Quotation of the Day…

by Don Boudreaux on September 11, 2017

in Inequality, Philosophy of Freedom

… is from page 73 of F.A. Hayek’s 1945 lecture “Individualism: True and False,” as this essay is reprinted in Studies on the Abuse & Decline of Reason, Bruce Caldwell, ed. (2010), which is volume 13 of the Collected Works of F.A. Hayek:

While individualism is profoundly opposed to all prescriptive privilege, to all protection, by law or force, of any rights not based on rules equally applicable to all persons, it also denies government the right to limit what the able or fortunate may achieve.  It is equally opposed to any rigid limitation of the position individuals may achieve, whether this power is used to perpetuate inequality or to create equality.  Its main principle is that no man or group of men should have power to decide what another man’s status ought to be, and it regards this as a condition of freedom so essential that it must not be sacrificed to the gratification of our sense of justice or of our envy.

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Writing in the Wall Street Journal, Martin Feldstein busts the myth that middle-class Americans are stagnating economically.  A slice:

If there is no increase in the cost of production, the government concludes that there has been no increase in quality. And if the manufacturer reports an increase in the cost of production, the government assumes that the value of the product to consumers has increased in the same proportion.

That’s a very narrow—and incorrect—way to measure quality change. In reality companies improve products in ways that don’t cost more to produce and may even cost less. That’s been true over the years for familiar products like television sets and audio speakers. The government therefore doesn’t really measure the value to consumers of the improved product, only the cost of the increased inputs. The same approach, based on measuring the cost of inputs rather than the value of output, is also used for services.

The official estimates of quality change are therefore mislabeled and misinterpreted. When it comes to quality change, what is called the growth of real output is really the growth of real inputs. The result is a major underestimation of the increase in real output and in the growth of real incomes that occurs through quality improvements.

Hurricane haikus from Bob Higgs.

Randy Holcombe explains that “progressive” democracy works for the 1%.

On CNN, GMU Econ alum Steve Horwitz reveals the unseen damage unleashed by prohibitions on so-called “price gouging.”

Houston will be rebuilt faster and better because of the absence there of zoning.

My Mercatus Center colleague Veronique de Rugy laments the plethora of government obstacles to private means of dealing with problems.

Here’s Jeff Jacoby on DACA, Congress, and presidential overreach.

FIRE’s Samantha Harris reports on yet another instance of foolishness by members of the modern American academy.

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Quotation of the Day…

by Don Boudreaux on September 10, 2017

in Politics, The Future, Virginia Political Economy

… is from page 81 of the original 1985 Cambridge University Press edition of Jim Buchanan’s and Geoff Brennan’s excellent book, The Reason of Rules:

Constitutional commitments or constraints become means by which members of a polity can incorporate long-term considerations into current-period decisions.  In the absence of such constraints, individuals will be led, almost necessarily, to adopt a short-term perspective in politics.

DBx: Constitutional constraints – to the extent to which they are effective – create in politics something of what private property rights create in the market, namely, a discipline to reduce our tendencies to succumb excessively to our natural preference for satisfaction today over satisfaction tomorrow.

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Bonus Quotation of the Day…

by Don Boudreaux on September 9, 2017

in Hayek, Hubris and humility

… is from page 526 of F.A. Hayek’s Postscript – “Why I Am Not a Conservative” – to the Definitive Edition (Ronald Hamowy, ed., 2011) of Hayek’s profoundly important 1960 volume, The Constitution of Liberty; (by “liberal,” Hayek here means liberal in the classical – that is, in the individual-freedom-loving, limited-government – sense):

Without preferring the new merely because it is new, the liberal is aware that it is of the essence of human achievement that it produces something new; and he is prepared to come to terms with new knowledge, whether he likes its immediate effects or not.

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Alberto Mingardi shares some of his thoughts on reading a posthumously published collection of essays by Ken Minogue.

Brittany Hunter offers three reasons to oppose a state-guaranteed universal minimum income.

John Tamny explains that bringing manufacturing jobs back to America would bring stagnation to America.

Here’s an audio tape of an interview on so-called “price gouging” that I did on Thursday with Michael Smerconish.

Steve Horwitz reviews the damage unleashed when government prohibits so-called “price gouging.”  Here’s Steve’s conclusion:

The laws of economics are not suspended in an emergency, no matter what the laws of politicians attempt to do. When goods are more scarce, they will be costly to obtain, whether those costs are in terms of money or something else. The importance of letting market prices do their job and determining who gets what is that this process is also the way in which we make sure that there is stuff to be allocated in the first place. The only way to make sure we have sufficient production is to let market prices determine consumption.

Mike Munger will be Bob Zadak’s guest on Sunday, 11:00am-12:pm EDT.  The topic is Nancy MacLean’s fabulist tale Democracy in Chains.

Arnold Kling bemoans HCBAMism.

George Will bemoans Congress’s abandonment of its authority to the executive branch.  A slice:

So does Attorney General Jeff Sessions, who preaches fire-and-brimstone law and order when he is not encouraging legalized theft under “civil forfeiture,” whereby government enriches itself by seizing the property of persons not convicted of crimes. Sessions, whose canine loyalty to Trump is not scrupulously reciprocated, seemed to relish the privilege of announcing Trump’s policy that, absent action from a Congress that is especially loath to act on immigration, could punish 690,000 children for what their parents did long ago.

As he does without fail, George Selgin writes sensibly about money and banking.

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… is from page 78 of the 2011 Definitive Edition (Ronald Hamowy, ed.) of F.A. Hayek’s 1960 volume, The Constitution of Liberty:

While the growth of our knowledge of nature constantly discloses new realms of ignorance, the increasing complexity of civilization which this knowledge enables us to build presents new obstacles to the intellectual comprehension of the world around us.  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.

DBx: Put differently, as our civilization expands and becomes more complex, the greater is the size of that which is unseen relative to the size of that which is seen.  It follows that as our civilization expands and becomes more complex, the greater is the folly of looking to the state to intervene in ways that are socially useful.

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Bonus Quotation of the Day…

by Don Boudreaux on September 8, 2017

in Complexity & Emergence

… is from page 146 of the 1985 NYU Press edition of the 1963 English-language translation of Carl Menger‘s 1883 Investigations Into the Method of the Social Sciences with Special Reference to Economics (Untersuchungen über die Methode der Sozialwissenschaften und der politischen Okonomie insbesondere) (footnote deleted; original emphasis):

Another portion of them [social phenomena], however, is not the result of agreement of members of society or of legislation, as we have already explained.  Language, religion, law, even the state itself, and, to mention a few economic social phenomena, the phenomena of markets, of competition, of money, and numerous other social structures are already met with in epochs of history where we cannot properly speak of a purposeful activity of the community as such directed at establishing them.  Nor can we speak of such activity on the part of the rulers.  We are confronted here with the appearance of social institutions which to a high degree serve the welfare of society.  Indeed, they are not infrequently of vital significance for the latter and yet are not the result of communal social activity.  It is here that we meet a noteworthy, perhaps the most noteworthy, problem of the social sciences:

How can it be that institutions which serve the common welfare and are extremely significant for its development come into being without a common will directed toward establishing them?

DBx: Yes.  Scholars competent in economics and the other social sciences reject secular creationism.  Such scholars understand that most features of society – and, certainly, society itself writ large – are the results of human action but not of human design.

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Quotation of the Day…

by Don Boudreaux on September 8, 2017

in Hayek

… is from pages 107-108 of Vol. II (“The Mirage of Social Justice” [1976]) of F.A. Hayek’s great work, Law, Legislation, and Liberty (footnote deleted):

An economy, in the strict sense of the word in which a household, a farm, or an enterprise can be called economies, consists of a complex of activities by which a given set of means is allocated in accordance with a unitary plan among the competing ends according to to their relative importance.  The market order serves no such single order of ends. What is commonly called a social or national economy is in this sense not a single economy but a network of many interlaced economies.

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Here’s a letter to another person who caught a radio interview with me this morning:

Mr. Kasim Wagner

Mr. Wagner:

Thanks for your e-mail.

You write that “it plainly is wrong for anyone to force people to pay higher prices for supplies in disaster areas” and, therefore, “government’s duty is to protect people from this greed.”

First, I agree that it’s wrong to force people to pay higher prices.  But we’re not talking about forcing people to pay higher prices.  Every buyer is free not to pay higher prices.  Of course, those people who don’t pay higher prices don’t get the goods.  Yet people are no more forced to pay whatever prices they pay because of natural disasters than they were forced to pay whatever prices they paid before any natural disaster became a reality.  All of those prices are paid voluntarily – a fact that is both economically and ethically relevant.

Second, if you truly believe that it’s unethical for anyone self-interestedly to cause consumers’ costs of acquiring much-needed goods to rise significantly, then you must believe that it’s unethical for people to rush into, and to stand in, the long lines that occur whenever there are shortages of goods.  Every person standing in front of Jones in a line of consumers hoping to buy, say, bottled water self-interestedly puts his or her own welfare ahead of that of Jones.  Each of those persons standing in front of Jones – both by increasing the chance that the store will run out of bottled water by the time Jones reaches the front of the line, and by increasing the amount of time that Jones waits in line – raises Jones’s cost of acquiring bottled water.

Do you believe that the individuals standing in line in front of Jones are unethical?  Should government, in addition to imposing a ceiling on the monetary price that people pay for bottled water, also impose a “queue ceiling” on the number of people who stand in line to buy bottled water?  If, as I suspect, your answer to each of these questions is “no,” why do you believe that government should prohibit only those increases in the costs of acquiring a good that take the form of increases in the monetary price of the good?

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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Bonus Quotation of the Day…

by Don Boudreaux on September 7, 2017

in Civil Society, Philosophy of Freedom

… is from Deirdre McCloskey’s new essay, “The Core of Liberty Is Economic Liberty”:

For one thing, mutually advantageous exchange is not the worst ethical school.  It is better than the violent pride of aristocrats or the violent insolence of bureaucrats.  And in economic liberalism, the human desire to excel is provided millions of honorable paths, from model railway building to show business, as against in illiberal societies the narrow path to eminence at the court or politburo or army.  We do not lose our souls in commerce, but cultivate them.  The military, admired nowadays even in liberal societies, is commended daily for its “service.”  But every economic act among consenting adults is service.  The ethical habits of commerce are expressed daily in the way an American shopkeeper greets his customer: “How can I help you?”

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