The Most Dangerous Virus

by Don Boudreaux on February 28, 2020

in Current Affairs, Economics

Here’s a letter to a frequent reader of my blog:

Ms. Robertson:

Thanks for your e-mail.

You ask why I write so little about the coronavirus. My answer is simple: I have nothing to add to the already huge discussion of this matter. I’m completely ignorant of medicine and public health, and I know next to nothing about the history and the economics of pandemics. As I recall my great colleague Walter Williams long-ago telling a tv-show host who questioned him on some topic about which Walter had no expertise, “Unlike you, Mr. ___, I don’t pretend to know everything about everything.”

So I spend my time combatting a virus about which I do have some expertise, however modest. And as it happens this virus is far more lethal, widespread, and frightening than is the coronavirus. The virus of which I speak is the economic-superstition virus.

In the past 100 years alone, one especially deadly strain of this virus (namely, communism) killed 100 million people. And those whom this virus doesn’t kill it impoverishes –  witness the deprivation suffered still today by the people of Cuba and North Korea.

Fortunately, we Americans aren’t yet as widely infected as are the populations of some other countries with the most lethal strains of the economic-superstition virus. But traces of some of these strong strains of the virus are amongst us, and less-lethal but nevertheless debilitating strains are widespread now in the U.S. – and seemingly infecting more and more Americans daily. On the left rampages the democraticsocialismvirus. On the right looms the threat of a pandemic of the economicnationalismvirus. Untreated and uncontained, these strains of the economic-superstition virus will become increasingly lethal as they spread.

My effort, if it is of any value at all to others, is best devoted to inoculating whoever I can against any and all strains of the virus of economic-superstition.

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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Some Links

by Don Boudreaux on February 28, 2020

in Current Affairs, Data, Hubris and humility, Myths and Fallacies, Politics, Regulation, Standard of Living, Work

Here’s the third thread in Scott Winship’s demolition of Oren Cass’s Cost-of-Thriving Index.

And here’s Michael Strain on some of the several flaws that run throughout Cass’s Index. A slice:

An unfortunate undercurrent in this discussion is the implication that women’s participation in the labor force has been a disappointing social development, hurting families and reducing marriage rates. And there is also the claim that many women are working because it takes two incomes to finance a middle-class life. This is Cass’s conclusion.

But this likely gets the causation backward. Take education as an example. Lots of factors affect its price. One is higher incomes. As a society gets richer, its willingness to spend on these services increases. And as the demand for education services goes up, driven by higher incomes, so does its price. (Indeed, Cass’s chart shows what single- and dual-earner households choose to buy, and compares it with what one male earner makes.) And we have already seen that male workers have experienced significant wage gains.

Also taking issue, but from a unique angle, with Oren Cass’s analysis is Dan Mitchell.

David Harsanyi writes realistically about comparisons of the United States to Denmark.

Jeffrey Tucker reflects on the most-recent Democratic “debate.”

Alberto Mingardi doesn’t share Pierre Lemieux’s optimism.

My intrepid Mercatus Center colleague Veronique de Rugy celebrates jurisdictional competition and the liberating effects that it has for workers and consumers.

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Pittsburgh Tribune-Review: “Don’t punish speculators”

by Don Boudreaux on February 28, 2020

in Archived writings, Complexity & Emergence, Financial Markets, Myths and Fallacies, Prices, Reality Is Not Optional, Seen and Unseen

In my July 24th, 2008, column for the Pittsburgh Tribune-Review, I defended speculators by doing my best to reveal the economic benefits they bestow on humanity. You can read my column beneath the fold.

Read the full post →

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Quotation of the Day…

by Don Boudreaux on February 28, 2020

in Books, Economics, Hubris and humility, Myths and Fallacies, Prices, Seen and Unseen, Subsidies, Trade

… is from page 288 of Deirdre McCloskey’s powerful 2019 book, Why Liberalism Works: How True Liberal Values Produce a Freer, More Equal, Prosperous World for All:

When you get worried by some business-school type wailing about how we need to arm ourselves to compete in the deadly war for exports, take down your battered old Econ 101 text and slowly re-read the chapter on foreign trade. You’ll never again believe the business-school types, or their siblings among historians and journalists and Trump advisors who didn’t trouble to read the chapter in the first place.

DBx: Yes. And read also the chapter on price formation. This material will help you to understand that prices set in markets not only communicate far and wide information about market conditions, but simultaneously also give to producers and consumers incentives to act on that information in ways that reduce as much as possible the constraints of scarcity.

Once you understand even the elementary economics of price formation and function, you’ll be forever skeptical of – and perhaps even completely immune to – assertions that politicians and their hirelings are capable of knowing enough to improve upon market processes by overriding these processes with their commands and controls and subsidies and punitive taxes. The promises of politicians and pundits to improve upon the operation of markets with tariffs set here, subsidies doled out there, and industrial policy implemented ‘strategically’ throughout will ring hollow. You will understand these promises to be even worse than would be the promise of someone to bring rain or to end a blizzard by doing a special dance – worse because, while like the government interventions the shaman’s dance has no hope of achieving the promised outcome, the dance will not, unlike the government interventions, make matters worse.

…..

Be sure, by the way, to use a good Econ 101 text – such as this one or this one or this one or this one.

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Bonus Quotation of the Day…

by Don Boudreaux on February 27, 2020

in History, Hubris and humility, Myths and Fallacies, Philosophy of Freedom

… is from page 27 of Stephanie Slade’s excellent cover essay – titled “Against the New Nationalism” – for the April 2020 issue of Reason:

Yet what makes the United States distinctive is the extent to which its history and culture are animated by liberal values such as pluralism, entrepreneurialism, and personal responsibility. In Give Me Liberty: A History of America’s Exceptional Idea (Basic Books), [Rich] Lowry’s National Review colleague Richard Brookhiser canvasses the last 400 years to show that, at virtually every turn, U.S. history has been shaped by Americans’ deep commitment to individual liberty, from democracy and markets to freedom of the press and the free exercise of religion. As F.A. Hayek put it, “What in Europe was called ‘liberalism’ was here the common tradition on which the American polity had been built.” As H.G. Wells once observed, “All Americans are, from the English point of view, Liberals of one sort or another.”

DBx: Indeed. And as Ms. Slade explains well, today’s conservative proponents of economic nationalism – pundits such as Oren Cass, Julius Krein, and Daniel McCarthy, and politicians such as Josh Hawley and Marco Rubio – are either oblivious to, or indifferent to, this American tradition. They would cast it off and replace it with the impoverishing and dignity-destroying feudal-like relations that would be the inevitable result of industrial policy.

Of course, Messrs. Cass, et al., do not intend any such outcome. On the contrary; they mean well. They imagine their schemes bringing about for ordinary Americans more economic and personal security, more meaning in their lives, more genuine prosperity, more fulfillment, more contentment, more of all manner of good things – spiritual, familial, communal, and material.

But each of these conservative nationalists lacks not only an understanding of American history, but also an understanding of economics. They blithely declare that their schemes will achieve the happy outcomes that float freely and beautifully in their imaginations. None, however, gives any genuinely serious thought to how their schemes will play out in reality compared to the results of the competitive market processes that each of them, in his economic ignorance, holds in contempt.

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Good for Harvard

by Don Boudreaux on February 27, 2020

in Data, Economics, Education, Truth-seeking & ideology

Phil Magness explains clearly why Harvard University’s upper administration was very well justified in denying an appointment to Gabriel Zucman, whose data-manipulation antics can be explained as nothing other than being ideologically driven.

Read Phil’s piece in its entirety.

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Some Links

by Don Boudreaux on February 27, 2020

in Current Affairs, Data, Health, Legal Issues, Reality Is Not Optional, Seen and Unseen, Standard of Living, The Economy, Trade, Work

My intrepid Mercatus Center colleague Veronique de Rugy busts more myths about government-orchestrated paid leave. A slice:

Among the most common claims used to make the case for government provision of paid leave is that not every working woman gets paid leave, which supposedly demonstrates a market failure. Still, data show that 63% of women today have access to such leave, a 280% increase since the 1960s. The women who don’t receive this benefit are mostly lower-skilled workers with part-time and hourly jobs employed at small businesses.

Undoubtedly, these women would like to get paid to stay home after the birth of their children, yet that’s no more evidence of a market failure than is my not driving a Tesla, even though I’d like to drive one if it were free. This isn’t a reason for government to mandate paid leave (or Teslas) for all workers.

Here’s the second of Scott Winship’s brilliant Twitter threads patiently and methodically pulling the stitching out of Oren Cass’s deeply flawed Cost-of-Thriving Index.

“Capitalism isn’t broken, but populism may be on the verge of breaking it.” – This sentence opens Michael Strain’s latest essay in the Washington Post.

James Capretta argues that market-driven health care is worth the effort.

Pierre Lemieux draws three lessons from the outbreak of the Coronavirus.

We should all thank the U.S. Ninth Circuit Court of Appeals for rejecting PragerU’s request for government to violate YouTube’s First Amendment rights.

George Will wisely calls on the United States Supreme Court to do a Janus-decision encore.

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Pittsburgh Tribune-Review: “Read these books!”

by Don Boudreaux on February 27, 2020

in Archived writings, Books, Economics, Philosophy of Freedom

In my column for the July 9th, 2008, edition of the Pittsburgh Tribune-Review, I recommended some good books. You can read my recommendations, with a link added and typos corrected, beneath the fold.

Read the full post →

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Quotation of the Day…

by Don Boudreaux on February 27, 2020

in History, Myths and Fallacies, Standard of Living, The Future

… is from page 287 of Matt Ridley’s indispensable 2010 book, The Rational Optimist (link added):

‘We cannot absolutely prove,’ said Macaulay in 1830, ‘that those are in error who tell us that society has reached a turning point, that we have seen our best days. But so said all who came before us, and with just as much apparent reason.’ So, too, would say all that came after him. Defining moments, tipping points, thresholds and points of no return have been encountered, it seems, by pessimists in every generation since. A fresh crop of pessimists springs up each decade, unabashed in its certainty that it stands balanced upon the fulcrum of history. Throughout the half-century between 1875 and 1925, while European living standards shot up to unimaginable levels, while electricity and cars, typewriters and movies, friendly societies and universities, indoor toilets and vaccines pressed their ameliorating influence out into the lives of so many, intellectuals were obsessed with imminent decline, degeneration and disaster. Again and again, just as Macaulay had said, they wailed that society had reached a turning point; we had see our best days.

DBx: I’m very pleased that Karol and I named our only child Thomas Macaulay Boudreaux – in honor of the late, great Hugh and Pinky Macaulay and of the incomparable classical liberal Thomas Babington Macaulay (pictured above).

(Please do read the essay at the link added in the quotation. It might well be a candidate for the single greatest essay ever written in the English language.)

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At Least Listen to Adam Smith

by Don Boudreaux on February 26, 2020

in Adam Smith, Hayek, Hubris and humility, Reality Is Not Optional, Seen and Unseen

Here’s a letter to American Affairs:

Editor:

Put aside the questionable accuracy of Michael Lind’s suggestion that a significant fraction of Democrats are embracing “economic neoliberalism” while Republicans are having a “fling with radical free market libertarianism” (“Tripartism, American Style: The Past and Future of Sectoral Policy,” Spring 2020). Instead, focus on the utter vacuity of his case for adoption in the U.S. of industrial policy.

Mr. Lind, of course, is at no loss for words in describing all the good that he imagines will be the fruit of such a policy. Yet none of his 8,300 words – some of which, it’s true, he wastes in the disgraceful task of caricaturing Milton Friedman and F.A. Hayek – give any hint about just how the politicians and bureaucrats invested with power to superintended and override market processes will acquire the knowledge necessary to perform the splendors that Mr. Lind imagines they will perform.

This silence is no minor matter. Nothing is easier than asserting that a government charged with achieving Splendid Outcomes by overriding market processes will, by being so charged, thereby achieve said Splendid Outcomes. The difficulty – and it is monumental – lies in arranging for government officials actually to gather, process, and apply productively the unfathomable amounts of detailed and ever-changing local knowledge that must be gathered, processed, and applied productively for schemes such as those imagined by Mr. Lind to succeed. (Never mind here the additional problem – also monumental – of ensuring that these government officials, armed with massive amounts of discretionary power, will use their power only ‘scientifically’ and apolitically.)

Yes, yes – the point I make here is associated today with the likes of Hayek and Friedman. Your readers might therefore dismiss it as the ranting of an equally benighted ideologue. So let me end instead with insights from Adam Smith – who, I feel it necessary to point out, never advised the Pinochet regime:

What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.*

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

* Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (Indianapolis: Liberty Fund, 1981 [1776]), Book IV, Ch. ii, page 456.

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