Bonus Quotation of the Day…

by Don Boudreaux on January 22, 2018

in Crony Capitalism, Trade

… is from page 168 of Dwight Lee’s and Richard McKenzie’s 1987 book, Regulating Government:

Tariffs blot out foreign competition, giving the protected industries opportunities to raise their prices and make more money.  In their impact, the higher prices have much the same effect on consumer purchasing power as a direct tax increase on personal income.  The greater incomes received by workers, owners, and suppliers of the protected industries are categorically the same as  welfare transfers such as checks distributed to low-income mothers with children.  Incomes in the protected industries are greater than what could have been earned in a free market; they are the consequence of forced shifts in purchasing power.

DBx: Few experiences are as galling as encountering ‘conservatives’ who oppose the welfare state and simultaneously support protectionism.  Such hypocrisy is insufferable.  And few experiences are as maddening as encountering “Progressives” who, believing that ‘the poor’ are short-changed and made helpless by the free market, support the welfare state and simultaneously support protectionism.  Such ignorance is inexcusable.

Add a Comment    Share Share    Print    Email

George Will ponders immigration policy.

George Leef is rightly unhappy with a pathetic 8th Circuit Court ruling in an occupational-licensing case.

James Pethokoukis argues that markets are more robustly competitive than antitrust enthusiasts believe them to be.  (I go ever further than does Pethokoukis.  A close study of economic history turns up little, if any, evidence that markets have ever generated firm or industry sizes, structures, or practices that have harmed consumers over any significant-enough length of time.  Indeed, reflecting on the government’s willingness to impose restrictions on both international and domestic trade – see the link just above to George Leef’s article – it’s preposterous to look to government, which habitually creates genuine monopoly power, for protection from imagined monopoly power.)

Scott Sumner writes about consumer and producer surplus – and, especially you economists, be sure also to read carefully Pierre Lemieux’s comment on Scott’s post.

John Miltimore asks why California has the highest rate of poverty among all U.S. states.

My Mercatus Center colleague Charles Blahaus warns of the budget-busting nature of Social Security and government health-care entitlements.

In the Wall Street Journal, William Easterly reviews Charles Mann’s book on doomsayers and their nemeses.

Free medical care is really costly for patients.

Add a Comment    Share Share    Print    Email

Photos as Data

by Don Boudreaux on January 22, 2018

in Cleaned by Capitalism, Data, Standard of Living, Video

This TED talk by Anna Rosling Rönnlund is extraordinarily informative.

Here’s the website.

I thank Steve Hardy for alerting me to this excellent video and website.

Add a Comment    Share Share    Print    Email

I wrote this December 2000 Freeman column on my son’s, Thomas’s, first day of pre-school.  My column is below the fold.

Read the full post →

Add a Comment    Share Share    Print    Email

Quotation of the Day…

by Don Boudreaux on January 22, 2018

in Crony Capitalism, History, Trade

… is from page 245 of Douglas Irwin’s 2017 book, Clashing Over Commerce; Doug here is writing about the post-civil-war United States; during this period, Republicans were the party of protectionism:

As much as the Democrats were dismayed by the corrupt politics behind tariffs, they ran up against a simple problem: the policy delivered tangible benefits to important constituencies, which in turn gave their political support to the Republicans.

DBx: Of course, protectionists of this era, as in ours, were forever offering up cockamamie tales of how government-induced greater scarcity of raw materials, intermediate goods, and consumer goods are really a blessing and source of much-increased wealth and happiness for the nation, cities, towns, villages, the People, workers, families, students, teachers, cats, and dogs.  Doug Irwin critically reviews these tales in his book; they differ in no essential ways from the tales offered today by protectionists.  Then as now, these tales were factually incorrect or incomplete and, with rare exception, logically incoherent.  (The few such tales that are coherent are irrelevant in reality.)  What all such tales have in common is that they do just enough to persuade ordinary men and women to allow themselves to be plundered by a subset of existing producer groups.

(Pictured above is William “Pig Iron” Kelley [R-PA].)

Add a Comment    Share Share    Print    Email

Milton and (Charlie) Rose in Full

by Don Boudreaux on January 21, 2018

in Balance of Payments, Trade, Video

My friend BobbyBig remembered that more than 12 years ago I posted this snippet from a transcript of one of the very last television appearances by the late, great Milton Friedman.

BobbyBig also sends this now-available full video and transcript of Friedman’s discussion with Charlie Rose.  Pay especially close attention to Friedman setting Charlie Rose straight on the matter of the so-called “trade deficit.”

Add a Comment    Share Share    Print    Email

… is from page 352 of Joseph Schumpeter‘s monumental, posthumously published 1954 History of Economic Analysis:

The first thing to observe about this concept [of the balance of trade] is that it is in fact an analytic tool.  The balance of trade is not a concrete thing like a price or a load of merchandise.

DBx: Yes (although it is even more accurate to describe the balance of trade as an accounting convention).  If, for example, it had been decided to record purchases and sales of real estate on the current account rather than on the capital account, the size of each country’s current-account deficit or surplus would be different even though absolutely nothing real in the national or global economy would be changed.  And yet to hear any of the many protectionists bemoan their country’s trade- or current-account deficit is to hear people who typically mistake this accounting convention for a concrete thing.  Such complaints almost always reflect utter misunderstanding of so-called ‘trade balances.’

Add a Comment    Share Share    Print    Email

21 January 2018

Rep. Paul Ryan, Rep. Nancy Pelosi, Sen. Mitch McConnell, Sen. Charles Schumer
Capitol Hill
Washington, DC

Congressional Leaders:

The theory (one to which you undoubtedly subscribe) is that the United States government bestows real and vital benefits upon us Americans in exchange for the taxes that we pay; that is, that taxes are the prices we citizens pay for services rendered by our government.  If this theory is correct, the current closure of much of the U.S. government denies to us many of these services and their accompanying benefits.

Will you, therefore, reduce our tax bills accordingly?  After all, why should we pay for services and goods that we do not receive?  I’m not obliged to pay my physician for services that she withholds from me.  Likewise, I’m not obliged to pay for a restaurant meal that is never served to me.  Ditto for services not rendered to me by my dry cleaner, not rendered to me by my appliance repairman, not rendered to me by my auto mechanic, and not rendered to me by any of the many other individuals and firms who refuse, for whatever reason, to serve me in exchange for what I would otherwise pay them.  Furthermore, if any of these merchants nevertheless attempted to forcibly extract from me payment for services not rendered, he or she would be rightly regarded as a common criminal and imprisoned.

Especially because you are, as they say, “public servants,” you of all people don’t wish to behave as common criminals.  I therefore request – actually, demand – that you adjust my and every other taxpayer’s tax bill downward so that we are not charged for services not rendered.

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

Add a Comment    Share Share    Print    Email

In the November 2000 Freeman I reviewed Joel Blau’s 1999 book, Illusions of Prosperity.  My review – which is below the fold – is not flattering.  (Also below the fold is another review of this book that I wrote and posted on in August 2000.)

Read the full post →

Add a Comment    Share Share    Print    Email

… is from page 223 of Douglas Irwin’s 2017 book, Clashing Over Commerce; Doug here is writing about the immediate post-civil-war United States (footnote deleted):

John Kasson (R-IA) agreed and warned that if Congress shifted from a tariff for revenue to a tariff for protection, special interests would come to have a disproportionate influence on policy: “I know very well that the iron interest, the cotton interest, the glass interest, and many others, can send gentlemen here to advocate their interests, and that they may be heard before the committee and may fill out lobbies; but the great interest of the consumers of the country is not organized into a system of mutual protective associations.  That interest must be heard by members of this floor who seek to protect it.  It must be heard here as much as these organizations of capital.”

DBx: Rep. Kasson obviously understood well the special-interest-group effect – likely because he, as a member of Congress, saw that effect in play each and every day that he spent as a member of Congress.  If individuals organized for political purposes to push their interests as consumers as readily and as successfully as many of them organize as producers to push their interests as producers, far fewer politicians and pundits would be sympathetic to protectionism (that is, sympathetic to what, again, Jon Murphy calls “scarcityism”).  But because for nearly all of us our interests as consumers, unlike our interests as producers, are not concentrated on any one or two items, our attention focuses on our interests as producers while our interests as consumers are largely ignored (save by a handful of economists who insist that that which is not immediately seen is both vast and important).

I say again to populists and “Progressives” who embrace protectionism in the name of ordinary people: you show me a tariff or other trade restriction, and I’ll show you a politically powerful producer group whose members charge prices higher than they would on free markets and are champions of a scheme of restriction that destroys business prospects and jobs in other parts of the domestic economy.
(Pictured above is Rep. John Kasson.)

Add a Comment    Share Share    Print    Email