… is from page 117 of Robert Tollison’s and Thomas Willett’s 1979 paper “Foreign Investment and the Multinational Corporation,” which is chapter 7 of the 1979 collection Tariffs, Quotas & Trade: The Politics of Protectionism:
Although advocates of restricted foreign investment and technology transfers usually state their case in terms of securing national advantages, their actual motivation is often to improve the economic position of one group at the expense of the rest of the population.
Here’s a letter to the Washington Post:
Editor:
A headline today of yours reads “Forcing people to work in deadly heat is mostly legal in the U.S.” Not so. Slavery was outlawed in the U.S. by the 13th amendment. While employers can fire workers who refuse to work in the heat, employers emphatically cannot force people to work in the heat or, for that matter, in any other conditions.
And because workers are free, for whatever reasons they choose, to refuse to work, employers who insist that their workers toil in extreme heat must pay a premium for this privilege. Workers in such jobs are paid what economists call “compensating differentials.” Employers who don’t pay this premium for unusually hazardous or unpleasant work eventually lose workers to employers who do. Therefore, if government were to outlaw working in extreme heat it would harm workers who prefer the higher wages to more-comfortable working conditions.
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
… is from this July 13th, 2023, Facebook post by the Nobel-laureate economist Vernon Smith:
Beware Corporations inviting regulation. That inevitably means “We want governemnt to limit any new entrants.”
For decades, the SEC maintained that proposals concerning the ordinary business or everyday workings of a company weren’t fit for inclusion in proxy statements. It was a sensible position, acknowledging that decisions about what a company should sell or how it should operate were best left to the professionals running the business, not shareholder plebiscites.
Yet on Mr. Gensler’s watch the SEC executed a dramatic reversal. The agency determined in November 2021 that shareholder proposals could be exempt from the ordinary-business rule as long as they “raise significant social policy issues.” That reinterpretation has not only turned a neutral and sensible process into a political fight but has also put the SEC in a position to decide arbitrarily what counts as “significant social policy issues.” This has allowed the agency essentially to compel progressive speech, according to the National Association of Manufacturers’ intervention in a recent lawsuit by the National Center for Public Policy Research against the SEC.
Before the rise of the regulatory state, America’s economic exceptionalism flowed from clear constitutional boundaries between the spheres of individual freedom and government power. All major federal initiatives were circumscribed by the Constitution and required legislation by both houses of Congress followed by the president’s signature. With rare exceptions, major policy changes required broad bipartisan support to gain a majority in the House and overcome a potential filibuster in the Senate. The result was economic and political stability enforced by checks and balances. While political inertia frustrated elected officials, the benefits of unparalleled economic certainty and unmatched freedom to work, save and invest delivered unequaled prosperity.
With the rise of the regulatory state, every sector of the economy can now be significantly altered by presidential action through executive initiatives with little basis in law. Checked only by the delayed restraints imposed by the courts, presidents now assert unilateral powers so that presidential elections alone produce dramatic shifts in public policy
Based on almost every conceivable measure of federal power, America’s historic economic certainty and the constitutional system of checks and balances that provides it are under siege by President Joe Biden’s “whole government” regulatory onslaught. In a closely divided Congress, timely defense of our constitutional system and limited government now depends on the ability of a five-vote House Republican majority to restore the power of the purse.
…..
The nation needs a replay of the debt-limit unity among House Republicans to bring the Biden imperial presidency back under constitutional control. As James Madison, the father of the Constitution, envisioned it, the power of the purse was “the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people, for obtaining a redress of every grievance.”
Tony Gill explains the connection between minimum-wage legislation and retailers going cashless.
Stephanie Slade writes about some real differences separating Natcons from “freecons.”
This suggestion comes from Seth J. Hill, a professor of political science at the University of California San Diego, who recently published a striking analysis of cities that raised their minimum wages between 2006 and 2019. He found that in these cities homelessness grew by double-digit percentage points. The effect was larger for cities with bigger minimum-wage increases, and it also appeared to get stronger over time.
I’ll confess, I was doubtful as I started reading this paper. For one thing, I already assume that minimum wage hikes cause significant unemployment, and I try to bring extra skepticism to research that flatters my opinions. For another, this paper is a preprint, not yet peer reviewed. For a third, homelessness seems to be spiking despite an incredibly tight labor market. And finally, I’ve been convinced by policy analysts who argue that the main driver of homelessness is the refusal of liberal cities to build enough housing.
But when I actually finished the paper, the study seemed solid. Moreover, Hill’s conclusions are plausibly modest. After all, the vulnerable people who are most likely to end up homeless — those with substance abuse or mental health problems, unstable family situations and so forth — are probably also the most likely to be let go when employers trim payrolls. And this effect doesn’t have to be large to have a big impact on homelessness, because the number of homeless people is (thankfully) small relative to the size of the labor market.
David Henderson takes a skeptical yet clear look at “market failure.”
Here’s Robert Pondiscio on Moms for Liberty.
Retsef Levi tweets: (HT Jay Bhattacharya)
Very accurate and powerful observations by Mike Rowe about how should we think as scientists and about science!
If you are a true scientist you speak with data, facts, logic, humanity and humility – not with arrogance, prestige and titles!
… is from David Hart’s splendid 2019 translation – still only on-line, but forthcoming in print – of Frédéric Bastiat’s 1850 Economic Harmonies; specifically, it’s from Chapter XXII, titled “The Driving Force of Society” (original emphases; footnotes deleted):
If I had to point out the characteristic that differentiates socialism from economic science, I would find it in this. Socialism encompasses a countless host of sects. Each of these has its own utopia and it can be said that they are so far from agreeing with one another that they are in bitter conflict with each other. Between the organized social workshop of Mr. Blanc and the anarchy of Mr. Proudhon, between the association of Fourier and the communism of Mr. Cabet, the difference is night and day. This being so, how do these leaders of (different) schools (of thought) band together under the common denomination of “socialists,” and what is the link that unites them against natural or Providential society? It cannot be other than this: They do not want a natural form of society. What they want is an artificial form of society that emerges fully formed from the brain of the inventor. It is true that each of them wants to be the Jupiter of this Minerva, that each nurtures his own form of artifice and dreams of his own form of social order. But there is one thing that they have in common: they do not acknowledge that the human race possesses either a driving force that impels it toward good or a curative force that delivers it from evil. They quarrel over who will knead the human clay, but agree that it is a clay that requires kneading. In their eyes, the human race is not a living and harmonious being; it is an inert material waiting for them to give it feeling and life. It is not a subject for study but a material on which to experiment.
Here’s a letter to the Wall Street Journal:
Editor:
Greg Ip is correct to be skeptical of industrial policy, but his skepticism should be deeper (“This Part of Bidenomics Needs More Economics,” July 12). Industrial policy’s root problem isn’t that economists have yet to study adequately; it’s root problem that it ignores market prices. Information about relative scarcities supplied by market prices is essential for determining not only which outputs to produce but also how best to produce these – for example, for determining which of the countless possible mixes of different inputs for producing steel is the least costly. Get this mix wrong and either too little steel is produced or too many resources are used to produce steel, leaving fewer resources available to produce other outputs. Multiply such a mistake across several industries through many years and economy-wide growth is significantly lowered even if every firm showered with industrial-policy privileges appears to be successful.
Detailed information about relative resource scarcities – scarcities that often change unexpectedly – is available only if market participants on the spot are free to make buying, production, and selling decisions using their own local knowledge. One result of such decision-making is an ever-changing pattern of market prices that conveys throughout the economy information about relative resource scarcities. Because it intentionally disregards market prices, industrial policy blinds economic decision-makers to information that is required to ensure maximum economic growth.
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
… is from page 262 of Thomas Sowell’s 1999 book, Barbarians Inside the Gates:
Equal opportunity policies are against racism. Affirmative action is racism under new management.
… might wish to take note of Chipotle’s announcement yesterday of plans to automate much of its production of guacamole.
My point here isn’t that the “Autocado” machine (or Chipotle’s “Chippy“) is itself a direct response to a minimum wage; perhaps it’s not. Instead, my point is that labor-saving innovation is real and at the ready. Firms – even those Chupacabra-like beasts with monopsony power over low-skilled workers – will turn to it more and more the higher are labor costs. And employers couldn’t care less if the costs of labor are driven higher by market forces or by government force.
The notion that employers respond to higher minimum wages by doing nothing other than raising the wages of all affected workers is about as uneconomic a notion as notions come. Yet, sadly, the world today has no shortage of ‘economists’ who embrace and trumpet this very notion.
Jennifer Huddleston warns of the dangers of the FTC’s hyperactive interventions. A slice:
For the millions of consumers who enjoy the benefits of their Amazon Prime membership, Amazon’s annual Prime Day has effectively become a new Black Friday in July. But while Prime Day may be a chance to grab a great deal, Amazon’s popular Prime program has, at times, drawn attention from regulators.
A new FTC case alleges that these consumers are not willing members of Prime, but instead are trapped or misled into their membership. In June, the FTC filed a complaint against Amazon for their usage of “dark patterns” to manipulate consumers into enrolling in the company’s Prime subscription and overcomplicating the process to cancel. The agency alleges design features, such as the location of the subscribe button on the online checkout screen and the multiple webpages required to click through to initiate a cancellation of Prime, are “tricking and trapping” consumers into their subscription.
Amazon rejected the “concerning” claims of the complaint in a statement,maintaining that they “make it clear and simple” for consumers to subscribe and unsubscribe from its Prime service. As many have pointed out, unlike some services, cancelling Amazon Prime takes a mere six clicks and not the more cumbersome processes many consumers experience with gyms, newspapers, or cable, where they can click to subscribe but must call or go in person to cancel.
As Prime Day’s popularity shows, Prime members remain members because they find the service valuable. In fact, following the popularity of Prime, other large retailers like Walmart have launched their own similar services. Many retailers, including Target and Macys, will also have July deal weeks to counter Amazon’s Prime Week. Shoppers continue to have an abundance of choices when it comes to retail — both online and offline — and feel that consumers have many options.
The gaming market remains competitive with a wide variety of options available to them. Many factors, including the availability of games, go into a consumer’s decision about their gaming consumption. In addition to multiple console options, the gaming ecosystem also includes P.C. games and an increasingly popular mobile gaming market. The Microsoft-Activision deal allows Microsoft to acquire popular franchises including Call of Duty and Candy Crush, but it will still face significant competition from Sony and Nintendo.
My intrepid Mercatus Center colleague, Veronique de Rugy, is understandably unimpressed with Bidenomics. Two slices:
Begin with Bidenomics’ hallmark: record spending. The president likes to claim he’s cut the deficit, but his allies in a unified Democratic congress have enacted $5 trillion in new spending over the decade. In an old-fashioned move, they have put most of it on Uncle Sam’s credit card rather than engaging in the politically unpopular move of paying with new taxes and spending offsets. As a result, annual budget deficits will grow over the next 10 years to around $3 trillion. For perspective, remember that just before the pandemic, the annual deficit was around $1 trillion.
This is no partisan argument. Looking at the spending trajectories under different presidents and Congresses, one realizes that this has been going on for a long time. Each administration and Congress irresponsibly outspends its predecessors, and each kicks the can down the road for future generations to deal with. This includes Republican presidents like Donald Trump and George W. Bush. Yet, this president took it to another level with an over-the-top embrace of the fiscal irresponsibility of the $2 trillion American Rescue Plan, which turned modest post-pandemic inflation into a 40-year inflation record.
…..
There is one area, however, where Bidenomics has been extremely successful: favoritism. The administration’s industrial policy has aggressively subsidized preferred industries such as semiconductors and electric cars, sheltered special interests from the accountability of consumers through mandates and bans, and boosted the fortunes of its union friends. Most of this took place under the cover of reviving the manufacturing sector and making long-term investments in sectors vital to our national well-being — and, of course, competing with China. As The Wall Street Journal’s Andy Kessler noted, “All that’s missing from his ‘new Washington consensus’ is Soviet-style Five Year Plans.”
Andrew Stuttaford gets the reality of industrial policy. A slice:
It is true that some of these officials, such as technocrats and planners on the left (and, for that matter, the right) do see industrial policy as tools to achieve “higher ends” (normally they take it on upon themselves to decide what “higher” is) and “broader national aims” (once again, something they define). The more opportunist among them, however, see the pursuit of such aims and ends as a source of careers, power, and rich pickings, even as, in some cases, they convince themselves it’s in a good cause. Technocracy is a rent-seeker’s paradise.
“Another athlete chooses a low-tax state.”
Pierre Lemieux praises The Economist for understanding the the price system.
John Stossel is right: “Affirmative action is racist and therefore wrong.”
I wonder if the @nytimes or @washingtonpost could ever be as intellectually honest about their disastrously incorrect covid coverage as @derfreitag, which just apologized for theirs.
… is from page 154 of the late, great Wesleyan University economic historian Stanley Lebergott’s insightful 1975 book, Wealth and Want:
But William Astor, Payne Whitney, and a thousand others saved a substantial share of their income, then invested that share for further returns. By so doing, the rich expanded the supply of loanable funds. Such expansion must tend to drive down interest rates.
Who benefits from the resultant decline in interest rates? One likely candidate is suggested by the century-long cry of American populists for cheap money, for bimetallism, and for any other means of lower interest rates. Which suggests that when the rich avariciously invest, rather than consume, they end up benefitting the populists – presumably to the confusion of each.
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