Quotation of the Day…

by Don Boudreaux on November 16, 2018

in Myths and Fallacies, Trade

… is from chapter 3 of William Graham Sumner’s 1885 book, Protectionism: the -ism Which Teaches that Waste Makes Wealth:

If trade was an object of suspicion and dread, then indeed we ought to have rules for distinguishing safe and beneficial trade from mischievous trade, but these attempts to define and discriminate only expose the folly of the suspicion. We find that the primitive men, who dwelt in caves in the glacial epoch, carried on trade. The earliest savages made footpaths through the forests by which to traffic and trade, winning thereby mutual advantages. They found that they could supply more wants with less effort by trade, which gave them a share in the natural advantages and acquired skill of others. They trained beasts of burden, improved roads, invented wagons and boats, all in order to extend and facilitate trade. They were foolish enough to think that they were gaining by it, and did not know that they needed a protective tariff to keep them from ruining themselves. Or, why does not some protectionist sociologist tell us at what stage of civilization trade ceases to be advantageous and begins to need restraint and regulation?

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Bonus Quotation of the Day…

by Don Boudreaux on November 15, 2018

in Philosophy of Freedom

… is this recent Facebook post by Bob Higgs:

Racism and nationalism are among the most menacing forms of collectivism in the world today. Racists and nationalists are among the greatest enemies of people who favor a society of free and responsible individuals, a society in which all persons are seen as equal claimants of natural rights and equally entitled to respect for their human dignity.

Donald Trump, by his words and his policies, draws on both these cesspools of collectivism and seeks to enlist those who have sold their souls to them to form the core of his political base and populate his cult of personality. Anyone who cherishes a society of free and responsible individuals should steer clear of these terrible forms of collectivism and their associated hatreds and superstitions.

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Trump is a Cartoonish Protectionist

by Don Boudreaux on November 15, 2018

in Myths and Fallacies, Trade

Here’s a letter to the Wall Street Journal:

All that is mistaken about Donald Trump’s understanding of international trade is summed up by this short passage in your report on his long-standing hostility to trade (“Trump Forged His Ideas on Trade in the 1980s – And Never Deviated,” November 15): “Asked in a recent Wall Street Journal interview about the origin of his views on trade, Mr. Trump said, ‘I just hate to see our country taken advantage of. I would see cars, you know, pour in from Japan by the millions.’”

Anyone who sees waves of valuable goods coming to America and then concludes that Americans are thereby being “taken advantage of” has matters completely backwards. Such a person overlooks what should be obvious: namely, that non-Americans sell their exports here only because each and every American buyer of these goods believes that he or she is getting a good deal. Does Mr. Trump believe that he’s being taken advantage of whenever he buys something?

That Mr. Trump regards our receipt of an abundance of goods from abroad as harmful to us is not only bizarre, it’s wholly inconsistent with most Americans’ celebration of innovation, technology, and entrepreneurship. When Mr. Trump sees jetliners, miracle drugs, larger harvests, and countless other goods and services pour in (as they do) from technological innovations, does he conclude that we’re thereby being taken advantage of by technology? When he observes American businesses improve their efficiencies in order to produce more output using fewer inputs, does he worry that we’re thereby being taken advantage of by sound management practices?

It’s distressing that we have a president whose one core, unshakable economic conviction is that we are impoverished by the abundance that comes our way when our tariffs are low, and that we are enriched by the deprivation we suffer when our tariffs are high.

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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The Weaponization of Milton Friedman

by Don Boudreaux on November 15, 2018

in Immigration

I’m pretty sure that I linked to this excellent essay by Shikha Dalmia when it first appeared back in July. But whether I did so or not, I link to it again here, for it’s filled with important context on Milton Friedman’s (in)famous expression of skepticism about open immigration into a country with a welfare state. And it is in this essay by Shikha that we find this especially relevant passage:

Now, if he [Friedman] had stopped at that, it would have been one thing. But he did not. He went on to declare that despite the welfare state, Mexican immigration was a “good thing” for America, particularly when it was of the illegal variety. Why? “Because as long as it’s illegal the people who come in do not qualify for welfare, they don’t qualify for Social Security, they don’t qualify for all the other myriads of benefits,” he pointed out. “They take jobs that most residents of this country are unwilling to take, they provide employers with workers of a kind they cannot get.”

In other words, as far as Friedman was concerned, free illegal immigration was perfectly compatible with the welfare state and slamming the door on it would be utter stupidity.

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Low-skilled Immigrants are Productive, Too

by Don Boudreaux on November 15, 2018

in Immigration

Here’s a letter to Mr. Alex Leventis, who majored in economics back in the 1990s at the University of Texas:

Mr. Leventis:

Thanks for your kind e-mail in which you express your support for more open immigration of high-skilled immigrants but not of low-skilled immigrants. I support more open immigration of both, for both sorts of immigrants make net contributions to the economy.

It’s true that each high-skilled immigrant typically makes a larger net contribution to the economy than does each low-skilled immigrant. This fact is true if only because the excess of the amount that each high-skilled immigrant produces over the amount that he or she consumes is greater than is the excess of each low-skilled immigrant’s production over his or her consumption. But as long as there is such an ‘excess’ – as there always is for every person who earns income in the market through mutually voluntary work and trade – why should we not avail ourselves of the net benefits of low-skilled immigrants? After all, the total net contribution of some number of low-skilled immigrants – say, perhaps, six of them – equals the net contribution of one high-skilled immigrant.

Put differently, just as a pound of feathers is as weighty as is a pound of lead, each $1 worth of net economic contribution by a group of low-skilled immigrants is as valuable as is each $1 worth of net economic contribution by one high-skilled immigrant.

Let me close by asking you to recall your microeconomics. There you learned that each producer expands her output as long as the revenue available from the sale of that additional output is greater than the cost of making that output available for sale. The analogy to immigration isn’t exact, but it’s close enough to be useful: just as a producer would be foolish not to make available for sale, say, a tenth unit of output simply because the profit she will earn by selling that tenth unit is, while positive, less than is the profit she earned by selling the ninth unit, we are foolish to turn away low-skilled immigrants just because the net contribution each makes to our economy is less than is the net contribution made by each high-skilled immigrant.

Here, if you’re interested, is a short essay that I wrote a few years ago on this topic.

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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Your Paypez Plees

by Don Boudreaux on November 15, 2018

in Immigration

Lots of people are angry with me for not distinguishing “illegal” from “legal” immigrants. Although angering people is not my purpose – and I truly do not like doing it – I will continue to anger these people because for most of the purposes for which I write about immigration, this distinction is irrelevant both economically and ethically.

I myself couldn’t care less if someone has his or her official government papers. The unethical actions in our current regime are not those of peaceful people who come to the United States without the official permission of the U.S. government; the unethical actions are those of the U.S. government in restricting the migration of peaceful people simply because some arbitrary quota of immigrants ‘must’ not be exceeded.

We Americans rightly are appalled when we reflect on the practice from the past in Nazi-occupied and Soviet-occupied lands of government officials who demanded to see the papers of people who were guilty of nothing other than being suspected of following the wrong faith or of being in a part of the city or country to which their access was forbidden. We understand that this practice was both a seed and a fruit of intolerable totalitarianism.

And we celebrate when we encounter tales of – or imagine – those who were asked for their papers managing to dupe the government officials who demanded to see papers. None of us think “Oh my, that Jew is a dangerous criminal! He broke the law not only by being in a part of town to which his access is legally forbidden, but he also lied to the nice government man who is only enforcing the law!”

Yet most Americans today think it to be perfectly acceptable – even sweet and desirable – that government officials here demand to see the papers of people who are guilty of nothing other than being suspected of being in some location, or of working at some job, without the U.S. government’s express permission. It is the playing out of totalitarianism in our midst. But because “we” do it – and because our officials don’t speak in sinister German or Russian accents when they ask to see papers – we applaud, or at least play along with, our government’s obstruction of the movement, association, and work of peaceful people.

…..

But for those readers who demand that I recognize the distinction between “legal” and “illegal” immigrants, here’s your opportunity to witness me doing so: “Illegal” immigrants, being largely ineligible for welfare-state handouts, are an even better economic bargain for American citizens than are “legal” immigrants and native-born Americans.

So I urge all of you who are bothered by the prospect of immigrants free-riding on the U.S. welfare state to celebrate those immigrants who come here “illegally.” Celebrate because most of these immigrants do manage to find employment here (“illegally,” of course, because they don’t have “zher papez”) – and, hence, are productive, even tax-paying, members of society – yet consume far fewer taxpayer resources than do “legal” immigrants who, in turn, consume fewer taxpayer resources than do native-born Americans.

(Request to readers: Somewhere Milton Friedman made this very point about “illegal” immigrants. Can anyone direct me to the source?)

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“They Work Too Much!” “They Work Too Little!”

by Don Boudreaux on November 15, 2018

in Immigration

My latest AIER piece was mentioned on air yesterday by Rush Limbaugh – a happy fact that nevertheless filled my e-mailbox this morning with several hostile missives from anti-immigrationists. This gentleman was one of several who discovered Cafe Hayek and blew a fuse when reading some of my posts on immigration. Here’s my letter to him:

Mr. Nick Poage

Mr. Poage:

You write to object to this blog post of mine. After expressing your support for government-imposed work restrictions that, in your words “stop immigrants from stealing American jobs,” you call “insane” my argument that much hostility to immigration is fueled by the (false) belief that immigrants produce too much and consume too little. You further write that “plenty of us Americans who want big reductions in immigration are pissed off because these people are parasites on our welfare system [which means that] they consume too much.”

First, the data don’t support the belief that immigrants are welfare-state “parasites.

Second, the fact that the data don’t support this belief is especially telling given the many restrictions that Uncle Sam places on immigrants’ abilities to work. By obstructing immigrants’ access to jobs in the formal economy, these restrictions artificially boost immigrants’ incentives to seek government welfare. Ending these restrictions would result in immigrants using even less such welfare. Yet you not only want to keep these restrictions, you wish to tighten them.

I’m sorry, but because you wish to prevent immigrants from working in America I have no sympathy for your complaint that immigrants allegedly free-ride on the American welfare state. You cannot, in justice, with one breath summon the state to prevent people from earning their livelihoods and then, with the next breath, self-righteously call those whom you prevent from earning their livelihoods “parasites.”

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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Quotation of the Day…

by Don Boudreaux on November 15, 2018

in Antitrust, Competition, Hubris and humility

… is from pages 120-121 of Frank Easterbrook’s classic 1988 paper “Ignorance and Antitrust,”” which first appeared in Thomas M. Jorde and David J. Teece, eds., Antitrust, Innovation, and Competitiveness (1992):

If judges had the data, we would not trust them to make good decisions. The business world relies on financial incentives to encourage managers to make the best use of knowledge and to weed out those who, despite their best efforts, cannot do as well as others. Judges do not profit from making astute business decisions and are not let go for making bad ones…. To the extent judges make economic decisions in antitrust cases, they are making predictions about tomorrow’s effects of today’s practices. This is problematic under the best of circumstances. Economists start from existing practices and try to explain why they exist and survive. Even when all agree about the effects so far, they disagree about impending effects under changed conditions. Experts will take diametrically opposed positions.

DBx: Easterbrook’s work on antitrust is simply superb. I worry, though, that his work – along with that of George Bittlingmayer, Yale Brozen, Harold Demsetz, Ken Elzinga, and other pioneering theorists and empirical researchers during the second half of the 20th century – will be ignored as new generations of economists, law professors, antitrust regulators, and judges enter the scene.

History supplies ample evidence that unholy, anticompetitive alliances are formed by academics with rent-seekers. As Ronald Coase famously observed in 1972, the former too readily conclude that any business practice, organizational form, contractual arrangement, or outcome that they haven’t encountered in textbooks or casebooks is anticompetitive. And the latter are all too happy to have the former use their credentials and word-smithing – and ‘math-smithing’ – to convince the general public, regulators, and courts that unfamiliar business and market arrangements are anticompetitive. Existing businesses are thus protected by the state from the competition of rivals who use innovative ways to attract consumers. The great irony is that this process of stifling competition is carried out in the name of keeping the economy competitive.
…..
Here’s my 1993 review, in Public Choice, of the Jorde & Teece collection.

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The topic for discussion in my International Economic Policy class (ECON 385) for this evening was immigration.

While preparing my lecture it dawned on me with unusual clarity that for many (most?) American anti-immigrationists the ideal immigrant is someone who comes to the United States with a bank account filled with billions of dollars that he or she immediately commences to spend on goods and services produced and sold here in America by Americans, yet who never lifts a finger to produce as much as one cent worth of output. But because almost no one immigrates to America exclusively to spend money without earning money – that is, to consume without producing – immigrants in general are regarded by these Americans as scourges who must be kept out.

How bizarre. How utterly, inexplicably bizarre.

The – or, at least, a – typical American anti-immigrationist is someone who complains about immigrants “stealing” American jobs. (How else to explain the enormous amount of resources and effort that Uncle Sam pours into efforts to restrict immigrants’ prospects of working in the U.S.?) But to issue such a complaint is to complain about immigrants coming here to produce. And to support restrictions on immigrants’ freedom to work is to support government efforts to prevent immigrants from producing.

When this hostility to immigrants producing economically valuable outputs in the U.S. is considered along side complaints about immigrants sending dollars back to their home countries as remittances, the fear that many Americans have about immigration becomes clear: this fear is that immigrants come to America to produce lots of stuff but then refuse to consume anything made in America. (Forget here that anti-immigrationists who complain about immigrants sending the dollars that they earn to their native countries as remittances fail to understand that those dollars do indeed return to the U.S. as demand for U.S.-produced goods and services. What matters here is what anti-immigrationists believe to be true.)

How bizarre. How utterly, inexplicably bizarre. Many (most?) anti-immigrationist Americans are hostile to immigrants in large part because these Americans worry that immigrants come to America only to increase the supply of goods and services available for us Americans to consume without then themselves consuming anything from this increased supply. In short, these anti-immigrationist Americans complain that immigrants produce too much for our economy and consume too little from our economy.

I repeat: how bizarre; how utterly, inexplicably bizarre to demonize people who come to America to produce.

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Some Links

by Don Boudreaux on November 14, 2018

in Books, Crony Capitalism, Health, Monetary Policy, Regulation, Subsidies, Taxes, The Crisis, Work

My intrepid Mercatus Center colleague Veronique de Rugy and my friend Deroy Murdock appeared today with Douglas Holtz-Eakin on Charles Payne’s show to discuss the cronyist policies that led to Amazon selecting Arlington, VA, and Queens, NY, for its new headquarters.

George Selgin’s new book – Floored! – on how the Fed worsened the 2008 financial crisis is out. Buy it and read it!

Tom Firey worries – understandably – that Trump will endorse an increase in the national minimum wage. A slice:

Even better from his perspective: raising the wage would redistribute employment to more skilled, more experienced, predominantly white workers—that is, to the people at the center of the Trump coalition. A century ago, the Progressive originators of the minimum wage understood this well. Redistributing employment to white male workers and away from “racially undesirable” immigrants was an avowed purpose of the wage’s creation. POTUS may not currently know this, but Stephen Miller, architect of the White House’s anti-immigration agenda, likely does and will soon explain it to Trump.

Should the Government Require Companies to Meet Cybersecurity Standards for Critical Infrastructure?” The Wall Street Journal asks the question and my Mercatus Center colleague – and GMU Econ alum – Anne Hobson argues “No – one-size-fits-all doesn’t work.” A slice:

At this point, the best way forward is for government to support an institutional environment that makes it worthwhile for companies and industries to self-regulate. Importantly, this requires that companies like Equifax bear the full cost of a data breach so that they prioritize cybersecurity. The threat of losses due to a breach is the most effective method available to encourage companies to learn from each other’s experiences and to do the right thing. Insulating companies from the consequences of their actions, as exemplified by the bailouts and concessions following the 2008 financial crisis, undermines these incentives.

GMU Econ doctoral candidate Jon Murphy clarifies the economic meaning of “obsolescence.

John Stossel makes the case against single-payer health care.

Also from Veronique de Rugy is this explanation of why the risk of EU-level taxes being imposed on cross-border digital services still looms.

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