Russell Roberts's Blog, page 82

What Protectionists Get Wrong Is the Economics

(Don Boudreaux)

Tweet

Arguing with protectionists is like playing whack-a-mole.

Mr. Y__:

Thanks for your follow-up note charging that I “don’t understand that most people that oppose free trade come from a totally different value place than where economists and libertarians are…. Most [people] that back muscular tariffs don’t care a lot about the pure economic effects of trade. We economic nationalists oppose globalization because we feel something major in terms of community and loyalty is lost by Americans relying on foreigners as much as we do.”

Hmmm.

You correctly suggest that it’s possible to accept the economics of trade and still support protectionism. Indeed, all policy choices reflect value judgments: People can fully agree on the positive analysis of trade yet disagree over what is the best trade policy. But I believe you to be incorrect to insist that most disputes over trade today ultimately reflect, not disagreements about the economics of trade, but instead disagreements over fundamental values.

If you’re correct that I and others who continue to repeat the basic economics of trade “talk past the most serious of globalization’s opponents,” then we wouldn’t hear and read so much economic nonsense about trade. We’d not encounter politicians insisting that tariffs increase employment, or warning that trade deficits destroy jobs. We’d hear no pundits assert that free trade imperils ordinary Americans’ incomes and results in America being “de-industrialized.” We’d never read any thinktank paper ‘explaining’ that government must restrict imports in order to raise workers’ wages. We’d come across no proposals to use export subsidies as a means of enabling American companies to compete against “unfair” foreign competition. No pundit would describe an economy under free trade as a drunk donkey, or advocate industrial policy as a means of ensuring that American workers gain better comparative advantages.

We’d encounter no such complaints about free trade, or any such promises about tariffs and subsidies. Yet overwhelmingly the complaints that we encounter about free trade are precisely what I detail in the previous paragraph. These complaints are all about free-trade’s allegedly harmful economic effects – effects that can, it is further asserted, be corrected only by protectionist interventions.

I’d intellectually respect someone who advocated protectionism in the U.S. by saying “I understand that tariffs and subsidies won’t increase overall employment in America. I understand that tariffs and subsidies will, instead, simply destroy jobs in which labor is employed productively and create jobs in which labor is employed wastefully. I further understand that the U.S. trade deficit is neither a sign nor a source of economic trouble. And I concede that the protectionism that I endorse will slow economic growth, leading over time to the living standards of nearly all Americans being lower than would arise under a policy of free trade. Still, I oppose free trade because, according to my values, I think we Americans should rely more upon each other for our goods and services and less upon foreigners.”

A protectionist who says such things is the kind of protectionist who you believe is typical. But, as I say, while I’d intellectually respect (as I nevertheless disagree with) such a person, I’ve never encountered any such protectionist. Every protectionist I’ve encountered over the past 40 years is a man or woman who gets the economics wrong. He or she believes both that greater abundance is created through the engineering of artificially greater scarcity, and that politicians and bureaucrats, spending and investing other people’s money and guided by political impulses, allocate resources better than do private market actors spending and investing their own money and guided by market prices.

I challenge you to send to me evidence of a protectionist who admits that protectionism is economically harmful. I don’t deny that such persons exist. I’ve just never encountered one. I admit that the experience would astonish me.

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…

(Don Boudreaux)

Tweet

… is from page 191 of W. Michael Cox’s and Richard Alm’s still-important 1999 volume, Myths of Rich & Poor:

Competition mobilizes. Protection immobilizes.

DBx: A big message succinctly stated.

Cox and Alm go on to say, on the same page, about protectionism that “[i]t safeguards only the status quo, at the high cost of crimping and eventually strangling progress.”

Some Links

(Don Boudreaux)

Tweet

Russ Roberts talks with Mike Munger about industrial policy. Here’s a slice, from the transcript, of Munger’s remarks:

Look, elected officials have a two-year time horizon until the next election. And that’s in November. So, in December they have a 23-month time horizon. So, politics has a really, really short time horizon, and that’s why these people who advocate for an industrial policy, they’re all wet. All they need to do is read basic Public Choice, and we would stop hearing about all this nonsense.

Scott Sumner draws important lessons from the Russian gas debacle. A slice:

Most pundits (including some economists) underestimate the ability of markets to do a “work around” when the supply of a key good is restricted. We often read that it is technologically impossible to do without X, and that it will take many years to ramp up the production of alternatives. Recall that during Covid we were assured that it would take a long time to produce various quantities of vaccines, masks, Paxlovid, etc., and then production easily blew right by the pessimistic forecasts. I am not suggesting that supply constraints are never a problem (Europe still faces some problems this winter), rather that we should be skeptical about claims of how hard it will take to circumvent those restrictions.

The Wall Street Journal‘s Editorial Board rightly ridicules the U.N. for continuing to pollute the intellectual environment with climate alarmism. A slice:

The climate lobby has spent more than 30 years preaching apocalypse to goad countries to purge fossil fuels. Most Western elites have joined the lobby. But publics around the world simply aren’t willing to make the sacrifices in standards of living that extreme climate advocates insist on.

Our sincere advice would to be drop the doomsday act, which people don’t believe, and focus instead on policies to adapt to a warmer planet and mitigate any damage if the worst happens. It beats standing in the public square with a sign saying “the end is near.”

Wall Street Journal columnist Holman Jenkins writes insightfully (except for his continued endorsement of a carbon tax) about the media and climate hysteria. A slice:

In a countering article, Matthew G. Burgess, Roger Pielke Jr. and Justin Ritchie also endorse more research but warn against marching such low-probability scenarios to the center of the conversation to mislead voters and policy makers.

This brings us to a third, epic-length piece of climate-related journalism, posted on Substack by the liberal political analyst Ruy Teixeira. He touches on all the same matters and mentions many of the same names, on the way to describing the political and policy disaster his fellow Democrats created for themselves by adopting the overdone and unscientific “climate crisis” stylings of Greta Thunberg.

Burton Abrams and James Butkiewicz decry the Fed’s mission creep.

Cathy Young isn’t impressed with “Sohrab Ahmari’s Vacuous Critique of the Anti-Hijab Protests.” A slice:

OK, we get it: Ahmari really, really hates the upending of traditional sexual and gender norms in the West. His crusade against the “demonic” practice of Drag Queen Story Hour is legendary. But one needn’t subscribe to progressive dogma on gender identity to be troubled by Ahmari’s “national conservatism,” which responds to these controversies by advocating coercion, as the latest step in Ahmari’s intellectual journey makes especially clear. Between a liberal society that tilts too far toward female and LGBT liberation—even if “too far” means merely allowing women to offend traditionalists with short skirts—and an authoritarian regime that compels the hijab and allows barely pubescent girls to be married to middle-aged men, Ahmari dislikes the liberal society more. His column makes it clear that he regards victory by the liberal opposition in Iran as not just unrealistic but undesirable: “I fear what it might portend should it ‘succeed,’” he writes.

Michael Greve, a GMU colleague over in the Antonin Scalia School of Law, looks back on his book published ten years ago by Harvard University Press, The Upside-Down Constitution. A slice:

All this is familiar to the point of ennui. What UDC adds, and what prompted some critics to dismiss the book as libertarian pamphleteering, is the elementary recognition—not mine, but that of a massive body of literature—that “dual” federalism is also and always competitivefederalism. On all the margins that are beyond the federal government’s powers, states will have to compete for citizens’ “affections,” as the Federalist put it; for productive citizens and their talents and assets.

David Henderson ponders “appropriate penalties for assaulting politicians and their relatives.”

The Babylon Bee lists 44 things for which the Democrats might request amnesty.

Dan Klein and Björn Hasselgren will lead a reading group on “God and Honest Income: 1500-1750.”

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

Lauren Smith, writing at Spiked, strongly disagrees with Emily Oster’s case for a “pandemic amnesty.” A slice:

During 2020 and 2021, Oster was very much on the side of lockdown. And she supported vaccine mandates in universities and for workers. In fairness to Oster, she did not support every Covid measure. She did, for instance, criticise how long it took for schools to re-open in the US back in the summer of 2020. Yet ultimately, she belonged to the side that was happy to criminalise meeting a friend for coffee or to separate people from their dying loved ones.

Now, with hindsight, Oster regrets some of her positions. The crux of her argument is that the people baying for more lockdowns, harsher restrictions and vaccine mandates couldn’t possibly have known any different at the time. She says that they couldn’t have known that outdoor transmission of Covid was rare, that schoolchildren were always a low-risk group and that cloth masks were virtually useless in preventing viral spread.

Many, however, did know these facts, including back in the spring of 2020. But those who said them out loud were quickly turned into pariahs.

Although Oster admits that those on the anti-lockdown side got many things right, she says this was merely a question of ‘luck’. But it should not have taken any great foresight to see the danger of lockdowns. They were responsible for the most significant loss of liberty in the history of the democratic world. Their impact on economic output was as profound as that of any war. Not since the days before universal education had so many kids been shut out of school. Worse still, those who did warn of these inevitable and dangerous consequences were met with derision and censorship.

At times it seemed as if the pro-lockdown side was driven less by science than by fear – less by the emerging evidence than by an authoritarian impulse. This is why so much debate about Covid was zealously shut down. It is why anyone who broke the lockdown rules was shamed as a ‘Covidiot’. It is why many on the side of lockdown thought it important to mock the deaths of the unvaccinated – ‘to make sure that the lessons of these teachable moments are heard’, in the words of the LA Times.

Also disagreeing with Emily Oster on the justice of a “pandemic amnesty” is el gato malo.

And the idea of a “pandemic amnesty” is sitting poorly with the Editorial Board of the Wall Street Journal. Two slices:

Believe it or not, American Federation of Teachers chief Randi Weingarten on Monday tacitly acknowledged that keeping schools closed during the pandemic was a mistake. Miracles happen, apparently. But she also now wants parents—especially if they’re voters next week—to forgive her and her political allies without seeking an apology or holding them accountable. Sorry, that lets them off way too easy.

“I agree,” Ms. Weingarten tweeted a link to a piece in The Atlantic by Emily Oster, “Let’s Declare a Pandemic Amnesty.” The article argues that Americans should forgive experts and government leaders for their mistakes during the pandemic.

Ms. Oster cites school closures as one example: “There is an emerging (if not universal) consensus that schools in the U.S. were closed for too long: The health risks of in-school spread were relatively low, whereas the costs to students’ well-being and educational progress were high.”

However, she adds, “in spring and summer 2020, we had only glimmers of information. Reasonable people—people who cared about children and teachers—advocated on both sides of the reopening debate.”

That’s awfully generous to Team Shutdown, which included all of the progressive great and good and nearly all of the media. Yet it was clear by summer 2020 that children were at extremely low risk for severe illness. They were also struggling with remote learning, as were their parents. All efforts should have been made to reopen schools, as Florida did in August 2020, and to keep them open.

But the teachers’ unions lobbied hard to keep them closed and succeeded in far too many places where they dominate local and state politics. Many big city school districts didn’t reopen until spring 2021. Chicago didn’t offer full in-person learning until last fall. The results in lost learning have been catastrophic.

…..

One certainty: The left will never forgive the shutdown dissenters, notably Florida Gov. Ron DeSantis, for being right.

Aaron Kheriaty tweets: (HT Jay Bhattacharya)

Maybe we should halt the spread of misinformation by censoring any communications that come from three-letter government agencies.

Quotation of the Day…

(Don Boudreaux)

Tweet

… is from page 40 of the late, great Julian Simon’s 1996 masterpiece, The Ultimate Resource 2:

There is one resource that has shown a trend of increasing scarcity rather than increasing abundance – the most important of all resources – human beings. Yes, there are more people on Earth now than ever before. But if we measure the scarcity of people the same way that we measure the scarcity of other economic goods – by how much we must pay to obtain their services – we see that wages and salaries have been going up all over the world, in poor countries as well as in rich countries, throughout the preceding decades and centuries. The amount that you must pay to obtain the services of a driver or a cook has risen in India, just as the price of a driver or cook – or economist – has risen in the United States. This increase in the price of people’s services is a clear indication that people are becoming more scarce even though there are more of us.

DBx: The above observation makes clear that the world today isn’t suffering from over-population. And while it doesn’t seal any deal in debates over immigration in the U.S., Simon’s observation – along with America’s overwhelmingly positive and long history of immigration – does suggest that the burden of persuasion ought to be not on those of us who support far more more open immigration, but, instead, on our intellectual opponents.

Inframarginal Consumers and the Per Se Legality of Vertical Restraints

(Don Boudreaux)

Tweet

My first publication in a law review is a paper that I co-wrote with my dissertation advisor, Bob Ekelund. Our paper – titled “Inframarginal Consumers and the Per Se Legality of Vertical Restraints” – appeared in the Fall 1988 issue of the Hofstra Law Review. In this paper, Bob and I did our best to correct a fallacious view, expressed by some antitrust enthusiasts, about the welfare consequence of resale-price-maintenance contracts, exclusive-dealing arrangements, and other so-called “vertical restraints.” I believe that our paper’s analysis still holds up. From the link above you can download the paper free of charge.

Bonus Quotation of the Day…

(Don Boudreaux)

Tweet

… is the opening line of Wall Street Journal columnist Allysia Finley’s October 31st column titled “Why Randi Weingarten Supports Harvard’s Discrimination“:

You almost have to admire the chutzpah of the teachers unions. Even as they fight to keep poor minority kids trapped in failing public schools, they plead that racial preferences in college admissions are necessary to compensate for these students’ inferior K-12 education.

DBx: True dat.

Some Links

(Don Boudreaux)

Tweet

Wall Street Journal columnist James Freeman reports on the straw-man’s on-going, cruel harassment of the Chinese people. Two slices:

Voters in the United States now have a chance to punish politicians who endorsed crippling lockdowns during the Covid panic. Meanwhile in China, citizens who are not allowed to choose their leaders seem to be taking extreme measures to escape continuing lockdowns. And now Chinese citizens may have even more reason to blame the communist regime for its actions at the dawn of the Covid era.

Martin Quin Pollard and Bernard Orr report for Reuters on the workers at a Chinese plant that does manufacturing for Apple Inc.:

In Zhengzhou, a Foxconn plant that makes iPhones and employs about 200,000 people has been rocked by discontent over stringent measures to curb the spread of COVID-19, with numerous staff fleeing the facility, prompting nearby cities to draw up plans to isolate migrant workers returning to their home towns.

…..

Of course the virus is a monster for some while posing little risk to others. The world-wide failure of public health authorities to focus on the vulnerable while discouraging broad lockdowns will haunt people around the world for years.

For those of you who doubt that covid derangement syndrome is real, dangerous, and still haunting humanity, read this report.

The Robber Baron tweets: (HT Jay Bhattacharya)

So in the last 24 hours, China has:
🇨🇳 Locked down over 230 million people
🇨🇳 Trapped visitors at a Disney theme park
🇨🇳 Caused employees to flee an Apple factory
🇨🇳 Seen its stocks fall to the lowest levels since 2005

But yeah, Zero-Covid would have worked great in the U.S.

Michael Lesher decries covidians’ ongoing assault on humanity.

Vinay Prasad has some recommendations to better ensure pandemic accountability. A slice:

The COVID-19 pandemic resulted in many bad policies being implemented. We need accountability so that we never institute these policies again. Let me enumerate some structural solutions

The person who heads the National Institutes of Health funding (or any of the Institutes) should not be setting federal policy. Either decide who gets funded, or set policy, you can’t do both. It’s a problematic dual role. Nobody will want to criticize you because they’ll fear retribution with funding.With novel scientific problems, and unprecedented responses, you need to have a series of public debates. I didn’t sign the Great Barrington declaration, but I can read it today and know that no one was closer to the truth about schools than the authors. At the same time they were demonized by Fauci and Collins, who called them Fringe epidemiologists. This was inappropriate. In times of crisis, we need to have big debates in academic institutions. We should not silence or censor people. We need to foster disagreement, not stifle it.The Federal government, and anyone who works for it, should never be telling social media companies who they should throw off the platform. This is absolutely unacceptable.Social media platforms should never try to regulate discussion around scientific issues. They do not have the expertise in-house to decide what is truth or fiction. Censorship is a fool’s errand.

…..

11. Vaccine makers should not be shielded from litigation for vaccine adverse events. People who mandate vaccines should also be subject to litigation. In America, the only retribution is litigation. If you mandate a booster in a 26-year-old man and he has myocarditis, he should be able to sue the s*** out of you.

Eric Pan warns of increasingly destructive Securities and Exchange Commission diktats. A slice:

But today’s SEC leadership—which as of August had proposed 26 new rules this year alone—is ignoring the real-world effects of its regulations on market participants. Its approach can be described as “regulation by hypothesis.” If not remedied, it will prove disastrous.

Examples of this pedantic approach to regulation abound. Take the SEC’s current rule proposal on money-market funds, which would require certain institutional money market funds to “swing,” or adjust the fund’s net asset value in the event of net redemptions. Swing pricing would remove features that investors value, such as same-day settlement and multiple net-asset-value strikes per day, and impose unpredictable costs. It may sound good in theory, proposing a way to charge investors leaving a fund, but in reality it will fundamentally alter the product, making it unattractive to investors and forcing sponsors to close and stop offering the funds. So much for healthy capital markets.

Wall Street Journal columnist Andy Kessler warns of the deadly dangers lurking in today’s “de-growth” movement. A slice:

The new craze is “de-growth.” Proponents demand we “put well-being ahead of profit.” Normally, I’d say “Pfffft, ignore them,” but none other than the Davos dudes of the World Economic Forum are featuring arguments for de-growth. Weird because mostly growing global companies pay the WEF’s bills—tributes to the woke dons. The WEF’s website is filled with scholar-infested nonsense including a video asking, “What would a post-economic-growth world look like?”

It wouldn’t be pretty. Like Manta rays that must keep swimming or die (sharks too), societies that don’t grow eventually devolve into oppression, chaos, anarchy and then ruin. The Roman Empire. The Soviet Union. Venezuela. De-growth is living with less. Capitalism’s productivity is doing more with less. Big difference.

Gary Galles reports on the U.S. government’s ramped-up war on savings. A slice:

Taxes on capital also reduce saving by reducing the after-tax returns on investments. These include property taxes that, while relatively small percentages of the capital invested, are sizable fractions of the annual income generated. Then state and federal (and sometimes local) corporate taxes take further bites from income, reducing the after-tax return still more. The implicit “tax” imposed by expanding regulatory burdens must also be borne, before earnings can go to investors.

GMU Econ alum Gabriella Beaumont‐​Smith is correct: “candyflation could be lower if the U.S. government did not cartelize sugar.”

Art Carden, writing at Forbes, explains what shouldn’t – but sadly does – need explaining: opposing protectionism is not treasonous. A slice:

The treason dragnet is going to have to go way beyond Cato and Mercatus. Support for free international trade—and by implication, opposition to mercantilist holdovers like the Jones Act—is more or less universal within the economics profession regardless of ideology. In 2017, NPR’s Planet Money did an episode on the Jones Act’s absurdity that featured Nobel Laureate Joseph Stiglitz, a notable man of the left. He’s hardly anyone’s idea of a free market zealot.

I’ve done contract work for both Cato and Mercatus and have long admired how they have defended the principles underlying free and prosperous societies. If joining an economists’ consensus on a policy that wastes resources and impoverishes the country is treason, then I guess that makes just about every economist in the country guilty.

Ben Zycher explains that California’s electric-vehicle mandate will harm all U.S. states.

Quotation of the Day…

(Don Boudreaux)

Tweet

… is from page 181 of Edward Shils’s Spring 1976 essay in The American Scholar, an essay titled “Intellectuals and Their Discontents“:

Contemporary American intellectuals are on the whole not cynical about public things. They have great expectations. They believe that the government is a fit instrument for the achievement of the worthiest goals of human beings. They believe that its capacities are limitless. There is no injustice it cannot rectify. There is no evil it cannot undo. There is no good it cannot achieve.

DBx: Indeed. Most intellectuals – and not only in America – believe that the state, when controlled by their preferred political party, is godlike. Most intellectuals mistake their wishes for possibilities, and further mistake their fine motives as justification for the initiation of coercion (which, of course, they do not even see as coercion because it is exercised to achieve excellent ends with which no reasonable people can possibly disagree). And most intellectuals believe in miracles.

Bonus Quotation of the Day…

(Don Boudreaux)

Tweet

… is from page 571 of the 1988 collection of Lord Acton’s writings (edited by the late J. Rufus Fears), Essays in Religion, Politics, and Morality; specifically, it’s from Acton’s July 9th, 1860, letter to Richard Simpson:

Conscription is not tolerated by a people that understands and loves freedom.

The Fed Has Indeed Failed

(Don Boudreaux)

Tweet

Here’s a letter of mine published in today’s Washington Post:

Eloquently critical of the Fed’s mission creep, George F. Will correctly noted in his Oct. 27 column, “The Fed has its own take on the Peter Principle,” that “the Fed’s primary purpose is to preserve the currency as a store of value: to prevent inflation.” Mr. Will also correctly reported that, in this primary responsibility, the Fed has failed. But the link documenting this failure — offering data going back only to January 2021 — doesn’t adequately convey this failure’s magnitude.

In a 2012 paper, economist George Selgin, along with co-writers William Lastrapes and my colleague Lawrence White, asked “Has the Fed been a failure?” Their answer is a resounding “yes.” Mr. Selgin and the others found that from 1790 until the Fed’s creation in 1913, the dollar lost — over this entire span of 124 years — only about 8 percent of its 1790 value. In contrast, over the course of the Fed’s first 100 years, the dollar lost about 96 percent of its 1913 value. Of course, today’s inflation drains the dollar’s value even further.

Mr. Will is right: A central bank that performs its primary responsibility so poorly has no business taking on other tasks.

Donald J. Boudreaux, Fairfax