Cafe Hayek — where orders emerge

Quotation of the Day…

by Don Boudreaux on April 6, 2014

in Man of System, Myths and Fallacies, Other People's Money, Property Rights, Reality Is Not Optional

… is from page 231 of Frank M. Machovec’s excellent 1995 volume, Perfect Competition and the Transformation of Economics (original emphasis; footnote deleted):

Real social security cannot be created through constitutional declarations and other political card tricks that create material ‘human rights’ that satisfy the something-for-nothing mentality of voters – and create moral hazards in health care and employment search – but do nothing to foster the institutions required to give substance to such material promises via enhancements in factor productivity. A rude awakening is in store for all those who have come to believe in – and hence to rely upon – the illusion of income ‘guarantees’ proffered by the men of system of this century.

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Michael Kinsley on the Role of Money in Speech and Politics

by Don Boudreaux on April 6, 2014

in Media, Politics

In yesterday’s Washington Post, Michael Kinsley writes great good sense about free speech and money in politics. (Kinsley, by the way, is one of my very favorite pundits. Although I often disagree with him – perhaps as often as 50 or 60 percent of the time – I find him always to be thoughtful, perceptive, humane, and never banal.) Here are his opening four paragraphs:

On Thursday, the day after the Supreme Court’s decision in McCutcheon v. Federal Election Commission, The Post and the New York Times between them carried eight separate print articles about the ruling. McCutcheon is the latest in a string of decisions in which the court has held that various limits on campaign contributions violate the First Amendment free speech rights of rich people and corporations. The articles ranged from fairly balanced news reports through only slightly slanted sidebars to open frothing and foaming on the Times editorial page.

Nevertheless, this was all too much for a group of Republican House members who introduced H.R. 2532, the so-called “Freedom From the Press Act,” which would place strict limits on how much a corporation or individual could spend putting out a newspaper or any other medium in which political opinions are expressed. “For too long,” said a news release issued with the text of the bill, “wealthy media companies have been able to dominate the political debate, drowning the voices of ordinary citizens who may not agree with these companies’ elitist views on subjects such as campaign contributions by wealthy corporations. Some of these ordinary citizens are veterans, who have fought for freedom in Afghanistan or Iraq, only to come home and find that their own voices are drowned out by the blowhards on ‘Morning Joe’ or the mandarins at the New York Times. Media corporations dominate the political debate, not just because of money but because they control the established channels of communication. This bill will be one step toward a level playing field.”

There is, in fact, no such bill as the Freedom From the Press Act, limiting anyone’s right to publish a newspaper or broadcast a talk show. But if there were, is it possible that the media might find this bill just a tad unconstitutional? Might they not invoke every cliche of First Amendment jurisprudence, such as “the solution to speech is more speech” (i.e., if you disagree with me, write your own op-ed piece but don’t try to stop mine) or all that stuff about disagreeing with what you say but defending to the death your right to say it? And wouldn’t they be right?

How can anyone say — as people do say, as if this settles the issue — that “Money isn’t speech” and then, in the same breath, ask for money to spread the word about the danger to democracy posed by the Koch brothers, who are pouring millions of dollars into political campaigns supporting their conservative-libertarian point of view? Money spent trying to spread a political message is speech, whether you like the message or not. More money is louder speech, that more people can hear.

Despite being a man of the left, Kinsley’s first instinct is seldom to use government to force others to behave as he fancies they should behave, or to behave according to some social-engineering blueprint.

(My own solution for getting money out of politics is to get politics out of money.)

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A Conversation Between Milton Friedman and Gary Becker

by Don Boudreaux on April 5, 2014

in Economics, Video

Here’s a splendid discussion between Milton Friedman and Gary Becker. It took place in Chicago in November 2002.

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The Simple Politics of Tax Simplification

by Don Boudreaux on April 5, 2014

in Politics, Seen and Unseen, Taxes

Here’s a letter to the Washington Post:

George Will writes that “tax simplification would reform politics by shrinking opportunities for transactions between private factions and the political class. This class confers favors as much with the tax code as with appropriations. ‘You can drain the swamp,’ says [Sen. Ron] Wyden. ‘They did it in ’86′” (“A tax reformer’s uphill push,” April 6).

Alas, matters are more complicated.

In 1986 Milton Friedman, along with my late Nobel-laureate colleague Jim Buchanan and many other economists, while applauding the tax simplification enacted that year, pointed out that it was politically feasible only because by the mid-1980s the tax code had become so flooded with fiscal favors dispensed to special-interest groups that there was little room left for politicians to dispense any further such favors. So politicians drained the swamp. They did so, however, not to shrink opportunities for them to exchange political favors with private factions, but to make such exchanges once again easy and profitable. The swamp was drained, in short, only so that it could be refilled with the foul water and stench of interest-group politics.

This reality is no argument against tax simplification, but it does counsel realism about the motives of politicians who seek it and about the permanence of that simplification.

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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Quotation of the Day…

by Don Boudreaux on April 5, 2014

in Property Rights

… is from page 380 of volume 2 of The Collected Works of Armen A. Alchian (2006); specifically, it’s from Alchian’s 1959 article “Private Property and the Relative Cost of Tenure”:

Loss of personal wealth is a powerful dissuader, while profits are a powerful persuader to pay heed to other people’s preference.

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Do You See the Connection….

by Don Boudreaux on April 5, 2014

in Economics, Man of System, Politics, Reality Is Not Optional

… between Tyler Cowen’s two most-recent posts (as of 6:44am EDT today) at Marginal Revolution – this one, then this next one?

Do you also see, in the second post (“Taxation and the distorted allocation of talent”), evidence of economists (here, the authors of the paper that Tyler mentions) committing the “Then a miracle occurs” move?

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An Introduction to the Myth of the Rationality of Collective Decision-Making

by Don Boudreaux on April 4, 2014

in Politics, Video

In this LearnLiberty video, (soon-to-be) Creighton University economics professor Diana Thomas (PhD, GMU) explains some elementary and important, yet little-appreciated, facts about voting.

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Minimum Wage: For the Greater Good?

by Don Boudreaux on April 4, 2014

in Seen and Unseen, Work

Here’s a letter to a correspondent from Canada:

Mr. Pierre Taverson

Dear Mr. Taverson:

Thanks for e-mailing. If I understand your defense of minimum-wage legislation - and your criticism of my opposition to that legislation - you argue that the number of people who gain from the legislation is so large, relative to the number who suffer as a consequence, that the legislation “easily passes the cost benefit test.”

You’re correct that the CBO predicts that a hike in the minimum wage to $10.10 per hour will raise the pay of 16.5 million Americans while it will cause “only” 500,000 people to remain unemployed. Unlike you, though, I do not believe that this CBO finding justifies raising the minimum wage.

Because you read my blog you know that economists predict that hikes in the minimum wage will not only destroy some jobs but will also have other ill consequences, including for many workers who retain their jobs at the higher minimum wage. Let’s, though, here ignore these other ill consequences and focus only on the CBO numbers mentioned in your e-mail.

I’ve some questions for you. Suppose the president of the United States randomly chooses 500,000 of the lowest-skilled workers in America and, with Congressional and Court approval, orders these workers to quit their jobs. “You must remain unemployed indefinitely,” the president commands these workers. “My reason for ordering you to enter and to remain in the ranks of the unemployed is that, by removing you from the workforce and thereby artificially reducing the supply of labor, the wages of 16.5 million other low-skilled workers will rise. So do not despair! Your sacrifice is for the greater good. My policy easily passes the cost-benefit test.”

Would you favor such a policy? If not, why do you support minimum-wage legislation knowing that it will force thousands of low-skilled workers into involuntary unemployment? While I understand that you can point to differences between a policy of raising the minimum wage and my hypothetical scenario, please explain which of those differences are substantive. Which of those differences make one policy of forcing a half-million workers into unemployment acceptable while the other policy of achieving the exact same outcome is unacceptable?

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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Some Links

by Don Boudreaux on April 4, 2014

in Competition, Myths and Fallacies, Politics, Reality Is Not Optional, Trade, Work

Students: Here are some internship opportunities from the Fund for American Studies.

Sign up for this free webinar, to be held on April 16th, with Sheldon Richman entitled “Don’t Rock the Vote.” It’s sponsored by the Future of Freedom Foundation.

Alan Reynolds explains that Paul Krugman should brush up a bit on intellectual and political history.

Derek Scissors explains that international trade is important, even in a nation as large as the United States. A slice:

What we often miss is the longer-term effect of trade, as the increased competition spurs faster technological progress. It isn’t just more companies making cell phones, competition causes the companies – domestic and foreign – to create better phones faster. That’s why many poor Americans today can afford phones far superior to those only the rich could afford 10 years ago.

My old NYU classmate and friend Sandy Ikeda explains that politics is inseparable from government. (As Russ might say, a kosher ham sandwich is an impossibility.) A slice:

Although the American government has not yet reached the scope of collectivist central planning that F. A. Hayek targeted in The Road to Serfdom, much of what he writes there is applicable to it, mutatis mutandis. I specifically have in mind his famous chapter 10, “Why the Worst Get on Top,” the central point of which is that the more detailed the plan the State seeks to impose on its citizens, the more ruthless and expedient its executioners must be if it is to succeed. This is why the most ruthless and unprincipled have the advantage in the struggle for political power. What separates President Obama, or any other recent American president, from someone like President Vladimir Putin of Russia is a matter of degree, not of kind. To paraphrase Lord Acton, not only does power tend to corrupt, but absolute power tends to attract the absolutely corrupt. Frank Underwood, the protagonist of the television drama House of Cards, is an excellent, though of course fictional, illustration of exactly that tendency.

Politics is inseparable from government, indeed it is government, and the bigger the government, the bigger the role of politics.

Diana Furchgott-Roth explains the faulty reasoning that fuels the “Paycheck Fairness Act.“

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Quotation of the Day…

by Don Boudreaux on April 4, 2014

in Growth, Standard of Living

… is from page 4 of the late Stanley Lebergott’s 1996 volume, Consumer Expenditures: New Measures & Old Motives:

Capitalism, however, monetized incomes. Consumption ceased to be decided by one’s heritage, noble or slave. Because income now came in monetary form it could be more readily spent in many ways. These permitted multiple choices. Workers and peasants began to range through markets, buying goods and services once restricted to blue bloods or Brahmins.

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