McCloskey on Comparative Advantage

by Don Boudreaux on October 22, 2017

in Economics, Trade

Here’s Deirdre McCloskey on comparative advantage.  A slice:

People who think they understand comparative advantage, and also think that economists are anyway a passel of pretentious fools, say silly things about Ricardo and his principle of comparative advantage.  For example, Sir James Goldsmith did: “According to Ricardo,” he wrote with brisk assurance, “each nation should specialize in those activities in which it excels” (The Trap, quoted in Paul Krugman, “Ricardo’s Difficult Idea”).  No, Sir James.  Each nation—or each member of the household or each member of a sports team–should specialize in those activities in which it gives up the least of activity X in doing activity Y.  Afterwards the household or nation should embark on trade.  By the principle of cooperation and then trade, each will have more cloth and wine than if it had manufactured both for itself behind tariff walls.

DBx: Another assertion that protectionists often make about comparative advantage is that it rests on the assumption that capital is not mobile across national boundaries.  Such an assumption – which was indeed made by David Ricardo in that part of his book in which he explained comparative advantage – merely makes explaining the logic of comparative advantage easier by assuming away one factor that can cause the particular international pattern of comparative advantage to change.  As Deirdre explains in her essay, comparative advantage exists in all instances in which individuals specialize and trade.  When it comes to teaching principles of economics, I have a comparative advantage over my next-door neighbor no less than over an orthopedic surgeon in Olso.  And this comparative advantage makes it worthwhile for my neighbor to pay me to teach his daughter economics no less than it makes it worthwhile for the orthopedic surgeon in Oslo to pay me to teach her son economics.  The fact that capital is much more mobile between my house and that of my neighbor next door than it is between my house and that of the orthopedic surgeon in Oslo does nothing to eliminate comparative advantage as an economic fact that makes it profitable for my neighbor and me each to specialize in what we each do best and to trade with each other.

Asserting that comparative advantage “breaks down” or “doesn’t work” when capital is mobile across international boundaries is a sure sign of failure to grasp the meaning and logic of comparative advantage. People who make this argument present the superficial appearance of being highly informed.  But in reality, the very fact that they make this argument is sufficient proof that they don’t understand comparative advantage.

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Here’s Phil Magness’s thorough review, in Modern Age, of Nancy MacLean’s fabricated tale of Jim Buchanan and public choice.  Some slices (but do read all of Phil’s fine review):

For such a strong and inflammatory insinuation, MacLean’s evidence is shockingly flimsy. Although she made use of Buchanan’s personal papers shortly after his death in 2013, she uncovered no specific documentation that he ever stated a position on Brown [v. Board of Education] and nothing to suggest he harbored animosity toward black people. What follows instead is a three-hundred-page exercise in poisoning the well against both Buchanan personally and the broader public choice tradition, achieved by means of reckless innuendos that lead the reader to conclusions MacLean stops short of making herself.

….

But MacLean’s tale suffers from a severe evidentiary problem that even prompted Steven Teles and Henry Farrell, two left-leaning scholars, to observe that her cited sources fall far short of her depictions, including on the matter of segregation. A closer look at her footnotes bears this out, as many of the strong claims noted above are cited only to a generalized secondary literature that makes no mention of Buchanan. Others refer to letters that do not sustain the specific interpretation she supplies, and an unsettling number carry no citations at all.

Such flimsy and misused evidence might ordinarily spell the death of any historical thesis, absent the confirmation biases that have led many scholars of MacLean’s own political persuasion to accept her word uncritically. But overreading or misreading existing documents is only half the problem with Democracy in Chains. The other half derives from a body of evidence that MacLean either neglected to consider or simply omitted from her account. Far from taking its cues from the Byrd machine, Buchanan’s TJC [Thomas Jefferson Center] was actually an active sponsor of scholarly work that sought to unite antiracist principles with the emerging field of public choice theory.

….

But there we find another of MacLean’s mistakes. She is writing for the politics of the current moment—a moment of frenzied partisanship in which bias-affirming red meat is especially welcome to left-wing activists, who look forward to the approaching election cycle. The core of Buchanan’s intellectual contribution is thus entirely lost on MacLean, as he had little invested in such frivolous concerns. He was writing, as he so often reminded his students and colleagues, for the ages.

DBx: No conclusion about Nancy MacLean’s performance in Democracy in Chains is warranted other than that she is either a complete fraud or, as I believe, someone who, although employed at a prestigious university to teach history, should instead be enrolled in classes at a community college to learn remedial reading and elementary logic.

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Quotation of the Day…

by Don Boudreaux on October 22, 2017

in Politics, Virginia Political Economy

… is from pages 460-461 of my late colleague Jim Buchanan‘s 1986 Nobel Prize lecture, “The Constitution of Economic Policy,” as it is reprinted in volume 1 of The Collected Works of James M. Buchanan: The Logical Foundations of Constitutional Liberty (original emphasis):

Individuals choose, and as they do so, identifiable economic interest is one of the “goods” that they value positively, whether behavior takes place in markets or in politics.  But markets are institutions of exchange; persons enter markets to exchange one thing for another.  They do not enter markets to further some supra-exchange or supra-individualistic result.  Markets are not motivationally functional; there is no conscious sense on the part of individual choosers that some preferred aggregate outcome, some overall “allocation” or “distribution” will emerge from the process.

The extension of this exchange conceptualization to politics counters the classical prejudice that persons participate in politics through some common search for the good, the true, and the beautiful, with these ideals being defined independently of the values of the participants as these might or might not be expressed by behavior.

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Bonus Quotation of the Day…

by Don Boudreaux on October 21, 2017

in Virginia Political Economy

… is from page 372 of my late Nobel-laureate colleague Jim Buchanan’s 1989 paper “The Ethics of Constitutional Order” as this paper is reprinted in volume 1 of The Collected Works of James M. Buchanan: The Logical Foundations of Constitutional Liberty (1999):

Much of what we have observed in modern politics is best described as action taken without understanding or even consideration of the rules that define the constitutional order.  I have referred to this politics as “constitutional anarchy,” by which I mean a politics that is almost exclusively dominated by and derivative from the strategic choices made by competing interests in disregard of the effects on political structure.

DBx: Economists are fond of calling upon the state to protect its citizens from the negative ‘externalities’ imposed by some people upon others.  And yet one gargantuan externality of using the state is the breakdown of rules that prevent us from using the state to prey upon each other.  When members of today’s political majority vote to seize for themselves resources from members of today’s political minority, members of the political majority not only prey upon members of the political minority, they – if their predation can be constitutionally justified only with legerdemain – prey also upon the entire polity (including their future selves).  They do so by undermining constitutional rules meant to minimize predation by the state.

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… is from page 89 of Knut Wicksell‘s 1896 essay “A New Principle of Just Taxation,” as it is so translated and appears in Classics in the Theory of Public Finance (Richard A. Musgrave & Alan T. Peacock, eds., 1958):

It would seem to be a blatant injustice if someone should be forced to contribute toward the costs of some activity which does not further his interests or may even be diametrically opposed to them.

DBx: In case it matters, Wicksell was – in addition to being one of history’s finest economic thinkers – a man of the political left.

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Nancy MacLean’s Third-Grader Defense

by Don Boudreaux on October 20, 2017

in Books, Myths and Fallacies

In today’s “Best of the Web” at the Wall Street Journal, James Freeman features one of Phil Magness’s most-recent revelations of the shoddy ‘research’ that characterizes Nancy MacLean’s fabulist tale Democracy in Chains.  Freeman reports that he e-mailed MacLean to give her the opportunity to defend herself against Phil’s charge.  MacLean replied to the first of Mr. Freeman’s e-mails:

Ms. MacLean said via email that Mr. Magness is “wrong about the facts of Virginia history” but has not responded to a follow-up question asking specifically which of the publications carried Buchanan’s work

Of course, MacLean’s reply to Mr. Freeman is no defense whatsoever.  It’s the equivalent of a third-grader saying “Nuhh unhhhh!” in response to a classmate’s truthful charge that she cheated while playing some game during recess on the schoolyard.

Anyone receiving an inquiry from a publication as prominent and as widely circulated as the Wall Street Journal would leap at the opportunity to share specific evidence of his or her accuser’s errors – anyone, that is, who actually has such evidence.  The fact that MacLean responds only with the equivalent of ‘Nuhh unhhhh!’ – the fact that she responds only with an unsubstantiated charge against Phil – is itself evidence as powerful as such evidence gets in such cases that she, in fact, has no credible evidence to point to in order to support her charge that Phil’s recounting of a slice of Virginia history is “wrong.”  If MacLean has such evidence, she’d be delighted to share that evidence in the prominent pages of the WSJ.

So I ask: how can MacLean get by without offering a single substantive defense of herself?  Her defense of her completely misleading quotation of Tyler Cowen – namely, that she quoted him in light of the “totality” of his work – would be a poor defense even if Tyler had elsewhere expressed sentiments of the sort that she falsely portrays him as expressing in her misquotation of him.  (See here, here, and here.)  But nothing in Tyler’s vast corpus of work supports MacLean’s quotation or her interpretation of the “totality” of Tyler’s work.

Has MacLean offered any substantive defense against even one of the dozens and dozens of specific charges of inaccuracy leveled against Democracy in Chains?  If so, I’ve not seen it.  Her defenses consist chiefly in accusing those who question the accuracy of her work of being participants in some shady conspiracy against her.  This ‘defense,’ of course, is itself based on zero evidence.  (And speaking as one of MacLean’s critics, I attest and solemnly swear on all that I hold dear that I am part of no conspiracy, organized or un.  I criticize MacLean’s work simply because I cannot abide the absurd portrayal of Jim Buchanan and of public choice that is presented in her fabulist tale.)

I challenge MacLean to offer a defense against even just one of the charges against her book.  (Note: defenses rooted in ad hominem accusations are not substantive.)  I challenge MacLean to offer evidence that even one of the many charges against her work is flawed or inapposite.  Surely a chaired professor of history at one of the world’s most prestigious research universities can offer substantive evidence in defense of at least one of the many charges against her book.

……

MacLean refuses to engage with her critics, again asserting that our motives are impure.  But ask yourself: if you were MacLean, subject as you are to a fusillade of specific charges of inaccuracies and falsehoods, wouldn’t you leap at the opportunity to defend yourself with evidence or logical argumentation if you could?  The only sensible conclusion to draw from MacLean’s continuing refusal to offer any substantive defense of her work is that she has no such defense to offer.  So she hides behind ad hominem fallacies and unsupported accusations.  She hides.  She doesn’t defend herself because, well, she has no substantive defense to offer.  What other reason can there be?

Here, by the way, is yet more on MacLean’s fallacies from Phil Magness.

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Quotation of the Day…

by Don Boudreaux on October 20, 2017

in Virginia Political Economy

… is from page 31 of the 2000 Liberty Fund edition of Geoffrey Brennan’s and James Buchanan’s important 1985 volume, The Reason of Rules:

Almost all of our ordinary behavior takes place within a well-defined structure of legal rules.  In politics, however, the notion that collectivities, governments, also behave and should behave within the constraints of well-defined rules seems less “natural.”  The notion that constitutions define the limits of political authority is an abstraction that seems difficult for many to comprehend.

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Anyone who still clings to the fantastic notion that Nancy MacLean’s Democracy in Chains is a serious work of scholarship that deserves its nomination for the 2017 National Book Award – rather than a sack of comical errors and astonishing ignorance the publication of which would deeply embarrass any serious scholar – should read this new post by Phil Magness.  Here’s Phil’s conclusion:

So there you have it. A finalist for the 2017 National Book Award appears to have been built upon a typo.

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Matt Ridley laments the juvenile attachment to virtue signaling.

Speaking of costs and distractions of virtue signaling, if you really want to reduce gun violence, press for an end to the so-called “war on drugs.

Are Thomas Piketty’s data reliable?

John Tamny busts mercantilist myths about the consequences of government subsidies.

Here’s the opening paragraph to a recent, superb essay by Mike Munger:

People sometimes ask me, “What is the most important concept in political economy?” The answer is easy, but subtle: permissionless innovation, a strong presumption in favor of allowing experimentation with new technologies and with new business platforms that use those technologies. A lot has been written about why this vague concept is so powerful (my own go-to source is Adam Theirer’s Permissionless Innovation).

Gary Galles celebrates the work of Benjamin Constant.

In this video, GMU Econ alum (and Hillsdale College economics professor) Ivan Pongracic discusses public choice.

Scott Sumner identifies a cognitive bias in some behavioral economists (as well as in some New York Times pundits).

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Quotation of the Day…

by Don Boudreaux on October 19, 2017

in Growth, Trade

… is from pages 297-298 of the 2015 Fourth Edition of Douglas Irwin’s indispensable volume, Free Trade Under Fire (footnotes deleted; link added):

Time and experience demonstrated that globalization did not lead to an intensification of poverty.  Instead, expanding world trade proved to be an escalator for bringing poor people out of poverty.  Between 1990 and 2011, the portion of the world’s population living in poverty fell from 36 to 15 percent, according to the World Bank.  The International Labor Office reported that the number of workers in the world earning less than $1.25 a day has fallen to 375 million in 2013 from 811 in 1991.  The past two decades have seen extraordinary progress in poverty reduction in the developing world.  Who should get the credit, the Millennium Development Goals of the United Nations and other international aid agencies?  Not quite.  As The Economist put it, “The MDGs may have helped marginally, by creating a yardstick for measuring progress, and by focusing minds on the evil of poverty.  Most of the credit, however, must go to capitalism and free trade, for they enable economies to grow – and it was growth, principally, that has eased destitution.”

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