Some Links

by Don Boudreaux on September 1, 2014

in Economics, Reality Is Not Optional, Seen and Unseen, War

Bob Murphy explains why intervention by the home government abroad promotes intervention by the home government at home.  Reality is not optional.

Speaking of which: I offer again this link to a post of mine from nine years ago explaining why I object to calls by the likes of the editorial board of the Wall Street Journal for active U.S.-government involvement in foreign-government and military affairs.

Here’s Steve Chapman on Uncle Sam’s latest war in Iraq.

Dwight Lee is not only one of the best natural economists that I’ve ever known – he’s also one of the wittiest and wisest and warmest.

I always love reading Sarah Skwire.

Shikha Dalmia explains why Obama is no believable spokesman for “racial justice.”

Add a Comment    Share Share    Print    Email

Quotation of the Day…

by Don Boudreaux on September 1, 2014

in Inflation, Monetary Policy, State of Macro, The Crisis

… is from page 10 of Roger Koppl’s hot-off-the-press monograph, From Crisis to Confidence: Macroeconomics after the Crash (original emphasis):

[T]he central banks inappropriately and needlessly expanded the volume of credit in the years before the boom, thus ensuring a subsequent bust [in 2008].  It was not bankers gone wild that caused the unsustainable boom; it was central bankers gone wild.

I just finished reading this truly superb work by Roger – a work that I’ll blog more on later.  I’ll say here only that Roger masterfully exposes the sorry intellectual state of mainstream macroeconomics.

Add a Comment    Share Share    Print    Email

Quotation of the Day…

by Don Boudreaux on August 31, 2014

in Politics

… is from page xxvii of Michael Huemer’s 2013 book, The Problem of Political Authority:

This book addresses the foundational problem of political philosophy: the problem of accounting for the authority of government.  This authority has always struck me as puzzling and problematic.  Why should 535 people in Washington be entitled to issue commands to 300 million others?  And why should the others obey?  These questions, as I argue in the following pages, have no satisfactory answers.

My brilliant colleague Bryan Caplan calls Michael Huemer his favorite political philosopher.  Having now read most of this 2013 book by Huemer, I can see vividly why Bryan offers such praise.  It’s a brilliant work.  Although 365 pages long – and although deeply serious and analytical throughout – this book can be read quickly because Huemer is such a skilled stylist and clear thinker.  (I read 80 percent of it on a flight just now from DC to Dubai.  [I'm en route to Hong Kong for the Mont Pelerin Society meetings.])

Add a Comment    Share Share    Print    Email

Quotation of the Day…

by Don Boudreaux on August 30, 2014

in Economics

… is from my friend the superb economist and wit Dwight Lee (as related by my colleague Larry White in the comments section of this EconLog post by David Henderson):

You can tell for whose benefit an institution is run by looking at who gets the closest parking spaces. At universities the students get the most distant spaces, administrators and faculty the closest. At Wal-Mart, they ask the employees to park away from the entrance.

Add a Comment    Share Share    Print    Email

Personal Bleg

by Don Boudreaux on August 30, 2014

in Weblogs

Cafe Patrons: Again this year I seek your kind assistance.

I’m entering the 2014 Coolidge Prize for Journalism competition.  I ask you again, as I did last year, to suggest to me your favorite blog posts or newspaper essays (or both) of mine that have appeared at between January 1, 2012 and August 25, 2014.  I get to submit up to three posts or newspaper essays, but each must be 800 words or less.

Which three of my posts or newspaper essays during this time are the ones that you believe, in your wise judgment, will give me the best chance to win this stiff competition?  Remember, my entries will likely be in competition with entries from super-bloggers and sterling columnists such as Bryan Caplan, Tyler Cowen, Veronique de Rugy, David Friedman, David Henderson, Alex Tabarrok, and Kevin Williamson.

Just fyi, you can access my Pittsburgh Tribune-Review columns here.

Feel free to put your suggestions in the comments section, but also please e-mail them to me at dboudrea@gmu.edu

Many thanks!

Don

Add a Comment    Share Share    Print    Email

Here’s a letter to the Wall Street Journal:

Properly decrying the CIA’s arming of anti-Assad Syrian rebels who turned out also to be anti-American ISIS jihadists, Sen. Rand Paul (R-KY) wisely warns of the unintended ill consequences of Uncle Sam’s meddling in foreign affairs (“How U.S. Interventionists Abetted the Rise of ISIS,” August 28).  This episode, of course, is not the first in which U.S. government subsidies to a foreign belligerent succeeded only in making the world more dangerous for peaceable people.

The lesson is clear: government is just as bad at picking winners when intervening in foreign affairs as it is at picking winners when intervening in economic affairs.  The same combination of hubris, imprudence, carelessness, misinformation, and myopia that leads government officials to spend other people’s treasure in support of economically calamitous ventures at home (such as subsidies to Solyndra) also leads these officials to spend other people’s treasure - and lives - in support of strategically calamitous ventures abroad (such as subsidies to Syrian rebels).

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

Add a Comment    Share Share    Print    Email

Quotation of the Day…

by Don Boudreaux on August 29, 2014

in Innovation, Myths and Fallacies, Seen and Unseen

… is from page 269 of Matt Ridley’s 2010 book, The Rational Optimist; (the quotation is from Terence Kealey’s 2006 book, Sex, Science and Profits; the OECD study is here):

A large study by the Organization for Economic Co-operation and Development concluded that government spending on R&D had no observable effect on economic growth, despite what governments believe.  Indeed it ‘crowds out resources that could be alternatively used by the private sector, including private R&D’.

Add a Comment    Share Share    Print    Email

In yesterday’s Wall Street Journal – in an essay entitled “How U.S. Interventionists Abetted the Rise of ISIS” - Rand Paul wisely warned interventionists of both parties to beware of unintended consequences of intervening in the affairs of other societies and states.

One can understand, if not excuse, “Progressives” who ignore such unintended consequences: they also ignore unintended consequences of domestic economic interventionism.  Much more difficult to understand – and, hence, even more difficult to excuse – is the large number of conservatives who, attuned to the reality of unintended consequences of domestic economic interventions, are blind to the reality of such consequences that spring from military and diplomatic interventions.  The complex and difficult trade-offs, unavoidable imperfections, hidden dangers, impossibility of successfully picking ‘winners,’ and venal and unprincipled vote-grasping politicians that together counsel non-intervention into the domestic economy miraculously disappear when the issue is some problem abroad.  What is seen abroad by pro-foreign-interventionists are relatively simple problems that we good guys – if only we have enough fortitude – can solve with a combination of military force and social-engineering on a global scale.  Yet as Mr. Paul argues, ill unintended consequences – and governments’ proclivity for creating them – are not at all limited to domestic economic interventions.

Here are some slices from Mr. Paul’s essay:

The administration’s goal has been to degrade Assad’s power, forcing him to negotiate with the rebels. But degrading Assad’s military capacity also degrades his ability to fend off the Islamic State of Iraq and al-Sham. Assad’s government recently bombed the self-proclaimed capital of ISIS in Raqqa, Syria.

To interventionists like former Secretary of State Hillary Clinton, we would caution that arming the Islamic rebels in Syria created a haven for the Islamic State. We are lucky Mrs. Clinton didn’t get her way and the Obama administration did not bring about regime change in Syria. That new regime might well be ISIS.

This is not to say the U.S. should ally with Assad. But we should recognize how regime change in Syria could have helped and emboldened the Islamic State, and recognize that those now calling for war against ISIS are still calling for arms to factions allied with ISIS in the Syrian civil war. We should realize that the interventionists are calling for Islamic rebels to win in Syria and for the same Islamic rebels to lose in Iraq. While no one in the West supports Assad, replacing him with ISIS would be a disaster.

….

But the problem is, we did do something. We aided those who’ve contributed to the rise of the Islamic State. The CIA delivered arms and other equipment to Syrian rebels, strengthening the side of the ISIS jihadists. Some even traveled to Syria from America to give moral and material support to these rebels even though there had been multiple reports some were allied with al Qaeda.

Patrick Cockburn, Middle East correspondent for the London newspaper, the Independent, recently reported something disturbing about these rebel groups in Syria. In his new book, “The Jihadis Return: ISIS and the New Sunni Uprising,” Mr. Cockburn writes that he traveled to southeast Turkey earlier in the year where “a source told me that ‘without exception’ they all expressed enthusiasm for the 9/11 attacks and hoped the same thing would happen in Europe as well as the U.S.” It’s safe to say these rebels are probably not friends of the United States.

Add a Comment    Share Share    Print    Email

San Jose, CA, recently raised a tax that it imposes on the use of low-skilled workers its minimum wage.  One result is that an employer reduced the size of the annual bonuses that she pays to her employees.  (NPR has the story; this particular part starts at around the 3 minute, 25 second mark in the audio version of the report.  [What is called at this NPR link the "Transcript" is not a complete transcript of what you'll hear if you click "Listen to the Story".])

Note that these particular workers are among the lucky ones.  While the higher minimum wage didn’t help them, it didn’t hurt them – or at least not very much.*  When bonuses are factored in, these employees were, in fact, already being paid more than even the now-higher minimum wage.  So their employer merely had to rearrange the method by which she paid her employees: more in hourly wages and less in the form of bonuses.

But what if the workers in question were not so productive as to justify total hourly compensation as high as the new legislated minimum wage?  The employer would then have had to resort to less pleasant and more substantive means of adjusting to the higher minimum wage, means that likely would have included employing fewer such workers.

….

* I say “or at least not very much” because the particular method of compensation used – hourly wages in combination with bonuses – presumably serves some useful purpose for both the employer and the employees.  (My guess is that it is a means of rewarding – and, hence, of encouraging – greater employee productivity.)  By reducing the employer’s and employees’ flexibility in choosing the particular forms in which compensation is paid, the higher minimum wage reduces the ability of payment options to elicit optimal efficiency.

Add a Comment    Share Share    Print    Email

Here’s a letter to the New York Times:

While Jared Bernstein is correct that the dollar’s role as the international reserve currency increases the U.S trade deficit, his analysis of the consequences of a high global demand for U.S. dollars is a jumble of confusions (“Dethrone ‘King Dollar,’“ Aug. 28).

Most notably, Mr. Bernstein argues that countries, such as the U.S., that run trade deficits simultaneously suffer excess aggregate demand (“trade-deficit countries must absorb those excess [global] savings to finance their excess consumption or investment”) and deficient aggregate demand (“a result of this dance [of foreigners accumulating dollars], as seen throughout the tepid recovery from the Great Recession, is insufficient domestic demand in America’s own labor market”).

A trade deficit might either increase or decrease a country’s aggregate demand (or do neither) but, contrary to Mr. Bernstein’s muddled account, it cannot possibly do both.  Alas, Mr. Bernstein’s confusion on this point reflects a more widespread and popular misunderstanding of trade deficits.

Sincerely,
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​​

Many other flaws infect Bernstein’s op-ed – ones that, if I have time later today or tomorrow, I’ll point out.

Add a Comment    Share Share    Print    Email