Tweet

… is from page 49 of my GMU Econ and Mercatus Center colleague Peter Boettke’s October 2011 Journal of Economic Behavior & Organization paper, “Teaching economics, appreciating spontaneous order, and economics as a public science,” as it is reprinted as chapter 4 of Pete’s 2012 collection, Living Economics (original emphasis):

The constellation of relative prices that actors within the economy face in making decisions provide them with both an incentive and a signal that is essential in their assessment of the situation as they choose this path or that. The existing array of prices, in other terms, provide the ex ante information about relative scarcities that economic actors use to infer alternative use of resources and methods of production. The market price that is paid for the good or service, and the profit and loss statement revealed in the market from offering those goods and services, provide economic actors with an ex post assessment of the appropriateness or inappropriateness of the enterprising decisions made. And, the very discrepancy between the ex ante expectations, and the ex post realization in the market, motivates the discovery or learning by economic actors of better ways to match their production plans with consumption demands. If this process of production and exchange does not take place, the knowledge and incentives required to produce the complex coordination of the market would not exist. It is not just that the information would be difficult to surmise; it is literally that it would not exist.

DBx: I’m aware that I repeat myself, but proponents of industrial policy ignore the reality described here by Pete. This ignorance, while apparently necessary in order for industrial policyists to successfully peddle their schemes, is fatal to their efforts to reallocate resources in ways that will improve the well-being of the people of the country.

Tweet

In a mere ten and a half minutes, Daniel Hannan makes a remarkably cogent and complete case for free trade. Watch it and enjoy witnessing in action a master thinker and orator.

Tweet

David Henderson rightly objects to the assertion that “rich countries are becoming addicted to cheap labor.”

The Editorial Board of the Wall Street Journal explains that even the Chinese government cannot escape economic reality. A slice:

Mr. Xi is consolidating more economic control in the hands of the Communist Party state. That includes real estate, where one effect of the shake-up has been to bolster state-owned property developers. The Party has rolled out the concept of “new productive forces,” a catch phrase that appears to encompass aggressive industrial policy in areas such as artificial intelligence and green tech.

Because most economists understand the limits of this gambit, China watchers are waiting for another credit-and-fiscal blowout of the sort Beijing used to gin up economic growth after the 2008 financial panic. But Beijing appears to fear such a “stimulus” now would mainly stimulate inflation, and has concluded that rapidly rising prices would be a bigger political threat to the Party than slowing growth. On this Mr. Xi might be right.

If Beijing can’t stir the economy its old, credit-exploding way, and won’t pivot to a new, private-entrepreneurship-led way, the result will be slower growth. That’s a tragedy for millions of still-poor Chinese, and a challenge for a world that would benefit from a healthier, freer Chinese economy.

Kevin Corinth warns social conservatives of the consequences of their embrace of the child tax credit.

Arnold Kling puts economic activity in context. A slice:

Specialization and trade, or outsourcing by choice, is one of the set of behaviors that is unique to humans. Start with two creatures, not mates, each of whom is capable of fishing or gathering berries. If one of them specializes in fishing and the other one gathers berries, and they trade with one another, then I bet that the creatures are humans. I can think of no examples of other species in which two creatures who are not mates will choose to specialize and trade.

George Will is a fan of Rob Henderson’s new book. A slice:

Henderson wryly notes that, in 2015, a person acquired status by seeing “Hamilton.” By 2020, however, when the masses had made the musical contemptibly popular, former enthusiasts turned against it, saying it insufficiently reflected America’s failings. Its creator, Lin-Manuel Miranda, performed the expected grovel: “All the criticisms are valid.”

Randy Holcombe understands the reality of politics. A slice:

As the political season ramps up this year, notice that the “policies” that politicians will propose are not really policies at all; they are aspirations. They say, “Here are some good things I would like to accomplish if I am elected,” but they don’t say how they intend to accomplish them. They amount to feel-good slogans rather than actual public policies.

Most people will be in favor of mitigating climate change, reducing crime, securing the border, and reducing the budget deficit. Those are feel-good aspirations. Fewer people will favor specific policies aimed at realizing those aspirations. That’s why politicians talk about aspirations rather than specific policies. That’s also why those aspirations often fail to be realized.

Tarnell Brown is correct: the government-caused dissolution of the proposed merger between the airlines Spirit and Jet Blue.

John Stossel makes the case that government should stop subsidizing ‘green’ energy.

Tweet

… is from chapter 1 of William Graham Sumner’s 1885 book, Protectionism: the -ism Which Teaches that Waste Makes Wealth (original emphasis):

Free trade is not a theory…. It would be as reasonable to apply the word theory to the protestant reformation, or to law reform, or to anti-slavery, or to the separation of church and state, or to popular rights, or to any other campaign in the great struggle which we call liberty and progress, as to apply it to free trade. The pro-slavery men formerly did apply it to abolition, and with excellent reason, if the use of it which I have criticised ever was correct; for it required great power of realizing in imagination the results of social change, and great power to follow and trust abstract reasoning, for any man bred under slavery to realize, in advance of experiment, the social and economic gain to be won – most of all for the whites – by emancipation. It now requires great power of “theoretical conception” for people who have no experience of the separation of church and state to realize its benefits and justice. Similar observations would hold true of all similar reforms. Free trade is a revolt, a conflict, a reform, a reaction and recuperation of the body politic, just as free conscience, free worship, free speech, free press, and free soil have been. It is in no sense a theory.

Tweet

Here’s a letter to the Wall Street Journal:

Editor:

Attempting to justify the Jones Act, Sen. Roger Wicker (R., Miss.) commits the classic protectionist error when he writes that this statute “facilitates some 650,000 jobs across our vast system of shipyards, ports and waterways and adds $150 billion annually to our economy” (Letters, March 5). Like all protectionists, Sen. Wicker fails to ask “as compared to what?”

No one doubts that protecting particular industries can increase employment and sales in those industries. But because protectionism works only by artificially diverting more workers and other resources into protected industries – and, hence, away from other industries – it unavoidably decreases employment and sales elsewhere in the economy. Sen. Wicker ignores these destroyed jobs and sales. Further, because industries that survive only because of protectionism are less efficient than are industries that thrive without protectionism, the economic activities made possible by the Jones Act and other protectionist measures are worse than are the activities made impossible by these interventions. With protectionism, therefore, wage and economic growth are reduced.

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

Tweet

Here’s a letter sent on February 21st to the Financial Times; it has not been published:

Editor:

You report that “Washington has warned Beijing that the US and its allies will take action if China tries to ease its industrial overcapacity problem by dumping goods on international markets” (“US warns China against dumping goods on global markets,” Feb. 20).

More-revealing wording is “Washington has warned Beijing that the US and its allies will not allow their own citizens to enrich themselves if China tries to ease its industrial overcapacity problem by increasing the rest of the world’s access to goods traded on international markets.”

We today in America are bombarded with demands to “put America first!” Heeding this plea with the greatest enthusiasm, it seems, are none other than the Chinese. They are producing, apparently at a loss to themselves, an abundance of goods that we Americans would eagerly scoop up but for Washington’s obstinate refusal to let us do so. Washington insists that the Chinese keep this abundance of goods for themselves.

In the topsy-turvy world of trade policy, the government putting America first is headquartered in Beijing while the one putting the Chinese first resides on the banks of the Potomac.

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

Tweet

Here’s the abstract of a new working paper by Maxim Pinkovskiy, Xavier Sala-i-Martin, Kasey Chatterji-Len, and William Nober (emphasis added): (HT David Levey)

Household surveys suffer from persistent and growing underreporting. We propose a novel procedure to adjust reported survey incomes for underreporting by estimating a model of misreporting whose main parameter of interest is the elasticity of regional national accounts income to regional survey income, which is closely related to the elasticity of underreporting with respect to income. We find this elasticity to be substantial but roughly constant over time, implying a large but relatively constant correction to survey-derived inequality estimates. Underreporting of income by the bottom 50% of the world income distribution has become particularly important in recent decades. We reconfirm the findings of the literature that global poverty and inequality have declined dramatically between 1980 and 2019. Finally, we find that within-country inequality is falling on average, and has been largely constant since the 1990s.

Peter Earle: “Wendy’s Won’t Use Dynamic Pricing – But Should They?”

Elizabeth Nolan Brown is correct: “Allowing surrogacy brokers to be paid is good. Allowing surrogates themselves to be paid would be better.”

Writing in the Wall Street Journal, Robert Bork, Jr., warns of the dangers of ESG. A slice:

This dynamic is why the ESG movement is increasingly perceived not merely as a social movement but as a cartel. In a 2022 letter to BlackRock’s Larry Fink, 19 state attorneys general questioned the effect on fiduciary responsibility when big asset managers work in tandem with nongovernmental organizations and proxy advisers to restrict oil and gas production. The attorneys general asserted that ESG investors violate the Sherman Act, the nation’s foundational antitrust law, by engaging in a “restraint of trade.” This has manifested in the environmental arena, when asset managers have made huge investments in oil and gas while seeking to restrict the supply of oil and gas.

Joakim Book reports on the beneficial impact on electricity markets of Bitcoin. A slice:

Bitcoin is an awesome monetary technology, revolutionizing the world of money and assets and savings one skeptic at a time. In its wake, we find all sorts of beneficial second-order effects — improving the electricity grid and vacuuming up stranded worldwide energy just being the latest one. “Bitcoin miners are the economically perfect consumers of electricity,” concludes Lee Bratcher for Bitcoin Magazine, “their consistent consumption incentivizes the buildout of additional generation.”

GMU Econ alum Thomas Hogan reviews the new collection on monetary policy edited by Michael Bordo, John Cochrane, and John Taylor.

Rachel Lomasky takes “a long view on artificial intelligence.”

Sarah Knapton: “Ministers failed to consider long-term pain of lockdown, say scientists.” (HT Jay Bhattacharya)

Tweet

… is from page 50 of GMU Scalia Law professor Frank Buckley’s 2013 paper “An Exceptional Nation?” which is a chapter in The American Illness (F. H. Buckley, ed., 2013):

Unless reversed, the turn to protectionism may be expected to hasten America’s decline, in both relative and absolute terms.

Tweet

I made a similar, yet more fleshed-out, argument nearly 30 years ago in the Cato Journal.

Editor, National Review

Wesley Smith’s arguments against legalization of surrogacy motherhood fail (“Thailand Plans to Reopen Exploitive Commercial Surrogacy Industry,” March 2). Each of the abuses that he alleges attend some surrogate-motherhood situations can be prohibited without outlawing surrogacy itself.

More fundamentally, it’s certainly true that only women whose best option is to serve as surrogate mothers will choose to serve as surrogate mothers. It might also be true that all of the women who choose this option are poor. But contrary to Mr. Smith’s argument, these women are exploited not by allowing them to choose this option but, instead, by denying them this option. Stripping adult women of the right to choose to serve as surrogate mothers compels them to choose options that are, for them, worse. Although inadvertent, the advocate of exploitation here is Mr. Smith.

Mr. Smith attempts to escape this logic by rhetorically asking a non-rhetorical question: “But couldn’t the same be said of workers exploited for low pay in sweatshop conditions to make our running shoes, or of the exploitation of Congolese women and children who mine cobalt for use in rechargeable batteries?” First, the case for legalized surrogacy applies to women, not children. Second, the answer to this question for adults is ‘yes.’ Adults whose best option is to work in sweatshop conditions improve their lives by choosing this option, for that is why they choose it. If this option were stripped away from them they would be forced to fall back on options that are even more difficult, dangerous, degrading, or otherwise unenviable.

It is wrong to reduce the range of peaceful options open to people – and especially to poor people. And as Mr. Smith writes, “wrong is wrong.”

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