Some Links

by Don Boudreaux on July 26, 2016

in Books, Crony Capitalism, Growth, Seen and Unseen, The Future, Trade

Writing in the Wall Street Journal, Amity Shlaes distinguishes the true forgotten man from the trumped-up “forgotten man.”  The latter, at best, is a mascot for people peddling bad economics, and, too often, a member of a special-interest group seeking government assistance in picking other people’s pockets.  This latter “forgotten man” is ever front-and-center in the minds of rent-creating and rent-distributing politicians.

Thomas Sowell is correct that lots of American politicians who boast of their anger at the state of race relations in the U.S. owe their political success to policies that ensure that race relations in the U.S. are never ‘harmonious’ (or recognized as such).  One such policy, although Sowell doesn’t mention it here, is minimum-wage legislation – perhaps the single most anti-black legislation today in the U.S.  The ‘war on drugs’ is the only other cruel contender for this awful distinction.  (For the pointer to Sowell’s essay I thank Dwight Oglesby)

Marian Tupy explains that Africa is growing economically due to freer markets.

My friend Rick Lowe reminds me that I likely have never posted at Cafe Hayek my 2003 review of the first English-language edition of Johan Norberg’s great 2001 book, In Defense of Global Capitalism.  (The Cato Institute, in 2003, published an updated version of this still-relevant book.)

My Mercatus Center colleague Scott Sumner offers some interesting reflections on marijuana legalization.

Nick Gillespie points out that the apocalypticism of the Democrats is just as ludicrous as is that of the Republicans.

But despite Nick’s essay – and despite the continuing, warranted influence among libertarians of Julian Simon’s work – don’t get too optimistic, warns Bob Higgs.

Matt Welch is unimpressed by the unimpressive Bernie Sanders – someone who I earlier described, I believe correctly, as having the economics of a toddler and the ethics of a thug.  (HT Yevdokiya Zagumenova)

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… is from page 241 of David Boaz’s superb 2015 book, The Libertarian Mind:

When you lay out a picnic, you get ants.  When you hand out more wealth through government, you get lobbyists.  The federal budget is the biggest picnic in history.

“Progressives” who lament the role of money in politics display their poor grasp of reality when they argue, with one breath, that this role can be reduced by preventing citizens from spending money on politicians, and, with the very next breath, argue that politicians should spend ever-more money of, and on, citizens.  See here.

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A Taxing Title

by Don Boudreaux on July 26, 2016

in Taxes

Warren Smith sent to me a link to a short essay by Noah Smith entitled “A Wealth Tax Looks Like It Can Make a Country Richer.”  But the title is misleading.  If the substance of the essay is correct – and that substance is quite plausible – what ‘makes a country richer’ is not a wealth tax but the elimination (or reduction) of taxes on capital gains.

Noah Smith reports on research from 2013 by Daphne Chen, Fatih Guvenen, Gueorgui Kambourov, and Burhanettin Kuruscu.  These researchers find that under plausible real-world circumstances, if government replaces taxes on capital gains with taxes on wealth, the economy becomes more efficient than it would be under a continuation of a regime in which taxes continue to fall heavily on capital gains.

No doubt.  But, again, what make the country richer here is not the wealth tax per se; rather, what makes the country richer is the elimination or reduction of taxes on the wealth-producing activity of investing.  Or to criticize the title (“Efficiency Gains from Wealth Taxation”) of the paper on which Noah Smith reports, the source of the efficiency gains is the elimination or reduction of taxes on capital gains; it’s not the wealth tax per se.

Even the most uncompromising and vigorous opponent of taxation understands that some taxes are less economically harmful than are other taxes, and that – given the reality that governments will tax – it is helpful to distinguish less-harmful methods of taxation from more-harmful ones.  I’ve not read the 2013 paper linked to above.  Yet judging from Noah Smith’s summary of it, from its abstract, and from what I know of economics, its thesis is sensible: taxing wealth might – only might – be less economically destructive than is taxing the gains from successful investing and, therefore, revenue-neutral increases in taxes on wealth and decreases in taxes on capital gains might indeed result in less wealth destruction over time.

For the record, I do not here endorse a tax on wealth (although I do endorse the elimination of taxes on capital gains).

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Each and every day at least ten unsolicited e-mails arrive in my e-mailbox from persons, politicians, or organizations peddling outlandish schemes to save the world from shadowy demons and other imaginary ghouls.  An e-mail that I just opened from the “Institute for Local Self-Reliance” is pretty typical.  Here it is in full – written to me by one “Nick Stumo-Langer” who, despite our apparently being on a first-name basis with each other, I’m sure that I’ve never met:

Hi Don,

The Democratic Party platform has now officially solidified a commitment to “generating 50% of our electricity from clean energy sources within a decade”, and renewable energy has never had a greater national prominence.

While prices for solar arrays are plummeting and attitudes across the political spectrum are changing in support of renewables, monopoly electric utilities are trying their hardest to undervalue and attack local ownership of clean energy resources.

This is an important discussion for your readers  as they grapple with the topic of renewable energy. I’d love to set up a conversation with you and John Farrell, the director of our Energy Democracy initiative at the Institute for Local Self-Reliance.

“What we’re seeing now is an obvious divide between investor-owned electric utilities trying to defend their profits, while customers are trying to make the best economic decision for themselves,” said John.

At the Institute for Local Self-Reliance, we fight against big utilities that are crushing individuals’ ability to produce their own energy. These monopoly electric utilities develop policies that encroach on rooftop solar by proposing plans that pay their customers less and allow less of an ownership stake.

Please let me know if I can set you up with an interview with John. You can email me at stumolanger@ilsr.org, or give me a call at 612-844-1330.

Best,

Nick

I’m especially annoyed by the part in which I’m warned that

big utilities that are crushing individuals’ ability to produce their own energy. These monopoly electric utilities develop policies that encroach on rooftop solar by proposing plans that pay their customers less and allow less of an ownership stake.

I’ve read this passage several times and still cannot decipher it save to determine that it’s meant to make me oh-so-angry at “big” and ‘monopolistic’ utilities.  But, pray, what are “policies that encroach on rooftop solar” – policies that utilities “develop … by proposing plans”?  The policies are said to “encroach” “by proposing plans.”  What does this chaos of words mean?  And for what, precisely, are customers paid less and allowed less of an ownership stake?*

Perhaps the answers are clear and will be revealed to me if I spend a few minutes clicking through this outfit’s website.  But my time is too precious to waste.  If the teaser e-mail cannot be deciphered, why should I believe that the contents of the website are more carefully worded and decipherable?

It’s true, I confess, that my suspicions that this outfit is a source of nothing but nonsense are further raised by the outfit’s name: Institute for Local Self-Reliance.  Anyone who thinks, or even hints at thinking, that human welfare is improved the more “locally” we consume and otherwise conduct our economic affairs knows too little about reality, history, and economics to take seriously.  Such a person is one who mistakes slogans for scholarship and first impressions for full analyses.  Such a person “feels” rather than thinks.  Any organization founded to promote such an “ideal” is one that I want nothing do do with and, more importantly, want it to have nothing to do with me.

Still, out of sick curiosity I clicked on the link.  I found what appears to be this outfit’s mission statement:

The Institute’s mission is to provide innovative strategies, working models and timely information to support environmentally sound and equitable community development. To this end, ILSR works with citizens, activists, policymakers and entrepreneurs to design systems, policies and enterprises that meet local or regional needs; to maximize human, material, natural and financial resources; and to ensure that the benefits of these systems and resources accrue to all local citizens.

I’m amused by the “… accrue to all local citizens.”   Is any citizen not local?  Isn’t each of us, no matter how dependent each of us is (as each of us in the modern world certainly is), a citizen of some locale?  How would the meaning of the above mission statement change if the phrase “local citizens” was replaced by the word “people”?

Oh, oh – yes.  Don’t tell me!  The mission statement is meant to emphasize that the benefits that each person gets will, once this outfit’s policies become the diktats of the land, come not from some distant place but from each person’s locale.  For example, all or most of my “human, material, natural and financial resources” – and the benefits to me therefrom – will come from Fairfax, Virginia, and not from some impersonal, distant place such as Washington, DC.

It would be funny if, contrary to reality, outfits such as this one had no prospect of actually influencing government policies – funny because this outfit pretends to be devoted to localism yet boasts of its support for national policies to make locales more self-reliant.

…..

* I do not doubt that many utility companies use the power of the state to secure for themselves genuine monopoly power and other special privileges.  But the problem with this reality has nothing to do with how ‘local’ or ‘non-renewable’ or ‘carbon-dependent’ or whatever these companies might or might not be.  The problem with this reality is that the state unjustifiably has the power to bestow special privileges on these companies.

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Today on the radio I heard an ad for a DC-area supermarket chain that boasts that it now has on sale – as in, selling for a reduced price – “sustainably farmed fish.”

I really dislike the word “sustainable” (and all of its variations) as used today to signal holier-than-thou environmental ‘awareness.’  As Robert Solow said about this concept,

It is very hard to be against sustainability.  In fact, the less you know about it, the better it sounds.

But advertising “sustainably farmed fish” – implying, as it does (rather bizarrely), that unsustainably farmed fish are common – is especially annoying.  While the absence of property rights in oceans and other large bodies of water, and in uncaught fish, might well lead to overfishing (that is, to a genuinely unsustainable manner of acquiring fish for human consumption), the very essence of a fish farm implies property rights in the fish stocks.  And where there are property rights there is sustainability.  A fish farmer is no more likely to allow his stock of fish to be depleted than is the owner of Triple Crown winner American Pharaoh to allow his horse to be slaughtered for sport, or than are you to allow the cost of motor oil to prevent you from ever changing the oil in your car.

Private property rights give to each owner incentives to consider not only the current values of alternative uses of the things that he or she owns, but to consider also the future values of alternative uses.  In other words, private property rights internalize on each owner not only the immediate, current costs and benefits of the chosen use of the property, but also the more-distant, future costs and benefits of that use.  Your cost today of changing the oil in your car might well be greater than the benefit such an oil change would yield to you if you knew that, say, your car would be stolen and destroyed tomorrow.  But because you own the car and expect either to keep it for several more years or to sell it, you care about the car’s future.  Your ownership of the car makes you care about that asset’s future.  Ownership is very much like a pair of eyeglasses: it cures economic myopia.

It’s depressing that those people who today are most likely to worry about resources being “unsustainable” – people who are most likely to prattle publicly about “sustainability” – are those people who also are most likely to disparage private property rights and to argue for government policies that weaken and attenuate such rights.  Such people are those who are most likely to wish to further collectivize the provision not only of environmental amenities such as park space and animal conservation, but also of health care, of education, of housing, and of a host of other private goods and services.  Such people also are those who are most likely to protest prices made higher by market forces, and to applaud rent-control and other government-imposed price ceilings on a variety of consumer goods and services.

In short, the people who today howl most frequently and loudly for “sustainability” are those who most frequently and loudly oppose the legal and economic institutions – private property and market-determined prices – that alone reliably promote genuine sustainability.

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Some Links

by Don Boudreaux on July 25, 2016

in Politics, Reality Is Not Optional, Trade, Work

The Wall Street Journal‘s Mary Anastasia O’Grady explains that Donald Trump, despite his Wharton degree, understands neither the facts nor the theory of trade.  A slice:

Higher tariffs on U.S. imports will be passed on to American consumers, many of whom are already hurting economically due to the sluggish Obama recovery. Trade wars will also damage U.S. competitiveness. As former Mexican deputy trade minister Luis de la Calle explained in a conference call to investors in New York earlier this month, Carrier Corp.’s production move to Mexico from Indiana—much-assailed by Mr. Trump—means that the company can survive Asian competition and can retain U.S. jobs in research, development, marketing and high-end components.

Someone who does understand the facts and theory of trade is GMU Econ alum Anne Bradley.

John Tamny is correct: at least on economic matters, Donald Trump sounds more like a “Progressive” Democrat than like a Reagan Republican.

Nick Gillespie ponders the choice between a bloviating buffoon and a North American Evita.

GMU Econ alum Mark Perry documents some likely destructive consequences of minimum wages.

From Clive Crook:

The speech [by Trump] was purest populism: nine-tenths grievances and empty promises, one-tenth stupid policy ideas. Yet the formula is working — partly because the grievances are skillfully marshalled, and partly because his opponents in politics and the media (meaning almost everybody in those incestuously connected industries) are deeply confused in their response.

My friends at Cato are unimpressed by Tim Kaine.

Are you, like me, sick and tired and anxious about this especially frightening election in the U.S.?  Sarah Skwire recommends a fishing break.

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Quotation of the Day…

by Don Boudreaux on July 25, 2016

in Competition, Inequality

… is from page 13 of the 2015 English edition (translated from Chinese by Matthew Dale) of Weiying Zhang’s excellent 2010 book, The Logic of the Market:

Under the planned economy, we did not pursue happiness by making others happy.  Instead, we pursued happiness by making others unhappy.  Our energies were spent fighting for power and gain.  We were competing, even competing for life and death, but we were not creating value.

Every expansion of the state incites more people to compete – and to compete more intensely – to possess the power over others that that expansion brings.  From each individual’s perspective, it’s better to be in the group that exercises power rather than in the groups against whom the power is exercised.  Unlike competition in markets, competition for power wastes material resources and human time and energy (rent-seeking wastes); such competition is never win-win but, rather, win-lose.  But also unlike competition in markets, competition for power results in the worst form of inequality – indeed, the only form of inequality that warrants legitimate concern – namely, inequality of power.  Those with state power, regardless of how they acquire it, can command those without state power.  Those with state power use force to override the choices of those without state power.  Those with state power do the choosing; those without state power do the obeying.

Unlike market-enabled differences in monetary incomes and wealth, this species of inequality – inequality of power – is inhumane and destructive, and it results from humans’ most primitive impulses.

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Milton Friedman on Trade and Consumer Sovereignty

by Don Boudreaux on July 24, 2016

in Trade, Video

I linked earlier today to this 1978 video of Milton Friedman speaking on trade.  But it’s such a good speech that I here offer it stand-alone – as an important inoculant against not only the unalloyed mercantilist moronics spewed by the bloviating buffoon named Donald Trump, but offered also (if in somewhat more subdued hues) by Czarina Clinton and the “Progressives” regressives who specialize in economic ignorance.

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Bonus Quotation of the Day…

by Don Boudreaux on July 24, 2016

in Energy, Hubris and humility

… is from page 487 of the great Armen Alchian‘s 1975 essay “An Introduction to Confusion,” as reprinted in The Collected Works of Armen A. Alchian (2006), Volume 1 (“Choice and Cost Under Uncertainty”; Daniel K. Benjamin, ed.); this essay is Alchian’s insightful response to the Final Report of the Energy Policy Project of the Ford Foundation (original emphasis):

Political controls on our use of energy – whether for outdoor lighting, household heating, or swimming pool heating – means simply that an elite group is undertaking to limit the options of other people.  Has the lesson of Nixon’s administration been ignored?  The Report recommends a higher gasoline tax and mandatory gasoline mileage standards to conserve gasoline – even beyond the amount available at costs that match the price people are willing to pay to get the gasoline (the value they place on it).  Such overconservation, making the costs of energy use appear higher than they really are, is a kind of masochism.

Or, worse, it’s a kind of sadism, with elites in government sneeringly restricting the choices that each of hundreds of millions of individuals makes in light of that individual’s unique circumstances and preferences and constraints.  Such restrictions – not only, of course, on energy use, but also on countless other dimensions of choice – are the result of nothing other than the arrogant presumptions held by those with power that they – the powerful – are entitled to lord it over individuals who are less powerful.

Statism is sadism.

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It is a fact as scientifically valid as any in the social sciences: anyone so hungry for power that he or she will say or do almost anything to get power is not fit to have power.  Here’s Jeff Jacoby.  A slice:

To be clear, I don’t hate Hillary Clinton. I don’t hate Donald Trump. But I do find them both to be indecent and unworthy, graspers of low character whose rise to political eminence is a terrible reflection on the Republican and Democratic parties. Neither deserves a vote for president. They certainly won’t get mine.

Nick Gillespie thinks that neither Clinton nor Trump knows the facts.  (Me thinks Nick is correct.)

James Pethokoukis reminds us that Ronald Reagan was far more cosmopolitan and (classically) liberal – including, of course, on both trade and immigration – than are the GOP’s currently ascendant pooh-bahs.

Speaking of James Pethokoukis, I thank him for pointing out this excellent essay on trade by the great trade economist Douglas Irwin.

People under 30 are scarily ignorant of recent history.

Mark Perry is right to dust off this video from 1978 in which Milton Friedman offers important lessons about trade.

Sandy Ikeda explains that tolerance, criticism, and humility are core principles of freedom.

Someone who is intolerant, cocksure, and uncritical of statist nostrums (including its potted version of history) is Elizabeth Warren.  My former student Ninos Malek has more.

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