If I Were A Shill for Industry….

by Don Boudreaux on March 13, 2008

in Myths and Fallacies

In this recent blog-post at “Notes,” I and my fellow GMU bloggers such as Bryan Caplan, Tyler Cowen, Arnold Kling, Alex Tabarrok, and, of course, Russ Roberts were said to “seem to be shills for industry.”  Actually, I really like the full quotation, so here it is:

If we were to judge by the internet, then the most influential economists in the world are the George Mason economists of Marginal Revolution, Cafe Hayek, and Econlog.

These guys seem to be everywhere. I don’t like them much — they seem to be shills for industry, and just plain lazy. (Consider Kling’s offhand comment that dogs impose more of a burden on the environment than SUVs, without any research.) They aren’t exactly mainstream, either, but their views are fairly stereotypical.

This accusation of seeming to be a “shill” for industry prompted me to write this column, published today in the Pittsburgh Tribune-Review.  Here’s a key paragraph:

If I were a shill for industry…I would oppose free markets. Free markets, after all, are markets open to competition that invariably keeps the profits of existing firms from remaining excessive and, often, even bankrupts firms once thought to be invincible industry leaders. Existing firms almost all deplore competition in their industries. They seek government regulations that hamstring rivals and potential rivals. And, of course, firms are forever pleading for “protection” from foreign competition.

I just wrote a book (“Globalization“) in which I make a strong and principled case for completely free trade – not free trade sometimes, for some firms, under some circumstances, with some qualifications, but free trade always, for all firms, under all circumstances, and with no qualifications.

Whether my book’s case for unalloyed free trade is correct or not, it is surely not the sort of book that causes the heads of many corporate CEOs to nod in eager agreement. The typical reaction of business people whenever they hear or read me make my case for genuinely free trade is to say something like, “Professor Boudreaux, you don’t understand the peculiarities of my industry.” And then each executive launches into a laundry list of excuses for why Congress should protect his industry from foreign rivals.

If I were an industry shill …

• I’d express agreement with these self-serving claims and do my best in my writings and speeches to make a case for “fair trade,” or ”balanced trade,” or “trade that’s in our national interest” — but never for free trade.

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Russ Nelson March 13, 2008 at 9:13 am

You would think that capitalists would be advocates for capitalism, but no. Capitalists want to buy from a free market and sell into a market protected against competition.

Brad Hutchings March 13, 2008 at 10:27 am

Wow. Talk about missing Arnold's point. And to discount the value of intuition of someone trained in the field and successful applying his knowledge outside academia. Amazing.

You guys ought to embrace the label though. Proudly call yourselves "shills for industriousness".

Unit March 13, 2008 at 10:30 am

The "tyranny of the market" (awful choice of words), that some people decry, cuts both ways: consumers want to buy low and sellers want to sell high. But both have to settle for the market price. Meta-knowledge of the market mechanism that lead to this result is not required of the actors involved, but it would make our life more pleasant.

indiana jim March 13, 2008 at 10:32 am

" If I were an industry shill …

• I'd express agreement with these self-serving claims and do my best in my writings and speeches to make a case for "fair trade," or "balanced trade," or "trade that's in our national interest" — but never for free trade. "

You'd be Lou Dobbs then?

TLH March 13, 2008 at 10:39 am

Kling has no numbers. He says he would bet, but he names no stakes, and specifies no terms. "Offhand remark" is a poor match.

John Dewey March 13, 2008 at 10:44 am

Don Boudreaux: "The typical reaction of business people whenever they hear or read me make my case for genuinely free trade is to say something like, "Professor Boudreaux, you don't understand the peculiarities of my industry."

I find this difficult to accept. I usually believe everything you write, but I'm skeptical about this reaction being "typical".

There are probably many business leaders who desire government intervention in their markets. But is that "typical"? Do the majority of industry captains desire "protection" for their products and services? Perhaps the ones who get the most attention by speaking loudly are protectionists. But how can anyone know these are the "typical" reactions of the "typical" business leaders?

I cannot blame a business leader for trying to gain an advantage. When politicians are handing out favors right and left, any executive would be shirking his responsibility by trying to obtain his share. But you are implying they prefer this arrangement.

Professor Boudreaux, I've worked with a few such leaders. I think they detest the power that politicians have to control their fate, and would gladly do away with it all. But they are trapped.

John Dewey March 13, 2008 at 10:46 am

My last post should have read:

"any executive would be shirking his responsibility by NOT trying to obtain his share"

Don Boudreaux March 13, 2008 at 10:58 am

To John Dewey: Perhaps "typical" is too strong a word. But it is surely true that that a FREQUENT reaction of business people whenever they hear or read me make my case for genuinely free trade is to say something like, "Professor Boudreaux, you don't understand the peculiarities of my industry.

Don Boudreaux

Brad Hutchings March 13, 2008 at 11:04 am

@TLH: If you read Kling in context, i.e. actually follow his voluminous essays and blog postings, you would understand why that is an offhand comment very atypical of his style, but probably based on sound intuition. I hope that if you're criticizing this one post of Kling's, you avoid spouting off what your intuition is in whatever it is that you do. Furthermore, how does research get done if nobody dares ask "could it be?" for fear that they will be labeled an industry shill? That this posting about SUVs vs. dogs is the new rallying point for opponents of Masonomics just demonstrates the general lack of curiosity and intellectual vacuousness of such people.

Randy March 13, 2008 at 11:14 am

Brad,

I'm thinking that it says a lot about the persuasive power of Masonomics that the progressive establishment finds it necessary to mount an offensive against it.

John Dewey March 13, 2008 at 11:14 am

OK, Don. Your explanation makes sense, and I'm back to believing almost everything you write.

save_the_rustbelt March 13, 2008 at 11:26 am

"…I just wrote a book ("Globalization") in which I make a strong and principled case for completely free trade…"

Don, so you are giving up tenure.

Congratulations on your liberation.

Sam Grove March 13, 2008 at 11:28 am

After all, business leaders have been making such claims since the time of anti-trust legislation.

Specific question for muirgeo:

Which interests originally called for anti-trust legislation?

scott clark March 13, 2008 at 11:57 am

John Dewey,

I am afraid it is more typical then you imagine. You may have in mind the business founder who spent his/her whole life devoted to it and watching it grow through sweat and ingenuity, and then distrustful of the government that could take it all away with the stroke of a legislative pen.
But that isn't the whole story, there is the case of young, ambitious people who join a company and work their way to the top, through external and internal politicing, generating returns for their shareholders by cultivating relationships with the government and its agents, getting seats on regulatory commissions, being asked to help write the rules. Those people spend their whole careers learning the protectionist and legislative game and how to turn it to their advantage, but they are far too deep into it to entertain the possiblity that what their doing is problematic.

I certainly hope your right, and it is reluctant acceptance of the current order, that they are part of the system only to protect themselves. I may have the wrong perspective because I live and work in the DC area, but I think my story happens fairly often, often enough to be called typical.

Brad Hutchings March 13, 2008 at 12:25 pm

Case in point. I've been watching CNBC in the background this morning, and lots of execs of big companies (example: GE) are at an environmental confab somewhere with a really pretty beach in the background calling for Congress to implement cap & trade on carbon output so the companies will have a more predictable handle on the future cost of carbon emissions. Coincidentally, GE expects to do $25B in sales in FY2010 from its so-called "green" products. Lock in your sales with laws, right?

Methinks March 13, 2008 at 12:29 pm

John Dewey,

I think Scott makes an important point. The government creates economic rent which businessmen would be stupid not to seek. In light of the growing government intervention in the economy, it's hard to believe that that rent-seeking behaviour isn't common and won't become even more widespread.

John Dewey March 13, 2008 at 12:33 pm

scott clark,

I may have a different perspective because I have not spent a minute working in DC. Over the past 35 years I've worked with executives in California, Texas, Tennessee, and Missouri. I've also done business with business managers in about a half dozen other states. I truly believe most business leaders – outside of the defense industry – would prefer this crap to go away.

Don't think because business leaders play the game that means they endorse it. The power of Washington and of our state governments forces them to play along. The problem is with the politicians and the government bureaucracy, not with the business leaders. The latter can survive without government protection and handouts. The former depends on it for their livelihood.

John Dewey March 13, 2008 at 12:40 pm

methinks: "In light of the growing government intervention in the economy, it's hard to believe that that rent-seeking behaviour isn't common and won't become even more widespread."

Perhaps you missed my statement from 10:44 this morning:

"When politicians are handing out favors right and left, any executive would be shirking his responsibility by (not) trying to obtain his share."

My point was that the reaction Don implied – that executives DESIRE to use government to protect them – is inaccurate. Rather, they are FORCED to do so by the power of politicians.

Again, don't blame the business leaders who are bound by law to represent the interests of shareholders. Blame the damned politicians who are supposed to be representing the interests of taxpayers.

FreedomLover March 13, 2008 at 12:53 pm

Proudly wear the label "Shill for Freedom".

FreedomLover March 13, 2008 at 12:55 pm

The guy who wrote that column should be called "shill for economic slavery and lowest common denominator".

FreedomLover March 13, 2008 at 12:56 pm

John Dewey:

It's only human nature to want to protect your piece of the pie. The idea that captain of industry would be for unfettered free markets strikes of saintly-hood that they've not earned.

FreedomLover March 13, 2008 at 12:59 pm

The only TRUE free-marketeers are small businessmen who have only to gain. Once they become large businessmen, suddenly they're in the protection racket. Free market theory and practice are different things.

John Dewey March 13, 2008 at 1:15 pm

feedomlover: "It's only human nature to want to protect your piece of the pie. "

Many more business leaders than you can imagine do play within the rules. The problem is not the business executives who are bound by law to protect the owners' interests. The problem is the rulemakers to whom we've given too much power.

Do I believe that all business leaders are saints? Of course not. But my view of teh relationship between businessmen and politicians is similar to that expressed by Thomas Sowell:

"Such is the moral fiber of our elected officials, whose purity we are trying to save from corruption by outside interests that make campaign contributions. It never seems to occur to many in the media that perhaps it is the politicians who are already corrupt and who demand tribute from businesses and others in the form of campaign contributions. "

Tom March 13, 2008 at 1:16 pm

"…the most influential economists in the world are the George Mason economists…

I'll toast to that! Congratulations!

I think of you guys as the "New Chicago" or the "Next Chicago". Which do you like best?

Keep up the great work.

Tom

Gamut March 13, 2008 at 1:40 pm

Save_the_rustbelt:

You'd have a case if you suggested that Dr. Bourdreaux push for academic "fair trade". After all, lots of places (like my own country) subsidise research and education by tremendous margins. In fact, some might say that academics here are public servants. How can American research compete in such an unfair environment? Perhaps a ban on citation of European and Canadian papers would help balance the trade? Definately restrictions on use of unfairly trained and protected forgein teachers is in order. After all, how can learning hope to survive with the odds stacked so unfavourably against poor American institutions?

Randy March 13, 2008 at 1:53 pm

Gamut,

That's an interesting point, but I question the assumption that making researchers public servants is an advantage. They may get more money, but they also have to deal with the buracracy. Nor am I sold on the idea that subsidized education is an advantage – for the same reason.

FreedomLover March 13, 2008 at 2:03 pm

Randy:

Large pharmas have their own bureaucracy. The nature of any large corporate beast.

Fabio Franco March 13, 2008 at 3:49 pm

"Accuse them of doing what you do, curse them for being what you are."
—–Lenin

The Leftists continue to follow the master's strategy. To counter them we must unveil their farce.

Dan Klein did this when he wrote about Paul Krugman in Econjournalwatch.org. He unmasked a malicious, dishonest "scholar" with an exhaustive analysis of ALL of Krugman's articles and proved that the NYT columnist has a parallel agenda.

Now, who is this undergroundman who hides behind his "Notes"? Dostoevsky already had him pegged:

"I am a sick man. … I am a spiteful man. I am an unattractive man. I believe my liver is diseased. However, I know nothing at all about my disease."

Well, the GMU docs understand your disease well. Listen to them and you will one day emerge out of the underground to see the light, and perhaps rid yourself of the blinding sickness called Leftism.

Methinks March 13, 2008 at 4:18 pm

John Dewey,

I did read your 10:44 post. We agree on the cause. I only meant that I think that once politics warps the environment and changes incentives, the way people think about business in general also changes. In addition to politics, I think human nature also leads us to believe that our business is somehow unique and deserves special treatment. Failures are blamed not on poor execution or pure dumb luck but on some "flaw" in the competitive system which only government can fix. This thinking is then passed on to the next generation of business "leaders".

Incidentally, I have run several of my own businesses, most in highly regulated environments, and I would love to sink or swim without the interference of government. However, in my experience, this attitude seems to be the exception rather than the norm. Then again, our different observations may be due to the fact that I'm in the Soviet Socialist Republic of New York and you're in Texas :)

John Dewey March 13, 2008 at 4:56 pm

methinks: "I'm in the Soviet Socialist Republic of New York and you're in Texas"

Oh, yeah. Worlds apart.

FreedomLover March 13, 2008 at 5:09 pm

Methinks:

So how many more permits do you need for the business you had in NY vs TX? Just wanting to quantify this. Obviously NY has much higher tax rates.

Methinks March 13, 2008 at 5:20 pm

My impressions of Texan's attitudes compated to New Yorkers' were formed in the days when I had to visit a lot during my oil days. I never lived there. So, my impressions may not totally reflect reality .

I don't know about the permits, Freedomlover. My current regulating body is Federal, so I would be equally effected everywhere in the country. My point is that attitudes here are so favourable to regulation than the seem to be in Texas.

FreedomLover March 13, 2008 at 5:23 pm

Methinks:

I've been reading lately that Texas is trending purple in the next 10 years and will be a solidly blue state in 20.

Sam Grove March 13, 2008 at 6:11 pm

If industry were interested in having a free market, the LP would've won decades ago.

Python March 13, 2008 at 7:16 pm

Freedomlover,

Please show evidence of Texas' move to the Democrat side in 20 years. I'd love to see the analysis.

Methinks March 13, 2008 at 7:25 pm

Freedomlover, we're bright red over here with Hillary painting a hammer and sickle on the state seal. It's all relative.

John Dewey March 13, 2008 at 7:48 pm

same grove: "If industry were interested in having a free market, the LP would've won decades ago."

If the LP were only interested in free markets – and if only industry executives and entrepreneurs could vote – perhaps the LP might have succeeded.

Industry executives I've known, with a few exceptions, are among the most conservative of all Americans. Many such men – and women – would be troubled by these LP positions:

- elimination of all drug laws;
- elimination of pornography laws;
- legalization of gay marriage;
- adoption rights for gay couples;
- legalization of prostitution;
- open immigration;
- sale and privatization of public parks, highways, and dams.

You may view all of these as free market issues. But to the conservative executives I've known, these issues are radically different from steel tariffs, consumer product standards, and medical licensing.

Sam Grove March 13, 2008 at 8:47 pm

John, it's a bit of a joke about libertarians being pro-corporation.

Progressives suppose that these corporate executives are ONLY interested in making money and are not motivated by any ideology.

LowcountryJoe March 13, 2008 at 8:48 pm

- legalization of gay marriage;

I do not have a problem with gay marriage. But I do see where a new definition of marriage may potentially lead. If same-sex couple would be allowed to be formally married — and be eligible to survivor benefits under the Social Security system as it is in place now — then what is to stop children from marrying their terminal ill parents to keep the benifits flowing? "Rediculous!", you say; perhaps. But if marriage is to no longer retain its traditional meaning, expect the slippery sloped laywers to fight for anything that any potential new legislation does not specifically prohibit.

babinich March 13, 2008 at 8:57 pm

Don,

You and your crew have done more to enlighten folks from all over the world free of charge than just about anyone else of this God forsaken marble.

Free, that's right free for you and me. They give of their time for our benefit.

Special mention goes out to Arnold Kling's site (I know it's not "his" but you know what I mean) and Econobrowser.

Keep up the good work!

Gamut March 13, 2008 at 9:05 pm

I definitely agree. Though the amount of work that I don't get done while I read all these comments does carry a hefty price tag. Thank you, and curse you for being so engaging all the time.

FreedomLover March 13, 2008 at 9:49 pm

I'm a little-L libertarian. I say YES to anarcho-capitalism now!

Gil March 13, 2008 at 9:55 pm

Not the mention the LP was knee deep when it revealed its Rothbardian policy on children. I can't help this was parodied in Simpsons Halloween episode 11 part 2.

mcwop March 13, 2008 at 11:25 pm

LowcountryJoe I have no problem with gay marriage at all, but marriage should be a religious/cultural ceremony and private contract. Government should not regulate marriage. For government, regulating marriage is their way of combining incomes that are subject to higher marginal rates.

Sam Grove March 14, 2008 at 1:22 am

Are there not two kinds of economists; those that advise the government how to manage things and those that advise government to lay off?

Kent Gatewood March 14, 2008 at 1:46 am

No restraints on selling defense related items to China?

Richard Pointer March 14, 2008 at 1:51 am

I just wish someone would go through the logic of the HO model with this kid and show him that Marxism was mathematically disproved long ago. Capital and Labor can have the same interests depending on the resource allocation.

a Duoist March 14, 2008 at 2:08 am

Has anyone ever done some rigorous work in delineating the amount of corporate welfare versus the amount of human welfare in the U.S. budget? And isn't the argument for both strands of welfare made in terms of the recipient's 'helplessness' in the face of more powerful, competing, and uncaring forces? If this is true, then isn't all welfare the manifestation of a determinist's world-view, one which finds itself even in the 'Comments' section of 'Cafe Hayek'?

FreedomLover March 14, 2008 at 3:07 am

Duoist:

It's all in the name of "compassion". As if evolution cares for such a thing. The more welfare we do, the more we hinder our own natural progress.

LowcountryJoe March 14, 2008 at 9:15 am

No restraints on selling defense related items to China?

Selling major weapons systems to a country like China — a country that postures violence on its neigbors from time to time — is probably not a good idea. But then companies that already have lucrative defense contracts with the Pentagon (and the Armed Forces Appropriators in congress who secure the budgetary monies) would likely not want to do any selling to countries that fit that kind of template for fear that the gravy-train of garaunteed contract revnue would vanish.

Then again, our Federal government sells surplus F-16s to Pakistan even though they and India posture violence on each other from time to time. Does an F-16 qualify as a major weapon system that shouldn't be traded? By itself, it is not a weapon; it is just a means of delivering weapons and taking out other delivery systems.

Isn't it interesting, though, that the last line of defense for a protectionist to use is defense and security issues. Because once that loophole has been established as the sole remaining impediment to free trade, everything that can be traded suddenly becomes tied to national interests, security, and defense. It is the vicious little loophole that keeps breeding more loopholes.

Side questions: does anyone here really believe that nuclear weapons can ever be containeed to just the governments that have them now? What is the total cost of containment and the associated enforcement costs of containing these types of weapons? Is the cost worth it? Are the United States excessively burdened with this cost? Would an expanded United States — through aggressive campaining (advertising) of our openess; using Article IV sections 3 & 4 of our constitution — be more effective at world peace than say the United Nations would be? I know that this is crazy talk but you all knew that someone would fill the Duck's void!

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