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Quotation of the Day…

… is from page 159 of Robert Higgs’s August 28, 2013, essay “Creative Destruction – The Best Game In Town,” as this essay is reprinted in Bob’s superb 2015 volume, Taking a Stand:

What are we to conclude, then, about the process of creative destruction? The main conclusion must be that however painful it may be for those who must make the wrenching adjustments required by the economy’s technological progress and changing structure, that pain plays an essential role in motivating the resource reallocation and other adjustments – for example, changes in the types of education, training, and experience people acquire – that make possible an ongoing process of economic development in which, in the course of time, nearly every member of society will be better off. Turning to the state, either for endless ad hoc intrusions or for across-the-board replacement of the market-directed economic order, may eliminate some of the pain associated with the process of creative destruction, to be sure, but only by replacing that process with one of uncompensated destruction, suffocating innovation and other forms of economic creativity and bringing real economic progress to a grinding halt.

DBx: Yes. Industrial-policy advocates take heed.


Some Links

Erec Smith talks with C-SPAN about his new book, A Critique of Anti-Racism in Rhetoric and Composition.

Ken Langone’s letter in today’s Wall Street Journal is worth reading:

A hearty second to Ira Stoll (“ProPublica Buries Its Clarence Thomas News,” op-ed, Sept. 23). The closer you look at the left’s latest attacks on Justice Clarence Thomas and his colleagues on the Supreme Court, the harder it is to take them seriously. The justice was friends with a billionaire? That comes from a news outlet, ProPublica, generously bankrolled by a billionaire to push ideologically tilted investigations. He flew on a private plane? Well, the justices got death threats, and an assassination attempt, after the news media hyped an unlawfully leaked opinion draft.

I recall no journalistic outrage when the nation’s most influential legal reporter penned a book last year about her cozy rapport with Justice Ruth Bader Ginsburg called “Dinners with Ruth: A Memoir on the Power of Friendships.” If billionaires corrupt all they touch, then the scribes at the Washington Post and New York Times might want to research who owns those papers.

I have long admired Justice Thomas, especially through our mutual work with the Horatio Alger Association, which provides scholarships and uplift for young people who, like he and I, came up the hard way.

I also attended some of the events mentioned in ProPublica’s smears, along with Charles G. Koch. They’re intellectually lively, spirited events with—the left may be shocked to learn—genuine and good-faith disagreements about important policy questions. Mr. Koch and I don’t agree on everything, but we’re both passionate about America and we lend our voices to causes that go far beyond our tax rates.

Ken Langone
Co-founder, Home Depot
New York

“I, Pothole.”

David Henderson reviews Sebastian Edwards’s new book, The Chile Project.

Katherine Mangu-Ward reflects on the 50th anniversary of the publication of David Friedman’s The Machinery of Freedom.

Maria Servold reports on the increasing wokeness of schools of journalism.

Tom Jefferson writes about “the covid backpedaling race.”


Quotation of the Day…

… is from page 454 of my late Nobel-laureate colleague Jim Buchanan’s 1989 paper “The Relatively Absolute Absolutes,” as this paper is reprinted in volume 1 (1999) of The Collected Works of James M. Buchanan: The Logical Foundations of Constitutional Liberty:

I consider it to be the task of economists, as economic scientists, to make rudimentary predictions about the behavior of persons within existing and potential constraints, whether these be imposed physically or artifactually. I have considered it to be the task of economists, as moral and social philosophers, to evaluate alternative sets of constraints, and to seek consensus on changes in direction of those that most nearly meet the discipline’s ultimate normative criteria, which are themselves determined by agreement.

DBx: Happy Birthday, Jim Buchanan, who was born on this date (October 3rd) in 1919.


This letter of mine appeared in the September 24th, 2023, edition of the Financial Times (links added):

In “The real reasons for the west’s protectionism” (Opinion, September 19), Gideon Rachman writes that “some US policymakers now look back to the decision to admit China to the World Trade Organization as a mistake. They believe that the huge boost this gave to Chinese exports also contributed significantly to the deindustrialisation of America.”

US policymakers might well believe such a thing, but they’re mistaken, as is Rachman, who wrongly treats assertions of America’s deindustrialisation as an established fact.

Tellingly, the link that Rachman supplies to support the claim of deindustrialisation does no such thing. It takes readers to a Politico report that mentions a 2020 Economic Policy Institute study. This (deeply flawed) study is about jobs, not industrial output or capacity — although the authors undoubtedly want readers to leap from the alleged loss of jobs to the conclusion that America is deindustrialising. But such a leap, although taken by Rachman, fails.

The fact is that industrial output in the US is today (August 2023) close to an all-time high, and is 18 per cent higher than when China joined the WTO in December 2001. Likewise, America’s industrial capacity is now merely 1 per cent smaller than its record-high size in December 2016 and 9 per cent larger than when China joined the WTO.

While Americans’ distressing appetite for protectionism cannot possibly be caused by a fictional occurrence, it surely is fed by careless repetition of this myth.

Professor Donald J Boudreaux
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center, George Mason University, Fairfax, VA, US


Some Links

Wall Street Journal columnist Allysia Finley explains how science is corrupted by “preapproved narratives.” Two slices:

Scientists were aghast last month when Patrick Brown, climate director at the Breakthrough Institute in Berkeley, Calif., acknowledged that he’d censored one of his studies to increase his odds of getting published. Credit to him for being honest about something his peers also do but are loath to admit.

In an essay for the Free Press, Mr. Brown explained that he omitted “key aspects other than climate change” from a paper on California wildfires because such details would “dilute the story that prestigious journals like Nature and its rival, Science, want to tell.” Editors of scientific journals, he wrote, “have made it abundantly clear, both by what they publish and what they reject, that they want climate papers that support certain preapproved narratives.”

Nature’s editor, Magdalena Skipper, denied that the journal has “a preferred narrative.” No doubt the editors at the New York Times and ProPublica would say the same of their own pages.


In January 2022, Johns Hopkins University economist Steve H. Hanke reported that Covid lockdowns had little effect on deaths. When he attempted to publish the findings on SSRN, the site turned him down. “Given the need to be cautious about posting medical content, SSRN is selective on the papers we post,” a rejection notice informed Mr. Hanke.

That’s the same response the site gave University of California, San Francisco epidemiologist Vinay Prasad when rejecting his studies debunking widely cited Covid studies, such as one claiming Boston schools’ mask mandate reduced cases. SSRN is run by the company Elsevier, which also publishes prominent medical journals that uniformly promote Covid orthodoxy.

Scientific journals and preprint servers aren’t selective about research quality. They’re selective about the conclusions. If experts want to know why so many Americans don’t trust “science,” they have their answer. Too many scientists no longer care about science.

Writing at National Review, Jay Bhattacharya describes and decries the plague of groupthink and censorship in science. Two slices:

Though it is hard to hear, the sad fact is that we are living in a time and in a society where there is once again a need for scientists to pass around their ideas secretly to one another so as to avoid censorship, smearing, and defamation by government authorities in the name of science.

I say this from firsthand experience. During the pandemic, the U.S. government violated my free-speech rights and those of my scientist colleagues for questioning the federal government’s Covid policies.

American government officials, working in concert with Big Tech companies, defamed and suppressed me and my colleagues for criticizing official pandemic policies — criticism that has been proven prescient. While this may sound like a conspiracy theory, it is a documented fact, and one recently confirmed by a federal circuit court.


So, what did the government want censored?

The trouble began on October 4, 2020, when my colleagues and I — Dr. Martin Kulldorff, a professor of medicine at Harvard University, and Dr. Sunetra Gupta, an epidemiologist at the University of Oxford — published the Great Barrington Declaration. It called for an end to economic lockdowns, school shutdowns, and similar restrictive policies because they disproportionately harm the young and economically disadvantaged while conferring limited benefits.

The declaration endorsed a “focused protection” approach that called for strong measures to protect high-risk populations while allowing lower-risk individuals to return to normal life with reasonable precautions. Tens of thousands of doctors and public-health scientists signed on to our statement.

With hindsight, it is clear that this strategy was the right one. Sweden, which in large part eschewed lockdown and, after early problems, embraced focused protection of older populations, had among the lowest age-adjusted all-cause excess deaths of nearly every other country in Europe and suffered none of the learning loss for its elementary-school children. Similarly, Florida has lower cumulative age-adjusted all-cause excess deaths than lockdown-crazy California since the start of the pandemic.

In the poorest parts of the world, the lockdowns were an even greater disaster. By spring 2020, the United Nations was already warning that the economic disruptions caused by the lockdowns would lead to 130 million or more people starving. The World Bank warned the lockdowns would throw 100 million people into dire poverty.

My GMU Econ colleague Dan Klein closely reads an important paragraph written by Adam Smith.

Pierre Lemieux writes about “the circus of FTC v. Amazon.” A slice:

The foundation of the argument against antitrust is that competition and potential competition provide a built-in constraint against concentration. Competition only requires that the market be free from government-granted privileges and legal restrictions to entry. In a free market, greed controls greed. In an overgrown state, power does not control power as much as it fuels it.

Economist Tom Hazlett explains Google’s popularity. Two slices:

The innovation was simple in design, complex in execution, and radical in result. The business achieved a rare triple play: First, a robust new web crawler devised a superior method for finding and tagging the world’s digital content, deploying cheap PCs linked in formations to achieve momentous computing power (Brin’s genius). Second, this more prolific database of global digital content was better cataloged. A clever “Page Rank” score evaluated keyword matches, countering the influence of scammers by scrutinizing the quality of their web page links (Page’s inspiration). Third, “intention-based advertising” displayed commercial messages to searchers self-identified as ready to buy. For instance, the internet user wondering about “coho salmon, Ketchikan, kids” gave Hank’s Family Fishing B&B in Alaska a digital target for its 10 percent off coupon, while signaling to Olay not to bother advertising its skin care products. This solved the famous marketing dilemma: “I know I’m wasting half my ad budget, I just don’t know which half.” Businesses loved these tiny slices of digital real estate, and Google mined gold.

The bountiful cash flow funded vast computer overhead and an elite army of software programmers, enabling Google to deliver truly extraordinary benefits to the mass market—all for free. According to Stanford University economist Eric Brynjolfsson’s conservative empirical estimate, each Google user in the U.S. enjoys an astounding $750 a year in consumer surplus, amounting to around $184 billion annually for the 246 million daily Google users— the equivalent to 1 percent of GDP.


It is crucial to recall that it was not yet theirs in 2002. Google was a phenom, yes, and it attracted 16 percent of U.S. search traffic. But Yahoo still had 36 percent, and strong rivals such Overture, Excite, and—yes—Microsoft were all in the mix. Yet, once Google scraped together the coin to launch on the big stage, consumers flocked. In just two years, Google passed Yahoo. The better mousetrap broke into a market where the giants demanded pay-to-play. So the upstart paid. Soon, the little guy owned the world. It is unfortunate that the then-ISP monopoly (as per the Federal Trade Commission’s official position), AOL, is not around to see it.

Pat Lynch spoke with Bruce Caldwell about Hayek (F.A., not Salma).


Quotation of the Day…

… is from pages 414-415 of W.H. Hutt’s quirky but important – and regrettably neglected – 1979 volume, The Keynesian Episode (original emphasis):

The trouble with using “artificially low” interest rates to achieve reemployment is that there is never a moment at which it can be legitimately contended that the abandonment of inflation will not mean some unemployment, in the absence of the price and cost adjustments which Keynesianism excludes from consideration.

DBx: Yep. Inflation of the money supply breeds dependency of some producers on inflation of the money supply. Stop, or even slow, that inflation, and unemployment will occur. This unemployment will be relatively short-lived if prices and wages adjust; it will be longer-lived if prices and wages are, as they say, “sticky downward.”


Some Links

Alex Tabarrok understandably decries the newly announced antitrust assault on Amazon. Here’s his conclusion:

More generally, the FTC under [Lina] Khan seems to be a lost opportunity. There are abusive practices such as hidden pricing by hospitals that could be improved but the FTC is throwing it away on pursuing the greatest store the world has ever known. Why? I have liberal friends who quit the FTC because they wanted to work on real cases not political grandstanding.

Even New York Times columnist Farhad Manjoo is skeptical of the antitrust case against Amazon. Three slices:

In order to characterize Amazon’s share of American retail as a monopoly, the plaintiffs define its market in a way that excludes just about every other retailer, online or offline.


“I think most competition scholars would say that the F.T.C. needs to go to the competition optometrist to get a new prescription,” David Balto, a former policy official in the F.T.C.’s bureau of competition, told me of the way the agency is defining Amazon’s market. “They’re suffering from significant myopia.”


The complaint zeros in on three other online superstores — the e-commerce divisions of Walmart and Target, and eBay. (The other relevant market, “online marketplace services,” refers to the money Amazon makes from outside merchants who sell to its customers; here the complaint mainly focuses on a comparison of Amazon to Walmart and eBay.) And it’s true, if you narrow your focus to include only retailers that satisfy all these criteria, Amazon wallops the competition. “Documents and data, both from Amazon and industry analysts, confirm that Amazon’s share of the overall value of goods sold by online superstores is well above 60 percent — and rising,” the complaint says.

I find this a little too cute. Amazon all but invented the notion of an online store that sells everything, and it’s been building out that idea for more than two decades; it’s hardly surprising that it dominates the category it pretty much brought into being. Citing Amazon’s dominance in the online-everything-store business seems sort of like citing Chipotle’s dominance in the choose-your-ingredients burrito business. Sure, it would be technically correct — but it wouldn’t meaningfully situate Chipotle in the larger marketplace for fast food.

Adam Martin continues to defend GMU’s late Nobel-laureate economist, James Buchanan, from misinterpretation.

Peter Earle asks: “Why is baby formula kept under lock and key?”

Pierre Lemieux describes “the arbitrariness of the ‘public interest.'”

My GMU Econ colleague Natalya Naumenko defends her findings about the nature of the Ukraine famine of 1932-1933 and of Stalin’s very real role in creating it.

Jay Bhattacharya and Steve Hanke, writing in Econ Journal Watch, report on the censorship and groupthink that prevailed during the covid pandemic. A slice:

A signal event in the timeline of Western covid lockdowns occurred on March 16, 2020, with the publication of the Imperial College London covid report (Ferguson et al. 2020). Its frightening predictions sent shock waves around the world. The next day, the government threw the United Kingdom into lockdown.

The impact of the report was amplified by the United Kingdom’s soft-power machine, the BBC. Its reach has no equal: broadcasting in 42 languages, reaching 468 million people worldwide each week, and efficiently disseminating its message (Barber 2022). With the BBC in full cry and the public genuinely alarmed, there was little room or tolerance for dissent. In the United Kingdom, the government put its recently established Counter Disinformation Unit on full covid alert, to stamp out dissent (Investigations Team 2023).

A copycat cascade then took hold, with the United States and other countries embracing the UK government’s messaging and policies. The result was a policy based on a defective model (see Herby et al. 2023a, 28–29) that originated at Imperial College London under the leadership of Professor Neil Ferguson, who is the director of Imperial College’s School of Public Health.

UK policymakers should have been aware that Professor Ferguson’s Imperial College team had a history of defective modeling and a track record littered with what are little more than fantasy numbers. To put the blunders of the Imperial College London’s epidemiological fear machine into context, consider the numbers generated by the modelers in 2005, when Professor Ferguson suggested that “up to around 200 million” could die from bird flu globally. He justified this claim by comparing the lethality of bird flu to that of the 1918 Spanish flu outbreak, which killed 40 million (Sturcke 2005). By 2021, bird flu had only killed 456 people worldwide (WHO 2021). And, there were other huge misses by the Imperial College London’s modelers: foot and mouth in 2001, mad cow in 2002, and swine flu in 2009 (Hanke and Dowd 2022).


Quotation of the Day…

… is from page 8 of economist Lionel Robbins’s insightful and still-relevant 1937 book, Economic Planning and International Order:

Discussion of plans for particular industries is obviously incomplete. If pushed to its logical conclusion it must involve discussion of general planning: as we shall see later on, the “planning” of particular industries almost inevitably tends to spread.

DBx: Robbins is correct because the economy is not, contrary to the supposition of proponents of industrial policy, a collection of static supply chains lying side by side but otherwise unconnected to each other. Instead, the economy is a web of inconceivably large numbers of dynamic interconnections, with each producer’s outputs being used by many downstream firms and consumers, and each of these outputs itself the product of the outputs of many different upstream producers. Attempts by government to expand one particular industry or sector necessarily pulls resources away from countless other uses elsewhere in the economy, with only a small handful of these consequences being within the purview of the planners. And the expansion of the output of the privileged industries lowers many prices downstream, causing firms in some other industries to scale back production. Most of these consequences are far away in the web, ignored by the proponents of the intervention.

But these distant consequences generate feedback in the form of changes in the pattern of prices and of resource allocation unforeseen by the arrogant industrial policyist. The availability of this or that resource to his favored industry will prove to be less than expected, compelling the industrial policyist to expand his intervention in order to salvage his scheme. This expanded intervention will produce similar unforeseen consequences.

The only escape from this problem is for the industrial-policy scheme to be pursued only in a half-hearted manner or – far better – to be abandoned altogether.