Gaetano Basso, Giovanni Peri, and Ahmed Rahman find that immigrants to the United States improve the economic lot of native-born Americans.  (HT David Levey)  Here’s the abstract:

The US and Europe have both seen wage polarisation in the last three decades, in parallel with increasing technical automation. This column analyses the impact of immigration on this wage divergence via its effect on the labour supply side. It finds that immigration partially reverses natives’ polarisation of employment opportunities and wages by expanding aggregate demand and allowing natives to move to better paying occupations. Policies to reduce low-skilled migration with the aim of favouring native middle-class labour market opportunities may in fact do the opposite.

David Henderson points us to recent research on the effects of medical-marijuana liberalization on crime in the U.S.

Amanda Little is rationally optimistic about the consequences of AI robots.  (HT Walter Grinder)

My intrepid Mercatus Center colleague Veronique de Rugy is rationally pessimistic about the prospects of U.S. Social Security.

Queen Oprah?

Kevin Williamson remembers Martin Luther King, Jr.

Truly excellent news!  Liberty Fund’s new edition, edited by Jerry Jordan, of Armen Alchian’s and William Allen’s great textbook, University Economics, will soon be available.  (HT Jon Murphy)  I recommend this book to everyone.  And to every economist: I regard a close study of this book to be indispensable.

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Quotation of the Day…

by Don Boudreaux on January 16, 2018

in Man of System, Virginia Political Economy

… is from pages 177 of my late Nobel-laureate colleague Jim Buchanan‘s 1973 paper “America’s Third Century in Perspective,” as this paper is reprinted in Vol. 19 (Ideas, Persons, and Events [2001]) of The Collected Works of James M. Buchanan:

Descriptively, we now live in what might best be called “constitutional anarchy,” where the range and the extent of federal government dominance over all our lives, over our private behavior, is largely dependent on the accidental preferences of politicians in judicial, legislative, and executive positions of power.  Increasingly, men feel themselves at the mercy of a faceless bureaucracy, itself irresponsible and subject to unpredictable twists and turns that destroy and distort personal and private expectations.

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… is from page 69 of Georgetown University philosopher Jason Brennan’s brilliant 2014 book, Why Not Capitalism?:

Economists have long understood that in a market economy, the systematic effect of private citizens’ pursuit of private ends is to create background conditions of wealth, opportunity, and cultural progress.  Each of us does as well as we do because of the positive externalities created by an extended system of social cooperation.  This extended system of cooperation explains why each of us in contemporary liberal societies have our high standards of living and easy access to culture, education, and social opportunities.  We are engaged in networks of mutual benefit, and we benefit from other people being engaged in these networks.

DBx: Because the number of individuals helpfully served by a new producer in a market is almost always much larger than is the number of individuals who compete against that new producer, a greater number of producers serving a market means more mutually beneficial social cooperation.  Tariffs and other trade restrictions (including domestic trade restrictions, such as occupational-licensing requirements) are obstacles to such social cooperation.  Trade restrictions artificially limit the number of individuals with whom you may choose to cooperate to mutual advantage.  In this, as in other ways, trade restrictions are genuinely uncivilized, for they restrict the growth and deepening of civilization.

Trade restrictions are a barbarous relic of antediluvian superstitions and fallacies mixed with venal interest-group politics.  It’s understandable why many of the people who find Trump to be an appealing character cheer for this barbarous relic; it is much less understandable why so many people who fancy themselves to be all modern-like and “progressive” are among this relic’s most vocal cheerleaders.

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In the February 2000 Freeman I made the case that, contrary to popular opinion, market-driven economic growth makes the environment cleaner.  This idea later sparked this series here at Cafe Hayek.

My column is below the fold.

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In this January 2000 Freeman column I drew two important lessons from the just-concluded 1900s.  My column is beneath the fold.

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Quotation of the Day…

by Don Boudreaux on January 15, 2018

in Complexity & Emergence, Curious Task, Economics

… is from page 267 of my late Nobel economics laureate colleague Jim Buchanan’s profound January 1989 Business Economics article, “On the Structure of an Economy,” as this article is reprinted in James M. Buchanan, Federalism, Liberty, and Law (2001), which is volume 18 of the Collected Works of James M. Buchanan (original emphasis):

The principle of spontaneous coordination of the market is the principle of our discipline.

DBx: Understanding that the economy and the society of which it is a part are indeed unplanned – and unplannable – orders is a first step for anyone who wishes to understand society and the economy, and who wishes also to master the economic way of thinking.  And a large portion of the economic way of thinking consists of being able to distinguish plausible accounts of how order emerges spontaneously from implausible accounts – and no account is more implausible than that the order is the intended result of human consciousness and design.

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In Which World Would You Rather Live?

by Don Boudreaux on January 14, 2018

in Myths and Fallacies

Yesterday, Craig Walenta sent to me this e-mail (the text of which I share here, in full, with his kind permission):

Good afternoon Professor,

Quick question. Discussing tax cuts generally somebody says to me, “Well if rich people get a tax cut, their marginal propensity to consume is lower.”

I responded that he’s not putting the money under his mattress, but how can I respond to that better?

Here’s the reply that I sent to Craig:

I’d respond by saying: “You’re absolutely correct – which means that rich-people’s marginal propensity to save and invest is higher.  And it’s savings and investing that are key drivers of economic growth.”

……

Allow me to elaborate a bit.  While saving and investment are not sufficient for economic growth and mass flourishing – market-tested innovation is indispensable, as is security of property rights – saving and investment are among the many necessary conditions.  And I believe that, among all of the many necessary conditions, saving and investment are especially important to emphasize given the man-in-the-street’s naive, Keynesian conviction that the great driver of economic prosperity is consumer spending.

For non-rich people it’s a blessing, not a curse, that rich people save.  Saving (rather than consuming) releases resources to be used, among other ways, to produce capital goods, to refurbish factories and stores, and – importantly – to fund and sustain research and development and other innovative institutions and efforts.  It is simply untrue that the economy necessarily “slows” or otherwise suffers insofar as money is not spent buying consumption goods and services.

So here’s a mental experiment, one that probes cases that, while admittedly extreme, are instructive.  Ask yourself in which world would you prefer to live: Smithworld or Keynesworld?

These two worlds are remarkably like each other except for one feature.  In Smithworld, many people save, while in Keynesworld no one saves.  Also in Smithworld, wealthier people save higher portions of their incomes than do their less-wealthy fellow Smithworlders.  In stark contrast, in Keynesworld every cent earned as income, within the week of it being earned, is spent to satisfy an immediate consumption desire.  Put differently, the marginal propensity to consume in Keynesworld is much higher than it is in Smithworld.  Indeed, in Keynesworld, the marginal propensity to consume is 100 percent, and it is 100 percent regardless of income level.

If you had to choose to be a life-long resident of one of these two worlds, which of these worlds would you choose for you and your family?

Without a split-moment of hesitation I’d choose Smithworld.  While Keynesworld’s prospects for economic growth are nil, such prospects exist in Smithworld.

……

To be upset that “rich” people spend for consumption a smaller percentage of their incomes than do other people is to be upset that “rich” people do not personally gobble down and use up for their own gratification as many resources as their current incomes permit.  To be upset at such a thing is to be upset that “rich” people are reserving resources for entrepreneurs and investors to put toward activities that increase outputs for others.

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In the January 2000 Freeman I reviewed one of my favorite books of the 1990s: Michael Cox’s and Richard Alm’s 1999 volume, Myths of Rich & Poor.  My review is below the fold.

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Debating the Virtue of Selfishness

by Don Boudreaux on January 14, 2018

in Current Affairs

On the evening of Tuesday Jan. 16th, you’ll be able to watch live, and for no charge, a debate on the virtue of selfishness.  The debaters are Yaron Brook and Gene Epstein.  It’ll start at 6:45 pm EST.  You’ll also be able to participate in the Oxford-style before-and-after voting, and write in questions that the debaters might directly address.

Click here to access the video posted by Reason Magazine for 6:45 pm on Tuesday, January 16th.

Go into the link right now and you’ll find a helpful reminder button for 6:45 on the 16th.  You’ll also find the link www.sohovote.com, which posts the resolution: “Selfishness is a virtue,” under the headline “Pre-Debate Vote.”  You’ll be able to vote right now with a “Yes,’ “No,” or “Undecided” on this resolution.  Your vote will go into the final tally only if you participate in the “Post-Debate” vote that will be held during the live event.

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Real Money Is Not Real Goods and Services

by Don Boudreaux on January 14, 2018

in Myths and Fallacies, Trade

Here’s another letter to my frequent “Trump Man” e-mail correspondent, Nolan McKinney:

Mr. McKinney:

Agitated by this letter of mine, you write that you “don’t see why Mexico has to export more to pay for [Trump’s border] wall. They’ll pay for it with just their money.”

Money has value only because it can be exchanged for real goods and service.  And so people, non-Americans no less than Americans, earn money only if and to the extent that they themselves supply to – export to – the market real goods and services.  The reason is that no one will voluntarily part with money that can be used to acquire real goods and services in exchange for nothing or (what is the same thing) in exchange for pieces of paper called “money,” such as Monopoly “money,” that cannot be exchanged for real goods and services.

If the economic proposition implicit in your claim is correct, then you can make an excellent living by quitting your current job in order to spend a few minutes each day using your office printer to print out “McKinney dollars” – little pieces of paper that you call “money.”  Your economic ‘theory’ implies that grocers, restaurateurs, department-store owners, physicians – indeed, anyone with whom you currently engage in market exchanges – will be content for you to pay for what you buy from them with ‘just your money.’

Try this manner of paying for things and let me know how it works out for you.

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

P.S. Suppose you order a meal in a Mexican restaurant and are served a plate piled high with nothing but pesos?  Would you eat that meal?

…..

Note to my fellow economists: especially – but not only – because I’m a great admirer of the work of the late W.H. Hutt, I am well aware that money performs real and genuinely valuable functions in a market economy.

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