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Bonus Quotation of the Day…

… is this Facebook post from exactly five years ago by the great economic historian Bob Higgs:

When every transaction between trading partners in different countries — buying, selling, lending, borrowing of whatever goods, services, financial instruments, and currencies — is voluntary and therefore subjectively gainful to each of the trading partners, it is nonsense to suppose that such transactions are somehow bad (e.g., because there is a “deficit” in the current account, or balance of trade, in the international balance of payments). No one can add a set of positive numbers and arrive correctly at a negative sum.

The international balance of payments has to be the most nonsensical accounting statement ever devised, serving no purpose but to justify to gullible people the government’s pernicious application of force and fraud as if its so-called protectionism were a benefit to the general public.

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Some Links

GMU Econ alum Shruti Rajagopalan interviews the great trade economist Douglas Irwin.

David Henderson ponders Thomas Piketty and Taylor Swift. Two slices:

Think about how Taylor Swift began her career. She started singing for money as a teenager. Did she steal anyone’s songs? Almost certainly not. People whose songs are stolen tend to object. Once she started making it big, did she steal songs? Again, probably not. What about the people around her whom she hires? Did she stiff them on the pay she promised? Here I’m virtually positive that the answer is no. Why? Because of the $100,000 bonuses she gave her truck drivers at the end of her recent Eras Tour. Someone who does that is highly unlikely to renege on more-normal payments.

How about her voice? That really is her voice. It’s not as if she’s got a prisoner in a basement doing the singing while she lip-syncs.

The bottom line is that Taylor Swift became a billionaire the old-fashioned way: she earned it.

…..

In a free economy, and even in a somewhat-free economy like that of the United States, a large percent of wealthy people’s wealth is gained in mutually agreeable voluntary exchange. Moreover, even though innovators often get very wealthy, most of the value they create is captured by consumers. It is unwise, therefore, to punish wealthy innovators with special taxes on their wealth. The novelists that Thomas Piketty quotes were good novelists. But they are hardly a guide to understanding how wealth is created and how it grows. Nor is Piketty’s book, with its proposed heavy taxes on wealth, a good guide to tax policy.

Eric Boehm sensibly asks: “If semiconductor chip demand is high, why do we need more subsidies?”

Pierre Lemieux riffs on the Gemini incident.

At his Facebook page, Vernon Smith questions the claim that Islam is “a liberal faith.”

Machines simultaneously substitute for, and complement, workers.

Contrary to the accusation of “TakingHayekSeriously,” in my latest AIER essay I do not say or suggest that Hayek did anything other than accept the findings of Milton Friedman and Anna Schwartz. It seems as though “TakingHayekSeriously” mistakes what I describe in paragraph three as the ‘textbook’ view of the typical economist regarding Friedman and Hayek for the actual reality. (The confusion is at least partly my fault, as I describe this textbook view as that of a “knowledgeable economist.” But by “knowledgeable” I meant someone who knows the textbook view rather than someone who is seriously familiar with the works of Hayek and Friedman. Careless wording on my part.)

Here’s Chelsea Follett on “the folly of legislating family sizes.”

Simon Maechling tweets: (HT Humanprogress.org)

Everything you eat has been modified genetically by humans.

Humans have been modifying plants and animals for tens of thousands of years.

We have only recently discovered how to do this a little faster.

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Some Links

Kevin Corcoran offers further evidence (on top of an already substantial amount of it) in support of Phil Magness’s and Michael Makovi’s thesis about the fame of Karl Marx.

People rightly worry about Donald Trump’s disregard for the law. But Joe Biden is no better – as reported here by the Editorial Board of the Wall Street Journal. Two slices:

Speaking in Culver City, Calif., on Wednesday, Mr. Biden said his original plan to “provide millions of working families with debt relief for their college student debt” was derailed by “MAGA Republicans” and “special interests” who challenged the plan in court. “The Supreme Court blocked it,” Mr. Biden added, “but that didn’t stop me.” He apparently thinks defying the law is a virtue.

…..

But worst of all is Mr. Biden’s blatant rejection of the law, even after the Supreme Court called him out. Is it any wonder that GOP voters don’t take Democratic alarms about losing democracy seriously? Mr. Biden doesn’t take his own warnings seriously.

The Wall Street Journal‘s Editorial Board exposes Lina Khan’s recklessness at the Federal Trade Commission. Two slices:

The FTC in particular has been known for its competent staff under chairmen of either party. Jon Leibowitz was chairman under Barack Obama and Tim Murisunder George W. Bush, and they had different priorities. But they both followed modern antitrust law and relied on expert staff. Ms. Khan has turned all that on its head as she pursues her antitrust revolution, as internal emails show.

One manager (names and dates are omitted) wrote in an email to the FTC’s chief of staff that he sensed “outside influences . . . have an undue impact on [FTC] priorities, investigation management, and enforcement decisions,” warning that the agency “should never make an enforcement-related decision for the sake of PR.” “Outside influences” seems to mean leftwing lobbying groups.

Ms. Khan wants to appear “aggressive,” the manager added, but she is acting “with little regard for the consequences of losing in a way that negatively affects the enforcement agenda (i.e., bad facts that can result in really bad precedents that haunt us for years).”

…..

Ms. Khan has achieved her goal of shaking up the agency, but not for the better. The report’s findings show how Ms. Khan has subordinated the FTC’s statutory mission of consumer protection to her personal progressive agenda. Our guess is that the Trump transition team is watching for pointers.

Arnold Kling insightfully describes debates about race as being akin to the game of rock, paper, scissors. A slice:

In thinking about The End of Race Politics, a new book by Coleman Hughes, I came up with a description of the race debate using the metaphor of the game Rock, Paper, Scissors. I assign a stance to each of the three symbols.

  • Rock is individualism. Treat people as individuals, not as members of a race.
  • Paper is equalitarianism. Treat differences in average outcomes by race as evidence of unfairness.
  • Scissors is realism. Explain differences in average outcomes by race by appealing to heredity and culture.

In the game, paper covers rock, scissors cuts paper, and rock breaks scissors. Translating from the metaphor, the most compelling argument against individualism is equalitarianism. The most compelling argument against equalitarianism is realism. And the most compelling argument against realism is individualism.

Individualism is the stance that Hughes takes. He admits that we instinctively categorize people in racial terms. But he says that individual differences are what matter. In your personal life and in organizational settings, try your best to respond to people as individuals, ignoring race as much as possible.

Equalitarianism is the stance that Ibram X. Kendi takes. He, and others who style themselves as anti-racists, argue that in America black people are under-represented in high-status positions and over-represented in prison because of systemic racism. That is, the institutions and norms of our society are rigged to disfavor blacks, and this system has to be relentlessly exposed and dismantled.

Will Sellers celebrates some of the history of economic freedom.

Pierre Lemieux warns of economic czars. A slice:

During the pandemic, it was thought that a czar should be in charge of the production or distribution of masks and other medical supplies in America. The situation was not better in many or perhaps most countries. Donald Trump named Peter Navarro as his “equipment czar.” Nararro talked tough, a bit like the speculator fighters during the French Revolution—see my post “When Free-Market Prices are Banned,” April 1, 2020. (He was then very much law-and-order, until he was prosecuted by the other tough-speaking law-and-order types.) It is revealing that powerful government figures are affectionately called by the name of the Russian absolute rulers (whose two-headed symbol adorns the featured image of this post). So, the US government subsidized domestic companies to produce masks and Americans are now stuck with the inefficiency of the beneficiaries (“The U.S. Invested Millions to Produce Masks at Home. Now Nobody’s Buying,” Wall Street Journal, February 4, 2024).

Christian Britschgi reports that California continues to go to the dogs.

Steven Greenhut cautions against allowing fear of crime to undermine our rights. A slice:

I am concerned about the crime wave. I’m also concerned about over-incarceration and over-policing. I also am skeptical that our governments—which seem incapable of doing anything competently, justly, and cost-effectively—can strike the right balance. I offer no easy solution or specific policy prescription, but I do offer a warning: Be careful what new laws we pass. They can take decades to undo—and can obliterate our rights in the process.

GMU Econ alum Dominic Pino is correct: “No matter how much money schools get, teachers’ unions will always cry ‘underfunded.’”

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Quotation of the Day…

… is from page 361 of Robert Higgs’s Spring 2000 Independent Review article, “The So-Called Third Way,” as this article is reprinted in the superb 2004 collection of some of Bob’s essays, Against Leviathan:

The post-World War II interventionist state ultimately provoked strong political challenge because it could not deliver the goods. By the 1970s, the economies of the interventionist states were floundering. Runaway regulation, high taxes, monetary inflation and, in some countries, inefficient government-owned industry were sapping economic dynamism. At the same time, the notion that centrally planned economies could outperform market-oriented economies – the “convergence hypothesis” widely accepted in the West during the 1950s and 1960s – no longer seemed compelling, despite the reluctance of many authorities, from Nobel laureate economist Paul Samuelson to the Central Intelligence Agency, to abandon it. No matter how much the intellectuals might abhor the capitalist goose, they finally had to admit that no other kind could lay golden eggs at the same high rate.

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Resist the Legerdemain

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

Mr. K__:

Thanks for e-mailing to me Stephanie Slade’s tweet of Oren Cass’s claim (made in this podcast) that “any country is going to have an industrial policy. It’s just a question of what industrial policy. And so you’re always going to have special interests steering it.”

In asking my opinion of Oren’s claim, you surely encountered no difficulty predicting it: This claim is profoundly mistaken. It’s counterintuitive in a way that excites gullible sophomores, but upon inspection it immediately falls apart. It’s legerdemain, nothing more.

The firms, industries, and production patterns that survive in the market are determined by consumers voluntarily spending their own, and only their own, money, unimpeded by the state. This decentralized, unplanned, market-directed process of allocating resources, being open-ended, differs categorically from government officials consciously choosing, by using subsidies and tariffs, which particular firms and industries will survive and which won’t.

Oren would respond by asserting that, by allowing markets to be free, governments thereby choose which particular firms and industries survive no less than when governments use subsidies and tariffs.

Common sense alone is sufficient to reveal the falsity of this assertion. But gullible sophomores aren’t famous for possessing common sense. So to them I note that, if it were true that, by keeping the market free, government officials choose which particular firms and industries survive and which die, then detailed knowledge of how the free market will develop in the future is available today. It follows that Oren and the sophomores who swallow his assertions can all soon be gazillionaires by putting their money where their mouths are and going long on the firms that are known to be tomorrow’s ‘winners’ in the market and going short on those that are known to be tomorrow’s losers.

Unless and until Oren and likeminded interventionists prove their mettle by earning gazillions in the stock market, their advice deserves no credit.

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

David Boaz is rightly rankled by presidential rankings. A slice:

Presidential scholars love presidents who expand the size, scope and power of the federal government. Thus they put the Roosevelts at the top of the list. And for a long time (in a different poll, from Siena College) they rated Woodrow Wilson—the anti‐​Madisonian president who gave us the entirely unnecessary World War I, which led to communism, National Socialism, World War II, and the Cold War—6th. Recently he’s fallen to 13th, presumably because of the increased publicity about his racism. In this survey he fell from 10th in 2015 to 15th this year. Not far enough, by a long shot.

Ronald Reagan, who did not resegregate the federal workforce or turn a European war into World War I, fell from 7th in 2018 to 16th this year. President Biden, after three years of vastly expanding the scope and cost of the federal government, is rated 14th. John F. Kennedy, a charismatic guy whose greatest substantive accomplishment was the launch of the Vietnam War, climbed into 10th place. Franklin D. Roosevelt, who never relinquished his claim on power, moved to no. 2, passing George Washington, who twice gave up power, ensuring that the new United States would be a republic. Lincoln is ranked first.

The Editorial Board of the Wall Street Journal is correct: Government did not build Nvidia’s acumen, innovativeness, or market valuation. A slice:

Mr. Biden is lucky that the AI revolution accelerated under his watch, just as Barack Obama was fortunate with the shale fracking boom. But AI advances are happening despite government, not because of it. Mr. Biden’s executive order last autumn has created new uncertainty about whether and how regulators will permit AI.

Silicon Valley startup accelerator Y Combinator is instructing founders in health care to “take the conservative approach” and “document everything, and know [evolving regulations are] a risk, and anyone who invests in you should know it’s a risk,” as StatNews reported this week. Regulatory risk is something ebullient Nvidia investors might keep in mind too.

Some Democrats are already threatening to suffocate AI with—what else?—climate regulation. Democratic Senators this month introduced a bill that would direct the National Institute of Standards and Technology to recommend administrative actions to mitigate AI’s environmental impact. Will ChatGPT soon need an Environmental Protection Agency permit?

Brent Skorup, Anastasia Boden, and Jennifer Schulp warn of the Securities and Exchange Commission’s market surveillance.

GMU Econ alum Caleb Fuller explains “why shareholder firms tend to persist over worker-owned models.”

My intrepid Mercatus Center colleague, Veronique de Rugy, continues to warn of the dangers of expanding the child tax credit. A slice:

It isn’t hard to see how this system, despite creating some work incentives at first, discourages people from pursuing better long-term paths for their families. This is a big deal. Increased employment among low-income parents as a result of work requirements has driven much of the long-term decline in child poverty, as we learned during the welfare reform of the 1990s. We need stronger incentives to move up the income ladder rather than incentives that perpetuate systemic poverty. And this expansion of the credit isn’t going to cut it.

Juliette Sellgren talks with Kristi Kendall about filmmaking.

George Will draws a lesson from Benn Steil’s new book.

Is another government shutdown coming?

John O. McGinnis writes about Carl Schmitt. A slice:

Schmitt’s theories have been rightly seen as deeply critical of liberal democracy and inclined toward dictatorship or worse. Nevertheless, they brilliantly illuminate the dangers against which classical liberalism must guard. Indeed, a flourishing liberal society must be the opposite of the one that Schmitt envisions as both necessary and desirable. It must defuse a politics of perpetual enmity, preserve social spheres apart from politics, and constrain executive power, particularly in domestic affairs. In short, Schmitt provides value by being the greatest negative exemplar for liberalism in the modern era. Treating Schmitt as providing a negative credo is more important than ever, because many on both the left and right would take steps to create a world where Schmitt’s dreams and liberalism’s nightmares are more likely to come true. Some academics have irresponsibly cheered them on.

Jay Bhattacharya tweets:

When the history books are written about the Biden presidency, Jen Psaki — if she is mentioned at all outside a footnote — will be remembered for her role in facilitating the Biden censorship industrial complex, which a federal judge called an “Orwellian Ministry of Truth.”

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Quotation of the Day…

is from page 28 of The Fiscal Policy of International Trade: Being a Summary of the Memorandum by Prof. Alfred Marshall, Published as a Parliamentary Paper in 1908, J.M Robertson, ed. (1910):

In her [England’s] case, therefore, import duties, levied otherwise than with a direct view to revenue, seem to me to have no economic justification. They cannot, I have argued, cause foreigners to contribute appreciably to her public burdens. Though they may cause new employment to appear in certain directions, they will necessarily lessen the National Dividend; and therefore will necessarily lessen the amount of employment at good wages.

DBx: Alfred Marshall was no fan of protective tariffs.

Marshall believed that the case for a policy of free trade was especially powerful in “old” countries, such as his native England, that had long histories of established, modern manufacturers. (America today, of course, is one such “old” country.) And although Marshall believed there to be validity in the textbook demonstration that in a ‘young’ country a public-spirited government, through the wise use of protective measures, might nourish ‘infant’ industries into vigor in ways that enrich the people of the country, he says earlier in this memo – on page 15 of the version linked to above – that as a practical matter this textbook demonstration should be ignored. The best policy remains one of free trade.

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In my latest column for AIER – inspired by reading Jennifer Burns’s new biography of Milton Friedman – I argue that Milton Friedman’s formal economics was not quite as far from Hayek’s formal economics as many people believe. A slice:

In place of the Cowles approach, Friedman proposed an approach that he called “portioning.” As Burns describes portioning, it “hearkened to the years before general equilibrium models. Rather than try to capture the whole picture in one model – which Friedman doubted could be done, based in part on his failed alloy at the Statistical Research Group – instead the economist assembled an overarching theory from discrete pieces of economic activity. This portioning approach made economics a useful tool, ‘an engine for the discovery of concrete truth.’”

Reading about Friedman’s strong negative reaction to the “Cowles approach” of general-equilibrium equation building, followed by his preferred “portioning” approach, called to my mind the socialist calculation debate of the 1920s and 1930s. During that debate, Ludwig von Mises and Hayek insisted that no government in practice could possibly gather and process all of the dispersed bits of knowledge that it would need in order to allocate resources in ways that yield economic outcomes superior to those that arise from individuals following prices and other signals generated in decentralized markets. Only by allowing individual property owners the freedom to buy and sell is it possible to generate the knowledge – mostly in the form of market prices – that must be acted on to ensure productive allocations of resources.

These socialists – prominently including, not coincidentally, the same Oskar Lange who would later wind up at the Cowles Commission in Chicago – dismissed Mises’s and Hayek’s argument by insisting, with no evidence whatsoever, that government would confront no serious difficulty in getting the real-world information necessary to make central planning successful.

Mises and Hayek argued for decentralized decision-making – for portioning decision-making power to individual property owners. And the economics that these Austrians did was correspondingly focused on the formation and function of prices and other market signals in individual markets. Mises and Hayek of course explained how markets are interconnected, but these interconnections are successful only insofar as they arise from the formation of market signals that arise whenever individual property owners freely make buying, selling, production, and investment decisions within particular markets.

The details of Mises’s and Hayek’s pre-war debate with socialists differ from those of Friedman’s post-war debate with the economists and mathematicians at Cowles. Also differing in detail are the styles of economics done by Hayek and other Austrians compared to that done by Friedman and other Chicagoans. But more interesting and significant than these differences is what the two camps of market-oriented economists shared – namely, an appreciation for the unfathomable complexity of the modern market economy and a corresponding understanding that economic models constructed in ignorance of this complexity will engender, not an actual ability of government to successfully plan an economy, but only a “fatal conceit” that such planning is feasible.

UPDATE: Someone on Twitter says that I get Hayek all wrong because Hayek accepted Friedman’s and Schwartz’s data. But I never denied or implied that Hayek rejected their data.

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Some Links

Scott Lincicome is not impressed with Tucker Carlson’s impressions of Russia. A slice:

Let’s start with that supposedly incredible Russian grocery store technology. As National Review’s Dominic Pino first pointed out, the futuristic Russian amenities that so captivated Carlson—coin-operated shopping carts, in-store bakeries, cart escalators, etc.—have been available at American grocery stores, even discount ones, for decades. (See, for example, Aldi or Wegman’s or Lidl.) Many American stores lack these amazing sci-fi technologies (LOL) simply because they’re unnecessary—not because we’re suffering from some sort of “radicalizing” national decline or whatever. And, of course, U.S. supermarkets are constantly innovating with new items, amenities, and technologies like smart carts, dynamic pricing, scan-and-go, made-to-order meals (ordered online or at a kiosk), and artificial intelligence—a testament to intense competition in the low-margin U.S. industry.

Carlson’s economics are similarly mistaken. First, he seemingly fails to understand that the surprisingly low price for his groceries—about $100 when he and his crew expected $400—is a tribute to American, not Russian, wealth. According to the latest data from the World Bank, for example, the median American worker would need to work about a day and a half to afford $100 worth of groceries, while it’d take the median Russian almost a week. A similar gap applies to the poor: The daily income or consumption of the poorest 10 percent of Americans in 2022 was more than three times that of their Russian counterparts, after adjusting for inflation and cost of living—a wealth differential that’s actually widened (from around 2.5 times) over the last decade.

Varad Raigaonkar decries “government’s expensive and protectionist public-private partnership meant to address concerns over a reliance on foreign countries, like China, for chips.” A slice:

The CHIPS and Science Act passed with bipartisan support. But its detractors were also made up of strange bedfellows. Sen. Bernie Sanders (I–Vt.) and then-Rep. Kevin McCarthy (R–Calif.) both referred to the law as “corporate welfare” and a “blank check.” Sanders went as far as to call it a “bribe.”

“When the government adopts an industrial policy that socializes all the risk and privatizes all the profits, that is crony capitalism,” Sanders said.

My intrepid Mercatus Center colleague, Veronique de Rugy, is understandably frustrated with advocates of industrial policy. A slice:

At the end of the day, those in favor of industrial policy must make a choice: Will they first eliminate the regulatory obstacles erected by the government and then assess what might productively be done, or will they instead plow forward with further government interventions — interventions destined to fail? I know the answer, and it worries me. With deregulation, there is less opportunity than there is with further regulation to exercise power.

George Will writes wisely about journalism – and about the misguided calls for government subsidization thereof. A slice:

Soon, government would mandate hiring and coverage quotas for “underrepresented” groups, would enforce government’s idea of editorial “balance,” would censor what government considers “misinformation” about public health, diversity, equity and inclusion, and would dictate all things pertinent to government’s ever-lengthening agenda. The task force’s recommendations — journalism throwing itself into government’s muscular arms — are a recipe for making local news sources as admired and trusted as government is.

Barry Brownstein is correct: “America’s DEI commissars threaten freedom.”

E Unum Pluribus?

Erec Smith explains why he’s devoted most of his career “to combatting diversity, equity and inclusion (DEI) initiatives.” Two slices:

The U.S. is currently celebrating Black History Month, and I’ve been asked to share my thoughts about how this month of celebration aligns with DEI initiatives. The answer to that question depends on the type of DEI. Some DEI initiatives align with the classical liberal values of the civil rights movement, and indeed of America’s founding, such as freedom and equal opportunity for all, regardless of skin color. Other versions of DEI, however, are undergirded by critical social justice (CSJ), an ideology that pits whites and Blacks against each other; whites are perpetual oppressors, and Blacks are perpetually oppressed. This variation of DEI, which I refer to as CSJ-DEI, is the ideology that was on display during the aforementioned listserv debacle. It insists on the perpetual victim status of Black Americans and, in so doing, is ideologically opposed to the celebration of Black Americans because it focuses on their trials, not their triumphs. Black History Month is supposed to be about Black empowerment, but CSJ-DEI depends on Black disempowerment.

…..

Virtuous lies are anything but virtuous in these situations, but they show up in traditionally virtuous places, such as scholarly journals. In the scientific journal Cell, prominent scientists insist that the Black individuals among their ranks “continue to suffer institutional slavery.” In addition, a philosophy professor argues that the “years 1492 and 1619 and 1857 and 1955 are still now” and insists she means this in “a meaningful, non-metaphorical sense” (my emphasis). The absurdity of these statements is matched, if not eclipsed, only by the fact that these authors were confident their arguments would be taken seriously. Congresswoman Alexandria Ocasio-Cortez was emboldened enough to say that a false narrative is acceptable if it feels “morally right”; to insist on facts is to be misguided.

Bob Graboyes riffs on “the mortality of New Yorkers, presidents, dogs, and TV characters.”

Jay Bhattacharya tweets:

In 2022, @MartinKulldorff and I warned that public health’s embrace of covid vax mandates, political partisanship, and the “noble” lie would increase public skepticism about other vaccines, including essential ones. Alas, this prophecy has come true.

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