Quotation of the Day…

by Don Boudreaux on October 27, 2014

in Politics

… is from page 289 of the 1978 collection, edited by Eric Mack, of Auberon Herbert’s remarkable essays, The Right and Wrong of Compulsion by the State; specifically, it’s from Herbert’s 1906 lecture “Mr. Spencer and the Great Machine”:

Does it mend matters to say that under our system we choose the best man available, and leave the hundred questions for him to deal with?  That is only our old friend, the autocrat, come back once more, with a democratic polish rubbed over his face to disguise and, as far as may be, to beautify his appearance.  Our sin consists in the suppression of our own selves and our own opinions; and in one sense we fall lower than the slaves of the autocrat, for they are simply sinned against, but we take an active part in the sin against ourselves.

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By now, you’ve likely heard that Hillary Clinton recently told a crowd of political partisans that it’s mistaken to believe that corporations and businesses create jobs:

Don’t let anybody tell you that it’s corporations and businesses that create jobs.  You know that old theory, trickle-down economics.  That has been tried, that has failed.  It has failed rather spectacularly.  One of the things my husband says when people ask him what he brought to Washington, he says I brought arithmetic.

The absurdity of the above remarks speaks for itself.  But these ludicrous remarks apparently were prefaced by this power-mad politician’s equally absurd comments on minimum-wage legislation:

Don’t let anybody tell you that raising the minimum wage will kill jobs.  They always say that.  I’ve been through that.  My husband gave working families a raise in the 1990s [by signing a bill that raised the national minimum wage].

The first-quoted remarks supply no opportunity for enlightened criticism.  As I say, they are absurd on their face.  Apart from pointing out that these remarks by Ms. Clinton, contrary to Mr. Obama’s infamous “You didn’t build that!” quip, apparently have no mitigating context or  interpretation, there’s just nothing interesting to say about them.  They speak for themselves.

It’s the second-quoted part of Ms. Clinton’s remarks that I find to be most galling.  Workers whose take-home, monetary pay rose as a result of a minimum-wage hike in the 1990s were not given that raise by Bill Clinton.  Rather, Bill Clinton was complicit with Congress in using threats of violence to force thousands of employers throughout America to give raises to some of their workers.

I write these words from a coffee shop in Fairfax, Virginia.  If I were to point a gun to the head of the man who is now standing second in line to buy coffee and order him to purchase cups of coffee for the two young women standing in front of him in line, no one would say that “Don Boudreaux gave cups of coffee to some women today!”  Rather, anyone who saw me commit this crime would call the police or, perhaps, justifiably take me down with a swift kick to my groin.  My actions would not be praiseworthy.  Quite the opposite, of course.

Yet when politicians in grand buildings commit essentially the same sorts of aggressions against innocent people, we tolerate their criminal actions – and we also tolerate such actions being described as praiseworthy, noble, and helpful.  Political titles, buildings, and ceremony mask the underlying coercive reality of what politicians do, and it deafens us to the lies – such as that Bill Clinton gave people raises – told about their predations.

….

On the more general matter of how the state is no friend of workers, see Sheldon Richman.

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… is from page 78 of the 2011 Definitive Edition of F.A. Hayek’s 1960 book, The Constitution of Liberty:

The more men know, the smaller the share of all that knowledge becomes that any one mind can absorb.  The more civilized we become, the more relatively ignorant must each individual be of the facts on which the working of his civilization depends.  The very division of knowledge increases the necessary ignorance of the individual of most of this knowledge.

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Quotation of the Day…

by Don Boudreaux on October 25, 2014

in Economics

… is from page 67 of the 2007 Liberty Fund edition of Ludwig von Mises’s 1949 magnum opus, Human Action:

It is impossible to understand the history of economic thought if one does not pay attention to the fact that economics as such is a challenge to the conceit of those in power.

Yes, but only for sound economics – the economics of scholars such as Adam Smith, J.B. Say, Frederic Bastiat, Carl Menger, Alfred Marshall, Frank Knight, Fritz Machlup, Ronald Coase, George Stigler, Milton Friedman, Armen Alchian, Yale Brozen, James Buchanan, Gordon Tullock, Leland Yeager, Harold Demsetz, Gary Becker, Bruce Yandle, Julian Simon, Deirdre McCloskey, Robert Higgs, David Friedman, and George Selgin (and, also, Austrians such as Mises, Hayek, and Israel Kirzner).  There are, of course, other species of economics, such as Keynesianism and much of modern welfare economics, that assure those in power that their conceits are justified – that the man-in-the-street’s economic superstitions are well-grounded in reality – that sufficient concentrations of power can in fact make miracles occur.

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Some Links

by Don Boudreaux on October 25, 2014

in Environment, Film, History, Seen and Unseen, Work

The Free To Choose Network’s new program, Suffer No Fools – a wonderful documentary of the life (so far!) of my great colleague Walter Williams – airs on Tuesday, October 28th, at 6:00pm (and again at 12:00am on Oct. 29th) on two Tucson public-television stations: KUAT, channel 6, and KUAS, channel 27.

David Friedman argues that, despite some claims to the contrary, his father, Milton Friedman, likely would not today support a carbon tax.

Here’s a great interview at Spiked with Reason’s Nick Gillespie.  (HT Walter Grinder)

Over at EconLog, Art Carden has some questions for Princesses Anna and Elsa.

James Pethokoukis ponders the effect of minimum-wage legislation on restaurant jobs.

Speaking of minimum-wage legislation: three different people sent me this short post by Thomas Lifson on Charlie Crist commenting on raising the minimum wage.  One of my correspondents said “At least Gov. Crist admits there’s a cost to workers of the minimum wage and he’s willing to pay it.”  I wrote back to my correspondent, pointing out that Mr. Crist will not pay that cost; rather, Mr. Crist is willing to force others – namely, many low-skilled workers – to bear that cost.

Sarah Skwire on fear of plague.

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Here’s another letter to my new correspondent from New Jersey:

Dear Mr. Sloan:

I appreciate your correspondence.  Thank you for it.

You ask if I agree that, because successful entrepreneurs “such as [Jeff] Bezos … benefit disproportionately” from government-supplied infrastructure, these entrepreneurs should be taxed at rates higher than those levied on “regular people.”

I don’t agree.  My reasons are many, not the least of which is that I doubt that successful entrepreneurs benefit disproportionately from government-supplied infrastructure.  Looking at the non-farm U.S. economy over the years 1948-2001, Yale economist William Nordhaus calculates that successful innovators capture only about two percent of the value to society of their innovations.  The other 98 percent of the value of these innovations is, as Nordhaus says, “passed on to consumers rather than captured by producers.”*

If this calculation is even only remotely accurate, then three points about taxes suggest themselves: (1) it’s unwise to raise taxes on - that is, to discourage - activities that generate such huge net benefits for society; (2) successful entrepreneurs already, through market competition, contribute to society nearly all (98 percent) of the value of their successful innovations; and (3) those who enjoy disproportionate benefits from whatever entrepreneurial innovations are made possible by government-supplied infrastructure are, thus, arguably the general public rather than the successful entrepreneurs.

It’s true that Jeff Bezos would be less wealthy today if there were no roads, airports, and other infrastructure to enable Amazon to serve consumers.  But it’s also true that consumers would be less wealthy today not only if there were no roads, airports, and other infrastructure to enable Amazon to serve consumers, but also if Jeff Bezos had instead chosen to become, say, a poet or a civil servant rather than an entrepreneur.  Mr. Bezos had to take positive, risky steps to gain his increased wealth; in contrast, consumers did nothing for their increased wealth other than enjoy it when Mr. Bezos offered it to them.

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

* William D. Nordhaus, “Schumpeterian Profits in the American Economy: Theory and Measurement” (April 2004).

…..

A different, but complementary, point was made to me by e-mail yesterday by a Cafe patron.  I quote him here with his kind permission:

One could effectively argue that the value of the infrastructure only exists because businesses and entrepreneurs make use of it; without them, it might as well be a fallow field.

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… is from the final paragraph of F.A. Hayek’s brilliant and profoundly important December 11, 1974 Nobel Prize lecture, “The Pretense of Knowledge“:

There is danger in the exuberant feeling of ever growing power which the advance of the physical sciences has engendered and which tempts man to try, ‘dizzy with success’, to use a characteristic phrase of early communism, to subject not only our natural but also our human environment to the control of a human will.  The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson in humility which should guard him against becoming an accomplice in men’s final striving to control society – a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.

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Here’s a letter to a student in New Jersey:

Dear Mr. Sloan:

Thanks for your latest note.  You remember correctly that I agree that Pres. Obama’s “You didn’t build that!” quip referred to infrastructure and other inputs – admittedly produced by others – that each entrepreneur relies on.  You’re mistaken, however, to insist that “because government makes businesses’ profits possible, even the most innovative” entrepreneurs and investors “earn only a portion of their profits.”

You confuse possibilities with actualities.  Infrastructure and other inputs do not turn themselves into valuable outputs.  That task requires entrepreneurial creativity, risk-taking, and effort.  The very existence of huge profits earned in markets suffused with infrastructure and other inputs implies that entrepreneurs who earn these huge profits produce something unusually rare and valuable - something that the vast majority of people, despite having the same access as do successful entrepreneurs to infrastructure and other inputs, do not produce.

In short, the outputs created by entrepreneurs would not otherwise have been produced.  Therefore, the profits of these entrepreneurs reflect the additional value to the economy of these outputs.  This is additional market value that, despite the use of infrastructure and other inputs, is created only through the actions of successful entrepreneurs.  These entrepreneurs, and they alone, are responsible for making actual that additional value which, without their efforts, would remain only an unrealized – indeed, unnoticed – potential.

This reality does not itself argue against taxation.  Infrastructure, like other inputs, must be paid for, and taxation is one way to pay for it.  But this reality does mean that it’s mistaken both to attribute to government a prime and uniquely important role in the creation of entrepreneurial profits and to suppose that government, by virtue of a politician quipping fatuously to entrepreneurs “You didn’t build that!,” becomes entitled to an open-ended claim on those profits.

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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… is from page 284 of the eminent Harvard historian Richard Pipes’s wonderful 1999 volume, Property and Freedom (footnote excluded):

The trend of modern times appears to indicate that citizens of democracies are willing heedlessly to surrender their freedoms to purchase social equality (along with economic security), apparently oblivious of the consequences.  And the consequences are that their ability to hold on to and use what they earn and own, to hire and fire at will, to enter freely into contracts, and even to speak their mind is steadily being eroded by governments bent on redistributing private assets and subordinating individual rights to group rights.  The entire concept of the welfare state as it has evolved in the second half of the twentieth century is incompatible with individual liberty, for it allows various groups with common needs to combine and claim the right to satisfy them at the expense of society at large, in the process steadily enhancing the power of the state which acts on their behalf.

Yes.  And, again, this obliviousness to the freedom-crushing features of the obsession with economic inequality and ‘redistribution’ has as part of its foundation the strange “Progressive” notion that the desire to keep what one owns and has earned is illiberal, ungenerous, anachronistic, and greedy, while the desire to take what others own and have earned is liberal, generous, enlightened, and selfless.  As I say, it’s a strange notion, but one that – because it is repeated so often in so many ways and in so many different venues – strikes most people today as being not only normal but right.

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Some Links

by Don Boudreaux on October 22, 2014

in Antitrust, Environment, Nanny State, Other People's Money, Seen and Unseen

Over at EconLog, Alberto Mingardi weighs in on Paul Krugman’s strange if unsurprising hostility toward Amazon.

In my latest column in the Pittsburgh Tribune-Review I remember two people who played especially important roles in my life: Michelle Bailliet and Leonard Liggio.  A slice:

Also great was Leonard Liggio, a man who did more than any other individual over the past half-century to build the libertarian intellectual movement. A lifelong bachelor, Leonard attended seemingly every significant conference, anywhere on Earth, at which ideas related to free markets and limited government were discussed. Not only did Leonard speak at these conferences, he networked brilliantly. He met everyone in the libertarian movement and tirelessly introduced to each other people he suspected would work together productively. Leonard’s goal was never to affect the outcome of the next election. He correctly understood that society is made more free or less free by the ideas that prevail in society. Electoral outcomes are consequences of ideas, not causes. So, what matters most is getting the ideas right.

George Leef is unimpressed – and rightly sometimes frightened – by government-sponsored research.   (See also Judge Napolitano.)

Jonah Goldberg productively ponders environmental complexities and trade-offs.

A former GMU student of mine, Romina Boccia, makes a case for reducing Uncle Sam’s girth and reach.

Thomas Sowell rightly criticizes the predatory politics that feeds in part on opposition to pay-day lending.

Shikha Dalmia on “The Left’s Creeping Totalitarianism on Affirmative [Sexual] Consent.”  Here’s Shikha’s concluding paragraph:

Throwing sons and brothers under the bus for crimes they haven’t committed in a utopian quest to protect women from their lovers perverts justice, and reminds us that utopianism and totalitarianism are often two sides of the same coin.

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