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Quotation of the Day…

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… is from pages 724-725 of Jim Dorn’s excellent tribute to our late professor Leland Yeager; Jim’s tribute is titled “Leland B. Yeager: Market Grandmaster [2]” and appears in the Fall 2018 issue of the Cato Journal [3] (citation and footnote deleted):

Throughout his career as a teacher and scholar, Leland always returned to fundamentals. In his keynote address at a meeting of the Chesapeake Association of Economic Educators, which I helped organize in 1979, he began by saying, “The economic ignorance that is so painfully evident in public-policy discussions is ignorance not of the subtleties of technicalities but of the basic truths. Economists should make an effort to communicate these basics, and not only to their students but also to a wider audience.” Moreover, “in our teaching we ought to point out not only truths but also ancient fallacies that keep being rediscovered in new guises with an air of triumphant novelty….”

DBx: A recent fad among some people has been to decry what they allege to be an excessive focus among policymakers and pundits on Econ 101.

If only.

From Trump’s tariffs, through minimum-wages and mandated paid leave, to the likes of Elizabeth Warren’s proposal to quasi-socialize corporations and Bernie Sanders’s and Tucker Carlson’s assertions that welfare payments to poor people generally subsidize employers of poor people, what is on display in each case is utter ignorance of Econ 101. It’s true that in many of these and other cases whiteboard theories have been concocted to show that under just the right set of circumstances interventions designed and operated by saintly, godlike, and apolitical social engineers might, just might, improve upon the outcomes of real-world markets. And because these esoteric whiteboard theories are typically the stuff of Econ 999 rather than of Econ 101, anyone who makes a case for free markets and who opposes intervention is accused of ignoring Econ 999 and being excessively focused on Econ 101.

But this accusation is unfounded. In the great majority of discussions that occur in the media and in the halls of power about markets and about government intervention, what is on display is complete unfamiliarity with economic principles. To insist that we should entrust those in power to engineer society as is suggested by much of Econ 999 would, to me, make no sense in any case, but this suggestion is especially ludicrous given that those in power are generally ignorant of Econ 101. Econ 999, whatever its merits or demerits as theory and as a guide for public policy, cannot be grasped without an understanding of Econ 101. And, again, far too many interventions into markets are proposed and implemented by people who are totally innocent of Econ 101.

Put differently, to assert that people such as E.J. Dionne, Donald Trump, and Bernie Sanders should be trusted to use their alleged solid grasp of Econ 999 to engineer society is akin to asserting that someone who hasn’t yet learned to do basic arithmetic should be entrusted to engineer a bridge that spans the Mississippi.

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