Russell Roberts's Blog, page 56

Quotation of the Day…

(Don Boudreaux)

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… is from page 35 of Eamonn Butler’s 2021 book, An Introduction to Trade & Globalisation:

Trade delivers more than higher income alone, however. It also delivers a better quality of life. Plainly, richer countries can afford to spend more on things like education, better healthcare and a cleaner environment. But these and other quality-of-life benefits are also promoted through new ideas, practices and processes coming from abroad.

What Was Uniquely Important About American Revolutionaries?

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

The only discordant note in Harold Holzer’s review of Edward Larson’s undoubtedly superb book on American revolutionaries occurs in the conclusion (“‘American Inheritance’ Review: How Bondage Shadowed Freedom,” Jan. 21). There, Mr. Holzer favorably quotes Mr. Larson’s line that “[l]iberty and slavery remain our conflicted American inheritance.”

It’s true that many American founders preached liberty while holding fellow humans in bondage. And this grotesque hypocrisy is indeed a stain on these founders’ legacies. Yet the unique contribution of America’s founders wasn’t slavery – that institution had been commonplace for millennia – but, instead, the world’s first government with a credal commitment to individual liberty.

That this commitment was imperfect is true. No less true, however, is this reality: Had men such as Washington, Jefferson, Madison, and Franklin pursued only political independence from Britain without their radical commitment to keep government power strictly limited, not only would slavery in the U.S. likely have persisted for at least as long as it actually did, but the American revolution would be remembered today as merely a successful rebellion with absolutely no philosophical significance.

Our uniquely American inheritance is liberty, full stop.

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…

(Don Boudreaux)

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… is from page 193 of Michael Shellenberger’s excellent 2020 book, Apocalypse Never: Why Environmental Alarmism Hurts Us All (footnotes deleted):

The main problem with biofuels – the land required – stems from their low power density. If the United States were to replace all of its gasoline with corn ethanol, it would need an area 50 percent larger than all of the current U.S. cropland.

Even the most efficient biofuels, like those made from soybeans, require 450 to 750 times more land than [does] petroleum. The best performing biofuel, sugarcane ethanol, widely used in Brazil, requires 400 times more land to produce the same amount of energy as petroleum.

The Primacy of the Consumer-Welfare Standard

(Don Boudreaux)

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In my latest column for AIER I defend the consumer-welfare standard. To reject this standard – or to propose that it is only one of several competing standards for assessing the performance of markets – reflect deep misunderstanding of the nature of economic activity. Two slices:

The consumer-welfare standard has guided antitrust jurisprudence since the mid-1970s. Under it, antitrust has one goal and one goal only, namely, to ensure that markets satisfy as fully as possible the demands of consumers. Antitrust under this standard is not concerned with promoting as an end in itself the welfare of individuals as entrepreneurs, as investors, or as business owners. The consumer-welfare standard recognizes the important roles that each of us plays in our capacities as producers, but what is here recognized as important is the capacity of each of us to satisfy the desires of consumers.

Production is a means; consumption is the end. The consumer-welfare standard is nothing more, nor less, than an understanding and acceptance of this fundamental economic reality. But because this reality is easily misunderstood, spending time exploring it is productive.

This relationship between production and consumption isn’t a matter of choice or ideology. Nor is it a relationship unique to capitalism. It is, instead, a relationship that inheres in the nature of all economic activity. The very meaning of “to produce” is to transform inputs into outputs that are more valuable than are the sum of those individual inputs. The inputs, and productive efforts, are means; the end is the output that will be consumed.

To judge whether any particular output is worth the inputs and effort spent to create it, some reliable method of assessing each output’s value is required. In an economy, that assessment is done by consumers spending their incomes as they choose. Producers who earn profits have actually produced value; producers who suffer losses have not. Activities that are ‘proven’ profitable are continued and perhaps expanded, while activities that generate losses are halted.

…..

Joe can spend eight hours building a chair, or – using exactly the same wood, nails, glue, paint, and tools – nine hours building a table. After weighing his options, Joe chooses to build a chair. But just before Joe starts work, Joe’s neighbor, Sam, shows up, loaded pistol in hand, and announces: “Joe! I know what’s best for you. I order you instead to build a table. The extra time that you’ll spend building the table is more time producing! So build a table.” Not wishing to lose his life, Joe builds a table.

Similar to the above case of the mistakenly built table, we might here say that Joe “produced a table.” Also as in the above case, once the table is built, Joe might decide to keep it. But none of us, and certainly not Joe, would describe Sam’s intervention as having increased Joe’s production. Quite the opposite. Because the output (the table) that Joe winds up with gives Joe less satisfaction than is the satisfaction that he would have gotten from having a new chair, Joe’s production is decreased by Sam’s intervention. It decreased Joe’s production because it decreased the amount of consumption desires that were satisfied by Joe’s work effort.

Sam here did cause Joe to work longer, and the extra hour Joe spent working to build the table was indeed necessary for the construction of that table. But to describe as “productive” this extra hour that Joe spends constructing a table is mistaken. Such a description ignores the value that Joe would have gotten from whatever else he would have produced, including possibly leisure, with that hour. Because the satisfaction that Joe would have produced for himself by producing a chair in eight hours would have been greater than is the satisfaction that he gets by having built a table in nine, the extra hour Joe spent working to produce the table was wasteful, not productive.

Left unmolested by Sam, Joe would have built a chair, and in doing so made himself better off. Importantly, Joe judges the outcome of his efforts exclusively by the results: is or is not the chair worth the cost that Joe incurred to build it? If so, Joe was productive; if not, Joe was unproductive. In other words, an action is productive only if, and only to the extent that, the result of that action is a net increase in the ability to consume. Another way of stating this conclusion is that Joe judges his efforts to produce by the consumer-welfare standard.

Nothing essential changes if Joe works at producing outputs for sale to other people, and then uses the income that he earns to acquire, from still other people, the goods and services that he consumes. If the value to Joe of the goods and services that he acquires for his consumption exceeds the costs that he incurred to earn the income used to purchase these goods and services, Joe has acted productively. In short, even in an exchange economy, Joe judges the results of his economic efforts according to the consumer-welfare standard.

Some Links

(Don Boudreaux)

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Jay Bhattacharya is the latest guest on Scott Atlas’s podcast.

Tom Slater bids good riddance to New Zealand’s authoritarian P.M. Jacinda Ardern. A slice:

In some ways, Ardern’s stardom reflects the triumph of political style over political substance. For all the talk of credulous Trump voters being won over by the sparkle of celebrity, Ardern has precisely that effect on a certain type of metropolitan ‘liberal’. She was more of a totem than a politician, an influencer who could be relied upon to mouth all the right platitudes about climate change, wellbeing and empathy.

But that isn’t to say she has no politics to speak of. Indeed, she has also become a figurehead of a ‘liberal’, ‘respectable’ authoritarianism that has essentially taken over the Western world, from Canada to Scotland to the United States.

During the pandemic, Ardern pursued a severe Zero Covid policy, locking out New Zealanders abroad, stopping many of them from returning home to say goodbye to dying relatives, before having to abandon it in the face of new, more transmissible variants. As New Zealand was forced to live with the virus, its vaccination rate lagged behind. Ardern’s answer was to usher in a two-tier society, with unvaccinated citizens facing tougher restrictions. So much for that famous empathy and inclusiveness.

Beyond New Zealand’s borders, Ardern became a vocal advocate for censorship. In a striking speech at the United Nations last September, she declared ‘misinformation’ and ‘disinformation’ – dissent, in elite-speak – a modern ‘weapon of war’, one that must be confronted by international leaders if they are to defeat ‘fake news’-spreading warmongers and climate-change deniers alike. She stopped short of saying exactly how this should be done, but the message couldn’t have been clearer: the easily led masses can no longer be trusted; it’s time for the elites to take back control.

Also critical of Jacinda Ardern’s authoritarian rule is Guy Hatchard. Two slices:

Revelations this week, hat Ardern personally overruled her scientific advisors who were expressing doubts about the safety of Covid vaccines for young people and the wisdom of mandates, have circulated very widely and no doubt this further undermined confidence in the government.

…..

Ardern introduced rule by regulation. Adopting the enabling model favoured by fascists in the 1930s, her government has empowered authorities to tell us all what to do, when to stay at home, and where not to go. The courts, the Human Rights Commission, and the broadcast regulators have all followed the government line meticulously, which had a devastating effect on business, families, communities, and professions. To cement her policies, Ardern introduced massive government funding of our media and broadcasters.

Kate Andrews writes that “Jacinda Ardern has turned New Zealand and its economy into a basket case.” A slice:

In perhaps one of the least shocking revelations of 2022, countries with zero-Covid policies came to realise that their policies resulted in painful economic consequences.

New Zealand, which once boasted to be ahead of the curve thanks to draconian policies, found itself lagging far behind: forced to abandon lockdown policies many months after countries like the UK had properly reopened.

As a result, New Zealand found its economy contracting for two quarters across 2021 and 2022, from which it has since been trying to recover.

During this process, the public also came to discover just how devastating Ardern’s public policy was for business, and how long the road to recovery would be.

Also weighing in on the fall of Jacinda Ardern is Fraser Nelson. Here’s his conclusion:

You might call it the curse of Covid: the leaders who locked down have either lost power, or look set to. Zero Covid failed on its own terms but it was the authoritarianism – especially over vaccine mandates – that was never quite forgiven. New Zealand now wants to turn the page and rebuild, as Australia did last year. And that’s what explains the Passion of St Jacinda: she thought her choice was to be thrown out by voters after an acrimonious election campaign – or bow out now, and soak up the world’s acclaim. For a global icon, there really was only one option.

Jay Bhattacharya tweets:

Many public health officials think telling ‘noble’ lies saves lives. On the contrary, lies undermine public health credibility so that when they do tell the truth, many do not believe it. Public health lying and manipulation kills.

John Moore’s recent letter in the Wall Street Journal is spot-on:

Mr. Daukas deserves credit for an incisive summary of the serpentine distinctions in Supreme Court decisions attempting to find a rational basis for racial preferences. The resulting case law represents an ill-conceived attempt to forge a pathway to a presumed beneficial end, but one lacking a firm legal foundation.

As a result, the high-minded goal of diversity has produced a quantitative and manufactured decision-making process in universities. This is a good example of the court turning the law on its head. The essence of law is supposed to be the avoidance of arbitrary standards that superimpose advantage on some over others. If courts pick and choose situations to exempt from the law against racial discrimination, the law itself is compromised. You can’t eliminate discrimination with more discrimination.

John Moore
Naples, Fla.

George Will continues to write wisely about the decline of “higher education” (so called). Two slices:

Last June, when the Supreme Court’s Dobbs decision overturned Roe v. Wade, Michael V. Drake, president of the University of California, issued a statement, not in his personal capacity, that included this edict: “The Court’s decision is antithetical to the University of California’s mission and values.”

So, any UC faculty member or student who believes that Roe was produced by shoddy constitutional reasoning — which some supporters of liberal abortion policies do — was, because of their deviation from the official orthodoxy, declared discordant with their institution. Of course, Drake’s institution has a large, muscular bureaucracy to promote and enforce “diversity” (but not regarding public constitutional reasoning) and “inclusion” (but not full inclusion of deviationists). Drake’s announcement was notably gratuitous, given that Dobbs will have no effect on access to abortion in California, where state law is maximally permissive.

…..

An essay in the Jan. 6 issue of the Chronicle of Higher Education is titled “The Apolitical University: Should Institutions Remain Neutral on Controversial Issues? Is that Even Possible?” Of course it is possible; they have done it for generations; abandoning neutrality is a choice. The essay, however, quotes Brian Rosenberg, visiting professor in Harvard’s Graduate School of Education, who insists: “You cannot escape politics. Your choice is to act as though you have no stake in those arguments or you can have a little more courage and actively engage in those debates.”

Now, this is defining courage down: The courage of academics consists of hopping, like frogs on lily pads, from one progressive choir to another, fearlessly expressing what the campus majority believes. Note how Rosenberg transforms a progressive aspiration — saturation politics, everywhere, always — into an inevitability: “You cannot escape politics.”

Today’s thoroughly saturated academia is a reminder: The defining characteristic of totalitarian societies is not that the individual cannot participate in politics, but that the individual cannot not participate.

Privatize the skies!

Quotation of the Day…

(Don Boudreaux)

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… is from page 14 of Will and Ariel Durant’s 1975 volume, The Age of Napoleon; here they write about Robespierre what might accurately be written also about countless others:

He suffered severely from our common failing – he could not get his ego out of the way of his eyes.

DBx: As the Durants say, each of us is subject to being blinded by ego. An each of us is, at least on occasion, actually so blinded. But some of us fall victim to this hazard more frequently than do others. The best – only? – protection against this tendency comes from that elusive quality called “wisdom.” It does not come from mere mastery of abstract ideas. And it certainly doesn’t come from the accumulation of collegiate degrees. It comes from wisdom, a quality that implies humility.

Art Carden and Larry White on W.H. Hutt

(Don Boudreaux)

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Art Carden talks with my GMU Econ colleague Larry White about the scurrilous effort by some ‘scholars’ to portray W.H. Hutt as a racist.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 445 of Thomas Sowell’s May 2004 conversation with Milton Friedman about the great development economist Peter Bauer, as a transcript of this conversation appears in the Fall 2005 issue of the Cato Journal; the remark is Sowell’s:

The other thing that Peter Bauer used to talk about was the overpopulation hysteria. He had all kinds of information on this, pointing out that famines don’t occur in overpopulated countries: they typically occur in thinly populated countries with lots of empty space and lots of unused land. The overpopulation theory is, I think, one of the miracles of the history of ideas. It’s more than 200 years old today, it is still going strong, and it’s had 200 years of evidence against it piling up. And yet, it just keeps right on going.

DBx: Pictured here is Peter Bauer.

Some Links

(Don Boudreaux)

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My intrepid Mercatus Center colleague, Veronique de Rugy, asks “What could go wrong?” if trade-policy makers take to heart U.S. Trade Representative Katherine Tai’s recent recommendation to increase people’s security by making the world’s trading system less efficient. [DBx: As Ms. Tai’s remark indicates, interventionists are becoming so skilled at spoofing themselves that it’s increasingly difficult for sensible people to out-spoof them.]

Writing in the Wall Street Journal, Phil Gramm and my former Mercatus Center colleague Hester Peirce (who is now an SEC commissioner) decry the Securities and Exchange Commission’s power grab. A slice:

Consider the commission’s climate-change proposal, which seeks to force climate risk to the center of every public company’s boardroom and management discussions. It would push companies to populate their boards and management ranks with climate experts and focus their strategic business and financial plans away from increasing market share and profitability to plans to transition to a lower-carbon economy.

Although technically applicable only to public companies, the proposal would reach every customer and supplier in a public company’s “value chain.” Large public companies would have to collect and report their suppliers’ and customers’ greenhouse-gas emissions, forcing countless small businesses and farmers to undertake expensive guessing exercises about how much of seven different gases they might be emitting.

The SEC, in a tacit acknowledgment of the proposed rule’s compliance burdens, moonlights in the proposal as a management consultant. It suggests that one way to reduce the data collection burden is to work with “suppliers and downstream distributors to take steps to reduce those entities’ … emissions.” The SEC also suggests that public companies make “products that are more energy efficient or involve less emissions when consumers use them,” choose “distributors that use shorter transportation routes,” or “purchase from more emission-efficient suppliers.”

The SEC proposes to turn a disclosure rule into a how-to guide for companies seeking to reduce their carbon footprints. Inducing private companies to take specific steps to meet unlegislated social goals has nothing to do with achieving the SEC’s mission of combating fraud, increasing transparency or fostering market integrity. It would undermine the market efficiency that the SEC’s rules are supposed to support.

Red Jahncke is correct: “Debt, not the debt ceiling, is the real fiscal crisis.” A slice:

The so-called responsible faction in the impending debt debate says that the ceiling should be raised without any risk that the nation default on its debt. The nation’s creditworthiness, they argue, shouldn’t be held hostage by conditions of fiscal discipline. The White House falls into this faction, insisting on a higher ceiling without any strings attached.

A group of about 20 House Republicans—many of whom originally opposed Kevin McCarthy’s speakership—announced their opposition to raising the ceiling without spending cuts. On Bloomberg TV on Wednesday, Rep. Andy Ogles of Tennessee said he was “unwilling to give Biden a blank check.” Yet his emerging faction is being called irresponsible and worse.

But who’s really irresponsible? This small group of Republicans wants to reintroduce fiscal discipline on the Biden administration and congressional Democrats, who have been borrowing and spending like drunken sailors for two years. Since President Biden’s inauguration alone, the national debt has soared by nearly $3.7 trillion.

Was this spending responsible after $4.4 trillion that was borrowed and spent between February 2020 and January 2021 as part of a necessary response to the pandemic and the ensuing economic shutdown? Many economists warned that Mr. Biden’s first spending initiative, the $1.9 trillion American Rescue Plan, was unnecessary and would unleash inflation—and it clearly has.

It’s hardly irresponsible to suggest that we return to fiscal sanity. Any increase in the debt ceiling should be matched by an equal reduction in this slew of post-pandemic domestic spending.

My GMU Econ colleague Bryan Caplan identifies ten facts relevant to MeToo considerations.

Alberto Mingardi remembers Paul Johnson.

Darragh McManus criticizes “Ireland’s covid amnesia.” A slice:

Ireland continued to be a world leader in lockdown safetyism as the pandemic went on. By July 2021, as 90,000 fans filled London’s Wembley Stadium for the final of the Euros, Ireland was the only place in Europe where you couldn’t drink at a pub. Ireland’s lockdowns were so strict and long-lasting that after the first year of the pandemic, Ireland’s Covid debt was €20,000 per head above the EU average.

The madness didn’t abate until late last January. Like some Victorian mesmerist, the Irish government relaxed most of Ireland’s Covid restrictions with a snap of its fingers and – voilà! – everyone snapped out of their trance.

Except they didn’t, really. The restrictions have disappeared but the trance goes on. One year later, there has hardly been any reckoning with the baleful effects of lockdown.

Dr. Kat Lindley tweets: (HT Jay Bhattacharya)

Have we lost our humanity in order to feel safe?
Has fear overridden every rule of decency?
Or have they preyed on our vulnerabilities?

Freedom is our birthright. What has been done in the name of public health policy is disgraceful.

Simon Fraser University economist Douglas Allen asks: “Why Did Jurisdictions Repeatedly Use Inefficient Lockdowns During the COVID-19 Pandemic?” Here’s the Executive Summary:

During the COVID-19 pandemic, economy-wide lockdowns, though never part of any pandemic strategy endorsed by the World Health Organization (WHO) or the Centers for Disease Control (CDC), were immediately applied, almost universally around the world, and repeated throughout the first five waves of the disease. During this time politicians, policy analysts, scientists, and public health officials learned a considerable amount about the nature of the virus and the efficacy of lockdown policies. They understood very early on that the virus would not be as lethal as predicted, and by the fall of 2020 they knew that the lockdown policy had only marginal and short-run benefits for public health.

Despite the surge of COVID-19 information, including the knowl- edge that generally speaking only a particular small subset of the population was especially vulnerable, government officials and politicians made no significant change to the lockdown policy. The same ineffective but extremely costly policies were repeated over and over. Furthermore, the enforcement of lockdown policies increased over time despite the overall decline in the lethalness of the virus and the increased abilities to treat it.

I argue that this behaviour was the result of a “double down” political equilibrium. For various reasons, governments around the world panicked in February and March of 2020 and concluded that only a severe lockdown could isolate the virus and stop it from spreading. They quickly became aware of the failure and cost of this action and were faced with a choice: they could admit their terrible mistake or double down, continue with the policy, and hope that an endemic state would come soon. When a second wave of the virus returned in the fall of 2020, the dominant strategy of those jurisdictions that had earlier locked down was to repeat their lockdown policy. This strategy continued until the widespread infections caused by the Omicron variant led to an endemic state and allowed for a declaration of lockdown victory.

The double-down strategy required political support, and this came mostly from two sources: the “laptop class” and other winners from the lockdown; and those terrified enough by the virus that they believed lockdowns were justified. This explains three observations over the first two years of the pandemic. First, the response to COVID-19 has led to large increases in economic inequality. Increased inequality means that the relative positions of those at the top have increased, giving this group more power in the competition for goods and services. Second, there was, from the beginning, a massive campaign of fear-mongering that created false assessments of the actual risk of the virus by the general population. Third, the enforcement of lockdowns and other mandates increased over time.

The Omicron variant did two things. First, it entered the homes of a large fraction of the population and demonstrated the actual risk of the virus at that stage of the pandemic. This led to protests and rebellions as the truth became disseminated. Second, by infecting so many it allowed States to declare that the virus had become endemic. Thus, despite a sixth wave from the BA.2 variant lockdowns came to an end.

Quotation of the Day…

(Don Boudreaux)

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… is from page 5 of F.A. Hayek’s great 1973 essay “Liberalism,” as this essay appears as chapter one of Essays on Liberalism and the Economy (2022), which is volume 18 (skillfully edited by Paul Lewis), of The Collected Works of F.A. Hayek:

While to the older British tradition the freedom of the individual in the sense of a protection by law against all arbitrary coercion was the chief value, in the Continental tradition the demand for the self-determination of each group concerning its form of government occupied the highest place.

DBx: Not only is this distinction between two very different understandings of ‘freedom’ important in its own right, it’s one that some recent careless critics of W.H. Hutt might wish to ponder.