by Don Boudreaux
on February 26, 2018
… upon seeing Smith pay to Jones a large sum of money to entice Jones to help Smith satisfy an urgent demand – say, the demand to cure Smith’s child of a life-threatening illness – concludes that people as a group become more prosperous the greater is the number of urgent demands they have. The protectionist, upon seeing the large sum of money that Smith pays to Jones for Jones’s assistance in saving the life of Smith’s child, advises state officials that the wealth of the nation will rise if these officials artificially arrange for as many as possible of the nation’s citizens to require the scarce services of expensive specialist producers – including those of physicians to save children’s lives.
Protectionists mistake scarcity as being the source of wealth because they see people willingly pay to have the bite of scarcity eased – and because the protectionist sees also that the more vicious is scarcity’s bite, the more people are willing to pay to have it eased. What the protectionist misses is that prosperity is found, not in scarcity’s bite, but in the easing of scarcity’s bite. Protectionists are blind to the reality that the less vicious is the bite of scarcity, the wealthier are the people.
While sensible people celebrate having greater access to goods and services, the protectionist laments this greater access. The protectionist laments this greater access because it means that less human effort and fewer resources must now be devoted to satisfying the consumer demands that are now better satisfied because of people’s greater access to goods and services.
As GMU Econ doctoral candidate Jon Murphy always correctly reminds us, protectionists are really scarcityists.
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by Don Boudreaux
on February 26, 2018
… according to Jairaj Devadiga has taken George Orwell’s Nineteen Eighty-Four to heart. For the protectionist:
SCARCITY IS PROSPERITY
DEFICITS ARE SURPLUSES
INJUSTICE IS FAIRNESS
(I thank Jairaj for his kind permission for me to share here his e-mail.)
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by Don Boudreaux
on February 26, 2018
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by Don Boudreaux
on February 26, 2018
… is from page 322 of my late Nobel-laureate colleague James Buchanan’s September 1977 paper, “Tax Reform in ‘Constitutional’ Perspective,” as this article is reprinted in Choice, Contract, and Constitutions (2001), which is volume 16 of The Collected Works of James M. Buchanan:
Predictable rules within which individuals may rationally plan their activities are part of the “public capital” of any society.
DBx: The point is too seldom made that a society whose members rely largely on legislation, as well as on administrative-state commands and prohibitions, is a society in which the predictability of the rules will be less than in a society that relies more on evolved law and conventions. A premise of many, if not all, of those who admire a ‘vigorous’ or ‘activist’ state is that such a state can ‘remake’ society – can by design and state action “change the world” for the good. Such hubris is dangerous. An uncertain regime of rules, one always subject to change based on changes in political personnel or on political manias, is a public bad.
Government is often declared to be the only reliable supplier of “public goods.” This declaration is far more aspirational than it is empirical. In fact, government too often undermines the provision of public goods, even as it does so in the name of supplying public goods.
….
One of the now-classic explanations of “regime uncertainty” and its dangers is this 1997 article by Bob Higgs.
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by Don Boudreaux
on February 25, 2018
… is unhappy that private firms nearly always fail in their attempts to gain and maintain genuine monopoly power in markets. The robust competitiveness of markets whose participants receive no special privileges from the state obliges producers to incessantly attempt to better meet the demands of consumers. One result of this robust competition is a more or less steady increase in the size of the flow of goods and services produced each year and made available to consumers.
The protectionist fears and loathes this on-going achievement of the market to ease scarcity’s bite. Therefore, greater success at grasping and holding on to monopoly power would please the protectionist, because, after all, the protectionist believes that the higher are the prices that producers are able to fetch from consumers, the more the economy is “winning” and the more prosperous are The People.
Alas, because private markets are so robustly competitive, the protectionist demands that government give to that subset of domestic producers that happen to catch his or her fancy special protection from competition. The protectionist then points to the higher revenues raked in by protected firms – and to the greater rates of output and higher employment levels of such firms – and declares victoriously to the world that protectionism is a useful means of enriching the nation as a whole. The protectionist’s philosophy seems to be this: “Because monopoly power cannot be created and sustained by purely private actions in markets, a proper role of government is to create and enforce monopoly privileges.”
In short, the protectionist believes that monopoly power is a public good, one that must be supplied by the state.
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by Don Boudreaux
on February 25, 2018
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by Don Boudreaux
on February 25, 2018
… is from page 292 of H.L. Mencken’s 1922 volume, Prejudices: Third Series:
The ideal government of all reflective men, from Aristotle to Herbert Spencer, is one which lets the individual alone – one which barely escapes being no government at all.
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by Don Boudreaux
on February 24, 2018
… loves pirates and opposes efforts to fight piracy. Protectionists correctly recognize that pirates reduce the flow of goods traded internationally. The artificial scarcity of goods created by pirates furthers the protectionist’s goal of artificially pushing up the prices of goods in the domestic market, and, hence, pushes up the wages of workers who produce goods in the domestic economy that would have competed with the goods that are bound for the protectionist’s home country but are instead stolen by pirates.
It’s true that in the protectionist’s ideal world pirates would steal only goods bound for the protectionist’s own country and would allow free passage to all ports of ships loaded with exports from the protectionist’s own country. But the protectionist, in this case, is a realist: because it’s impossible in practice to persuade pirates to seize only those goods on ships bound for the protectionist’s home country – the country that the protectionist claims to wish to see flourish – the protectionist nevertheless appreciates pirates’ socially constructive achievement of reducing the overall flow of goods traded internationally.
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by Don Boudreaux
on February 24, 2018
… is from page 402 of the late University of Washington economist Paul Heyne‘s 1982 lecture “What Is the Responsibility of Business Under Democratic Capitalism?” as this lecture appears in the 2008 collection of Heyne’s writings, “Are Economists Basically Immoral?” and Other Essays on Economics, Ethics, and Religion (Geoffrey Brennan and A.M.C. Waterman, eds.):
The basic problem with democracy is that special interests have an enormous advantage in this competition. People know and care about their own interests. But they usually don’t pursue them successfully through the political process, because the cost to any one person of exerting influence will typically exceed by a large amount the expected benefit from acting. Each of us is just one voice and one vote. So why bother? Why bear the cost? Since my action will have an insignificant impact, while imposing considerable costs on me in time and money, it is in my interest to behave like a free rider in the political arena: to do nothing and hope that someone else will defend my interests.
The people for whom the expected benefits exceed the costs are people who form part of a relatively small group with a relatively substantial interest. The laws that emerge from operation of democratic processes are consequently laws that cater to an endless succession of narrow, special interests. We are not governed by the will of the majority but by the wills of innumerable minorities. Special preferences and restrictions multiply, and collectively make all of us ultimately worse off. Competition in the political arena subverts competition in the economic arena, and thereby subverts the invisible hand that extracts the public advantage from the pursuit of private advantages.
DBx: Combining the above problem with voters’ rational ignorance and rational irrationality reveals beyond any doubt that government is the last institution to be entrusted with the task of correcting market imperfections.
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