It’s been a while since I last offered an example of a modern, every day product that makes our lives cleaner and more sanitary.

I refer here not to the quotidian marvel that is an indoor flush urinal – with an automatic flush! (This one is in the Burlington, Vermont, airport.) Rather, I refer to the plastic liner with the brand name “Splash Hog.” This device reduces the splash – keeping men cleaner.

This addition to our capitalist cleanliness is small. But the many such small additions to our capitalist cleanliness add up to make our lives cleaner, more pleasant, and safer than at any time in history.

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Quotation of the Day…

by Don Boudreaux on April 18, 2019

in Standard of Living, Trade

… is from page 188 of the original edition of Charles Wheelan’s 2002 book, Naked Economics:

The easiest way to appreciate the gains from trade is to imagine life without it. You would wake up early in a small, drafty house that you had built yourself. You would put on clothes that you wove yourself after shearing the two sheep that graze in your backyard. Then you would pluck a few coffee beans off the scraggly tree that does not grow particularly well in Minneapolis – all the while hoping that your chicken had laid an egg overnight so that you might have something to eat for breakfast. The bottom line is that our standard of living is high because we are able to focus on the tasks that we do best and trade for everything else.

Why would these kinds of transactions be different if a product or service originated in Germany or India? Theyre not, really. Weve crossed a political boundary, but the economics have not changed in any significant way.

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Bonus Quotation of the Day…

by Don Boudreaux on April 17, 2019

in Myths and Fallacies, Trade

… is from page 224 of my late, great teacher Fritz Machlup’s 1977 book, A History of Thought on Economic Integration; Machlup – pictured here – in this passage is summarizing his assessment of Friedrich List’s case for protectionism; the second bracketed comment is Machlup’s own:

[List’s] arguments, however, lacked the necessary analytical support. His assertion that free competition between two nations can be mutually beneficial only if both of them are in a nearly equal position of industrial development is completely unfounded. [What about several parts of a nation with different degrees of industrialisation?]

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My intrepid Mercatus Center colleague Veronique de Rugy and her co-author Justin Leventhal have some data on that great geyser of cronyism, the U.S. Export-Import Bank.

James Pethokoukis highlights some contradictions of Trump’s trade policy.

Art Carden points out that robots are not causing starvation.

In this short video, Johan Norberg busts a popular myth about the history of U.S. income-tax rates.

And here are more tax facts, from Mark Perry.

Is crazy Bernie Sanders a sincere hypocrite?” – Dan Mitchell asks.

My former GMU colleague Tom Hazlett riffs on Mark Zuckerberg’s call for more regulation by government. A slice:

It is not clear where the optimal privacy protections lie, but these three things are clear.

First, Facebook is highly motivated to avoid another “existential crisis” wherein scores of billion dollar fines are imposed by markets.

Second, internet users continue to happily trade personal data for “free” social media apps. In recent laboratory experiments, Facebook users were offered money to disengage. By the prices demanded by the participants, the consumer value generated by Facebook was revealed to average about $1,000 per user per year. Regulations that limit the development of such platforms may hurt consumers as well as shareholders––and the former far more than the latter.

The great Matt Ridley ponders climate protests.

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Quotation of the Day…

by Don Boudreaux on April 17, 2019

in Economics, Hayek

… is from page 34 of Hayek’s insightful 1933 essay “The Trend of Economic Thinking,” reprinted in F.A. Hayek, The Trend of Economic Thinking: Essays on Political Economists and Economic History (Chicago: University of Chicago Press, 1991), pp. 17-34:

[T]he economist frequently finds himself in disagreement in regard to means with those whom he is in agreement with regard to ends; and in agreement in regard to means with those whose views regarding ends are entirely antipathetic to him….

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… is from page 95 of Tyler Cowen’s just-released (2019) book, Big Business: A Love Letter to an American Anti-Hero:

Furthermore, one of the big problems with the domestic airline market is that foreign carriers, by law, are not allowed to serve domestic routes. Repealing that law would usher in much more competition and a new era of low-fare flights. So often when there is monopoly or partial monopoly, it is actually regulation that is at fault.

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Communist Joke

by Don Boudreaux on April 16, 2019

in Not from the Onion

Cafe Hayek reader John Dawson e-mailed to me a little bit of humor about communism – specifically, from Poland during the reign there of communists. (I thank John for his kind permission to share the joke here.)

Ole: Hey Stash! How are you?

Stash: Better. Not as good as yesterday of course but better than tomorrow.

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Peter Earle explains that socialism will never carry the day.

Dan Mitchell is correct that Venezuela is an example of the nightmare that is statism.

Allan Golombek is right that Trump is wrong that “America is full.

Vincent Geloso notes that global inequality isn’t what it used to be.

Whatever the reason, here’s evidence that more-intense competition increases productivity. (HT Tyler Cowen)

I will order and eagerly read Dan Moller’s Governing Least.

Qui est nous?

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by Don Boudreaux on April 16, 2019

in Myths and Fallacies, Seen and Unseen

I haven’t yet read law-professor Katharina Pistor’s new book, The Code of Capital: How Law Creates Wealth and Inequality. Princeton University Press sent me a complimentary copy.

The book’s subtitle combines with the flyer that came along with the book to make me not want to read this volume.

First – and least importantly – books that pander to current obsessions immediately raise my suspicions about such books’ quality. People today – and especially those on the political left – are obsessed with inequalities in monetary wealth and income. Yet my experience when reading these modern descriptions and complaints about such inequality is that the complainers are often very careless with the statistics they report, and surprisingly shallow in their attempted explanations of why such inequalities matter.

I continue to be at a loss to understand why I should care that Jeff Bezos’s monetary income and wealth are magnitudes larger than my own or that of most other Americans. Did Mr. Bezos steal all or some of his wealth? If so, the problem is with his manner of acquiring his fortune and not with the size of his fortune relative to that of anyone else or group of anyone elses. But if, as I’m pretty sure is true, Mr. Bezos created his wealth, what’s the problem? I see no problem.

Second, behold this passage in the book’s flyer (which I assume reflects accurately Pistor’s attitude toward capital and wealth):

What is it, exactly, that transforms mere wealth into an asset that automatically creates more wealth?

Automatically creates more wealth!!! Is she serious? I suspect that she is. After all, even some economists – most notably of late, Thomas Piketty – have such a view of capital. Yet no view of capital could be more distorted and mistaken.

This view of capital is astonishingly superficial. It sees only the surface and is blind to the vast and complex economic forces at work that result in some capitals both creating wealth and, in the process, destroying wealth.

There was nothing automatic, for example, about Bezos’s Amazon. The creation of Bezos’s wealth required his creativity, risk taking, and very hard and sustained work. And the creation of this wealth arose only because Bezos figured out how to better serve hundreds of millions of ordinary consumers. In the process, Bezos’s creation of his wealth destroyed a great deal of the wealth of others retailers. Eventually, much of the value of Amazon will itself be destroyed by the competitive entrepreneurial process of creative destruction.

This Piketty-Pistor view of wealth creation is akin to a view, say, of a moving locomotive and, seeing only the currently moving locomotive, concluding that this movement is “automatic.” Unseen are the moving engine parts, the fuel being pumped into the engine, the gears and transmission and engine-cooling system and hoses and wires and the locomotive’s designers and financiers and assembly workers and maintenance workers and the man or woman who is actually driving of the giant machine. Countless human actions in the past and present are necessary to make a locomotive travel down a track, none of which was or is “automatic.”

This passage in the flyer for Pistor’s book would be hilarious were it not a symptom of a deep misunderstanding that can fuel extraordinarily destructive government policies.


By the way, the correct answer to the question asked in the italicized quotation above is: “Nothing.”

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Quotation of the Day…

by Don Boudreaux on April 16, 2019

in Economics, Trade

… is from the penultimate paragraph, pages 229-230, of Dartmouth College economist Douglas Irwin’s superb 1996 book, Against the Tide: An Intellectual History of Free Trade:

A closer look at each free trade controversy reveals that there are significant shortcomings to each proposed argument against free trade. Perhaps the most glaring example is that of the infant industry argument, which economists, particularly in the nineteenth and early twentieth centuries, bent over backward to accept in an effort to be fair-minded about the possibility of a positive government role. Yet a specific theoretical rationale for infant industry protection was never worked out and sound cost-benefit analyses of such protection was not undertaken until much later.

DBx: The human mind is not only creative and fertile, it is also determined. If it wishes to find a reason to believe, it almost never fails. This reality is true even for the most fanciful of desired beliefs.

Finding valid theoretical exceptions to the case for a policy of free trade has long occupied many in the economics profession. (By “valid” I mean “does not contradict the basic premises in common use by economists when they do economic analyses.”) A few such valid exceptions have been found, but none that more than a handful of serious economists consider to have much practical merit.

Of course, those who aren’t constrained by the need to ensure that their theoretical case against free trade is valid churn out alleged exceptions in huge volumes. Just as ‘proving’ that there are exceptions to the laws of arithmetic if one isn’t obliged to stick to the logic and language of basic mathematics is childishly simple – “See, when arithmetic is done by people named Sam, five minus two equals eight!” – ‘proving’ that there are exceptions to the case for a policy of free trade is equally simple. But, of course, all such ‘proofs’ or ‘demonstrations’ are gibberish – and gibberish usually in service to grasping special-interest groups.

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