Russell Roberts's Blog, page 92
October 3, 2022
Quotation of the Day…
… is from page 307 of my late Nobel laureate colleague James Buchanan’s October 1991 article, co-authored with Viktor Vanberg (and originally published in Economics and Philosophy), “The Market as a Creative Process” as this article is reprinted in James M. Buchanan, Federalism, Liberty, and Law (2001), which is volume 18 of the Collected Works of James M. Buchanan (original emphasis):
The market economy,as an aggregation, neither maximizes nor minimizes anything. It simply allows participants to pursue that which they value, subject to the preferences and endowments of others, and within the constraints of general “rules of the game” that allow, and provide incentives for, individuals to try out new ways of doing things. There is simply no “external,” independently defined objective against which the results of market processes can be evaluated.
DBx: Truly so.
This insight from Buchanan and Vanberg nicely complements yesterday’s Bonus Quotation of the Day.
…..
Jim Buchanan was born on a farm in Tennessee on this date in 1919.
October 2, 2022
Prosperity Is Not Rooted in Slavery
Sarah to Don: “Yes, but these things were made possible by the wealth that whites extracted from slaves. Without the wealth produced by slaves and then stolen from them, we wouldn’t have had the foundation to produce what we did after slavery ended.”
Don: “American slaves worked overwhelmingly in agriculture. How did, say, cotton picked by slaves in Louisiana in 1860 turn 160 years later in Michigan into middle-class homes equipped with wi-fi, Google Home, and refrigerators stuffed with orange juice from Florida, pineapples from Hawaii, and sauvignon blanc from New Zealand?”
Sarah: “The wealth stolen from slave labor was eventually invested in factories that produced all these things.”
Don: “Not so. Consider, for example, Henry Ford. He was born into modest means on a Michigan farm in 1863 to a family with no history of slave-owning. What made him successful in business?”
Sarah: “You’re asking me?”
Don: “I am.”
Sarah: “I’m not sure. I don’t know the specifics.”
Don: “Henry Ford had entrepreneurial ideas. He also had the gumption and the freedom, as the economist Deirdre McCloskey says, ‘to have a go’ at putting his ideas into practice. Ford, like countless other lesser-known entrepreneurs, created wealth. Ford grew rich by dramatically increasing the efficiency of producing automobiles that the masses eagerly bought. His business success owed nothing to slavery.”
Sarah: “I get that he didn’t use slaves. But I feel that the capital to start his company probably came from wealth that had earlier been produced by slaves.”
Me: “First, the capital that first backed Ford came from a man named William H. Murphy. Born in 1855 in Maine, Murphy moved to Detroit where he and his father were successful in the lumber business. I’m pretty sure that post-Civil War Michigan lumbermen didn’t earn any income from slavery. Murphy, like Ford after him, created his wealth by running a successful business.
“Second, regardless of the source of the capital that Murphy invested in Ford’s new business, that investment would have been worth diddlysquat if Ford hadn’t had the vision, energy, and freedom to use those resources in ways that produced outputs that the masses wanted to buy and at costs low enough to make it worthwhile for Ford to continue to produce. This is what I mean when I say that Ford created wealth – wealth, obviously, for himself, but also for his customers in the form of automobiles that were worthwhile to purchase, and for his workers in the form of opportunities to earn incomes higher than they could have earned by working elsewhere.”
Sarah: “But I still feel that the seed money for all these later companies like Ford’s came from the slave economy that lasted in this country for centuries.”
Don: “Sarah, don’t feel. Think! Don’t you see that Ford created wealth? Don’t you see that he created value that didn’t exist until he put his entrepreneurial ideas into action? If Henry Ford could, without slavery – as you admit – turn some amount of wealth into a larger amount of wealth, why can’t other people have done the same, before and after Ford? Even if – contrary to fact – all of the seed money for the Ford Motor Co. happened to come from former slave owners, what created Henry Ford’s wealth and the valuable goods that he produced for millions of Americans was Henry Ford’s entrepreneurial vision and effort put into operation in an economy that permitted him to act entrepreneurially. No amount of resource-value grows into a larger amount of resource-value automatically.
“The ability of an entrepreneur to turn some amount of resource-value into greater resource-value doesn’t depend upon the source of the initial funding that the entrepreneur used to launch his or her venture. What matters is the entrepreneurship and the freedom of markets, which emphatically has nothing to do with slavery.”
Bonus Quotation of the Day…
They misconstrue their own arbitrary value judgments derived from intuition as the voice of the Almighty or of the nature of things.
DBx: Mises here refers to persons of many different ideologies each of which proposes schemes by which the government will (attempt to) engineer society to better appeal to the fancies of the adherents of these ideologies.
Critics of the free market never tire of hurling at proponents of the free market the uninformed charge of ‘celebrating greed’ or of wishing to elevate petty, materialist desires over noble and meaningful social goals such as community, family, diversity and inclusion, solidarity, the glory of the nation, etc., etc., etc. (The particular noble and meaningful social goals that are said to be undermined by free markets differ, of course, across the wide variety of opponents of liberalism. The fancies of today’s Progressives differ in their details from the fancies of today’s Natcons, which themselves differ in their details from the fancies of the adherents of this or that other world-saving ideology.)
Yet what’s more self-centered and greedy than demanding that society itself be re-engineered to suit one’s fancy? Even if, contrary to fact, each individual choosing and acting in free markets seeks to gratify only his or her narrow material cravings, that person isn’t nearly as greedy and as arrogant – and certainly is not as dangerous – as is someone who presses the government to re-engineer society to suit his or her fancies.
Quotation of the Day…
… is from pages 35-36 of the Mercatus Center’s 2016 re-issue of my late colleague Don Lavoie’s indispensable 1985 volume – one that all proponents of industrial policy should read before going public with their economically naive proposals – National Economic Planning: What Is Left?:
In traditional societies it is quite rational to be reluctant to diverge from old and established methods. One of the chief advantages of the Market as a coordinating process relative to Tradition is that it facilitates a far more diverse and rapid experimentation with new productive techniques.
With technological experimentation now so much less costly, productive methods can change much more rapidly as guided by the attraction (or repulsion) of potential profit (or loss). The production methods of society are freed from the relatively rigid constraints imposed by the risk-averse adherents of traditional methods and now become increasingly dictated by the new standard of profitability.
DBx: In markets, the allocation of resources is guided by prices confronted by, profits earned by, and losses suffered by individuals spending their own money. And because what is ‘destroyed’ by market-driven creative destruction isn’t anything physical or biological – because what is destroyed isn’t human lives – because this ‘destruction’ is merely of economic value and is the result only of peaceful and productive choices rather than of war or famine or disease – the process of creative destruction is a blessing for humanity. To the extent that it is allowed to operate, the process of creative destruction brings us ever-greater prosperity.
Advocates of industrial policy imagine that, by some miracle, government officials can allocate resources in ways that either do not cause losses to anyone, or that cause only particular losses that are less burdensome or more acceptable than are the particular losses caused by creative destruction. But this imagined miraculous ability of government officials is purely fanciful. Why should we suppose that whenever industrial-policy mandarins order that resources be shifted from Here to There, that the particular losses suffered by those persons who are Here will be both more than offset by the resulting gains to the persons who are There, and be less troublesome than are the losses suffered by those persons whose firms or jobs are ‘destroyed’ by market-driven creative destruction?
We’ve no reason to believe any such thing, not least because industrial-policy proponents seldom even acknowledge this question. A question unacknowledged is a question unanswered.
Industrial-policy proponents write and plead as if the costs, if any, of such a policy are guaranteed to be small enough to justify the benefit. The details of the imagined benefits from industrial policy differ across the different industrial-policy advocates. Many “natcon” advocates of industrial policy seem to believe that the promise of industrial policy lies in its ability to revert the American economy back to what these advocates imagine the American economy to have been in the past – a past near enough to be remembered as one of widespread prosperity yet distant enough to have the details of its reality gauzily veiled by nostalgia.
It’s impossible to return the American economy to the 1950s or 1960s or 1970s. And thank goodness, for if such a return were somehow engineered, even today’s most ardent champions of industrial policy would soon lament the results of their handiwork. We Americans in 2022 are not just a bit more materially prosperous than were Americans of the 1950s, 1960s, or 1970s. We are spectacularly more prosperous.
Don’t believe me? Do your best to spend just one month back in that halcyon time. Lock up for 30 days your laptop(s), your desktop, your iPad, your smartphone, and your Google Home. Don’t use even that old scientific pocket calculator that’s been stranded for more than a decade in the back of one of your desk drawers. You may, however, use a slide rule.
Of course, do no e-banking or Venmo-ing. Tell those who owe you money to hand or to mail to you a physical check, and you do the same to pay those persons who owe money to you. To deposit your check, go to the bank. Physically go to the bank. Even though ATMs came rather late, I’ll let you use one to withdraw cash, deposit checks, and to check your bank balance. However, you may not use a debit card.
As for a vehicle to drive, find a 1957 Chevy or a 1977 Buick LeSabre (or even a 1987 Oldsmobile Cutlass). Don’t take any medications that weren’t available to the general public before 1990 – and be sure to have your parents, grandparents, and children do the same. If you wear soft contact lenses, stop. Instead wear your glasses. (If you’ve had Lasik surgery or – like me – are surgically fitted with artificial lenses that restore your vision to 20/20, well, I’ll not ask you to undo that marvelous medical procedure. But please do recognize that no such marvels would have been available to you, your spouse, or your parents even just a few decades ago.)
Lay your hands on an old CRT “television set” (as we called such a thing back in the day), and content yourself to watch on that low-res beast only what is telecast by ABC, CBS, NBC, and PBS. Dust off your stereo along with your Frank Sinatra, Platters, Beatles, Engelbert Humperdinck, ABBA, and Journey vinyl records and listen only to those and their like. If you want to buy an airline ticket, find a wall or desk phone, preferably one with a rotary dial, and call the airline to make your reservation – and then contact me for help at finding the real price that your roundtrip fare from D.C. to L.A. or from Salt Lake City to Boston would have cost you in, say, 1975. Offer to pay to the airline that higher sum.
In the supermarket, pretend that 9 out of every 10 of the items there for sale are not there. And when you’re finished filling your cart with the items from your relatively meager options, you may not use the self-checkout lanes. Wait in line to be checked out by the cashier who just started to help the young father with a grocery-cart overflowing with a week’s worth of groceries for his family. (Once you get to the front of the checkout line, you can’t practically avoid enjoying the speed of having your groceries scanned rather than have the cashier punch into a cash register the price of each item. So I’ll let that pass.)
In your kitchen, avoid using the pull-down feature of your kitchen-faucet’s retractible nozzle. Avoid also using the built-in straps in the linings of each of your plastic kitchen garbage bags. Although each of the canned goods that you might wish to open can be opened easily by pulling on the built-in tab, instead use a can opener. (Feel free to encore the old electric one that was last operated during the first presidential term of Bill Clinton.)
Of course, accept and send no overnight deliveries.
Oh, and you yourself mow – or have your kids mow – your own lawn. It’s not realistic to hire that crew of hard-working Hispanics to mow it for you.
Those who today yearn for middle-class American prosperity of the 1950s, 1960s, 1970s, or 1980s either weren’t alive then or their memories are severely tarnished. These yearners for yesteryear yearn not for the full package of what actually back then existed, but either for what they mistakenly imagine to have existed, or for only one select aspect of what existed (for example, lower labor-force participation of women) as if that aspect can be regained without the entire package of which that one aspect was a part.
Advocates of industrial policy are dreamers. But not dreamers who dream realistically. Their dream, were it to come true, would trap us all in, if not quite a nightmare, a dream most unpleasant and disturbing.
October 1, 2022
Some Links
American Compass wants conservatives to be more friendly to organized labor, with executive director Oren Cass arguing for European-style sectoral bargaining. If the U.S. had adopted that approach in the ’80s, it would have been much harder, if not impossible, for Japanese carmakers to build in the U.S.
All things considered, there is decent evidence in King and Vaughn’s piece that American car companies benefited from Reagan’s decision. But should it be the federal government’s job to protect them from competition? If so, is it also the federal government’s job to protect other large companies that employ many Americans from competition? Meta, the parent company of Facebook, just announced it will be cutting jobs and freezing hiring because its revenue is falling. Part of the reason for Meta’s recent struggles is that it is facing stiff competition from ByteDance, the Chinese company that owns TikTok.
Is this a case for more protectionism?
GMU Econ graduate student Kacey Reeves West shares prudent advice to entrepreneurs from Adam Smith.
Bravo for nurse Laura Morgan. Here’s a slice from her piece in today’s Wall Street Journal:
I was fired from my nursing job this year for refusing to take “implicit bias” training. After 39 years of providing equal care to all my patients without regard to their race, I objected to a mandatory course grounded in the idea that I’m racist because I’m white. I fear every healthcare professional will soon be forced to make the same awful decision I did: Falsely admit to being racist or abandon the medical field.
My ordeal started in September 2021 when my employer, Dallas-based Baylor Scott & White Health, rolled out its annual training modules for clinical educators. The list included “Overcoming Unconscious Bias.” After viewing the interactive course, I contacted my supervisor and asked for a meeting with the chief nursing officer and the human resources director. The former sent a surrogate; the latter didn’t attend. After two meetings, it was clear that I wouldn’t be given an exemption. My supervisor told me, “I don’t want you to die on this cross.”
But I did. The idea of implicit bias is grounded in the belief that white people treat those who aren’t white worse than those who are. It’s part of the woke assumption that society, including healthcare, suffers from “systemic racism.” Accordingly, my own supposed implicit bias, which is a euphemism for ingrained racism, must be rooted out. Not only that, it must be replaced with preferential treatment for the nonwhite. I fail to see how real racial discrimination is justified by my nonexistent racism.
George Will explains that “Biden’s slapdash, election-season student loan gambit may be in trouble.” Two slices:
The Pacific Legal Foundation, libertarian litigators with no shortage of things to litigate against, might have found the key to unlocking a courthouse door. If it has, President Biden’s slapdash, election-season, $500 billion (at least) student-loan forgiveness might perish from multiple flaws.
Its grossest flaw is forgetfulness regarding the Constitution’s appropriations clause, which — in case it has slipped your mind, as it evidently has Biden’s — says: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”
How else does student-loan forgiveness violate statutory and constitutional law, common sense, and justice? Let us count the ways.
It transfers wealth upward to a mostly affluent minority — college graduates, withhigher projected lifetime earnings (on average, nearly $1 million higher) than the nearly two-thirds of Americans without college degrees who will pay, as taxpayers, to improve the financial condition of those who do. Forgiveness is unjust to students who worked and scrimped to avoid accumulating education debt. And to those who repaid their debts. Forgiveness creates moral hazard: Future students will borrow in anticipation of future forgiveness. Forgiveness draws arbitrary distinctions: Why is student debt a more pressing problem than, say, consumer or auto or mortgage debt? The half-trillion-dollar expenditure will dwarf the postulated $248 billion in savings from the new, whimsically titled Inflation Reduction Act.
…..
Presidents properly wield “emergency” powers not to solve long-standing problems, but only in sudden, unexpected, fast-moving crises, and only until Congress can exercise its lawmaking jurisdiction. Biden, however, announced his loan forgiveness as an act of executive discretion justified by a law written in response to the Iraq War, an emergency that is over — a law repurposed to inflate presidential power during the declared pandemic emergency.
But about a month after Biden announced the forgiveness, he said: “The pandemic is over.” Nevertheless, progressives praise all this. Their praise has temporarily interrupted their professions of alarm about endangered constitutional, rule-of-law and democratic norms.
Michael Tanner argues against the expansion of government welfare for the middle-class.
Juliette Sellgren talks with Darren Staloff about America’s founding.
Remember the fight between the monks of St. Joseph Abbey in Covington, Louisiana, and the embalmers and funeral directors of that state? The monks wanted to sell unadorned, handmade pine and cypress caskets. Funeral directors and embalmers didn’t like this competition and resorted to using the power of the state licensing board to forbid it. Eight of the nine board members worked in the funeral industry.
Thankfully, the Institute for Justice represented the monks and in 2013 won a victory against the cronies. Unfortunately, many businesses in many industries around the country that are oppressed by licensing boards continue to be victimized without recourse.
For all these reasons, I, like many other free market advocates, do not consider myself pro-business. In fact, those who read me regularly know that I would like to get rid of all forms of government handouts, whether that means subsidies, loans or loan guarantees, entry restrictions such as those created by occupational licensing, and protectionist barriers like tariffs.
“Australians for science and freedom.”
Ian Williams reports that “China’s lockdown nightmare is far from over.”
Every time someone dismantles a useless plexiglass barrier, an angel gets its wings.
Quotation of the Day…
… is from page 278 of Albert Jay Nock’s 1943 essay “Liberalism, Properly So Called,” as it is printed in Liberty Fund’s 1991 collection of some of Nock’s essays – a collection titled The State of the Union: Essays in Social Criticism (Charles H. Hamilton, ed.):
Liberalism held that society’s work should be carried on, its responsibilities met, and its difficulties dealt with, by the application of social power, not governmental power; social power meaning the power generated and exercised by individuals and groups of individuals working in an economy which is free of governmental interference – an economy of free contract.
September 30, 2022
Quotation of the Day…
… is from pages 174-175 of Edwin Cannan’s December 1902 address to the British Association (Section F) – an address titled “The Practical Utility of Economic Science” – as this address is reprinted in the 1912 collection of some of Cannan’s essays, The Economic Outlook (E. Cannan, ed.) (paragraph break added for ease of reading):
The first, or almost the first, thing he [“the modern teacher of economic theory”] will do is try to open the eyes of his pupils to the wonderful way in which the people of the whole civilized world now co-operate in the production of wealth. He may perhaps read them Adam Smith’s famous description of the making of the labourer’s coat, a description which required three generations and three great writers to elaborate in the form in which we know it. Or he will ask them to consider the daily feeding of London. There are, he will point out, six millions of people in and about London, so closely packed together that they cannot grow anything for their own consumption, and yet every morning their food arrives with unfailing regularity, so that all but an infinitesimal fraction of them would be extremely surprised if they did not find their breakfast ready to hand. To prepare it they use coal which has been dug from great depths hundreds of miles away in the Midlands or Durham; in consuming it they eat and drink products which have come from Wiltshire, Jamaica, Dakota, or China, with no more thought than an infant consuming its mother’s milk. It is clear that there is in existence some machinery, some organisation for production which, in spite of occasional failures here and there, does its work on the whole with extraordinary success.
It is easy to be pessimistic, especially when the weather is damp, and we are apt to concentrate our attention, and to endeavor to make others concentrate their attention, on this or that defect, and to forget that the system is not made up of defects, but on the whole works very well. Imagine the report of a really outside observer. In all civilised planets, I have no doubt, there must be an institution more or less resembling the British Association. An economist in Mars, let us say, has been favoured with a glimpse of this island through a new mammoth telescope of sufficient power to let him see us walking about, and he is reporting to Section F what he saw. Will he say that he saw a confused scramble for the scanty natural products of the earth? That most people were obviously in a state of starvation? That few had clothes? And that scarcely any were housed? No, truly; he will be much more likely to report that he saw a wonderfully orderly population, going to and from its work with amazing regularity, without a sign of compulsion or unwillingness; that it appeared to be fed and clothed and housed in way extraordinarily creditable on the whole to some mysterious organisation, the nature of which he could only guess it.
DBx: This.
September 29, 2022
Bonus Quotation of the Day…
… is from my GMU Econ colleague Pete Boettke’s September 24th, 2018, AIER essay titled “Lionel Robbins, Prophet of International Liberalism” (reference info deleted; links added):
By the late 1930s, international liberalism was in retreat. The market economy, it was argued, was inefficient, unstable, and unjust, and government planning was the panacea of the age. Lionel Robbins decided to step up and provide the counterargument. As Henry Hazlitt pointed out in his August 1, 1937, New York Times review of Economic Planning and International Order (1937), the “brilliant exception” to the tenor of the times was Lionel Robbins.
Liberalism without apology was the answer to the social ills that plagued the world economy. Robbins dedicates his book to the memory of Edwin Cannan, and in 300+ well-written pages he makes the case that “not capitalism, which rightly conditioned, is a safeguard of liberty and progress, but nationalism, which tends to poverty and conflict, is the cause of our present distresses.”
“The principle of international liberalism,” Robbins writes, “is decentralization and control by the market.” Planning, on the other hand, has proven itself to lead to “waste and insecurity,” and thus “now there seems reason to doubt … the practicability of a comprehensive planning from the centre which does not destroy just that which it was intended to preserve.” Civilization was at stake, and sober economic analysis was perhaps the best response. For it is the technical principles of economics that enable the analyst to assess the impact of alternative institutional arrangements on the ability of individuals to realize productive specialization and peaceful social cooperation.
DBx: Indeed.
Pictured above is Lionel Robbins (1898-1984). (It is Robbins who is most responsible for arranging for Hayek, in the early 1930s, to join the faculty at the L.S.E.)
Quotation of the Day…
… is from page 7 of the 2006 Liberty Fund edition of Ludwig von Mises’s 1956 volume, The Anti-capitalistic Mentality (available free-of-charge on-line here):
In a society based on caste and status, the individual can ascribe adverse fate to conditions beyond his own control.
DBx: Yes, and insofar as society is marked by caste and status, such ascription is largely correct. The tighter and more restrictive are the bonds of caste and status, the less scope each individual has over his or her own fate.
When the discussion is explicitly about a society in which individuals are classified according to caste and status – an example, of course, is the Jim Crow American south – a too-typical assumption is that everyone in the favored caste or with favored status benefits at the expense of those in the disfavored caste or with disfavored status. It’s true that harm is unambiguously inflicted on those who are disfavored, but it’s not true that everyone in the favored caste, or with favored status, gains. When, for example, the commercial engagements that blacks in the American south were permitted to carry on with whites were severely restricted, the gains that blacks would have reaped from this commerce were denied to blacks. Obviously so. But so, too, were whites denied the opportunity to benefit from engaging in peaceful commerce and cooperation with blacks. To deny this latter reality is to unintentionally presume that blacks had nothing of value to contribute through the market to whites – a presumption clearly absurd and bigoted.
Both kinds of persons – persons in ‘high’ castes and persons in ‘low’ castes – have, as a consequence of the caste or status system, less agency over their lives. And so both kinds of persons have less of their lives under their control than would be the case in a liberal system in which relationships are governed by contract and consent rather than by caste or by status.
What we are witnessing today, at least in America, is the sad reality of people actively seeking to be considered – indeed, in many cases, even to be formally classified – as members of ‘low’ castes.
In a society still infused with genuinely liberal sentiments (as American society is), sympathies run warm for everyone regarded as being victimized by conditions beyond their control. And when the society in which such sympathies run warm is also materially prosperous (as liberal societies tend to be), those who think of themselves as being of ‘high’ caste understandably want to bestow special favors – including material ones – on those persons who are believed to be of ‘low’ caste.
Under these conditions, being of ‘low’ caste becomes an advantage. Those of ‘low’ caste are relieved of the often challenging obligation to take personal responsibilities for their lives. These individuals can then enjoy the emotional gratification of blaming others for their fate. Persons perversely proud and boastful of possessing status as ‘low’ caste demand – and accurately predict that they will receive – special favors and support from those who flagellate themselves for being members of an oppressive ‘high’ caste.
Perversely, ‘low’ caste becomes ‘high’ caste, and ‘high’ caste becomes ‘low’ caste. And as is always the case when caste and status reign – and, thus, when the role of individual contract and consent is restricted – the scope for voluntary social cooperation shrinks. Society becomes not only materially poorer, but spiritually poisoned, less tolerant, and more belligerent. Civilization retreats.
…..
Ludwig von Mises was born on this date 141 years ago.
September 28, 2022
Look Who’s A ‘Market Fundamentalist’
Here’s more (surprise!) on industrial policy.
Mr. M___:
Thanks for your reply to my note of a few days ago.
Insisting that U.S. industrial policy (as you say) “is needed to make sure our economy is strong enough to compete with China,” you allege that I build my argument against industrial policy “on discredited market fundamentalist ideas which only George Mason/Mercatus Center types have faith in.”
Hmmm. Is arithmetic discredited outside of a few buildings in northern Virginia? Central to the argument against industrial policy – an argument that I did not develop but find to be compelling and worth repeating – is the reality that government cannot direct resources to favored firms without denying those resources to other firms. Adding resources here requires subtracting resources there. And so U.S. industrial policy can artificially strengthen some American firms only by artificially weakening other American firms.
And is intellectual humility discredited outside of Fairfax and Arlington? Another key part of the argument against industrial policy is that, absent the information conveyed by market prices, industrial-policy mandarins have no way to know if it’s worthwhile to add resources here at the cost of subtracting resources there. Until industrial-policy proponents explain substantively how government officials will acquire the detailed information necessary to carry out industrial policy productively, I refuse to trust substance-free assertions that empowering the state to override market-determined patterns of resource allocation will make the American economy stronger.
Finally, guess which George Mason devotee of market fundamentalism wrote the following:
What we should be able to teach our students is that the main competition going on is one of U.S. industries against each other, over which sector is going to get the scarce resources of capital, skill, and, yes, labor. Government support of an industry may help that industry compete against foreigners, but it also draws resources away from other domestic industries. That is, the increased importance of international trade does not change the fact the government cannot favor one domestic industry except at the expense of others.*
My apologies; it’s a trick question. The above-quoted market-fundamentalist idea was expressed by someone with no affiliation or affinity with GMU Econ or Mercatus: Paul Krugman.
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
* Paul Krugman, “What Do Undergrads Need to Know about Trade?” American Economic Review, Vol. 83, May 1993, pages 23-26. The quotation is found on page 26.
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