Quotation of the Day…

by Don Boudreaux on April 22, 2017

in Crony Capitalism, Myths and Fallacies, Trade

… is from page 214 of Martin Wolf’s 2004 volume, Why Globalization Works:

UnknownEvery well-informed economist knows that anti-dumping lacks all economic justification, even in theory, let alone in its still more indefensible practice.

DBx: Reality teems with mere possibilities.  Yet almost everything that is possible is so improbable that you are safe in betting all that you own that these mere possibilities will never occur.

It’s possible that I’ll be killed later today by a pig being flung through my window.  After all, I can easily imagine a brute buying a catapult and, after setting the contraption just outside my window, stuffing it with a pig and flinging the beast at me with precision aim.  But despite the horror of the easily imagined event, I’ll take no precautionary action against it.  It’s simply too far fetched to believe.

Much the same can be said about so-called “dumping” that is imagined to lead to domestic consumers in the future being victimized by foreign monopolists.  One can indeed imagine foreign firms – especially ones that are subsidized by foreign governments – charging prices so low that these firms bankrupt all of their rivals and eventually gain monopoly power.

Yet one trouble with this imagined outcome is that history knows no credible examples of it.  Another trouble with the story is that economic theory – when done well and wisely – identifies so many reasons why such a strategy will likely fail in reality that to worry about such an outcome is equivalent to me worrying about being killed later today by a catapulted pig.  And a third trouble with the story is that in practice it is used to bestow monopoly power on domestic firms who use it to frighten the populace into letting the state with certainty today punitively tax domestic consumers as a safeguard, allegedly, against the mere possibility of their being punitively taxed tomorrow by imagined monopolists.

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Don’t Buy It

by Don Boudreaux on April 21, 2017

in Other People's Money, Trade

Here’s a letter to the Wall Street Journal:

Pres. Trump’s push to have Uncle Sam “buy American” is a slap in the face of the many people who voted for him because of his alleged business acumen (“In ‘Buy American’ Push, Trump Is Starting in a Hole,” April 21).

Good business executives ensure that their firms do not incur costs that are unnecessarily high.  Well-run businesses do not produce for themselves inputs that they can acquire from others at lower costs.  Profitable firms spend shareholders’ money only to create value and never to create jobs for the sake of creating jobs.

And yet Trump is actively trying to force American taxpayers to spend more than is necessary on the provision of government services.  This supposedly brilliant businessman fancies that he’ll somehow make us richer by draining more money from our pockets.  Such an incompetent chief executive deserves to be fired.

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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(I thank my dear friend Fred Dent for the pointer.)

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Public Choice Outreach Seminar 2017

by Don Boudreaux on April 21, 2017

in Economics

Here’s a reminder that the deadline for students to apply to attend the 2017 Public Choice Outreach seminar is April 28th – one week from today.  I encourage all advanced undergrads and grad students to apply.

Here’s more information on the seminar from Center for Study of Public Choice director Alex Tabarrok:

The annual Public Choice Outreach Conference is June 16-18th, at the Hyatt Arlington in Rosslyn, VA! Submit an application and please do encourage your students to apply. Here’s some more information.

What is the Public Choice Outreach Conference? The Public Choice Outreach Conference is a compact lecture series designed as a “crash course” in Public Choice for students planning careers in academia, journalism, law, or public policy. Graduate students and advanced undergraduates are eligible to apply. Many past participants of the Outreach seminar have gone on to notable careers in academia, law and business.

Who can apply? Graduate students and advanced undergraduates are eligible to apply. Students majoring in economics, history, international studies, law, philosophy political science, psychology, public administration, religious studies, and sociology have attended past conferences. Advanced degree students with a demonstrated interest in political economy or demonstrated interest in political economy are invited to apply. Applicants unfamiliar with Public Choice and students from outside of George Mason University are especially encouraged. Download a 2017 application here.

What are the fees involved? Outreach has no conference fee – it is free to attend. Room and meals are included for all participants. However, ALL travel costs are the responsibility of the participants.

If you have any questions please contact: Lisa Hill-Corley, Outreach Conference Coordinator (703) 993-2316 email: lhillcor <at> gmu <dot> edu

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Quotation of the Day…

by Don Boudreaux on April 21, 2017

in Civil Society, Trade

… is from pages 122-123 of Daniel Cohen’s odd but worthwhile 2006 book, Globalization and Its Enemies (which is the translation, by Jessica Baker, of Cohen’s 2004 book, La Mondialisation et ses ennemis):

41bbj3mSKHL._SX336_BO1,204,203,200_Economic development nourishes new aspirations, just as it feeds on them.  It opens new possibilities without ascribing them to a preordained agenda.  The determination of those who see the march of human history toward a peaceful end is, in this regard, certainly naive, but no more so than the mechanical vision of those who obstinately believe that the conflict between civilizations is fixed in the form of an immutable past.

DBx: Put in yet a different way: economic growth and the trade that both promotes it and is promoted by it are creative.  In part because it is positive-sum, and in other part because it requires that each party take into account the interests of his or her trading partners, trade also reduces the significance of cultural differences.  Indeed, trade even reduces, although it doesn’t eliminate, cultural differences themselves.

In short, as long as and as far as trade is free, civilizations that might otherwise ‘clash’ violently with each other can instead cooperate peacefully and productively with each other.

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Quotation of the Day…

by Don Boudreaux on April 20, 2017

in Adam Smith, Civil Society, Property Rights

… is from page 108 Mark Zupan’s new (2017) book, Inside Job (footnotes deleted; links added):

41Wyt9ZDrcL._SX329_BO1,204,203,200_Both Steven Pinker, in The Better Angels of Our Nature, and Matt Ridley, in The Rational Optimist, credit markets and business enterprises for improving our species’ civility.  Over 200 years earlier, Adam Smith intended to spell this out in a third book that was not published due to his death.  Free markets, which are based on clearly defined and enforced property rights as well as on the liberty of individuals to pursue their happiness, maximize the opportunity for repeat interaction across time, products, places, and people.  The prospect for repeat interaction creates a future and that future, by casting its shadow on the present, promotes integrity.

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… is from page 295 of Arnold Kling‘s 2004 book, Learning Economics:

416OArjHtnLAnyone who believes that we can afford collectively what we cannot afford individually is delusional.

DBx: Indisputably true.  This reality, alas, implies that a large number of people – likely a majority of the population, and without a doubt nearly all politicians, professors, and elite pundits – are delusional.

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Not “Leaders.” Lackeys

by Don Boudreaux on April 19, 2017

in Politics, Trade

Here’s a letter to the Wall Street Journal:

Today, the 200th anniversary of the publication of David Ricardo’s On the Principles of Political Economy and Taxation – the book that famously first explained to the world the key principle of comparative advantage – Greg Ip quotes GOP advisor Lanhee Chen’s observation about GOP members of Congress caving to the Republican base’s increasing hostility to free trade (“Is Trump Turning Globalist? Not So Easy”): “I don’t know any [Republican] members who are going to die at the stake for free trade. The majority for free trade just isn’t there anymore.”

So here’s a question: why are politicians routinely called “leaders”?  The typical politician is less a leader than a tortoise is a racehorse.  A far more descriptive term for politicians is “lackeys” – craven, mercenary lackeys.

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

This WSJ report by Ip reveals just how mistaken were those libertarians who supported Trump because they believed that he would at least be less militaristic than other major candidates.  According to Ip, Trump is becoming more “globalist” on matters of foreign intervention while he’s sticking hard to his anti-trade and anti-immigration stances.  It’s the worst of all worlds.

Trump is a calamity – a threat both to whatever hope we might have for more peaceable times and to our prosperity.

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My Mercatus Center colleague Dan Griswold spells out in ideal detail what Trump means by “bad trade deal” and by “good trade deal.”  A slice:

A bad trade [in Trump’s view] deal allows U.S. manufacturing companies to lower their production costs by importing capital machinery, raw materials and intermediate inputs such as steel at global prices. A good trade deal protects the domestic U.S. steel industry and its 150,000 workers by raising the costs of production for steel-using manufacturing companies that employ 6.5 million U.S. workers.

A bad trade deal lowers or eliminates tariffs on the imported food, clothing and shoes that make up a disproportionately larger share of the family budgets of working class Americans and the 45 million Americans living below the poverty line, thus allowing their real wages and standard of living to rise.

A good deal protects the few hundred thousand remaining manufacturing jobs in the U.S. textile, apparel and footwear industries by maintaining a regressive tax of duties on food, clothing and footwear that imposes an effective tariff on the poorest 10% of Americans that is 5 times higher than the effective tariff on goods purchased by the richest 10%.

Sheldon Richman prescribes more competition for the U.S. health-care market.

In this short video, Johan Norberg busts the myth that protectionism – what Jon Murphy might call “scarcityism” – increases overall employment in the domestic economy.

Here’s Shikha Dalmia on Trump’s executive order targeting the H-1B visa program.

Richard Epstein tackles energy and climate hysteria.

Washington Post columnist Robert Samuelson reflects on Bruce Sacerdote’s new paper that casts doubt on the claim that the American middle-class has stagnated economically for the past several decades.  A slice:

These increases [in ordinary Americans’ consumption] can be reconciled with stagnant “real” wages, Sacerdote argues, because real wages weren’t stagnant. Inflation was overstated, meaning that real wages — their purchasing power — were understated. That’s the third source of his evidence. Although the difference is tiny in any one year, the cumulative effect is large. Sacerdote’s estimates imply hourly wages in 2015 roughly 25 percent to 50 percent higher than in 1975.

And here’s Scott Sumner on Sacerdote’s paper.  A slice:

Last week I purchased a one-year-old Nissan Maxima SL (with 6600 miles) for $26,350, and was stunned by how much cars had changed since I bought my last car (a one-year-old Altima, in 2008.) I recall reading that (in the 1990s) Bill Gates used to drive a Lexus LS400. I would much prefer this 2016 Maxima to the car driven by the richest guy in the world, just a couple decades ago. The monthly payments are about $480, which means it’s within reach of tens of millions of Americans. There are an amazing number of safety innovations since I last bought a car.

(Remember: ordinary Americans today are, almost certainly, materially wealthier than was John D. Rockefeller, Sr., a mere century ago.)

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Commenting on this post, Lanny Ebenstein asks me:

If even the smartest professors aren’t able to engineer a society according to their, or to anyone else’s, designs, and if the belief that it is possible to do this is always futile and often fatal, why do you believe that it would be possible massively to reorganize society in a libertarian direction of vastly less government? Isn’t that a contradiction of what you have just said?

With respect, I see no contradiction.  My libertarianism (which, I think, is a quite common kind of libertarianism) is simply a call for the state to cease and desist from its own social-engineering projects – from projects small (such as protective tariffs) to projects big (such as government-run pension plans).  The patterns of human interactions that will emerge in place of the state’s interventions are unpredictable in their details, but history and theory both teach that such patterns do indeed emerge spontaneously.

To call for an end to social engineering is not itself a call for some different sort of social engineering or ‘reorganization’ of society.  (Lanny has written much about Hayek, so he is familiar with Hayek’s distinction between “order” and “organization.”  I believe that this distinction is both real and important.)

…..

I’m convinced that the kind of laws, customs, and government that reign at any time in a society largely reflect that society’s ideologies.  If I am correct about this matter, then libertarianism – just like “Progressivism,” Nazism, Talibanism, or any other ism – cannot be imposed in a way that lasts for any length of time.  The bulk of people must prefer it to available competing isms.  So, with rare exceptions, when I make my case for a libertarian society, I aim not to change today’s policies but to do my modest part in planting seeds that in the future might, just might, cause hearts and minds to change in a direction that will make people more free.

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