Who does occupational licensing hurt the most?
Russ Roberts blogs on gratitude, kindness, and loveliness.
Vincent Geloso and Alex Salter write about state capacity.
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… is from pages 143-144 of my Mercatus Center colleague Dan Griswold’s excellent and important 2009 book, Mad About Trade:
As if it were not enough to argue that free trade has lifted millions out of poverty, strengthened human rights and democracy, and spread peace, let me make one more bold claim: Free trade and globalization encourage individuals to behave in better ways. The same “invisible hand” that turns our personal drive for betterment to the public’s benefit also shapes our characters. The commercial and personal interactions with people from other countries that have come with globalization teach us tolerance, sympathy, humility, prudence, trustworthiness, and a spirit of service to our fellow human beings.
Here’s a letter to the Wall Street Journal:
Editor:
By my count, Peter Navarro’s op-ed in today’s pages – “Give Trump’s Tariffs a Fair Test” – is the seventh such piece that you’ve published by him since he became Donald Trump’s trade shaman. Each of these essays is a cascade of contradictions and confusions so immense that even listing them would require an unusually long op-ed. But two examples will suffice.
First, in a March 6th, 2017, piece Mr. Navarro argued that U.S. trade deficits inflict such harm on the American economy that U.S. trade restrictions are justified as a means of trying to reduce these deficits. Yet in today’s op-ed he boasts that the “threat of auto tariffs has likewise drawn billions of dollars of new foreign direct investment from the likes of Toyota, Volkswagen and Mercedes-Benz.” Mr. Navarro apparently doesn’t understand the elementary fact that, because every dollar invested in the U.S. by foreigners is a dollar not spent on U.S. exports, the investments about which Mr. Navarro today boasts promote the very trade deficits that, in other contexts, he bemoans.
Second, Mr. Navarro commits the sophomoric error of confusing correlation with causation. Yes, today’s U.S. economy is booming. But economics tells us that, contrary to Mr. Navarro’s claim, this good performance is fueled, not by tariffs, but by the tax cuts and deregulation for which the Trump administration can take credit.
Researchers who’ve focused in on the actual effects of the tariffs find that, without them, today’s economy would be even more buoyant and healthy. To cite just one example: Federal Reserve economists Aaron Flaaen and Justin Pierce find “that the 2018 tariffs are associated with relative reductions in manufacturing employment and relative increases in producer prices. For manufacturing employment, a small boost from the import protection effect of tariffs is more than offset by larger drags from the effects of rising input costs and retaliatory tariffs.”
I understand the importance of giving some of your valuable ink to prominent officials. But you insult your readers by repeatedly publishing arguments that are so comically self-contradictory and intellectually insupportable that the author, were he to submit them as answers to a high-school economics quiz, would receive an F-.
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
In my latest column for AIER I argue that what society needs isn’t a new’n’improved economics; what it needs instead is greater attention to the realities revealed by the economic way of thinking. Here’s my conclusion:
We economists then perform some of our most valuable service in explaining how the mostly unintended consequences of self-interested actions in this world of scarcity either do or don’t combine to form an economic order – or a market process – that allows each of us to consume far more than each of us could possibly produce. Armed with an understanding of the logic of such an economic order, good economists are thus charged with – some might say cursed with – the adult responsibility of dashing the hopes of those who fall for any of the plethora of schemes for enriching society by having the state override market processes.
This core task of economists is not new, but it remains as important as ever. Far from needing to be replaced or even revised, what is needed most is that this core task be embraced more firmly by economists and accorded more respect by non-economists.
… is from page 170 of my colleague Richard Wagner’s superb 2017 intellectual biography of Jim Buchanan, James M. Buchanan and Liberal Political Economy (typo corrected):
This [classical] liberal system means there are no sheltered positions in society where a prosperous enterprise can be protected from competition that would erode that wealth. The creator of a successful business cannot call upon political authorities to prevent competition from other enterprises. For a successful enterprise to continue to be successful, it will be necessary for the enterprise continually to attract support in the face of free and open competition. Similarly, within a liberal society an enterprise will not be able to secure subsidies to get started, or to keep going when otherwise it would fail because it couldn’t operate as a going concern without political support.
Within a liberal society, there would be no positions of special privilege that either were established using political power or were maintained in the face of competition using political power.
DBx: The only practical means for us creatures this side of omniscience to know if particular productive operations are, in fact, productive – that is, to know if particular uses of resources and time produce value for society rather than destroy value – is to observe which particular productive operations survive when people as consumers spend their own money and time unobstructed, and when people as income-seekers spend their own money and time unobstructed.
The market order described above by Wagner is an institution that assures, as nearly as we can practically expect any institution to assure, that individuals promote their own welfare (however each individual might reckon his or her welfare) only by helping other people – including helping countless strangers – promote their welfare. You want to earn profit? Excellent! Produce something using a mix of resources that costs less than is the value that I attach – as I reveal by my willingness to pay my own money – for the good or service that you produce and offer for sale. If you do so, net value will be created not only for you, but also for me as well as for those who voluntarily sell to you their labor and the other inputs that you use to produce your goods or services.
But this connection between each of us promoting our own welfare only by helping other people to promote their welfare is severed by special privileges granted by the state. Owners of business enterprises that survive only because of tariffs profit at the expense of their fellow human beings. Ditto for owners of business enterprises the revenues of which are inflated by subsidies. The same, of course, holds true for workers in such firms. A worker whose job exists only because of tariffs or other special privileges granted by the state might appear to economically uninformed observers to be productive, but in reality that worker is a parasite: he or she survives in that specific job only because state coercion compels fellow human beings – usually fellow citizens – to sacrifice for that worker’s benefit. This worker’s gain is less than the costs to others of supporting him or her.
The bottom line is this: those who seek tariffs or subsidies seek to survive as parasites. Those who acquire tariffs or subsides survive as parasites. And those who apologize for tariffs or subsidies apologize for parasites.
It isn’t always, perhaps not even usually, the case that these parasites and those who apologize for them are aware of their parasitical nature and existence. But economics reveals this nature and existence to be reality. Just as tapeworms’ obliviousness to their destructive parasitical actions does nothing to make tapeworms less parasitical, protected or subsidized producers’ obliviousness to their destructive parasitical actions does nothing to make these actions less parasitical. Indeed, ignorance of, and resistance to, the economics that reveals such parasitism only encourages it.
… is from page 483 of James Buchanan’s and Richard Wagner’s August 1978 Journal of Monetary Economics paper, “Dialogues Concerning Fiscal Religion,” as this paper is reprinted in Debt and Taxes (2000), which is volume 14 of the The Collected Works of James M. Buchanan:
[P]oliticians, not economists, make economic policy.
DBx: Indisputable, of course. Yet too many economists continue to write, lecture, and opine as if they believe themselves to be offering policy advice to apolitical power-holders interested in nothing but selflessly and faithfully pursuing the public good as revealed to them by scribbling, yammering, and opinionated economists.
In fact, this belief by policy-offering economists is as realistic as is the belief that tigers can be convinced to bark like beagles and to dine exclusively on lettuce and sunflower seeds. Such fantastical performances can be imagined, but imagination is not reality.
Politicians will no more follow economists’ advice to pursue the public interest if doing so runs counter to politicians’ own interests than will tigers become vegetarians if lectured at by vegans.
Here’s a letter to Fred Hochberg, a former Chairman and President of that great geyser of cronyism, the U.S. Export-Import Bank. (The comment by Hochberg to which I refer starts around the 22-minute mark.)
Mr. Hochberg:
Appearing today on NPR’s “The 1A” you argued that, because “a lot of jobs are dependent on exports and trade,” the U.S. government should increase subsidies to American exporters.
Your conclusion is a non sequitur. It makes no more sense than would the conclusion that, because a lot of jobs are dependent on Americans eating at restaurants, the U.S. government should subsidize American restaurants. Just as there’s no reason to believe that the current amount of meals served in restaurants is suboptimal, there’s no reason to believe that the current amount of exporting is suboptimal.
You ignore the fact that subsidizing exports necessarily draws resources away from other productive uses. If the value of what American producers can get in exchange for what they export is greater than the value of resources used to produce exports, American producers do not need the spur of subsidies to convince them to produce these goods for export. And so any goods that are produced and exported from the U.S. only because their exportation is subsidized are goods for which Americans receive from foreigners payments that fail to fully cover the costs of those exports.
Export subsidies, in short, make us poorer – a reality that isn’t changed in the least if other governments are in the habit of using subsidies to make their own citizens poorer.
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
Joel Kotkin sings the praises of economic growth. A slice:
As Benjamin Friedman suggested over a decade ago, economic growth is critical not only for its own sake but it has, at least in the West, nurtured more enlightened and generous societies. “Economic growth—meaning a rising standard of living for the majority of citizens—more often than not,” observed Friedman, “fosters greater tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy.”
Friedman also identified the environmental benefits of a fast-growing economy. When a population feels its material future is assured, he demonstrates, it is far more willing to invest in such things as clean water and air, and in preserving critical habitat; much of the landmark environmental legislation in America, for example, to clean the air and water were enacted during the 1960s boom.
The great Bruce Yandle is an extraordinarily trusted brand.
John Cochrane offers an overview of his posts on wealth and taxes.
… is from page 162 of Bas Van Der Vossen’s and Jason Brennan’s excellent 2018 book, In Defense of Openness (footnotes deleted; links added):
When people are poor, not only are they more likely to suffer from starvation or disease, but their ability to cope with bad weather and weather disasters is also much worse. We often hear that climate change may lead to more frequent and much worse severe superstorms. It may indeed, even if the United Nations recently release a report arguing that so far, it has not. But it’s worth noting that weather-related deaths have declined dramatically over the past century. Despite a much larger population, the absolute (not just relative) number of yearly weather-related deaths are only about one-fiftieth now what they were 80 years ago.
DBx: The historical record proves – as conclusively as any historical record can prove anything – that the economic growth brought over the past 200 or so years by market-driven innovism (to use Deirdre McCloskey’s proposed substitute term for “capitalism”) is by far humanity’s greatest and most reliable source of safety, cleanliness, and protection from physical harm. In contrast, the history of governments’ treatment of human beings is, shall we say, rather checkered.
“Ironic” does not fully capture the oddity of pursuing greater human safety by entrusting the state with power to rein in competitive, innovative markets.
… is from page 57 of George Will’s 2019 book, The Conservative Sensibility:
The crux of modern radicalism is that human nature has no constancy, that it is merely an unstable imprint of the fluctuating social atmosphere. This fallacy emboldens political actors to adopt agendas of ambitious social engineering.
