Some Non-Covid Links

by Don Boudreaux on June 2, 2022

in Budget Issues, Environment, Inflation, Myths and Fallacies, Seen and Unseen, Trade

Wall Street Journal columnist Daniel Henninger wisely warns of the dangers of ‘doing something’ in response to every well-publicized tragedy or unfortunate event. A slice:

A related phenomenon is the belief that “do something” will produce the desired result. But what if we have arrived at the point where something close to the opposite is true? Step back and it’s hard not to notice: The American political system has accreted so many solutions and sub-solutions to so many problems that what we have created is a system mired in sludge.

The political left is forever in the streets screaming the system “doesn’t work” for many people. Who could disagree? But they should take a closer look at what the “system” actually has become—whether the public schools, health care, criminal justice, mental health, climate or for that matter, the Pentagon.

It’s a morass of laws, follow-on laws, rules, administrative procedures, court decisions and revisions of revisions that have produced both unresponsive sludge and, increasingly, disasters. A sad political truth is that over time, do something often produces less of its intended good.

David Simon rightly criticizes some economists’ dire predictions about global warming. A slice:

The data show that as the earth has warmed, deaths caused by natural disasters have sharply declined. Since 1920, the earth’s average temperature has risen by 1.11 degrees Celsius. Yet since 1920, even as world population has quadrupled from less than two billion to almost eight billion, data from EM-DAT – The International Disaster Database (presented by University of Oxford economist Max Roser and researcher Hannah Ritchie) show that the number of people killed each year by natural disasters since 1920 has declined by over 90%.

The data show that global warming has not resulted in more hurricanes. In a 2021 report, the U.S. EPA admitted the following: “The total number of hurricanes (particularly after being adjusted for improvements in observation methods) and the number reaching the United States do not indicate a clear overall trend since 1878.”

The data show that global warming has not resulted in more land burned by fires. Data from the Journal of Geophysical Research: Biogeosciences, Remote Sensing of Environment, and Earth’s Future (presented by environmental statistician Bjorn Lomborg) show that the percentage of global land burned per year in 1905 through 2020 and most of 2021 has been declining.

The Editorial Board of the Wall Street Journal justly criticizes the Biden administration and other Progressives for their recklessness with the forces that cause inflation. A slice:

The truth is they were anticipated, and many people did warn about inflation. Some of those warnings appeared in these pages from conservative economists. Prominent Democratic economist Larry Summers also warned in March 2021 that too much spending and easy monetary policy could spur an excess of economic demand over supply.

Why were those warnings ignored? The answer is a combination of politics and mistaken economic models. Democrats ran all of Washington and wanted to justify a huge expansion of the welfare state. Their economic household remedy is always more government spending and easy monetary policy. Most of the press endorsed the Democrats’ $1.9 trillion spending blowout in March 2021 as necessary, though the economy was growing rapidly at the time.

While the Federal Reserve was making its monetary mistakes, progressives didn’t object. They embraced the fad of Modern Monetary Theory that low interest rates could finance any amount of government spending more or less forever.

All of this has been another failure of progressive economics. By focusing solely on macroeconomic demand, while ignoring supply-side and regulatory bottlenecks, their policies fueled the inflation we have today. They also ignored the role of excess money, forgetting economist Milton Friedman’s famous lesson. As President Biden declared in an April 2020 interview, “Milton Friedman isn’t running the show anymore.” That is one campaign promise he has kept.

Thoroughly – and understandably – unimpressed with Biden’s recent op-ed in the Wall Street Journal, my intrepid Mercatus Center colleague Veronique de Rugy wonders when the Biden administration’s magical thinking will end. A slice:

Yet the most striking part of Biden’s op-ed comes at the end. He notes correctly that “we need to keep reducing the federal deficit, which will help ease price pressures.” That’s true. But it is also obvious that he has no intention of cutting spending — the most effective way to achieve his goal. After all, he proudly lists additional spending programs he’d like to implement while calling for more handouts for crony industries.

The president goes on to brag about the deficit reduction that took place since he took office — a reduction, he asserts, that happened because he succeeded in “winding down emergency programs responsibly.” That’s fascinating, since the only reason there was any such winding down is that BBB — which would have made permanent many of these emergency programs — was killed when Democratic Sens. Kyrsten Sinema and Joe Manchin joined Republicans in opposition.

“On Student Loans, Joe Biden Is in Thrall to the Most Radical, Most Selfish Voices in America” – so reads the headline of this NRO Corner post by Charles Cooke.

Using India as an example, GMU Econ alum Dominic Pino, writing for National Review, busts the myth that ‘economic independence’ is beneficial. A slice:

The example of India should serve as a reminder to America’s own trade restrictionists that self-sufficiency is not a smart economic goal. Of course, India’s case as a developing economy is different from America’s as a developed one. The U.S. domestic market is much larger than India’s on a per capita basis, but our economic output is much larger as well, and the same basic logic of Ahluwalia’s case holds for any country. We’d be foolish to limit our massive economic output to domestic customers only.

Our all-domestic baby-formula market is a clear example of the weakness of self-sufficiency. Sole-source government contracts through WIC eliminate competition. Secular price increases result. Calls for government assistance to consumers follow. It’s the same pattern as in India: One government “fix” leads to a pile-on of government intervention that ends up making everyone worse off. Now we’re in a situation where one factory closes down and there are widespread shortages.

The allure of focusing on the domestic market trapped India in decades of economic stagnation. The U.S. is far wealthier than India, but we shouldn’t be buying into the same logic behind the domestic-market myth in pursuit of the same wrongheaded economic goal.

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