Russell Roberts's Blog, page 97

Challenging John Burtka to a Debate on Trade Policy

(Don Boudreaux)

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Here I challenge ISI President John Burtka to a public debate on trade policy.

Mr. John A. Burtka IV
President and CEO
Intercollegiate Studies Institute

Mr. Burtka:

Having read your economic case against free trade, published recently by Oren Cass’s organization American Compass, I challenge you to a public debate. I’m open to suggestions on the precise wording of the proposition to be debated, but I have in mind something along these line: “Protectionism Practiced by the U.S. Government Makes Americans Economically More Prosperous Than They Would Be Under a Policy of Free Trade.” (To be clear: I propose debating what you discussed in your essay, namely, the economic consequences of protectionism. We would not debate whether and to what extent protectionism might be prudent for national-security reasons.)

You would defend the proposition that protectionism is good economics. I would oppose it.

Because you’re obviously eloquent and seem to be quite confident in the veracity and power of your arguments against free trade, I trust that you’ll eagerly accept my invitation. But let me nevertheless sweeten my invitation by revealing to you here some of the arguments that, should you accept my invitation, I would use to make my case against protectionism and in support of free trade.

First, I would point out that you – at least in your American Compass essay – completely ignore the economic arguments against protectionism. Instead, your case for protectionism relies exclusively on the fallacy of mistaking historical correlations with causation. It’s true, as you note, that the American economy grew impressively during most of the 19thcentury even though for much of that century America had in place protective tariffs. It’s also true that many early American luminaries wrote documents and letters that reveal skepticism of free trade. And further, you’re correct to note that the American confederacy, despite being more committed than was the U.S. government to free trade, was a comparative economic weakling.

All true. Yet each of these realities, when examined carefully (such as has been done by Dartmouth economist Douglas Irwin in his monumental 2017 history of American trade policy, Clashing Over Commerce), fails as a reason to embrace protectionism.

Second, after explaining that government cannot use protectionist measures to strengthen some domestic industries without drawing resources away from – and, hence, weakening – other domestic industries, I would challenge you to tell me and the audience why government officials are to be trusted to know which particular industries are worth artificially promoting – and, hence, which particular industries are worth artificially damaging. I would also explain to the audience that economics has a well-developed theory that predicts that, when the home government follows a policy of free trade, resources in the home country are directed away from uses in which they are relatively less productive and toward uses in which they are relatively more productive. I would then share some empirical evidence in support of this economic prediction.

I would challenge you also to explain why you’re confident that government officials empowered to impose protective measures can be trusted to impose these measures in the public interest rather than in a manner influenced by special-interest groups. Let me here warn you that I would point out that, as documented by Doug Irwin in his above-mentioned definitive history of American trade policy, whenever in U.S. history special interests were in conflict over trade matters with the public interest, the former almost always prevailed over the latter.

The case for free trade is simple: Allow fellow citizens to spend their incomes in any peaceful ways they choose, and to do so irrespective of whatever trade policies are followed by foreign governments. Such a policy, I submit, is consistent in a way that protectionism is not with the liberty for which America’s founders risked their lives. But being an economist I would emphasize, not the consistency of free trade with liberty, but the positive and causal connection of free trade with economic growth and economic flourishing for the masses.

I’ll be happy to debate you pretty much any time after the New Year. (The Fall months are for me, as I’m sure they must be for you, already filled with obligations and deadlines.) If you’re game, please contact me and we can work out details, including the location, specific date, and, of course, the precise wording of the proposition to be debated.

I look forward to hearing from you and, hopefully, engaging with you in a civil debate on this important policy matter.

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

Cato Journal: “Cable Reregulation” (with Bob Ekelund)

(Don Boudreaux)

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In the Spring/Summer 1994 issue of the Cato Journal, Robert Ekelund and I – in our paper titled “Cable Reregulation” – explored mid-1990s’ efforts to re-impose stricter government regulations on cable television. (A decade earlier, Bob Ekelund supervised my dissertation at Auburn University.) You can read my and Bob’s paper beneath the fold.

(more…)

Some Links

(Don Boudreaux)

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Anthony Gill and GMU Econ alum Michael Thomas compare Biden’s student-loan forgiveness to jubilee.

Jeffrey Rogers Hummel reviews, in Reason, Roger Lowenstein’s new book, Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War. A slice:

Prior to the war, the U.S. government had generally run surpluses, and the national debt stood at a miniscule $65 million (equivalent to about $2 billion in 2022 dollars). By the end of the war, the debt had risen to $1.3 billion, with interest alone constituting, as Lowenstein notes, “more than the entire prewar budget.” Yet that was not sufficient to cover the war’s cost. So [Treasury secretary Salmon P.] Chase, previously a hard-money Democrat, reluctantly resorted to fiat money—greenbacks—generating inflation that ultimately increased the price level by nearly 80 percent. Lowenstein considers this “hardly all bad” and bemoans postwar efforts to reestablish a gold standard.

Similar predilections are apparent in Lowenstein’s discussion of another Chase initiative, the national banking system, which came to fruition only after Chase’s resignation as treasury secretary. Lowenstein unfairly characterizes the prewar monetary system as “chaotic,” ignoring the copious scholarship that finds antebellum “free banking,” although far from perfect, to have been at least as serviceable as most subsequent U.S. monetary regimes. Moreover, Lowenstein’s praise for national banking hardly accords with his description, in his book on the Federal Reserve, of the national banking system as plagued by panics. Toward the end of Ways and Means, he even backtracks slightly, admitting that the new system gave too much dominance to Wall Street. But he never realizes that the two most serious defects were nearly identical for both prewar and postwar banking: legal limits on branch banking and requirements that banks hold government bonds (state-issued before the war and Treasury-issued afterward).

The Wall Street Journal Editorial Board is understandably impressed with a new paper by Clemson University economists Michael Makowsky and Patrick Warren – a paper that shows that black people’s access to guns reduced incidents of lynching. A slice:

The key finding of “Firearms and Lynching”is clear: “Rates of Black lynching decreased with greater Black firearm access” in the Jim Crow South.

In other words, when black Americans couldn’t count on the cops to protect them, guns made a difference. A few years ago, former Secretary of State Condoleezza Rice spoke to this on ABC’s “The View.” She related a personal anecdote from her childhood in Birmingham, Ala., to explain her appreciation for the Second Amendment.

“There was no way that Bull Connor and the Birmingham Police were going to protect you,” she said. “And so when White Knight Riders would come through our neighborhood my father and his friends would take their guns and they’d go to the head of the neighborhood, it’s a little cul-de-sac, and they would fire in the air, if anybody came through.

“I don’t think they actually ever hit anybody. But they protected the neighborhood. And I’m sure if Bull Connor had known where those guns were he would have rounded them up.”

The study confirms Ms. Rice’s point.

David Henderson is correct: “A tariff is a tax.”

Jeffrey Singer decries the effort of the government of California to stifle scientific discourse about covid. A slice:

Our understanding of how the virus spreads, how best to control spread, how to accurately diagnose a COVID-19 infection, how to treat infection, and even how effectively vaccines work against the virus gets continually revised. Scientific opinions once dismissed as “fringe,” such as employing a pandemic policy of “focused protection,” are now gaining traction as the pandemic has become endemic. (We discussed this at a Cato online policy forum last month.) Reasonable people in the public health community still disagree about the need for and timing of COVID vaccine boosters. The constant churning of scientific knowledge about how the virus works and how to treat infections means medical science doesn’t yet know enough to arrive at a standard of care.

Mark Oshinskie wonders why so many people continue to cling to covid panic.

Quotation of the Day…

(Don Boudreaux)

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… 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:

And since the theoreticians of democracy have for over a hundred years taught the majorities that whatever they desire is just, we must not be surprised if the majorities no longer even ask whether what they decide is just.

DBx: What Hayek here describes is one of the dangerous consequences of anthropomorphizing the collective in a way that creates the impression that when the collective ‘chooses’ through majority-rule voting it acts just as a flesh-and-blood person does when he or she chooses whether or not to have ice cream for dessert and, if so, what flavor to enjoy.

Not All Deflation Causes Suffering

(Don Boudreaux)

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Here’s a letter to the Wall Street Journal:

Editor:

Roger Lowenstein’s review of Troy Senik’s biography of Grover Cleveland is excellent (“‘A Man of Iron’ Review: Grover Cleveland, Honest to a Fault,” September 17). But Mr. Lowenstein makes a small error when, implicitly commenting on the gold standard in place during Cleveland’s time as president, he says that “Cleveland seemed blind to larger shortcomings in the monetary system (the U.S. had suffered persistent deflation since the 1860s).”

Contrary to popular (and, alas, even to much professional) economic opinion, deflation is not necessarily – as it is when caused by contractions of the money supply – a source of suffering. Indeed, the “persistent deflation” that Mr. Lowenstein decries was a natural result of the enormous growth during those decades in the productivity of the U.S. economy.

U.S. industrial output skyrocketed in the decades immediately following the Civil War. It rose in 33 of the final 40 years of the 19th century, nearly all which 40 years witnessed deflation. One result was that annual U.S. industrial output in 1900 was nearly 7.5 times higher than it was in 1860* – a result explained by population growth. On a per-capita basis, industrial output per American was about three times higher in 1900 than it was in 1860. Also increasing during those four decades was agricultural productivity.**

With a stable supply of money chasing ever-more goods (and services), the natural result was a falling price level. And it’s a result that deserves applause. As economist George Selgin explains in his pioneering 1997 study Less Than Zero: The Case for a Falling Price Level in a Growing Economy, “even zero inflation would have involved some failure of money price signals to reflect transparently and accurately the true state and progress of real production possibilities.”***

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

* Joseph H. Davis, “An Annual Index of U.S. Industrial Production: 1790-1915,” Quarterly Journal of Economics, Vol. 119, November 2004, pages 1177-1215. See especially Table III.

** Lisa Geib-Gundersen and Elizabeth Zahrt, “A New Look at U.S. Agricultural Productivity Growth, 1800–1910,” Journal of Economic History, Vol. 56, September 1996, pages 679-686.

*** George Selgin, Less Than Zero, 2nd Edition (Washington, DC: Cato Institute, 2018). The quotation in the text is from page 13 of the original 1997 Institute of Economic Affairs edition.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 499 of Herbert Spencer’s insightful 1891 essay “From Freedom to Bondage,” as this essay is reprinted in Liberty Fund’s 1981 collection of some of Spencer’s writings, The Man Versus the State, with Six Essays on Government, Society, and Freedom:

For as fast as the régime of contract is discarded the régime of status is of necessity adopted. As fast as voluntary cooperation is abandoned compulsory cooperation must be substituted. Some kind of organization labour must have; and if it is not that which arises by agreement under free competition, it must be that which is imposed by authority…. This is a truth which the communist or the socialist does not dwell upon. Angry with the existing system under which each of us takes care of himself, while all of us see that each has fair play, he thinks how much better it would be for all of us to take care of each of us; and he refrains from thinking of the machinery by which this is to be done.

DBx: It’s not only communists and socialists who refrain from thinking of the machinery by which their fancied outcomes are to be pursued by government. Nearly all proponents of government intervention, including today’s proponents of industrial policy, also so refrain.

Interventionists typically describe lovely outcomes and then posit a handful of measures for government officials to impose – measures for ham-fistedly prohibiting this large class of actions, penalizing that other large class of actions, and subsidizing yet some other other large class of actions. Selling their schemes to the public in terms of excellent promised outcomes, the means that interventionists propose for government to use to achieve these outcomes – and to do so without giving rise to worse unintended consequences – are never formulated and calibrated to account for the great, unseen complexity of the economic and social phenomena that must be successfully rearranged if the interventionists’ schemes are to have any hope of successfully achieving the interventionists’ stated goals. Instead, interventionists count on the occurrence of miracles.

Quotation of the Day…

(Don Boudreaux)

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… is from page 144 of an advance copy of Samuel Gregg’s excellent and important forthcoming book, The Next American Economy: Nation, State, and Markets in an Uncertain World:

[S]takeholder capitalism undermines and distorts accountability. It helps entrench incompetent boards and executives by allowing them to excuse poor performance by telling shareholders that the company’s legal obligations to help actualize various national and international objectives means that investors must settle for less profit.

The Myopia of Antitrust

(Don Boudreaux)

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Here’s a letter to the Washington Post:

Editor:

Beneath the verbiage and fine phrases of California’s antitrust complaint against Amazon lies this fact: The State of California is punishing Amazon for its unusual success at serving customers (“California sues Amazon, accusing it of anticompetitive behavior,” Sept. 15).

Key among California’s specific complaints is that third-party merchants find offering their wares for sale on Amazon’s platform to be so very attractive that these merchants would do far less business if they chose not to use Amazon. Indeed, this attractiveness of doing business with Amazon is so great that third-party merchants are willing to effectively agree not to sell their wares on other platforms (such as those of Target and Walmart) at prices lower than they charge on Amazon’s platform. These merchants would not agree to this contractual provision with Amazon if the differential value to them of selling on Amazon’s platform weren’t enormous.

Furthermore, the fact that neither Target nor Walmart (or any other company) has yet managed to offer a platform as attractive as Amazon’s testifies to the reality that succcessfully creating and maintaining such a platform is especially difficult. The revenue that Amazon earns through the challenged contractual terms, therefore, is Amazon’s just reward for supplying a valuable service that even retailers as large and as experienced as Target and Walmart have yet figured out how to supply.

Now that Amazon’s singularly successful platform is in place, California’s antitrust action might well reduce the prices of consumer goods in the short run. But by preventing Amazon from reaping the reward for its entrepreneurial success, this antitrust action will discourage not only it, but all other companies, from exerting effort in the future to experiment with creative means of improving their ability to serve consumers.

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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Allen Mendenhall explains that corporate wokeness harms the groups that its proponents purport to help. A slice:

Florida’s “Stop Woke Act” is an example of how not to counter wokeism. Designed to neutralize woke indoctrination, this legislation burdens speech by banning mandatory workplace training regarding sex or race that could cause “anguish” or “guilt.”

It’s one thing for the government to limit its own expression — say, by removing critical race theory from public grade-school curricula or restricting state-agency implicit bias instruction — but the Stop Woke Act binds private employers and voluntary membership associations. The illiberalism and censorship codified by the Stop Woke Act mirror the illiberalism and censorship championed by woke ideologues.

Also critical of critical theory is Richard Bosshardt, M.D., who writes in the Wall Street Journal that…

… The 84,000-member professional [American College of Surgeon’s] society’s sole focus should be improving the standard of surgical care, but in recent years the college has made a priority of promoting critical race theory and so-called antiracism. Like many radicalized organizations, the college has taken to punishing members who raise concerns over its new agenda.

The college’s elevation of ideology—and demotion of surgery—was swift. I saw the first signs in 2019, when the college invited Joan Y. Reede to deliver its prestigious annual lecture. Dr. Reede is dean for diversity and community partnership at Harvard Medical School. The topic of her speech was “a path toward diversity, inclusion, and excellence.”

As the son of a Brazilian mother and American father, I welcomed her praise of diversity, but Dr. Reede’s speech made no meaningful mention of “excellence.” Surgery is a discipline that demands excellence in all its stages, from training to practice. Should diversity supplant quality in surgeon performance, patient care would suffer. Remarkably, Dr. Reede’s vision was met with rapturous acceptance by the college’s leadership, and the unqualified push for diversity became a lodestar for the group.
…..
These are the actions of ideologues intent on radicalizing the surgical field instead of improving care. Surgeons can’t let that happen. The only way to reverse it is for surgeons to speak out against the corruption of our profession. The ACS must choose between surgery and ideology. Whatever the choice may be, my colleagues and I will fight for the good of our patients.

Barry Brownstein decries the madness of collectivism – the madness both of its sources and of its results.

Writing in the Wall Street Journal, Dorothy Rabinowitz gives a glowing review to the forthcoming Ken Burns documentary “The U.S. and the Holocaust.” A slice:

The family [of Anne Frank, whose father was Otto] moved to Amsterdam, but Otto’s eyes were on the U.S. Yet America, they soon discovered, was not willing to open its doors to them—and that is the essential, haunting point of this three-part documentary awash in the forever-raw pain of certain facts. Among them, not least, that in the years when escape from the Nazis’ designs for mass murder of the Jews was still possible, the U.S. government, moved by its own prejudices, especially in the State Department—and what that government guessed was the will of the people—was unwilling to accept more than a modest number of the desperate refugees. This, despite the persistent efforts of Americans who felt deeply about the issue, as Eleanor Roosevelt did, though the first lady was in no position to wield power in Congress or to do anything to enlarge the immigration quota.

My intrepid Mercatus Center colleague Veronique de Rugy rightly criticizes Britain’s P.M. Liz Truss’s foolish attempt to shield the people of the U.K. from the reality of energy’s scarcity. A slice:

Shortly after taking over as the new U.K. prime minister, Liz Truss announced plans to fight inflation by capping household energy prices over the next two years. Blimey! Billed as the most free-market prime minister since Margaret Thatcher, Truss’s first major move is a counterproductive scheme that will prolong the United Kindom’s energy woes and increase its budget deficit. What could go wrong?

“Extraordinary challenges call for extraordinary measures, ensuring that the United Kingdom is never in this situation again,” Truss declared. When you hear phrases like this, beware of bad policies on the way. Starting in October, the government will limit the energy prices charged to households for two years and businesses for six months. It will make up the difference to utility companies with subsidies paid for with borrowed funds. The cost of this boondoggle is forecasted to be over $120 billion.

GMU Econ alum Caleb Fuller shares the greatest hits of price controls.

Colin Grabow continues to document the damage done to the American economy by the cronyist Jones Act.

Over on his Facebook page, Phil Magness is doing great work exposing the ignorance and illiberalism of Hans-Hermann Hoppe.

Emma Camp reports yet more evidence of the Biden administration’s contempt for the rule of law.

“A day in the life of a masked child.”

HART busts myths of long covid.

Quotation of the Day…

(Don Boudreaux)

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… is from pages 16-17 of the 1903 3rd edition of Edwin Cannan’s splendid slim volume, Elementary Political Economy:

A third cause of the increase which has taken place in the productiveness of industry is the growth of co-operation between individuals. At one time the circles within which individuals co-operated or worked together were small – for most purposes not larger than the family or village community. The tendency of civilisation has been to enlarge the area of co-operation, till now we see the production of many good things carried on by individuals working together all over the globe.