Quotation of the Day…

by Don Boudreaux on February 20, 2019

in Economics, Myths and Fallacies, Trade

… is from page 116 of the 2007 3rd edition of Russell Roberts’s indispensable and brilliant book The Choice; at a mere 116 pages, Russ’s book might well be the single best defense of free trade ever written; in no other work is that which is unseen made so visible and vibrant as Russ here reveals it to be:

Economists understand better than anyone that it’s not really about money, but about striving and living and dreaming.

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My intrepid Mercatus Center colleague Veronique de Rugy warns of the dangers of Uncle Sam’s ‘entitlements’ commitments.

“Thanks to Trump, Refugees Fleeing Authoritarian States Are No Longer Welcome” – that’s the title of my and GMU Econ grad-student Jeffrey Mason’s recent op-ed in The Morning Consult. A slice:

The Trump administration hasn’t just slashed the cap levels on refugee resettlement. It isn’t even attempting to meet those limits, leaving thousands of refugee-admission slots unused every year. This inaction comes at a time when the United Nations estimates there to be over 25 million refugees worldwide in need of resettlement. Few examples come to mind of a more needless and depraved abdication of responsibility by an American president, the costs of which are borne by the world’s most vulnerable people.

Phil Magness tells the story of Karl Marx’s London gravesite, and draws from it a lesson.

Well, well, well … minimum-wage diktats do indeed have negative consequences for those whom such diktats are meant to help (as Mark Perry here reveals).

From August 2008 is this plea by Bjorn Lomborg for free trade. A slice:

It is interesting to contrast global skepticism about free trade with support for expensive, inefficient methods to combat global warming. Many argue that we should act, even if such action will have no benefit for the next decades, because it will help lessen the impact of global warming by the century’s end.

But free trade also promises few benefits now and huge benefits in the future. Moreover, if we could stop global warming (which we can’t), the benefit for future generations would be one-tenth or less of the benefit of freer trade (which we certainly can achieve). Still, there are few celebrity campaigners calling on politicians to sort out the Doha Round.

Global fear about free trade leaves the planet at risk of missing out on the extraordinary benefits that it offers. Free trade is good not only for big corporations, or for job growth. It is simply good.

David Henderson properly praises Peter Van Doren’s recent piece on payday loans.

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Another Deleted

by Don Boudreaux on February 19, 2019

in Trade

Pasted below is another Cafe Hayek post – this one from November 2017 – the original of which I’m deleting because I’m being an excessively nice guy to C__ W__.

An Open Letter to Cafe Hayek Commenter C___ W____
by DON BOUDREAUX on NOVEMBER 11, 2017

in MYTHS AND FALLACIES, TRADE

Mr. W___:

You read on my blog that I’ll soon defend, in a debate in New York City, the proposition that Americans would be best served by a policy of free trade regardless of whether or not other countries follow such a policy.  In the comments section of my blog you wrote in response that “If actually reciprocal I vote for that any day.  Without reciprocity, I’m just not interested.”

So you believe that as long as other governments keep their peoples poorer than those peoples would otherwise be, Uncle Sam should keep us Americans poorer than we’d otherwise be.  Given your logic, I assume that if your neighbor stubbornly engages in economically imprudent practices – say, spends his money frivolously, or buries all of his earnings in a hole in his backyard – that you, too, will engage in those same insane practices for as long as your neighbor persists in his insanity.  How foolish of you.

You apparently believe that governments that restrict imports or subsidize exports thereby enrich their citizens at the expense of countries that don’t engage in these practices.  But your belief is mistaken.  Governments that restrict imports or subsidize exports not only make their citizens poorer, they often also artificially enrich the citizens of other countries at the expense of their own people.  It therefore makes no sense whatsoever for Uncle Sam to condition his commitment to eliminate the restrictions that he imposes on Americans’ access to resources, goods, and services on other governments doing the same for their citizens.  It is insanity for Uncle Sam to continue to deny to us Americans the greater riches that we’d get from free trade simply because other governments deny to their citizens the greater riches that they, too, would get from free trade.

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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Deleted

by Don Boudreaux on February 19, 2019

in Trade

Once-frequent Cafe Hayek commenter C__ W__ complained several months ago to me about my using his name in Cafe Hayek posts when I responded to him. Note that when C__ W__ commented publicly here at Cafe Hayek, he himself used his full name! He nevertheless threatened to sue me for libel because, in my responses to him, I identified him by his full name. Although he hasn’t a snowball’s chance in hell of winning such a lawsuit – after all, I say again, he himself publicly posted in the comments section here under his own full name! – I wished to be civilized and so, upon hearing his complaint, I removed his name from all posts.

Earlier today C__ W__ e-mailed me accusing me of lying about having removed his name. Turns out, he saw something that I didn’t even think of: Although I removed his name (and kept it removed) from all posts, in one post his name appears in that post’s URL. The post is from February 2018. The text of this post appears below, but I have just now deleted the original of this post from Cafe Hayek – despite the fact that I was under neither legal nor ethical obligation to do so. [UPDATE: Turns out that his name appeared in two urls, not just one url, here at Cafe Hayek. Both posts have now been deleted.]

I leave it to Cafe Hayek patrons to pass their own judgments on this matter.
…………………….

Another Open Letter to C____ W_____
by Don Boudreaux on February 16, 2018
in Crony Capitalism, Myths and Fallacies

Mr. W_____:

I don’t understand why you think my example of an inexpensive cancer-curing pill to be inapposite.  That example, while hypothetical, probes the essence of an argument that American protectionists frequently use in their attempts to explain why foreign-governments’ abuse of their citizens justifies Uncle Sam’s abuse of American citizens.

To coherently make their case, protectionists must clear an ethical hurdle that is too seldom put before them – namely, they must justify their implicit assumption that domestic producers have a right to – a property in – the patronage of domestic consumers.  Yet this assumption is nearly impossible to justify when stated explicitly and squarely.  Does, say, Apple Inc. have a right to my patronage?  Am I morally obliged to buy some minimum number of smartphones from Apple every few years?  Does the lost revenue that my decision to stop using smartphones causes Apple to experience justify action by Uncle Sam to punish me?  Is it ethically appropriate for Uncle Sam to punitively tariff my decision to stop using smartphones?

If you answer ‘no’ to these questions, you thereby admit that Apple has no right to my patronage.  How, then, is it wrong for me to deny my patronage to Apple by purchasing a competing product that happens to be sold by a foreign firm?  Apple has thereby lost nothing to which it had any ethical or economic right or claim.  And this fact remains true even if the production of the imported smartphone that I choose to buy is subsidized by a foreign government.

Again, the foreign-government subsidy might well be said to inflict an injustice, but that injustice cannot possibly be against Apple given that that subsidy denies to Apple nothing to which Apple has any right or claim.  The injustice done by the foreign government is exclusively inflicted on, and exclusively borne by, those people who are forced to pay the price of this subsidy – namely, the taxpayers and consumers of that foreign country.

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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Bonus Quotation of the Day…

by Don Boudreaux on February 19, 2019

in Myths and Fallacies, Seen and Unseen, Trade

… is from page 58 of Frédéric Bastiat’s 1845 essay “Reciprocity” (“Réciprocité”) as it appears in Liberty Fund’s 2017 expanded English-language edition, expertly edited by David Hart, of Bastiat’s great work Economic Sophisms and “What Is Seen and What Is Not Seen” (original emphasis; footnote deleted):

It is therefore true to say that a tariff is a marsh, a rut or gap in the road, or a steep slope; in a word, an obstacle whose effect results in increasing the difference between the prices of consumption and production. Similarly, it is incontrovertible that marshes or bogs are genuine protective tariffs.

There are people (a few, it is true, but there are some) who are beginning to understand that obstacles are no less obstacles because they are artificial and that our well-being has more to gain from freedom than from protection, precisely for the same reason that makes a canal more favorable than a “sandy, steep and difficult track.”

DBx: The true protectionist – the protectionist who knows what he is about and consistently advocates protectionism – doesn’t advocate only tariffs and quantitative restrictions on imports. No. The true and consistent protectionist (admittedly, a creature as rare as fangs on a sparrow) also opposes infrastructure, telecommunications, and any other instruments and institutions that save human labor. Indeed, the true and consistent protectionist opposes even the likes of levers, pulleys, wheels, baskets, and buckets – for such tools, as with all tools, save human labor. And according to the true and consistent protectionist, the saving of human labor leads to impoverishment.

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David Bernstein – a GMU colleague from over in the Scalia law school – writes wisely about presidential assertions of power, such as Trump absurdly declaring a ‘national emergency’ in order to get taxpayer funds to build a border wall.

Also on Trump’s trumped-up emergency declaration is Cato’s Ilya Shapiro.

Matt Welch explores Trump’s trumped-up emergency declaration from an angle too often ignored.

James Pethokoukis injects some reality into the discussion about wealth inequality.

Richard Ebeling accurately describes the fairyland vision of Green New Dealers as a nightmare.

My GMU Econ colleague Bryan Caplan is a renegade.

Gary Galles reminds us of Jean-Baptiste Say’s great defense of private property. A slice:

As Larry Sechrest noted, J.B. Say was “precise and yet as simple as possible, so that any literate, reasonably intelligent person can comprehend his meaning.” However, Americans have been governed by violators of those principles because [as Say said] “agents of public authority…can enforce error and absurdity at the point of the bayonet.”

Jeff Jacoby recalls U.S. President Benjamin Harrison. A slice:

From the perspective of a 21st-century American, the election of 1888 and the Harrison administration that followed are a reminder of an inconvenient truth about political parties: They exist to fight and win elections, not to uphold permanent principles.

Here’s the great University of Virginia philosopher Loren Lomasky on democracy.

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Quotation of the Day…

by Don Boudreaux on February 19, 2019

in Myths and Fallacies, Seen and Unseen, Trade

… is from page 3 of Columbia University economics professor Arvind Panagariya’s forthcoming book from Oxford University Press, Free Trade and Prosperity (footnote deleted; links added):

As the brilliant French economist Frédéric Bastiat reminded us 170 years ago, the expansion of industry that receives import protection is visible to all, but the damage from such protection, which is spread throughout the economy, is not. As a result, import substitution remains a tempting target for politicians keen on demonstrating the successes of their policies to an unsuspecting electorate.

DBx: I’m very glad to see Bastiat here receive the respect that he deserves from a prominent modern mainstream economist who doesn’t have roots in the Austrian school.

Panagariya’s Bastiatian point is the core ingredient in the economic case for a policy of free trade. This case includes many other ingredients and trains of reasoning – much, although not all, in response to the fallacies and half-truths that are incessantly offered by protectionists.

The fact is that it is the rare protectionist whose objections to free trade do not begin with the failure to look beyond the most immediate impact on jobs and wages of imports. Whenever protectionists’ objections to free trade go beyond pointing out the particular jobs that are ‘destroyed’ by imports, these extensions of their argument nearly always are nothing more than motivated reasoning: desperate grasping for any available excuse, no matter how illogical or far-fetched, to allow them to cling to their absurd dogma that domestic abundance increases as a result of domestically contrived artificial scarcities.

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Bonus Quotation of the Day…

by Don Boudreaux on February 18, 2019

in Adam Smith, Philosophy of Freedom

… is from page 229 of Liberty Fund’s 1982 edition of Adam Smith’s 1759 profound classic, The Theory of Moral Sentiments:

France and England may each of them have some reason to dread the increase of the naval and military power of the other; but for either of them to envy the internal happiness and prosperity of the other, the cultivation of its lands, the advancement of its manufactures, the increase of its commerce, the security and number of its ports and harbours, its proficiency in all the liberal arts and sciences, is surely beneath the dignity of two such great nations. These are all real improvements of the world we live in. Mankind are benefited, human nature is ennobled by them. In such improvements each nation ought, not only to endeavour itself to excel, but from the love of mankind, to promote, instead of obstructing the excellence of its neighbours. These are all proper objects of national emulation, not of national prejudice or envy.

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Here’s a letter to National Review:

Editor:

Samuel Hammond’s “Marco Rubio Wants a National Innovation Strategy” (Feb. 15) is flawed in its history and its economics. Here are examples of each error.

As a matter of history, Mr. Hammond is mistaken to declare that “Every successful economic-development story has included national efforts to diversify industries, including our own.” In fact, no such “national effort” was responsible for the impressive U.S. economic growth fueled by such entrepreneurs as Cornelius Vanderbilt with steamships (quite the opposite!), Cyrus McCormick with farm equipment, Gustavus Swift with meatpacking, J.D. Rockefeller with petroleum, Herbert Dow with chemicals, or Henry Ford with automobiles.

As a matter of economics, Mr. Hammond discredits his argument by quoting favorably this line from Sen. Marco Rubio’s attempt to justify U.S. industrial policy: “States place great value on capturing high-productivity, high-labor content industries, or developing new ones.”

States – that is, politicians – might well believe that economic growth springs from “high-productivity, high-labor content industries.” Economists, in contrast, understand that the lovely phrase “high-productivity, high-labor content industries” is an oxymoron. In reality, the higher the productivity of an industry the lower is its labor content.

Economic growth occurs as rising productivity, like increasing trade, releases labor from its current uses so that it becomes available to produce goods and services that would otherwise remain too costly to supply. Yet politicians, however much they might value high productivity, value high labor content far more. Therefore, real-world attempts by governments to pick industrial ‘winners’ will slow economic growth by diverting resources away from industries that use relatively little labor to produce each unit of output and toward industries that use relatively large amounts of labor to produce each unit of output – that is, toward industries that are highly productive only in procuring for politicians the votes of subsidized industrialists and their employees.

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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Bastiat Deserves More Respect

by Don Boudreaux on February 18, 2019

in Economics, Seen and Unseen, Trade

In my latest column for AIER, I argue that Frédéric Bastiat was more than a brilliant polemicist. A slice:

A final example of Bastiat’s brilliance is his illustration, in his 1850 paper “What Is Seen and What Is Not Seen,” of the nature of protectionism — protectionism as personified by a fictional French iron monger, Mr. Prohibant. Mr. Prohibant feels abused by his fellow citizens who purchase iron from his Belgian competitors.

“I will take my rifle,” he [Mr. Prohibant] said to himself, “I will put four pistols in my belt, I will fill my cartridge pouch, I will buckle on my sword and, thus equipped, I will go to the border. There, I will kill the first blacksmith, nail-maker, farrier, mechanic or locksmith who comes to do business with them and not with me. That will teach him how to conduct himself properly.”

When he was about to leave, Mr. Prohibant had second thoughts, which mellowed his bellicose ardor somewhat. He said to himself: “First of all, it is not totally out of the question that my fellow-citizens and enemies, the purchasers of iron, will take this action badly, and instead of letting themselves be killed they will kill me first. Next, even if I marshal all my servants, we cannot guard all the border posts. Finally, this action will cost me a great deal, more than the result is worth.”

Mr. Prohibant was about to resign himself sadly to being merely as free as anyone else when a flash of inspiration shone in his brain.

He remembered that in Paris there was a great law factory. “What is a law?” he asked himself. “It is a measure to which everyone is required to comply once it has been decreed, whether it is good or bad.”

Bastiat explains that Mr. Prohibant then went to Paris to lobby the state to inflict violence upon all French blacksmiths, nail makers, farriers, mechanics, and locksmiths who insist on buying iron from Belgium. In this brilliant example, Bastiat — with his signature sense of humor — revealed the true essence of protectionism.

Some people will object to my calling Bastiat an economic theorist. They’ll point out that he did not devise any theories that are new — that the truths that Bastiat so clearly revealed were already known to professional economists.

Let’s grant here that Bastiat invented no original theories. (This concession is likely contrary to fact. David Hart of Liberty Fund and, separately, GMU econ student Jon Murphy are each working on projects that will show that Bastiat did indeed have original theoretical insights.) Even if Bastiat has to his credit no original theories, we economists have long, and rightly, celebrated the work of those whom we call applied theorists.

Applied theorists apply existing abstract theories to real-world situations. In doing so, these theorists enhance our understanding of reality. The stories they tell cause us to go, “Aha!”

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