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… is from page 268 of Richard W. Duesenberg’s deeply insightful 1962 article “Individualism and Corporations” (available without charge on-line here) as it appears in Liberty Fund’s 1981 single-volume collection of the New Individualist Review:

Freedom is the best means to security.

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… is from page 148 of the original Cambridge University Press edition of the late Don Lavoie’s great 1985 book Rivalry and Central Planning:

Hence it is not enough to establish the technological feasibility of a production plan; it is also necessary to determine its economic cost – that is, the value of opportunities forgone by this plan. The complexity of deliberately tracing out such cost implications of each plan necessitates that this be done unconsciously by relying on the information supplied by a price system.

DBx: This reality is ignored by advocates of industrial policy. Their failure to grasp the enormous complexity of market arrangements combines with their ignorance of the role of prices to fool them into thinking that their schemes can work.

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A few months ago the current British P.M. walked out of the House of Commons in order not to hear criticism of his lockdown policy from the previous P.M. Too bad for the British people that Ms. May is no longer P.M.

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John Stossel tells us what Thomas Sowell can teach us about standing up to the mob.

Writing in the Wall Street Journal, GMU Econ alum Alex Salter – inspired by the work of the late Bill Allen and Armen Alchian – defends the economic way of thinking (“price theory”) from the increasingly dominant obsession with data mining. A slice:

The heights of the economics profession are increasingly inhabited by people who disdain price theory. Reliance on the economic way of thinking in solving problems is viewed as obsolete and unscientific. The data jockeys think they’re cutting-edge, but they’re merely repeating old mistakes. In the late 19th and early 20th centuries, economists of the German Historical and Old Institutionalist schools thought they could make do with history and statistics alone, unconstrained by theory. In the end, they got so bogged down in details that they came up with very little that lasted.

A common anti-price-theory trope is that its practitioners are political ideologues masquerading as scientists. The opposite is closer to the truth. Old-school economics recognized that trade-offs and constraints are everywhere. There are no free lunches. Armed with price theory, economists resisted the politically appealing but economically unsound proposals of both the right and left. Today’s economists, innocent of price theory, have no such armor.

The atheoretical approach of contemporary economists makes them particularly susceptible to the technocratic pretensions of the center-left. If, contrary to the claims of price theory, there are no enduring laws of economics, then there is no reason to stop the technocrats from tinkering. Many of these economists don’t realize they have been politically compromised. They see it as “just the facts, ma’am” pragmatism. In reality, it is ideology sneaking in through the back door.

Dan Mitchell asks if France is suffering from too much austerity.

Jessica Melugin works to help keep straight antitrust’s dismal historical record.

John Tamny could not put down Kevin Williamson’s new book, Big White Ghetto.

David Henderson doesn’t share Alan Blinder’s enthusiasm for Joe Biden’s “stimulus” scheme.

Richard Rahn calls the minimum wage “the cruelest tax on job growth.”

My Mercatus Center colleague (and GMU Econ alum) Shruti Rajagopalan spoke with the great trade economist Arvind Panagariya about free trade and industrial policy. A slice:

RAJAGOPALAN: In this South Korean story, how much of it is free trade and prosperity, and how much of it is industrial policy? Because this is one constant source of discussion between trade economists and development economists. How much is trade part, or outward embracing of global markets part, of the success story of South Korea?

PANAGARIYA: Shruti, in this, I must say that the proponents of this industrial policy school have so obscured the reality of South Korea, and I must say that a lot of the people on the side of free trade advocacy have not done a great job, actually, on defending. Often, they give in, “Yeah, yeah, yeah,” you know. This is what I separate out, when does Korea start? About 1963 is the turning point. This starts with liberalizing the economy, and 1963 to 1973 there is no industrial targeting.

Even when I started looking at all the evidence, I came in thinking that Korea was doing some industrial targeting all through. Then from ’63 to ’73, I see no industrial targeting….

…..

Some people like Ha-Joon Chang, et cetera, really tried to make their case by saying, “Oh, look, we protected the auto industry, and it is such a successful industry today.” This is a post hoc fallacy. Post hoc ergo propter hoc, whatever you say. “After this, therefore, because of this.” But I’ve never understood—just because you did something before, and eventually some industry succeeds, that doesn’t mean anything, and moreover, what about the ones that failed?

I don’t have it in the book but actually, Anne Krueger pointed out to me that they put up this very, very large ball-bearing factory in S. Korea, and it was so inefficient, there was no way it could compete on the global marketplace. And it was so large that the S. Korean market was not large enough to consume it, so it became a white elephant and eventually had to be closed down. Nobody remembers it. Only successes are remembered. Failures are gone. That also gives a bit of a bias to this.

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Scott Atlas asks if the truth about Covid-19 restrictions will ever prevail. Two slices:

Here’s the reality — almost all states and major cities, with a handful of exceptions, have implemented severe restrictions for many months, including closures of businesses and in-person school, mobility restrictions and curfews, quarantines, limits on group gatherings, and mask mandates dating back to at least the summer.  These measures did not significantly change the typical pattern or damage from the SARS2 virus.  President Biden openly admitted as much in his speech to the nation on Jan. 22, when he said “there is nothing we can do to change the trajectory of the pandemic in the next several months.”  Instead of rethinking the results of implemented policies, many want to blame those who opposed lockdowns and mandates for the failure of the very lockdowns and mandates that were widely implemented.

…..

America is now a country where differing interpretations of science in order to seek the truth is the new anathema.  I fear that “the science” has been seriously damaged, and many have simply become fatigued by the arguments.  That is even worse, because fatigue will allow fallacy to triumph over truth. Perhaps Harvard Medical School Professor Martin Kulldorff was correct when he lamented, “After 300 years, the Age of Enlightenment has ended.”

The Times of London blatantly misrepresents the impact of Covid. (Among the chief ways that Covid Derangement Syndrome spreads is that the pathogen causes the media to become even more sensationalist and irresponsible than usual, which in turn enables the pathogen to infect and distort the minds of millions.)

“Too Many Experts, Too Little Knowledge“.

For those of you who doubt the tyranny of Covid lockdowns, Jordan Schachtel has some news that you might wish to consult.

And for those of you who doubt the cruelty and utter derangement of Covid lockdowns, Charles Oliver reports on an incident that you might wish to learn about.

Katherine Mangu-Ward talks with Brown University economist Emily Oster about Covid and schooling.

Mark Ellse works to put the U.K.’s Covid death toll in proper perspective.

Covid lockdowns have revived the speakeasy! (HT Phil Magness)

Here’s a screenshot from Phil Magness’s Facebook page – a screenshot that does not speak well of Anthony Fauci.

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… is from page 250 of my late, great teacher Leland Yeager’s, and David Tuerck’s, superb and still-relevant 1966 book, Trade Policy and the Price System (footnote deleted; the author quoted within this quotation is Walter Salant):

In a dynamic economy, all sorts of changes strike innocent victims. If they could count on the same sympathetic hearing that victims of import competition traditionally get, other victims would readily present the same sort of heart-tugging human-interest appeals for relief, complete with stories of dedicated old craftsmen cast on the scrap-heap. The crises in an Upper Michigan community when a shift of demand from wooden to metal station-wagon bodies forced the closing of a Ford plant illustrates the general nature of issues raised by specific dislocations. Problems of trade liberalization “do not reflect an inherent conflict between the needs of the domestic economy and the needs of international economic policy, but rather the more general conflict between the security of an existing status of an individual or a firm or an industry an any change, whatever its cause.”

DBx: Yep. And in a country as large, with an economy as (pre-Covid) dynamic, as that of the United States, the number of jobs ‘destroyed’ (and created) directly by international trade is a tiny fraction of the total number of jobs ‘destroyed’ and created by economic forces generally – that is, by economic churn.

I pick only one small nit with Leland’s and David’s wording: people who lose jobs in competitive markets aren’t truly victims. Such people suffer burdens, of course. But a true victim is someone who suffers because his or her rights have been violated – he was murdered; she was raped; his pocket was picked; her car was stolen; their house was torched by an arsonist.

But people in markets have no legitimate expectation, beyond what they contract for, of continuation of the commercial patronage of others. This fact implies that others are under no obligation to continue to patronize someone  simply because these others have chosen in the past to purchase something from that someone. If and when these others chose to reduce their purchasing from that someone, that someone loses nothing to which he or she is entitled, either legally or ethically.

To play by the rules of a free and liberal society requires playing by this particular rule.

…..

(Yeager and Tuerck quote Walter Salant from a 1958 volume titled Foreign Trade Policy, but I can find no link to this volume on-line.)

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… you ain’t gonna make it with anyone, anyhow.”

I share this video simply because I so love the Beatles.

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… is from page 112 of my colleague Richard Wagner’s superb 2017 intellectual biography of our late Nobel-laureate colleague, Jim Buchanan: James M. Buchanan and Liberal Political Economy:

If a battleship is financed by taxation, it is clearly taxpayers who turn over the resources necessary to build the battleship. But what if bondholders provide those resources by buying government bonds? It’s not reasonable to claim that the bondholders bear the cost of the battleship. Indeed, they have gained personal advantage by buying bonds. The voluntary purchase of bonds means that bondholders have traded opportunities they value less highly today for opportunities they value more highly tomorrow. Buying debt enables the bondholders to achieve a superior intertemporal pattern of consumption opportunities. Bondholders rearrange their temporal pattern of consumption, consuming less today and more tomorrow, and experience an increase in their present valuation of their intertemporal pattern of opportunities. Present taxpayers, moreover, don’t pay higher taxes to finance the battleship, as the purchase of bonds by bondholders replaces the higher taxes that taxpayers would otherwise have paid. The only option is that it is future taxpayers who now face smaller consumption opportunities due to the burden they will bear to retire public debt. Hence, public debt allows the cost of public spending to be transferred forward in time.

DBx: Indeed.

And so there is no good reason to believe that the building of this battleship is justified – that is, that it is not an instance of excessive, and hence wasteful, government expenditure. The ability of today’s citizens to acquire for themselves a government good that is to be paid for by other people – namely, tomorrow’s taxpayers – means that today’s citizens will spend more recklessly than they would spend if they were required to fund all of today’s programs with currently collected taxes.

The size of the government budget is not independent of the means used to finance it. Let me repeat, with emphasis, this central reality: The size of the government budget is not independent of the means used to finance it. If among these available means is borrowing, the cost today to citizens and their political representatives of spending is lower than it would be were borrowing not an option (or were an option that is especially difficult to use). And the lower the cost of any activity, the more that activity will be pursued.

It follows that the more readily government is able today to fund its projects and programs with borrowed funds, the more projects and programs government will today undertake. The same point put differently is this: Deficit financing translates into greater government spending – into larger government budgets – into greater government influence over the economy – into more government waste and inefficiency.

Therefore, anyone who truly wishes to reduce government spending and imprudent uses of resources should be at the forefront of those who oppose the financing of government budgets with borrowed funds. I repeat yet again, this time with appropriate coloration: The size of the government budget is not independent of the means used to finance it.

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Here’s an e-mail to my friend John Tamny:

John:

While there’s much to admire in your essay “Socialism, Not Debt, Causes Economic Collapse,” you dismiss too quickly the possibility of government debt being monetized and, hence, fueling inflation – as well as dismiss too quickly the findings of Carmen Reinhart and Ken Rogoff. In addition, you miss at least two other foundational objections to deficit financing. One is ethical while the other is economic.

The ethical: The bills for government programs paid for today with borrowed funds are handed to future generations. Our children and grandchildren are forced by government borrowing to pay tomorrow for whatever programs we undertake today. While borrowing for some projects might overcome the presumption that such spending of other people’s money is unethical, this presumption looms large. Yet it is ignored – I believe unethically – by those who are blasé about government borrowing.

The economic: Spending other people’s money is inefficient. The ability to launch and expand government programs with borrowed funds that will be repaid, not by the borrowers, but by other people naturally prompts today’s citizens and their political representatives to launch and expand some programs that they would otherwise choose to forego. Just as I will purchase a new Mercedes rather than a used Toyota if I get to spend, not my money, but your money without your permission – indeed, without even your knowledge – today’s citizens and politicians will purchase, at the expense of future generations, government goods and services for themselves that they would not purchase if they had to spend their own money.

In short, ability to borrow fuels excessive government growth, which reduces private-sector growth.

The fact that the U.S. and U.K. economies have grown despite their governments’ heavy borrowing does not mean that this borrowing has had no negative economic consequences. The only way that you could deny this conclusion is if you were to insist that real resources are not scarce – if you were to insist that real resources channeled by debt into today’s government programs materialize, not from the private sector, but out of thin air.

Knowing that you understand that real resources are indeed unavoidably scarce, I continue to be mystified that you remain so blasé about government borrowing.

Sincerely,
Don