Here’s a letter to the Wall Street Journal:

The substance of former GOP Congressman George Nethercutt’s defense of Congressional earmarks is as contorted as is the language he uses for this defense - for example: “Allowing earmarks provides an opportunity for constituents to advocate to their members for accountable federal spending in their districts or state” (Letters, Nov. 28).

In light of the difficulty of making sense of this indigestible word salad, one can only guess at Mr. Nethercutt’s meaning.  My guess is that he’s asserting that - compared to Congress as a whole and to the executive branch - individual members of Congress, using earmarks, spend money more wisely in their districts or states because these members gain more intimate, local knowledge of the needs and opportunities of the people there.

This claim about local knowledge is likely true, but it doesn’t support the case for earmarks.  Instead, it supports the case for lower taxes, less spending, and smaller government.  If money is spent most wisely by people with the most precise and reliable knowledge of the diverse needs and opportunities in each of this country’s many different locales, then each private citizen, in his or her own individual household or firm, is far better able to spend money ‘accountably’ than is any politician working in Washington.  As my friend Frayda Levin said a few years ago in response to her senator’s similar defense of earmarks, it’s absurd for taxpayers to “send money to D.C.” and “then have to spend resources finding a sympathetic ear who can … understand local needs.”

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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Quotation of the Day…

by Don Boudreaux on November 28, 2014

in Science, Self-deception

… is from page 48 of Joseph Epstein’s 2012 collection, Essays in Biography; specifically, it’s from Epstein’s June 2009 New Criterion essay on George Santayana entitled “The Permanent Transient“:

True freedom comes only to a lucid mind unbound by conventional wisdom and suspicious of received opinions.

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Saving Liberalism

by Don Boudreaux on November 28, 2014

in Civil Society, Video

My colleague Dan Klein is leading a noble quest to reclaim the word “liberalism” for that set of ideals and beliefs in support of a civilization infused with individual freedom, genuinely limited government, and bourgeois virtues.  Here’s a video of a presentation that Dan gave last month at Guatemala’s great liberal institution, Universidad Francisco Marroquin.

To learn more about Dan’s efforts on behalf of liberalism, see here, here, and here.

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Quotation of the Day…

by Don Boudreaux on November 27, 2014

in History, Other People's Money, Property Rights

… is from Caroline Baum’s Nov. 25th e21 article, “Giving Thanks for Property Rights“:

One of the traditions the Pilgrims had brought with [them] from England was a practice known as “farming in common” (the “common course and condition” to [Gov. William] Bradford). Everything produced became community property, to be allocated according to need as specified in the Mayflower Compact.

They had thought “the taking away of property and bringing in community into a commonwealth would make them happy and flourishing,” Bradford writes. Instead, “for this community (so far as it was) was found to breed much confusion and discontent and retard much employment that would have been to their benefit and comfort.” Young, able-bodied men resented working for others without compensation, which they saw as an “injustice.”

After three winters of near-starvation, Bradford and his advisors decided to experiment when it came time for the spring planting. They set aside a plot of land for each family “that they should set corn every man for his own particular, and in that regard to trust to themselves.”

“This had very good success,” Bradford writes, “for it made all hands very industrious, so as much more corn was planted than otherwise would have been by any means the Governor or any other could use, and saved him a great deal of trouble, and gave far better content.”

The women now went willingly into the field, carrying their young children on their backs. Those who previously claimed they were too old or ill to work embraced the idea of private property, eventually producing enough to trade their surplus corn for furs and other commodities.

Grateful for their ample harvest in 1623, the Pilgrims set aside a day of thanksgiving. “Any general want or famine hath not been amongst them to this day,” Bradford writes in an entry from 1647, the final year of his history.

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… is from pages 44-45 of my colleague Richard Wagner’s deeply insightful 1996 monograph, Economic Policy in a Liberal Democracy:

Suppose medical care is financed through state budgets, or, equivalently, through private insurance that is constrained by government to charge common pricing.  Once this happens, a new network of interests is created.  People who make relatively low use of a service form a natural interest group in opposition to those who might make relatively high use.  What was once a matter of a simple toleration of different choices of life-styles under conditions where the choosers bear the costs associated with their choices, becomes a matter of political concern.  In the presence of collective provision or common pricing, activities that entail above-average costs, actuarially speaking, will be shifted partially on to those whose activities entail below-average costs.

The state necessarily becomes involved as a battleground for the adjudication of disputes over personal life-styles.  When economic activity was organized according to the principles of property, contract, and liability, a society could tolerate peaceably a variety of such life-styles because those who conducted more costly patterns of life would pay for them.  But once the market principle of personal responsibility is abridged for some principle of collective responsibility, interest groups are automatically established that will bring personal life-styles on to the political agenda.

People on the left pride themselves on their rationality and tolerance for different lifestyles – tolerance for the preferences and choices of people who differ from the norm.  Yet a rational person understands that if you force A to subsidize the life-choices of B, then at least three unhappy consequences of note occur.

First, B will make some lifestyle choices that he or she would otherwise not make – in which case it becomes inaccurate to describe B‘s life-style choices as a genuine reflection of B‘s true preferences.  A person’s preferences are in large part the particular ways that that person makes trade-offs.

In 1992 I had the opportunity to earn a princely salary by accepting a position at a Washington, DC, law firm.  And although I (like nearly everyone) prefer more money to less, I turned that job down for a much-lower-paying position on the faculty of Clemson University.  I prefer the lifestyle of an academic (including the greater leisure) so strongly that I rejected the (much) higher law-firm salary along with its lifestyle.  An even better deal for me, of course, would have been to get paid the law-firm salary while having to work only as an academic. That option, however, wasn’t available.  Yet suppose there was a government program in place that subsidizes any on-the-job leisure I might take were I to work full time as a lawyer.  That is, suppose that a government program forces other people to do whatever law-firm work should be done by a full-time lawyer but is not done because the full-time lawyer spends much of his time on the job reading economics books for pleasure rather than doing his work as an attorney.  In that case, I might have chosen the law-firm job instead of the lower-salaried college teaching job – with the result being too much leisure being taken by lawyers and too many resources being spent by government to compensate for this inefficient leisure-taking.

The point is that my preferences deserve respect only if I pay the full costs of indulging my preferences.  But if some of those costs are shoved onto other people, then my preferences change – they are no longer, I would say, my true preferences given the constraints of reality.

The second unhappy consequence of forcing A to subsidize B‘s choices is that A is necessarily forced to make choices different from those that he most prefers.  A‘s preferences are ignored.  A is obliged to live in part by what are not only the preferences of B, but by the improper preferences of B - preferences (as explained above) that are not easily described as being B‘s true preferences but are, instead, preferences that B indulges only because A is forced to pay part of the costs of B‘s choices and actions.

The third unhappy consequence is the one highlighted by Dick Wagner in the above quotation: A will attempt to forcibly restrain B‘s choices and actions.  Society will become less diverse and less tolerant.

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In my latest column for the Pittsburgh Tribune-Review I ponder various kinds and degrees of insignificance of individual human choices and actions.

I wrote this column before completing my reading of Russ’s brilliant new book, How Adam Smith Can Change Your Life.  While finishing my reading of Russ’s book hasn’t caused me to change my mind on any matter mentioned in my column, it has caused me to see some additional issues that warrant more careful scrutiny.  Likewise for David Henderson’s recent – and, I hope to show in a future blog post, related – thoughts on Mt. Rushmore.

Here’s a slice from my column – a column entitled “Significant Insignificance”:

Our individual choices in markets and personal relationships are significant to us. Every such choice matters to every individual who makes that choice. The reason is that each such choice changes the pattern of the chooser’s life. Sometimes the change is minuscule (as when choosing a brand of toothpaste) and sometimes it’s massive (as when choosing whom to marry). But in all cases each choice matters .

Not so with political choices. Despite oceans of public rhetoric to the contrary, each of those choices truly is insignificant from the perspective of the individual voter.

The typical voter is not stupid. Therefore, you — as a voter — understand that the outcome of the election does not hinge on your vote. If candidate Jones defeats candidate Smith in an election, that outcome would not have changed had you cast your ballot differently — or if you had cast no ballot. From the standpoint of each individual, voting in a political election is truly insignificant. Your individual vote plays no role in determining which candidate you get to represent you.

Nor does your vote have any significant impact on the public’s and politicians’ assessment of the election. Suppose you voted for Smith, who wound up losing to Jones by 20,696 votes. Had you instead voted for Jones, Smith would then have lost by 20,698 votes. Or suppose that you didn’t vote at all: Smith would have lost to Jones by 20,697 votes. Does anyone think that the policies that Smith endorsed are more highly regarded because, due to your vote, Smith lost by only 20,696 votes rather than by 20,698 votes? Surely not.

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If someone who knows not the slightest thing about neurosurgery beyond what he infers by pondering his own skull takes a scalpel to a patient’s brain, the patient suffers a gruesome death and the pretend-healer is exposed immediately as a charlatan.  Matters, alas, differ in economics.  Pretend-economists often not only get away with the most bizarre quackery, but receive applause for practicing it.

Fortunately, the blogosphere has in it true scholars such as George Selgin to expose pretenders. Here’s George’s brilliant exposé of one Izabella Kaminska.  Do treat yourself to the pure pleasure of reading George’s prose and absorbing his learning.  A slice from near the beginning:

Tell me I’m not with it, if you must, but the fact is that until a couple of days ago I’d never heard of Izabella Kaminska, who bills herself as a “finance blogger” and believer in something called the “collaborative economy,” in which sharing things takes the place of buying and selling them, the result being, she claims, a reduced carbon footprint.

Although I rather doubt that we’re likely to witness an end to our “propensity to truck and barter” anytime soon, I don’t doubt that such an event would in fact reduce carbon emissions: there would, for one thing, be a lot less less breathing going on. But what concerns me isn’t Ms. Kaminska’s general economic philosophy, to call it that. It’s her vertiginous spin on free banking, which she saw fit to air this past week, first on FT Alphaville, and then on a blog of her own called, appropriately enough, Dizzynomics.

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Here’s a letter to the Wall Street Journal:

The subheading describing Alan Blinder’s essay “The Unsettling Mystery of Productivity” (Nov. 25) reads “Since 2010 U.S. productivity has grown at a miserable rate.  And no one, not even the Fed, seems to understand why.”

Here’s a potential explanation: regime uncertainty.  Pioneered by economist Robert Higgs to explain the length and depth of the Great Depression,* the concept of “regime uncertainty” captures the difficulty of investors to foresee how their rights to their property (including to their profits) will be affected by government policies.  A rise in regime uncertainty reduces productive, private-sector investments - and a consequence of reduced investment is slower productivity growth.

Economists at Stanford and the University of Chicago measure “economic policy uncertainty” - a concept quite close to regime uncertainty.  Data on their website go back to 1985.  The average level of U.S. economic-policy uncertainty from 1985 through 2009 is 101.1, while the average level of such uncertainty from January 2010 through October 2014 is 140.7.  That is, the average amount of uncertainty (as measured using data found on the website Economic Policy Uncertainty) since the start of 2010 is nearly 40 percent higher than during the preceding 25 years.

Whether or not this heightened uncertainty explains the slowdown in productivity growth, such intense, government-created uncertainty cannot possibly be good for the 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

* Robert Higgs, “Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed After the War,” The Independent Review, Spring 1997, Vol. 1: 561-590.

See also Roger Koppl’s important 2014 monograph, From Crisis to Confidence.

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Quotation of the Day…

by Don Boudreaux on November 25, 2014

in Politics

… is from page 53 of the 1983 collection of some of the writings of the late G. Warren Nutter, entitled Political Economy and Freedom; specifically, it’s from Nutter’s insightful 1976 essay “A Comment on Okun” (link added):

In passing, [Arthur] Okun cannot resist praising recent legislation on campaign spending as a welcome curb to the “counterfeiting” of votes and hence a boost to a more “democratic” political process.  Here is another example of of miscomprehension of the complex issues underlying the First Amendment, with which this legislation is wholly inconsistent, to say the least.  Let me merely observe that, as far as the democratic process is concerned, there is likely to be more to fear from a silver tongue than from a gold finger.

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CEI’s John Berlau on crowdfunding.

Mark Perry on the alleged stagnation of household incomes in America.

My Mercatus Center colleague Veronique de Rugy on Hillary Clinton’s affection for cronyism.

Jonah Goldberg on Obama, Jonathan Gruber, and political deceptions.

Scott Atlas on how Obamacare is diminishing access to physicians.

Michael Mandel on Obama’s plan to burden the Internet with more government regulation.

Bill Shughart on the U.S. ban on oil exports.

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