Russell Roberts's Blog, page 75

Pittsburgh Tribune-Review: “The Pilgrims’ economic progress”

(Don Boudreaux)

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In my column for the November 29th, 2012, edition of the Pittsburgh Tribune-Review I wrote about a vital economic lesson learned very early by the English settlers of Massachusetts. You can read my column in full beneath the fold.

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Quotation of the Day…

(Don Boudreaux)

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… is from page 69 of Daniel Hannan’s 2010 book, The New Road to Serfdom: A Letter of Warning to America:

The New Deal Democrats, like many elected representatives today, were in the grip of one of the most dangerous of political fallacies: the idea that, at a time of crisis, the government’s response must be proportionate to the degree of public anxiety. “Doing nothing is not an option!” intone politicians, as though hyperactivity were itself a solution. Is that phrase ever true? Doing nothing is always an option, and often it is the best option.

DBx: Yes. And never forget that government doing noting does not imply society doing nothing. Individuals experiment and act in response to various challenges. These experiments and actions are, of course, “doing something,” even though the somethings being done are not being done by government. In many (most?) cases, indeed, when government “does something” the result is a reduction in the quantity of ‘somethings’ being done, as government activity – often by mandate, sometimes by crowding-out – displaces private activity.

Some Links

(Don Boudreaux)

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Wall Street Journal columnist Gerard Baker exposes the economic fallacies that infect and fuel the push for ‘climate reparations.’ Three slices:

The latest synod of our modern church of climate change theologians, otherwise known as COP27, concluded its deliberations in Sharm el-Sheikh, Egypt, with a “breakthrough” agreement over the “loss and damage” provisions of the global governance regime they have established to tackle climate change.

Before they left their air-conditioned hotels and hopped into limousines to take them to their jets for the long journey home, these courageous fighters for carbon neutrality agreed to create a fund on the principle that rich countries like the U.S. should compensate poor countries for the damage caused by climate change. Successive administrations, Democratic and Republican, long opposed this idea, justifiably fearing that it represents an open-ended scheme to funnel American taxpayers’ money to beacons of planet-saving good governance like South Africa, Pakistan and Indonesia.

…..

In his brilliant dissection of the climate extremists’ case in his book, “Unsettled,” Steven Koonin, who served as undersecretary for science in President Obama’s Energy Department, notes that climate-related deaths have plummeted in the era of global warming. Citing data from the Centre for Research on the Epidemiology of Disaster at the Catholic University of Louvain, Belgium, he notes that “weather-related death rates fell dramatically during the past one hundred years” and are “about 80 times less frequent today than they were a century ago.”

Why? Almost entirely thanks to improvements in infrastructure and mitigation enabled by rapid industrialization.

…..

Above all, the idea that the least developed countries in the world have received only the cost of industrialization and not the many benefits is ahistorical. The sophists at the United Nations insist that the new fund is a model of “climate justice,” but it sounds an awful lot like a vehicle for the “reparations” climate extremists have long demanded from the countries that were first to industrialize for supposedly having inflicted their environmental costs on the world.

If we in the West are to pay damages for the Industrial Revolution, shouldn’t we also consider the extraordinary wealth that process has helped spread around the world?

James Bovard decries the return of industrial policy. A slice:

But Commerce bureaucrats have repeatedly disrupted high-tech industries by rotely applying formulas from protectionist laws (such as the antidumping statutes) Congress passed. In 1986, Commerce fabricated unfair trade charges against Japanese semiconductor exports. Those charges were used to browbeat Japan into signing a pact seeking to restrict world-wide semiconductor trade, a shady deal that was extended in 1991. That agreement politically impaled one of America’s most competitive industries. The Commerce Department decreed that imported semiconductor prices must rise by 200 percent, at a time when domestic semiconductor producers could not satisfy domestic demand. That deal destroyed more than 10,000 jobs in companies using chips, according to the Center for the Study of American Business. In 1991, Commerce rubber stamped punitive taxes on the import of computer flat panel displays that devastated American computer makers. But as long as the trade restrictions made a few domestic companies happy, politicians reaped windfall profit in campaign contributions.

Lee Ohanian sings the praises of charter schools.

Reason‘s Robby Soave has interesting observations about how many mainstream media are reporting on Sam Bankman-Fried.

Great news out of Oregon!

Ben Zycher warns that even talk of enacting a windfall-profits tax has negative economic consequences. A slice:

Notice also that no one advocates a “windfall losses” subsidy for fossil fuel producers when “profits” (or prices)are low due to market conditions. (The common argument that fossil fuel producers receive large subsidies is a lot of hooey, in particular in contrast with unconventional energy.) The threat of “windfall profits” taxes combined with the absence of proposals for “windfall losses” subsidies means that expectationally there is a reduction in upside price potential for the fossil fuel producers, but no corresponding reduction in downside price risks. In other words, the entire statistical distribution of expected net prices — returns to investment — shifts downward.

Elon Musk tweets: (HT Jay Bhattacharya)

It is shocking how many journalists viscously attack free speech, but somehow think they’re the good guys!

John Naugle is rightly critical of “the deification of mathematical modeling.” A slice:

One of the understudied causes of the mass hysteria which broke out in 2020 is the deification of mathematical models. We were promised certain doom by Neil Ferguson from the Imperial College London and The Institute for Health Metrics and Evaluation at the University of Washington. Politicians and media outlets took every graph they created as if it were directly from the Oracle of Delphi. They were prophetic utterances! “Thus saith The Experts, The Science’s wrath is upon, let us distance and muzzle ourselves in penance!”

I’ve already written here on how I perceived Covid hysteria as a quasi-religious phenomenon. I would like to further suggest however that our increasingly secularized society has unintentionally recreated religious roles such as seers and prophets under the newer titles of “experts” and “academics.” Quite frankly this phenomenon isn’t particularly new; the minor hysterias of overpopulation and global cooling of the past were equally caused by over-certain academics with mathematical models. Since these creators of models are increasingly acting like prophets, let us remember how prophets are to be tested.

The Seen and Unseen of Tax Cuts

(Don Boudreaux)

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Here’s a letter to someone who learned of a recent essay of mine because her father-in-law, thanks to George Leef, discovered it through National Review.

Ms. C__:

You write, in response to this essay of mine, that I “and other conservative tax cut apologists do hocus pocus in picturing tax cuts as helping anyone except the rich.”

First, I’m not and never have been a conservative. I am and always have been a liberal (with no prefix).

Second, the fact that high-income earners can be said to gain when their taxes are cut is understood by everyone and denied by no one. But a corollary of this fact is frequently missed – namely, high-income earners enjoy what you call “disproportionately large gains” from today’s tax cuts only because high-income earners suffered disproportionately large losses from yesterday’s tax hikes. These “disproportionately large gains” for high-income earners, in other words, might fairly be described as the results of a discontinuation of a policy of inflicting on high-income earners disproportionately large losses.

If you stop punching me in the face, I suppose I can be said to “gain,” but you’ll forgive me if I describe the situation differently.

Third and most fundamentally – and contrary to your denial – the additional work effort and investments that are undertaken as a result of tax cuts do indeed benefit people other than the individuals whose tax liabilities are reduced. Workers’ productivity is increased, leading to higher real wages, while more consumer goods and services are produced, thus lowering prices and improving consumer well-being.

You can argue that the public’s gains on these fronts are exceeded by the losses it suffers as a consequence of the hit to the government’s treasury. And you might be correct in any particular case. But you can’t legitimately deny the reality of these gains any more than you can deny that, say, increased freedom of the press – while obviously benefiting the likes of newspaper owners, tv-news reporters, and basement bloggers – is beneficial mostly because it ensures a better flow of reliable information to the public.

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 pages 35-36 of Julian Simon’s posthumously published 1999 volume, Hoodwinking the Nation:

Writers about population growth usually mention a greater number of mouths coming into the world, and sometimes note more pairs of hands, but never mention more brains arriving.

Some Links

(Don Boudreaux)

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Arif Ahmed identifies the fallacies that doom “effective altruism.” Two slices:

The first concerns what is realistic. Throughout history people have, on the whole, cared more about those closer in space and time — their family, their neighbours, their generation. Imagine replacing these natural human concerns with a neutral, abstract care for “humanity in general”. In that world, we would care as much about the unseen, unknown children of the 25th millennium as about our own. That may be admirable to some people — at any rate some philosophers. But it is hardly realistic.

…..

The second point is that it’s hardly obvious, even from a long-term perspective, that we should care more about our descendants in 25000AD — not at the expense of our contemporaries. To see this, we can apply a thought-experiment owed to the Australian philosopher Frank Jackson. Suppose you are a senior policeman controlling a large demonstration. You have a hundred officers. You want to distribute them through the crowd to maximise your chances of spotting and extinguishing trouble. There are two ways to do it — you might call them the “Scatter” plan and the “Sector” plan. The Scatter plan is as follows: each officer keeps an eye on the whole crowd. If he spots a disturbance, he runs off to that part of the crowd to deal with it.

The Sector plan is as follows: each officer surveys and controls one sector of the crowd. If she spots a disturbance in her sector, she deals with it. But she only focuses on her own sector. She doesn’t look for trouble in any other sector. And she won’t deal with trouble outside her sector if it arises. What works better? I have described it so abstractly that you couldn’t say. It depends on the details. But the sector plan might work better. If each policeman is short-sighted and slow, each additional unit of attention might be better focused on problems that she can effectively address (those in her sector) rather than the ones that she can’t.

The analogy is obvious. It might be better for everyone in the crowd if each policeman were to concentrate on what was near in space. And it may be better, for everyone in each future generation, if each generation were to concentrate on what is near to it in time. This means you, your community, your children and grandchildren. Each generation would then enjoy the focused attention and concern of its own and the two preceding generations. On the other scheme, the long-termist one, each one gets marginal attention from all preceding generations. And each of those must also think about thousands of other generations. And most of them are inevitably ignorant about the problems facing this one.

The Editorial Board of the Wall Street Journal rightly decries the Biden administration signing up to pay ‘climate reparations.’ A slice:

Details about the reparations fund—such as which countries will pay, how much, and which countries will benefit—will be fleshed out over the next year. Biden officials claim the agreement doesn’t create new liabilities for Americans. But the U.S. and Europe are conceding the principle that their emissions cause climate damage even though there isn’t a definitive link between rising CO2 levels and natural disasters such as the monsoon flooding in Pakistan this year.

All of this ignores the benefits for humanity, rich and poor, that economic growth spurred by capitalism have provided. American taxpayers are being asked to pay because the U.S. industrialized first and then lifted billions of people out of poverty via investment and trade.

David Friedman exposes the appalling errors of a Nature paper on the “social cost of CO2.” (HT David Henderson) A slice:

To begin with, CO2 output as a function of GNP depends on the technology for producing power. An order of magnitude reduction in the cost of either nuclear power or storage would almost entirely eliminate the use of fossil fuels, as would the development of cheap fusion power, either of which could happen in the next fifty years. That makes any estimate of CO2 output over the next three centuries a guess about unknowable technological change.

Almost all of the article’s estimated cost of carbon is from either increased mortality or reduced agricultural output. Mortality from increased temperature depends on medical technology, home insulation and cooling technology, and probably other technologies. Agricultural yields depend on agricultural technologies. We have no way of predicting those effects.

How does the article deal with technological change? As best I could tell, it ignores it. It is predicting the effect of temperature changes on mortality over the next three centuries on the assumption that they will be dealt with using the medical technology of today, and similarly for other relevant technologies. It is predicting the effect of climate change on agriculture with the same assumption.

George Selgin busts a few myths about a famous theory offered by some recent Nobel laureates in economics and the connections of that theory with the demise of FTX.

Art Carden ponders (and pictures) economics while walking in the park.

Richard Morrison is a fan of James Otteson’s 2021 book, Seven Deadly Economic Sins.

My GMU Econ colleague Bryan Caplan will be speaking in Japan.

Laurie Wastell documents one of the beauties of competitive markets. (DBx: For the record, I believe that Ron DeSantis was wrong – for the reasons that DeSantis admitted – to remove Disney’s favorable tax status.)

Telegraph columnist Zoe Strimpel is correct when she writes that

Woke is not being just a normal nice person, “alert to injustice in society, especially racism”. It means adopting authoritarian positions on theories that have no basis in reality. It insists on everyone propounding contentious ideas like “structural” racism. It punishes dissenters by bullying, investigating or sacking those who don’t want to sign up to brainwashing programmes.

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

Jay Bhattacharya tweets:

The covid pandemic “increased global extreme poverty by 73.9 million in 202… 63.6 million in 2030… and 57.1 million in 2050.”

Lockdowns kill.

Quotation of the Day…

(Don Boudreaux)

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… is from page 2 of Julian Simon’s posthumously published 1999 book, Hoodwinking the Nation:

Many people have a propensity to compare the present and the future with an ideal state of affairs rather than with the past or with some other feasible state; the present and the future inevitably look bad in such a comparison.

Trade Is Trade Is Trade

(Don Boudreaux)

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Here I tilt with a toothpick at a giant windmill:

Mr. O__:

Thanks for the link to Lisa Kahn’s, Lindsay Oldenski’s, and Geunyong Park’s new paper, “Racial and Ethnic Inequality and the China Shock” (which I recently learned of, I think, from Scott Lincicome).

Like you, I find interesting these researchers’ discovery that (as they put it) “[t]he China [trade] shock narrowed the Black-white employment gap by about 15%. While many recent labor market trends have exacerbated Black-white gaps, import competition is a modest offsetting force.” Also like you, I applaud this consequence of increased American trade with China.

These findings are indeed useful evidence against the commonplace assertion that increased trade by Americans with people in lower-wage countries inevitably harms lower-skilled workers in America. Yet I’m prompted here to register an uneasiness that I always experience when encountering such studies.

My uneasiness comes, specifically, from the fact that such studies further the false impression that commercial exchanges that cross political borders – and any economic or social changes sparked by these exchanges – differ categorically from exchanges and changes that occur purely internally to a country.

Changes in trade patterns occur relentlessly, and in a large country such as the United States most such changes are purely domestic. More women enter the workforce – inflation-fueled cuts in minimum wages better enable low-skilled workers to find employment in the above-ground economy – new labor-saving techniques are introduced in the retail industry – income-tax cuts in Louisiana lead to more trade between Louisianians and Iowans – the quality of Virginia wines continues to rise relative to the quality of California wines – American consumers develop stronger preferences for eating apples and weaker preferences for eating oranges. These and countless other such ‘domestic’ economic changes occur daily. Each one destroys some particular jobs and creates other particular jobs. Yet all but a minuscule handful of such domestic economic changes remain unnoticed by the general public, researchers, and policymakers, with even fewer of these changes sparking empirical investigations of their consequences.

The ’cat’ of treating international trade as categorically distinct from domestic trade long ago escaped the ‘bag’ to which I wish it had been securely confined – namely, treating all trade simply as trade, with the recognition that nothing economically relevant arises or is implicated merely because one party to a trade happens to be in a political jurisdiction different from the jurisdiction in which his or her trading partner currently happens to be. And so given that people will continue to classify international trade as a distinct category of trade, studies such as the one you share are worthwhile. I myself will continue to use them when appropriate. But from time to time it’s worthwhile to step back to look at the bigger picture. This picture reveals that trade is trade is trade, with the political or geographic locations of those persons who carry it out being utterly irrelevant for purposes of economic policy.

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

Some Links

(Don Boudreaux)

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Aaron Kheriaty explains the connection between technocracy and tyranny. A slice:

Scientism is the philosophical claim—which cannot be proven scientifically—that science is the only valid form of knowledge. Anyone who begins a sentence with the phrase, “Science says . . . ” is likely in the grip of scientism. Genuine scientists don’t talk like this. They begin sentences with phrases like, “The findings of this study suggest,” or “This meta-analysis concluded. . . .” Scientism, by contrast, is a religious and often a political ideology. “It has been evident for quite a while that science has become our time’s religion,” the Italian philosopher Giorgio Agamben observed, “the thing which people believe that they believe in.” When science becomes a religion—a closed and exclusionary belief system—we are dealing with scientism.

The characteristic feature of science is warranted uncertainty, which leads to intellectual humility.

The characteristic feature of scientism is unwarranted certainty, which leads to intellectual hubris.

(DBx: Although F.A. Hayek defined “scientism” a bit differently – as the unthinking use in one branch of scientific inquiry of the methods used in other branches of inquiry – his brilliant work on what he called “the abuse and decline of reason” led him to a conclusion quite similar to that of Kheriaty and Agamden. It’s hardly an exaggeration to say that the single worst intellectual error that has haunted humanity over the past two centuries is the false notion that society is a science project, one that can be ‘solved’ or ‘completed’ by ‘experts’ if only the elements of society – individuals – will obey without resistance.)

American-born Telegraph columnist Janet Daley reasonably argues that “[l]ockdown turned Britain into a nation of neurotics who still cling to their homes.” A slice:

Again I must revert to anecdotal accounts which ring true to me. In many countries which have authoritarian political traditions, such rules were resented and frequently (often openly) flouted. But in the UK the government was aware of the libertarian inclinations of its population, and so presented lockdown as the moral responsibility of every individual. Through a quite insidious and carefully orchestrated campaign of fear and potential guilt, it made people internalise the need for their own imprisonment.

Now even when the jail door has been opened, an awful lot of people, having grown accustomed to their confinement, don’t want to leave. We should have seen this coming.

Toby Young reports that

Readers will recall the ban on singing of all kinds during the lockdowns and even after they were lifted because singing was supposedly a ‘transmission risk’. Turns out, this typical piece of Covid hysteria was based on a flawed study. The Church Times has more.

When I offered my reasons for believing that it would be dangerously unwise to attempt to have the state impose personal penalties on lockdowners and their prominent supporters for their policy decisions, I wrote that, nevertheless, inquiries into pandemic panic are in order – inquiries that, alas, I fear will themselves be poisoned by bias and politics. Evidence of the validity of this latter fear is arising in Britain.

While the line perhaps seems too fine between applauding efforts to expose the tyranny and depredations of lockdowners and opposing efforts to have the state impose sanctions personally upon lockdowners, I believe that this line is real and important – which is one reason why I agree with this essay by Jon Sanders. Two slices:

[Emily] Oster and her enthusiasts [for now excusing lockdowners] would have us believe they [those persons who resisted lockdowns] were lucky [in having acted in ways that have turned out to be more appropriate than were the actions advocated by lockdowners]. No, they were principled. The pastors who trusted in God and kept the churches open. The tattoo artists, bar owners, speedway owners, and other “nonessential” small businessmen who went back to work in defiance of arbitrary government orders, the same orders allowing “essential” businesses next door to remain open. Epidemiologists and other scholars who refused to be cowed into acquiescence with governments’ message du jour but spoke out for known best practices for living through a pandemic, protecting the vulnerable while building herd immunity. The governors and heads of state who resisted the worldwide rush to COVID tyranny, choosing instead to stand with established science. The doctors who put their patients first, even prescribing treatments shown to work that were questioned after the fact by authorities. The civil libertarians who held firm to their tenets rather than run like emus. Public employees who refused to submit to unnecessary vaccination and challenged them in court. Lawyers who represented them despite excoriation from their peers and others. Judges who upheld the law rather than ruling out of fear and hubris. Parents who started attending school board meetings to demand their children return to classroom instruction.

…..

At the end of “Tombstone,” about to be shot, Ike Clanton tears off the red sash that signified his allegiance to the Cowboys. He was spared. The narrator informs us, however, that Clanton was “shot and killed two years later during an attempted robbery.” He’d gone right back to wrongdoing. He hadn’t repented.

If we are going to accomplish Oster’s “work together to build back and move forward,” it’s imperative to acknowledge and address the wrongs done that tore everything down and everyone apart. Many of those things are still being done now, in pockets across the country. Without their repentance, our pretending it never happened isn’t grace, it’s Stockholm Syndrome.

Ian Miller tweets: (HT Jay Bhattacharya)

The fact that vaccine mandates are continuing into 2023 is absolutely indefensible

There is no scientifically justifiable reason for it — it’s entirely about forcing compliance and punishing anyone who dares dissent

David Henderson decries the Biden administration’s “disrespect [for] one of the most fundamental rights people have: the right to choose whether to engage in contract work.”

John Miller remembers Martin Morse Wooster.

“Europe Threatens New Tariffs Over Biden’s ‘Buy American’ Tax Credits.” (DBx: International-trade policy as carried out by real-world governments is cartoonish. The government of country A enriches a small handful of its citizens by imposing greater harms on the bulk of the citizens of A. The government of country B, in an effort to protect the interests of a small handful of its citizens by pressuring the government of country A to reverse course, imposes larger harms on the bulk of the citizens of B.)

Tim Worstall offers evidence that social changes are upstream even from some legislative changes.

Fraser Myers warns of green austerity.

My GMU Econ colleague Bryan Caplan offers evidence in support of Phil Magness’s and Michael Makovi’s thesis that Karl Marx’s prominence is due chiefly to the fact that his name was used in a successful coup by totalitarians in 1917. A slice:

To speak plainly, academics after 1917 tacitly applied a “might makes right” or at least a “might makes credible” heuristic. When Marx’s followers were an inbred cult, academics treated them like an inbred cult. Once they took over a major country, however, academia “reassessed.” Predictably, they found that the only philosopher whose adherents ruled a country was actually worth reading on his merits.

Quotation of the Day…

(Don Boudreaux)

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… is from page 151 of the 2016 second edition of Thomas Sowell’s splendid volume Wealth, Poverty and Politics (footnote deleted; link added):

Economic outcomes are affected not only by attitudes toward work but attitudes toward progress as well. In modern industrial societies, progress is more or less taken for granted, but this was not always so, even in countries that are today modern societies. A history of the rise of Western civilization said of Europe in medieval times, “the very idea of innovation was lacking: men did what custom prescribed, cooperated in the plowing and to some extent in the harvesting, and for many generations did not dream of trying to change.”