Robots Are Nothing New

by Don Boudreaux on August 18, 2016

in History, Innovation, Myths and Fallacies

Here’s a letter to the Washington Post:

Robert Samuelson observes that “[w]e imagine hordes of robots destroying jobs, leaving millions of middle-class families without work and income.”  He then advises: “Relax.  Unless we adopt self-destructive policies, this is one doomsday we’ll avoid” (“Our robot panic is overblown,” August 17).

He’s correct.  Robots not only do not threaten to increase long-term unemployment, they make our lives easier and more prosperous – and they’ve done so for eons.  Witness the wheel, the lever, the bucket, the shovel, the cart, the harness, the plough, the rope, the spear, the knife, the pulley, the pipe, the pump, the oar, the sail, the printing press – and, of course, the steam engine, the locomotive, the bulldozer, the bus, the jet engine, the kitchen blender, the washing machine, the light switch, the flush toilet, the microprocessor.  As Deirdre McCloskey writes in her new volume, Bourgeois Equality, “[t]he repeated alarms against robots are silly, since robots are merely mechanical slaves for our benefit.”*

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

* Deirdre N. McCloskey, Bourgeois Equality (Chicago: University of Chicago Press, 2016), page 497.

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Some Links

by Don Boudreaux on August 18, 2016

in History, Hubris and humility, Myths and Fallacies, Trade, Video

My Mercatus Center colleague Veronique de Rugy notes that, on trade, Trump and Clinton are, well, Clump – the same.  And they’re wrong.  A slice:

Either way, the reality is that her [Clinton’s] instincts on pretty much every policy issue are incorrect. She wants the government to grow and she wants to smother the labor market to death with new mandates and tell entrepreneurs how to run their companies and pay their workers. She wants more regulations and she wants the government to have a say in what the innovations of the future should be. She wants a one-size-fits-all labor market and opposes the sharing economy. She is a drug warrior and “the candidate of the war machine.” She is also in favor of the worst crony programs out there, like the Ex-Im Bank. For all these reasons, it is hard for me to believe that she is good on trade. And one thing is sure: Like most people, Hillary fails to understand that imports – not exports – are what improve the lives of millions of Americans, especially low-income Americans. No one explained it better than Paul Krugman in a beautiful and beautifully succinct article called “What Do Undergrads Need to Know About Trade?“

Quoting Adam Ozimek, James Pethokoukis makes the case that tariffs are harmful.

Alberto Mingardi ponders the intellectual as celebrity.

This short, 2015 Marginal Revolution University video on the demand curve is a worthwhile view for most non-economists – and even for some economists.

In this even shorter video, Johan Norberg busts myths about trade, NAFTA, and deindustrialization.

Speaking of NAFTA, my Mercatus Center colleague Dan Griswold is correct: tearing it up would harm America’s and Mexico’s economies.

George Selgin explains that there are worse things than libertarian fantasies about monetary reform.

Finally, apropos nothing, I really enjoyed this video entitled “What Latin Sounded Like – and how we know.

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Quotation of the Day…

by Don Boudreaux on August 18, 2016

in Economics, Myths and Fallacies, State of Macro

… is from page 180 of the 1990 Transaction Publishers reprint of W.H. Hutt‘s 1936 book, Economists and the Public:

A decline of respect for the authority of political economy necessarily accompanied the swing to collectivism.  As the State as umpire was converted into the State as despoiler for politically powerful groups, a logical system which tended to expose the clash between private and social interest had, perforce, to be discredited.  Economists in general have been the constant enemies of power-thought in the field of economic relations.  Those private groups or individuals who have found orthodox teachings to be opposed to their advantage have realized that the source of such influence as the teachers have had has always been respect for their integrity and their science.  It is not surprising, then, that vested interests have never been slow to take full advantage of any apparent dissension within the economists’ ranks in order to destroy their authority.

Ironically, the very same year in which this volume of Hutt’s was published saw the publication of another and much more famous volume, by another economist, that marks as well as any event the point at which many economists began pandering to the man-in-the-street and assuring that man that his economic fallacies are, in fact, economic wisdom.  ‘Ignore those older – those “classical” – economists’ was the message of John Maynard Keynes, a message featured in his 1936 volume, The General Theory.  ‘You – the economically untutored man-in-the-street – have been correct all along.  All that your ideas require are a bit of fancy jargon and a few new concepts to transform them into a new and very different science of economics that will not only give scientific cred to your ages-old notions, but also justify government policies based on those notions.’

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Here’s a letter to a relatively new Cafe Hayek patron:

Mr. Javier Durand

Mr. Durand:

You ask why I oppose “trade protection for US firms who compete with subsidized foreign firms.”  Good question.  Here’s a three-part answer.

First, subsidized foreign firms that sell outputs in the U.S. make Americans richer, not poorer.  Such subsidies amount to foreign taxpayers subsidizing Americans’ consumption.  You and I are no more made poorer by such subsidies than we would be if our next-door neighbor takes us out to dinner and pays the entire bill.

Second, it’s far more difficult than is commonly realized to accurately identify subsidies.  Outright bounties paid to exporters are clearly export subsidies.  But what about government provision of high-quality roads, bridges, and docks that reduce suppliers’ costs of getting goods to market?  What about government provision of a powerful navy that pirates dare not test?  What about government provision of high-quality STEM education?  What about government provision of courts that businesses use to arbitrate disputes?  What about government provision of a relatively stable currency?  Do these government programs subsidize exporters?*

Third, if it’s appropriate for Uncle Sam to punitively tax Americans who buy goods the production of which is subsidized by foreign taxpayers, it’s equally appropriate for Uncle Sam to tax Americans who buy goods the production of which is subsidized by American taxpayers.  Yet I never hear the likes of Donald Trump, Hillary Clinton, or Barack Obama demanding punitive taxes on Americans’ purchases of American-made solar panels, of Chevy Volts and Tesla Model ‘S’s, of tickets to NFL games played at government-built stadiums, or of any of the many other American-produced goods and services the prices of which are driven artificially lower by government subsidies.

Until and unless protectionists begin to display consistency in their arguments for punitive taxes and other restrictions on domestic consumers, no one should treat these arguments as being anything other than the shams that they are.

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

* There are nuances to this argument, which I deal with in this 2011 article in Economic Affairs.

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Some Links

by Don Boudreaux on August 17, 2016

in FDA, Regulation, Seen and Unseen, Work

My brilliant colleague Bryan Caplan reports the findings of a survey of empirical research into the elasticity of demand for labor.  No surprise: empirical studies generally find that employers respond to higher wages by employing fewer hours of labor.  (Although these empirical findings square perfectly with foundational economic theory, these findings are nearly impossible to square with the often-heard insistence that the market for low-skilled labor is so exceptional that minimum-wage legislation will often not worsen any low-skilled-workers’ job prospects.)

Speaking of minimum wages worsening low-skilled-workers’ job prospects, here’s Hannah Bleau.

Continuing on the same subject, Peter Gordon is correct to insist that the law of demand “takes no prisoners.

At his Facebook page, Bob Higgs succinctly explains the logic of government intervention.  A slice:

Government can hardly ever do just one thing. Its action has repercussions, and these repercussions have repercussions, and so forth. Even when the government’s initial action may seem compassionate or productive, it is highly unlike that the repercussions will prove likewise.

Perhaps a giant sticker should be plastered on the headquarters of the F.D.A. reading “These regulators may be hazardous to your health.”  Sally Satel explains.

My Mercatus Center colleagues Chris Koopman and Tom Savidge explain that the people of Rio are the biggest losers at the Rio Olympics.

Matthew Andrews and James Gattuso document the sorry reality that there is no great stagnation in the growth ‘industry’ that is government regulation.  (HT Yevdokiya Zagumenova)

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… is from pages 80-81 of my late Nobel-laureate colleague James M. Buchanan‘s 2005 book, Why I, Too, Am Not a Conservative: The Normative Vision of Classical Liberalism:

Interpreting the market culture as community allows classical liberals to respond readily to modern communitarian critics of market capitalism who charge that the market order is destructive of valued cultural traditions.  These critics concentrate on the destruction of one set of cultural rules while neglecting the role of a well-functioning market in the construction of an alternative set of rules, adherence to which signifies the presence of an alternative community, one that is both more inclusive and more productive of economic value.

By the way, among the foundational rules of the market order is ‘producers work for consumers’ (and not ‘consumers work for producers’).  Put differently, individuals as producers are obliged – if and to the extent that they wish to earn market incomes – to adjust their activities to the spending patterns of consumers; individuals as consumers are not obliged – and ought not be forced – to adjust their spending patterns to the activities of producers.  Therefore, proponents of tariffs and other trade restrictions (including occupational-licensing requirements) are proponents of rule-breaking: they want select individuals – in their roles as producers – to be exempt from the rule that requires producers to serve consumers.

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OMG! We’re Not Paying Enough!

by Don Boudreaux on August 16, 2016

in Myths and Fallacies, Trade

Here’s a letter to the Wall Street Journal:

Dennis O’Connor asserts that free trade now harms America because “U.S. goods and services imports from China were triple U.S. exports to China in 2015, $498 billion versus $161 billion” (Letters, August 16).

Let’s play along with Mr. O’Connor’s failure to understand that in a world of many countries there is no more reason to expect that America will sell to China the same dollar amount of products that it buys from China than there is to expect that in a world of many people LeBron James will sell to his local supermarket the same dollar amount of products that he buys from his local supermarket.  And let’s be clear about just what Mr. O’Connor complains – namely, that we Americans get more goods and services from the Chinese than we give in exchange.

I’ve some questions for Mr. O’Connor to probe the sincerity of his evident belief that people are harmed whenever they get in exchange more than they give.  When your employer, Mr. O’Connor, offers you a ten-percent raise, do you demand that your employer also increase your work hours by ten percent, so that your hourly pay remains unchanged?  When your local liquor store cuts by 17 percent the price of a six-pack of your favorite beer, do you demand that the store remove one of the bottles, so that you get only a five-pack?  When you buy a new computer that, because of Moore’s Law, has twice the computing power of your last computer, do you demand to pay for your new computer twice the price that you paid for your last computer?  And whenever the value of your stock portfolio rises, do you donate all of your capital gains to your stockbroker to ensure that when you sell your assets you receive in return no more than what you paid for them?

If Mr. O’Conner answers “no” to any of these questions, he should reconsider his odd belief that we Americans are harmed if the value of the imports that we receive exceeds the value of the exports that we give as payment for these imports.

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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Young Eric Cunningham is that rarest of commodities: an economically informed journalist who sees not only what is immediately obvious but what is less obvious if no less real.  (HT Bryan Riley)  A slice:

These trends in some ways reflect manufacturing productivity across America: a recent study by Ball State University, for example, found that national manufacturing output between 1990 and 2013 rose by nearly $1 trillion, while nearly 90 percent of lost manufacturing jobs from 2000-2010 were caused not by trade, but by productivity gains. In other words: American manufacturers can produce more but with fewer workers, and a job that today requires only one worker might once have required five. Meanwhile, outside of manufacturing, the country has gained tens of millions of jobs over the same period.

Mark Perry riffs productively on a quotation from Frederick Douglass that was sent to Mark by Jeff Jacoby.

Richard Rahn makes a case for free trade.

Bill Shughart and Michael Jensen explain that government efforts to promote ‘green’ energy hurt the poor.

Here’s the latest Love Gov video.

Jeff Tucker is correct: socialists are scarcity-deniers.

In this excellent post from 2011, George Selgin exposes the many faults in today’s arguments against fractional-reserve banking.

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Quotation of the Day…

by Don Boudreaux on August 16, 2016

in Growth, Innovation, Standard of Living, The Economy

… is from Leonard Read’s 1956 essay “Unearned Riches” (original emphasis):

Others – society past and present – place within his reach [that of an ordinary worker in modern society] goods and services and knowledge in such an array and abundance that he could not himself produce in thousands of years that portion of it which he consumes in a single day.  And he obtains all of this in exchange for his own meager efforts.

The astounding thing is that it is possible for him to gain without any change in his efforts, his skills, his knowledge.  Let others become more inventive and more productive, and he may receive more in exchange for what he has to offer.  Parenthetically, it is also possible for him to lose out entirely, as might happen if he persisted in offering nothing in exchange but buggy whips.

There is a fact still more astounding.  Our wage earner may think of his plight as hapless when compared to the one who inherited his millions.  True, the millionaire has gained much from the doings of others.  But the wage earner himself owes his life to the doings of others.

Do not forget William Nordhaus’s estimation that the overwhelming bulk – nearly 98% – of the benefits of capitalist innovation are reaped, not by the innovators, but by consumers.  (Nordhaus’s calculations are for the non-farm U.S. economy over the years 1948-2001.  But there’s no reason to believe that this slice of modern economic history is unique in this regard.)  Talk about income – or material-benefits – redistribution!

This reality is one among the many reasons why I oppose any government-granted basic income guarantee.  Everyone living in a modern economy – such as in America’s portion of today’s global economy – is already guaranteed easy access to an abundance of material wealth of a like and magnitude that would have left the richest rentier in pre-industrial times speechless with wonder and lime-green with envy.

Indeed, even American billionaires of just 100 years ago were not as materially prosperous as are ordinary Americans today.

Life in a market-oriented, bourgeoised modern society already practically guarantees to each of its denizens enormous material riches – or, at least, it guarantees access to such riches that is so easy as to make, in my mind, the economic and ethical case for a basic guaranteed income very weak indeed.

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Bonus Quotation of the Day…

by Don Boudreaux on August 15, 2016

in History, Hubris and humility, Work

… is from page 161 of Princeton University economist Thomas Leonard’s revealing 2016 book, Illiberal Reformers, which is a study of how the scientistic pretenses of late-19th and early-20th century “Progressives” led them to endorse illiberal – indeed, often vicious – social-engineering schemes, including eugenics and minimum-wage legislation:

The many left progressives who advocated the minimum wage, among them Father John Ryan, Charles Henderson, Matthew B. Hammond, Henry A. Millis, Henry R. Seager, Arthur T. Holcombe, and Albert B. Wolfe, agreed that the minimum wage would throw the least productive employees out [of] work and prevent their employment in the first place.  But the reformers saw the removal of the less productive not as a cost of the minimum wage but as a positive benefit to society.  Removing the inferior from work was not a regrettable outcome, justified by the higher wages for other workers.  Removing the inferior from work benefitted society by protecting American wages and Anglo-Saxon racial integrity.

Again, at least these early 20th-century “Progressives” – despite their egregious ethics and naive scientism –  correctly understood the economics of the minimum wage.

And for those who would do (dubious) “cost-benefit tests” to judge the worth of minimum wages, I’ve this question: suppose that the minimum wage causes the incomes of white blue-bloods to rise by $X but at the expense of causing the incomes of swarthy ‘inferiors’ to fall by .75$X; does this outcome pass your cost-benefit test?

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