Russell Roberts's Blog, page 66

Quotation of the Day…

(Don Boudreaux)

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… is from page 237 of Russ Roberts’s superb 2014 book, How Adam Smith Can Change Your Life:

Love locally, trade globally.

DBx: The counsel packed into this quotation is not only wise, it’s also a fine summary of Adam Smith’s two books.

Smith’s 1759 The Theory of Moral Sentiments is very much, although not exclusively, about how to act among people who we know on a face-to-face or small-group – a ‘local’ – basis. Many motivations in such settings regularly prompt us to sacrifice our self-interest in order to promote the interests of others.

Smith’s 1776 An Inquiry Into the Nature and Causes of the Wealth of Nations was largely, although not exclusively, focused on the interactions among large numbers of strangers. The same moral sentiments that prompt us to nurse a sick child, to make substantial sacrifices to help a friend in distress, or to give generous gifts to neighbors and colleagues operate with far less intensity and regularity in our dealings with strangers. Because the enormous wealth of modern society requires the cooperation of millions, and in some cases today billions, of individuals, coordination of the production actions of these multitudes cannot possibly be guided by the kinds of moral sentiments that govern our behavior among people who we know. Such coordination must instead rely upon abstract rules of justice along with market-determined prices.

…..

Pictured above is Milton Friedman holding and admiring a product the production and distribution-to-consumers of which requires the knowledge and cooperation of hundreds of millions of strangers.

David Henderson on “The Abject Failure of Central Planning During Covid”

(Don Boudreaux)

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The second, excellent paper in the Fraser Institute’s series on covid, covid hysteria, and covid reactions is written by David Henderson, and is available free of charge on-line. A slice:

We know now and, indeed, we could have known back in March 2020, that most of these self-limits were overreactions, at least for those under age 60. The data from Italy showed an extreme gradient in death rates from COVID-19. A study of COVID-19 fatalities published on March 23, 2020 (Onder, Rezza, and Brusaferro, 2020), showed no fatalities for people under age 30, only 4 fatalities for people aged 30 to 39, 53 fatalities for people 40 to 59, 139 fatalities for people 60 to 69, 578 fatalities for people 70 to 79, and 850 fatalities for people aged 80 or above. That means that the median age of death from COVID-19 in Italy was above 80. And, of course, getting back to the athletic examples, virtually all the athletes in the three organizations mentioned above were under age 40 and almost all were under age 30.

These overreactions were due to two things: (1) people’s own attitudes to risk and their innumeracy about death rates and (2) the incessant media hyping about the dangers of COVID. Still, the advantage of leaving the decision in people’s own hands and letting them be free to choose was that they could get new information and act on it. Indeed, that’s what people in many areas did when allowed to. In June 2020, for example, California’s government, which had imposed one of the harshest lockdowns, allowed bars to open for a few weeks. And, wonder of wonders, many people, especially young people, who were at little risk, started going to bars again.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 130 of the 2014 Sixth Edition of (my mentor) Robert Ekelund’s and Robert Hébert’s remarkable history-of-economic-thought textbook, A History of Economic Theory & Method:

The idea of a self-regulating economy operating within a market system was a new one in the mid-eighteenth century. Anticipations of the idea crept into early Continental economic literature before then, but clearly Adam Smith gave the idea its most timely and forceful expression. The perception of a natural social order, existing in the absence of any form of central planning, was one of the most liberating ideas ever to emerge in the history of economic thought.

Some Links

(Don Boudreaux)

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Brian Riley dissects Robert Lighthizer’s recent New York Times op-ed on U.S. trade with China. Two slices:

In a weekend op-ed for the New York Times calling for strategic decoupling from China, former U.S. Trade Representative (USTR) Robert Lighthizer attempts to rewrite trade history and the laws of economics. However, there is one thing he gets partially right: “The U.S. objective should be to continue trade and economic activity beneficial to us and to discourage any part that is not.”

The question is, who gets to decide whether trade and economic activity is beneficial or not: Hard-working Americans deciding how to spend and invest their money? Or politicians and bureaucrats based on which industries have the most political clout?

…..

More fundamentally, a trade deficit is not a transfer of wealth. When Americans import goods from other countries, those dollars are used either to buy U.S. exports or to invest in our economy. Either way, we benefit.

GMU Econ alum Dominic Pino offers evidence that “China isn’t even good at being China.”

Kate Wand talks with Samuel Gregg.

Glenn Loury explains that “racial preferences won’t solve racial inequality.” A slice:

Racial preferences persist because they represent the path of least resistance. If an administrator of a selective institution saw that blacks were a minuscule percent of his student body, he would want to change that. If he found that admitting African-American students at a lower percentile of performance would ease his public-relations problem, then he would do it. But when thousands of people in that same situation make the same decision and place it beyond criticism, the goal of equality suffers. Failing to address ourselves to the developmental disparities manifest in test scores, as well as failing to change the dynamics of human development at the root of black underrepresentation in elite and selective venues, means failing to solve the inequality problem.

Head counts are no substitute for performance, and everyone knows it. No policy can paper over the racial dimension of academic disparities. True equality would seek to remedy the foundational circumstances reflected in the underrepresentation of African-Americans at the Bronx High School of Science, Brooklyn Tech, Holy Cross, or Harvard. I’m for racial equality, not patronization. Don’t patronize my people, inflict on us the consequences of a soft bigotry of low expectations, or presume that we’re not capable of manifesting excellence in the same way as any other people. Don’t judge blacks by a different standard.

Jonathan Lesser is correct: “Climate activists push electrification and degrowth, complementary strategies that would lead to lower standards of living and more government control.” A slice:

For degrowth proponents, the improvement in global living standards is nothing to celebrate. According to a new article in Nature, degrowth requires developed countries to abandon economic expansion as a goal. It means producing and consuming less, abandoning “less necessary” consumption of fossil fuels, meat and dairy products, cars and air travel, and even “fast fashion.” It means less (or no) private ownership and new ways (read: government control) of “provisioning” individuals to meet their needs.

Mike Munger, writing at AIER, insightfully describes green energy (so called) as “the modern ‘broken window.'” A slice:

Once you are duped into believing destruction is productive, almost everything that a rational public policy would label as a cost becomes, by some judo move of seraphic intuition, a benefit. If need is wealth, then it makes sense to outlaw fossil fuels immediately, because of all the jobs created trying desperately to provide basic transport and energy.

The problem is that jobs are not wealth. Wealth is access to the goods, products, and services that make our lives better. It is true that “studies show” that wiping out all our productive wealth based on fossil fuels efficiently would create jobs. Those “studies” are among the best arguments against doing anything of the sort.

Steven Malanga details some of the disadvantages of living in U.S. states with especially high taxes and degrees of government intervention. A slice:

Advocates of high taxes say that people don’t relocate because of taxes. It’s true that in surveys that ask people why they moved, migrants list plenty of reasons, including housing costs, economic opportunity, and pursuit of a better overall quality of life. Still, there’s a close correlation between lists of the highest-taxing states and rankings of states that people are leaving. The relationship is so glaring that several years ago Gallup remarked, “Even after controlling for various demographic characteristics including age, gender, race and ethnicity, and education, there is still a strong relationship between total state tax burden and desire to leave one’s current state of residence.”

My former Mercatus Center colleague Robert Graboyes accurately describes many ‘experts’ using statistics as “chimps with machine guns.” A slice:

In a caustic 2011 column, “Leaving Children Behind,” Nobel Prize-winning economist Paul Krugman offered a back-of-the-envelope statistical analysis to extoll Wisconsin’s unionized teachers and excoriate nonunionized teachers in states like Texas. Shortly after, Twitter car-identification guy and acerbic commentator David Burge (a.k.a. @Iowahawkblog) took Krugman’s analysis down to an automobile graveyard and ran it through an Al-Jon Car Crusher (made in Iowa). His takedown was a blogpost titled “Longhorns 17, Badgers 1.”

TANSTAFPFC (There Ain’t No Such Thing As Free Protection From Covid)

Eugyppius is justly critical of New York Times reporting (so called) on covid. A slice:

It’s also interesting how [in the eyes of New York Times ‘reporters’ and opiners] anti-lockdown protestors in the West are thugs and stupid conspiracy-crazed Nazis, while in China they are “students, workers and homeowners.”

Jay Bhattacharya tweets:

“1) Was Fauci involved in U.S. government funding of controversial early research into covid?

2) Did Fauci lie about this to Congress?

The answer to both questions is “yes.””
—
@thackerpd

Quotation of the Day…

(Don Boudreaux)

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… is from pages 442-443 of Hayek’s 1976 lecture “Socialism and Science,” as this lecture appears as Chapter 29 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:

In a society whose wealth rests upon prompt adaptation to constantly changing circumstances, the individual can be left free to choose the directions of his efforts only if rewards fluctuate with the value of the services he can contribute to the society’s common pool of resources. If his income is politically determined, he loses not merely the incentive but also the possibility of deciding what he ought to do in the general interest. And if he cannot know himself what he must do to make his services valuable to his fellows, he must be commanded to do what is required.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 253 of Will and Ariel Durant’s 1975 volume, The Age of Napoleon (original emphasis):

Perhaps it was magnificent to try, but it was certain to fail. In the end imagination toppled reason….

DBx: How many government programs can be described in this way? Alas, far too many.

Very many people – including (or, especially?) today those who gaudily exhibit their alleged allegiance to science – treat the state if it possesses the power to work miracles. Very many people – including (or, especially?) today those who gaudily exhibit their alleged allegiance to science – commit what Matt Ridley identifies as the reverse naturalistic fallacy, which is to conclude that, if something should exist, then that something can indeed, with enough effort and will-power, be conjured into existence.

A true understanding of, and commitment to, science promotes humility. A false understanding of science promotes hubris and dogmatism.

Vernon Smith on Adam Smith (and on Adam Smith’s Interpreters)

(Don Boudreaux)

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Pasted below is a comment left on my Facebook page (and also at the Wall Street Journal) by my emeritus Nobel-laureate colleague, Vernon Smith:

Here is my comment in the Conversation section of WSJ on the Swain article on Adam Smith: The problem with much of the literature on Adam Smith is that the authors do not read him as carefully as he wrote. For example, reference is made to “people pursuing their own self-interest,” but Smith used the term “own interest” 25 times in Vol. II of WN, the term “self interest” only once in referring to the minor clergy of Rome, who were “kept more alive by the powerful motive of self-interest. The parochial clergy derive, many of them, a very considerable part of their subsistence from the voluntary oblations of the people; a source of revenue which confession gives them many opportunities of improving. The mendicant orders derive their whole subsistence from such oblations. It is with them, as with the hussars and light infantry of some armies; no plunder, no pay.) WN, Vol II, p234-5).

Smith also made plain that commodity value was determined by labor only “In that early and rude state of society which precedes both the accumulation of stock (capital) and the appropriation of land, the proportion between the quantities of labour necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them for one another.” (WN, Vol. I. p 49)

DBx: Indeed it is true both that Adam Smith wrote with remarkable care, and that many of his readers read with remarkable carelessness.

Some Links

(Don Boudreaux)

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Noah Carl asks why, even after April 2020, so very many people continued to call for, and to fall for, lockdowns. Two slices:

Up until April of 2020, the basic case for lockdown was still intact: there’s a virus going round with a 1% mortality rate; it will continue spreading until two thirds of the population has been infected; if we don’t lock down, hundreds of thousands of people will die; therefore we must do so.

Now, I’m not saying this case was strong. After all, it completely ignores the issue of civil liberties – even if locking down had saved hundreds of thousands of lives, doing so might have still been wrong given the massive violation of civil liberties it entailed. Another weakness is it assumes the only way to stop people dying was by locking down; in reality, we could have tried focussed protection.

Nonetheless, the premises at least appeared sound. This changed at the end of April 2020, when Covid deaths in Sweden began trending downward….

…..

It’s often claimed that Swedes locked down voluntarily by drastically reducing their time spent outside. But this simply isn’t true, as Google mobility data shows…. Swedes reduced their time spent on retail and recreation by only a quarter as much as Brits.

Sweden’s experience clearly undermined the second premise in the case for lockdown: that Covid will continue spreading until most people have been infected. After Sweden, it was no longer possible to argue that lockdown was necessary to halt the spread. You could still argue it made a difference, but not that it was the only thing standing between us and armageddon.

Which raises the question: why did so many people continue calling for lockdown? Why didn’t it dawn on them that the cost/benefit ratio was much greater than they’d initially believed? And I’m not just talking about joe public, who massively overestimated the risk of dying. Many ‘experts’ who were perfectly aware that the risk was low continued banging the lockdown drum.

Three reasons come to mind.

First, the benefits are concentrated (on those who are protected), whereas the costs are widely dispersed. Second, the benefits are immediate, whereas the costs are largely delayed (inflation, government debt, worse educational outcomes). Third, measuring the benefits is easy (or at least, was presented as being easy), while measuring the costs is somewhat harder.

For these reasons, I suspect, the costs were more difficult for people to “see” – in the sense of Frédéric Bastiat’s essay ‘What is seen, and what is not seen’. It’s not just the magnitude of costs that affects decision-making, but also their ‘visibility’.

Phil Magness – writing at his Facebook page – is skeptical of the chief conclusion of Markus Bjoerkheim’s and Alex Tabarrok’s new paper that is skeptical of focused protection. A slice:

I’m reading through the Marginal Revolution-featured paper on “focused protection” in nursing homes. Since the paper’s study period covers the pre-vaccination part of the pandemic, the main question I raised yesterday was whether they accounted for the mandatory covid patient readmission policies that several states imposed on nursing homes.

The contents are not encouraging. They acknowledge this problem, but minimize it (citing a document from the scandal-plagued New York department of health, which imposed one of those rules and covered up the consequences). They then go on to describe a series of approaches that could have been adopted that sound an awful lot like the “focused protection” from the Great Barrington Declaration…only to acknowledge that few if any of them were ever adopted.

One of their regressions does suggest a small but statistically significant relationship between covid patient admissions and nursing home deaths, although the interpretation of it here seems overly mechanistic (IOW simply predicting 25 admitted patients per 1 additional death discounts the transmission pattern of the disease, i.e. if 1 single admitted carrier gives it to another resident, who then spreads it to others & so forth). The discussion of this finding (in the third image) amounts to unconvincing hand-waving that repeats the NY Dept of Health press release’s talking point and invokes the implementation of testing…but only in June 2020, after the first wave had passed.

In conclusion: If (a) you did not control for significant policy variation between the states on admission requirements, (b) do not identify states that attempted any specific “focused protection” measure on a wide scale, and (c) do not show any evidence that other non-pharmaceutical interventions such as lockdowns and mask mandates achieved any of the things they claim to do, how exactly do you justify the conclusion that “Focused protection without extensive non-pharmaceutical interventions elsewhere would almost certainly have resulted in more death”?

Brendan O’Neill describes “the elites’ blacklisting of lockdown dissenters” as “shameful and self-destructive.” Two slices:

Nearly three years on from the start of the pandemic, it’s apparent that censorship was central to lockdown. It wasn’t only our everyday lives that were forcibly put on hold – so was our right to say certain things and even think certain things. In the US, Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases who was fawned over by the liberal media for his handling of Covid, has been deposed in a lawsuit that accuses him and the Biden administration more broadly of colluding with Big Tech to undermine the American people’s speech rights during the pandemic. The lawsuit is brought by the attorney general of Missouri, Eric Schmitt. The transcript of the questioning of Fauci was released earlier this month. It’s a frustrating read. Fauci continually says he doesn’t recall or doesn’t know in response to questions about his alleged role in suppressing speech in the Covid era. But it seems clear that, informally at least, he helped to devise and enforce the parameters of acceptable thought during the pandemic.

Consider the Great Barrington Declaration. Fauci had high-ranking discussions about how to counteract this open letter that raised ‘grave concerns about the damaging physical and mental-health impacts of the prevailing Covid-19 policies’. Freedom-of-information requests show that Fauci was asked by officials to engage in a ‘quick and devastating takedown’ of the GBD. He hopped to it. He ‘jumped into action to smear and discredit the GBD in the media’, as one account describes it. This included writing off the GBD’s authors – Martin Kulldorff, Sunetra Gupta and Jay Bhattacharya – as ‘fringe epidemiologists’ who were peddling ‘nonsense’. We know now that Bhattacharya, a professor of medicine at Stanford, was subsequently shadow-banned on Twitter and even added to its McCarthyite ‘Trends Blacklist’, meaning his tweets would never make it into ‘trending topics’. The algorithm weaponised against a heretical professor who had been publicly denounced by Fauci.

…..

Elite consensus opinion is a powerful beast. Time and again, the government view on Covid became the only utterable view in the digital public square. So when officialdom was pro-masks, dissent on masks was ruthlessly censored: witness YouTube’s banning of a video featuring senator Rand Paul questioning the effectiveness of masks. When officialdom insisted that lockdown was the right and only way to tackle Covid, all intellectual bristling against lockdown ran the risk of being blacklisted, as the GBD folks and others discovered. And when it was Fauci’s belief that the lab-leak theory about Covid was a ridiculous conspiracy theory, ‘all views in conflict’ with that take risked censure online. Strikingly, it was only when the Biden administration said in May last year that it would look into the lab-leak theory that Facebook finally lifted its censure of the theory – proof that the government view ruled supreme on social media in the pandemic.

Telegraph columnist Janet Daley decries the fact that modern governments “have learnt that fear works.” A slice:

As the year in which life officially returned to normal comes to an end, we must ask an uncomfortable question. What on earth just happened? We have lived through a period of what would once have been the unthinkable suspension of basic freedoms: interventions by the state into personal life that even most totalitarian governments would not have dared to impose. And we, along with most (not all) of the democratic societies of the West, accepted it. Before that era slips into the fog of convenient forgetfulness, it is absolutely imperative that we – the country as a whole – hold a thorough post hoc examination, because our governing classes have certainly learnt something they will remember.

The critical lesson that has been indelibly absorbed by people in power, and those who advise them, is that fear works. There is, it turns out, almost nothing that a population (even one as brave and insouciant as Britain’s) will not give up if they are systematically, relentlessly frightened.

The Covid phenomenon has provided an invaluable training session in public mind-control techniques: the formula was refined – with the assistance of sophisticated advertising and opinion-forming advice – to an astonishingly successful blend of mass anxiety (your life is in danger) and moral coercion (you are putting other people’s lives in danger). But it was not just the endless repetition of that message that accomplished the almost universal, and quite unexpected, compliance. It was the comprehensive suppression of dissent even when it came from expert sources – and the prohibition on argument even when it was accompanied by counter-evidence – that really did the trick. Now the prescription is readily available for any governing elite hoping to initiate a policy likely to meet with strong public resistance. First tell people that they, or their children and grandchildren, will die if they do not comply. Then prohibit any mitigating argument or critique of this prediction.

Glenn Greenwald tweets: (HT Jay Bhattacharya)

I’ve never seen an orgy of hypocrisy quite as brazen as how the exact same media corporations and journalists who spent years demanding more Big Tech censorship turned *overnight* into free speech champions: because now it’s their friends being silenced rather than their enemies.

Tim Worstall exposes the dystopian authoritarianism that’s at the heart of the “deegrowth” movement.

Bryan Caplan vs. Dan Klein on immigration. [DBx: These two gentleman are both my long-time personal friends and highly respected colleagues. It is seldom that I disagree with either; I typically agree with both. In this case, though, I find the better arguments to be those offered by Bryan.]

Here’s the transcript of Nick Gillespie’s talk, back in July, with John Cleese.

Quotation of the Day…

(Don Boudreaux)

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… is from page 147 of the 2021 35th anniversary edition of Steven Rhoads’s excellent 1985 book, The Economist’s View of the World: And the Quest for Well-Being:

Rent controls also magnify housing discrimination. Under rent control, there is usually a shortage of apartments. If the landlord doesn’t like African-Americans, he can lie and say that he has promised the apartment to someone else. Given the shortage of apartments, he can be sure that he can refuse the African-American and still have people of other races lined up to sign a contract. If there is no rent control, there will be vacant apartment, sometimes for months at a time. The landlord will know that acting on his prejudices may cost him a lot of rent; he will be more likely to accept the African-American tenant, lest his apartment stay vacant for months.

Getting Adam Smith Right

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

Barton Swaim, in his review of Glory Liu’s book on interpretations of Adam Smith, gets one important thing wrong (“‘Adam Smith’s America’ Review: Wealth of a Nation,” Dec. 17). Fortunately, correcting this error further strengthens Mr. Swaim’s solid case that Smith did indeed, contrary to Ms. Liu’s argument, support free markets as unwaveringly as did F.A. Hayek and Milton Friedman.

Mr. Swaim mistakenly describes Smith’s 1759 The Theory of Moral Sentiments as a work that “isn’t very good.” It is in fact a great and profound work. In it, Smith explained the role that our moral sentiments – involving that which we today call “empathy” – play in governing conduct in familial and other small group settings. Smith’s focus in his 1776 Wealth of Nations was wider. In this latter book, Smith explained how multitudes of strangers can be motivated to cooperate productively with each other in order to produce streams of output that improve the standard of living of the masses.

While the moral sentiments that are the subject of the earlier book do not disappear when individuals deal with strangers, these sentiments alone are too weak to incite and guide countless strangers to cooperate productively. Instead, such extensive cooperation can be achieved only within free markets in which competitively set prices and wages channel producers’ self-interest towards satisfying consumer demands. Markets prompt producers to act in ways that benefit strangers as if producers are motivated in their dealings with strangers by many of the same moral sentiments that lead them to treat their family, friends, and neighbors with generosity and kindness. And because the number of strangers who can be served by impersonal market forces isn’t limited as is the number of individuals for whom someone can experience deep personal empathy or concern, the size of the market in which strangers productively cooperate can indeed be global.

A corollary of this insight – one that Smith made explicit many times – is that government officials cannot hope to have enough knowledge to intervene in ways that improve the outcome of markets that are coordinated, not by personal knowledge and sympathies, but by prices and wages. This same Smithian recognition of the limits of the knowledge of politicians and bureaucrats is at the heart of the case for free markets made by Hayek, Friedman, and other modern champions – such as Ronald Coase, Deirdre McCloskey, and Richard Epstein – of classical liberalism. Were Smith still alive, he would undoubtedly be proud, despite Ms. Liu’s claim, to be ranked in this august company.

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