James Pethokoukis talks with my colleague Bryan Caplan about Bryan’s new book (with Zach Weinersmith), Open Borders.

Support Teaching, Research, and Outreach that Champion a Society of Responsibility, Prosperity, and Freedom

(Don Boudreaux)

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To Cafe Hayek’s very much appreciated patrons:

Every year at this time I – like many others – impose on your generosity. I do so by asking you to consider including the Mercatus Center at George Mason University in your end-of-year giving plans. A financial contribution to the Mercatus Center at GMU helps not only to maintain, but to strengthen, the great bastion of sound economic thinking, teaching, research, scholarship, and public engagement that is uniquely GMU Econ. It helps also to support Mercatus’s stalwart efforts to translate this research into public-policy proposals that make the economy freer and, hence, more productive of mass prosperity.

We rely heavily, and gratefully, upon your generosity.

More than 90 percent of all funding for our graduate-student scholarships and stipends – and almost 100 percent of the funding for faculty and grad-student research expenses – comes not from the state but instead from annual private donations. Mercatus now supports a total of 255 students – three more than last academic year (which itself was five more than the previous year). Forty-six of these students are enrolled in GMU’s graduate economics program.

Among the activities that are privately funded are:

– our weekly Philosophy, Politics, & Economics Workshop which brings top scholars from other institutions to visit GMU throughout the academic year to mix with our faculty and students.

– the Adam Smith Fellows Program, in which students from institutions other than George Mason University meet regularly over extended weekends with GMU Econ and Mercatus Center faculty in order to discuss Austrian economics, public-choice economics, and the Bloomington School of economics founded by the late Nobel laureate Elinor Ostrom. Because student interest in this program continues to grown impressively, in 2019 we maintained the expansion started in 2016 of this Program to sites other than GMU: in addition to multiple weekend seminars near our Fairfax campus, we also now do seminars in Arizona and in London.

Other privately funded ventures at GMU Econ, often in partnership with the Mercatus Center and the Institute for Humane Studies, MRUniversity, outreach efforts to policymakers in government, and of course our blogging – blogging not only at Café Hayek, but also at Alt-M, Coordination Problem, EconLog, Marginal Revolution, and Overcoming Bias. (Not all of these blogs, I point out, are housed at GMU or Mercatus, but each is one at which some of my colleagues are regular contributors.) Just FYI, almost all of the work that my colleagues and I do on these projects is uncompensated; we do this work as part of our way of contributing to the causes of sound economic education and a free society. And I hardly need add – but I will – that none of these efforts receives a cent of government aid.

On the program side, of particular interest to me is Mercatus’s Trade and Immigration Project (TIP). Directed by Dan Griswold and me, this program challenges the economically uninformed and dangerous embrace of economic nationalism – an embrace offered today by those on the political right no less than by those on the political left.

An excellent example of just some of the output of this program is this superb new paper by my intrepid Mercatus Center colleague Veronique de Rugy. (Vero, by the way, continues to be a thorn in the side of supporters of the cronyist U.S. Export-Import Bank – including with this recent op-ed in the New York Times. She is also an incessant opponent of profligate government spending and of those who wish to interfere in the labor market.)

And Vero, Dan Griswold, and many other of my colleagues are near-daily voices and faces in the media – radio, t.v., podcasts, you name it –  defending economic openness, permissionless innovation, budgetary sanity, and other free-market policies with intelligence and clarity against the economic nationalism that now looms so frighteningly on the Potomac.

…..

GMU Econ is decidedly outside of the mainstream of modern economics, despite the fact that two of our faculty members won Nobel Prizes since 1986 – the late Jim Buchanan in 1986 and Vernon Smith, now emeritus at George Mason (and currently teaching at Chapman University), in 2002. The reason we are outside of the mainstream is that we do not approach economics as if it is a branch of applied mathematics or a training ground for social engineers. We also reject the increasingly common claim (among economists) that the best economic knowledge is that which is gotten through empirical studies. While our students are trained in appropriate mathematical and econometric methods, we at GMU Econ understand that economics is much more than those techniques.

The typical GMU economist – Arnold Kling calls us “Masonomists” – is a student of society. He or she knows not only cutting-edge economic research, but also the full tradition of economics dating back to before the time of Adam Smith. (We even have an entire field of specialization in the economics of Adam Smith, in which students and faculty members – including me – study carefully and discuss critically large swathes of Smith’s writings.) The GMU economist – unlike the typical modern economist – is thoroughly steeped in history, jurisprudence, political science, and philosophy. This broader understanding of society promotes skepticism of the social-engineering schemes that are forever pouring out of towers of ivory and from buildings of marble. Simultaneously, it promotes also a great appreciation of – indeed, a sense of wonder at – the stupendous coordinating and creative powers of free markets and free people.

Economics at George Mason University is intellectually alive and exciting. The world’s finest students – such as Rosolino Candela, who joined Mercatus after doing post-doctoral research at Brown University – who want to study economics in the rich tradition that is still honored at GMU Econ apply every year to our program; they apply either for entry into our PhD program or our Masters program.  We accommodate many of them, but (resources being scarce!) we can’t accommodate all.

A contribution from you will increase our capacity to teach and mentor more students. It will also help us to better serve the cause of sound economic education in other ways, such as by enabling us to extend summer funding to more undergrad students who wish to work with our faculty between academic years, and by enabling us to more fruitfully experiment with alternative media as we search for ways to communicate both with other scholars and with the general public about economics.

This last point is especially important. No other economics program is as active in the public discussion and debate as is GMU Econ; certainly no other program is as staunch a champion of free and depoliticized markets as is GMU Econ. Our faculty includes some of the world’s top economics bloggers, such as Peter Boettke, Bryan Caplan, Tyler Cowen, Robin Hanson, and Alex Tabarrok. These and other Masonomists – including, of course, the great Walter Williams – also frequently write in the pages of the New York Times, the Wall Street Journal, USA Today, and other popular outlets. And we are also often interviewed on radio and television and in podcasts. It’s our passion not only to better understand the logic and the workings of the economy, but to explain to non-economists the countless unseen or underappreciated ways that free markets coordinate human activities peacefully and productively.

If you like what you read here at Cafe Hayek, please consider helping the larger effort of which this blog is a small part – that larger effort is better and more widespread economic education. You can do so by making a tax-deductible contribution to GMU Econ through the Mercatus Center. (Those of you who contribute by mailing in a check might mention Cafe Hayek in a cover note. That snailmail address is the one available at the link or: Donald J. Boudreaux, Department of Economics, 114 Mason Hall, George Mason University, Fairfax, VA 22030)

I thank you all for honoring me by reading this blog. And I wish you the happiest of holidays and a 2020 that is filled with prosperity, peace, freedom, and a reinvigorated invisible hand.

Many thanks!

Don

Pittsburgh Tribune-Review: “A most illiberal sentiment”

(Don Boudreaux)

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My Pittsburgh Tribune-Review column of November 28th, 2006, was written in honor of Milton Friedman, who died earlier that month. It’s titled “A most illiberal sentiment” and appears beneath the fold. (For some reason, this column is not available on-line.)

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