Quotation of the Day…

by Don Boudreaux on April 18, 2016

in Adam Smith, Growth, Myths and Fallacies

… is from page xxx of the just-published third volume – Bourgeois Equality – in Deirdre McCloskey’s pioneering trilogy on the essence and role of bourgeois values in modern life (links added):

The theory of great wealth espoused by the peasantry and proletariat and their soi-disant champions among the leftist clerisy is non-desert by luck or theft.  Likewise, the theory of great wealth espoused by the aristocracy and their own soi-disant champions among the rightish clerisy is desert by inheritance, itself justified by ancient luck or theft, an inheritance we bloodline aristoi should receive without psychologically comforting rationalizations.  By contrast, the theory of great wealth espoused by the bourgeoisie and its friends, the liberal liberal economists such as Smith and Mill and Friedman … is desert by a skill in supplying ethically, without force or fraud, what people are willing to buy.

…..

On Thursday (April 21st) on George Mason University’s Fairfax campus, I’ll have a conversation with Deirdre.

Add a Comment    Share Share    Print    Email

HT to Michael York for alerting me to this Money Illusion post by Scott Sumner – a post that contains this graph:

Screen-Shot-2016-04-12-at-8.20.55-PM-e1460507084740

Relatedly: below it is a screen-shot of a slide in one of my PowerPoint presentations:

Screen Shot 2016-04-17 at 1.08.15 PM

UPDATE: Ike Pigott, in the comments, sends along this “in motion” version of the graph from Scott Sumner’s post that I share above.

Add a Comment    Share Share    Print    Email

Quotation of the Day…

by Don Boudreaux on April 17, 2016

in Competition

… is from page xvii of the just-published third volume – Bourgeois Equality – in Deirdre McCloskey’s brilliant trilogy on the essence and role of bourgeois values in modern life:

And in truth our main protection against the ravenous has been just such competition in trade – not City Hall or Whitehall, which have had their own ravenous habits, backed by violence.

Add a Comment    Share Share    Print    Email

Are people with blue eyes benefitted less when the factory across town and the shopping mall down the street are owned or financed by people with brown eyes than they are when these enterprises are owned or financed by people with blue eyes?  The logic of Mr. Romano’s argument suggests – wrongly, of course – that the answer is ‘yes.’

…..

Editor, NetRightDaily

Sir or Madam:

Robert Romano’s complaint about the U.S. trade deficit reflects deep misunderstandings of economics (“$8.7 trillion of economic growth lost to trade deficits since 2000,” April 15).  An example of one such misunderstanding is this passage in which Mr. Romano replies to a (sound) explanation that Tim Worstall offered of the trade deficit: “Having the $8.7 trillion of trade deficits ‘all invested back into the U.S. economy,’ in Worstall’s words, into U.S. government treasuries, mortgage-backed securities, corporate debt or equities, which are then owned by foreign governments and investors is not the same as the alternative.  Which is, profits in companies earned by Americans offering jobs to Americans, rising incomes with additional demand for labor.”

A factory in Florida, a hotel in Hawaii, and a shopping mall in Missouri create jobs and promote wage growth – and, also, improve consumers’ options – no less surely, and in no smaller numbers, if these enterprises are owned or financed by non-Americans than if they are owned or financed by Americans.  Also, the profits earned from the successful operation of these enterprises will be re-invested in the U.S. economy by non-American earners no less (or no more) surely than these profits would be reinvested in the U.S. economy by American earners.  And because these profits are earned in dollars, even non-American owners who wish to spend or invest all of their dollar profits only outside of America must first exchange their dollars for foreign currencies – exchanges that are possible only because other foreigners wish to spend or to invest at least the same number of dollars in America.

As for Mr. Romano’s concern that some dollar-denominated assets are owned by foreign governments, that’s a red herring.  Until and unless foreign-government owners of such assets begin to pursue political goals by using these assets in ways that intentionally diminish their market value, the fact that some foreign investors are foreign governments is irrelevant both to Mr. Romano’s faulty case that a U.S. trade deficit necessarily slows U.S. economic growth and to the correct case that it does no such thing.

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

Quotation of the Day…

by Don Boudreaux on April 16, 2016

in Inequality, Other People's Money

… is from page 633 of the hot-off-the-press third volume – Bourgeois Equality – in Deirdre McCloskey’s indispensable trilogy on the essence and role of bourgeois values in modern life:514B+AoYlbL._SX330_BO1,204,203,200_

The left, however, instead of focusing on the raising of the absolute level of the poor, suggests that we take riches from the well-off, even if the productivity of the quite well-off doctor or the fantastically well-off oil man in fact helps the present poor by giving them hip replacements or gas heating.  Foreign aid has this ethically dubious rationale.  The left will cite opinion polls showing (as though it were not obvious, though unethical) that people are envious, and would after all prefer taking from millionaires over raising all incomes.

…..
On Thursday (April 21st) on George Mason University’s Fairfax campus, I’ll have a conversation with Deirdre.

Add a Comment    Share Share    Print    Email

Here’s a letter to a mass e-mailer:

Mr. Fred Lunt
American College of Physicians

Mr. Lunt:

In your recent mass e-mail you announce that “[t]he American College of Physicians issues urgent call to action on Climate Change and its possible catastrophic health effects.”

I wonder if the American College of Physicians is also issuing an urgent call to action on government-imposed restrictions on markets and their possible catastrophic health effects.  Because history knows no force that rivals free markets at improving humans’ health, surely you and your organization’s caring physicians are also concerned that the health of ordinary men, women, and children will be put in grave jeopardy by efforts to halt climate change through government interventions that hamstring markets.

Surely your members appreciate, for example, the enormous health benefits of inexpensive machine-washable underwear and the fact that these are the products of free markets.  Surely your members appreciate also other health-promoting features of free markets – features such inexpensive indoor plumbing, inexpensive potable water, inexpensive household detergents and disinfectants, inexpensive dental-hygiene products, and, most importantly, salvation from the malnutrition and starvation that were routine before the industrial age.

And I trust that your concerned members also take due account of the enormous benefits that inexpensive fossil fuels directly bestow on ordinary people – benefits such as affordable transportation that enables local pharmacies to be always fully stocked with life-saving drugs; affordable energy that keeps people’s homes and workplaces safely cool during summer and safely warm during winter; and affordable electricity that gives nearly everyone access not only to clean-burning electric light bulbs and kitchen ranges, but also ready on-line access to the latest legitimate medical advice and even to the latest paroxysms of mindless hysteria about the consequences of fossil-fuel use.

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

Mark Perry reviews some important history of the U.S. income tax.

Here’s an unpublished op-ed that my brilliant young colleague Bryan Caplan wrote in 1994 about taxation, when he was still in graduate school at Princeton.  A slice:

Every year when tax day comes along, people start talking about “tax fairness.” Yet strangely, I hear very few people discuss the fairness of taxation itself. What right does the government have to force people to pay for services that they may not even want? In particular, what right does the government have to take money from people who never consented to pay? Almost everyone sees that consent is the proper moral foundation for other relationships. To take one eloquent slogan: If a woman says no, it’s rape. Unless we can show that we really consent to pay taxes, we cannot avoid the parallel maxim: If a taxpayer says no, it’s theft.

Here’s Glenn Reynolds on jury nullification.

Washington Post columnist Charles Lane rightly counsels Popes and politicians to learn more about economic reality before pronouncing upon it.  (HT David Boaz)

Has the American middle class stagnated economically since the 1970s?  No! explains Johan Norberg in this short video.

Sandy Ikeda explains that the essence and advantage of capitalism isn’t efficiency but, rather, innovation.

Brent Gardner updates us on the latest shenanigans of that great geyser of cronyism, the U.S. Export-Import Bank.  (HT Veronique de Rugy)

Speaking of Veronique, here she is on the relationship between worker productivity and worker pay.  (I’m eager to read the new research by James Sherk that Vero mentions.)

Add a Comment    Share Share    Print    Email

Quotation of the Day…

by Don Boudreaux on April 15, 2016

in Crony Capitalism, The Economy, Trade

… is from page 489 of the 5th edition (2015) of Thomas Sowell’s Basic Economics:

At any given time, it is undoubtedly true that some industries will be adversely affected by competing imported products, just as they are adversely affected by every other source of cheaper or better products, whether domestic or foreign.  These other sources of greater efficiency are at work all the time, forcing industries to modernize, downsize or go out of business.  Yet, when this happens because of foreigners, it can be depicted politically as a case of our country versus theirs, when in fact it is the old story of domestic special interests versus consumers.

Add a Comment    Share Share    Print    Email

I recently sat down for about ten minutes with Reason’s Nick Gillespie to discuss the minimum wage.  (Watching this video makes me realize that I often talk too fast.)

Add a Comment    Share Share    Print    Email

Water Is Not a Public Good

by Don Boudreaux on April 14, 2016

in Economics, Myths and Fallacies

Last night in my seminar on Adam Smith’s Wealth of Nations my students and I covered Smith’s chapters on public goods.  During the course of the discussion one of my superb students, Chris Kuiper, mentioned in passing that Paul Krugman, in a recent New York Times column, mistakenly described safe drinking water as a public good.  Here’s that column.  Mr. Krugman emphasizes that safe drinking water is a public good according to “Econ 101.”

(Please excuse me for a moment while I take a sip of water from my bottle of Aquafina….  Ok – my thirst is now well and truly and safely quenched.  Back to this blog post…..)

Mr. Krugman should refresh his memory by reading a solid Econ 101 textbook.  A public good, according to Econ 101, has two specific characteristics: it is (1) non-excludable and (2) non-rivalrous in consumption.  In lay-persons’ terms, this means that (1) if the good is supplied to Smith, no one – including the supplier – can, at reasonable cost, prevent Jones and Williams from also consuming the good even if Jones and Williams refuse to pay for their use of it; and (2) Smith’s consumption of the good does not diminish (that is, does not “rival”) Jones’s or Williams’s ability to consume the good.

Safe drinking water is emphatically not a public good as defined in Econ 101, for safe drinking water is both excludable (your water supply, and yours alone, can be cut off if you don’t pay your water bill) and rivalrous in consumption (every gallon of water that you use today is a gallon that your neighbors cannot use today).

To note that safe drinking water is not a public good as economists define public goods is not to say that it should not be supplied by the state; that’s a different question.  But Mr. Krugman is very sloppy these days when discussing basic economics.

I just learned that the ever-reliable Tim Worstall early on called Mr. Krugman out on this issue.

Add a Comment    Share Share    Print    Email