Russell Roberts's Blog, page 67
December 18, 2022
Quotation of the Day…
… is from page 195 of economist Lionel Robbins’s excellent and still-relevant 1937 book, Economic Planning and International Order (original emphasis):
Our judgment of the success of any organization therefore must be based, not on its capacity at any moment to achieve the “ideal”, but upon its capacity continually to tend in that direction.
DBx: One of the finest yet most-underappreciated features of the free market is its ability to discover and correct errors.
Errors are unavoidable. Resources are used wastefully here and suboptimally there. Some people in some capacities are poorly informed. Particular workers are underpaid while others are overpaid. Today this employer has ‘excessive’ bargaining power, as does that seller of widgets. But nearly all of these errors are profit opportunities. Alert and creative entrepreneurs earn profits if and when they successfully ‘correct’ market errors. Underpaid workers, for example, are like $100 bills lying on the sidewalk. Ditto for consumers buying overpriced outputs.
Because market participants spend their own money, they confront powerful incentives not to err and, no less importantly, both to be on the alert for their errors and to correct their errors ASAP. The market punishes strongly the throwing of good money after bad. The market also, because it typically features simultaneous ‘experiments’ – that is, different firms simultaneously trying their hands at satisfying the same consumer demands or ‘solving’ the same ‘problems’ – readily exposes those particular activities that work best.
Matters differ categorically for government actions. Politicians and bureaucrats spend other people’s money, and they do so often in contexts in which no one else can compete simultaneously. Errors aren’t readily or obviously exposed, and even when some hint of error is given, the politician’s and bureaucrat’s incentive is never to admit error. Instead, this incentive is either to deny error or, if such denial is plainly foolish, to cast blame on others or to assert that success will surely come if more money is thrown at the problem.
As Arnold Kling often counsels, “Markets fail. Use markets.”
December 17, 2022
Vernon Smith on the Fall of ‘Nature’
My emeritus Nobel-laureate colleague Vernon Smith sent to me the following e-mail in response to this letter of mine to Nature; I share Vernon’s e-mail here in full and with his kind permission.
Don:
Nature/editorial and MS review process now requires that research include consideration of policy consequences, and editorials recognizing the past sins of science/scientists in matters of race, gender and ethnic maltreatment.
I asked them to cancel my subscription for this reason and they did not bother to answer. Elite pretentious pigs!
It is like censoring Mark Twain for using the N word–Huck Finn without the N word is like a carriage without a horse.
I switched my subscription to Science. I used to subscribe to both, but decided it was too much. Years ago, they published the evolutionary evidence that skin pigmentation adapts, black to white, in 7000 years after moving North with less sunlight.
They should be proud that social historical changes simply show how far we have come.
Are we not obligated to see that our kids know the truth, the whole truth and nothing but the truth?
Vernon
History “Disprivileges” This Person’s Understanding
Here’s a note to a first-time (and very agitated) correspondent:
Mr. B__:
Unhappy with this Café Hayek post, you assert that “history DOES PROVE AGAIN AND AGAIN that free markets constantly disprivilege people of color.”
You’re mistaken. I recommend that you read the two books to which I link in that post, the first written by Robert Higgs, and the second written by Thomas Sowell. In addition, consider also this quotation from page 126 of David Freeman Hawke’s 1988 book, Everyday Life in Early America:
Peter H. Wood found little discrimination in early South Carolina. “Common hardships and the continuing shortage of hands,” he writes [in 1974], “put the different races, as well as separate sexes, upon a more equal footing than they would see in subsequent generations.” Many scholars now conclude that discrimination set in only during the last quarter of the century when a “series of court decisions and statutes began closing the gates of freedom along racial lines,” changes that finally became codified in Virginia’s slave code of 1705.
Actually exploring the historical record greatly improves one’s grasp of reality and reveals that invidious discrimination is typically fueled – rather than diminished – by state interventions.
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
Bonus Quotation of the Day…
… is from page 478 of Will & Ariel Durant’s 1961 volume, The Age of Reason Begins:
The merchant rulers of the city [Amsterdam] allowed considerable religious freedom, for only in this way could trade be encouraged with peoples of diverse faiths.
DBx: All the many people who assert that free markets, commerce, and capitalism are built on, or generally encourage, invidious discrimination simply don’t know what they’re talking about. They’re ignorant of history and of economics.
Some Links
George Will writes about the new University of Austin in Texas. A slice:
This is a familiar adage: If you don’t like the news, go make some. The news from academia is embarrassing — intellectual fads, political hysterias, the hunting of heretics. So, with substantial financial assistance and guidance from some tech entrepreneurs and others, [Pano] Kanelos — like Thomas Jefferson, sort of — is creating UATX as an alternative.
COVID-related shutdowns in Taiwanese factories caused noticeable dips in global supply, at a time when people all over the world, forced to work and entertain themselves from home, were ordering new electronics. Like manufacturers of many other goods, chipmakers and end-users scaled back production, anticipating depressed sales. But demand unexpectedly boomed.
Politicians rushed to (be seen to) reinforce American manufacturing, both as a matter of strategic output (production of goods domestically) and of employment (millions of workers employed in industries that could be shut down by supply shocks). The near-invitable subsidy bill was the CHIPS and Science Act of 2022 (a backronym for Creating Helpful Incentives to Produce Semiconductors for America).
Chip fabrication plants require long lead times to build (up to five years) and cost billions of dollars. The less-sophisticated plants that make less-sophisticated chips have lower profit margins, and the most sophisticated ones are not only staggeringly costly to construct, but to run and staff.
American companies didn’t need Washington’s encouragement to bring manufacturing back from the outsourcing enthusiasm of the 1990s. American-born companies were already investing in chip production on US soil. Industry-leading Micron Tech broke ground on a $15 billion new plant in September, near its 40-year headquarters in Boise, Idaho. In January, eight months before the CHIPS Act’s signing, California-based Intel announced what may be the world’s largest chip fabrication facility on 1,000 acres of suburban Ohio.
American chip designers are independently motivated to reclaim semiconductor manufacturing from the dominance (and potential volatility) of Asian suppliers, now that the unseen costs of offshoring’s savings can be acutely felt. Chip designers’ reinvestment preceded any such government signal, and its budget for that factory alone dwarfs the CHIPS Act’s investment. Still, future campaigns will be quick to claim credit for revitalizing the industry.
Which proves all the concerns about “illiberal democracy” quite right. The latter is a simply electoral democracy that is devoid of political liberalism—with pillars such as freedom of speech, rule of law, and judicial independence. Without such guardrails, democracy can simply devolve into the tyranny of the majority, embodied in the whimsical rule of a strongman—which is exactly what Turkey is today.
David Bier is correct: What makes crossing U.S. borders illegal is the U.S. Department of Homeland Security. Here’s his conclusion:
As important as the legal implications are, the political implications are just as important. If these entries are legal, it removes the most significant rhetorical tool for opponents of immigration. DHS has the power to change the story about the border from one of chaos and illegality to one of orderliness and legality, and its refusal to do so leads to greater hostility to immigrants and feeds into misguided “invasion” narratives around immigration. DHS should stop blocking asylum seekers and create a process for legal entry to the United States.
“Work not welfare is key to escaping poverty” – so argues Michael Tanner. A slice:
Scott Lincicome’s new book, Empowering the New American Worker, is focused, unsurprisingly, on American workers. However, my chapter in this book is, in fact, focused on those who are not working—or at least not working as much as necessary to help them escape poverty. Specifically, I raise concerns about the ways in which the modern welfare state can discourage work, savings, and family formation.
Households in or near poverty that receive assistance often face marginal effective tax rates that are counterproductive, deterring work effort or putting a low ceiling on how much these families can increase their standard of living. In those cases, much of each additional dollar earned is clawed back through higher taxes or reduced benefits.
Jay Bhattacharya, talking with UnHerd‘s Freddie Sayers, tells what he learned at Twitter HQ.
I can’t stop laughing at this hilarious New York Times article on ‘Why It’s Time to Wear A Mask Again’. The generally excellent Vinay Prasad already caught them citing as “strong evidence” for mask efficacy, this study, which fails to find that masks have any significant effect on rates of influenza infection. Just link to anything and hope nobody notices, Times bros.
…..
The poor pandemic faithful started out masking to save the lives of the elderly and vulnerable, but now they find themselves in an unending hygiene prison from which the only escape, is admitting that they’ve behaved like fools for the past three years. If they can’t do that, a bleak future awaits them, of persisting as the solitary idiotic masker in the grocery store and on the train, of demanding all their acquaintances produce negative tests before they’re allowed to come to any party, and, above all, of never being able to relax around other people. How living like this is better than occasional virus infections, nobody can explain.
Zac Bissonnette tweets: (HT Jay Bhattacharya)
The number of astonishingly embarrassing COVID data corrections the NYT science reporter makes is amazing
About the most fundamental issues of the topic
It would be like if their star hockey reporter repeatedly had to correct pieces to note that hockey doesn’t have 11 periods
Vinay Prasad tweets: (HT Martin Kulldorff)
In the last 6 mo, ID docs, ER docs, Pediatricians & Bone marrow transplant doctors all had huge conferences with no masks in sight
Meanwhile, a hard of hearing elderly woman hospitalized is not allowed to see the lips of her doctors; lives in isolation
Quotation of the Day…
… is from pages 510-511 of Liberty Fund’s splendid 1990 edition, edited by Thomas West, of Algernon Sidney’s remarkable Discourses Concerning Government, which were first published in 1698, 15 years after Sidney’s execution (editor’s footnotes deleted):
If any man ask how nations come to have the power of doing these things, I answer, that liberty being only an exemption from the dominion of another, the question ought not to be, how a nation can come to be free, but how a man comes to have a dominion over it; for till the right of dominion be proved and justified, liberty subsists as arising from the nature and being of a man. Tertullian speaking of the emperors says, ab eo imperium a quo spiritus [“Dominion comes from the same source as one’s spirit.”]; and we taking man in his first condition may justly say, ab eo libertas a quo spiritus [“Liberty comes from the same source as one’s spirit.”]; for no man can owe more than he has received. The creature having nothing, and being nothing but what the creator makes him, must owe all to him, and nothing to anyone from whom he has received nothing. Man therefore must be naturally free, unless he be created by another power than we have yet heard of. The obedience due to parents arises from hence, in that they are the instruments of our generation; and we are instructed by the light of reason, that we ought to make great returns to those from whom under God we have received all. When they die we are their heirs, we enjoy the same rights, and devolve the same to our posterity. God only who confers this right upon us, can deprive us of it: and we can no way understand that he does so, unless he had so declared by express revelation, or had set some distinguishing marks of dominion and subjection upon men; and, as an ingenious person not long since said, caused some to be born with crowns upon their heads, and all others with saddles upon their backs.
December 16, 2022
Daniele Struppa on the ‘Degrowth’ Paper
My dear friend and former Dean at GMU, the mathematician Daniele Struppa (who is now President of Chapman University), sent to me the following e-mail in response to this letter of mine to Nature on the lunatic proposal for “degrowth.” I share it here with Daniele’s kind permission.
Reading these things [DBx: the paper on “degrowth”] is profoundly disappointing.
To begin with, it is sad to see one of the most prestigious journals (the same journal that published the Watson and Crick paper on DNA…) is publishing this kind of rubbish. The article does not have a single piece of data. It is just a manifesto for a deindustrialization of the west, filled with naïve and simplistic comments. For example “it is necessary to ensure universal access to high-quality health care”. Nobody disagrees, but do they realize that such health care requires expensive doctors, expensive medications, expensive machinery (MRI, CAT, etc.)? And why would big pharma invest in discovery if their board of directors are more interested in the environment than they are in dividends and returns? And why would a kid invest 10+ years in becoming a doctor, with gruesome hours, if he cannot make a bunch of money at the end. Sure…love for humanity, etc etc, but at the end if you leave it to passion we simply won’t have enough people to go around.
But what is even more sad is to see that most of the authors are very successful and highly published and highly cited academics. This tells us that this is not a fringe movement. It is a movement that, in Gramsci’s words, has accomplished the long march in the institutions, and now controls funding, publications, etc.
It is a very sad state of affairs.
Some Links
The great Bruce Yandle decries protectionist U.S. tariffs. A slice:
Donald Trump famously saw himself as gatekeeper to the U.S. economy and happily referred to himself as a “tariff man” — but President Joe Biden has quietly maintained the same stance. Although interrupted by the 2020 pandemic recession, tariff revenues have until quite recently continued to accelerate.
Figuratively speaking, for six years, our government has put rocks in our harbors to keep out foreign-made goods. Now, the tariffs are taking a small bite out of Christmas. Scrooge would be proud. In each instance, the rocks were said to improve the well-being of some Americans or industries, sometimes supplemented by patriotic or even environmental appeals, but at the expense of a lot of other Americans.
While we call the practice “protectionism,” the industries and groups gaining protection are numerically few, highly organized, and politically active. Those picking up the tab are much larger in number, diverse, and less organized, and so most of them — like you and I — quietly pay the cost through higher prices or other means. Put another way, the politics of the matter favor those who know how to play the game.
[DBx: Yes. A more accurate name for what we call “protectionism” is “destructionism.”]
Prosperity without profits? The piece goes on to suggest plans for universal income and canceling international debts and by now readers may be getting the feeling that this is not so much about saving the environment as it is about tearing out the institutions of capitalism root and branch.
I trust that you’ll be enlightened by the wisdom shared here by Arnold Kling.
GMU Econ alum Alex Nowrasteh debates nationalism with Rich Lowry.
My intrepid Mercatus Center colleague Veronique de Rugy warns against subsidizing workers. A slice:
Enter American Enterprise Institute economist Michael Strain with a new paper challenging the claim that worker productivity no longer determines workers’ pay.
Strain notes, for instance, that when measuring someone’s pay, it is essential to use total compensation as opposed to only wages. If one fails to include fringe benefits, one fails to capture what is today one-third of workers’ pay. Strain concludes, “When properly measured, with variable definitions based on the most appropriate understanding of the relevant underlying economic concepts, trends in compensation and productivity have been very similar over the past several decades.”
Telegraph columnist Fraser Nelson decries the failure to learn the terrible lessons of lockdowns. A slice:
No one disputes the damage – the question is whether it was a price worth paying for a smaller pandemic death toll. But advocates of lockdown seem strikingly uninterested in finding out. A report was published earlier this month by (among others) Chris Whitty and Sir Patrick Vallance, the two gentlemen of Corona, to summarise what they learned from handling the pandemic. What about lockdowns? Hard to tell these things, it says, because so many things happen at once. In this way, the £400 billion question – do lockdowns work? – is breezily cast aside.
Covid Derangement Syndrome is not yet done harming children in Philadelphia. (HT Jay Bhattacharya)
How ‘Nature’ Has Fallen
Here’s a letter to Nature, which just published a paper that is an excellent candidate for the most idiotic publication of 2022.
Editor:
We know from the get-go of Jason Hickel’s, et al.’s, article “Degrowth can work – here’s how science can help” (Dec. 12) that the authors’ understanding of economic reality is so fundamentally flawed that nothing that appears in the article should be taken seriously.
Specifically, the article’s subheading – which accurately summarizes the authors’ thesis – reads: “Wealthy countries can create prosperity while using less materials and energy if they abandon economic growth as an objective.” This claim is grammatically correct gobbledygook.
Because the very meaning of economic growth is greater per-person prosperity, to propose abandoning economic growth as a means of creating economic prosperity is a preposterous contradiction.
Further, contrary to the authors’ implication, wealthy countries have been creating prosperity by using less materials and energy since the dawn of the industrial age. That’s how economies grow. Indeed, that’s the only way for economies to grow. Economists’ uninspired name for this process is an increase in total factor productivity – meaning that the amount of inputs required to produce a given amount of economic output falls (implying, of course, that a given amount of inputs come to be able to produce greater economic output, resulting in economic growth).
And because producing more (and better) with less is the source of profit, an essential driver of economic growth – that is, an essential driver of producing more with less – is the entrepreneurial quest for profit. As shown by Stanford University economist Gavin Wright,* and more famously by the late Julian Simon** – and as Marian Tupy and Gale Pooley*** have painstakingly more recently documented – innovative capitalism has steadily increased supplies of resources.
Therefore, rather than forsake free-market capitalism as the authors propose, optimal growth in prosperity, and its accompanying incessant increases in resource conservation, requires that markets be made more free.
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
* Gavin Wright, “The Origins of American Industrial Success, 1879-1940,” American Economic Review, Vol. 80, September 1990, pages 651-668.
** Julian L. Simon, The Ultimate Resource 2 (Princeton: Princeton University Press, 1996).
*** Marian L. Tupy and Gale Pooley, “Resources Are More Abundant Than Ever, and People Are the Reason,” Cato Unbound, April 21, 2021. See also Tupy’s and Pooley’s remarkable 2022 book, Superabundance.
Quotation of the Day…
… is from page 428-429 of No. 62 of Cato’s Letters – this one is by Thomas Gordon and first published on January 20th, 1722 – as this letter appears in the beautiful 1995 Liberty Fund edition of Cato’s Letters:
Let people alone, and they will take care of themselves, and do it best; and if they do not, a sufficient punishment will follow their neglect, without the magistrate’s interposition and penalties. It is plain, that such busy care and officious intrusion into the personal affairs, or private actions, thoughts, and imaginations of men, has in it more craft than kindness; and is only a device to mislead people, and pick their pockets, under the false pretence of the publick and their private good. To quarrel with any man for his opinions, humours, or the fashion of his clothes, is an offence taken without being given.
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