Here’s a letter to a new correspondent:

Dr. Harlan Quarles:

Dr. Quarles:

You write that you find “hysterically laughable” all attempts by “free marketeering nut jobs,” including me, “to defend WalMart free-riding on taxpayers” – by which, you explain, Walmart’s ability (as you mistakenly see it) to pay to its workers excessively low wages because these workers receive welfare handouts from the state.  I’ll not bother repeating here the arguments that send you into such stitches (although – in case you’re in the mood for more side-splitting amusement – I provide convenient links to some of these arguments below*).

I here rest content to ask you a serious question – and, in doing so, I grant for the sake of argument the truth of your false belief that taxpayers do indeed subsidize Walmart’s employment of low-wage workers: If, as you apparently agree, forcing taxpayers to subsidize the activities of private parties is objectionable, why don’t you turn your ire away from Walmart and direct it instead toward those people who are directly responsible for arranging for such subsidies in the first place – namely, politicians and pundits who continue to support the welfare state?  I agree with you that institutional arrangements that allow Jones to free-ride on Smith are undesirable. Yet such free-riding is at the very core of the welfare state; free-riding is inseparable from this institutional arrangement.  Therefore, given your apparent, deep concern for the well-being of taxpayers, and your anger that third parties now have indefensible access to taxpayers’ funds, I should expect that you will join me and other classical liberals and libertarians in calling for the welfare state to be completely abolished.

Can we count on you?!

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

* See here, here, and here.

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Free Trade: A Prosperity Machine

by Don Boudreaux on September 25, 2016

in Seen and Unseen, Trade, Video

Here’s a wonderful, short video on trade featuring Tom Palmer.  (I believe that I failed to mention it here, at Cafe Hayek, when it first came out in 2010.)  Watch this video!!  (HT Jim Rose)

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Some Links

by Don Boudreaux on September 25, 2016

in Books, Competition, Immigration, Monetary Policy, Prices, Seen and Unseen, Taxes, Trade

Bob Higgs gets to the heart of the benefits of trade.  A slice:

Yet producing and exporting goods is clearly always a means whereby the goods produced abroad and imported into the USA are acquired at lesser total resource cost than would be the case if those goods were produced domestically.

Many people fail to see the simple logic of this kind of exchange, yet in economic essentials it is no different from beneficial exchange that does not involve crossing national borders. The economically irrelevant borders are used by interested parties and economic nincompoops to muddy the waters of understanding—and to feather the nests of special interests who cannot or do not wish to compete openly for the business of American buyers. The outrageous upshot is, among other things, that aspirants for the presidency currently compete to promise the public that if elected they will carry out economically destructive anti-free-trade policies of various sorts.

Here’s part 7 of George Selgin’s Primer on Monetary Policy.

Matt Welch supplies a helpful readers’ guide to lefty panic over Gary Johnson’s candidacy.

John Cochrane offers an economics quiz to Clinton, Trump, and everyone else who wants to lower the cost of child care in America.

Ryan Bourne defends surge pricing.

I am very eager to read Doug Irwin’s forthcoming (2017) book on the history of trade policy in America.  (HT Tyler Cowen)

Everyone who frets over “corporate inversions” should read this essay by Veronique de Rugy.

Sarah Skwire gives a wonderful history lesson in religious freedom.

Steve Horwitz explains that there is no such thing as “trickle-down economics.

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… is from page 18 of Arnold Kling’s splendid new book (2016), Specialization and Trade: A Re-introduction to Economics:

[T]he price system guides the economy toward sustainable use of resources.  In contrast, individuals who attempt to override the price system through their individual choices or by imposing government regulations can easily miscalculate the costs of their actions.

Common examples of people who display such hubris and who commit such miscalculation include, but are not limited to, proponents

– of minimum wages

– of tariffs and of “infant-industry” protection

– of subsidies of all sorts, including the export subsidies doled out by that great geyser of cronyism, the U.S. Export-Import Bank

– of price ceilings, including rent control and prohibitions on so-called “price gouging”

– of buying local as a means of improving the local economy or of helping the environment

– of recycling of the sort that is politically correct today (Although much recycling is indeed sensible; such sensible recycling is encouraged by market prices.)

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Bonus Quotation of the Day…

by Don Boudreaux on September 24, 2016

in Complexity & Emergence, Law

… is from page 24 of the 1998 Liberty Fund reprint of John Maxcy Zane’s 1927 volume, The Story of Law:

Each one of the community was driven to conform to customary ways of acting.  This fundamental instinct is still as intense in us as in the original man.  It is for law the most important instinct of the animal man, for upon it and not upon force or authority, has depended the growth and development of law.  But it fixes, once and for all, the important fact that law cannot be changed any faster than the mass of the community changes in opinion or belief.  The most absolute despot that has ever lived, the force of legislation or the irrefutable arguments for change, cannot impose upon men a change in law until the mass of the community is ready to accept or has already accepted the change.

Unlike legislation, which is the result both of human action and of human design, law is the result of human action but not of human design.

This truth, explained so eloquently by Zane in his book, lies at the heart of why I regard voting in political elections to be far less important than most people think voting to be.

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More On Why I Don’t Vote

by Don Boudreaux on September 24, 2016

in Complexity & Emergence, Law

Here’s a letter to a correspondent:

Mr. Craig Morgan:

Thanks for your kind e-mail.  Perplexed that I don’t vote in political elections, you write that you assume that I “favor democracy over other forms of government, and of course democracy needs voters to function.”

My position is a bit different from what you describe.  I favor no form of sovereign government.  I believe that, without any state, voluntarily formed associations of people would arise to supply public goods, and would supply them better than does the state.  None of these associations would supply public goods perfectly, but perfection isn’t the appropriate standard.  I’m aware that this ‘no-state’ statement of mine likely strikes you as absurd.  But see some of the books that I list below.*  If you read even just one or two of these works you’ll at least better see where I’m coming from.

I agree that if government exists, a least-dangerous form of it is to be found in some manner of representative democracy.  And, of course, representative democracy – as you note – “needs voters to function.”  But voters are not all that it needs to function.  It needs also ideas.

In fact, I believe that voters are far less important in a democracy than most people assume them to be.  As I see matters, the single most important factor by far that determines what the state actually does is public opinion – that is, prevailing ideas, attitudes, presumptions, values, shared beliefs, and expectations.  If public opinion changes, the course of public policy changes.  If public opinion does not change, the course of public policy does not change.  Voters determine the particular individuals who hold office at any time, but voters as such do not determine the public policies that will be pursued.  And nor, really, do the individuals who hold office make these determinations.  The thrusts of public policies, if not their details, are determined, overwhelmingly, by prevailing public opinion.

If I’m correct about this matter, then I ask: why elevate voting to a special rank?  Voters play a role, of course.  But so, too – and more importantly – do opinion makers and shapers, including neighbors talking over the fence to each other in the evening, co-workers conversing over lunch, and (very important this!) parents teaching their children.  The reason I don’t vote isn’t exclusively because I have an extreme distaste for formal politics.  Another main part of the reason is that I don’t believe that voting is all that important.

Understand: my belief in the relative unimportance of voting springs not just from, and not even mainly from, the reality that no one vote will determine the outcome of any election.  Rather, my belief springs from the fact that each of us is most effective in changing public policy, not when we vote, but when and to the extent that each of us does our part to change prevailing ideas.

The fact that I don’t vote means only that I choose not to perform what I regard to be a remarkably unimportant and insignificant (and disagreeable) act – an act that would be largely insignificant even if my vote were guaranteed to determine the outcome of the election.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

* See, for example:

David Beito, Peter Gordon, & Alex Tabarrok, eds., The Voluntary City
Bruce Benson, The Enterprise of Law
Robert Ellickson, Order without Law
David D. Friedman, The Machinery of Freedom
Michael Huemer, The Problem of Political Authority
Peter Leeson, Anarchy Unbound
David Skarbek, The Social Order of the Underworld
Edward Stringham, Private Governance

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Shikha Dalmia debates Jeremy Waldron on freedom of speech.  A slice from Shikha’s remarks:

I think it’s fair to say that free speech is more endangered on college campuses than anywhere else in America, although the virus is spreading.

Partly this is due to federal mandates like Title IX that require all colleges, public and private that receive federal money, to ensure gender equality on campus and, prevent sexual “harassment” – verbal and nonverbal. But partly it is of their own volitional embrace of political correctness and demands by social justice warriors who want not freedom of speech but freedom from speech.

My colleague Alex Tabarrok is rightly flabbergasted at how depraved and evil some intellectuals with mainstream platforms can be.  As Alex correctly points out, the real world really does feature villains from Ayn Rand’s fiction.

Patrick Eddington is rightly critical of Hillary Clinton, who is a dishonest and dangerous neocon.  A slice:

Clinton has spent much of the post-convention campaign season excoriating Trump for his anti-Muslim language and proposals. He richly deserves the criticism. But Trump at least appears to be honest about the kind of unconstitutional surveillance and political repression he would likely try to perpetrate against Arabs and Muslims, whether its targeting those who already live here or those who would like to come here to escape a war-torn Middle East. Clinton is telling Arab- and Muslim-Americans how our government should not be persecuting members of their community while endorsing federal surveillance and related programs that do precisely that.

Elaine Schwartz helps us to see why the benefits of trade, although bountiful, are difficult to see.

My Mercatus Center colleagues Chris Koopman and Tom Savidge argue for less regulation of – and against government subsidies to – craft breweries.

In this short video, Johan Norberg reports on yet another unintended ill consequence of government intervention into the labor market.

Arnold Kling ponders the influence of Milton Friedman and Paul Samuelson.  A slice (link added):

Back to academic economists. I think that both Friedman and Samuelson were guilty of promoting economic methods that involved imitating hard science (at least as they thought of science as being practiced). Instead, in my book I argue that economic analysis can yield frameworks of interpretation, but economic hypotheses are not verifiable the way that they are in chemistry or physics.

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Quotation of the Day…

by Don Boudreaux on September 24, 2016

in Economics

… is from page 72 of Ben Rogge’s late-1970s speech “What Economists Can and Cannot Do,” as this essay is reprinted in A Maverick’s Defense of Freedom, the 2010 collection of Rogge’s essays that is edited by Dwight Lee:

Moreover, I am persuaded that capitalism can survive in meaningful form only in a society in which most of its members accept on principle a presumption in favor of freedom of choice, personal responsibility, and private property.  If each time a proposal is made that contradicts one or more of these principles (say, a requirement that peanuts may be grown on a given piece of land only if that piece of land has been “licensed” for peanut growing), each citizen has to consult his economics textbook to discover the likely long-run effects of such a law on real growth, unemployment among black teenagers, and the survival of the family farm, the cause is as well lost.

Yes.  Society is not a thing that has an engineering ‘solution.’  Economics is an indispensable guide to understanding the likely consequences of various policies, and for understanding how order emerges, or not, spontaneously.  But economics can no more ‘prove,’ or even show, what is the best set of policies, for economics is not a system of values.

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I don’t always agree with Richard Epstein, but I typically do.  He is, without doubt, one of the most articulate and significant classical liberals of our age.

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… is from page 267 of the late Ben Rogge’s 1971 essay “The Welfare State against the Negro,” as this essay is reprinted in A Maverick’s Defense of Freedom, the 2010 collection of Rogge’s essays that is edited by Dwight Lee:

Let me read you another one.  “Minimum wage rates: these often hurt those they are designed to help.  What good does it do a Negro youth to know that an employer must pay him $1.60 per hour if the fact that he must be paid that amount is what keeps him from getting a job?”  By the way, we need not just say Negro youth there; what good does it do any young person to know that an employer must pay him $1.60 if that is the fact that keeps him from getting the job at all?  Where is this statement from?  From the seventh edition of Economics by Paul Samuelson.

Paul Samuelson (1915-2009) – the first American to win the Nobel Prize in economics and a scholar embraced warmly by the political left – asked the most appropriate question about minimum wages.  This question, which is asked also by many others, has yet to be answered adequately.  It is usually ignored.  When it is not ignored, this question either is said to rest on a false premise (‘The best research show that the minimum wage casts no one out of a job!”) or is accused of being the wrong question (“The correct question is whether or not the losses suffered by those who, unfortunately, are rendered unemployable are outweighed by the gains enjoyed by those whose incomes rise as a result of the minimum wage.”).  Apart from the theoretically possible – but in the U.S. empirically preposterous – existence of monopsony power in the market for low-skilled workers (or the even more preposterous ‘efficiency-wage’ justification for minimum wages), minimum wages must shrink low-skilled workers’ employment options.  This shrinkage, moreover, almost certainly comes chiefly in the form of destroyed jobs (although it can, and surely does, occasionally come also in the form of worsened work conditions or fewer fringe benefits).

See this related EconLog post by David Henderson.

Proponents of the minimum wage are enemies of the least advantage people in society.  That most minimum-wage proponents do not realize the cruelty that their pet policy unleashes does not alter the reality.

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