Quotation of the Day…

by Don Boudreaux on February 12, 2016

in Seen and Unseen, Trade, Uncategorized

… is from page 31 of my colleague Tyler Cowen’s important 2002 book, Creative Destruction:

Wealth and technology not only bring the new, they also help cultures preserve and extend the best of their past.  Most artistic and musical products from the poorer nations were not made to be especially durable but, rather, were intended for the immediate moment.  Lack of durability is common when wealth is low, technologies are few, and short-run survival is a pressing need.  Western technologies, however, have enabled many cultural products to last and to reach wider audiences.

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Some Links

by Don Boudreaux on February 11, 2016

in Myths and Fallacies, Taxes, War, Work

I am very sad to learn that Andrew Coulson has died.

My colleague Chris Coyne analyses the lobotomized brain of a defense hawk.  Here’s the abstract:

Economists model national defense as a pure public good optimally provided by a benevolent and omnipotent “defense brain” to maximize social welfare. I critically consider five assumptions associated with this view: (1) that defense and security is a pure public good that must be provided by a national government, (2) that state-provided defense is always a “good” and never a “bad”, (3) that the state can provide defense in the optimal quantity and quality, (4) that state expenditures on defense are neutral with respect to private economic activity, and (5) that state-provided defense activities are neutral with respect to domestic political institutions. I discuss an alternative framework—the “individualistic view”—for analyzing defense provision and suggest it is superior for understanding reality.

On a related note, David Henderson and Chad Seagren call for an end to all draft registration.

Do high-income Americans really not pay ‘their fair share’ of taxes?

Chelsea German and Marian Tupy explain that economic growth in Africa is being fueled by freedom and not by infrastructure.

Tyler Cowen’s next Conversation is with Nate Silver.

My Mercatus Center colleague Adam Millsap explains how the minimum wage increases taxpayers’ fiscal burden.

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Quotation of the Day…

by Don Boudreaux on February 11, 2016

in Myths and Fallacies, Property Rights

… is from page 292 of Anthony de Jasay’s 1998 volume, The State (original emphasis):

Before the bureaucracy can rule, ownership must lose its significance.

One way to strip ownership of its significance is to perpetuate the fallacy that property and law are creations of the state, and that each of us holds our property only by the grace of the state – as if we merely lease it from our kindly and provisioning overlords, in exchange for our obedience and regular tax payments.  And to help ensure that we serfs do not start fancying that our property is really ours – fancying that we created it and, therefore, have original title to it – our overlords scold us regularly with a non sequitur, telling each of us, as individual owners of property, that “you didn’t build” individually and from scratch any of the social, legal, or physical institutions that make the creation and security of property possible.

In short, and from another work by Jasay, it’s as if your dog owns your house.

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Here’s a reply to a follow-up e-mail from my former Clemson student Bobby Hester (who, I report, was a student not in any economics class that I taught but, rather, in one of my business-law classes) (link added):

Dear Mr. Hester:

Thanks for your reply.

You say that I am “naïve to forget about” the “unfairly low prices which the Chinese ruling elite impose on us.”

Please.  Low prices in America – especially if they are made artificially low at the expense of non-Americans – are no imposition on Americans; they are a blessing to Americans.  (Do you think that we earthlings would be made richer if our rulers adopt policies that require us to start paying more for the light and heat that we have until now imported from the sun at the low price of $0?  If not, why do you think that we Americans would be made richer if our rulers adopt policies that require us to start paying more for the goods that we have until now imported from China at low prices?)

Also, Chinese low wages are largely the consequence of the Chinese people being enslaved, tyrannized, and impoverished for decades by an unspeakably cruel Maoist regime.  Do you honestly believe that this terrible history gives the Chinese people today an unfair economic advantage over Americans?  If so, you must regret that we Americans were denied the advantage-rich experience of being forced to live in a collectivized, starvation-ridden society ruled by murderous despots.  My gosh!  If we, too, could today boast the horrifying recent history of China, then we, too, might be as poor as the Chinese and, hence, we, too, would enjoy – as do today’s Chinese – all the splendid “advantages” bestowed by such an impoverishing history!

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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Trumping Trump

by Don Boudreaux on February 10, 2016

in Myths and Fallacies, Trade

One of the silver linings around the dark cloud of rampant economic ignorance is that such ignorance brings out the best in sensible people who attempt to counter it.  Here are lines from two e-mails sent to me within the past few days, as well as from a comment here at Cafe Hayek.  The first is from the excellent Hillsdale College economist Gary Wolfram:

I like where Trump says we will “win trade with China”.

Hard not to win when you trade.

Gary, of course, is correct.  What Trump’s policies would in fact do is to create losses for Americans by denying the great majority of Americans the opportunities to spend their own money as effectively as they can as each of them, individually, judges the matter.  (Trump’s talk of “winning” at trade reflects a truth mentioned recently by Bob Higgs on Facebook: the level of public understanding of trade remains primitive – pre- Adam Smith.  I’ll add that no Trump supporter has any business sneering at or ridiculing the many economic misunderstandings of Bernie Sanders and Sanders’s fans, for Trump and Trump’s fans are no less economically ignorant.)

…..

And here’s the substance of an e-mail from Stuart Anderson:

In the recent debate, Donald Trump said New Hampshire has been “virtually wiped out” by trade with Mexico. I checked and the unemployment rate in New Hampshire is 3.1 percent. And I imagine everyone in New Hampshire also has access to food, water, and shelter and is walking around with smartphones that would have been considered science fiction two or three decades ago.

The incessantly repeated myth that ordinary Americans have stagnated economically for the past 40 years – a myth screeched especially loudly and frequently by pundits on the left, such as Paul Krugman and Robert Reich (but not exclusively: Edmund Phelps repeats this myth in his 2013 book Mass Flourishing) – is surely helping to fuel the inferno of ignorance that is Donald Trump’s candidacy.

….

Finally, here’s Bobby Valentine’s comment on this post – a post in which I report that a Trump supporter accused me of “paying no attention to the losses … caused to U.S. workers by the Chinese.”  Mr. Valentine re-words the accusation slightly; it is a line that I wish I’d thought of to use in my letter:

“paying no attention to the gains… caused to U.S. consumers by the Chinese.”

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My Mercatus Center colleague Veronique de Rugy is a guide to the mountain of debt piled high and heavy – and precariously – by Uncle Sam.

I learned only yesterday of Learn Liberty’s three short, excellent, and informative videos – featuring Deirdre McCloskey and Sarah Rose – on transgendered people.  They are here, here, and here.

Jeff Jacoby – the conservative columnist for the Boston Globe – accurately describes Donald Trump as “a vulgar and loudmouthed egomaniac, as ignorant of public affairs as he is gifted at stoking anger and xenophobia.”  And that’s putting it politely.

My GMU Econ and Mercatus Center colleague Tyler Cowen wishes that Paul Krugman would make up his mind.

Arnold Kling reflects on Larry Summers’s reflections on Robert Gordon’s new book on the alleged secular slowing of economic growth.  A slice:

Take air travel. The main reason that flying takes longer and is less comfortable (for Larry) is that air travel is no longer a luxury. Many more people can afford to fly. As for me, I would say that air travel is more comfortable. I’ll take no-smoking flights, noise-canceling headphones, and on-board WIFI over more legroom any day. For that matter, if you want extra legroom, you can pay for it–you still end up flying for less money than you did 40 years ago.

I think it is easy to forget what computer and communications technology have done. Traveling overseas is remarkably easier now. My wife and I had a vacation in Croatia a couple years ago that we could never have planned and executed in the days before TripAdvisor and GPS. More recently, when we were in Israel, we got around easily by bus, because my daughter could use Google Maps to find bus routes and she had an app telling her when the buses were coming.

Forty years ago, the only affordable long-distance communication tool was snail mail. I don’t know about Larry, but for me going back to that would not be so simple.

James Pethokoukis (citing my George Mason University Econ colleague Garett Jones) explores the economic impact in the U.S. of low-skilled immigrants.

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Here’s a letter to someone who says that he was in a class that I taught at Clemson University in the mid-1990s.  I don’t remember him.

Mr. Bobby Hester

Dear Mr. Hester:

You accuse me of “paying no attention to the losses … caused to U.S. workers by the Chinese.”  You add that “only somebody like Donald Trump would protect Americans from that damage.”

With respect, you’re mistaken.  First, the losses “caused to U.S. workers” are caused, not by the Chinese, but by your fellow Americans who choose to purchase imports from China.  The Chinese merely offer deals that your fellow citizens judge to be good; the Chinese do not compel Americans to accept these deals.  What you and Mr. Trump in fact propose to do is to threaten to inflict violence on Americans who would otherwise choose to spend their money as they prefer rather than as you and Mr. Trump think they should spend their money.  What right have you or Mr. Trump to tell other people how to spend their money?  Do you really believe that the American economy will be strengthened over time if its firms and workers are protected from competition?  And do you honestly suppose that such orders from Washington will “make America great again”?

Second, if you truly want to protect yourself from the risks of your fellow Americans choosing to spend less of their money buying whatever it is that you produce, you don’t need Mr. Trump’s help.  You already have the power to protect yourself from your fellow Americans’ economic choices.  Buy a plot of land on which to grow your own food, make your own clothing, and build your own housing – all with absolutely nothing imported from abroad.  Indeed, consume nothing that is produced using any materials or labor from outside of your immediate vicinity.  Thus protected from economic change, you’ll then live as people lived for millennia upon millennia before the extensive division of labor and trading networks emerged and began to enrich ordinary people.

Do not tell me that my suggestion is impractical, for the only reason it is impractical is that, if you were to follow it, you and your family would become desperately poor by being cut off from the global economy that alone is responsible for your current prosperity.  You have no right to lay claim to the fruits of that global prosperity if you refuse to play by the rules that make that prosperity possible – rules that include allowing consumers to spend their money as they wish and allowing entrepreneurs, regardless of nationality, to compete for those consumer dollars.

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 February 10, 2016

in Property Rights

… is from page 307 of the 1978 collection, edited by Eric Mack, of Auberon Herbert’s essays, The Right and Wrong of Compulsion by the State; specifically, it’s from Herbert’s profound June 7th, 1906, lecture at Oxford University, “Mr. Spencer and the Great Machine”:

Our task is to make it clear to the whole nation that a great principle, that which involves the free use of faculties, the independence of every life, the self-guidance and self-ownership, the very manhood of all of us, that commands and constrains us to preserve the inviolability of property for all its owners, whoever they may be.  The inviolability of property is not simply the material interest of one class that happens today to possess it; it is the supreme interest of all classes.  True material prosperity can only be won by the great body of the nation through the widest measure of liberty – not the half and half, not the mock system, that exists at present.  Create the largest and most generous system of liberty, create – as you will do with it – the vital energizing spirit of liberty, and in a few short years the working classes could cease to be the propertyless class; would become with their great natural qualities the largest property owners in the country.

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I just discovered this superb 2014 Learn Liberty video featuring my old Clemson University colleague Dan Benjamin on a topic on which he is a leading expert: recycling.

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Broken Window

by Don Boudreaux on February 9, 2016

in Seen and Unseen

This morning I discovered that the rear window of my car is completely shattered.  (I’ve no idea how it happened, although I do not suspect foul play.)  So I hired a glass company to repair it.  The repair (which will occur on Thursday) will cost me a sum just north of $500.  Explaining this unfortunate unexpected broken window just now to my GMU Econ colleagues, doctoral student Patrick Newman pointed out that what is unfortunate for me is fortunate for my fellow citizens, as my paying to have my broken window repaired will stimulate the economy.  (Paul Krugman might point out that, because unemployment remains a bit high, there is actually no cost to repairing my window.  It’s free!  That’s very comforting.  In order to be relieved of the need to fork over several hundred dollars to the glass-repair firm, I’ll try to explain to them that it really costs them nothing to repair my window.  I don’t anticipate success with that explanation.)

Of course, Patrick’s tongue is planted – Bastiat-like – solidly in his cheek.  The glass-repair company gains from my misfortune, as do its workers and other suppliers.  But the $500+ that they gain is a $500+ loss for me.

I can’t identify precisely what I will not buy now that I am $500+ poorer.  I can say that whatever it is that I will not buy is some good or service that I would otherwise have purchased in the future.  That $500+ will be withdrawn from my savings (or, more precisely, not added to my savings).  Banks will have less money to lend.  Some entrepreneur will find herself with $500 less in borrowed funds to use to start or to upgrade her firm, or some consumer will have $500 less to spend on a new car or on home remodeling, or a student will have a bit more difficulty securing at a good rate a loan to pay for college.

Stepping back, scarce resources – including labor – that will now be consumed in repairing my car’s window will not be available to produce whatever other valuable goods or services that those resources would otherwise have been used to produce.

The breaking of my window makes not only me, but all of humanity, poorer.  Either way, I have an unbroken window in my car, but now I don’t have whatever it is that I’d have purchased with the money I spent to repair the window.  Either way, the world has an unbroken window in my car, but it doesn’t have whatever else would have been produced with the resources that are consumed in repairing my window.

Obviously – and thankfully – this negative effect is so slight that I’m the only person who will notice it.  (Believe me, while I’m grateful to be able, as we say, “to afford” to pay this $500+ expense, I would much prefer that my window had not been broken and that I could instead use that $500+ in some way other than to make my car only just as useful to me as it was before the window in it was broken.)

Contrary to claims made by reporters and pundits following every natural disaster, the disaster is not good for the economy.  Never.  The world is wealthier if I have a never-broken window and whatever it is that I buy with my $500+ than it is if I have a repaired window acquired at the expense of whatever it is that I would have otherwise purchased.  For the same reason, the world is wealthier if cities and towns remain in one piece by escaping natural disasters rather than having to be rebuilt.

The fact that this fact is not widely recognized as a fact is, in fact, unfortunate.

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