… is the closing paragraph, on page 262, of Joseph Epstein’s insightful 1993 essay “Culture and Capitalism,” as this essay is reprinted in Epstein’s 2014 collection, A Literary Education and Other Essays:

I love art; apart from family and friends, nothing in life is so important to me; and I am grateful to have been able to arrange my life so that I can spend a greater part of it than most people indulging myself in the splendors and delights of others’ artistic production. But however necessary to some of us art remains, it is well to remember that, in the larger perspective, art is a luxury – the luxury of luxuries – and one that is only earned by societies that, in the fundamental sense of the phrase, first take care of business.

DBx: The production of art requires scarce resources. Not the least of these resources – but not the only of these resources – is human time, effort, and creativity. And to enjoy and appreciate art requires leisure and the absence of pressing concerns such as the need to find food to feed your starving children.

As Tyler Cowen explains and documents beautifully in his 1998 book, In Praise of Commercial Culture – and as Joseph Epstein in this essay also notes – free markets promote both the creation and the sharing of great art. The state, in contrast, not so much – even if the state is championed and staffed by individuals who fancy themselves to be especially enlightened and progressive.

True, free markets promote also the creation and sharing of what many who appreciate as great art regard as bad art – often “art” that is regarded by aficionados as not art at all. Yet this latter “art” – whatever your, my, or historys opinion of it – is an unavoidable by-product of the competitive, creative, and open-ended process of the artistic experimentation that brings to us good and great art. Criticizing markets for producing “bad” art makes no more sense than does criticizing markets for producing New Coke or the Apple Newton.

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Here’s a letter to my “Trump man” correspondent, Nolan McKinney:

Mr. McKinney:

You write that “The immense pride felt by all Americans when our women’s soccer team defeated all the countries we played to win the World Cup is pride which we should feel about our industries. Like our wonderful soccer team, our economy can also win! That’s what President Trump is about!”

Sigh, sir. So much misunderstanding flows through the above-quoted 48 words that I don’t know where to begin. I’ll content myself to make only two points.

First, unlike the U.S. soccer team, our economy competes with no one. It makes no more sense to talk of the U.S. economy as being involved in zero-sum contests with our trading partners – contests that produce a loser for each winner – than it makes to talk of me being in zero-sum contests with the physicians from whom I buy my medical care and the vintners from whom I buy my wine. Voluntary trade is win-win. It’s an on-going process in which success is measured by how well each person satisfies the demands of others; it’s not a game in which victory’s essence is the vanquishing of losers.

Unlike in soccer matches, we Americans grow and prosper – we ‘win’ – the more the people of other countries also ‘win’ by growing and prospering. To see why, ask how ‘victorious’ I would be at earning a living teaching economics if other people were not victorious at earning their livings at the billions of tasks at which I’m a ‘loser’ – tasks such healing the sick and injured, making wine, manufacturing clothing, growing food, supplying microchips, piloting jetliners, and on and on and on.

Second, Pres. Trump proposes to bring ‘victory’ to select American firms by imposing artificial burdens on their foreign competitors. Some “victory” that. How much pride would you now feel if the U.S. women’s soccer team had won each of its games against opponents who were forced, unlike American players, to wear sandbags around their waists and patches over their right eyes? If your answer is – as it should be – “none,” then you should oppose rather than endorse Trump’s tariffs. Such tariffs make us Americans losers.

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 July 7, 2019

in Competition, Creative destruction, History, Trade

… is from page 325 of the 1936 English-language edition (translated from German by Alfred Stonier and Frederic Benham) of Gottfried Haberler’s classic 1933 work, The Theory of International Trade With Its Application to Commercial Policy:

For without a tariff each producer has only the natural protection of transport costs; as soon as his price exceeds the level at which foreign producers can profitably sell in his country they will commence to do so.

These views are confirmed by a thousandfold by experience. Cartels have developed much less in England than on the Continent. This is partly due to such factors as the proverbial individualism of the English entrepreneur, but it is largely due to the absence of protective tariffs. Nor is it a mere coincidence that the rapid growth of cartels in Germany began just after she adopted Protection in 1879.

DBx: Haberler is correct that when the state obstructs its citizens’ abilities to trade with foreigners, a source of often real and always potential competition in the home market thereby shrinks. This outcome also raises the likelihood of the successful formation and maintenance of domestic cartels, although in a large and otherwise dynamic economy, such as the U.S., cartels remain unlikely.

But in all cases, even when because of domestic competition producers have no ability to charge monopolistically high prices – that is, to charge prices above their costs of production – the ‘protected’ domestic economy suffers. The access of home-country buyers to lower-priced goods and services from abroad is nevertheless obstructed. (Also, depending upon the details of how home-country trade restrictions are defined and imposed, home-country consumers might also be obstructed in their access to goods and services of higher quality.)

Because genuine competition is a process – an on-going effort of entrepreneurs to earn profit by finding better ways to serve consumers – trade restrictions obstruct competition. Many better ideas from abroad – ideas for new and better outputs and for means of production and distribution – are prevented from improving the market processes of the home country.

A protected economy experiences less creative destruction and, hence, less growth.

A lesson drawn from the New Yorker’s cartoon-caption contest is relevant here.

…..

In 1879, Bismarck turned Germany more resolutely toward protectionism.

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Bonus Quotation of the Day…

by Don Boudreaux on July 6, 2019

in Myths and Fallacies, Politics

… is from pages 105-106 of George Will’s newly published and superb 2019 book, The Conservative Sensibility:

Alchemy, which was the dream that chemistry could turn base metals into gold, is properly derided as a medieval superstition. Many contemporary Americans, however, have faith in political alchemy: The faith is that 270 electoral votes can do more than turn a person into a president, they can turn a lout into a gentleman, a mediocrity into a savant, a master of electoral politics into a moral tutor and embodiment of the national spirit.

DBx: Listen to the typical successful politician. He or she promises to perform miracles. He or she assures listeners that reality is optional. He or she is a con artist seeking power by duping gullible voters.

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Commerce Is Not War

by Don Boudreaux on July 6, 2019

in Myths and Fallacies, Trade

Here’s a letter to a new correspondent, Ricky Miller:

Mr. Miller:

You describe my support of unilateral free trade as support of “unilateral disarmament,” and you give as an example the alleged “danger of keeping our tariffs low when other countries keep high tariffs on US goods.”

First, the charge that free traders advocate “unilateral disarmament,” although common, is completely inappropriate. Our government (ostensibly) maintains military readiness to protect us from being killed by bullets and bombs that foreigners force on us violently. In contrast, our government maintains tariffs to deter us from being enriched by goods and services that foreigners offer to us peacefully.

Tariffs and other such ‘economic armaments’ are weapons aimed at one’s own citizens. Far from offering protection against foreign aggression, tariffs are by their very nature weapons of domestic aggression used by each government to injure most of its own people in order to bestow unjust privileges on a few.

Second, suppose that (say) the Chinese government were to protect select Chinese producers not with tariffs but, instead, by confiscating  from the Chinese people, each December 31st, 20 percent of all goods that they purchased from abroad during the previous year. Given that the protective effect of this policy of outright confiscation is identical to that of tariffs, do you believe that this Chinese-government practice of stealing its citizens’ property would justify – economically and ethically – a like policy of Uncle Sam stealing each year 20 percent of the goods that we purchase from abroad? If you really are convinced that foreign-governments’ tariffs on their citizens justify U.S. government tariffs on Americans, your answer should be ‘yes’ – a fact that ought to cause you to reconsider your opposition to a policy of unilateral free trade.

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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… is from pages 47-48 of Lionel Robbins’s February 1931 Economica article, titled “Economic Notes on Some Arguments for Protection“:

To establish a case for restriction of complete laissez faire is not to establish a case for particular administrative expedients. To ascertain that occasionally an operation for appendicitis is necessary is not to establish that the appendix is best removed with a chisel. This fact is often overlooked in popular discussions of this matter, and arguments which establish the negative conclusion that laissez faire may not in certain cases lead to the most satisfactory results are made the pretext for the crudest arguments for a tariff.

DBx: And so matters remain nearly 90 years later, with trade policy as well as with other policies.

Jones observes that real-world market processes aren’t as excellent as is some ideal that he can imagine. Although Jones too seldom pauses to ponder if his imagined ideal really is one that is widely shared by his fellow citizens or human beings, Jones nevertheless rushes headlong to the conclusion not only that the market “fails” but that this “failure” can – indeed, must – be “corrected” by conscious intervention by state officials.

In this performance, Jones mysteriously assumes that none of the constraints on knowledge and motivation that he was quick to identify as the source of the “market failure” affect the flesh-and-blood human beings who will exercise state power to engineer reality toward Jones’s imagined ideal.

Jones self-confidently regards himself – and presents himself to others – as an objective scientist, no more driven to his endorsement of state intervention by ideology than is an astrophysicist driven to identify a distant binary star by ideology.

Jones’s conceit is, for humanity, among those that are fatal.

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Here’s a letter to the Washington Post:

Editor:

Henry Olsen is correct that Rep. Justin Amash’s libertarianism is today out of place in politics (“Justin Amash is a man without a party. That’s because no party can win with his ideas,” July 5). This reality is unsurprising given the embrace, by both major U.S. political parties, of the philosophy that the state should be constrained by little more than the need to assemble majoritarian coalitions, however fleeting, in its efforts to bestow privileges on favored groups at the expense of demonized ones. Today’s Republicans and Democrats differ from each other only in their identification of which groups to favor and which to demonize.

Neither of these parties acts in accordance with the natural-rights, pro-freedom principles enunciated in the Declaration of Independence or governs in ways that are consistent with the text of the Constitution. In stark contrast, Rep. Amash is one of the few modern elected officials in Washington who takes seriously his oath to uphold the Constitution – a document that he rightly understands in light of the principles embodied in the Declaration.

How sad that Mr. Olsen, treating as sacrosanct the public’s gluttonous demands for unconstitutionally created government privileges, flings contempt at Rep. Amash for adhering to the creed that gave birth to America by refusing to pander to rent-seekers and power-mongers.

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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George Leef reviews Jason Brennan’s and Phil Magness’s book, Cracks in the Ivory Tower. A slice:

The tools that the authors use throughout are insights into human behavior that economists (particularly those working in public choice theory) have developed: There are no free lunches; there are always budget constraints; incentives matter to people; actions usually have unintended consequences; people often break rules when they think they can; rules shape incentives; and good rules economize on virtue (i.e., we should create ones that align public interest with individuals’ private interests). Applying those insights, Brennan and Magness explain why American higher education costs as much as it does and delivers as little actual education as it does.

And from Phil Magness is this careful explanation of why Uncle Sam’s budget deficits will not be eliminated with higher taxes on rich-Americans’ wealth.

Alexandra Hudson explains that commercial society enables us all to enjoy picnics.

Pierre Lemieux is correct to argue that James Madison would not be pleased.

In my latest column for the Pittsburgh Tribune-Review I outline some of the reasons for skepticism of claims that protectionism is necessary for national defense.

Barry Brownstein pleads for a culture of tolerance and freedom.

George Will talks with Jonah Goldberg.

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Quotation of the Day…

by Don Boudreaux on July 5, 2019

in Growth, Innovation, Standard of Living

… is from page 100 of Tyler Cowen’s 2019 book Big Business: A Love Letter to an American Anti-Hero:

I would like to speak up for the tech companies, especially the big ones. They have brought human beings into closer contact with each other than ever before, whether emotionally or intellectually, mostly through social media. They also have placed so much of the world’s information at our fingertips, and more often than not it is accessible within minutes or even seconds. Whatever problems these developments may have brought in their wake, they are unparalleled achievements and arguably the greatest advances of the contemporary world.

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Here are some data from FRED.

Much is made these days of the “low” U.S. labor-force participation rate. Specifically, we are supposed to regard today’s very low unemployment rate of 3.6 percent skeptically. Despite having to go back to December 1969 to find a monthly unemployment rate this low or lower (in 12/69 the rate was 3.5 percent), we are told that today’s nearly half-century low unemployment rate is overrated as an achievement because the U.S. labor-force participation rate is low. (Only persons participating in the labor force, but who are currently without employment, are counted as unemployed. Adults of working age who choose not to work are not counted as unemployed.)

Well.

Today’s (May 2019) labor-force participation rate of 62.8 percent is indeed lower than the all-time high rate of 67.3 percent that prevailed from January 2000 through April 2000, and lower also than it was for most of the first 13 years of the 21st century. But this rate today is higher, by 2.6 percentage points, than the 60.2 percent rate in December 1969 (the last month since the present day when the U.S. civilian unemployment rate was as low as it is today).

Note that today’s labor-force participation rate has been pretty steady for the past five years. (For example, in May 2014, this rate was 62.9.)

More significantly, note that today’s labor-force participation rate is well above its level for all of the years that many pundits, professors, and politicians – left, right, and center – routinely assert were the golden years for the American middle-class: the post-WWII years through the mid-1970s. Although falling somewhat from the mid-1950s through the mid-1960s, from the mid-1960s through 2000 the labor-force participation rate trended upward, although with a noticeable decline in its rate of increase starting in 1990. And yet for all of those post-WWII years until the late 1970s, the U.S. labor-force participation rate was lower than it is today.

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