How Can a Vote that Counts Ever Be Wasted?

by Don Boudreaux on January 13, 2015

in Politics

Cafe patron W.E. Heasley e-mails last evening with a worthy point, made pithily:

The same talking heads and political pundits tell their audience every vote counts and of the over all importance of voting. Yet the same pundits, in the next breath, tell the audience that a vote for a third party candidate is “a wasted vote”.

It can’t be both ways.

Seems correct.

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Some Links

by Don Boudreaux on January 12, 2015

in Economics, Environment, Health, State of Macro, Work

Sheldon Richman remembers Leonard Liggio.  (I only just today discovered this essay from October by Sheldon.)

George Selgin entertainingly and informatively reflects on his own relationship to Austrian economics.

Ben Zycher reflects on “Progressives’” opposition to the Keystone XL pipeline.  (BTW, I, too, oppose this pipeline if building it requires the use of eminent domain.  Kudos to Rep. Justin Amash on this front.)  A slice from Ben’s essay:

At a broader level, inventiveness—the ability to use intelligence to overcome the obstacles inherent in nature after the exit from the Garden of Eden—is uniquely human, and one striking feature of modern environmentalism as an ideology is a pavlovian opposition to much technological advance. Genetic engineering, childhood vaccinations, nuclear power (whatever the underlying economics), hydraulic fracturing, advanced herbicides, the pharmaceutical industry, ad infinitum: The left hates it all regardless of the specifics. However narrow the Keystone XL issue may appear to be, the battle is both economic and more fundamentally ideological. It is, therefore, well worth fighting.

Jeff Jacoby rightly recommends that U.S. Supreme Court justices stop attending State of the Union addresses.

Driven largely by my vanity, I link here to Mark Perry’s most recent post – a post in which Mark adds productively to the discussion of the minimum wage.  Pay especially close attention to the figure at the bottom of Mark’s post and recognize that that figure offers empirical evidence of the likely consequences over time of the minimum wage.

Michael Marlow explores the science behind nudging.

My Mercatus Center colleague Bob Graboyes explains why health-care must be liberated from government’s clutches.

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We Are the True Liberals

by Don Boudreaux on January 12, 2015

in Civil Society, Video

My GMU Econ colleague Dan Klein here discusses with Jeff Tucker his (Dan’s) intrepid efforts to reclaim the term “liberal” from statists and return it to true liberals – namely, those who understand that human nature and imperfections are, generally speaking, channeled productively and peacefully by decentralized institutions, especially the market, and channeled destructively and dangerously by collectivist institutions, especially the state.

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Quotation of the Day…

by Don Boudreaux on January 12, 2015

in Hayek, Law

… is from page 222 of the 2011 Definitive Edition of F.A. Hayek’s 1960 book, The Constitution of Liberty:

The true contrast to a reign of status is the reign of general and equal laws, of the rules which are the same for all, or, we might say, the rule of leges in the original meaning of the Latin word for laws - leges that is, as opposed to the privi-leges.

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Aaron the Aaron and few other e-mail correspondents question my claim (made in this post earlier today) that the higher real household incomes of Americans today, compared to 1975, is evidence of genuine economic improvement for middle-class and even poor Americans.  These correspondents insist that these household-income gains are overwhelmingly the result of women entering the workforce and, therefore, do not signal any real improvement in the economic well-being of the typical American individual.  The argument is that women entered the workforce because it was harder to make household ends meet on one salary once real wages allegedly started stagnating in the mid-1970s.

I hope soon to offer a longer post on this important and interesting topic.  But I want here to make one quick observation: if real wages really did start to stagnate in the mid-1970s (as is often claimed) – and if this wage stagnation obliged women to enter the workforce in order to keep ordinary households economically solvent – then we’d expect to see evidence of an increased rate of labor-force participation by women starting in the mid-1970s.  In fact, though, we don’t see such a thing.

This graph is from page 3 of an interesting May 2006 Bureau of Labor Statistics report entitled “100 Years of U.S. Consumer Spending.

Screen Shot 2015-01-11 at 4.36.24 PM
The trend of women entering the workforce is practically unchanged from 1950 through 1997.  This trend, therefore, is not consistent with the assertion that economic survival became more difficult for ordinary Americans in the mid-1970s (or early 1980s).  Indeed, to get more detailed, this trend actually slows just a bit starting in 1984-85, and then slows even more noticeably between 1996-97 and 2002-03.

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More Evidence of Evidence

by Don Boudreaux on January 11, 2015

in Myths and Fallacies, Standard of Living

With the debate with David Cay Johnston fresh in mind, I offer here an updated version of a PowerPoint slide that I use in a presentation that I frequently give – a presentation entitled “The Myth of Middle-Class Stagnation.”  Notice that the income figures are real (that is, adjusted for inflation, here using the CPI).  As the url at the bottom of the slide indicates, these data are from the U.S. Census Bureau.  (Click on the image to enlarge it.)  The bottom row in the image shows the percentage-point changes, between 1975 and 2013, in the number of households in each income group.

Screen Shot 2015-01-11 at 11.33.41 AM

Notice that, in one sense, the American middle-class is disappearing – at least as this class was defined, household-income-wise, in the mid-1970s. But it’s disappearing by becoming richer, even when measured in strictly real monetary incomes.  The percentage of American households with what might commonly be regarded to be middle-class incomes is indeed falling – but so, too, is the percentage of American households with what are surely “poor” incomes.  So once-middle-class Americans are not becoming poor.  Instead, they’re becoming rich; their real monetary incomes are rising.  The percentage of American households earning high incomes ($100,000 annually and above) is on the rise – and impressively so.  Let me emphasize: A much greater percentage of households today (compared to 1975) have annual incomes of $100,000 or more (in 2013 dollars).

I’ve no room on the slide to do so, but if you follow the Census Bureau and divide the above-$100K households into finer groupings, here’s what you get: the percentage of households earning $100,000-$149,999 in 1975 was 8.0 while today it’s 12.4; the percentage earning $150,000-$199,999 in 1975 was 1.8 while today it’s 5.3; the percentage earning $200,000 or more in 1975 was 1.0 while today it’s 4.8.  (Again, these dollar figures are in constant 2013 dollars.)

Here are a few other things to note:

(1) the average number of persons per American household today (2013) is 13.6 percent fewer than in 1975, so each real dollar of household income is today shared by fewer people than in 1975 – meaning that the increase in “per-person-in-household” annual real incomes is even more impressive than these data show;

(2) these data are pre-tax yet post-cash transfers (such as Social Security payments);*

(3) these data include neither fringe benefits (which today are a larger portion of the typical American worker’s income than was true in 1975) nor non-cash transfers such as food stamps and energy assistance;*

(4) the happy tale told by these data is not diminished by pointing out that today a greater percentage of women work in the market for cash incomes rather than remain at home as housewives.  The reason turns on the reason that more women today work outside of the home, namely, that goods and services that were once most efficiently produced in-house by stay-at-home moms and wives – goods and services such as delicious meals and clothes laundering and ironing – are today produced in much greater proportion more efficiently either outside of the household (such as excellent prepared meals of the sort that simply were unavailable to ordinary Americans in the mid-1970s) or within households in ways that today consume far less time and effort than was true in the mid-1970s (such as washing and ironing clothes).  In short, households today still get the valuable goods and services once produced by stay-at-home moms and wives but get also whatever other goods and services are purchased with the market incomes earned by moms and wives who work outside of the home.

……

* See pages 9-3 and 9-4 of the Glossary here.

……….

Unrelated bleg: Today, for reasons that I can’t discover, both of my posts give this sort of message:

Warning: http://cafehayek.com/2015/01/more-evidence-of-evidence.html cannot be crawled by Facebook’s servers.

How can I correct this problem in order to allow people again to comment on my posts by using Facebook?

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… is from page 229 of Albert Venn Dicey’s magnificent 1905 book, Lectures on the Relation Between Law & Public Opinion in England During the Nineteenth Century; Dicey is here speaking of the 7th Earl of Shaftesbury (1801-1885) (link added):

From [Robert] Southey he had imbibed that opposition to laissez faire which is characteristic of every collectivist, and which falls in with the natural desire of an ardent philanthropist to save from immediate suffering any class of persons who are unable completely to protect themselves against oppression, and to do this by the means which lie nearest to hand, without deeply considering whether action which gives immediate relief to sufferers, e.g. women overworked in factories, may not possibly in the end produce evils of untold magnitude.  Lord Shaftesbury, in short, was in practice, though not in theory, the apostle of governmental interference, and this, in part at least, because his intellectual limitations prevented him from realising the difficulty of reconciling paternal government with respect for individual freedom.

Shaftesbury was no liberal, neither in the correct sense in which that term was used during his day nor in the corrupted sense in which it is abused during ours.  He was a Tory.  He was like many current conservative politicians today in the U.K. and the U.S. who proclaim, in theory, an understanding of, and strong allegiance to, genuine individual freedom but who in practice have intellects too small, imaginations too dim, visions too short and tunneled, and principles too ill-formed and weak to avoid – even when they are able to rise above their own narrow political interests – proposing or supporting ham-fisted government interventions.  Such people can ‘see’ only what is most immediate and apparently obvious.  The intellectual exercise of carefully considering consequences that are beyond the immediate, and that are distinct from the intentions proclaimed in public and written on paper, seems either never to occur to them to do, or is beyond their mental abilities to carry out (or both).  This intellectual failing occurs on both domestic- and foreign-policy fronts.

Of course, the chief distinction separating such conservative politicians from “Progressive” politicians is that the latter never bother to proclaim in any serious way a strong allegiance to genuine individual freedom.

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… is from page 219 of Albert Venn Dicey’s monumental 1905 volume, Lectures on the Relation Between Law & Public Opinion in England During the Nineteenth Century:

The age of individualism was emphatically the age of humanitarianism – it was the philanthropy of the day which, in the midst of the agitation for parliamentary reform, would not suffer the wrongs of the negroes to be forgotten.

This short quotation challenges many myths born of lazy thinking, including the myths that

- freeing the individual to pursue his or her own ends within the confines of a private-property-rights regime (rather than forcing the individual to pursue ends imposed by god, tradition, the tribe, a monarch, the state, or some other force or entity “larger” than the individual) makes people more narrowly selfish and both destroys humanitarian sentiments and ensures against humanitarian results;

- the scientific endeavor (especially that of the science of economics) to understand and explain the motives that lead individuals to conduct commerce peacefully and productively with strangers – and the demonstration that these largely self-regarding motives are both natural to human beings and generate mass flourishing in private-property markets – is an apology for greed and a sinister effort to protect the privileges of the ‘haves’ against the aspirations of the ‘have-nots’;

- individualism and the capitalism that it spawned were forces allied in support of chattel slavery.  (In fact, these forces undermined chattel slavery intellectually and ethically [and economically].  [See here, for example, the pioneering work by my colleague David Levy and his co-author Sandra Peart.])

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Evidence of Evidence

by Don Boudreaux on January 9, 2015

in Growth, Myths and Fallacies, Standard of Living

Over at EconLog, David Henderson took issue with a recent article by the journalist David Cay Johnston, and Johnston replied (in comments to David’s post at EconLog) to David H.’s criticisms.  David H. then responded to David C.J.’s comments.  Regular Cafe patrons will be unsurprised to discover that I believe that David H. has the better argument than does David C.J.

I here, though, wish to weigh in only on a small part of this debate.  (Apologies if I missed any commenters at EconLog who’ve already addressed this issue.)  In his original article, David C.J. repeats a version of the widely believed claim that the incomes of ordinary Americans have long been stagnant:

the median wage has been stagnant for almost a generation.

(I think he means much longer than a generation: here’s the plot of the average real hourly wage rate of private-sector production and nonsupervisory employees from January 1973 through April 2014.*  [Click on the figure to enlarge it.]  Looks pretty stagnant, doesn’t it?  Yet this true statistic is economically very misleading; it paints a wholly inaccurate picture of what’s happened to the economic well-being of actual flesh-and-blood people.  See the links listed below.)

Screen Shot 2015-01-09 at 11.51.59 AM

David C.J. also said, in one of his replies to David H. that “there is exactly zero evidence of rising incomes for the vast majority.”

It’s David C.J.’s assertion of the alleged undeniable reality of middle-class economic stagnation that I want to briefly address here.  The fact is that there is zero evidence (if not zero assertions) that there is zero evidence of rising incomes for the vast majority.  David C.J., Robert Reich, Paul Krugman, and others might think that the evidence of rising incomes for the middle-class (even rising incomes for the poor) in America is weak, unpersuasive, or inadequate.  That would be a fair point to argue.  But a journalist of David C.J.’s reputation and access to research resources ought not to be allowed to get away with saying that “there is exactly zero evidence of rising incomes for the vast majority.”

Listed below (in no particular order) are only some of the many pieces of evidence in support of the proposition that ordinary and poor Americans’ real incomes have in fact risen quite impressively over the past several decades (at least up until the start of the 2007 recession).

W. Michael Cox & Richard Alm, Myths of Rich & Poor (1999).

Donald J. Boudreaux and Mark J. Perry, “The Myth of a Stagnant Middle Class,” Wall Street Journal, January 24, 2013.

Mark J. Perry, “Yes, the middle class has been disappearing, but they haven’t fallen into the lower class, they’ve risen into the upper class,” Carpe Diem, July 12, 2013.

Scott Winship, “What Has Happened to the Incomes of the Middle Class and Poor?” e21 (2013), in three parts: first, second, and third.

Scott Winship, “Poor and Middle Class Incomes Have Increased Significantly,” e21, November 13, 2013.

Terry J. Fitzgerald, “Has Middle America Stagnated?The Region, Federal Reserve Bank of Minneapolis, September 2007.

Terry J. Fitzgerald, “Where Has All the Income Gone?“ The Region, Federal Reserve Bank of Minneapolis, September 2008.

Ronald A. Wirtz, “Supersize Me,” fedgazette, Federal Reserve Bank of Minneapolis, September 2008.

Again, these links contain only some of the evidence in support of the proposition that real income gains for middle-class and poor Americans have been significant over the time span – roughly, 1975 until today – that pundits and politicians on the political left (and, I presume, David C.J.) insist has witnessed only economic stagnation for the masses.
….
* I can find no good, extended data on the real median wage in the U.S. through time.  If someone can point me to such data, I’d be grateful.  The data I show here, taken today from the website of the Bureau of Labor Statistics (BLS), is of the average wage of “production and nonsupervisory workers” – a group that the BLS says encompasses four-fifths of all non-farm workers on private payrolls in America.  (If the stagnation thesis were true – that is, if it were true that nearly all income gains over the past several decades have gone to the top one percent – then any plot of the real median wage of such workers would appear to be even worse for ordinary Americans than does the graph I show above.)  The nominal wages in the graph above are adjusted for inflation using the Consumer Price Index.

I constructed this figure at www.bls.gov by typing in CEU0500000032 into the search engine in the upper right hand corner.  I then clicked on “Total Private,” and then chose 1973 as my Start Year and 2014 as my End Year, and then clicked on Update.  The result is the figure that you see above (with April 2014 being the most recent date available now for this data-constructed graph).

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Quotation of the Day…

by Don Boudreaux on January 9, 2015

in Creative destruction, Growth, History, Innovation

… is one that Deirdre McCloskey surely applauds; it’s from pages 61-62 of the late Stanley Lebergott’s superb 1984 volume, The Americans: An Economic Record; Lebergott is here writing specifically about the period 1783-1860 in the United States:

But once such central “economic” contributions to growth [such as people's savings] are recognized we must turn to the contribution made by the values of the people themselves.  These values drove the “productivity” gains, for they prompted the American willingness to accept persistent novelty in production.  Without such willingness Americans would never have put up with the costs of growth – job turnover, migration, high depreciation of machinery, destruction of business investments, and the harsh obsolescence of human skills and training.

Visitors to the United States have long remarked how unusually willing Americans were to accept novelty in the economic process….  Such open mindedness brought a near endless series of innovations which persistently drove up the nation’s productivity.

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