Protectionism Is Immoral

by Don Boudreaux on December 16, 2017

in Philosophy of Freedom, Seen and Unseen, Trade

Here’s yet another letter to the “proud Trump man” (his term) – Nolan McKinney – who now e-mails me almost daily to accuse me and other economists of all manner of intellectual and ethical failings:

Mr. McKinney:

You now accuse me, when I defend free trade, of “work[ing] from a narrow materialistic basis.”  You allege that I don’t see trade’s “human costs.”

Please.

Perhaps the greatest contribution that economics makes to the analysis of trade is that it shows that many more humans than are seen by protectionists are affected by trade.  It’s the economist who points out that, in addition to those humans in the domestic economy whose jobs are protected by tariffs, there are humans in the domestic economy whose jobs are destroyed by tariffs.  It’s the economist who points out that the artificial hike in incomes created by tariffs for some humans in the domestic economy occurs only because other humans in the domestic economy suffer a larger, artificial cut in incomes.  And it’s the economist who understands better than anyone else that the term “human costs” is ridiculously redundant: all costs are borne by humans.

All that said, my support, ultimately, for free trade is not based on economics.  It’s based on ethics.  Convinced that particular, currently existing producers in ‘my’ country are not ethically entitled to use force or fraud to grab more of my or other Americans’ incomes than we voluntarily choose to spend on those producers’ outputs, I oppose tariffs for the same ethical reason that I oppose robbery, burglary, embezzlement, and pickpocketing.  Protectionism differs from these varieties of theft only in that its victims are generally unaware of their victimization.  One task of the economist, therefore, is to help the victims of protectionism see that they are indeed victimized – to see that portions of their incomes are confiscated only in order to enrich others unjustly.

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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Freeman Columns

by Don Boudreaux on December 16, 2017

in Work

For more than 15 years (1997-2012) I wrote a regular column for FEE’s iconic magazine, The Freeman, and before that, several other essays.  Mostly to better enable me in the future to easily gain access to these columns, I’ll start today to post them here at Cafe Hayek.  I’ve already, in the past, posted here some of these essays and book reviews, but certainly not all.  I begin today with my very first essay in The Freeman (October 1989).  It’s titled “The Minimum Wage: An Unfair Advantage for Employers“; it’s below the fold.

Read the full post →

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Some Links

by Don Boudreaux on December 16, 2017

in Crony Capitalism, Economics, Taxes, Trade, Truth-seeking & ideology

George Will calls out the hypocrites at Whirlpool and warns Americans to reject their – and similar – cronyist pleas for punitive tariffs on imported home appliances punitive taxes on Americans who choose to buy imported home appliances.  Here’s Will’s opening paragraph:

A household appliance will be the next stepping-stone on America’s path to restored greatness. The government is poised to punish many Americans, in the name of protecting a few of them, because, in the government’s opinion, too many of them are choosing to buy foreign-made washing machines for no better reason than that the buyers think they are better. If you are wondering why the government is squandering its dwindling prestige by having opinions about such things, you have not been paying attention to Whirlpool’s demonstration that it is more adept at manipulating Washington than it is at making washing machines.

Pierre Lemieux writes wisely on unilateral free trade and free-trade agreements.  A slice:

If a foreign country is protectionist, the government of your own country only compounds your problems by adopting protectionism too. As economist Joan Robinson suggested in her Essays in the Theory of Employment (1947), protectionist retaliation looks like the decision “to dump rocks into our harbors because other nations have rocky coasts.” One’s own government’s trade policy should not depend on the restrictions that foreign countries impose on their own citizens.

Patrick McLaughlin, Stephen Strosko, and Andrew DeJoy document the I.R.S.’s unbearable weight.

Here’s food for thought from Robin Koerner.

Katherine Mangu-Ward laments the demise of free speech.

Arnold Kling makes a case for a rejuvenated science of economics.

My intrepid Mercatus Center colleague Veronique de Rugy applauds a small victory against U.S.-based airlines’ cronyism.  A slice (link added):

But Delta, American and United, along with their unions, have argued that the governments of Qatar and the United Arab Emirates are providing unfair subsidies, and that their state-run carriers should have their U.S. routes frozen.

This is ridiculous. As my colleague Gary Leff, the author of the famous blog “View from the Wing,” tells me, “U.S. airline employment is at a long term peak. And Delta has no problem taking advantage of subsidies — fuel tax breaks in Georgia, subsidies for its oil refinery in Pennsylvania, and having moved pension obligations onto the federal Pension Benefit Guaranty Corporation in bankruptcy.

“Delta even shares revenue on routes across the Atlantic with Alitalia, which had been subsidized by Etihad. Delta owns a stake in the most subsidized Chinese airline, China Eastern.”

“The issue,” he adds, “isn’t free markets versus subsidies but ‘subsidies for me but not for thee’ while lobbying the federal government to pick the pockets of American consumers despite U.S. airlines earning nearly half the world’s commercial aviation profits.”

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… is from page 158 of Douglas Irwin’s exhaustive and important 2017 book, Clashing Over Commerce (footnote excluded; link added); the “American System” to which Doug refers was the economic-nationalism ‘movement,’ led by Henry Clay (1777-1852), that featured, as central projects, discretionary protective tariffs and other efforts by government to forcibly direct resources toward particular projects and industries somehow divined by politicians to be vital for economic growth in the United States:

The great failure of American System advocates was their inability to enact a comprehensive plan for either internal improvement or the encouragement of manufacturers.  Instead, internal improvement projects proceeded in a piecemeal fashion, in which politicians get to pick and choose which canal or road proposal to support.  The result was an ad hoc process in which Congress set about [as John Larson put it] “advancing pet projects with increasingly dubious claims of national significance and indulging in ever more bitter attacks on each other.”  Proponents also failed to develop a comprehensive plan for protecting domestic industries with import duties.  As seen in the debates regarding the Tariff of Abominations, the process by which Congress set import duties was deeply political rather than based on some rational design.

DBx: Even if theory informed us that reality is far more likely than we now believe it to be to offer sets of circumstances for an apolitical, ‘science’-guided state to increase the nation’s overall economic welfare by using carefully calibrated tariffs, subsidies, and other interventions, theory continues to inform us also that no state is or ever will be sufficiently apolitical to be trusted with such authority.  (I am here writing exclusively about the narrow economics of the matter and not the ethics.)  The state is neither god nor god-like.  And the refusal of the faithful to cast off their belief in this fictional superhuman being does nothing to make this phantasm of devout minds any more real than are Santa Claus, Superman, or the presidential administration of Jed Bartlet.

When the unavoidable reality of politics combines with the unavoidable reality of dispersed and ever-changing knowledge, the case for using tariffs, subsidies, and other interventions to “grow” the economy becomes even more ludicrous.  Regular readers of Cafe Hayek know that I often quote from my late GMU Econ colleague Don Lavoie’s brilliant 1985 book National Economic Planning: What Is Left?.  Although written more than three decades ago, Don’s book is no less relevant today than it was in the mid-1980s.  In this book, Don describes in great detail the various schemes and plans that were then bandied about by the likes of Michael Harrington, Robert Reich, and Felix Rohatyn for how government ‘should’ intervene to invigorate and improve the American economy.  Remarkably, the pretensions and notions of these scheme-peddlers of the 1980s differ in no essential ways from the pretensions and notions of Henry Clay and other scheme-peddlers of a century and a half earlier.  Such scheme-peddlers always fancy themselves to be forward-looking thinkers – “progressive” – when, in fact, they are simply carriers of old, foolish, and dangerous superstitions regarding the power of people invested with state power.

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A Public Choice Truth

by Don Boudreaux on December 15, 2017

in Crony Capitalism, Reality Is Not Optional, Trade

A simple sentence on pages 155-156 of Douglas Irwin’s monumental 2017 book, Clashing Over Commerce, tells a familiar public-choice truth:

The growth of manufacturing and relative decline of shipping and shipbuilding in New England [after the War of 1812] helped turn the region from one supporting open trade to one supporting protective tariffs, although its representatives were often divided depending on their particular constituency.

Government panders to producer groups; government is no agency guided by science to maximize social welfare, to bring about Pareto optimality, or to otherwise promote the general welfare.  (See again today’s Quotation of the Day.)

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Some Links

by Don Boudreaux on December 15, 2017

in Books, Crony Capitalism, Doux Commerce, Legal Issues, Media, Podcast, Regulation, Trade

Pierre Lemieux reviews, in Regulation, Doug Irwin’s great new book, Clashing Over Commerce.  (Scroll down at this link.)

Speaking of commerce, Inu Manak and Colin Grabow explain some basic realities of commerce to U.S. Commerce secretary Wilbur Ross, who – judging by his repeated statements on the matter – appears, like Trump, to know nothing about it.

John Cochrane writes about my former GMU colleague Tom Hazlett’s new book, Political Spectrum.

Mike Munger says “Tear down those statues!”  Here’s his conclusion:

Take down those statues. Put them in museums, preserve the memory of what they symbolize, but don’t give them places of honor. Because the statues don’t honor the brave sacrifice of the soldiers in the era of the Confederacy. They honor the cowards and racists who re-enslaved black citizens in the era of Jim Crow.

Marian Tupy writes wisely about the freedoms that are at stake in the ‘gay cake case.

Also from Marian Tupy is this account of how free markets promote trust.

Sheldon Richman explains how economic mobility is thwarted by the state.

In this interesting podcast, James Pethokoukis talks with Google’s chief economist, Hal Varian.

Scott Shackford identifies yet another piece of pernicious protectionism at work in the United States.

David Harsanyi pinpoints the blame for political journalism’s sinking credibility.

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… is from page 307 of my late Nobel-laureate colleague Jim Buchanan‘s 1977 paper “Political Equality and Private Property,” as this paper is reprinted in Moral Science and Moral Order (2001), Vol. 17 of The Collected Works of James M. Buchanan (link added):

As Knut Wicksell wisely pointed out nearly eighty years ago, most economists talk as if they are advising  a benevolent despot.  But, of course, such a despot is nonexistent.  Governments embody the choices and the actions of quite ordinary people, from voters who exercise their ultimate political rights of franchise through legislative representatives who act for voters and for themselves, to bureaucrats who actually carry out policy decisions, including some of their own.  The complex structure that is government cannot readily be controlled at any level, and any target is likely to be missed.

DBx: Although very few people expressly disagree with the observation that human beings acting politically are no less self-interested, no less poorly informed, no less subject to psychological quirks, and, generally, no less imperfect than are human beings acting privately and commercially, nearly everyone who identifies some problem (real or imaginary) with reality and who then proposes that government intervene to ‘correct’ this problem treats government as rather like an earthly god – at least when that government is controlled by one’s preferred political party.

(Pictured here is Wicksell.)

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Spot On

by Don Boudreaux on December 14, 2017

in Reality Is Not Optional

From Morgan Frank:

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Why the Inconsistency?

by Don Boudreaux on December 14, 2017

in Regulation, Trade

Here’s a letter to the Wall Street Journal:

I applaud my former George Mason University colleague Neomi Rao for the work that she’s spearheading, as director of the Office of Information and Regulatory Affairs, to reduce Americans’ regulatory burdens (“The Trump Regulatory Game Plan,” Dec. 14).  It’s reassuring to know that, as concerns the regulatory terrain under her watchful eye, “[t]he Trump administration remains confident in markets and the American people’s ability to make responsible choices.”

But I have some questions – questions not so much for Neomi but for other members of Pres. Trump’s administration, such as Commerce secretary Wilbur Ross, and for Pres. Trump himself.  I ask them: Why does your confidence in markets and the American people’s ability to make responsible choices end at the border?  Why, given your understanding that government regulations on Americans’ commerce with other Americans often produce effects that are harmful, do you believe that government regulations on Americans’ commerce with non-Americans often produce effects that are helpful?  Why, given your recognition that economic activity is distorted and debilitated by high taxes called “taxes,” do you suppose that economic activity is improved and invigorated by high taxes called “tariffs”?  Why, given that you distrust bureaucrats with power to superintend Americans’ choices in the domestic economy, do you trust bureaucrats with power to superintend Americans’ choices in the global economy?

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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Tim Cook and Charles Koch, writing in today’s Washington Post, make a strong case for more humane immigration policy.  A slice:

No society can truly flourish when a significant portion of its people feel threatened or unable to fulfill their potential. Nor can it prosper by excluding those who want to make positive contributions. This isn’t just a noble principle; it’s a basic fact, borne out through our national history.

Dreamers are doing their part. They have shown great faith in the United States by coming forward, subjecting themselves to background checks, and submitting personal and biometric data.

Now, the rest of us need to do our part. Congress should act quickly, ideally before year’s end, to ensure that these decent people can work and stay and dream in the United States.

Here’s the Fraser Institute’s newly released Economic Freedom of North America 2017.  (Dean Stansel, the primary author, tells me that GMU Econ alum Meg Tuszynski supplied invaluable help on this project.)

George Will reflects eloquently on the failed candidacy of the truly scary Roy Moore.

Kyle Swan busts some myths about so-called ‘net neutrality.

Ryan Ferguson explains that a job is not a thing.

Mark Perry updates Bastiat’s classic “The Candlemakers’ Petition.

The sad paradox of free markets.

Bruce Yandle asks if the U.S. economy is surging or sleepwalking.

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