Here’s a letter to a new correspondent:

Mr. B__:

Thanks for your e-mail in response to my essay at AIER on the State of California’s recently announced antitrust action against Amazon. That action specifically challenges Amazon’s practice of discouraging third-party merchants who sell their wares on Amazon’s site from charging for their wares offered for sale also on other sites – such as those of Target and Walmart – prices lower than they charge for their wares on Amazon’s site. You write:

It seemed to me, though, that you’re conflating the interests of sellers with the interests of the consumers who buy through them. It’s economically rational for the sellers to stay with Amazon because they benefit from Amazon’s efficiencies, but they just pass on the additional costs to consumers. The consumers may have interests and preferences that don’t coincide with that of the sellers. Many consumers may prefer to buy at a lower total cost, even if it’s somewhat less convenient or if delivery is slower, etc.

First, the complaint issued by California’s Attorney General identified third-party merchants as being among the victims of Amazon’s practice.

Second and more substantively, if Amazon’s site offers services or has features that are especially beneficial to third-party merchants – as California’s complaint concedes – it must be true that these services and features better enable merchants who sell on Amazon’s site to earn differentially greater profits on their sales. So the question becomes: Does Amazon’s platform enable third-party merchants to reap monopoly profits (that is, to profit at the expense of consumers), or does Amazon’s platform enhance merchants’ ability to compete for customers (that is, to profit by being better able to serve consumers)?

If for no reason other than that third-party merchants also sell on other sites, it’s highly implausible that selling on Amazon’s platform is a source of monopoly power and profit for third-party merchants. If all Amazon does is to push up the prices of third-party-merchants’ wares to monopolistic levels, then consumers would buy these wares, not on Amazon’s site, but at lower prices on sites owned by Target, Walmart, and other retailers that host e-commerce sites. And Amazon’s attempt to discourage price-cutting on other sites would fail because no third-party merchant would agree to charge prices that are monopolistic knowing that other merchants – of which there are many – will undersell them by charging prices that are competitive. 

Here’s the bottom line: Because merchants are quite numerous they have no monopoly power. And so no merchant has any interest in being cornered into charging monopolistically high prices given that any merchant so cornered would be outcompeted by rival merchants who refuse to be so cornered. Rival merchants who are not so cornered will, by advertising the competitively low prices they charge on e-commerce sites other than Amazon’s, easily outcompete any merchant who is foolish enough to allow Amazon to compel it to charge prices that are monopolistic. With no reason to assume that the typical merchant is self-destructively foolish, when we observe merchants agreeing to abide by Amazon’s terms in exchange for being able to sell on Amazon’s site, the only reasonable conclusion is that Amazon’s site provides unique services or features that enhance rather than stifle third-party-merchants’ competitiveness. 

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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Bill Shughart asks progressives to leave the Senate alone.

Thomas Berry argues that the U.S. Court of Appeals for the Fifth Circuit gets – in a recent ruling – “the right to editorial freedom very wrong.”

The Boston Globe‘s Editorial Board calls for abolition of the cronyist Jones Act. (HT Jon Murphy)

David Henderson shares one of his favorite passages from Atlas Shrugged.

Ron Bailey wonders why environmental ‘activists’ are “trying to stop research into a promising backup plan to handle climate change?”

Daniel Hannan applauds newly announced measures to reduce the heavy burden of government in Britain. Two slices:

And more is on the way: liberation of financial services, lighter business regulation, easier planning, cheaper childcare, safeguards against strike action. Liz Truss, the first PM to come from a think-tank background, understands detail and, just as important, knows which wonks to hire.

Especially encouraging was the recognition that complicated taxes are as damaging to prosperity as high taxes. The elimination of the 45p rate makes taxes flatter and simpler as well as lower. This matters enormously. In opposition, the Tories used to complain that, under Brown, the tax guide had grown from 5,000 to 11,000 pages. It now stands at 24,000 pages, and HMRC employs more officials than the NHS does GPs.

…..

Most of Friday’s announcements were designed to boost our prosperity as a nation rather than being aimed at any particular group. Yes, poor people will benefit – but they will benefit as British citizens rather than as poor people.

This point cannot be stressed too strongly because it runs against the prevailing analysis. No sooner had [Chancellor of the Exchequer Kwasi] Kwarteng sat down than we were seeing those familiar bar charts showing that his tax cuts would be more valuable to higher than to lower earners.

This finding is delivered as if it were a devastating critique of government policy but, taken to its logical conclusion, it becomes an argument against cutting any tax ever. By definition, tax cuts help people who pay taxes more than people who don’t.

Jonathan Turley decries Harvard University’s hostility to ideological diversity and inclusion. (HT Bill Evers)

My Mercatus Center colleague Christine McDaniel praises free trade.

My Mercatus Center colleague Alden Abbott rightly criticizes Biden’s antitrust enforcers’ ignorance of economics. A slice:

Chair Khan’s presentation, which called for a far-reaching “course correction” in U.S. antitrust, was even more bold and alarming. She announced plans for a new FTC Act Section 5 “unfair methods of competition” (UMC) policy statement centered on bringing “standalone” cases not reachable under the antitrust laws. Such cases would not consider any potential efficiencies and would not be subject to the rule of reason. Endorsing that approach amounts to an admission that economic analysis will not play a serious role in future FTC UMC assessments (a posture that likely will cause FTC filings to be viewed skeptically by federal judges).

How can anyone read this report out of Hong Kong and deny that covid derangement syndrome is real (and, unfortunately, still afflicting many people)?

Vinay Prasad is justly critical of Fauci for failing to acknowledge the damage done by prolonged school closures. Two slices:

A few weeks later it became clear: schools could be run safety (largely through Sweden’s experience), the risks to children were low, teachers did not have vastly elevated risks of death, and, by late summer, a German study proved that opening school did not drive substantive community transmission.

Many European nations reopened after 6 weeks (e.g. Switzerland) in the spring of 2020, while nearly all reopened by the fall of 2020. Some US states managed to reopen rapidly too, such as Florida, Texas and Rhode Island. But many cities remained closed: DC, Chicago, SF, Portland, Los Angeles.

During these months, Fauci went on television stirring up fear that reopening schools was dangerous. This would be disastrous advocacy. Even now, in 2022, with the benefit of hindsight, Fauci comments remain full of errors. He still doesn’t not get it— He was wrong; Spectacularly wrong; Once in a century error sort of wrong.

…..

In conclusion, Anthony Fauci did position himself initially as a forceful defender of school closure. When much of Western Europe and Ron DeSantis reopened— Fauci went on TV to criticize the Florida governor. Even now, 2 years later, Fauci clings to delusional ideas to justify closures. He denies the reality that many US cities—with strong allegiance to him— closed the longest. Fauci’s comments show a person not capable admitting error. I suspect these comments will not age well in history.

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Quotation of the Day…

by Don Boudreaux on September 25, 2022

in Entertainment, Media, Myths and Fallacies, Science

… is from page 249 of former Caltech physics professor and provost – and former Energy Department undersecretary during the Obama administration – Steven Koonin’s excellent 2021 book, Unsettled? What Climate Science Tells Us, What It Doesn’t, and Why It Matters:

I began [fifteen years earlier] by believing that we were in a race to save the planet from climate catastrophe. Since then, I’ve evolved to become a public critic of how The Science of climate change is presented.

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Jon Miltimore looks back on the sorry history of price controls. A slice:

And let us not forget the French Revolution, where in 1793 leaders paused their head-lopping to pass the Law of the General Maximum, a set of price controls passed to limit “price gouging.” (Henry Hazlitt had it right when he called the law “a desperate attempt to offset the consequences of [the leaders’] own reckless overissue of paper money.”)

The American historian Andrew Dickson White (1832-1918), a cofounder of Cornell University, explained the consequences of the policy.

“The first result of the Maximum [price law] was that every means was taken to evade the fixed price imposed, and the farmers brought in as little produce as they possibly could,” White wrote. “This increased the scarcity, and the people of the large cities were put on an allowance.”

The Wall Street Journal‘s Editorial Board decries the calamitous environmental lunacy now on the loose in California. Two slices:

Nothing—including cost or reality—will keep California progressives from their effort to turn the state into a grand carbon-free economic experiment. The state Air Resources Board moved this week to ban gas space and water heaters in 2030 and proposed that all big rig trucks must go electric.

…..

Long-haul diesel trucks can go some 1,000 miles before needing to fill up, which takes 10 to 15 minutes. But electric models have a much shorter range, and “even the fastest available chargers right now are going to take three to four hours to charge up to a full state,” California Trucking Association senior vice president Chris Shimoda told the local news outlet LAist.

He added: “These charging stations are going to be a huge, huge power draw.” And for context, “the Levi’s Stadium in Santa Clara on a game day uses around 300 to 350 kilowatts of power. A charging station needed for a big rig is going to be like 30 times larger.”

Arnold Kling is understandably unhappy with today’s politics. A slice:

Richard Hanania claims that the people on the left care more than conservatives about politics. If that is true, then we can expect the left to be more ruthless.

I have already remarked on Democratic organizations making contributions in Republican primaries to candidates they really hate in order to knock off more formidable moderate challengers. I consider that indefensible, and friends of mine who are Democrats (but not party officials) agree.

Juliette Sellgren talks with Range author David Epstein.

What unites Donald Trump, Black Lives Matter, Steve Bannon, and the Lincoln Project?

Walter Olson explores the constitutionality of universities’ mandating ‘diversity statements’ (so called).

Eric Boehm asks an excellent question: “If Sanders and Warren Think Climate Change Is an Emergency, Why Are They Against These Green Energy Reforms?”

My GMU Econ colleague Vincent Geloso reviews Marian Tupy’s and Gale Pooley’s new book, Superabundance. A slice:

They innovate by using “time-prices” which represent the length of time that people must work to purchase something. Time-prices are particularly useful, as they allow us to capture the effect of a richer world on the demand for goods. For example, imagine that incomes increase by 20 percent which leads us to consume more goods that use copper. The price of copper, as a result of the income-driven increase in demand, surges by 5 percent. Based on only the price change, one could say that copper is now dearer. However, this would be incomplete. Indeed, the time-price suggests that one needs 12.5 percent less time to acquire a given quantity of copper. Yes, copper is dearer now but only because we can satisfy more wants! As such, the fall in time-price speaks to greater abundance.

In and of themselves, the time prices of Pooley and Tupy are not novel. Historians like Fernand Braudel in the 1960s used “wheat wages” with the assumption that the number of workdays needed to buy a bushel of wheat could speak to differences in living standards over time and across countries. Modern economic historians created something similar in the use of “welfare ratios” which divide annual incomes by the cost of a basket of goods that assures subsistence. Others simply changed the ratio to see how long it took to buy the basket.

The novelty that Pooley and Tupy undertook is the task of analyzing hundreds of commodities, goods, and services spanning two centuries in more than forty countries. Compressing this data into a few figures, they confirm the phenomenal improvements in living standards. Economists and economic historians had long been aware of the time-prices. They simply never undertook the task of assembling the data and presenting them in a straightforward and appealing manner. Economists are aware of the tools needed to provide the measurement. All they needed to undertake was the gruesome task of assembling the data and presenting it in a way that allowed Milton Friedman to say that a picture was worth a thousand words. In Superabundance, the picture is novel, and it is worth a thousand words.

Also reviewing Superabundance is The Economist.

My GMU Econ colleague Bryan Caplan shares his favorite page from Chapter 2 of his new animated book, Build, Baby, Build.

Jay Bhattacharya tweets:

It’s now beyond clear that the unvaxxed workers do not pose a categorically different risk of covid transmission than vaxxed ones. Companies should stop discriminating against the unvaxxed in hiring, firing, work opportunities, and pay. No more rapid tests for the unvaxxed only.

Laura Powell reports on “the dystopian vision of the health-information police.” A slice:

While most proponents say as little as possible regarding Assembly Bill 2098’s implications, one group is more vocal and less guarded in its statements. Two self-described “frontline” California doctors, Nick Sawyer and Taylor Nichols, formed No License for Disinformation (NLFD) in September 2021.

As its name suggests, the organization’s purpose is to promote policies that use the threat of medical license revocation to discourage doctors from spreading information it believes to be false. Sawyer has twice testified before legislative committees in favor of Assembly Bill 2098. NLFD’s prolific tweets and other public statements paint a dystopian picture that reflects opponents’ worst fears of the type of authoritarian regime proponents wish to impose.

NLFD pushes the idea that there is, as Sawyer described it his testimony before the Assembly committee on April 19, a “well-coordinated and well-funded network of doctors” who promote “anti-vaccine conspiracy theories, sow distrust in the Centers for Disease Control and Prevention, the federal government, and ultimately the Covid-19 vaccines.”

At the outset, note the irony that NLFD frequently criticizes “conspiracy theorists” while promoting its own conspiracy theories. And NLFD not only wants to silence those who undermine faith in public health measures, but anyone who “sows distrust” in the government. Let that sink in.

NLFD’s tweets elaborate on its conspiracy theories, which are, like most conspiracy theories, built on weak evidence that magnify tenuous connections. A recent tweet shared a long thread posted by one of its founders that purports to uncover a web of right-wing “disinformation” purveyors funded by oil money. It implicates, among others, anyone associated with the Great Barrington Declaration or Brownstone Institute and specifically names UCSF professor and doctor Vinay Prasad, journalist and author David Zweig, and Johns Hopkins epidemiologist Stefan Baral as part of this cabal.

…..

Many of NLFD’s conspiracy theories are quite dark and disturbing. It recently retweeted a thread from its own Nick Sawyer, which argues that the United States is currently in the midst of a civil war, which goes unrecognized because it is an information war. Another recent tweet exhorts: “This is an information war, a battle for the truth, and [every] American is a soldier. Get up to speed and start fighting for evidence based reality. No one is going to do this for us.”

NLFD’s primary weapon in this imagined information war is censorship, but it also advocates for criminal prosecution for expressing the wrong ideas. It frequently encourages its followers to report physicians to their medical boards, even if they have no relationship with them. It also frequently calls on Twitter to deplatform accounts it feels say things that are untrue. But it goes even further, tagging the FBI and posting a link to the FBI tip line, asking its followers to report people for alleged misinformation.

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“None of Them”

by Don Boudreaux on September 24, 2022

in Reality Is Not Optional

Cafe Hayek patron Dean Collins shared this meme with me, and I share it here with Dean’s kind permission.

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Quotation of the Day…

by Don Boudreaux on September 24, 2022

in Politics

… is from page 14 of Robert Gross’s 1976 book, The Minutemen and Their World:

Ideally, a potential leader neither sought nor clung to office; were he to campaign openly, he would simply demonstrate his unfitness for public trust.

DBx: It’s too bad that this wisdom of Revolutionary-era New Englanders has been lost. Our world today – and in the United States especially during the months leading up to each November in every even-numbered year – swarms with persons actively outdoing each other at demonstrating their unfitness for public trust.

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Don’t Trust Antitrust

by Don Boudreaux on September 23, 2022

in Antitrust, Archived writings, Seen and Unseen

In my latest column for AIER, I write critically about the government of California’s recently announced antirust harassment of Amazon. Two slices:

To get a more complete and clearer view of this reality, ask: given that Amazon unquestionably does discourage third-party merchants who use its site from selling their wares on other sites at lower prices, why do these merchants nevertheless continue to offer their wares on Amazon’s site? The very existence of the problem about which California complains means that Amazon’s platform isn’t the only one available for use by these merchants. So the problem is obviously not that Amazon has a literal monopoly in the market for online platforms that merchants can use. Merchants have, and in practice take advantage of, the option to use platforms in addition to Amazon’s.

These other platforms open to merchants aren’t owned by fly-by-night operations. One is owned and operated by Target, another by Walmart.

So the State of California’s complaint against Amazon boils down to this: Amazon has made its platform so attractive to third-party merchants that large numbers of them willingly pay a premium in order to continue to use Amazon’s platform. This premium is paid to Amazon by these merchants when they effectively agree not to cut the prices they charge for wares offered for sale on non-Amazon sites.

What, exactly, does Amazon offer to third-party merchants in exchange for their paying this premium? I don’t know, for I’m not a third-party merchant. But I do know that Amazon offers something of value, for otherwise third-party merchants wouldn’t agree to the terms Amazon asks, or wouldn’t care if Amazon reduces the visibility of their offerings on its platform.

…..

Whatever is the source of the durability of the differentially superior service now available on Amazon’s platform was created by Amazon. The company was not gifted this competitive edge by luck or by leprechauns. The superiority of Amazon’s platform is the result of entrepreneurial creativity, risk-taking, and hard work. And the differential returns that Amazon now receives as a result of successfully discouraging third-party merchants from selling their wares on competing platforms at lower prices is the entrepreneurial profit that Amazon earns as a consequence of this entrepreneurial achievement.

Attempts to prevent Amazon from reaping this entrepreneurial profit will discourage not only it, but also other firms and entrepreneurs, from experimenting with differentially better ways to create value for customers. And so even if California successfully uses this antitrust action to lower today’s prices of goods sold on-line by third-party merchants, consumers will find tomorrow’s prices and quality worse as on-line retail platforms and platform features fail to improve as fast and as much as they would have improved had this stunt by California’s government not succeeded.

Since it began in the U.S. in 1889, antitrust has often been fueled by the hubris of intellectuals and government officials who do not realize that what the late Nobel-laureate economist Oliver Williamson called “the economic institutions of capitalism” are in reality mind-bogglingly creative, nuanced, and complex. These intellectuals and officials arrogantly suppose that any contractual terms or organizational arrangements that they cannot immediately understand as serving competition must therefore be devious exercises of monopoly power or attempts to secure such power. Such is the case with California’s new antitrust attack on Amazon. Yet only a bit of dispassionate thought about the facts of this case makes plain that interfering with third-party merchants’ contractual arrangements with Amazon will quite possibly make consumers worse off even in the near term, and will certainly make consumers worse off over time.

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Some Links

by Don Boudreaux on September 23, 2022

in Environment, Immigration, Philosophy of Freedom

Alexander Salter and Phil Magness lament the “rising illiberalism on the Right and Left.” A slice:

As classical liberals, we cannot hide our dismay with contemporary politics. On the Right, the fusionist coalition that once offered old-fashioned liberals a voice within the GOP is falling apart. On the Left, Democrats treat as enemies of the state anybody who dares dissent from extreme progressivism. Now, even elements of the Libertarian Party are turning against classical liberalism, preferring outrage-stoking and noxious racialism to a principled defense of human freedom.

Federalism, free markets, and even the Constitution have few defenders in the public square. While we don’t expect sweetness and light from partisan contests, surely it’s reasonable to demand the political process respect quintessentially American beliefs. Turning away from liberalism means leaving behind part of what makes us who we are. Republicans, Democrats, and Libertarians have forgotten the difference between policy disagreements and civic loyalty.

There’s little room for our economic ideas in the Democratic Party. They’ve opposed free enterprise since the New Deal, if not earlier. But another, more recent illiberal turn is far more alarming: Democrats have turned their back on basic values such as free speech, toleration of dissent, and open scientific inquiry. Instead, they prefer totalizing wokeness, seasoned heavily with authoritarianism. Left-illiberalism infuses every aspect of life with “social justice” activism, from the ESG investment schemes of Wall Street to the monetary policy priorities of the Federal Reserve to the kinds of cars and appliances permissible to purchase. If Democrats get their way, everything social and cultural will necessarily become political. There’s no room for liberalism here.

Conservatives once paid lip service to freedom of contract, voluntary exchange, free trade, and fiscal discipline. Alas, those days are gone. Under the misleading cover of pursuing America’s “national interest,” their policies single out politically connected industries as recipients of public largesse. Some are even heralding the revival of Henry Clay’s “American System” — a discredited platform of trade protectionism and subsidized infrastructure from the 19th century. These policies invariably devolve into political cronyism, as happened in the disastrous Smoot-Hawley Tariff of 1930, which triggered an international collapse in commerce and helped put the “Great” in the “Great Depression.” As history shows, right-wing illiberalism is dangerous, too.

My GMU Econ colleague Bryan Caplan reflects on his recent debate with Peter Singer.

My intrepid Mercatus Center colleague Veronique de Rugy sings the praises of immigrants as she criticizes politicians’ hostility toward them. A slice:

At a time when the American economy could use more people, restrictions on immigration continue to trap a lot of unused talent in low-productivity countries. To unleash it, the United States could simply let these immigrants in and let them work. They’d become a productive part of the system that makes this country so wealthy. But politicians are getting in the way.

Forget for a moment about the usual fear-based talking points. Ignore the recent use of immigrants as political props. As George Mason University economist Bryan Caplan said on PBS, “if you don’t know anything about economics, just learn this: the secret to mass consumption is mass production. Countries that produce a lot of stuff have a high living standard. Countries that produce a small amount of stuff have a low living standard. That is why people want to live in rich countries, because production per person is high in rich countries.”

Speaking of immigration, GMU Econ alum Alex Nowrasteh exposes several problems that infect a recent video, from PragerU, on immigration.

David Henderson documents an example on Wikipedia of scurrilous defamation of a classical liberal.

Those persons who are convinced that Beijing’s industrial policy has China’s economy on track to overtake America’s economy (whatever such an overtaking is taken to mean) might revise their opinion after reading this short piece by Derek Scissors.

Bjorn Lomborg busts more myths about the environment. A slice:

It’s easy to believe that life on Earth is getting ever-worse. The media highlight one catastrophe after another and make terrifying predictions. With a torrent of doom and gloom about climate change and the environment, it’s understandable why many people — especially the young — genuinely believe the world is about to end.

The fact is that while problems remain, the world is in fact getting better. We just rarely hear it.

We areincessantly told about disasters, whether it is the latest heatwave, flood, wildfire or storm. Yet the data overwhelmingly shows that over the past century, people have become much, much safer from all these weather events. Indeed, in the 1920s, around half a million people were killed by weather disasters, whereas in the last decade the death-toll averaged around 18,000. This year, just like 2020 and 2021, is tracking below that. Why? Because when people get richer, they get more resilient.

Leonidas Zelmanovitz explains the value of programs in politics, philosophy, and economics (PPE). A slice:

I would argue that such a concentration of studies could be useful even at the graduate level. Take for instance the Adam Smith Fellowship program offered by the Mercatus Center of George Mason University in partnership with Liberty Fund. They bring together a selected group of graduate students from different universities for a year-long program in which the teachings of Austrian Economics, the Virginia school of Economics, and the Bloomington school are combined. Think about that as a conversation between Frederick Hayek, James Buchanan, and Elinor Ostrom, along with their respective colleagues.

The integration of concepts about the nature of the market process (as Austrian Economics can provide), with concepts about the logic of collective action (as Public Choice theory can provide), and the insights about poly-centric orders (as the Bloomington school can) certainly will help students understand and apply the economic way of thinking in ways that narrow neoclassical theory would never do alone. Neoclassical economics is a much poorer guide to understanding social reality than the one you can gain with a grasp of the political theory behind Public Choice, or of the relations between the different institutional settings and the psychology explaining the behavior of the economic agents under those different set of rules.

Paraphrasing Hayek: “an economist that is only an economist is not only a nuisance, he may become dangerous.”

Thorsteinn Siglaugsson decries the policy of some tech companies to refuse service to those who dissent from the official line.

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Quotation of the Day…

by Don Boudreaux on September 23, 2022

in Virginia Political Economy

… is from page 71 of the excellent 2017 volume by Matthew Mitchell and Peter Boettke, Applied Mainline Economics: Bridging the Gap between Theory and Public Policy:

A consumer who selects peanut butter at the grocery store is also a voter who selects a president in the voting booth. This seems obvious. But a great deal of public policy is made with the implicit assumption that humans are stupid, nasty, or venal when they are in the supermarket or the boardroom but wise, angelic, and selfless when they walk into a voting booth or accept a civil service position.

DBx: Indeed. The transformation that humans are believed to undergo when moving from the private to the public sector is downright miraculous.

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Here’s a letter to the Wall Street Journal:

Editor:

Pleading for U.S. industrial policy, Rick Switzer and David Feith commit an error famously described by Frédéric Bastiat – namely, being enchanted by that which is seen while ignoring that which is unseen (“China Hit Some Bumps on Its Road to Semiconductor Dominance,” Sept. 22).

One can question the accuracy of Messrs. Switzer’s and Feith’s claim that China’s industrial policy unfairly hamstrings American rivals of Chinese producers; see, for example, research by Scott Lincicome and Alfredo Carrillo Obregon showing that investment in U.S. semiconductor production is quite robust. But even if we stipulate that this claim of Messrs. Switzer and Feith is accurate, it follows neither that Chinese industrial policy is successful nor that America should respond in kind.

What these authors don’t see is that which the Chinese necessarily sacrifice by diverting resources to politically favored producers. Which firms in China are artificially weakened, or annihilated altogether, by having resources stripped away from them by Beijing’s industrial-policy mandarins? Which advanced industries are failing to thrive in China because high-tech workers are directed by bureaucrats into semiconductor production? Which economic sectors are now floundering in that country only because the CCP forcibly shoves manufacturing resources and workers into building solar panels and ships?

Only by ignoring such questions can Messrs. Switzer and Feith conclude that “Beijing’s policy is finding success.” Because there’s no doubt that particular industries can be sustained with tariffs sufficiently high and subsidies sufficiently profuse, it’s not news that industries so favored in China are now growing. But there’s also no doubt that these ‘successes’ are bought at the terribly high price of the many unseen firms and industries in China that are artificially stymied in their growth. And because resource allocation is sure to be more wasteful when done by government officials spending other people’s money than when done by markets in which entrepreneurs and consumers spend their own money, industrial policy is a recipe for economic decline. We Americans should not mimic China’s economic self-destruction.

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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