Some Links

by Don Boudreaux on February 23, 2023

in Antitrust, Financial Markets, History, Seen and Unseen, Social Security, Trade

Phil Magness explains that, contrary to claims peddled by today’s “national conservatives,” neither Thomas Jefferson nor James Madison would be on board with the NatCons’ proposed government interventions. Two slices:

James Madison reviewed a transcript of Clay’s speech a few weeks after its delivery in the Senate chamber. On April 24, 1824 the primary architect of the Constitution wrote the Kentucky Senator a lengthy letter. After crediting Clay for his eloquence, the former president proceeded to lodge his concerns: “candor obliges me to add that I can not concur in the extent to which the pending Bill carries the tariff, nor in some of the reasoning by which it is advocated.” Madison then presented Clay with a lesson in basic free-market economics:

The Bill, I think, loses sight too much of the general principle which leaves to the judgment of individuals the choice of profitable employments for their labor and capital: And the arguments in favor of it drawn from the aptitudes of our situation for manufacturing Establishments, tend to show that these would take place without a Legislative interference. The law would not say to the Cotton planter, you overstock the market, and ought to plant Tobacco: nor to the planter of Tobo, you would do better by substituting Wheat. It presumes that profit, being the object of each, as the profit of each is the wealth of the whole, each will make whatever change the state of markets and prices may require. We see, in fact, changes of this sort frequently produced in agricultural pursuits by individual sagacity watching over individual interest. And why not trust to the same guidance in favor of manufacturing industry, whenever it promises more profit than any of the Agricultural Branches; or more than mercantile pursuits from which we see capital readily transferred to manufacturing Establishments likely to yield a greater income.

Madison did hedge his commitment to a modest degree, deviating from a pure laissez-faire stance on economic matters. He declared himself “a friend to the general principle of ‘free industry’ as the basis of a sound System of political Economy,” but recognized certain “particular reasons for exceptions to the General Rule, not derogating from its generality.” He was therefore willing to entertain a “a moderate tariff that would at once answer the purpose of revenue, and foster domestic manufactures,” perhaps not unlike the bill he approved during his own presidency.

Historical context is important in interpreting this passage though, as it is not an endorsement of the full-fledged protectionist program sought by Clay. In the early 19thcentury, tariffs provided the single largest source of revenue for the federal government. This circumstance gave rise to the doctrine of the Revenue Tariff with “incidental protection” insofar as the tax measure could be designed to offer moderate encouragement to domestic industries as a secondary effect of filling the treasury. This was not Clay’s objective though; the Kentuckian sought significantly higher tariff rates to provide explicit protection to industry, even at the price of losing tax revenue.


Whereas Madison framed his opposition to the American System as constructive criticism to Clay, Thomas Jefferson responded by directly mobilizing his political contacts to defeat the tariff and subsidies program. Clay’s package contained a large “internal improvements” scheme, designed to assist politically connected industries with infrastructure spending and similar federal handouts. These measures illustrated the worst aspects of pork-barrel politicking, which is precisely why they were able to attract special interest support in Congress.

By late 1825, Jefferson considered the situation desperate. In a letter to Madison, he denounced Clay’s American system in no uncertain terms. Not only did the “internal improvements” scheme reach beyond the enumerated powers of the federal government, it imperiled the entire constitutional order of the United States.

Also critical of “national conservatives” is Jack Butler. A slice:

It is true, though not very controversial, to assert that “the free market cannot be absolute.” But while globalization has presented many challenges to America, the picture the statement paints of America’s economic situation is both hyperbolic and selective. Both trade and automation have played a role in reducing manufacturing employment, yet manufacturing remains a significant driver of our economy. And while both Adam Smith and Milton Friedman would agree that national security is an acceptable free-market exception, we already have many policies in place to that end. Moreover, many people work hard to take advantage of that exception. If you want to know why sugar is so much more expensive in the United States than elsewhere, thank the Florida sugar lobby’s success in making its product a national-security priority.

Scott Lincicome criticizes the criticisms of stock buybacks. A slice:

At the risk of sounding like a broken record, I regret to inform you that the populists are mostly mistaken—often wildly—when it comes to the evils of stock buybacks. Yes, of course, some buybacks can prioritize short-term profits and corporate insiders over sound financial moves, but the idea that they are systemically corrupt or economically harmful (and thus deserve to be banned) suffers from major flaws.

First, there is no reason—either theoretically or empirically—to believe that buybacks prevent corporations from financing major capital investments, increasing worker pay, or otherwise thriving in the future. As already noted, corporations have multiple ways to finance their business operations, including via cash, equity, or debt—the last of which has been very attractive in recent years, thanks to extremely low interest rates. Indeed, Harvard’s Mark Roe found that the post-Great Recession increase in buybacks was essentially offset by new, ultra-low-rate debt (borrowed “nearly for free”) that also carried certain tax benefits. He thus concludes that “corporate America recapitalized its balance sheet with cheap debt” instead of equity, while its net cash position (i.e., money that could be spent on equipment, workers, etc.) remained basically the same. Money, it turns out, remains fungible. (BREAKING, I know.)

If the United States must have a Social Security program, then let’s have one more like Sweden’s, whose program is described, in the Wall Street Journal, by Johan Norberg. A slice:

In 1994 the Social Democrats agreed with the four center-right parties to create an entirely new system based on the principle that pensions should correspond to what the beneficiary pays into the system—a system in which the contribution, not the benefits, is defined.

The reforms were designed to make it impossible to run a deficit and pass the costs to future generations. Crucially, the agreement introduced a balancing mechanism nicknamed “the brake.” When the economy is doing worse than expected, pension benefits are automatically reduced, and when the economy picks up again, the brake is released.

Sweden introduced partial privatization of the kind the American left derides as a Republican plot to gamble our money away on the stock market. The Swedish government withholds roughly 2.3% of wages and puts it into individual pension accounts. Workers are allowed to choose up to five different funds in which to invest this money, according to their own risk preference, and can change them at any time free.

Commentators claim partial privatization would mean that pensions could be lost in a financial crash. That ignores that the money isn’t all invested or withdrawn at the same time, meaning that the performance in a single year isn’t crucial. The returns from the normal income pension is around 2% per year, but from the private accounts the average Swede has made an impressive average return of roughly 10% a year since its inception in 1995, despite the dot-com crash, the financial crisis and the pandemic.

What’s the real DEI agenda?

Anesthesiologist Marilyn Singleton writes eloquently, in the Washington Post, against the woke indoctrination sessions now required for physicians in California. Three slices:

When I graduated with a medical degree in 1973, a Black woman in a class of mostly White men, there was a real sense that the days of obsessing over skin color and making race-based assumptions about our fellow human beings was finally fading — and, hopefully, soon gone for good.

Apparently not. That racial obsession has come rushing back — in academia, politics, business and even in my beloved medical profession. But now it’s coming from the opposite direction. The malignant false assumption that Black people are inherently inferior intellectually has been traded in for the malignant false assumption that White people are inherently racist.


Many of my friends and colleagues ask why I’m so upset by the law. Clearly, implicit bias training isn’t meant for me. It’s aimed at White people, who are far and away the biggest share of the medical profession. My answer is simple. I reject the unscientific accusation that people are defined by their race, not by their individual beliefs and choices. It is little consolation that studies are finding implicit bias training has no effect on its intended targets, and might even make matters worse.


Since I became a physician, I have seen exactly one instance of racism in health care — and it was from a patient, not a fellow physician. As for my colleagues, I have been consistently impressed with the conscientious, individualized care they have provided to patients of every race and culture. When we all took our oath to “first, do no harm,” we meant it, and we live it. I can’t imagine spending my entire career thinking my peers can’t uphold that oath without constant racial reeducation.

The message to physicians is bad enough, but the message to patients is much worse. Black people are, in effect, being told that White physicians are likely to quite literally damage our health. If that’s the case, why on earth would you seek medical care, unless you could be absolutely certain of not being treated by a White physician? And if you do seek medical care, why wouldn’t you doubt every word from a White doctor who is inherently prejudiced against you?

My former Mercatus Center colleague Bob Graboyes weighs in on the castration of Roald Dahl.

GMU Scalia Law’s Bruce Kobayashi and Tim Muris decry the return of the economically misinformed mid-20th-century approach to antitrust enforcement. A slice (footnotes deleted):

Critics of antitrust enforcement since 1980, including those who now control Biden administration antitrust policy, also cite newer studies that show increasing industry concentration as well as evidence of a concurrent increase in aggregate markups. Yet, these newer studies suffer the same problems as the now-abandoned SCP [structure-conduct-performance] paradigm discussed in section II of this article. By itself, an association between a measure of concentration and measures of firm profitability is consistent with either a reduction in competition from the exercise of market power or an increase in competition from more competitive firms enjoying greater success. Further, the crucial study from [Harold] Demsetz, discussed in section II, ignoring arguendo the flaws of the accounting data used, is consistent with efficiency, not market power. As with the earlier literature, today’s evidence on the source of growing firm markups is consistent with efficiency, not market power.

What remains of Team Mask is a bunch of deeply irrational people, and there is no reasoning with them“.

alex gutentag tweets: (HT Jay Bhattacharya)

It’s not accurate to say that mask mandates “did nothing.” Their purpose was to sow fear and division. They created an illusion of constant danger, normalized coercive medical requirements, and broke people psychologically. In this way mask mandates were very successful.

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