Russell Roberts's Blog, page 91

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 38 of the original edition of the late Nobel-laureate economist James M. Buchanan’s 1975 book, The Limits of Liberty:

Ordinary exchange in private goods can be described as taking place under implicit unanimity. That is to say, if a buyer and a seller agree on terms, an exchange takes place and members of the community outside this two-party relationship acquiesce in the outcome. Explicit agreement is not required on the part of these outsiders and if any of this group should have desired to interfere with the observed exchange, he had the option of offering more favorable terms to either the buyer or seller.

DBx: Buchanan’s observation here is simultaneously obvious and profound. The combination makes it rich in implications.

When owners of steel mills in Ohio and Pennsylvania lobby government to impose, as is commonly described, protective tariffs on steel imports, they in fact lobby government to impose penalties on fellow Americans who choose to buy steel manufactured outside of the United States. Yet too few people recognize even this much about the tariff. The tariff is portrayed exclusively as a penalty imposed  on foreigners – foreigners, by the way, who are frequently accused of nefariously benefiting as they take advantage of naive and ethically purer Americans. American voters – especially, but not only, those on the right – thrill when some tough-talking, all-action, ‘realistic’ American politician flies in with theatrical determination, courage, and strength to put these underhanded foreigners in their place by preventing them from offering attractive deals to American consumers.

Too few people step back from these accounts of our good guys and gals heroically battling bad, or at least dangerous, foreign guys and gals to recognize that it’s bizarre to regard as bad, or even as worrisome, foreigners offering deals to fellow Americans that fellow Americans, spending their own money, voluntarily accept.

One possibility is that those persons who look with suspicion upon Americans’ voluntary purchases of imports regard these American purchasers, not as adults, but as akin to children who ‘voluntarily’ accept candy offered by the sweaty, hooded man driving a van. Just as we need, in each neighborhood, adults to protect gullible young’uns from domestic predators, we need adults to protect gullible fellow adults from foreign predators.

This ‘foreign-sellers-mean-us-harm’ belief explains much sympathy for protectionism. But even greater support for protectionism comes from the implicit assumption that producers at home have a sort of property right in whatever patronage they’ve enjoyed in the past from consumers. And so if in 2012 I bought my car from a producer based in America but in 2022 I buy my car from a producer based in Japan, I’m believed in 2022 to deprive that American producer of a right that it obtained by my having earlier bought my automobile from it.

If sellers gain property rights in consumer patronage by the act of consumers patronizing them, then of course for me, who earlier bought a car from an American producer, to later buy my car from a foreign producer would violate the American producer’s property right. I could legally and ethically buy my new car from the foreign producer only after securing the American producer’s consent – consent that I’d obviously have to pay to receive.

Obviously, however, among the central tenets of a market economy is the recognition that consumers, by purchasing today from producer X, create for X no property right in on-going consumer patronage. This reality is what Buchanan refers to above when he writes “implicit unanimity.” In a market economy, we all agree that no seller (and no buyer) has a property right in any buyer’s (or seller’s) commercial engagement. So that when you today buy your carrots or cars from sellers different from those who you yesterday patronized, you violate no property right and, thus, you need no one’s prior approval to switch your patronage.

And so, as Buchanan notes at the end of the above quotation, if seller X wants your continued patronage, under the rules of a market economy he must ‘purchase’ from you such patronage. X must offer you a deal that you are free to reject and that, if you accept, you accept voluntarily. The property right to your income belongs to you and not to X (or to any other seller or to the collective).

Tariffs and other protectionist measures conflict categorically with this foundational tenet of a market economy, for these interventions spring from the presumption that you, the consumer, owe domestic producers your patronage (at least insofar as you can be restricted from giving that patronage to foreign sellers). A key protectionist presumption is that domestic producers possess some property-rights claim on the incomes of consumers. Consistent, principled application of this presumption would destroy the market economy and, along with it, much of humanity.

…..

The Limits of Liberty is not my favorite of all of Buchanan’s book. Nevertheless, it is rich in insights and is remarkably thought-provoking. It’s a work of deep scholarship and careful analysis.

Quotation of the Day…

(Don Boudreaux)

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… is from page 290 of the late Anthony de Jasay’s 1995 paper “The Bitter Medicine of Freedom” as this paper is reprinted in Justice and Its Surroundings, a 2002 collection of some of de Jasay’s writings:

The rough underside of freedom is responsibility for oneself. The fewer the institutional obstacles an individual faces in choosing acts to fit his preferences, the more his life is what he makes it, and the less excuse he has for what he has made of it.

DBx: Yes. This fact should be obvious to everyone older than eight. But it’s not. Many individuals demand, understandably, the freedom to express themselves as they wish, to live as they wish, to do this, that, and the other as they wish. But far too many of these same individuals also demand that the collective be coerced into protecting individuals from the downsides of their choices. Applauding themselves for being ‘progressive’ – even cutting-edge – and ‘caring,’ these individuals in fact reveal themselves to be infantile.

Some Links

(Don Boudreaux)

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My former Mercatus Center colleague Bob Graboyes writes on “tempering systemic racism in medicine.” A slice:

For some advocates, the philosophy underlying systemic racism is not subject to refutation by logic or evidence. Its tautological, Orwellian nature is beautifully crystallized in a statement by psychology professor Angela Bell: “If you have to ask if you are a racist, you are … And if you are not asking if you are a racist, you are.”[13] This makes sense when one considers the Frankfurt School origins of a good deal of thought in the sphere of systemic racism. For example, the editors of Critical Race Theory: The Key Writings That Formed the Movement,[14] wrote: “[S]cholarship about race in America can never be written from a distance of detachment or with an attitude of objectivity. … Scholarship … is inevitably political.”

Wall Street Journal columnist Jason Riley explains that racial preferences harm their beneficiaries. A slice:

Like any public policy, affirmative action involves trade-offs, but supporters are ignoring that reality because good intentions are what matter most to them. Nevertheless, after 50 years of racial preferences in higher education, we have plenty of empirical evidence that these policies have done more harm than good to the intended beneficiaries, even if the media shows little interest in reporting it.

Racial preferences in higher education were implemented in earnest beginning around 1970. The objective was to help the black poor enter the middle class, even though a significant black middle class already existed in the 1960s and was growing rapidly. Between 1940 and 1960, for example, the black poverty rate fell by 40 percentage points, and during the 1960s median black household income doubled. Nevertheless, affirmative action continues to receive credit for black progress that predates it. And it continues to be promoted by people who put politics and ideology above principle.

What happened in higher education after racial preferences were introduced is what social scientists refer to as “mismatching.” Black students were admitted to schools with academic credentials far below those of the average student in attendance. Subsequently, these black students struggled academically, dropped out at higher rates, or were more likely to switch to an easier major than they originally intended to study. These same students, in all likelihood, would have prospered at a less selective college where the same subjects are taught at a pace that matched their readiness. Instead, they were set up to fail at institutions that wanted them there to make the campus more racially diverse. Today, we have dozens of academic studies, including by the U.S. Commission on Civil Rights, that show the mismatching of students and schools is detrimental to learning.

Bobby Miller reports yet another piece of evidence that institutions of “higher learning” (so called) are more and more opposed to learning.

John Stossel reveals what the media get wrong about hurricanes.

Alaa Al-Ameri isn’t impressed with The Woman King. A slice:

The new historical action film, The Woman King, starring Viola Davis and John Boyega, should have been so much better than it is. It should have been a chance to explore a little-known part of modern history. It should have been a chance to look at the interaction between pre-existing African slavery and the Atlantic slave trade.

But The Woman King does nothing of the sort. Instead, it ignores African history altogether, and caters to the white, progressive demand for one-dimensional black caricatures of victimhood. Indeed, it’s worth noting that while the cast and characters are almost all black, The Woman King’s writer and producer are both white women. And it is their worldview and prejudices that shape what we see on screen.

Covid hysteria lingers in Britain.

Jim Bovard rightly describes the lingering covid-vaccine mandates as unjust.

Jay Bhattacharya tweets:

Ostensibly liberal democracies deployed propaganda techniques to panic and manipulate the public during the pandemic. I wonder at the behavioral economics and psychology professions, which contributed to or approved of this deeply unethical endeavor.

The Reality of Rent Control Cannot Be Pointed Out Too Often

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

You accurately describe rent control as “among the dumbest policies known to man” (“St. Paul Regrets Rent Control,” Oct. 4). It is also, short of an actual shooting war, one of the most destructive. Rent control certainly does, as it’s doing now in St. Paul, diminish builders’ enticements to construct new housing. But this policy also reduces landlords’ incentives and abilities to maintain existing housing units. The quantity of housing shrinks as its quality deteriorates. As my late colleague Walter Williams observed, “short of aerial saturation bombing, rent control might be one of the most effective means of destroying a city.”*

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

* Walter E. Williams, “The Poor, Poor Welfare State,” Reason, July 1987.

Quotation of the Day…

(Don Boudreaux)

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… is from page 191 of Lionel Robbins’s superb and still-relevant 1937 book, Economic Planning and International Order:

The rulers of this world have not often regarded their subjects as being the best judges of their own happiness. In our own day, there are many who would willingly dictate to their fellows the way they should live and act…. To adapt the people to the plan rather than the plan to the people is not likely to cease to be a temptation.

DBx: Yes. And nothing much has changed in the 85 years since the debut of this book by Robbins. Politicians and bureaucrats – along with the hordes of campus and think-tank intellectuals who are forever drafting blueprints for how the state might engineer society into some heavenly condition – look upon the masses of ordinary men and women as lab rats upon whom politicians, bureaucrats, and intellectuals might practice experimentation and regimentation.

That the politicians, bureaucrats, and their whispering intellectual allies who so experiment and regiment tell themselves – and, I suspect, in most cases also sincerely believe – that their experimentation and regimentation are for the greater good of the lab rats the People does not, of course, change the reality that these politicians, bureaucrats, and intellectuals fancy themselves as our masters and we as, well, animals to be poked, prodded, protected, taxed, tariffed, subsidized, schooled, penalized, informed, ‘disinformed,’ and ‘nudged’ so that the social engineers might thrill to the implementation of their world-saving schemes.

…..

In choosing a photo to accompany today’s Quotation of the Day I could have chosen a photo of any politician, bureaucrat, or intellectual almost at random. But the photo above of those particular experimenters-on-people-as-lab-rats is appropriate.

Does Industrial Policy Suffer the Knowledge Problem?

(Don Boudreaux)

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Again, pardon the length.

Mr. M__:

Thanks for sharing with me GMU Econ alum Alex Salter’s recent Washington Examiner piece titled “Industrial policy is possible, which is why we should oppose it.”

I strongly agree with much that Alex so eloquently says there. But I disagree with him – and with you – that industrial policy of the sort called for by Oren Cass isn’t subject to the criticisms that Ludwig von Mises, F.A. Hayek, and other Austrian economists leveled against more comprehensive socialist planning.

It’s true that Oren’s explicit goals appear to be modest enough to be achievable – goals that include (in Alex’s words) “more factory workers and more of what factory workers produce.” And Alex correctly observes that “[d]irect subsidies, tax credits, and similar policies are fully capable of achieving this.” But Alex incorrectly claims that Oren’s case for industrial policy is thereby rendered immune to knowledge-problem criticisms.

While Oren and other advocates of his sort of industrial policy are willing (very generous of them!) to have Americans pay some cost to achieve these advocates’ desired outcome of more manufacturing jobs and fewer women in the work force, their case rests on the belief that most Americans will find this cost to be one worth paying. That is, Oren and those who sympathize with him believe that the economic outcomes that they propose to engineer will on net be better than the outcomes of freer markets – outcomes that Oren tellingly describes as being the results of the meanderings of a “drunk donkey” (meaning an economy that irrationally ignores the information offered by the compass held by wise planners).

And so when Oren writes – in words quoted by Alex – that his proposal “has nothing to do with the most efficient allocation of resources,” Oren reveals only his misunderstanding of what economists mean by “efficient allocation of resources.” Because “efficient allocation of resources” means ‘that allocation of resources that achieves maximum possible satisfaction of human wants,’ when Oren presses for his industrial policy he presses for a government-engineered allocation of resources that he believes will prove to be more efficient than is the allocation that would otherwise arise on a freer market.

This fact about Oren’s case alone means that Oren ignores the knowledge problem: How does he know that the number of increased American factory jobs that his scheme will achieve will be worth the cost? The fact is, he doesn’t know and he has no way of knowing.

But there’s a second way in which Oren’s proposal remains subject to the Austrian knowledge-problem criticism. Even if the greater number of factory jobs that industrial policy brings about tomorrow will be judged by Americans to be worth the sacrifice necessary to experience it, economic facts are always changing. Technology improves; tastes change; new sources of raw materials are discovered while some known sources surprisingly diminish; entrepreneurs develop new products and new methods of finance and distribution; some countries liberalize and enter the global economy while others militarize and pull back from the global economy.

In order to ensure that the government-engineered additional number of factory jobs remains at a level that is worthwhile for Americans to continue to pay for, the consequences of each and every one of these changes must be accounted for by industrial-policy mandarins. These mandarins must acquire this dispersed and detailed knowledge, process it, and alter their subsidies, tariffs, taxes, and other interventions accordingly in order to ensure that their engineered economic outcomes continue to yield net benefits to Americans. This knowledge-acquisition and processing activity must take place on a regular basis, with the subsidies, tariffs, taxes, and other interventions also changing regularly in light of knowledge of these ever-changing facts.

That industrial policy of the sort advocated by Oren Cass would not doom Americans to economic hell as quickly as would comprehensive socialist planning of the entire economy is indisputable. But it’s also indisputable that the same insurmountable knowledge problems that quickly doom to failure comprehensive socialist planning gradually doom to failure each and every form of industrial 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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At EconJournalWatch, Phil Magness and Art Carden have a new paper on the hatchet-job done by Sandy Darity, M’Balou Camera, and Nancy MacLean on the late W.H. Hutt. Here’s the abstract:

William Darity, M’Balou Camara, and Nancy MacLean claim that William H. Hutt was a white supremacist: “Hutt was a white supremacist”; he “was not innocent of white supremacy.” We show the claim is baseless. They also say that Hutt “embraced notions of black inferiority”, and we show that Hutt neither said nor implied or speculated on any kind of genetically based racial inferiority but simply addressed the problems of inferior economic outcomes for blacks, which he said flowed chiefly from man-made causes—which he worked to undo.

(DBx: I was introduced to the works of Hutt more than 40 years ago as an undergraduate, and since then I’ve read nearly all of his books and many of his articles and essays – several more than once. I even had the pleasure, in 1986 or 1987, of driving him back to his hotel in Fairfax after he spoke earlier that day on GMU’s campus. The assertion that William Hutt was a racist not only makes no sense, it is as backwards as would be the assertion that Charles Darwin was a creationist.)

Wall Street Journal columnist William McGurn is rightly impressed with the message of the excellent new book – Superabundance – by Marian Tupy and Gale Pooley. A slice:

Tesla and SpaceX CEO Elon Musk has a more positive view [than do those who fear ‘overpopulation’], even warning that civilization itself will “crumble” without more babies. “There are not enough people,” he said to a Wall Street Journal audience in December. He added that many “smart people” falsely believe the world is overpopulated and urged them to look at the numbers.

Now Marian L. Tupy and Gale L. Pooley have done just that. In “Superabundance,” their new book published by the Cato Institute, Messrs. Tupy and Pooley find empirical support for Mr. Musk’s more-the-merrier outlook. More people, they say, means not only a bigger economic pie—but more minds to think up more solutions for more of the world’s problems.

“The book will affirm the moral and practical value of every additional human being, leave you appreciative of the abundance that you are enjoying today, and even hopeful about the future fate of humanity,” the authors write. Capitalism, they posit, succeeds not only because it is efficient but because it correctly locates the source of wealth in the human mind.

Their argument builds on the life’s work of Julian Simon, who features prominently in “Superabundance.” Simon was a University of Maryland economist (and contributor to these pages) who wrote a revolutionary 1981 book called “The Ultimate Resource.” A physical resource traditionally considered a source of wealth (e.g., oil), he observed, is valuable only because of the uses to which the human mind puts it.

Here’s GMU Econ alum Dominic Pino writing on Cato’s Chris Edwards writing on income taxes.

Wall Street Journal columnist Andy Kessler is understandably appalled by the woke, pro-Marxist ideology now on display at the New York Public Library’s “Treasuries” exhibit. A slice:

Wouldn’t you know it, next to “The Wealth of Nations” was none other than manuscript notes for “Das Kapital” by Karl Marx with this description: “The work has exerted an immense and lasting influence on world events: over the past century, its ideas have not only maintained a secure place in the realm of economic and political theory, but also inspired anticapitalist revolutions across the globe.” OK, but it was a lasting negative influence. And of course there was no mention of the hundreds of millions of people impoverished and slaughtered by Marxist regimes.

The description goes on: “Karl Marx’s foundational account of capitalist production and its manifold effects on human lives still inspires argument, insight, and resistance.” Inspires? Marxism is a desperate and dangerous call for redistribution from the productive class to, say, museum curators. No matter, a 2018 New York Times opinion piece blared, “Happy Birthday, Karl Marx. You Were Right!” The Marx rehabilitation tour continues.

A 2020 Edelman global survey found that 56% agreed that “capitalism as it exists today does more harm than good in the world.” Really? I guess somehow the global increase in living standards and lowering of the extreme poverty rate from 36% to under 10% since 1990 happened by magic. It’s really a miracle since capitalism is so bad and Marxism is so good. Of the porous southern border President Biden recently noted, “What’s on my watch now is Venezuela, Cuba and Nicaragua.” Why would anyone leave a Marxist paradise for the capitalist U.S.? Maybe the New York Public Library has an answer.

Alberto Mingardi warns against falling for the mainstream media’s too-easy, and inaccurate, description of new Italian Prime Minister Giorgia Meloni as a fascist. Two slices:

Ms. Meloni grew substantially in the public’s appreciation during the pandemic, when she opposed most measures enacted to control the plague by controlling people’s lives. Her formidable parliamentary speeches against then prime minister Giuseppe Conte’s lockdowns proved that, at least so far, when she encountered authoritarianism, she took the opposite side.

…..

The present author is neither a “nationalist,” nor a “national conservative.” But it is easy to get annoyed by Brussels — or the Economist — playing the headmaster. For all its faults, democracy has the redeeming feature of making politics a precarious employment. Italy, for all its institutional weaknesses, is a 70-year old democracy with a record of frequent and regular elections. There is a good chance that Ms. Meloni will prove an inadequate prime minister and if so, Italians will certainly take note of that. But they deserve to cast their votes for whomever they like, without being lectured from on high by our ostensible betters.

Pierre Lemieux applauds the late John Cowperthwaite’s laissez faire policies for Hong Kong. A slice:

The Maddison Project allows us to quantify the result of this laissez-faire policy better than Friedman was able to do (I am using the Maddison 2020 database). In 1950, according to this data, Hong Kong’s real GDP per capita was 27% of the US level. Until the territory was ceded to the Chinese state in 1997, Hong Kong grew so rapidly that this proportion had risen to 80% by 1997. Between 1997 and 2018 (the last estimate available), Hong Kong’s rate of economic growth diminished from 4.7% to 2.1%, but that was still sufficient for its real GDP per capita to reach 92% of the American level. (The Asian financial crisis of 1997 impacted Hong Kong’s GDP in 1998, but without changing the general portrait.) As the “one country, two systems” promised by the Chinese rulers for 50 years was fraught with uncertainty, and has indeed started to be degraded, the growth after 1997 remains an achievement, but is not likely to continue.

Jeffrey Tucker recalls “the 70 seconds that shook the world.”

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

Ian Miller tweets: (HT Jay Bhattacharya)

Multiple colleges have reinstated mask mandates in October 2022 because incompetent administrators believe in prolific “expert” misinformation

This was always the danger in allowing “experts” to lie to the public about masks for 2+ years, endless rolling restrictions

Quotation of the Day…

(Don Boudreaux)

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… is from page 3 of Lionel Robbins’s excellent and still-relevant 1937 book, Economic Planning and International Order:

“Planning” is the grand panacea of our age. But unfortunately its meaning is highly ambiguous. In popular discussion it stands for almost any policy which it is wished to present as desirable. Indeed there can be no doubt that it is this very ambiguity which lends it attractive force. Men do not cherish vague emotions about precise concepts. When the average citizen, be he Nazi or Communist or Summer School Liberal, warms to the statement that “What the world needs is planning”, what he really feels is that the world needs that which is satisfactory. It is in fact almost certain that the more of a plan he is actually confronted with, the less general will be his emotion, the less likely his agreement with the other members of the crowd.

DBx: A common move by proponents of government planning of the economy – whether it be extensive planning of the sort desired by socialists or the more isolated planning championed by enthusiasts for industrial policy – is to present their schemes as if the promised benefits will either be costless or come at costs so low that no reasonable person would reckon these costs as significant. Of course, if government planning of all or parts of the economy is destined to produce benefits without any attendant costs – or if the assumption is indisputably correct that the benefits of such planning are greater than their costs – there can be no legitimate disagreement about the merits of such planning. Plan (or industrial-policy) away!

Yet in reality, as Robbins points out, often what one person regards as a worthwhile benefit another person regards as not worthwhile. In fact, often it’s the case that an outcome that Jones regards to be a benefit is regarded by Smith to be a cost. Advocates of deploying the government to override market-determined patterns of resource allocation content themselves with assuming – without any basis – that the outcomes that they wish to engineer not only can be engineered by government as advertised, but also are outcomes about which there is widespread agreement among the countless individuals whose lives and livelihoods are thereby affected.

The hubris of socialists and of industrial-policy advocates is intense.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is the closing paragraph of Jeb Hensarling’s superb op-ed in today’s Wall Street Journal – an op-ed appropriately titled “GOP Needs to Leave Trump Behind on Trade“:

The most important argument for free trade has nothing to do with economics. It has everything to do with securing “the blessings of liberty to ourselves and our posterity.” In other words, it’s about freedom. Fundamentally, trade should not be viewed as a discretionary foreign policy but as an individual right. If the GOP stands for freedom of speech, free enterprise and the freedom to bear arms, it should again unequivocally stand for free trade.

King and Vaughn Should Voluntarily Restrain Themselves from Writing About Trade

(Don Boudreaux)

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Pardon the length, but if all the fallacies strewn throughout this essay by Wells King and Dan Vaughn were to be addressed, what would follow would be a monograph of more than 100 pages.

Editor, National Review

Editor:

Wells King and Dan Vaughn praise Ronald Reagan’s use of Voluntary Export Restraints (VERs) in the 1980s to protect the U.S. automobile industry from Japanese imports (“The American Camry,” October 17, 2022). Unfortunately, their essay is infected with several flaws, three of which are especially noteworthy.

First, by writing as if the cause of Japanese auto producers building factories in the U.S. during the 1980s was the VERs, King and Vaughn commit the post hoc, ergo propter hoc fallacy. It’s possible that the Japanese agreement back then to restrict their auto exports to the U.S. was exclusively responsible for prompting Japanese automakers to open factories in America in order to evade the restrictions of the VERs. But it’s more likely that the VERs at best sped up such direct foreign investment in the U.S. – a country with a skilled labor force, excellent infrastructure, and (importantly) a flexible and largely non-unionized labor market in those parts of the U.S. where these foreign auto producers built factories.

Because the VERs were set to expire after a few short years, no foreign automaker would have built a factory here if it weren’t convinced of the long-term profitability of doing so. Further, the VERs applied only to auto exports from Japan. A germane fact unmentioned by King and Vaughn is BMW’s announcement in 1992 of plans to manufacture cars in the U.S., with Hyundai following suit in 2002 and Volkswagen in 2008. None of these announcements were the result of Reagan’s VERs and, more generally, none appears to have been prompted by fears of U.S. protectionism.

Second, King and Vaughn never ask “As compared to what?” Because the VERs caused Americans to pay higher prices for automobiles – on average about $1,000 more per vehicle* – which goods and services were, as a result, denied to American consumers? And which industries in America shrank, and which jobs in America were destroyed or not created, by whatever artificial diversion was effected by the VERs of resources into increased auto manufacturing in America?

King and Vaughn reveal a dismaying ignorance of the economic case for free trade by mistakenly suggesting that economists who support free trade are surprised by protectionism’s ability, at least for a time, to buoy protected industries. We serious economists have never denied the possibility of such buoying. Instead, what we deny is the possibility of using protectionism to buoy some industry or industries without at the same time harming one or more other industries – industries and harms unseen; industries and harms ignored by King and Vaughn.

Third, it’s distressing that in the same essay in which King and Vaughn applaud protectionism because of its alleged success at inciting foreigners to invest more in the U.S., these authors also applaud Robert Lighthizer’s proposal to use protectionism to incite foreigners to invest less in the U.S.

By praising Lighthizer’s call for raising tariffs as a means of reducing U.S. trade deficits, King and Vaughn display their ignorance of the meaning and implications of trade deficits – and in particular their ignorance of the fact that the more foreigners invest in the U.S., the larger is America’s trade (more precisely, current-account) deficit. The investments by the Japanese in America that King and Vaughn applaud made U.S. trade deficits larger than these would have otherwise been. And so if U.S. trade deficits are, as King and Vaughn believe, an evil appropriately resisted with protectionist measures, these authors should then lament rather than praise the greater foreign investments in the U.S. that they celebrate as having been caused by the VERs.

King’s and Vaughn’s understanding of the economics of trade is so shallow and mistaken that all that they write about trade and trade policy should be read with great skepticism.

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

* Douglas A. Irwin, Clashing Over Commerce: A History of US Trade Policy (Chicago: University of Chicago Press, 2017), page 592. (Adjusted for inflation, $1,000 in the early 1980s is, in 2022 dollars, about $3,000.)