What I Hold In Contempt Is Economic Error

by Don Boudreaux on February 2, 2016

in Economics

My utter mystification at being accused, in the comments section of this post, of viewing ordinary people with contempt causes me to ask: What could possibly give an obviously intelligent person that notion?

I think I have the answer – one that goes further than do the two comments that I there posted in reply.  The answer is that I am very critical of the opinions that most non-economists (and many economists) express about economics and economic matters.  It’s true that I do hold in very low regard – in, indeed, contempt – the “economics” expressed by many non-economists and by the politicians and pundits who cater to economic ignorance.  But this fact does not mean that I regard these people to be stupid or unable individually to tend properly and prudently to each of their own individual affairs.  I criticize such people in the same way that, I’m sure, an experienced engineer would criticize people who, seeking a way to allow motorists to get back and forth across the Mississippi river, propose to build a bridge made only of cotton candy.  And just as the engineer would no doubt amplify the volume of his protests if the clamoring for such a cotton-candy bridge grew loud and began to display a real prospect for being taken seriously, I amplify the volume of my protests when similarly fanciful and unscientific notions – such as making us wealthier with tariffs – grow loud and display a real prospect for being taken seriously.

It is ungenerous – or, certainly, erroneous – to accuse someone who is an expert in X of thinking that those who know nothing of X, yet who express opinions about X, are contemptible.  These expressed opinions about X are typically mistaken, and in many cases even contemptible.  Further, they become a public nuisance when politicians secure power by professing to share these mistaken opinions.  It is, therefore, appropriate for someone who knows better to explain that those opinions are flawed.  And if those opinions continue to be stubbornly held in ways that threaten to generate outcomes quite the opposite of the outcomes expected by those who profess those mistaken opinions, it is appropriate for a knowledgeable person to amplify his or her reasons for rejecting those opinions.

But, surely, just as no one would think the engineer to be arrogant or haughty if he continues to explain why a cotton-candy bridge will not support automobile traffic, no one should think the economist to be arrogant or haughty if he continues to explain why, say, tariffs do not create jobs or raise wages generally, or why the minimum wage will reduce low-skilled workers’ employment options.  Yet no more should it be inferred from the economist’s protests that he views ordinary people with contempt than it should be inferred from the engineer’s protest that he views ordinary people with contempt.

Add a Comment    Share Share    Print    Email

Here’s a comment, in full, from “Jim” on this recent EconLog post by my colleague Bryan Caplan:

This blog [EconLog] is interesting as illustrating the contempt with which the American elite view the common American people.

I’ll not here join the discussion over the appropriateness of Bryan’s use of ADHD to motivate his post.  What interests me far more is Jim’s total misunderstanding of the general message consistently delivered by Bryan (and David Henderson, Scott Sumner, and their guest bloggers) at EconLog.

In fact, Bryan and his fellow EconLog bloggers consistently fight against “the American elite” who “view the common American people” with contempt.  Those who hold the common American people in contempt are those who believe that government must superintend or direct ordinary people’s decisions – those who, for example, are convinced that ordinary people are too incompetent, too uninformed, too unintelligent, or too uncreative to find better jobs so that the only means of getting these people raises is for government to enact minimum-wage diktats.  Bryan and his EconLog colleagues have a long and consistent record of trusting decisions made by individuals and of defending those decisions against officious do-gooders (and opportunistic rent-seekers) who demand that government constrain, override, tax, subsidize, or otherwise alter those decisions.

What Bryan and his fellow bloggers also point out, however, is that collectively made decisions – including voting – are unreliable both as guides to reveal what people really desire and as a means of deciding on actual courses of action.  What Bryan and his fellow bloggers distrust is a particular means of making decisions and not the people who participate in making those decisions.  The same person – “ordinary” or elite – who can and should be trusted to make wise decisions for himself or herself when choosing privately and when spending his or her own money is led by the poor incentives of the decision-making structure to make poor decisions when choosing collectively.

Put differently, by consistently defending freedom and by calling for collective decisions to be as few as possible (so that private decisions are as many as possible), Bryan and his fellow bloggers display their hearty and heartfelt confidence in the ability of ordinary people each to run his or her life as he or she sees fit rather than as how elites fancy those individuals’ lives ought to be run.  Those who hold ordinary people in contempt are those who endorse an active role for the state, for it is those people – and not scholars such as Bryan and his fellow EconLog bloggers – who insist that ordinary people must be attended to and herded (and sometimes slaughtered) as if they are sheep rather than left free to lead their lives as each of them chooses.  And, it must be added, Bryan and his fellow EconLog bloggers understand also that to treat people like sheep is to attract and energize wolves.

Add a Comment    Share Share    Print    Email

Quotation of the Day…

by Don Boudreaux on February 2, 2016

in Growth, Myths and Fallacies, Population, Seen and Unseen

… is from page 81 of Julian Simon’s 1993 essay “In Favour of Immigration,” as reprinted in the excellent 2000 collection Population: The Ultimate Resource (Barun S. Mitra, editor):

A key characteristic of a high level of economic civilisation is that it contains the capacity to resolve newly arising problems more quickly than did lower economic civilisations.  For example, the incidence of famine has declined sharply in the past century because of modern roads and transportation systems.  Food scarcity as a result of rapid population growth took much longer to remedy in 1300 AD than now, because we have systematic ways of finding and applying new knowledge that will meliorate the scarcity.  There are not natural or “physical” limits that are an increasing constraint on our powers.  The improvement that has occurred in the world’s resource availability would not have taken place if population density had remained at the lower levels of the past.

I thought about Julian yesterday when listening to Terry Gross’s Fresh Air interview with Mei Fong about China’s one-child policy.  Starting at around the 23:20 mark, Ms. Gross asks Ms. Fong if China’s economic boom over the past 35 or so year was caused in part by the one-child policy.  Ms. Fong’s answer is pretty good; she insisted – quite correctly, I believe – that China boomed because of its move toward being a more open and more market-oriented society.  The fact that the boom started at about the same time as the one-child policy began (1980) is only coincidental.

I haven’t read Ms. Fong’s book, so I dare not speculate on the details of any further views that she has on the connection between China’s post-Mao economic boom and the one-child policy, but it’s clear from this interview that she doesn’t believe that any positive connection exists.  She might well – as I do – believe that any connection that does exist is a negative one.  As Julian Simon taught better than anyone else, people are productive assets to the society of which they belong – a truth that is manifest when those societies are market-oriented.  (It’s true that some people become predators – burglars, bandits, politicians – but this fact is true regardless of population size or the type of economy that society has.)  China’s one-child policy not only was a grotesque and cruel violation of individual rights, it has caused the stock and variety of that ultimate resource, human creativity and effort, to be artificially smaller in China.  One consequence is that all of humanity, including the Chinese, are poorer than we would otherwise be.

Add a Comment    Share Share    Print    Email

Loco

by Don Boudreaux on February 1, 2016

in Myths and Fallacies, Seen and Unseen, Video

Among the more economically idiotic fetishes of the past several years is the “Buy Local” movement.  Last year I did a video on this fetish.  And regular Cafe Hayek readers know that I’m a big fan of Pierre Desrochers’s and Hiroko Shimizu’s 2012 book, The Locavore’s Dilemma.

Ferris State University (in Michigan) econ professor Dave Hebert – a GMU Econ PhD – just posted this item on his Facebook page:

I’ve been invited to appear on Buy Local Michigan to discuss what it means to buy local in a global economy. Given that the email ended with “remember to buy and shop locally,” I think he wants me to talk about how beneficial buying local is.

Obviously, this isn’t a policy or philosophy that I condone. But I need to 1) be civil about it and 2) establish common ground that the host and I can share.

What sort of common ground would you suggest I seek to establish? Here are my thoughts. We both want…

1) local people to have quality jobs.
2) local people to live healthily and wealthily.
3) ???

There’s much to say – among which is, as I suggested in a comment on Dave’s page, this question:

Ask your host if he believes that people outside of Michigan should buy local automobiles.

The practice of locos (as I call them) is to dismiss such a question as an irrelevant reductio ad absurdum.  “Well, we’re not asking people to buy locally things that are impossible to find locally!” – is the sort of “we’re reasonable in our economics” dodge that is offered by locos to such a question.  But in fact the range of products that can rather easily be purchased only locally is much larger than even locos recognize. Here’s a follow-up comment (here modified from the original) that I put on Dave’s Facebook page:

P.S. Don’t let your host avoid the question about buying local cars by saying that such is impossible. First (and least interestingly) one reason there aren’t more local auto plants spread around the country is because Michigan has historically done such a good job at producing good cars and selling them profitably at low prices.  Who knows how many cities and towns would have viable auto factories if only the denizens of those places would buy locally produced cars?  True, the prices of such new cars would be much higher than are the prices of new cars made in Michigan, but so what?  All the extra money that the local folks spend on those cars would remain in the local community (as the locos’ theory goes) and so those high costs and high prices would actually promote each locale’s economic thriving!

Second and more to the point, the world is awash in used cars.  There are many used cars in almost every locale across America.  Buying more used cars locally – in the likes of Culpeper, Virginia, and Salem, Oregon – is not only possible, it is quite feasible.  And, like all local purchases, buying only locally sold cars would keep local money in the local communities and, thereby, enrich all the locals (assuming, that is, that the locos’ economics is correct).

Of course, what’s true for cars is true for many other products that are thought not to be available locally – products such as steel and aluminum (scrap metal can be found in many places if one looks hard enough).  Likewise, one need not live near an electronics factory to buy locally available computers and other consumer electronic products.  Nearly every burgh in the Western world has lots of used computers, used cell phones, used e-pads, used televisions, and other such used products.  These, too, can therefore be bought locally rather easily.

Now I admit – quite readily – that it is very easy to list many reasons why buying such things locally makes no good sense.  Indeed, making such a list gives you a good idea why the “buy local” movement is loco.

Add a Comment    Share Share    Print    Email

Here’s an e-mail from Cafe Hayek reader Wayne Mikkelson, shared here in full with his kind permission:

Professor Boudreaux,

Last night my partner and I tried a favorite restaurant here in Ashland, OR, which had been closed for awhile for remodeling and rebranding. Our waiter was explaining to us that they had changed their sourcing of food and moved the menu away from gluten-free to organic. Without any prompting from me, the waiter went on to say that the changes allow the restaurant to employ fewer people and get a leg up on the competition in advance of the likely increases in the Oregon minimum wage.

How’s that for direct evidence?

Regards,

Wayne Mikkelson
Emeritus Professor of Financial Economics (and Cafe Hayek reader)

Who’d a-thunk it?

Add a Comment    Share Share    Print    Email

Makes Me Cringe

by Don Boudreaux on February 1, 2016

in Politics

Under the subject line “Checking in, Don,” I just received this e-mail from someone named Jeanette Rubio, who I presume is the wife of a politician named Marco Rubio.  Here’s the opening line of this e-mail:

Don,

I didn’t tell Marco that I was going to send you this email, but I felt it was so important to reach out to you today.

Now I did meet Marco Rubio once.  (He’d not remember me and I was so unimpressed with him that I wish that I didn’t remember him.)  I’m quite confident that I never met his wife.  And yet here I am, getting from her an e-mail as if I’m a close, trusted confidant of the Rubio family.

This crap is insulting.  Not only am I (and the upteengazillion other people who, I’m sure, received this same e-mail [with only the names of the addressees changed]) asked to pretend that Marco Rubio’s wife has made a personal decision without his knowledge to solicit funds for his presidential campaign, we’re also supposed to be fooled into feeling that we have some special, confidential connection to this now-famous aspirant-for-power.

People who I call by their first names, and who I write to in such a manner, are people who I feel comfortable asking to meet me for coffee, lunch, a drink, or dinner.  They are people who, when I call them, they answer my calls or return them soon.  They are people who invite me to their homes and who I invite to mine.  They are, in short, loved ones, friends, colleagues, or close acquaintances.  I never presume to cold-contact a stranger and address that person by his or her first name.  And I would never make that person feel uncomfortable by being pressed by my impertinence into playing a game of “pretend reality is different than it is.”  (I’m quite sure that, should Sen. Rubio become Pres. Rubio, I’m unlikely to be able to call Mr. or Ms. Rubio to suggest drinks at The Capitol Grille.  [“Hey, J & M: Don here!  Let’s meet up after that Rose Garden event for dinner.  It’s been too long!”])

The falsehoods, pretenses, duplicities – nay, multiplicities – and lies that are the stock-in-trade of the typical politician are things that every decent person finds revolting and wishes to have nothing at all to do with.

Add a Comment    Share Share    Print    Email

I very much like most of what Forbes columnist John Tamny writes.  His recent essay on immigration – in particular, on National Review‘s deep inconsistency on this matter – is the best thing I’ve read by him yet.  (I especially like John’s point about immigration and affirmative action.)  I’m tempted simply to paste the entire essay below, but I’ll instead offer just a few choice slices.  Do, however, read the essay in its entirety.

It’s wasting words to say that private property is fairly basic to conservatism. It’s to conservatism what an engine is to a car. Applied to immigrants, they generally come to the U.S. in order to fulfill stateside demand for their labor (more on this in a bit), yet NR would prefer barriers of the legislative kind to this inflow. Forget about many immigrants trying to escape tyrannical governments decried by NR, forget about how much government would have to grow in order to modestly keep some foreigners out, and forget about whom privately owned businesses would prefer to hire, NR has different views when immigration enters the discussion. While there’s much to dislike about the recent spending bill shepherded by House Speaker Paul Ryan, one of NR’s biggest critiques of the legislation was that “Republican voters are clearly anxious about large-scale immigration and frustrated that the federal government repeatedly demonstrates no interest in doing anything about it.”

NR’s stance on immigration unwittingly reveals contempt for the hiring preferences of private business, and this goes well-beyond the hiring needs of companies who might otherwise add “low-skilled Americans” to their roster of employees.
….
Such a view is interesting beyond what the position needlessly puts NR in on the subject of private property. The magazine is clearly in favor of the latter, but its immigration stance requires it to always be in favor of private property so long as businesses don’t presume to hire whom they want.

NR is most certainly for free markets, [so] it would probably dismiss in humorous fashion any legislation from Harry Reid or Bernie Sanders dictating what U.S. businesses need and don’t need from a plant & equipment perspective, but when it comes to the most important economic input of all (human), NR presumes to know what businesses require.
….
Taking this further, NR has long been one of the most articulate voices against affirmative action. With good reason. Affirmative action cruelly places individuals where their skills wouldn’t such that they’re more likely to fail, it penalizes those who don’t receive preferential treatment based on their gender and/or skin color, and then it needlessly creates disharmony on campus and in the workplace for the attainments of the preferred groups perhaps being privately questioned. Why then, would NR seek to legislate preferential treatment for American workers knowing full well that many U.S. businesses would prefer foreign workers? If affirmative action is cruel to its intended beneficiaries, can’t the same be said for legislation meant to promote affirmative hiring of Americans over foreigners?

Add a Comment    Share Share    Print    Email

… is from page 22 of the late Nobel laureate Elinor Ostrom‘s important 1990 volume, Governing the Commons:

An assertion that central regulation is necessary tells us nothing about the way a central agency should be constituted, what authority it should have, how the limits on its authority should be maintained, how it will obtain information, or how its agents should be selected, motivated to do their work, and have their performances monitored and rewarded or sanctioned.

Yes.  Calls to empower and entrust government to undertake this or that task are typically done with shocking recklessness.  The presumption behind these calls is that the power that is being called upon is a god-like entity – a miracle-worker – who by assumption and by assumption only not only puts “our” interest ahead of its own, but is also sufficiently informed and wise, and who operates with such an ideal mix of prudence and creativity, that we can be sure that it will improve our lives.

This wholly unscientific – this largely faith-based – manner of regarding the state is not confined to rubes, children, and people who are bewitched by the likes of Bernie Sanders and Donald Trump.  It is, I am chagrined to say, the manner of regarding the state that is typical among most economists.  Very common today is the economist who swears his or her allegiance to Objective Science (although, I note in passing, most of these oaths are to the false god of scientism and not to actual science as it is appropriate for the study of society) – who boasts of being “data driven” as a means of trumpeting his or her Scientific creds – who sincerely believes that he or she is an immune-to-bias evaluator of “the facts” as these relate to different policy options.  But regardless of the actual scientific merit of such work as it applies to the study of the private economy, far too much of it merely assumes, with a faith that would humble St. Paul, that government can be trusted to exercise power wisely and successfully for the good of all humankind.

Add a Comment    Share Share    Print    Email

On Net-cruelty

by Don Boudreaux on January 31, 2016

in Regulation, Seen and Unseen

Here’s a letter to the Wall Street Journal:

Geoffrey Manne rightly applauds Facebook’s offering of Free Basics (“a ‘zero-rated’ service that allows users to access Facebook – and other useful websites – without incurring data charges”) which has given Internet access to millions of poor people (“Since When Is Free Web Access A Bad Thing?” Jan. 29).  Yet as Mr. Manne explains, ‘net-neutralicists’ object; they demand that service providers be forced to charge one, flat price for access to all of these providers’ services and content.

Mr. Manne’s essay prompts me to imagine what the world would look like if ‘food-neutralicists’ were similarly on the loose:

A hungry woman dying of thirst in the desert is approached by an entrepreneur who offers her unlimited quantities of bottles of water and a selection of snacks, all at a price of $0.  No strings attached.  The entrepreneur also informs the woman that, if she wishes, he’ll sell to her a seven-course meal (champagne included) for $100.  A moment later an armed regulator shows up.  Offering nothing to anyone but diktats, the regulator orders the entrepreneur to cease and desist this practice of differential pricing.  Unless the entrepreneur offers to the woman access at one, flat price to all that he sells, the entrepreneur must not offer the woman anything.

Uncertain of the woman’s willingness to pay enough for a seven-course meal (champagne included) – and unable to afford to supply such a meal free of charge – the entrepreneur leaves the scene, giving the woman nothing.  The woman soon dies as the regulator boasts of his magnanimity at having protected her access to “food-neutrality.”

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 pages 65-66 of César Hidalgo’s fascinating 2015 book, Why Information Grows:

In my talks I often ask the attendees to raise their hands if they have used toothpaste that morning.  I find this to be a good way to get audience participation, since the embarrassment of not having used toothpaste encourages even the shyest attendee to raise her hand.  After almost everyone has raised a hand and I crack a joke about those who didn’t, I ask audience members to keep their hands up only if they know how to synthesize sodium fluoride.  As you can imagine, all hands go down.  This shows that products give us access not only to embodied information but also to the practical uses of the knowledge that is required to make them.  That is, products give us access to the practical uses of the knowledge and knowhow residing in the nervous systems of other people….

[W]e can note that when we are buying toothpaste we are not simply buying paste in a tube.  Instead we are buying access to the practical uses of the creativity of the person who invented toothpaste, the scientific knowledge informing the chemical synthesis that is required to make toothpaste, the knowhow required to synthesize sodium fluoride, put it inside a tube, and make it available across the planet, and the knowledge that fluoride makes our teeth stronger and has beneficial effects on our health.  Something as simple as toothpaste gives us indirect access to the practical uses of the imagination, knowledge, and knowhow that exist, or existed, in the nervous systems of people we have probably never met.

This past October, Russ did an EconTalk podcast with Hidalgo.

Add a Comment    Share Share    Print    Email