Some Links

by Don Boudreaux on June 18, 2015

in Books, History, Regulation, Seen and Unseen, The Economy, Trade, War

My former student Liya Palagashvili writes in U.S. News & World Report about a recent discussion on Capitol Hill of the decline in economic freedom in America.  A slice:

The research cited indicates that the regulatory burden on businesses in the United States is increasing and, as a result, entrepreneurship is declining. Sen. Ron Johnson, R-Wis., shared his experience as a CEO of a plastics manufacturing company and explained that the multi-layered rules and regulation are an enormous cost of doing business. The decline of entrepreneurship poses a problem because a thriving business climate is necessary for long-term economic growth.

Over at Library of Law & Liberty, Alberto Mingardi discusses the late Andro Linklater’s new book, Owning the Earth.

David Henderson is even more staunchly opposed to conscription than was Milton Friedman.  (I agree with David.)

My colleague Bryan Caplan wonders where have all the minarchists gone.

Deepak Lal reflects on Magna Carta.

Ben Zycher rightly calls for an end to government interference in the trade of crude oil.

Add a Comment    Share Share    Print    Email

A few people have e-mailed me today to ask my opinion of the argument that asserts that military conscription, by threatening to send the sons and daughters of politicians and other elites into war, would serve the excellent purpose of diminishing Uncle Sam’s eagerness to launch shooting wars.

I think very little of this argument.  Here are links to earlier posts on this specific matter:

http://cafehayek.com/2004/05/the_worst_case_.html

http://cafehayek.com/2012/06/economists-for-peace.html

http://cafehayek.com/2006/11/rangeling_with_.html

http://cafehayek.com/2006/11/more_rangeling_.html

http://cafehayek.com/2004/10/rangel_defends_.html

Add a Comment    Share Share    Print    Email

Here’s another letter to a frequent – and always quite hostile – e-mail correspondent:

Mr. Aaron the Aaron

Dear Mr. the Aaron:

Like many ‘Progressives,’ you champion both conscription and the minimum wage.  As such, you call my opposition to conscription “dogmatic,” while you reckon that my opposition to minimum-wage legislation results from my being (quoting one of your earlier e-mails) “blind to employers’ power over employees.”

Allow me to summarize your policy position: You wish to force people to work for certain employers (governments) at wages that these people judge to be too low but that you judge to be acceptably high for them, while simultaneously forcing people not to work for other employers (private firms) at wages that these people judge to be acceptably high but that you judge to be too low for them.  In short, you presume to forcibly override with your own assessment – or with that of politicians whom you mysteriously trust – the assessments of each of millions of individuals of what are and what are not acceptable working terms and conditions for these individuals.

I could comment further on your arguments’ inconsistencies (for example, no employer has as much “power over employees” as does one that can actually conscript workers).  But I’ll simply add that the lone consistency that knits together all of your arguments is a faith that employment arrangements dictated by force are superior to those reached through mutual and voluntary consent.

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 243 of George Melloan’s 2009 volume, The Great Money Binge:

In its very essence, government is a cop.  It can be a good cop or a bad cop.  It can be a vicious cop or a considerate cop.  It can be a thoughtful or a dumb cop.  But one thing is certain.  When it goes beyond being a cop and tries to actually manage the productive processes of a nation, it invariably makes a hash of the job.

Add a Comment    Share Share    Print    Email

No Conscription. Ever. Unconditionally.

by Don Boudreaux on June 16, 2015

in War

Here’s a letter to a correspondent:

Mr. Craig Clayton

Dear Mr. Clayton:

Criticizing my unconditional opposition to conscription, you ask what I would do if “our fighting forces were undermanned and needing substantial infusions of manpower to protect our freedoms.”  That’s easy: raise soldiers’ pay until the supply of such workers is sufficient to meet the Pentagon’s ‘needs.’

This market method of recruiting workers works for every other sort of business.  When convenience stores (which are very dangerous places to work) need more workers, no one frets about the nation being “underserved” because of a shortage of convenience-store clerks – and no one proposes that the government, to protect against this possibility, conscript people to work in convenience stores.  Instead, the pay of such store clerks rises.  Problem solved.  Ditto for fishing boats (also very dangerous places to work).  And ditto for local police, fire-fighting, and EMS forces.  Ditto for every other job you can name.

If every job other than those in a national-government’s military is routinely filled without problem or concern by market forces, I see zero reason to worry that jobs in the U.S. military cannot continue to be filled in the same way.  And I see every reason to worry that, should politicians and Pentagon brass once again grab the power to enslave young people, that power will be used with even less humanity than was the power of antebellum plantation owners in the American south to enslave blacks.  Plantation owners, for all of their vileness, at least were not in the business of waging war.

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

It occurred to me only after I sent the above reply to Mr. Clayton to point out also that humanity sadly has never experienced any shortage of young men who are eager to tote around or to man lethal weapons and then to charge into combat wielding those weapons.  Any government that finds itself unable to persuade lots of young men to experience – and with pay, to boot – the alleged thrills and stupid ‘glory’ of battle would be historically incompetent and, hence, especially not to be trusted to enslave young people.

Add a Comment    Share Share    Print    Email

Radley Balko explains that there is in America no credible evidence of a new nationwide crimewave.

Dan Sanchez details some especially nasty unintended (if not entirely unforeseen) consequences of Uncle Sam’s foreign-policy and military adventures abroad.  (HT Bob Murphy)

My colleague Alex Tabarrok reviews, in today’s Wall Street Journal, Alvin Roth’s new book, Who Gets What – and Why.

Richard Ebeling is correct: today’s American “Progressives” are intellectual – and ethical – descendants of Bismarck.  A slice:

The American progressives, many of whom as graduate students in philosophy, political science, economics, and history had studied at German universities in the closing decades of the nineteenth and the open decade of the twentieth century, came back from their foreign education with confidence that an elite of “experts” trained like themselves should be and would be the social engineers of the future.

For instance, one of the leading Americans influenced by his German welfare-statist professors was Richard Ely, a founder of the American Economic Association and a leading proponent of this new “cradle to grave” political paternalism.

Would you prefer to live today on an annual salary, in 2015 dollars, of $50,000 or in 1985 on an annual salary (in 1985 dollars) of $500,000?  James Pethokoukis correctly notes that the answer isn’t obvious for most people.

Greg Mankiw is understandably unimpressed with the arguments offered in favor of reauthorizing that great geyser of cronyism, the U.S. Export-Import Bank.  A slice:

Three arguments for the Ex-Im Bank were given:

1. It creates jobs.  Of course it does!  If the government were to put the names of all businesses into a hat, pull out a few randomly, and give those a per unit subsidy, those businesses would expand and hire more workers. That would not make it a good policy, however, because the wrong jobs would be created.

2. It returns money to the Treasury.  Really?  If the bank were truly a profitable venture, we could privatize it.  I bet if the government tried to sell off the Ex-Im Bank, it wouldn’t get much, if anything at all.  If the Bank’s activity were actually profitable, we wouldn’t need a government-run bank to do it.

3. Other countries give similar subsidies to their firms. So what? If other nations engage in corporate welfare, that is no reason for the United States to follow suit in the name of a level playing field.  We don’t need to import other nations’ bad policies.

Add a Comment    Share Share    Print    Email

Quotation of the Day…

by Don Boudreaux on June 16, 2015

in Economics

… is from page 6 of the second edition (1998) of Deirdre McCloskey’s path-breaking 1985 volume, The Rhetoric of Economics (original emphasis):

[T]o do a useful piece of economic analysis you need to have finished the course.  The noneconomists imagine it’s enough to have some first-week idea of what “oligopoly” means.  Economics is in fact a good example of the “hermeneutic circle”: you need to know the argument overall to understand the details, and the details to understand the argument.

I do not interpret Deirdre here to be saying that only people who are formally trained in economics can successfully master the economic way of thinking.  Plenty of people manage, with natural smarts and good judgment, to think pretty deeply about economic matters even though they’ve never taken a formal course in economics – and, heaven knows, plenty of PhD economists have yet to master the economic way of thinking.  It is true, though, that many concepts in formal economics – concepts such as demand, oligopoly, comparative advantage, public goods, and debt burden, to name a few – too easily mislead into error many people who have only a passing knowledge of the formal meanings and contexts of these concepts.  (Indeed, sometimes even trained economists are misled if they – as is sadly too typical – being insufficiently familiar with the history of their discipline, use an economics term or concept that is outside of their area of narrow specialization.)

Add a Comment    Share Share    Print    Email

Krugman and Other Stuff

by Russ Roberts on June 15, 2015

in Uncategorized

I recently found myself on Paul Krugman’s bad side by suggesting that his ideological bias informs his views on economics in the same way that my biases affect my views on economics. My point is that we all have a tendency to view evidence and the world around us through various preconceived notions. I don’t think it’s a coincidence that most interventionist economists favored Obama’s $800 billion stimulus package. I don’t think it’s a coincidence that they are pretty confident that it worked. Similarly, those of us who want smaller government opposed the stimulus package and see it as a failure.

When confronted with evidence that conflicts with either our ideology or our stance as policy advocates or just our past claims on how the world works, people on all sides of those divides find ways to dismiss it or explain it away. Krugman claims he is a Keynesian who favors fiscal stimulus because the evidence is convincing. But there are Nobel Prize winning economists or of similar quality who find the evidence unconvincing. How does that work? How can both sides find the evidence convincing? Is it possible that there is too much evidence which allows advocates on both sides to pick and choose what they find convincing and what they find unconvincing?

Krugman will concede he has made some bad predictions about the expected scope of the housing crisis or what moves bond prices. But I cannot remember him ever admitting that there is evidence against the power of fiscal policy to fight recession, just to take one example of a fundamental principle that underlies his worldview.

The question each of us must ask is whether there is any evidence that might dissuade us from our position on Keynesianism or the minimum wage or any other contentious policy issue.

It seems pretty clear that we are mostly impervious to evidence that challenges our most fundamental principles about how the world works. Here are a few examples from Krugman’s writing that illustrate the problem. I pick on him only because he appears to believe he is impervious to bias or at least writes as if he is.

When there was an increase in the payroll tax in January 2013 and the sequester reduced spending beginning in March 2013, Krugman wrote that monetary policy, which was expansionary, would not be able to offset the impact of fiscal policy:

…as Mike Konczal points out, we are in effect getting a test of the market monetarist view right now, with the Fed having adopted more expansionary policies even as fiscal policy tightens…

Sorry, guys, but as a practical matter the Fed – while it should be doing more – can’t make up for contractionary fiscal policy in the face of a depressed economy.

When the economy grew more quickly in 2013 than in 2012, the test was no longer a test. Here is Krugman in January of 2014:

Incidentally, these other factors are why I don’t take seriously the claims of market monetarists that the failure of growth to collapse in 2013 somehow showed that fiscal policy doesn’t matter. US austerity, although a really bad thing, wasn’t nearly as intense as what happened in southern Europe; it was small enough that it could be, and I’d argue was, more or less offset by other stuff over the course of a single year.

Strange answer. As Scott Sumner pointed out, it wasn’t that growth didn’t collapse. The economy grew faster, particularly in the 3rd and 4th quarter when the sequester took effect. But the key is the phrase in the last sentence–the reference to “other stuff.” Krugman’s answer is that if it weren’t for “other stuff” the economy would have collapsed.

There is always “other stuff.”

When it’s convenient, Krugman ignores the “other stuff.” (We all do.) So according to Krugman, the economy of Kansas is struggling because the governor cut taxes. One variable explains everything. We can ignore the other stuff. Or Iceland is doing better than Ireland because Iceland didn’t listen to those foolish austerians and rejected the fiscal austerity that Ireland fell prey to. One variable, fiscal policy, explains everything. When it’s convenient, when it confirms our worldview, the other stuff can be ignored. More troubling for Krugman’s claims is that it appears that Iceland actually embraced austerity big time—raising taxes and cutting spending. How will Krugman explain Iceland’s success? Must be other stuff. But there is always other stuff. The world is a complicated place. I would suggest that our job as economists is to always remember the existence of other stuff, all the time and not just when it’s convenient.

So my point for Krugman and others is that too many macroeconomists suffer from the post hoc ergo propter hoc fallacy—after this, therefore because of this and ignoring other causal factors. We are all prone to confirmation bias, interpreting the events of the word and sophisticated econometric studies as all on our side. I think government regulation is too intrusive. Does that explain the mediocre recovery from the Great Recession? Convenient for my worldview as an explanation, but very unproven. Is there evidence? Sure, but it is nothing close to decisive. It’s just a correlation. This is a problem that afflicts all parts of the ideological spectrum. An honest economist should concede that the world is a complicated place and that teasing out causality or the impact of one variable on a massively-complex economy is a fool’s game.

Nassim Taleb calls it the narrative fallacy, the tendency we all have to construct a consistent narrative by emphasizing some aspects of the world around us while ignore others. Jonathan Haidt uses the metaphor of the elephant and the rider. The elephant is our heart, the rider, our mind. The elephant usually goes where it wants but it is not so hard for the rider to convince himself after the fact that that was indeed the direction he was headed all along. Macroeconomists and economists in general would be wise to read Taleb and Haidt.

Krugman misinterpreted me. Maybe it’s my fault. But he interpreted me to be saying something cynical—that macroeconomists pretend to have certain theories in order to advance their ideologies. I don’t think that’s true. The reality is scarier. Most of us, including myself, have trouble even imagining that the other side could be right. After all, all the evidence is on my side! But it isn’t true. The evidence is a mess leaving each of us free to cherry-pick what sustains our worldview be it ideological or philosophical or just consistent with our flavor of economics.

This does not mean that evidence is irrelevant or that we come to our views without any evidence at all. There are lots of different kinds of evidence. There is logic and intuition and experience. There are facts that matter. But we should stop pretending macroeconomics is anything remotely like the physical sciences where models can actually be tested and implemented. There is too much other stuff going on at the same time that we cannot control for. Economics is more like history where different theories are supported by various facts and evidence but few facts or studies or natural experiments, if any, are decisive. This isn’t cynical. It’s honest.

Noah Smith’s thoughts on this issue are here.

Adam Ozimek’s thoughts are here and here.

My earlier response to Krugman on a related attack is here.

Add a Comment    Share Share    Print    Email

My Son Will Never Be A Conscript

by Don Boudreaux on June 15, 2015

in War

Today’s mail brought my son, Thomas – who turned 18 earlier this month – a letter from the U.S. Selective Service System.  (When Thomas got his driver’s license in Virginia well over a year ago, he was automatically, and against his will, ‘registered’ to become fodder for Uncle Sam’s war-making machine.)  This letter came along with a card that Uncle Sam commands my son to sign and to keep.

GetFileAttachment

Nothing – literally nothing – makes my blood boil more furiously than the notion that my boy is at the disposal of politicians and bureaucrats who claim the privilege of conscripting him into “service” – or of even merely reserving the ‘right’ to conscript him into “service.”  My son is no one’s slave – neither in actuality nor potentiality.

I’m proud of Thomas for sharing my anger at the presumptuousness of strangers who would steal years of his life – and, perhaps, even his life itself – from him without his explicit consent.  When he opened the letter from Selective Service, he dropped it contemptuously on the kitchen counter and exclaimed with unalloyed seriousness “That’s evil.”

Fortunately, what is perhaps Milton Friedman’s greatest legacy remains in place: actual conscription does not now exist in America.  Yet let it be known that if conscription of any sort returns and if anyone or any group tries to conscript my son, they will fail.  My son will not be forced to sacrifice for anyone or anything, and least of all for any government.

Add a Comment    Share Share    Print    Email

Here’s a just-released video from LearnLiberty.  Even though this video is narrated by me and is associated with the Fraser Institute’s Essential Hayek project, it’s not one of the five videos that appear on Fraser’s website – essentialhayek.org – for my new book.  It’s a different video, although one that is part of the larger project to convey to non-academic audiences the essential insights of F.A. Hayek.

Add a Comment    Share Share    Print    Email