My GMU Econ colleague Alex Tabarrok is interviewed in the Washington Post on the FDA.

John Tamny rightly bemoans the GOP’s mysterious new fondness for tax hikes.

Here’s what Arnold Kling – sensibly, of course – believes about education.

David Henderson is understandably impressed with the work of Lisa Servon.

Here’s Shikha Dalmia on Medicaid.

Richard Ebeling writes about Karl Marx the man – and what an unsavory man Marx was.

Alex Nowrasteh responds to David French’s criticism of Nicholas Kristof.

My Mercatus Center colleague Omar Al-Ubaydli discusses the alleged tension between technology and trade.

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Quotation of the Day…

by Don Boudreaux on February 15, 2017

in Crony Capitalism, Seen and Unseen, Trade

… is from page 242 of Milton Friedman’s 1962 article “Is a Free Society Stable?” as it appears in Liberty Fund’s 1981 single-volume collection of the New Individualist Review:

Unknown-2The benefits that are alleged to flow from a tariff are clear and obvious.  If a tariff is imposed, a specified group of people, whose names can almost be listed, seem to be benefited in the first instance.  The harm that is wrought by the tariff is borne by people whose names one does not know and who are unlikely themselves to know that they are or will be harmed.  The tariff does most harm to people who have special capacities for producing the exports that would pay for the goods that would be imported in the absence of a tariff.  With a tariff in effect, the potential export industry may never exist and no one will ever know that he might have been employed in it or who would have been.  The indirect harm to consumers via a more inefficient allocation of resources and higher prices for the resulting products are spread even more thinly through the society.

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Calling Mark Perry

by Don Boudreaux on February 14, 2017

in Immigration, Myths and Fallacies, Population

How many are the people who worry both that population growth will impoverish the masses globally (or that immigration will impoverish the masses domestically) and that the advance of trade and labor-saving technologies will destroy most jobs (that is, destroy opportunities for human beings to earn livings by helping each other deal with scarcity)?

I suspect that there are many individuals who simultaneously hold both of these inconsistent beliefs.

I’m quite sure that neither of these beliefs is correct.  But one fact about them is plain: they cannot both be correct.

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Here’s an open letter to a Fox News analyst:

Dr. Keith Ablow
Fox News

Dr. Ablow:

Disturbed by labor-saving techniques such as self-checkout lanes, you wonder why “no one was raising any red flags about the fact that machines had obviously put people out of work” (“Should Trump stop robots from stealing jobs?” Feb. 13).  Your fear of mechanization is so intense that you call on the Trump administration to conduct a study to see if, because of mechanization, “rampant unemployment is likely.”

Such a study – one far more reliable than any that can be conducted by government officials – has been ongoing for quite some time.  It’s called “history.”  Since humans first controlled fire and carved arrows, history is a long tale of the invention and use of labor-saving techniques and devices.  Domestication of oxen and horses.  Pulleys.  Levers.  Irrigation channels.  Metal saws.  The printing press.  Concrete.  The wheel.  All save labor, yet none has led to permanent increases in unemployment.

It’s true that the pace of introducing new labor-saving techniques has magnificently quickened in the past two hundred years.  This fast pace continues today.  Yet still we encounter no evidence that labor-saving techniques permanently increase unemployment.

You’ll reply “This time is different!”  Perhaps, but I doubt it.  And I’m so confident in my prediction that I’ll put $10,000 of my own my money where my mouth is.

I will bet you $10,000, straight up, that in not one of the next 20 years will the annual U.S. labor-force participation rate, as measured by the U.S. Bureau of Labor Statistics, fall below 58.1 percent – which is the lowest rate on record at the Bureau of Labor Statistics.  (The labor-force participation rate hit this post-WWII low in December 1954.  And because the unemployment rate does not count unemployed workers who are so discouraged that they’ve stopped looking for jobs, the labor-force participation rate is more likely than is the unemployment rate to capture any long-term job-destroying effects of technology.)

Because you are so worried about labor-saving technology causing secular job loss that you’re willing to empower government to tamp down the rate of innovation, you should not hesitate to accept my bet.  If your worries are justified, you’ll not only earn $10,000 but also the right to brag that you correctly predicted a first-time-in-millennia change in the historical relationship between technology and jobs.  If instead your worries prove to be unfounded, I’ll not rub it in too hard that you are only the latest in a long, long line of mistaken Luddites.*

Do we have a bet?

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

* Please note that technology can advance so far that the labor-force participation rate falls below 58.1 percent not because technology is impoverishing us but, rather, because it makes so many of us so much richer that lots of us simply choose not to work. If this result occurs, I’ll lose the bet despite the fact that this result will be an especially happy one for humankind. Nevertheless, I remain so confident that, as technology advances, humans will continue discover such a large number of wants and desires to satisfy through economic activities (and that foolish government interference will not stymie these activities) that the annual labor-force participation rate in the U.S. will not fall below 58.1 percent between now and 2037.

(HT Roger Brown for alerting me to Dr. Ablow’s essay.)

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Location, Location, Location

by Don Boudreaux on February 14, 2017

in Crony Capitalism, Myths and Fallacies, Trade

Here’s a letter to a Cafe Hayek reader:

Mr. Jim Tamm

Mr. Tamm:

You’re “put off” by my “rigid opposition to any and all limits on trade.”  “Surely,” you claim, “some benefit of doubt is deserved for officials tasked to carry out the trade policies of our nation.”

What you call “trade policies” are interferences with voluntary commercial transactions – interferences done not to help “our nation” but, rather, to bloat the profits and wages of politically influential producer groups at the expense of the masses.  The parties to these peaceful transactions would be be left unmolested if each lived in the same political jurisdiction as the other.  But for no reason other than the economically inconsequential fact that these parties live in different political jurisdictions, state officials obstruct their commerce.  The thuggish nature of such obstructions aren’t transformed into something different and sweeter by calling these obstructions “trade policies.”

Suppose that Uncle Sam hired agents to swarm out across the country, to each and every home and business, to daily seize from each of these homes and businesses some percentage of all goods that these agents determine are foreign-made.  I’m confident that most Americans would not tolerate such thievery.  But let Uncle Sam change merely the location of operation of these agents – let Uncle Sam instead have these agents seize or destroy the same percentage of foreign-made goods behind the cover of port warehouses – and suddenly such coercive and destructive interference with ordinary people’s affairs appears to be sanitized “trade policy.”

Yet because the economic consequences of the second of these alternative arrangements for reducing people’s access to foreign-made goods are identical to the consequences of the first of these arrangements, I see no reason to tolerate the second arrangement any more than I would tolerate the first.  The trade-obstructers’ location of operation is irrelevant.

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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Some Links

by Don Boudreaux on February 14, 2017

in Books, Civil Asset Forfeiture, Economics, Politics, Trade

Kevin Williamson rightly exposes the absurdity of the notion that everything is political.

Richard Epstein – after pointing out some positive moves by Trump – wisely calls on Trump to resign the office of U.S. president.  (HT Warren Smith)  A slice:

Yet there are deeper problems, because President Trump’s anti-free trade agenda will hurt—if not devastate—the very people whom he wants to help. Extensive trade between the United States and Mexico is indispensable for the prosperity of both countries. The looming trade war threatens that win/win position. The notion that the United States should run positive trade balances with every country is an absurd position to take in international economic relations, lest every country has the right to claim the same preferred status for itself. Yet it has never occurred to Trump that a negative trade balance amounts to a vote of confidence by other countries that it is safe to invest in the United States, allowing the United States to create new industries and new jobs. Nor does he understand that any effort to be successful in the export market requires importing cheap components from foreign firms—an oversight evident from his ill-conceived executive order calling, whenever legal, for American pipe on an American pipelines.

Dan Mitchell is correct to observe that “One of the unfortunate features of Washington is that people often wind up in places that bring out their worst behaviors.”  And, as Dan explains, one of these people is Jeff Sessions.

Marian Tupy channels Julian Simon.

I’m delighted to share the news that Randy Holcombe’s Introduction to the Austrian School of Economics is being translated into Korean.

Mark Perry wishes us a Happy Valetine’s Day with a message from India.

And Pete Boettke wishes Israel Kirzner a very happy 87th birthday (which was yesterday, February 13th).

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… is from pages 476-477 of the 5th edition (2015) of Thomas Sowell’s Basic Economics:

41DmJtOy2tL._UY250_The basic facts about international trade are not difficult to understand.  What is difficult to untangle are all the misconceptions and jargon which so often clutter up the discussion.  The great U.S. Supreme Court Justice Oliver Wendell Holmes said, “we need to think things instead of words.”  Nowhere is that more important than when discussing international trade, where there are so many misleading and emotional words used to describe and confuse things that are not very difficult to understand in themselves.

For example, the terminology used to describe an export surplus as a “favorable” balance of trade and an import surplus as an “unfavorable” balance of trade goes back for centuries.  At one time, it was widely believed that importing more than was exported impoverished a nation because the difference between imports and exports had to be paid in gold, and the loss of gold was seen as a loss of national wealth.  However, as early as 1776, Adam Smith’s classic The Wealth of Nations argued that the real wealth of a nation consists of its goods and services, not its gold supply.

Too many people have yet to grasp the full implications of that, even in the twenty-first century.  If the goods and services available to the American people are greater as a result of international trade, then Americans are wealthier, not poorer, regardless of whether there is a “deficit” or “surplus” in the international balance of trade.

DBx: (I disagree here with Sowell only in his assessment of Oliver Wendell Holmes, who I believe not to have been great.)

Let’s list some other familiar yet wholly misleading words and phrases used in discussions of international trade:

– “dumping” – as in “Foreigners are dumping goods on us!” (Meaning: foreigners are increasing Americans’ wealth by increasing our access to goods and services.)

– “flooding” – as in “Foreigners are flooding our market with too many of their goods!” (Meaning: foreigners are selling to Americans as much as Americans are willing to buy from foreigners.)

– “unfair trade practices” – as in “Foreigners are charging American consumers unfairly low prices!”  (Meaning: foreigners are successfully competing for the patronage of American consumers by offering these consumers attractively low prices.)

– “level the playing field” – as in “Our government should level the playing field of international trade by imposing higher tariffs on imports!”  (Meaning: our government should tilt the playing field of international trade by imposing higher tariffs on imports.)

– “our dollars” – as in “Foreigners are accumulating too many of our dollars!”  (Meaning: foreigners are earning lots of dollars from Americans, dollars that in fact do not belong to those who issue this complaint and who mask a core fallacy of their complaint by using a first-person plural possessive pronoun.)

– “invading our market” – as in “Foreigners are invading our market!”  (Meaning: foreigners are successfully competing for the dollars of many American consumers – dollars that, again, are not collectively owned by “us.”)

– “They’re killing us!” – as in “They’re killing us!”  (Meaning: they’re enriching us and, in doing so, pushing many American firms and workers to switch to more productive lines of work.)

This list can be lengthened.

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Bonus Quotation of the Day…

by Don Boudreaux on February 13, 2017

in Crony Capitalism, Trade

is from Bob Higgs’s latest post at The Beacon:

Screen Shot 2017-02-13 at 5.27.01 PMProtectionism, as it is misleadingly known, has always been an insider’s game, a political gambit aimed at enriching those to whom the government is especially beholden or seeks to seduce at the expense of other people.  Incumbent producers who produce products on which tariffs are imposed succeed in repelling competition by force of the government’s customs officers, which is to say that they succeed in increasing their profits by force, not by offering consumers a better deal.

DBx: What Bob says.

I encounter these days a distressingly large number of people who argue thusly: ‘Look, even if free trade is the best policy, the populace has become populist.  Free trade is no longer politically salable.  People no longer believe in free trade.  Protectionism is now all the rage.  So either change the subject or adopt a more moderate tone if you wish to have any influence.’

To my ears and eyes, such advice is no more appealing or persuasive than would be the advice of someone who advises an opponent of arson to tone his objections down on the grounds that large numbers of the general populace have come wrongly but sincerely to believe that arson is economically enriching and, therefore, that arson should be practiced more widely.

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As I’ve said on other occasions: compared to (most of) today’s advocates of the minimum wage, the minimum-wage’s early advocates had far worse ethics but a far better grasp of economics.  These early advocates of the minimum wage correctly understood not only that the minimum wage destroys jobs for some low-skilled workers, but also that the low-skilled workers most likely to suffer the consequent job losses are those who are held in lowest esteem by their fellow human beings.

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Some Links

by Don Boudreaux on February 13, 2017

in Books, Crony Capitalism, Education, Energy, Health, Myths and Fallacies, The Future, Trade

Mark Perry identifies 25 reasons for the continuing popularity of economically destructive protectionist policies.

James Pethokoukis talks with Virginia Postrel 20 years after the publication of her great book The Future and Its Enemies.

This map – courtesy of Elaine Schwartz – of U.S. states and their chief exports and imports is interesting.

Here’s John Cochrane on healthcare repair.

George Leef explains the value of Marx for those who wish to better understand modern academia.

My Mercatus Center colleague Veronique de Rugy says that it’s time to abolish the Department of Energy’s loan-guarantee program.

Jeff Jacoby celebrates school choice, not least because it helps to keep the peace.

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