Quotation of the Day…

by Don Boudreaux on October 16, 2014

in Civil Society, Seen and Unseen

… is from page 223 of Robert Wright’s wonderful 1994 book, The Moral Animal:

Even urban gang members have people who can trust them.  And even scrupulously polite Victorian men went to war, convinced of the justness of the death they dished out.  Moral development is often a question not just of how strong the conscience will be, but of how long a reach it will have.

This important insight does not imply that each of us should love and care for strangers as much as we love and care for our family members and close friends.  Such sentiments (and even more obviously, actions consistent with those sentiments) are humanly impossible.  What Wright’s insight does suggest is that each of us should be better at recognizing the humanity of all people, regardless of where those people live and of which sovereign rulers issue their passports.  The same civil sentiments that we have for strangers in our own countries are civil sentiments that we ought to have for strangers in other political jurisdictions.

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Judge Andrew Napolitano explains (in my words) that the Patriot Act makes Uncle Sam more like a terrorist.  A slice:

The Patriot Act is the most unconstitutional legislation since the Alien and Sedition Acts of 1798, which proscribed speech critical of the government, yet the FBI loves it. Its premise is that in dangerous times, if we surrender our freedoms to the government, the government will keep us safe until the danger passes. This is a flawed argument. The Declaration of Independence recognizes the continuous possession of personal freedoms (“endowed by their Creator with certain inalienable rights”), and thus they cannot be stolen by a majority vote in Congress, but only surrendered by a personal, intentional, knowing choice. History teaches that government does not return freedoms once stolen or surrendered. Without freedom, who will protect us from the government?

Sheldon Richman and the Future of Freedom Foundation will host, on October 21st, a free webinar on America’s antimilitarist libertarian tradition.

Here’s an opportunity for students to help the great Institute for Justice identify and call out government abuses.

David Henderson on Jean Tirole.

With the help of Milton Friedman and Deirdre McCloskey, James Pethokoukis explains why Barack Obama doesn’t understand what markets are or why they work.

Stewart Dompe and Adam Smith, two GMU Econ PhDs, now teaching at Johnson & Wales University, explain how government interventions on the consumer-credit front are resurrecting long-dead retailing practices from the past – practices that consumers would not endorse but for the fact that government has now stripped them of better options.

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Bonus Quotation of the Day…

by Don Boudreaux on October 15, 2014

in Civil Society, Sports

… is from George Will’s most-recent column in the Washington Post; in this column Will discusses the absurd hoopla stirred by Very Sensitive People over the nickname of the professional football team located in Washington, DC – that nickname being “Redskins”:

The fact that censorship is progressivism’s default position regarding so many things is evidence of progressives’ pessimism about the ability of their agenda to advance under a regime of robust discussion. It also indicates the delight progressives derive from bossing people around and imposing a particular sensibility, in the name of diversity, of course.

Despite my having lived in the DC area for most of my adult life, I emphatically am no fan of any DC-area sports team.  (I have an instinctive dislike of anything that most Washingtonians like.) But if there is one development that could possibly cause me to cheer for the Redskins it’s the grandstanding, self-righteous, ridiculous objections to the name “Redskins.”  People pull for teams that they identify with – teams that make people feel proud to be allied with.  The name “Redskins” is certainly not slanderous and demeaning in the minds of the (I’m guessing) three or four million people who are self-proclaimed fans of the Washington Redskins: these people, at least, regard the name as a source of pride.  So these fans – and the team’s owners – surely do not intend to insult native Americans.

Although I struggle (without success) to lose all interest in spectator sports, I remain a huge fan of a professional football team named the “New Orleans Saints.”  Yet in being such a fan I do not regard myself as pulling for a team that slanders or demeans people who are unusually good and tender-hearted, or one that promotes prejudice against (or even simply encourages ‘insensitivity’ towards) souls who have been canonized by the church of Rome.  And if I should awaken one fine morning to discover all of my sins forgiven and whatever less-than-wholesome human appetites I have forever sated – with myself to be led nevermore into temptation – I would still take no offense at the name of the professional football franchise headquartered in the city of my birth.  Indeed, I suspect that I would be deeply honored by that nickname.

I could write pages on why I believe it absurd to give credence to the complaints by some over the name “Redskins.”  But I’m too busy to participate further in this pow-wow.

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Two Passings

by Don Boudreaux on October 15, 2014

in Civil Society, Education

On Monday, my first economics teacher – Michelle Bailliet (or as she was known in 1977, Michelle Francois) – died.  And yesterday, Leonard Liggio passed away.

My life would today be very different, and in a bad way, were it not for the influence and generosity of these two people.

I took Michelle’s ECON 252 class (Principles of Microeconomics) at Nicholls State University during the second (Spring 1977) semester of my freshman year.  I took it only because it met on Mondays and Wednesdays.  I was working at Avondale Shipyards near New Orleans on Tuesdays and Thursdays, and so this class fit my schedule.  When I signed up for it I had no earthly idea what economics is, and I didn’t care.  My plan was to quit college at the end of that semester and start working at the shipyard full time.

I stayed in school because of Michelle’s class.  She was a great teacher.  On January 17, 1977, Michelle explained, clearly and cogently, that government-imposed price ceilings cause shortages.  Eureka!  I finally had a sensible explanation for why I’d waited so many times in long lines to buy gasoline – a product that was frequently in short supply during the disco decade.  Encountering Michelle’s expert explanation was the closest thing I’ve ever had, or ever will have, to a born-again moment.  I fell in love with economics immediately and completely; it’s a love affair that still burns bright.

Had Michelle taught that class with lots of equations, I’d likely today be an unemployed welder or pipe fitter.  I’ve often joked that Michelle saved my life.  That’s something of an overstatement, of course, but it’s only because of her great skills as a classroom instructor, and her generosity with her time outside of class, that I am an economist – a profession that I cherish.

Michelle – or Dr. Francois, as I called her back then – graciously tolerated my constant presence in her office to discuss this amazing subject called “economics.”  (She eventually introduced me to another Nicholls State faculty member, Bill Field, who remains to this day my greatest mentor.)  Michelle is also the person who introduced me to the works of Frederic Bastiat.


Leonard Liggio touched the lives of so many modern classical liberals.  I first met him when I was a summer fellow for the Institute for Humane Studies in 1984.  IHS was then still in Menlo Park, CA.  (I first met the other great IHS leader, Walter Grinder, earlier that summer at an Austrian Economics seminar in Milwaukee.)  Remembrances of Leonard are starting to come on line.  They will be many; they will be heartfelt.  I will link to some of them here at the Cafe.  I content myself now to say that his positive influence on the modern liberty movement, not just in the U.S. but around the world, is so huge that it is impossible to imagine what that movement would be like had Leonard never existed – save to say that it would be smaller, less significant, and much more weakly grounded intellectually.

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… is from page 83 of the 2008 Oxford World’s Classics edition of Elizabeth Gaskell’s brilliant 1855 novel, North and South; the quotation is from the character John Thornton, a cotton-mill owner in the fictional English town of Milton (modeled by Gaskell after Manchester):

[W]ell, some of these early manufacturers did ride to the devil in a magnificent style – crushing human bone and flesh under their horses’ hoofs without remorse.  But by-and-by came a reaction; there were more factories, more masters; more men were wanted.  The power of masters and men became more evenly balanced; and now the battle is pretty fairly waged between us.  We will hardly submit to the decision of an umpire, much less to the interference of a meddler with only a smattering of the knowledge of the real facts of the case, even though that meddler be called the High Court of Parliament.

Pay and working conditions are best determined by open competition among employers for workers and among workers for jobs, with this competition being most effective when there are no government-imposed restraints on entry, by firms, into any enterprise or, by workers, into any occupation.  Government officials with their power, incumbent firms with their political influence, labor-union bosses with their bully tactics, and academics with their models cannot possibly ever know enough about reality to successfully second guess the astonishingly detailed, nuanced, and ever-changing outcomes of this competitive process.

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Three minutes of Adam Smith and happiness

by Russ Roberts on October 14, 2014

in Adam Smith, Books

I talk to Mary Kissel of the WSJ. You can buy the book here.

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Open Letter to Leon Panetta

by Don Boudreaux on October 14, 2014

in Civil Society, Cooperation, Myths and Fallacies

Mr. Leon Panetta
Former U.S. Secretary of Defense and
Former Member of Congress

Mr. Panetta:

On today’s Diane Rehm Show you proudly explained that you now devote your time to encouraging young people to pursue “public service.”  The implication is that society needs more “public servants.”

“Public service” is a lovely term.  But it’s a euphemism for government, and government - whatever its merits or demerits - achieves its ends overwhelmingly by ordering people about.  So to be in “public service” is to be in the business of compulsion.

The opposite of “public service” enjoys no analogously lovely euphemism.  But in a society based on private property rights, people operating in the private sector prosper only if, and insofar as, they persuade other people voluntarily to cooperate with them.  In the private sector, no one tells anyone else what to do; rather, we each can only ask of others.  People in the private sector are therefore in the business of mutually beneficial and peaceful cooperation.

Contrary to your belief, society would be better off the greater are the number of young people who pursue careers as peaceful persuaders - such as, for example, retailers who persuade shoppers to frequent their stores - and the fewer are the number of young people who pursue careers as armed and arrogant busy-bodies (i.e, as “public servants”).

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

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Over at EconLog, my colleague Bryan Caplan exposes further misunderstanding about the relationship between poverty and illness.  A slice:

It’s almost like the last two centuries never happened.  Quick recap: During the last two hundred years, living standards exploded even though the distribution of income remained quite unequal.  How is such a thing possible?  Because total production per person drastically increased.  During this era, no country escaped dire poverty via redistribution, but many escaped dire poverty via increased production.  And while the effect of moderate redistributive policies on growth is unclear, there is no doubt that populist and socialist movements determined to “tackle the inequitable distribution of money, power and resources” and “change the way that society is organized” sharply retard growth.

In yesterday’s Wall Street Journal (that was an especially fine edition!) my former research assistant Mark Perry, along with Michael Saltsman, set the record straight about the ratio of CEO pay to that of other workers.

CEI Senior Attorney Hans Bader reveals one of the many ways that so-called “liberals” are quite illiberal.

Speaking of liberals, both genuine and faux, Alberto Mingardi reviews Edmund Fawcett’s book such.

And speaking of Alberto, he points us to this recent interview with Deirdre McCloskey.

Bob Murphy explains that outsourcing makes us richer.  A slice:

To see the relevance of this point, let’s consider exactly how the phenomenon of outsourcing occurs. As the video describes it, US employers realized “about 30 years ago” that they could hire foreign workers to do the same jobs at much lower wages, so they relocated their production facilities abroad. This assertion raises the question: Why didn’t employers just cut US wages down to what the foreigners were asking?

The answer is that US workers won’t take such low-paying jobs because they have better options. For example, suppose Americans are originally employed in a TV factory in Tennessee, making $16 an hour. The owner of the plant realizes he can relocate it to India, where he can hire workers who are half as productive (meaning they only make half as many TVs per hour) but who are willing to work for $4 an hour. He would never bother relocating if the American workers would simply accept a pay cut to $8 an hour. (The American workers make twice as many TVs per hour, remember.) Suppose they won’t do that, because their next-best job option is to work in a warehouse for $10 an hour. In this case, with the numbers I’ve invented, the original factory owner would “ship jobs to India,” not because of some horrible flaw in the labor market, but because American workers had better things to do than make TVs for $8 an hour. It was more efficient for those workers to go into the warehouse sector and for the Indian workers to make the TVs.

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… is from page 272 of the 1977 volume, edited by Walter Grinder, of Ludwig Lachmann’s papers, Capital, Expectations, and the Market Process; in particular, this quotation is from Lachmann’s 1940 Economica paper, “A Reconsideration of the Austrian Theory of Industrial Fluctuations“:

“[C]apital-intensification” or the “deepening of capital” is merely another form of Innovation.  Once we have rid ourselves of the notion of capital as a homogeneous aggregate and bear in mind its essentially heterogeneous character as an agglomeration of houses, ships, machinery, etc., it is easy to see that “an increase of capital per unit of output” does not just mean the addition of another piece of machinery to an otherwise unchanged equipment park, but that as often as not it will entail a complete re-arrangement of the existing productive apparatus, including depreciation of specific factors, and possibly a change in the character of the final product.

Thus, it is incorrect to insist that increasing the amount of capital relative to labor or other inputs (including previously assembled pieces of capital) necessarily reduces capital’s marginal productivity.  Being cognizant of this complex reality of capital and its structure makes much more difficult the task of composing simple theories about capital and its relationship to labor and to aggregate demand.  But this reality isn’t optional – and nor are the many real-world problems created by interventionist policies whose justifications are rooted in simplistic theories (such as those of Keynes) about the nature of capital and of the economy.

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More On Hayek’s Nobel

by Don Boudreaux on October 13, 2014

in Economics, Hayek, State of Macro

In addition to my essay, with Todd Zywicki, in today’s Wall Street Journal on Hayek’s 1974 Nobel award, I also devote my latest column in the Pittsburgh Tribune-Review to the commemoration of the 40th anniversary of this award of the Prize.  A slice:

With his work in economic theory regarded, by the start of WWII, as reactionary and unscientific, Hayek turned increasingly to political theory. In 1960 he published an ambitious volume — “The Constitution of Liberty” — on the nature of the good society. And in the 1970s he produced an even deeper and more profound study of the relationship between the economy, politics and law: the three-volume “Law, Legislation, and Liberty.”

Hayek’s refusal to go along with Keynesian economics did not reflect a closed-minded devotion to an older tradition in economics. Instead, it reflected Hayek’s intellectual brilliance and courage. By 1940 he surely realized that he was being cast aside by his fellow economists because of his continuing opposition to Keynesianism. Yet rather than give credit to a popular brand of economics he knew to be fundamentally flawed, he remained true to what his reason and interpretation of the facts told him about the economy.

In time, Hayek’s perseverance paid off. By the 1970s the flaws in Keynesian economics became manifest.

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