Russell Roberts's Blog, page 61

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 149 of Morgan Reynolds’s 1986 paper “On the Economics of the Colour Bar,” which appears as the final chapter of W.H. Hutt: An Economist for the Long Run (Morgan O. Reynolds, ed., 1986) (link added):

In Professor Hutt’s lifetime work, his Economics of the Colour Bar displays his fearless courage, demonstrates the power of simple economic theory in the hands of a master, reinforces the unity of his work, and once again verifies that the release of market restraints is the means to maximum employment and output. Capitalism is the solution, not the problem.

DBx: Hutt (pictured here) was indeed courageous. Then living full-time in South Africa, he published his highly critical analysis of apartheid in 1964, when South Africa’s apartheid government was in power. And yet a handful of ignorant – I’ve no kinder appropriate descriptor – ‘scholars’ are on an ideologically charged quest to portray Hutt as a white supremacist.

The ‘scholars” purpose in their quest is to help salvage a certain Duke University ‘historians” egregiously mistaken argument that the late Nobel-laureate economist James Buchanan was a white supremacist. You see, in 1965, while on the faculty at the University of Virginia, Buchanan invited Hutt to visit UVA – a move that, given Hutt’s well-known opposition to South Africa’s “colour bar,” is difficult to square with the assertion that Buchanan was racist.

…..

These ‘scholars’ (who in their ignorance nevertheless insist on writing about Hutt – and about Buchanan) tirelessly twist the meaning of their and others’ words. If someone with whom they ideologically disagree were to write “dogs bark, they don’t meow,” these scholars are not above quoting this someone as believing that “dogs … meow.” Yet if someone with whom they are ideologically aligned were to write “cats bark, they don’t meow,” these scholars will insist that their ideological comrade of course isn’t so daft as to believe that cats bark; “Look,” they’ll self-righteously insist, “our friend wrote clearly that ‘cats … meow.'”

None of these ‘scholars’ is, of course, really a scholar, despite the fact that some of them occupy faculty positions at elite universities. They are ideologues who are led by their emotions to particular conclusions – usually mistaken ones – and then craft ‘narratives’ or ‘histories’ in attempts to justify their conclusions. Fortunately, their skills at telling false tales are no better than are their skills at actual scholarship. The fallacies peddled by these ‘scholars’ are easily detected by anyone who can read and who isn’t baffled by basic rules of logic.

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(Don Boudreaux)

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My GMU Econ colleague Vincent Geloso identifies three errors consistently committed by Paul Ehrlich. Two slices:

In the 60 minutes segment, not much appeared to have changed to Ehrlich’s message. Doom is still coming. Overpopulation is still the root cause. Population control remains the only solution.

The consistency in messaging is jaw-dropping given how wrong Ehrlich was then and remains now. In fact, the errors and fallacies in Ehrlich’s reasoning have been identified multiple times since The Population Bomb was published. The errors can be identified in three blows that Ehrlich received – two of which were self-inflicted.

The first blow to Ehrlich’s view came from economist Julian Simon. In an article published in Social Science Quarterly, Simon taunted Ehrlich into taking a bet that would go directly at the foundations of their respective views. Unlike Ehrlich, Simon believed that politically and economically free societies could accommodate rapid population growth. In fact, the population growth would actually bring about more innovation, ideas and techniques that would lead to long-term improvements in material and environmental conditions. Relatively free markets would communicate information through price signals about which innovation would be the most socially valued. As such, resource depletion would never become a permanent problem in Simon’s worldview.

…..

The third error in Ehrlich’s reasoning is also self-inflicted. Reflecting somewhat bitterly on the wager decades later, Ehrlich scorned Simon’s naïve view of the ability of free societies to innovate around environmental problems. Obviously and unsurprisingly, he argued that coercive state measures remained the only way forward. Yet, this stubborn commitment to the same solutions over some 30 years suggests that Ehrlich never learned or read his opponents’ work. Indeed, Simon frequently argued that environmental problems could be created by governments who were expected to enact solutions.

Francis Crescia warns of an Orwellian attempt to regulate freedom of expression in Canada.

My GMU Econ colleague Bryan Caplan reflects on his and his son Simon’s recent trip to Japan.

“The IRS Spares the Side‐​Hustlers (For Now)”

Stephanie Slade will miss having Ben Sasse in the U.S. Senate.

Phil Gramm and John Early report that “upward mobility is alive and well in America.” A slice:

You might expect that children would tend to end up in the same income quintile as their parents. Parents impart their genes and values to their children. Those with high incomes are generally highly educated and give their children every advantage, such as private schools, tutors and counselors. Poor families often lack the knowledge and resources to provide those advantages.

Yet the share of adult children who grow up to live in a household in the same income quintile as their parents is surprisingly small. The chart shows that for the middle three quintiles, only 22.6% to 24.4% of children remain in their parents’ quintile—barely more than the 20% that would result if income quintiles were assigned at random. On average, 39% of those children as adults rose to a higher quintile and 37% fell to a lower one. The harshest critics of mobility in America can find little to fault in the income mobility of the three central quintiles.

They focus instead on the top and bottom quintiles—but miss substantial mobility there too. Of children reared in the top quintile, 62% fell to one of the lower quintiles, including more than 9% to the bottom quintile. A significant number of the children reared in the top quintile who stayed in the top quintile as adults had incomes far greater than their parents, but statistically they could not rise out of the top quintile.

With few advantages and often trapped in failing public schools, 63% of children who grew up in bottom quintile families rose to a higher quintile, 6.1% rising all the way to the top quintile. A significant number of those who failed to rise would have been the adult children who didn’t work as public assistance soared. The share of the bottom quintile who worked fell from 68% in the parents’ generation to 36% in the children’s generation.

But even these impressive numbers understate real income mobility in America. These studies measure relative mobility by comparing the children’s income quintile then and now. Relative mobility is a zero-sum game—by definition, 20% of households are in the lowest quintile and only 20% in the highest—but income growth isn’t. The vast majority of adult children had higher real incomes than their parents. To rise out of the bottom quintile, children’s inflation-adjusted income had to increase by more than the growth of the income ceiling for the bottom quintile during the years between generations—35% in Mr. Strain’s study. Children reared in any other quintile had to see their real income as adults rise on average by roughly 50% above their parents’ income simply to avoid falling into a lower quintile than their parents. The climb to a higher quintile is steeper still.

Here’s some insight from Joel Kotkin:

The United States today stands as a living contradiction to the ‘great man theory of history’. For the US is a great country led by small minds. In recent times, it has been ruled by a narcissistic moral reprobate and it is now being run by a cognitively deficient and scandal-plagued politician. There is a growing feeling, particularly among the young, that today’s America is diminished. Yet the US remains the world’s premier power, and its last best hope against a rising authoritarian tide.

…..

Yet perhaps even more than nature’s gifts, America’s greatest asset may lie in its centuries-old constitutional order. This is very different to the much ballyhooed, bureaucratic ‘rules-based’ system so attractive to Eurocrats and their American admirers. In Europe, decisions are based on the political fashions of the moment. Only a bureaucracy in thrall to green ideology, for instance, could have ignored all the warning signs of the current energy crisis and placed ever more bets on unreliable wind and solar in the name of stopping climate change – even while China, by far the world’s biggest emitter of CO2, is building more coal plants to power its homes and industries. Today, coal is now being consumed more than at any time in history.

Although it looks less ‘professional’ than the Brussels bureaucracy, the US’s constitutionally directed democratic governance has survived other chaotic periods like this one. As bad as our leaders may be, they are fortunately not omnipotent. In contrast, while unencumbered leaders can at times make enormous strides in catching up with more advanced countries, they almost always fail in the long run – bad news for Xi and Putin.

These lessons have still not been learned in academia and the media, which continue the old Western intellectual habit, visible in the 1930s and again in the 1960s, of eulogising foreign despotisms. For years now, many have regarded the ascendency of China’s ‘stronger government’ model as inevitable. Yet now, even China’s supreme leader admits its growth will be slowing and that surpassing the US in the medium term is no longer assured.

Ramesh Thakur decries covidian tyranny.

Jay Bhattacharya tweets:

Under [Gov. Gavin] Newsom, California counties took away the right to in person schooling, the right to worship, and now the right of doctors to practice without fear of state interference.

Replying to Noahpinion, Prof Francois Balloux tweets: (HT Jay Bhattacharya)

The immediate harm in a fraction of the population believing that SARS-CoV-2 could have been eradicated if harsher ‘lockdown’ measures had been enforced, is that they will forever hate anyone who didn’t buy into their fantasy. This is not trivial harm, societally …

Quotation of the Day…

(Don Boudreaux)

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… is from page 272 of the 1975 HarperPerennial printing of the third (1950) edition of Joseph Schumpeter’s profound 1942 volume, Capitalism, Socialism, and Democracy:

Evidently the will of the majority is the will of the majority and not the will of “the people.” The latter is a mosaic that the former completely fails to “represent.”

DBx: Schumpeter died – just one month shy of his 67th birthday – on this date 73 years ago.

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(Don Boudreaux)

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Josiah Neeley rightly criticizes the recent report in the New York Times on how deregulation allegedly results in higher utility prices. A slice:

The Times is similarly confused when it comes to the intricacies of real-time electric market auctions. In an organized wholesale electric market, generators submit bids to supply power to the grid and the market automatically chooses the cheapest mix of bids needed to supply customer demands. The article portrays this approach as wasteful because the lowest-cost generators get paid the same price as the most expensive bid chosen. The truth is the approach rewards low-cost generators more than high-cost generators and, thus, pressures all generators to work more efficiently. This isn’t just theoretical speculation. There is plenty of research demonstrating that this “uniform clearing price” approach works to promote efficiency in practice.

That leaves the third explanation by the Times, the old staple of anti-market thinking: Competition leads to higher prices because of “profits taken in by energy suppliers.” Based on reading the Times article, you might be surprised to learn that monopoly utilities also make profits. Indeed, utility rates are typically set to give the utility a set percentage of profit based on their past investments. This, needless to say, does not encourage utilities to find ways to lower costs.

Arnold Kling identifies important differences separating institutions from networks.

My intrepid Mercatus Center colleague, Veronique de Rugy, ponders the public reaction to the release of Trump’s tax returns. A slice:

Blaming the unfairness of our system on Trump’s use of such loss-carryforward provisions, as if these are illegitimate or fraudulent, is silly. It becomes laughably hypocritical when it is offered by the same people who never stop pushing for bigger tax credits for their favorite causes.

Steven Greenhut reports that government in California continues to chase people away. A slice:

The news about California is alarming. Our nation’s population growth has increased post-COVID, but the distribution has been uneven. Texas gained an astounding 471,000 people last year and Florida gained 417,000, while California lost 114,000. This is the third year in a row that California—with its can’t quite reach 40-million population—has lost people. This isn’t slowing growth, but actual losses (although the rate of decline slowed this year).

Gary Galles debunks several false claims about the alleged morality of labor unions. Here’s his conclusion:

As an entreaty from an employer to a worker, “Why don’t you go somewhere else?” deserves more respect. It is not callous nor uncaring. In many areas of our lives, to exit (to other opportunities) is often a more effective mechanism than to negotiate (talking others into adopting your point of view). You are not a cold-hearted curmudgeon every time you take your business elsewhere, when unsatisfied with your current arrangements. It is why America’s Founders thought “voting with your feet” was a core protective feature of federalism. Advocates of unionization efforts, who utilize exit opportunities to their advantage throughout their lives, would deny similar exit protections to employers and unwilling workers, forcing them to abide after a one-time majority vote to unionize.

David Henderson productively unpacks the holiday woes of Southwest Airlines and its customers. A slice:

Think about how the owner sees the issue. If he refuses to give satisfaction, he will lose my business. Not only that, but also I’ll spread the word, telling others that the owner treats customers badly. That loss of business hurts his revenue: his residual is less. Until about the late 1990s, the ways we could spread the word were orally and with letters to the editors of local newspapers. But now we have so many ways to do so: Facebook, Yelp, and Nextdoor, to name three.

We consumers are ruthless. Businesses know that and, unless they’re bailed out by governments, they need to take that into account.

Hmmm…. Fake covid information spread on Twitter? (HT Robert Blumen)

David Zweig writes that spending time with kids might actually help to better protect older people from covid. A slice:

The two studies were published in the journal Proceedings of the National Academy of Sciences — one in August and one last month [November] — and together they achieved something rare: They offered dramatic and important new information suggesting a correction to a commonly held narrative about children as dangerous viral vectors during the pandemic. But their results, according to multiple experts interviewed for this article, were also entirely expected.

The August paper found that “exposure to young children was strongly associated with less severe COVID-19 illness.” In an analysis of the records of more than 3 million adults in the Kaiser Permanente Northern California health system, the authors found that “those without identifiable household exposure to children based on health insurance enrollment had a 27% higher rate of COVID-19 hospitalization and a 49% higher rate of COVID-19 hospitalization requiring ICU admission than those with young children.” (In comparing adults with and without exposure to young children, the analysis matched each group for known COVID risk factors such as age, hypertension, diabetes, and BMI.) The study’s researchers, from Kaiser, Stanford University, and Columbia University, said their findings suggest that cross-immunity from common coronaviruses — which sometimes cause the colds and sniffles that children tend to carry — may play a role in protection against severe COVID-19 outcomes.

The study published in November, by researchers from Harvard Medical School, Boston University School of Medicine, and the Veterans Administration, offered biological evidence for the Kaiser study’s epidemiological finding. The researchers found that, during the first year of the pandemic, VA patients who had tested positive for some of the common-cold coronaviruses had an 80 to 90 percent reduction in likelihood of testing positive for SARS-CoV-2 infection. In other words, at least for a limited time, getting the common cold appeared to help some people’s immune system protect against COVID.

These two studies — one relying on laboratory data, the other on observational data — complement each other so compellingly that the researchers behind the November study cite the August paper as the inspiration for theirs. Taken together, the findings suggest that social distancing and isolation at a population level, particularly from young children, may have counterintuitively put some people at greater risk of COVID infection or severe disease once they resumed normal contact. (Several of the experts I spoke with noted that this doesn’t mean social distancing wasn’t beneficial for those at high risk of bad outcomes who were able to remain uninfected until they were vaccinated.)

Jeffrey Tucker calls for an immediate end to travel restrictions.

Jay Bhattacharya tweets:

Health care in blue states will be last to return to status quo ante. The leadership of hospitals and health care will need to change because this generation of leaders will be loathe to admit they read the evidence so poorly and got the policy so wrong.

Martin Kulldorff tweets:

As a vaccine epidemiologist I have focused on scientific evidence, letting the chips fall where they may. In the current fight between vaccine fanatics and anti-vaxxers, the walls have now closed in from both sides. I can no longer support my family doing vaccine safety research.

Quotation of the Day…

(Don Boudreaux)

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… is from pages 21-22 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 (expertly edited by Paul Lewis), of The Collected Works of F.A. Hayek (footnote deleted):

Freedom under the law implies economic freedom, while economic control, as the control of the means for all purposes, makes a restriction of all freedom possible.

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(Don Boudreaux)

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My intrepid Mercatus Center colleague, Veronique de Rugy, writing at National Review, points to evidence that Beijing’s industrial policy is weakening China’s economy. A slice:

I have always believed that this mimicking of Beijing’s economic policies is nuts. I don’t see how becoming more like Communist China, with its warm embrace of central planning under President Xi, will strengthen us economically. In fact, as similar historical episodes suggest, it will weaken our economy. And it will do so for the very same reason that Beijing’s own heavy-handed interventions are now weakening the Chinese economy — a realization that appears to be dawning on Chinese leadership.

George Will eloquently decries the intolerance, ignorance, illiberality, and sheer ridiculousness of campus wokism. A slice:

The fires of wokeness will soon be starved of fuel by the sterile monotony of wokeness’s achievement: enforced orthodoxy. Campuses are becoming burned-over places, sullen about the scarcity of things to deplore and cancel within their gates. Beyond those gates, society increasingly regards academia with, at best, bemusement.

Nevertheless, in their leafy quarantine, the woke will have the consolation of vanity. Wokeness has many flavors but one purpose: self-flattery. Wokeness tells its disciples how morally superior they are to almost everyone, ever. The woke have revised Martin Luther King Jr.’s maxim about the moral universe to: “The arc of the moral universe is long and bends toward me.”

Yael Hungerford reviews Marian Tupy’s and Gale Pooley’s marvelous 2022 book, Superabundance. A slice:

At the center of Superabundance is the argument that human beings are not a drain on resources—they are, instead, the most valuable resource. Humans have come up with countless ways to live more efficiently and support more human life. A large population is key to this innovation: more people mean more ideas and larger markets to try out those ideas. This dynamic is fostered by the division of labor and development of human capital, possible only in sufficiently large populations.

Tupy and Pooley see the price of a resource as more important than its quantity. Quantity is imperfectly known and is thus an inadequate measure of abundance; we know much more today, for example, about where to find and extract fossil fuels than we did even a few decades ago. By contrast, price reflects not only current supply but also beliefs about future supply: a price decline suggests belief that a good is abundant and will remain so.

As their ultimate unit to measure prices across time and countries, Tupy and Pooley use time prices—the amount of labor, measured over time, that it takes to acquire a good. As Adam Smith taught, “the real price of everything is the toil and trouble of acquiring it.” The use of time prices avoids the difficulties of comparing nominal costs over time and place, like how to measure inflation or how to account for the benefits of innovation.

Some examples of their findings: the time price of 50 basic commodities, including uranium, pulpwood, and natural gas, fell by an average 71.6 percent during the period 1980–2018. For American blue-collar and unskilled workers, the average time prices for basic commodities fell by more than 96 percent and 93 percent, respectively, between 1900 and 2018. Purchasing a pound of sugar required nearly three hours of factory work in 1850; in 2021, it required only 35 seconds. An air conditioning unit cost more than 200 hours of blue-collar work in 1952; in 2019, it cost just 5.5 hours.

James Pethokoukis explains that the “Paul Ehrlich interview on ’60 Minutes’ shows the need to finally defeat degrowth environmentalism.” A slice:

Imagine if instead of Ehrlich, 60 Minutes had instead featured Hannah Ritchie, head of research at Our World in Data where she focuses on “the long-term development of food supply, agriculture, energy, and environment, and their compatibility with global development.” (She holds a Ph.D. in GeoSciences from the University of Edinburgh.) Ritchie would have presented data-driven analysis of the reality of the situation. (The segment’s idea of data is a couple of passing references to a study from the World Wildlife Fund. Hey, good enough for television!) Among the insights she might have offered:

“On average, there has been a large decline across tens of thousands of wildlife populations since 1970”“Not all animal populations are in decline; around half have increasing numbers”“Wild mammals have declined by 85 % since the rise of humans”“Wild mammals make up only a few percent of the world’s mammals”“Thanks to conservation efforts, some wild mammals are making a comeback”

Speaking of Hannah Ritchie, she’s Russ Roberts’s latest guest on EconTalk.

Lamont Rodgers revisits Bertrand de Jouvenel’s great 1952 book, The Ethics of Redistribution.

“The US economy no longer can sustain a policy of endless war” – so explains Doug Bandow.

Christian Britschgi reports on just how arrogant and entitled politicians can be.

Meghan Murphy describes Canadian strongman Justin Trudeau as “riding roughshod over liberty.” A slice:

Our beta test for Tyranny 2.0 began with the Covid lockdowns in 2020. Would Canadians agree to stay at home, mask up, abandon their elderly loved ones to die alone in hospitals and long-term care homes? Would they ostracise family members who dared to suggest a funeral for grandma? Would they shut down their businesses, host virtual cocktail hours and pretend that banging pots and pans from their windows equates to some kind of community-building exercise? Would they scream at strangers who dared to breathe too close to them on a hiking path, or who took off their masks for a bike ride? Would they turn their neighbours in to the police for hosting Christmas dinner? Why, yes they would!

After Canadians passed that test, the Liberal government pushed Covid restrictions further in 2022. At the start of the year, Canadians had to sign up to one app in order to leave the country and to return, and use another app to access restaurants, bars, gyms and sporting events. Kids were kept out of schools – indefinitely, it seemed back then – ensuring an entire generation fell behind in their education, mental, social and emotional development.

Victoria Fox tweets: (HT Jay Bhattacharya)

My son loves to tell me about all the stupid ways kids don’t wear their mask properly at school.

It hangs off their face. They pull it down constantly to vent it. Massive gaps.

It would be even funnier if he weren’t knowingly forced to participate in a pointless charade.

Quotation of the Day…

(Don Boudreaux)

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… is from page 167 of Phil Gramm’s, Robert Ekelund’s, and John Early’s excellent 2022 book, The Myth of American Inequality: How Government Biases Policy Debate; here the authors summarize the correct understanding of economists and other thinkers writing in what my colleague Peter Boettke calls the “mainline” tradition:

The wealth of a nation and its people came from enhanced productivity. Greater output per capita led to higher wages and incomes, greater consumption, and increased capital accumulation. This virtuous process, led by entrepreneurs and innovators, would swell production, granting anyone and everyone at least a chance to prosper.

The United States Certainly Did Have Lockdowns

(Don Boudreaux)

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Here’s a letter to the New York Times:

Editor:

David Wallace-Wells claims that, because lockdown measures in China, Peru, and some other countries were harsher and lasted longer than was the case in America, “the United States never had lockdowns. (Not like elsewhere in the world, at least.)” (“9 Pandemic Narratives We’re Getting Wrong,” Jan. 4).

Nonsense.

Ordering businesses to close, shuttering schools, restricting travel, allowing only freakish carboard cutouts rather than actual fans to attend sporting events, and putting limits on the number of people who could gather together for holiday celebrations, weddings, and funerals – these restrictions, which were indeed imposed throughout much of U.S., locked Americans out of familiar social and economic engagements that are essential to leading productive and meaningful lives.

Mr. Wallace-Wells’s claim is as false as would be the claim that, because slavery in the Caribbean was arguably harsher than in the United States – and, in Brazil, lasted longer – the United States never had slavery. (Not like elsewhere in the world, at least.) Such a claim is simply absurd.

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 11 of Ronald Bailey’s and Marian Tupy’s beautiful and important 2020 volume, Ten Global Trends Every Smart Person Should Know (footnote deleted):

Between 1980 and 2017, the inflation-adjusted global hourly income per person also grew by 80.1 percent. Therefore, for the amount of work required, commodities became 64.7 percent cheaper. Put differently, commodities that took 60 minutes of work to buy in 1980 took only 21 minutes of work to buy in 2017. All in all, resources are not being depleted in the way that [Paul] Ehrlich feared they would – as witnessed by the fact that humanity has not yet run out of a single supposedly nonrenewable resource. In fact, resources tend to become more abundant over time relative to the demand for them.

Trade, Tariffs, and Complexity

(Don Boudreaux)

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In my latest column for AIER, I continue to emphasize the inescapable reality that the modern economy is far too complex for government officials successfully to use tariffs to improve the performance of the overall economy. A slice:

Tariffs are imposed by human beings. For tariffs to improve the home-country’s comparative advantages, government officials would have to predict two futures accurately and in detail. First, these officials must predict which resources, industries, skills, and consumer preferences would develop, in the home country and abroad, if the home-country government were to follow a policy of free trade. Second, these officials must predict just how their efforts to engineer into existence those comparative advantages (that they’ve somehow divined to be superior) will actually play out in complex reality.

The jobs, skills, firms, and industries that are visible to the naked eye, or that can be measured by statisticians, are only tiny tips of gigantic, amorphous, and unseen icebergs of complex interactions. Each (say) steelworker’s job exists only because he is economically connected to multitudes of strangers; connected not only to many different consumers, but more importantly here, also to countless different producers who are incited to work together in such ways as to build the likes of steel factories, blast furnaces, and input-supply networks that ensure that each steel mill is regularly equipped with the materials necessary for its workers to produce steel. And yet the vast majority of workers and firms whose efforts make possible the job of the steel worker are so very far removed, on the economic “supply web,” from the steelworker that no mortal mind can detect more than a minuscule fraction of these connections.

The accountant for a firm that produces, among other outputs, heavy-duty shock absorbers used by trucks that haul iron ore to steel mills likely has no idea that she is part of the “supply web” of steel production. Ditto for the designers of the software used by this accountant in the course of her job. And ditto also for the electricians whose efforts supply the power used by those software designers.

And so, for example, if tariffs are applied with the intention of increasing the home-country’s capacity to produce microchips (and if this increased capacity to produce microchips is believed to improve the overall performance of the home economy), government officials are predicting that such tariffs will have this intended result. But there’s no reason to believe that this prediction will pan out.

Reality’s unfathomable complexity renders foolish all attempts to make any such prediction. How can tariff-imposing officials know from which other industries, and in which specific quantities, all the resources drawn by microchip tariffs into microchip production will come? They can’t know such a thing – at least not beforehand, which is when such knowledge is necessary. Further, even if by some miracle tariff-imposing officials were able to gather this knowledge beforehand, they would still not know whether or not the gains to the home economy from its enhanced capacity to produce microchips will outweigh or fall short of the losses to the home economy from its diminished capacity to produce steel, wheat, pharmaceutical products, medical care, and other goods and services besides microchips.

In practice, then, the best any country can do is to rely upon the market. Leave consumers free to spend their money as they choose, investors free to invest as they judge best, and businesses free to meet market demands in ways they believe will be most profitable. Successes will be rewarded with profits, and failures punished with losses. Resources will shift from less-profitable to more-profitable uses. The ‘outcomes’ will always be far from perfect, but they’ll be the best that’s humanly obtainable.

Confidence that resources are allocated more productively by markets than by the conscious efforts by government officials is justified largely by the market’s reliance on prices. As F.A. Hayek explained in his most famous academic paper, “The Use of Knowledge in Society,” each market price, in its relation to other prices, informs producers not only which outputs are most urgently demanded by buyers, but also which inputs are most abundantly available for use in production. (Compared to using inputs that are less abundant, using inputs that are more abundant leaves more inputs available for the production of other outputs.) Government officials who aim to change the allocation of resources have no comparable source of information to guide them.

Politicians or administrators, therefore, might be sincerely motivated to impose tariffs in ways that improve the home-economy’s economic performance – that is, to impose tariffs that improve the home economy’s comparative advantages. But such politicians or administrators are flying blind. This point bears repeating: unlike market participants guided by prices, these officials literally have no reliable information to guide them. They will therefore be guided exclusively by their own biases and hunches.