Russell Roberts's Blog, page 99

Quotation of the Day…

(Don Boudreaux)

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… is from pages 111-112 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 (footnote deleted; link added):

How much of [China’s] economic development can be attributed to industrial policy? [Barry] Naughton poses precisely that question in his book The Rise of China’s Industrial Policy, 1978-2020. “The answer,” he states, “is simple: none.” Industrial policy is far more a feature of post-2008 financial crisis China than the China which engaged in cautious and selective liberalizations until 2007.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from page 119 of Gerald P. O’Driscoll’s superb 1977 paper “Spontaneous Order and the Coordination of Economic Activities,” as this paper is reprinted in New Directions in Austrian Economics (Louis M. Spadaro, ed., 1978):

The institutional setting and the allocation mechanism matter in economics precisely because behavior in a changing world is not automatically coordinated. Laws and institutions have a significant impact on human behavior precisely because some facilitate and some inhibit the flow of information that is necessary for adaptation in a changing world. This realization is certainly contained in The Wealth of Nations – Smith’s emphasis on the importance of these matters suffuses that work.

DBx: Yes.

And so persons who advocate industrial policy are among those people who, in effect, advocate obstructing the flow in information that individuals must receive and act upon if they are to adapt as well as is humanly possible to the changing preferences of their fellow human beings as well as to changing technologies and events in nature. Industrial-policy advocates – yet to explain how government officials will acquire the information necessary to out-perform the market at allocating resources in ways that promote the long-run welfare of the masses – apparently believe in miracles.

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(Don Boudreaux)

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James Bovard reflects on the Biden administration’s efforts of a few months ago to create a “Disinformation Governance Board.” A slice:

From the start, the Disinformation Governance Board looked like a political caricature dreamed up by people who never appreciated either Monty Python or Orwell’s 1984. Given the Biden record, it was unclear whether the new board will be fighting or promulgating “disinformation.” After controversy erupted, an unnamed DHS spokesperson told the Washington Post: “The Board’s purpose has been grossly mischaracterized; it will not police speech…. Its focus is to ensure that freedom of speech is protected.” Geez, why didn’t the Founding Fathers think of adding a clause to the First Amendment creating a nefarious-sounding government agency to ride shotgun on the nation’s media?

Also from Jim Bovard is this just criticism of malarky issued by the Biden administration about its economic ‘accomplishments.’

The Wall Street Journal‘s Editorial Board explains that Europe’s “emissions-trading system raises energy costs for no reason.” A slice:

Europe has operated the ETS since 2005. Mandarins issue a set number of permits each year, and then market participants can trade the permits so heavier emitters can buy the certificates they need from those who have reduced emissions. If demand exceeds supply, a rising permit cost is supposed to encourage green investments to reduce emissions.

The system wasn’t designed with a crisis such as this year’s in mind, however. One factor driving up permit costs is a shift in the fuel mix driven by political supply constraints rather than the kind of market incentive the ETS is supposed to change.

Yale Law professor Stephen Carter argues that “closing schools should be the last option in a pandemic.” A slice:

And yet, there was a public health “consensus” that the schools should stay closed until … until … well, the target seemed variable.

Early in the pandemic, I heard one public health “expert” proclaim on television that no measure is too extreme if it saves a single life. Such an assertion does not even constitute serious argument, still less the teaching of an academic discipline. But the host treated the claim like Holy Writ.

In her book, [Anya] Kamenetz laments that those who knew better didn’t raise their voices loudly enough. A more realistic way to put the point is that those who knew better were drowned out, even accused of spreading misinformation. But allowing only one side in a debate over an issue of public importance leads predictably to bad policy. And, in the jargon of the moment, it’s also a threat to democracy, which thrives only on open disagreement.

Kerry McDonald rightly distinguishes “schooling” from “learning.”

K. Lloyd Billingsley decries the apparent attempt by Fauci and other covidians to censor dissent. A slice:

The case, ;Missouri et al v. Biden et al, is now in federal court under judge Terry Doughty. Jenin Younes of the New Civil Liberties Alliance, and an attorney for some of the plaintiffs, notes that Dr. Fauci had “demanded that specific individuals, including two of our clients, Jay Bhattacharya and Martin Kulldorff, be censored on social media.” Dr. Bhattacharya, of Stanford Medical School, and Dr. Kulldorff of Harvard, are co-authors of the Great Barrington Declaration, which took issue with Dr. Fauci on the issue of lockdowns.

As we noted, National Institutes of Health (NIH) director Francis Collins tasked Dr. Fauci to conduct “a quick and devastating public takedown” of the Great Barrington scientists, smeared as “fringe epidemiologists.”

In an Epoch Times commentary, Bhattacharya and Kulldorff wondered if Collins and Fauci ever read the GBD and why they opted for a “takedown” instead of “vigorous scientific discussion.” The GBD authors recall the harm caused by the lockdowns caused, particularly the school shutdowns that harmed children without affecting disease spread. That damage will take years to reverse, but the authors have thoughts on ways to avoid similar disasters.

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

Margery Smelkinson and Leslie Bienen rightly insist that “it’s time to end the COVID public health emergency.” (HT Jay Bhattacharya) A slice:

Hospitals receive a 20% increase in the Medicare payment rate for every patient diagnosed with COVID.

This bolus of payments might help explain why all the large urban hospital systems we checked and the vast majority of smaller systems were still COVID testing all patients. The tests themselves can also be cash generators for hospitals.

Quotation of the Day…

(Don Boudreaux)

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… is from Nobel-laureate economist James Buchanan’s October 17th, 1960, letter to the Ford Foundation’s Kermit Gordon, as this letter appears on pages 76-81 of David Levy’s and Sandra Peart’s superb 2020 volume from Cambridge University Press, Towards an Economics of Natural Equals: A Documentary History of the Early Virginia School:

In my view, the essential content of the inquiring spirit or atmosphere lies in the explicit acceptance of what may be called scientific morality. By this I mean a willingness to search for and to accept truth, regardless of where it may lead us, and to accept all currently-established truths as, in one sense, relative and subject to modification upon the progressive development of new ideas.

On Intellectuals and the ‘China Shock’

(Don Boudreaux)

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Here’s a letter to Reason:

Editor:

While he identifies several problems with Karl Polanyi’s criticisms of the free-market order, Daniel Drezner nevertheless gives Polanyi excessive credit (“Goodbye, Globalization?” October). Unlike F.A. Hayek and Milton Friedman, Polanyi failed to understand that the public’s responses to economic developments are heavily influenced by intellectuals who comment on and interpret these developments. If intellectuals’ commentary and interpretations are hostile to markets, as they mostly are, then the public will be more prone to harbor hostility to markets. And even when the public isn’t as hostile to markets as are intellectuals, intellectuals will interpret any apparent uneasiness in the public as evidence that the public’s unhappiness is with markets.

Consider the alleged “shock” of the U.S. liberalizing trade with China that Mr. Drezner describes as a source of “a lot of social disruption.” Intellectuals and politicians, left and right, certainly claim that Americans’ increased trade with the Chinese was so cataclysmic as to create major dislocations and despair among working-class Americans. But in their famous “China Shock” paper – the results of which continue to be cited in support of this alleged economic cataclysm – David Autor, David Dorn, and Gordon Hanson estimate that the total number of American jobs destroyed by trade with the Chinese over the 13-year period 1999-2011 is 2.4 million, for a monthly average of 15,385. This scary-sounding number was immediately seized upon to explain why blue-collar Americans, apparently feeling the burden of these trade dislocations, are justly receptive to populists peddling protectionism.

But a fuller set of facts reveals that this explanation of blue-collar discontent is untenable. As I wrote  in the New York Times in March 2018, data from a November 2016 Bureau of Labor Statistics report show that from September 2006 through September 2016 – and excluding the Great Recession months – the monthly average number of workers in the United States who lost their jobs was around 1.75 million. Even allowing for the fact that the average monthly size of the labor force and employment were a bit larger during the 2006-2016 span than they were during the 1999-2011 span, the “China Shock” was responsible for the destruction of no more than about one percent of the total number of jobs that are routinely, month in and month out, destroyed by the mighty economic churn that’s inseparable from America’s dynamic economy.

It’s therefore utterly far-fetched to blame any growing hostility toward globalization among middle Americans on U.S. trade with China. Blame for any such hostility instead falls on peddlers and spinners of ideas – that is, on intellectuals and politicians. It is they who, out of ignorance or cunning, told an incredible tale that not only reinforced their own priors but also misled many others to mistaken conclusions.

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

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(Don Boudreaux)

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Even the New York Times calls China’s zero-covid policy “Kafaesque.” Four slices – each of which is evidence of the reality either of covid Derangement Syndrome or of the vileness of political authorities:

As fire was raging in the mountains surrounding the southwestern Chinese metropolis of Chongqing, 10 million residents stood in 100-plus-degree heat to get Covid tests. Two cases were detected that day in August.

A week earlier in Xiamen, in the country’s southeast, pandemic workers swabbed the throats of fishermen before they tested their catch of fish and crab. Cars got swabbed, too, at an auto show last week in Chengdu, in the southwest

When a strong earthquake struck Chengdu on Monday, the first instinct of many residents was not to run for safety but to ask for permission to leave their homes under lockdown. “Don’t come downstairs! @all,” a property manager warned in a group chat. In Luding County, the epicenter of the earthquake, which killed at least 86 people, the local government told residents to make sure they got tested every day.
…..

Mao didn’t care that people starved to death or that the country was thrown into chaos in those two disastrous campaigns. Mr. Xi doesn’t seem to care that his campaign has been extremely disruptive even as the coronavirus has become much milder, if more transmittable.

…..

The Communist Party has defended its policy, saying that relaxing the Covid restrictions could cause widespread infections in a country with limited medical resources and a large population of older people, among whom 15 percent are not fully vaccinated. The party said it would crack down on any speech or behavior that distorted, questioned or disapproved of the policy.

Many Chinese buy into the narrative and willingly act as foot soldiers in the party’s fight against the virus.

Last week, passengers on a bus in the northeastern city of Dalian scolded a man for wearing merely a surgical mask, not an N95 respirator mask that the local government required in an announcement a few hours earlier. “Get off the bus!” they yelled at the man, according to official Chinese media. “You’re wicked.” One of the passengers called the police, who led him off the bus.

…..

Local authorities have become increasingly harsh in punishing those who don’t follow the zero-Covid rules. In recent months, many people were detained by the police for five to 10 days for failing to get Covid tests. Officers in the northwestern province of Shaanxi detained a 20-year-old man for five days in August because he had skipped two Covid tests and had ridden a bike. His behavior “posed risks of spreading the virus,” they said.

Pandemic control workers, in their white hazmat suits, have come to embody the absurdity and the brutality of the campaign.

James Melville tweets: (HT Jay Bhattacharya)

Excess deaths per country.
January 2020 – June 2022.
Sweden 🇸🇪 has one of the lowest excess death rates in the world. An inconvenient truth for some people.

2020 was a very bad year for economic freedom.

Writing for Reason, Dan Drezner warns of the dire consequences that will arise if the world retreats from globalization. A slice:

No progress has been made on reviving the WTO as a force for trade liberalization. There has been a moratorium on new trade deals. Tai has insisted despite all evidence to the contrary that the China tariffs provide bargaining leverage, so the trade war with China persists. The Biden administration has made scant effort to increase immigration flows.

The two administrations’ signature foreign economic deals reflect their resistance to the open global economy. The Trump administration renegotiated the North American Free Trade Agreement, which became the more restrictive United States–Mexico–Canada Agreement (USMCA). The Biden administration launched the Indo-Pacific Economic Framework for Prosperity to entice partners away from excessive dependence on China. The most telling fact about this proposed agreement is that it does not include what trade negotiators call “market access”—i.e., reduced import barriers. This is a trade deal with no additional trade in it.

Jukka Savolainen decries the politicization of yet another “scientific” journal.

Quotation of the Day…

(Don Boudreaux)

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… is from page 165 of Deirdre McCloskey’s superb 2022 volume, Beyond Positivism, Behaviorism, and Neoinstitutionalism in Economics (original emphasis):

Yet it is not “capitalism” that requires creative destruction, but any progressive economy. If you don’t want betterment to happen and don’t want poor people to get rich by the 3,000 percent that they have in Japan and Finland and the rest since 1800, then fine, we can stick with the old jobs, keeping their former employment the peasants, elevator operators and telephone operators, the armies of typists on old mechanical Underwoods, grocery stores with a clerk in an apron handing you the can of baked beans over the counter. But if innovation is to happen – Piggly Wiggly in Memphis in September 1916 initiating the self-service grocery store, or a North Carolina tobacco trucker initiating in 1956 the shipping container – then people, and also the machines and factories owned by the bosses and their stockholders, have to lose their old jobs. Human and physical capital has to relocate.

DBx: Indeed so. Yet large numbers of pundits, professors, and politicians speak, write, and act as if this reality isn’t so. These out-of-touch-with-reality ‘reformers’ believe that government can protect most or many workers and businesses from change while humanity continues either to enjoy increasing amounts of material prosperity, or at least avoids any great decline in such prosperity.

Government can indeed, with enough coercion, prevent economic change by greatly suppressing economic competition. But government cannot greatly suppress economic competition and change and at the same time protect prosperity and opportunity for the masses. The results of such suppression of economic competition would not be, as some economically uninformed people say, merely slightly higher prices of tee-shirts and trinkets. The results instead would be at first stymied and then steadily declining access to the likes of modern health care, safer and more comfortable housing, leisure and travel, opportunities to learn, better and more interesting diets, and new artistic expressions. Year after year life expectancy itself would fall, as more infants die, as more mothers die as a result of birthing, and as older people die sooner and thus have fewer years with their children and grandchildren.

Even to maintain the current standard of living requires the freedom of individuals to adjust to changing economic circumstances such as falling supplies of raw materials, foreign wars (shooting and trade), alterations in weather, and shifts in demographics. Protecting today’s firms and jobs from being destroyed by economic (and non-economic) forces would come at a steep price.

But, hey, look what we’d get in return for these sufferings! We’d celebrate the satisfaction of knowing that Bobby works at the same factory that employed his father and grandfather, and is doing the same job that each of them did. And Bobby and his family will also enjoy the assurance that that same factory and job will be occupied also by Bobby’s own son – and by Bobby’s grandson. It’s a bargain that can be arranged only by government!

…..

Today is Deirdre McCloskey’s 80th birthday. Happy Birthday, Deirdre! May you – for your sake and for ours – have many, many more.

Regular patrons of Cafe Hayek are well aware that Deirdre’s work has had an enormous influence on my own understanding of the economy, of economic history, and of liberalism generally. Her insights – on price theory, on methodology, on the sources of economic growth (and on the non-sources!), on the craft of writing, and on the philosophy of liberalism – are profound. I cannot imagine what would be the contours of my worldview had I not encountered her work when I was a graduate student; I know only that my understanding would be much worse than it is today. The bourgeois virtues cannot have hoped for a better champion.

Bonus Quotation of the Day…

(Don Boudreaux)

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… is from C.S. Lewis’s essay, “The Humanitarian Theory of Punishment” [1954?]:

Of all tyrannies a tyranny sincerely exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. They may be more likely to go to Heaven yet at the same time likelier to make a Hell of earth. Their very kindness stings with intolerable insult. To be ‘cured’ against one’s will and cured of states which we may not regard as disease is to be put on a level with those who have not yet reached the age of reason or those who never will; to be classed with infants, imbeciles, and domestic animals.

Some Links

(Don Boudreaux)

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Phil Magness and James Harrigan ponder the state of economic freedom in America. A slice:

But that only tells part of the story. It’s when we look at ratings rather than rankings that things get interesting. While the United States has been kicking around in the top ten, even if falling, for decades, it is not doing all that well when compared to itself over time. Indeed, the US’s cumulative rating of 7.97 is considerably lower than its 1980 rating of 8.34. Digging into the recent data, the United States dropped in rank across all five indexed categories from 2019 to 2020. The most significant changes have been in the size of government and regulation categories, where the United States fell 7.32 to 6.79, and 8.68 to 8.11, respectively. Both measures directly reflect the COVID era’s unprecedented expansions of government, as federal spending was unleashed from any semblance of fiscal constraint and draconian regulatory intrusions on daily economic life reached every single American.

In short, the United States finished 2020 less economically free than we were at the tail end of the Carter years.

In the time since COVID, these problems have only continued to compound. The United States appears to be entering the same economic malaise of bloated bureaucracy, excessive taxation, and spiraling inflation that typified the Carter years. Back then we had to wait in line, sometimes for hours, just to buy gas. Now we have rolling blackouts and energy crises in some states, impending electric vehicle mandates, perpetual budget-busting deficits that were unheard of even two decades ago, and – yes – a return of inflation that tops 8 percent for the year. Perhaps the most telling fact of all is that our elected officials and policymakers haven’t a clue how to reverse these trends. Indeed, they are still feeding them.

My GMU Econ colleague Chris Coyne warns of the threat to Americans’ liberty posed by growth in the U.S. military. A slice:

The Pentagon is the world’s largest employer. The military-industrial sector is characterized by entanglements between government and private firms, with the latter earning large profits from war preparation and war-making.

These entanglements are a hallmark of political capitalism—a system where political decision-making influences private decision-making and where private parties influence politics to further their interests, usually at the expense of taxpayers. The same you-scratch-my-back-I’ll-scratch-yours exists in other areas where the government is heavily involved as well, such as education and infrastructure, where private firms and other special interests spend millions of dollars attempting to influence policy for their own benefit in the name of some “common good.”

My intrepid Mercatus Center colleague Veronique de Rugy, writing at EconLog, decries conservatives’ eagerness to help pave the road to serfdom. A slice:

For the last ten years I have been baffled as I watched the conservative movement devolve into a weird wing of progressivism—especially on economic issues. While once at least paying lip service to limited government, fiscal prudence, and personal responsibility, conservatives now ignore the size of government and fiscal responsibility. They increasingly call for a larger child tax credit, a universal basic income, and paid leave arranged and ensured by the federal government. Many conservatives now also proudly embrace tariffs, hyperactive antitrust, and industrial policy (often justified, of course, as necessary to ‘fight’ China).

Juliette Sellgren talks with William Allen about the state of black America.

Wall Street Journal columnist Holman Jenkins profiles Jeff Yass. A slice:

Mr. Yass, ecumenical with his money and his vote, remains a registered Libertarian and longtime member of the Cato Institute board. He argues that history’s “libertarian arc” is manifested in the advance of gay rights as well as the $50 trillion valuation of America’s corporate sector, dwarfing China’s or Europe’s.

But if the odds in favor of liberty and progress are 51 to 49 on any given day, that leaves room for long runs of bad outcomes. Worryingly, a wave of destructive ideology is emanating from America’s universities. Young people are being encouraged to hate the capitalism and free markets that gave them their opportunity-rich lives. And renominating Donald Trump isn’t the answer.

A Never Trumper in 2016, the Bronx-born Mr. Yass later found himself pitching school choice to a fellow product of New York’s outer boroughs: “Jared, let’s go do this,” he imitates the 45th president barking to son-in-law and adviser Jared Kushner.

But Mr. Trump has become the Democrats’ “most valuable player.” Mr. Yass and allies have been noodling how to discourage a 2024 bid: “He doesn’t have any donors. He doesn’t need the money. He gets so much free publicity. It’s not like you can influence him at all. The only thing you can appeal to is, ‘You’re gonna lose and be humiliated.’”

Mr. Yass is instead throwing his weight behind the rising Mr. DeSantis, who eked out his 2018 Florida victory with help from black moms who wanted options for their kids. The Florida governor is a “little gruff” and “not a libertarian” but good on school choice and the best bet “if you’ve had enough of the political warfare,” Mr. Yass says.

Writing in the Wall Street Journal, Bjorn Lomborg busts myths about electric automobiles. A slice:

Electric cars’ impact on air pollution isn’t as straightforward as you might think. The vehicles themselves pollute only slightly less than a gasoline car because their massive batteries and consequent weight leads to more particulate pollution from greater wear on brakes, tires and roads. On top of that, the additional electricity they require can throw up large amounts of air pollution depending on how it’s generated. One recent study found that electric cars put out more of the most dangerous particulate air pollution than gasoline-powered cars in 70% of U.S. states. An American Economic Association study found that rather than lowering air pollution, on average each additional electric car in the U.S. causes additional air-pollution damage worth $1,100 over its lifetime.

“The Case for Free Trade Remains Inside Your Pocket.”

Julie Ponesse encourages college students to resist campus covid hysteria.

Martin Kulldorff tweets:

Science is not a tool for power, it is a powerful tool.

Quotation of the Day…

(Don Boudreaux)

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… is from page 84 of the original 1960 Harvard University Press edition of Frank Knight’s collection of lectures, delivered in 1958 at the University of Virginia, titled Intelligence and Democratic Action:

Why have this entrepreneur, this despot and alleged exploiter for his own profit? Why don’t they just work it out on a basis of equity? Or, for that matter, why don’t the laborers hire the capital and the managers instead of being hired as they are? Of course there are reasons. We cannot go far into them here, but the general reason that this system exists is because it is the system on which the parties concerned are able to agree. If the people involved could agree on any other system, there is no law against their having any other arrangement, no impediment whatever to having production carried on, for example, in what is called a producers’ cooperative if the people can make it work. The fact is, they cannot: it has been tried and failed often enough to make that clear.

DBx: If you’re among the (large) group of people who, like Thomas Piketty and his fans, believe that capital grows automatically according to (mysterious) ‘laws’ – that is, if you’re among those who believe that the growth of the capital flow and stock occurs largely independently of what are identified by Armen Alchian as “economic forces at work” – then you naturally see no socially useful role for entrepreneurship or profit. If the plant, equipment, and natural resources with which workers work exist (and in the case of plant and equipment grow) ‘naturally,’ then there is no reason why firms cannot be owned and operated just as well by workers as by shareholders and shareholders’ appointed executives. Entrepreneurs and shareholders in your view are interlopers who profit only by artificially grabbing – with the help of bourgeois laws that protect property and contract rights – that which would otherwise and with greater justice flow to the owners of the hands and backs who perform the actual labor to physically produce goods and services.

If you’re among the (large) group of people who think along the lines sketched out in the previous paragraph, you’re also mistaken. Deeply mistaken. Even so-called “natural resources” require human creativity and risk-taking to become what they are. And such creativity and risk-taking are also required to create every good and service that you consume and each and every bit of the capital tools and services – including workable organizational structures and management strategies – that are used to produce those goods and services and deliver them to you in such abundance that you’re able to take this abundance for granted.

Blindness to this reality has been, and threatens to continue to be, a source of misery and tyranny.