Russell Roberts's Blog, page 84
October 28, 2022
Protectionism Is An Affront to Non-Monetary Values
Here’s a letter to a new correspondent:
Mr. Y__:
Thanks for your e-mail.
After reading many of my posts at Café Hayek on trade, you “conclude that [I am] misguided on trade” because I – as you allege – “being an economist dismiss that people value more than just consumption. Many people put intrinsic meaning on their jobs and don’t see these as just a way to get more spendable income.” Protectionism, you insist, “is a means of protecting workers’ enjoyment of the intrinsic value of their occupations.”
With respect, I don’t deny that many people put intrinsic meaning on their jobs and see their jobs as more than merely sources of maximum possible monetary income. Our economy is filled with workers who love their jobs so much that they’ve voluntarily taken lower pay in order to hold the particular jobs that they hold. I’m one such worker, as 30 years ago I turned down a lucrative job offer at a Washington, DC, law firm in order take a lower-paying job as a college professor. It’s a decision that I’ve never regretted. I get great satisfaction from teaching young adults; I also enjoy the leisure and intellectual stimulation that academic employment affords.
Among the great advantages of a growing market economy – an advantage that I sincerely applaud – is that it consistently expands worker Jones’s practical ability to sacrifice monetary income in favor of non-monetary amenities and values.
What I condemn is Jones forcing Smith and Williams to subsidize his consumption of non-monetary amenities and his pursuit of non-monetary values. Such unjust subsidization is exactly what is achieved by economic protectionism: Jones gets to keep his existing job at the expense of Smith and Williams, who thereby become less able to afford for themselves and their families not only material goods but also whatever non-monetary amenities and values that they desire.
As do most protectionists, I readily recognize that Jones likely attaches some non-monetary value to his current job. But unlike protectionists, I also believe that the person who should pay for this non-monetary value is Jones, for it is he who enjoys it. He can pay for it by offering to work at his current job at a lower wage. I oppose protectionism in part because it enables Jones to compel Smith and Williams to subsidize his consumption of non-monetary values (and, by the way, subsidize also his consumption of material goods and services).
Unless you can give me a good reason why Jones’s values are not only more important than are Smith’s and Williams’s values, but are so much more important that government is justified in forcing Smith and Williams to pay for Jones to enjoy his values, I will continue to oppose protectionism. My opposition, please note, is not merely or even mainly because protectionism is economically inefficient. My opposition comes chiefly from my own non-monetary value that holds that it is unjust to force some fellow citizens to subsidize the consumption and life-styles of other fellow citizens.
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 332 of F.A. Hayek’s October 1973 Wincott Memorial Lecture – titled “Economic Freedom and Representative Government” – as the text of this lecture appears as chapter 24 in the hot-off-the-press Essays on Liberalism and the Economy (2022), which is volume 18 (expertly edited by Paul Lewis), of The Collected Works of F.A. Hayek:
Differences in wealth, education, tradition, religion, language or race may today become the cause of differential treatment on the pretext of a pretended principle of social justice or of public necessity. Once such discrimination is recognised as legitimate, all the safeguards of individual freedom of the liberal tradition are gone. If it is assumed that whatever the majority decides is just, even if what it lays down is not a general rule, but aims at affecting particular people, it would be expecting too much to believe that a sense of justice will restrain the caprice of the majority: in any group it is soon believed that what is desired by the group is just.
Some Links
Over at National Review today, I correct recent claims from American Compass’ Wells King and Dan Vaughn that 1980s U.S. automotive protectionism—in the form of Japanese “voluntary export restraints”—was a tremendous success, boosting both Japanese investment in the United States and domestic “Big 3” car manufacturers at minimal cost to American consumers or the economy more broadly. As I explain, “a fuller accounting… reveals the VERs not to be some inspiring success but instead a cautionary tale of American industrial policy’s high costs and failed objectives.” Owing to word limits and format (as a letter in the “dead‐tree” magazine), however, several aspects of my original critique—hyperlinks, charts, snarky asides, etc.—were left on the cutting room floor. This blog post will therefore serve as a supplement to the letter, which you can read in full over at NR.
Let’s start with the litany of rigorous economic studies showing that the consumer costs of the VERs were far greater than the $5 billion total King and Vaughn provided, due in large part to the fact that (contra their figures) the quotas increased the prices of not just Japanese cars, but also American and European ones too, and they lasted for another decade after President Reagan wisely disavowed them in early 1985…..
…..
King and Vaughn are probably on firmest ground when claiming that the VERs accelerated investments by Japanese automakers in the United States in the mid‐1980s (though, as noted, at a very high cost). But they again err by crediting the protectionism for all such investment through 1991. As I note at NR, for example, foreign automakers had begun investing before the VERs and kept investing thereafter: “The VERs followed Volkswagen’s late-’70s investment in Pennsylvania and Honda’s in Ohio (announced in 1980), and about a dozen other automobile factories—Japanese, German, and Korean—have arrived since 1992.” In fact, foreign direct investment in motor vehicle and equipment manufacturing grew faster post‐1990 than before it….
Kevin Corcoran corrects Yoram Hazony’s uninformed criticism of the case for free trade. A slice:
Hazony has badly misunderstood the arguments he is attempting to engage. Those who support free trade and the tradition of classical liberalism don’t believe the least expensive options are somehow the most freedom enhancing. It is the absence or presence of force, not the magnitude of expense, which is relevant to freedom. Nor is buying from the cheapest source or selling to the highest bidder some terminal value, from which deviating constitutes a market distortion. If someone makes their buying or selling decisions out of a sense of loyalty rather than in search of the most favorable price, no economist in the classical liberal tradition will accuse them of irrationally distorting the market.
The classical liberal tradition presents no obstacles to engaging in the kind of economic decision making Hazony advocates. The problem for Hazony, I think, is that while classical liberal economics allows he and his fellow thinkers to operate according to the values he holds, it doesn’t require everyone to do as he wishes.
Arnold Kling offers his thoughts on the use of mathematical models in economics.
“The China Challenge: What’s a Real Liberal To Do?”
Richard Sander explains that “even liberals [that is, progressives] should be skeptical of racial preferences in higher education.” (HT George Leef)
Regarding Jeb Bush’s “How to End the Epidemic of Failure in America’s Schools” (op-ed, Oct. 24): The problem isn’t an epidemic but a monopoly in America’s public schools, thanks to teachers unions and school administrators. Their failure is driven by lack of competition and poor capital allocation with no required rate of return on taxpayer capital.
The simple solution is school choice. Let parents decide where to send their children to school. Given vouchers, parents will allocate capital to schools that provide the best education for their children.
Terence E. Burns
Fairfax Station, Va.
My intrepid Mercatus Center colleague Veronique de Rugy decries Fed officials’ hubris.
David Henderson reports that “[t]he Laffer Curve in California is alive and well.”
One simple step for @Twitter to regain its status as a platform committed to free speech: when the US government tells you to censor people or tweets or ideas that violate no law, tell the government to go find some other way to violate the first amendment. Don’t cooperate.
James Allan is no fan of today’s so-called “experts.” A slice:
Speaking of failures by the expert class, let’s now turn our attention to the public health clerisy in this country [Australia]. It was to these medicos that our woeful political caste abdicated virtually all decision-making during the pandemic. Last week a self-styled ‘Independent Covid Review’ led by Peter Shergold reported back on how we did in Australia. It found that no schools should have been shut; some of the lockdowns and border closures were avoidable; key groups were excluded from financial support; and generally was not overly complimentary. But let me be abundantly blunt here. This report is as tepid as they come. The data is now clear there should have been no lockdowns, no mandates, no police thuggery, no outspending Trudeau, the list goes on. So say so.
Here’s the problem. All these reports done by the great and the good all start with the premise that in the face of radical uncertainty (no one knew how bad the virus was going to be) the government had to take steps and err on the side of doing something big to keep people safe. It’s from that premise that even this report makes its criticisms. But in my view that core premise is simply wrong-headed. In the face of radical uncertainty there is no plausible ground for thinking the default position should be some regulatory equivalent of the precautionary principle – ie opt for what looks like the zero-risk position – requiring big-state actions. In fact, the best-supported approach in the face of radical uncertainty is to continue on with what the till-then accumulated data indicated was the best road and wait for new data. (Data, not models, to be clear.) That, readers, is basically what three of the world’s top epidemiologists recommended in the Great Barrington Declaration. And it is exactly what we in Australia (and most of the non-Swedish world) did not do. The costs are now proving to be astronomical, even in terms of cumulative excess deaths where we are worse than Sweden. So this report points in broadly the right direction but, really, it is pathetically weak in its criticisms. We lived through thuggery, the worst inroads on our civil liberties in 300 years, massive impositions on the young and poor to benefit the old and rich, and virtually no MPs (Libs included) said a word. Our expert class was wholly useless as were our politicians. (My kingdom for a DeSantis.) Their first principles were catastrophically wrong. And we here in the pages of the Speccie Australia were saying it from day one, not in an enervated report long after the fact that is far, far too tepid.
Jennifer Sey wonders “[w]hen will Fauci admit the ‘open schools’ parents were right?” Two slices:
Yet now, two and half years into the pandemic, Fauci insists we should have known all along he understood there would be harmful impacts from extended school closures. So why didn’t he stress this oh-so-obvious fact? Why didn’t he clearly state that, “yes, sad to say, there will be learning loss, as well as mental health impacts”?
The obvious answer is that keeping public schools closed was his priority and he led the messaging to ensure it would happen. That message was then adopted by key political and media figures. Fauci knowingly chose to let children suffer — low-income kids especially. And he encouraged the shouting down of dissident parents who were barred from school board meetings, deemed unemployable bigots, or simply cowed into silence.
The fact is that, despite his cultivated veneer of scientific objectivity, Fauci has always been intensely political; which is to say, always able speak out of both sides of his mouth on an issue. So, for instance, in an interview with NPR’s Judy Woodruff in July 2020, Fauci said, “we should try and get the children back to school as best as we possibly can.”
But Dr. Fauci had been the face and voice of America’s Covid policy since March 2020. If he thought schools should have been opened, they would have been. But he didn’t. Instead, both behind the scenes and in front of the cameras, he did everything he could do to ensure schools stayed closed.
…..
Rather than citing data to support the age stratification of risk and the fact that people from the ages of 0-19 have an infection fatality rate from Covid-19 of .0003 percent pre-vaccine, Fauci chose to incite panic and further irrational policymaking. He consistently and repeatedly positioned public schools as dangerous and children as deadly vectors of disease, at high risk themselves of death and other adverse consequences such as MIS-C. And states like California followed suit, keeping public schools closed for close to eighteen months.
At every turn, Fauci stoked rather than allayed fears.
Quotation of the Day…
… is from page xxxviii of the late, great Julian Simon’s 1996 magnum opus, The Ultimate Resource 2:
The main fuel to speed the world’s progress is our stock of knowledge, and the brake is our lack of imagination. The ultimate resource is people – skilled, spirited, hopeful people – who will exert their wills and imaginations for their own benefit as well as in a spirit of faith and social concern. Inevitably they will benefit not only themselves but the poor and the rest of us as well.
DBx: Indeed so.
But I understand that the sentiment expressed here by Julian Simon is unfashionable. It seems oh-so-unintellectual, oh-so-pollyannaish, oh-so-bourgeois, oh-so-uncool, oh-so-‘this-can’t-possibly-be-true.’
Well, it’s true. For evidence so powerful that it rises to the level of proof, simply look at the modern world. Contemplate your cellphone. Consider your car. Cogitate on your copious clothing. Ruminate on your refrigerator. Examine your electrical appliances and toys. Mull over modern medicine. Reflect on reinforced concrete. Ponder the plumbing in your home, school, or workplace. These marvels do not occur naturally. Not one of them, and not any collection of them (despite assertions to the contrary), “tends to grow mechanically.” Each and every one of these marvels is the consequence of countless acts of human creativity, ingenuity, risk-taking, and work – acts from around the globe that were coordinated productively with each other by the only method that can possibly achieve such astonishing coordination: the market price system grounded in the security of private property rights and freedom of contract.
October 27, 2022
Pittsburgh Tribune-Review: “The science of economics”
In my column for the June 7th, 2013, edition of the Pittsburgh Tribune-Review, I discussed the scientific character of economics done well. You can read my column in full beneath the fold.
Bonus Quotation of the Day…
… is from page 37 of the 2016 re-issue of my late colleague Don Lavoie’s soaring – and now more relevant than ever – 1985 volume National Economic Planning: What Is Left?:
The main procedure by which the Market achieves that degree of coordination of which it is capable is rivalrous competition in the pursuit of money profits. The contrary tugs and pulls of the various market participants bidding prices up or down constitute the driving force of mutual coordination.
DBx: Truly so. Also truly so is the reality that advocates of industrial policy wish to destroy, or at least to override or mute, this procedure for achieving productive coordination.
As for just what procedure industrial-policy proponents propose to use to tap into knowledge superior to that supplied by the market on how to productively allocate resources, we know nothing. We are simply supposed to believe that, by some miracle, government officials will know what to do.
Some Links
Jonathan Barnett is properly critical of today’s Federal Trade Commission. A slice:
Some legislators and regulators argue that preemptive action to block startup acquisitions by large firms is necessary to preserve competitive conditions in technology markets. So far it seems the opposite may be the case.
Continued action by antitrust enforcers to block startup acquisitions (or, in the case of the Altria/Juul transaction, even a minority equity investment) without evidence of competitive harm may preclude new firms from securing the risk capital without which they cannot grow. The campaign against startup acquisitions can easily suppress startup entry — a blatantly anticompetitive outcome that runs counter to the objective of the antitrust laws.
Perhaps of greatest concern, the FTC’s continued intent to bring antitrust cases that rest on meager evidence of competitive harm raises doubts about the agency’s commitment to the rule of law. If the agency is blocking Facebook’s acquisition of Within, what is the principle that explains why it is not also blocking the tens of other acquisitions made by Facebook? Or Walmart? Or Exxon?
Peter Earle corrects Biden on inflation.
Scott Lincicome’s pieces alone make a subscription to The Dispatch worthwhile.
The Wall Street Journal‘s Editorial Board decries the Trump-Biden tariffs. A slice:
President Biden has rolled back some of Donald Trump’s destructive tariffs, but not enough, and they’re still doing economic harm. New analyses of Mr. Trump’s Section 232 steel and aluminum tariffs show how consumers and manufacturers are still paying for the border taxes that benefit only a few companies.
A study by Harbor Aluminum for the Beer Institute finds that the 10% tariff on imported aluminum cost U.S. beverage manufacturers $1.7 billion from March 2018 through August 2022. About 93% of the $1.7 billion has been pocketed by domestic aluminum producers and smelters in the U.S. and Canada. Only $120 million has gone to the U.S. government.
More than 70% of aluminum in cans is made from recycled scrap metal, which isn’t subject to tariffs. Most aluminum imports come from Canada, which since 2019—aside from a brief reversal in 2020—is no longer covered by the Section 232 tariffs. So beverage manufacturers don’t have to pay tariffs on the vast majority of metal that goes into beer and soda cans.
Yet the tariffs still increase costs for beverage makers as they let domestic aluminum producers raise prices for U.S. manufacturers that buy the metal. This is what tariffs typically do.
Laurie Wastell warns of the dangers of climate alarmism. A slice:
The fact that economic growth makes the world safer, as the Lancet acknowledges, entirely undercuts its warnings about the climate. Eager to tout the many dangers of a warming world, climate alarmists – including at the BBC – forget that thanks to economic growth, total numbers of climate-related deaths have actually fallen 20-fold in the past century. This is despite the massive global population increase in that time, meaning the actual risk to an individual of succumbing to a climate-related death has fallen by 99 per cent.
Thomas Shull talks with Steve Davies about Rishi Sunak.
Dan Klein and Caleb Petitt explore some word usage by Adam Smith.
John Tamny busts myths about China – and warns of Xi’s consolidation of power. A slice:
[Nadia] Schadlow imagines that China’s growth was born of industrial policy directed from the Commanding Heights, and that the US must do the same. How sad. How naïve.
That is so simply because governments are logically constrained by the known of commerce. By definition. We know this because actual commerce is regularly being pulled in all new directions by entrepreneurs feverishly taking us where we never imagined we needed to go. To then pretend as Schadlow does that China’s immense economic strides were planned by bureaucrats speaks to an impressive misunderstanding of how economies grow. Schadlow is basically calling for government types unable to see beyond the present to plan a future that will be defined by the present. Talk about a step backward.
Frank Palmer on covid tyranny. Two slices:
In 2020 this country [the U.K.], like a number of others, was subjected to a tyranny which our political leaders and the medical establishment, with the assistance of the mainstream media, imposed upon us in a style reminiscent of, if not inspired by, communist China.
…..
Even more powerfully, the 19th century philosopher and theologian Søren Kierkegaard brought out the ethical importance of resisting blind conformity by describing ‘the crowd as the untruth’, by which he meant that, ethically speaking, the crowd is an abstraction, not a person, and that hiding behind this abstraction ‘renders the individual completely impenitent and irresponsible or, at least, weakens his sense of responsibility by reducing it to a fraction’. To deny one’s own personal responsibility by seeking refuge in the crowd (even if it is a crowd of four) is to ‘flee in cowardice from being an individual’.
The huge number of people who felt no resistance or outrage against the inhumane restrictions carried out against us in the name of a virus that was not exactly the new Black Death were/are not suffering from psychosis, but, for a variety of different reasons, succumbed to a permanent feature of human nature. They were morally culpable for that compliance and in some cases, are still refusing to see the threat of future restrictions in the name of what Michael Gove and others have parroted as ‘The New Normal’, the WEF’s ‘Great Reset’. More crucially, the Mass Psychosis view does not explain why a number of us resisted. That was due, among other things, to courage, natural scepticism of mass movements, a love of truth, moral values deeper than mere physical safety, an ability to see through the empty virtue-signalling and demonising of the ‘unclean’ (the non-masked and non-vaxxed) and, for some of us, a knowledge of the history of totalitarianism. Last, but not least, the possession of wisdom, the gradual disappearance of which was lamented by T S Eliot in the epigraph to this article. Where indeed is ‘the Life we have lost in living’?
The most dangerous source of misinformation is a government that seeks to censor misinformation.
Quotation of the Day…
… is from page 6 of the 2021 updated version of Bjorn Lomborg’s 2020 book, False Alarm: How Climate Change Panic Costs Us Trillions, Hurts the Poor, and Fails to Fix the Planet:
The political reaction to the reality of climate change has always been flawed – this, too, I have been pointing out for decades. There are, I have argued and continue to argue, smarter ways than our present-day approach to tackle global warming. But the conversation around me has changed dramatically in recent years. The rhetoric on climate change has become ever more extreme and less moored to the actual science. Over the past twenty years, climate scientists have painstakingly increased knowledge about climate change, and we have more – and more reliable – data than ever before. But at the same time, the rhetoric that comes from commentators and the media has become increasingly irrational.
October 26, 2022
Bonus Quotation of the Day…
… is from page 121 of Phil Gramm’s, Robert Ekelund’s, and John Early’s 2022 book, The Myth of American Inequality: How Government Biases Policy Debate (footnote deleted):
As with the Vanderbilts, large accumulations of wealth [by families] in America typically disappear within about four generations. Other mega-rich families like the Kluges, Hartfords, and Strohs completely disappeared so quickly that they are now known only to economic historians.
DBx: Yep.
Note that this dissolving and eventual disappearance of accumulated wealth in families in America is nearly impossible for the likes of Thomas Piketty (and many other like-minded folks) to explain. Piketty, recall, insists that – barring shooting wars or major economic collapses – wealth in capitalist societies grows automatically.
…..
Bob Ekelund served as chairman of my doctoral dissertation committee at Auburn University back in the mid-1980s. I learned much from Bob and remain grateful for his mentorship and support through the years. I’m proud to call myself his student.
Greed Isn’t Spendable
Here’s a letter to the Wall Street Journal:
Editor:
James Freeman brilliantly ridicules Bernie Sanders’s economically ignorant allegation that today’s inflation is caused by greed (“Bernie Sanders and the Inflation Blame Game,” Oct. 26). Yet one further point warrants mention: Unlike dollars, greed cannot be spent. So even if merchants across America have recently become infected with intensified greed, consumers can’t spend this greed to pay the higher overall prices that they’re now paying. Higher overall prices are paid for only with more money in circulation – more money that, as Mr. Freeman correctly notes, was put into circulation by the Fed.
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
Russell Roberts's Blog
- Russell Roberts's profile
- 39 followers
