… is from page 154 of John Cochrane’s superb 2014 speech “Why and How We Care About Inequality,” which is a chapter in Inequality & Economic Policy: Essays in Memory of Gary Becker (Tom Church, Chris Miller, & John B. Taylor, eds., 2015) (original emphasis):

Now, the critique of an increasingly rent-seeking society echoes from both the Left and the libertarians.  Rent-seeking is a big problem.  Cronyism is a big problem.  George Stigler finds a lot to agree with in Joe Stiglitz.  As do Milton Friedman, James Buchanan, and so forth.

But now comes the most astounding lack of logic of all.  If the central problem is rent-seeking – abuse of the power of the state – to deliver economic goods to the wealthy and politically powerful, how in the world is more governmen the answer?

If we increase the statutory maximum Federal income tax rate 70% , on top of state and local taxes, estate taxes, payroll taxes, corporate taxes, sales taxes and on and on … will that not simply, dramatically, increase the demand for tax lawyers, lobbyists and loopholes?

If you believe cronyism is the problem, why is the first item on your agenda not to repeal the Dodd Frank act and Obamacare, surely two of the biggest invitations to cronyism of our lifetimes?

DBx: Yes.  And the fact that nearly all proponents of using state power to forcibly ‘redistribute’ income or wealth ignore this reality is powerful evidence that they do not think realistically – that they do not think scientifically – about the matters on which they offer policy advice.  For these proponents, the state is simply assumed to have the potential to overcome the human imperfections that cause real (and imagined) problems in the market; this is to say that, for these proponents, the state is simply assumed to have the potential to be god-like.  That attitude isn’t scientific; it’s religious.

(The original version of Cochrane’s speech is here.)

Add a Comment    Share Share    Print    Email

Bonus Quotation of the Day…

by Don Boudreaux on May 16, 2017

in Economics, Monetary Policy

… is from page xi of the hot-off-the-press new book by George Selgin, Money: Free and Unfree (footnote deleted):

61s6vqnVfWL._SX331_BO1,204,203,200_Economists’ general lack of awareness of, and interest in, alternative monetary arrangements – and decentralized alternatives especially – is partly due to the tremendous influence exerted by central banks themselves, and partly a reflection of the state of modern economics graduate programs.  Most of the latter programs have dispensed with classes on either economic history or the history of economic thought – subjects once considered indispensable – so as to make room for more courses on mathematical modeling and econometrics.  Courses on monetary theory and macroeconomics have at the same time become increasingly abstract – so much so, indeed, that many of them hardly refer to “money” at all!  Faced with such a curriculum, graduate students are left to their own devices when it comes to learning anything at all about existing U.S. monetary institutions, let alone foreign or historical ones, or others that have been proposed but never tried.

DBx: Sad but true.  (I boast that GMU Econ – especially featuring, as we do, George’s mentor and frequent co-author, Larry White – is one of the precious few economics graduate programs in the English-speaking world that isn’t guilty of mistaking mastery of methods for mastery of the material.  And we still offer courses in economic history and the history of economic thought.)

Add a Comment    Share Share    Print    Email

Here’s a short snippet from this longer interview that Dave Rubin did with my brilliant colleague Bryan Caplan.

Add a Comment    Share Share    Print    Email

Run Away from Such Officious People

by Don Boudreaux on May 16, 2017

in Hubris and humility

Here’s a letter to two people who sent to me yesterday a blast e-mail:

Ms. Amanda Litman & Mr. Ross Rocketto
Run for Something

Ms. Litman and Mr. Rocketto:

Your blast e-mail from yesterday boasts of Hillary Clinton’s support for your organization’s “efforts to recruit young progressives to run for local office.”  Judging from the tone of your e-mail, I and other recipients of your note are supposed to be inspired by the prospect of twenty- and thirtysomethings seeking and seizing political power.

Yet far from finding this prospect inspiring, I find it simultaneously saddening and frightening.

It’s saddening that you attempt to attract young people out of the private sector (where success would spring from these young people each creatively discovering ways to persuade others to voluntarily trade with him or her) and into the ‘public’ sector (where success springs from these young people organizing or joining coalitions large enough to ham-fistedly force others to do these young-people’s bidding).

It’s frightening because power, while dangerous in anyone’s hands, is especially dangerous in the hands of people who are enticed during early adulthood into believing both that they are fit to order others about and that such commandeering of the lives of others is noble rather than nefarious.

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

Add a Comment    Share Share    Print    Email

Sweethearts

by Don Boudreaux on May 16, 2017

in Crony Capitalism, Trade

Here’s a speaks-for-itself e-mail from Duke’s Ed Tower (links added):

Don, With regard to your Café Hayek discussion of sugar protectionism. Here is my favorite footnote on protectionism. It is from Doug Irwin’s “Free Trade Under Fire,” fourth edition, p.88.

The family of Alfonso Fanjul singlehandedly supplies the United States with about 15 percent of its sugarcane through its land holdings in south Florida and the Dominican Republic, collecting somewhere between $52 to $90 million in benefits from the price supports on U.S. production and the quota rents on Dominican sugar exports. Not surprisingly, the Fanjul family could afford to make nearly $300,000 in campaign contributions in 1988. 26

26. Alfonso Fanjul is so politically powerful that President Bill Clinton interrupted a “meeting” with Monica Lewinsky to take a phone call from him. This is according to Lewinsky’s testimony as presented in the Kenneth Starr report.

Add a Comment    Share Share    Print    Email

Some Links

by Don Boudreaux on May 16, 2017

in Immigration, Media, Myths and Fallacies, Taxes, Trade

My colleague Bryan Caplan draws an important policy lesson from geo-determinism.

Citing a fine new paper by Gary Hufbauer and Lucy Lu, Robert Samuelson helps to bust the myth that globalization has wreaked havoc.  A slice:

First, trade has contributed substantially to the rise of American living standards since World War II. The report estimates those gains at $2.1 trillion on an annual basis, which was about 11 percent of the $18.5 trillion economy in 2016. Put differently, slightly more than one-tenth of what we produce and consume comes from trade’s cumulative benefits.

We enjoy these benefits in many ways. Imports are often cheaper than U.S. products. Think clothes, shoes, consumer electronics. Trade especially aids lower-income households whose budgets are weighted toward manufactured products, where price declines have been steep. Foreign competition and technology also force U.S. firms to lower costs and improve reliability. Cars are an excellent example. Toyota has made GM vehicles better. Finally, exports create jobs and economies of scale for U.S. firms.

Speaking of globalization, here’s a great column by John Tamny.  A slice:

All of this speaks to the greatest aspect of free trade: it’s the path to individual specialization.  When global competition for customers brings down the cost of everything, rising disposable income leads to new wants in the marketplace being discovered, and with these new wants, new forms of work rise up as a necessary way of fulfilling the needs of consumers who desire all sorts of goods and services as a reward for their work. Free trade leads to lower prices, which lead to greater individual specialization, and by extension much greater productivity.  When we’re more and more able to do the work most commensurate with our unique skills, our productivity surges.

Larry Reed notes that protectionism is very much like a skit by the Three Stooges.

David Boaz properly scolds those – and they are many – who mistake the president of one of the three co-equal branches of one of the multiple levels of one of the multitude of institutions in the United States as being “the commander-in-chief of the United States.”  Here’s David’s conclusion:

Donald Trump is not my commander in chief. Neither was Barack Obama. Each was elected president, charged with leading the executive branch of the federal government.

Marian Tupy is correct: socialism prodigiously produces immorality.

Ira Stoll justifiably criticizes the New York Times’s coverage of Trump’s proposed tax cuts.

Here’s Richard Rahn on Europe.

My great colleague Walter Williams is rightly and highly critical of the mix of infantilism and totalitarian impulses that abounds today on too many college campuses.

Add a Comment    Share Share    Print    Email

Quotation of the Day…

by Don Boudreaux on May 16, 2017

in Complexity & Emergence

… is from page 165 of the 2016 Mercatus Center re-issue of my late colleague Don Lavoie’s superb 1985 volume National Economic Planning: What Is Left?:

individualityOne might hope, in any case, that people could find ways to feel whole without having to sacrifice themselves to anybody’s grandiose social causes.  To me, the great virtue of Americans is their diversity.  These United States are living proof that a nation need not be very united in order to be great.

Add a Comment    Share Share    Print    Email

Let’s Not Sugar-Coat the Reality

by Don Boudreaux on May 15, 2017

in Crony Capitalism, Trade

Here’s a letter to Robert Romano, who is with Americans for Limited Government (“ALG”):

The headline of your blast e-mail today reads “ALG urges Trump to enforce NAFTA and stop Mexican sugar dumping.”  Let’s reword in order to clarify just what your organization advocates:

“ALG urges Trump to protect the bloated revenues of long-coddled American sugar producers by stopping American consumers from taking advantage of low sugar prices offered by Mexicans.”

There.  That’s more clear.

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

Add a Comment    Share Share    Print    Email

… is from page 368 of the 2007 University of Chicago re-issue of F.A. Hayek’s 1941 The Pure Theory of Capital:

Unknown-3It is not surprising that Mr. Keynes finds his views anticipated by the mercantilist writers and gifted amateurs: concern with the surface phenomena has always marked the first stage of the scientific approach to our subject.  But it is alarming to see that after we have once gone through the process of developing a systematic account of those forces which in the long run determine prices and production, we are now called upon to scrap it, in order to replace it by the shortsighted philosophy of the business man raised to the dignity of a science.

DBx: Again, I am increasingly struck and distressed by how much of modern economics – economics since the time of J.M. Keynes (1883-1946) – is an elaborate practice of assuring the man-in-the-street that his economically untutored sense of the way economies work is, in fact, spot-on correct. The man-in-the-street, seeing only what Deirdre McCloskey calls the “first act” of economic phenomena, concludes that the first act is all that there is.

Does freer trade reduce domestic employment? The man-in-the-street concludes that it does because the man-in-the-street sees only the jobs lost to imports. Do minimum wages improve the welfare of low-paid workers? The man-in-the-street concludes that it does because the man-in-the-street never bothers to ask how employers and employees will adjust to mandated higher labor costs. Does more government spending improve the economy? The man-in-the-street concludes that it does because the man-in-the-street sees only the increased output and employment of those firms that receive the government spending. Must the government act to “correct” externalities? The man-in-the-street concludes that it must because the man-in-the-street neither bothers to ponder the processes that give rise to the apparent externalities nor questions the ability or willingness of government officials to act in the public interest.

If modern astronomy were akin to modern economics, a great deal of modern astronomy (although by no means all of it) would be devoted to explaining – with the use of fantastic mathematics and elaborate empirical demonstrations – that the man-in-the-street has been correct all along in believing that the sun and the planets and the stars all revolve around a stationary earth.

Add a Comment    Share Share    Print    Email

Tim Worstall flags the inconsistency between Jimmy Carter’s work to increase the supply of housing for the poor and Carter’s recent call for tariffs on lumber.

Dan Mitchell exposes the thuggery and cronyism that is occupational licensing.

Valentin Schmid writes about the Austrian school of economics.  (HT Tom Elia)

Jeff Jacoby bemoans the over-the-top hysteria of too many ‘discussion’ of health-care policy.

Speaking of health-care policy, here are some sound suggestions by Levi Russell.  And here’s my colleague Tyler Cowen.

Robin Koerner warns against arrogance – and, especially, the combination of arrogance with power.

David Henderson finds a flaw in Greg Mankiw’s treatment of externalities.

Ilya Somin, of GMU’s Scalia law school, explains how federalism can help the poor.

Sheldon Richman identifies the Orwellian nature of too much tax talk.  A slice:

Consider Jimmy Kimmel‘s appeal for “free” medical care. No decent person can help feeling sympathy for Kimmel and his ill child. But emotion should not cloud our judgment. When he says that no one should be denied medical care because he or she can’t afford it, he means that other people ought to be forced to pay for those services whenever the need is thought—by whom?—great enough. Why not say that openly? There’s no common pool of medical services or money to be drawn from.

Add a Comment    Share Share    Print    Email