Bonus Quotation of the Day…

by Don Boudreaux on July 9, 2020

in Hubris and humility

… is from page 4 of Deirdre McCloskey’s important 1990 volume, If You’re So Smart: The Narrative of Economic Expertise:

And the tale of expert social engineering is unbelievable, really. It cannot answer the simplest folk skepticism: If You’re So Smart, what ain’t you rich?

DBx: Indeed.

The world is overpopulated with people each of whom seems truly to believe that he or she is blessed with special intelligence or insight about reality’s complex details – intelligence or insight that, sadly, is denied to nearly all of his or her fellow human beings. And these geniuses are so confident in their schemes that none hesitates to propose that millions of his or her fellow human beings be coerced in order to conform their actions to the genius’s Vision.

Geniuses on the right – Daniel McCarthy, Oren Cass, Marco Rubio. Geniuses on the left – Elizabeth Warren, Robert Reich, and Bernie Sanders. Geniuses everywhere. But, strangely, none has become even modestly wealthy by serving fellow human beings in the voluntary arena that is the market. What reason, I ask, is there to trust that these individuals – who would use coercion to superintend the spending of hundreds of millions of consumers and the investments of countless entrepreneurs – have even an inkling of understanding about what they talk and write, and sometimes shout, about so glibly?

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The world suffers no shortage of arguments for protectionism. And given protectionism’s long (and sordid) history, no such argument is original. (The last time an original argument in support of protectionism appeared on this earth was likely during the presidency of Millard Fillmore.)

And so it comes to pass that EconLog commenter “James” pushed back against David Henderson’s entirely reasonable and compelling argument that the USMCA (which went into effect on July 1st, 2020 by replacing NAFTA) is a lamentable step back from free(r) trade toward protectionism. One of the USMCA’s features that David rightly complains about is its increase in the amount of North American “content” that must be in automobiles produced in North America if these vehicles are to be sold here duty-free. Another feature is the agreement’s requirement that certain auto workers in Mexico be paid the equivalent of at least $16 per hour.

James thinks these features of the USMCA to be just dandy. Here’s the bulk of the comment that I left at EconLog in response:

James:

You write:

The auto industry changes [with USMCA] on whole seem good for America. Judging from the poor quality products that come out of Mexico and China the US consumer should also benefit from the North American content requirement and the minimum age requirements. Wins all around

You here overlook two critical points. First, because auto sellers in the U.S. have every incentive in the market to supply that level of quality that consumers are willing to pay for, your insinuation that the quality of “products that come out of Mexico and China” is too low is unwarranted. American consumers can on their own determine the level of quality they desire in their automobiles; they do not need the U.S. government to make this determination for them.

Second, the domestic-content and minimum-wage rules in the USMCA have nothing to do with ensuring product quality and everything to do with protecting parts producers, and certain workers, in the U.S. from foreign competition. Therefore, far from ensuring that autos and auto parts will be of the quality that consumers expect, these provisions – by dimming the intensity of competition – will likely cause product quality to fall.

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If 5-2=3, How Can 5+2=3?

by Don Boudreaux on July 9, 2020

in Myths and Fallacies, Trade

Here’s a letter to the Wall Street Journal:

Editor:

With China’s (re)turn to totalitarianism, knotty questions about trade policy are in America’s future. Regrettably, our ability to grapple with these challenges is weakened by economically uninformed analyses of the sort offered by Greg Ip in “As Chinese Trade Surpluses Persist, So Will Risk of Trade Wars” (July 8).

The flaws with this column are inadvertently summarized in its nonsensical sub-heading: “By suppressing consumption, China imposes a production glut on the world, to the detriment of its own workers and trading partners.”

Beijing’s restriction of the Chinese people’s ability to consume does indeed harm the Chinese people: they have less to consume. But any resulting “glut” of output on global markets which increases the amounts of goods available for consumption by us Americans and others outside of China is, to us, not a detriment but an economic benefit. We have more to consume – meaning that Beijing’s policy makes us richer.

It’s impossible not to scratch one’s head at a columnist who, after correctly noting that a people are harmed when their access to goods and services shrinks, insists also that a people are harmed when their access to goods and services expands.

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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My Mercatus Center colleague Dan Griswold pushes back against those who argue that the United States should withdraw from the World Trade Organization (WTO). A slice:

Since the General Agreement on Tariffs and Trade was adopted by the United States and other major trading nations in 1947, the average level of global tariffs levied against U.S. exports has dropped sharply from 22 percent to under 5 percent. That trend has continued under the 1994 Uruguay Round Agreement, which established the WTO while beefing up the dispute settlement mechanism to keep barriers down.

The result has been a healthy increase in U.S. trade, including exports. Since the creation of the WTO, U.S. exports of goods and services have jumped from $700 billion in 1994 to $2.5 trillion in 2019. As a share of the domestic economy, exports have climbed from under 10 percent to 12 percent. The WTO has also encouraged lower U.S. barriers to trade, to the benefit of tens of millions of consumers here at home, as well as import-consuming U.S. producers.

Pierre Lemieux reviews Arvind Panagariya’s important 2019 book, Free Trade & Prosperity.

My intrepid Mercatus Center colleague Veronique de Rugy is surprised that people are surprised.

GMU Econ alum Shruti Rajagopalan talks with Mario Rizzo and Glen Whitman about so-called “libertarian paternalism” and “nudging.

Eric Boehm isn’t buying the Trump administration’s claim that coronavirus “stimulus” spending saved 51 million jobs.

The great Jim Gwartney offers some predictions about the U.S. economy post-covid.

Jesse Singal eloquently responds to the unhinged reaction to the recent letter in Harper’s calling for a return to liberal values (although I don’t quite follow the “hit dog will holler” analogy).

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Quotation of the Day…

by Don Boudreaux on July 9, 2020

in Crony Capitalism, Politics

… is from pages 8-9 of Peter Schweizer’s 2013 book, Extortion: How Politicians Extract Your Money, Buy Votes, and Line Their Own Pockets:

Politics in Washington is a lot like professional wrestling. What seems like vicious combat to the uninitiated is actually choreographed acting. Professional wrestlers face off in the ring, shouting and pointing fingers and appearing to hate each other. But in fact, they are partners in a commercial enterprise to entertain and extract money from the audience.

DBx: Yep.

Near the end of his excellent – and favorable – review, in Regulation, of my GMU Econ colleague Garett Jones’s new book, 10% Less Democracy, David Henderson expresses understandable displeasure when he learned from Garett that Senator Orrin Hatch (R-UT) and the late Sen. Ted Kennedy (D-MA) would often affectionately bear-hug each other in the corridors of the Capitol. (Garett once served as an aide to Hatch, and David remembers Kennedy’s abominable behavior after the tragic incident at Chappaquiddick.) While Peter Schweizer’s point does nothing to diminish David’s (or anyone else’s) distaste for Kennedy, it does help us to better understand the character of the great majority of people who successfully seek and retain power.

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Mr. Jones (and the Execrable Walter Duranty)

by Don Boudreaux on July 8, 2020

in History, Media, Movies

How can I have spent 43 years immersed in the literature of liberalism and have never heard, until just a few days ago, of the heroic Gareth Jones? Jones (1905-1935) is the man who exposed the lies that New York Times reporter – and Pulitzer Prize-winner – Walter Duranty spewed to cover-up the Ukrainian mass murder carried out in the 1930s by Stalin.

A few days ago I watched the 2019 movie Mr. Jones. It is spectacular, if deeply grim – grim as it must be to tell the terrible truth that it tells.

Here’s the final paragraph of Kyle Smith’s review of this remarkable film:

Back in Moscow, Duranty shrugs at all this: “You can’t make an omelet without breaking a few eggs,” he says, speaking for all of the genocidal murderers who viewed people as brunch. Duranty really did publish this grotesque cliche (already in common use at the time) in the March 31, 1933, edition of the Times. He and Mr. Jones faced two very different fates after the events depicted in this film; one of them was murdered in 1935 and the other died in Orlando, Fla., at a ripe old age. You can probably guess which is which. To this day, Mr. Jones is all but unknown and his courage is unsung by his inky heirs, whereas Duranty’s Pulitzer Prize remains on the books even after a thousand other things have been canceled. Meanwhile, Mr. Jones joins the unconscionably brief list of brutally honest films about Communism.

And here’s David Boaz.

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… is from pages 74-75 of the May 9th, 2020, draft of the important forthcoming monograph from Deirdre McCloskey and Alberto Mingardi, The Illiberal and Anti-Entrepreneurial State of Mariana Mazzucato:

Politicians and policy makers insistently raise the alarm. They say that they are fixing those grievous imperfections caused by natural liberty, fixing the “problems” that every generation of politicians discerns anew. (The vocabulary of social “problems,” and their solution with “policies,” by the way, grew up in the 19th century along with New Liberalism and socialism.) Yet we wonder how the politicians and policy makers discern the problems, and opportunities, and how they know in the longer view better than stock markets specialized in making such judgments, and risking personal wealth in making them? Why would someone with no skin the game do better than people who have plenty of such skin, being holders of stock in a market in which hour by hour the future is forecasted? We wonder.

DBx: I, too, wonder. Protectionists and industrial-policy advocates talk blithely and incessantly about using government coercion to arrange for this happier outcome and to prevent that deviation from an imagined ideal. But never, ever do they reveal just how government officials will acquire the information necessary to outperform competitive market processes.

…..

Of course, protectionists and industrial-policy advocates are careful never to use the word “coercion.” Doing so would raise alarms about the true nature of their project. They wish to pass off their schemes as gentle assistance offered by the intelligent, noble, and wise few to the stupid, grasping, and imprudent many. In fact, protectionists and industrial-policy advocates get defensive when someone, such as Mike Munger, pulls back the curtain to expose the reality of their schemes. But this reality – the reality that behind every tariff and every subsidy are loaded, pointed guns operated at the command of flesh-and-blood human beings – cannot, in the end, be plausibly denied.

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In my column for the January 27th, 2010, edition of the Pittsburgh Tribune-Review I wrote about wrecking balls and what I call “the Prosperity Tower.” You can read my column beneath the fold.

Read the full post →

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My intrepid Mercatus Center colleague Veronique de Rugy and Mercatus’s Executive Director, Dan Rothschild, explain why they are rightly unimpressed with the “Moving Forward” Act. A slice:

The jobs argument is the last refuge of a desperate appropriator. Our last national experiment with creating jobs through massive infrastructure spending—the American Recovery and Reinvestment Act—was a flop when it came to mitigating unemployment. The academic literature on this statute and its effects shows that claims about massive job creation from infrastructure spending should be taken with a healthy serving of salt.

Infrastructure spending should be evaluated on the merits of the infrastructure being built or maintained—not on the jobs created. After all, as Milton Friedman pointed out, digging a canal with spoons instead of shovels creates lots of jobs—but not much infrastructure. Moreover, the Moving Forward Act strengthens “Buy American” provisions: good for populist politics, bad for creating value for taxpayers.

Also from Dan Rothschild is this criticism of the threat by the New York Times to reveal the identity of the heterodox blogger Scott Alexander.

Jeffrey Tucker recommends Albert Camus’s 1947 book, The Plague.

Sarah Skwire finds economic insight in places where many people wrongly suppose it doesn’t exist.

The moral high ground cannot be retained by those who abandon it: Holman Jenkins rightly calls out the Washington Post for outright lying about the contents of a recent Trump speech. Here are Jenkins’s opening few paragraphs:

Every American, regardless of how he or she feels about Donald Trump, should read his July 3 speech at Mount Rushmore and then the Washington Post account of the speech by Robert Costa and Philip Rucker. The Post account begins: “President Trump’s unyielding push to preserve Confederate symbols and the legacy of white domination, crystallized by his harsh denunciation of the racial justice movement Friday night at Mount Rushmore . . .”

Except that Mr. Trump made no reference to the Confederacy or any of its symbols. His only reference to the Civil War was to Abraham Lincoln and the abolition of slavery as a fulfillment of the American Revolution.

Sen. Tammy Duckworth, as many commentators on the right noted, also lied when she said Mr. Trump “spent all his time talking about dead traitors.” He mentioned not a single leader or champion of the Confederacy.

In its own account, though hardly friendly to Mr. Trump, the New York Times went out of its way to counter these rampant distortions, reporting that Mr. Trump “avoided references . . . to the symbols of the Confederacy that have been a target of many protests.”

George Will is rightly unsparing in his condemnation of Beijing’s appalling suppression of freedom in Hong Kong. A slice:

Acting as communists do, the leaders of China’s Communist Party, which is the bone and sinew of that nation’s Leninist party-state, have, less than halfway through their commitment, shredded the agreement to respect Hong Kong’s autonomy until 2047. The new law mocks the rule of law, which requires sufficient specificity to give those subject to the law due notice of what is proscribed or prohibited. The new law stipulates four major offenses: separatism, subversion, terrorism and collusion with foreign governments. These will be defined post facto, in capricious enforcements against those whose speech is not chilled by the law’s menacing vagueness. The “law” authorizing the committee to operate secretly was released at 11 p.m. Tuesday, probably to deter demonstrations on Wednesday, which was the anniversary of the 1997 handover.

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Quotation of the Day…

by Don Boudreaux on July 8, 2020

in Philosophy of Freedom

… is from pages 11-12 of the 1969 Arlington House edition of Ludwig von Mises’s 1944 Yale University Press book, Omnipotent Government: The Rise of the Total State and Total War (available free-of-charge on-line here):

Every doctrine that has recourse to the police power or to other methods of violence or threat for its protection reveals its inner weakness.

DBx: Who can doubt the truth of this observation? Any person or group who threatens with physical violence those who offer challenging words is a person or group whose ideas and ideals are not worth defending. This fact is so regardless of the brilliance of the superficial gleam emitted by those ideas and ideals.

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