… warns of the grave dangers to the neighborhood if a family on the next street refuses to save and thus prevents additional resources from being channeled into a neighborhood factory, and who warns of the grave dangers to the neighborhood if a family in the next town chooses to save in a way that channels additional resources into the very same neighborhood factory.
In other words, for every steel worker that may be helped by the import tax, there are over 38 workers in steel-using sectors that may be harmed by it. Further, the vast majority of steel-consuming manufacturers are small businesses that don’t command the ability to pass higher prices on to their consumers.
In my latest Pittsburgh Tribune-Review column I celebrate the power of the economic way of thinking. A slice:
Another example [of a point emphasized by David Friedman]: You buy a jacket, telling friends it “cost” you $100. But your statement is inaccurate. When you gave, say, five $20 bills to the clerk, what you really gave up wasn’t five pieces of paper engraved with Andrew Jackson’s portrait. What you really gave up is whatever you otherwise would have bought with those five pieces of paper.
Suppose that, had you not bought the jacket, you would have bought a meal at a nice restaurant for you and a friend. In this case, you compared a jacket to that restaurant meal.
We humans constantly compare apples to oranges — and choose sensibly between them.
The University of Chicago’s James Traina finds evidence against the claims of the increasing number of those who call for more vigorous antitrust enforcement. (HT Tyler Cowen)
Jairaj Devadiga argues that politicians are generally aware of the harm done by minimum-wage diktats.
David Henderson makes the case against hand-wringing over income inequality. A slice:
If the problem we care about is poverty, then the calls to tax the rich and reduce income inequality are misguided. Instead, we should be cheering for policies that lead to higher economic growth. One other important measure is increased immigration. Allowing more immigration into the United States would allow people to move from low-productivity jobs in poor countries to higher-productivity jobs in America. That would dramatically improve the plight of the poor while also improving, but by a smaller margin, the well-being of the rich. Piketty, for all his faults, put his finger on how to do so. He wrote: “A seemingly more peaceful form of redistribution and regulation of global wealth inequality is immigration. Rather than move capital, which poses all sorts of difficulties, it is sometimes simpler to allow labor to move to places where wages are higher.”
Amen, frère.
My colleague Walter Williams reflects on Black History Month.
The December 2003 Freeman‘s “It Just Ain’t So!” column featured my argument against the claim that human rights come from – or originate with – the state. My argument is below the fold.
… is from an August 1894 letter from Pres. Grover Cleveland to Rep. T.C. Catchings (D-Mississippi) in which Cleveland gave his reasons for refusing to sign a tariff act; I discovered this quotation on page 292 of Douglas Irwin’s marvelous 2017 volume, Clashing Over Commerce:
When we give to our manufacturers free [that is, untariffed] raw materials we unshackle American enterprise and ingenuity, and these will open the doors of foreign markets to the reception of our wares and give opportunity for the continuous and remunerative employment of American labor. With materials cheapened by their freedom from tariff charges, the cost of their product must be correspondingly cheapened. Thereupon justice and fairness to the consumer would demand that the manufacturers be obliged to submit to such a readjustment and modification of the tariff upon their finished goods as would secure to the people the benefit of the reduced cost of their manufacture, and shield the consumer against the exaction of inordinate profits.
DBx: Cleveland here makes the case against the mercantilist fallacy that trade policy should encourage maximum domestic production and minimum domestic imports. Protectionists who subscribe to this fallacy often approve of low or even no tariffs on inputs used by domestic producers (especially domestic producers who produce for export markets) as a means of encouraging domestic production and exporting. But these protectionists demand high tariffs on consumer goods as a means both of preventing the outflow to foreign countries of money and – more importantly – of protecting domestic producers from competition. (Many modern American subscribers to this fallacy are under the absurd delusion that protecting American producers from foreign competition will make these producers “great again.”)
Protectionists are always looking out for the interest of a subset of existing domestic producers. Protectionists care nothing about consumers except insofar as consumption spending is a means of furthering the end of maximally and artificially inflating the revenues of the favored subset of existing domestic producers.
….
As. U.S. presidents go, Grover Cleveland is my all-time favorite. H.L. Mencken perceptively called him “a good man in a bad trade.”
Today – February 20th, 2018 – is the second anniversary of what is by far the single most popular blog post that I’ve ever written. It’s on how ordinary Americans today are quite plausibly materially richer than was J.D. Rockefeller a mere 100 years earlier. I stand by that claim. And if my claim is correct – or even if it is a candidate for being correct – of what relevance is all of today’s hand-wringing over, and pontificating about, differences in the sizes of monetary incomes or of monetary wealth?
If you are alive today in a first-world country, you are historically off-the-charts super rich. You are among the luckiest and most fortunate human beings ever to draw a breath. So if you’re complaining about the fact that your income or wealth isn’t as high as is that of, say, Bill Gates or George Clooney or your neighbor-the-neurosurgeon, stop it and grow up. You are complaining about an insignificance. Appreciate your immense good fortune.
… if he sells an automobile to a stranger for cash, believes that the value of this exchange for him is maximized if he stashes every bit of the cash into his mattress and never, ever spends it. That is, this protectionist believes that he would make himself worse off if ever he would spend any of the cash on goods and services that would improve his standard of living. This protectionist also believes that the automobile buyer is a gullible sucker or irresponsible fool for parting with cash in exchange for a good that she, the stranger, didn’t produce with her own two hands.
… is from page 3 of Mike Munger’s 2015 book, The Thing Itself:
Things are rarely so bad that demagogues can’t make them worse.
From time to time, when I write a blog post I feel as though I’m setting a trap. Setting a trap is never my intention, but on such occasions I have a pretty good sense of the specific contents of the retorts that my post will elicit – retorts that will give me the opportunities to explain just why the retorts are mistaken.
I had such a sense when writing this post earlier today and, sure enough, the retort that I felt confident would come actually came (as it happens in this case from Bret Wallach). My post made the point that the logic of protectionism, if it were correct, would suggest that individual households would maximize their material prosperity by refusing to trade with each other. Each household would be autarkic.
Here’s Bret Wallach’s comment, in full, on my earlier post:
And an anti-protectionist who makes such a claim has no concept that scale can matter, that while going from one person doing everything himself to a thousand people specializing is overwhelmingly more productive, going from a billion people trading to a trillion people trading might not be more productive at all, and even if it is more productive, will not yield nearly the increase as going from 1 to 1,000 people.
Scale does indeed matter, but contrary to Mr. Wallach’s evident supposition, this reality does not strengthen the protectionist’s case for trade restrictions. I have two responses to Mr. Wallach’s point, with the latter being the more fundamental – the one that I anticipated being given the opportunity to make.
First, scaling up from an individual being completely self-sufficient to that individual trading with a thousand people might well produce a larger increase in that individual’s material standard of living than would be produced if, as one of a million people who as a group start off trading only with each other, the group opens up trade such that the trading group now consist of a billion people. But maybe not. Suppose that when the group of a million people opens up trade with 999,000,000 other people, one of the 999,000,000 other people is an Alexander Fleming who invents antibiotics or a Norman Borlaug whose research greatly expands crop yields. Is it obvious that the additional lives saved and improved by having access to the fruits of such a person’s genius, creativity, and hard work would be a lesser improvement in living standards than that which would occur when one individual begins trading with 999 other individuals?
Remember that the number of possible ways for individuals to connect and to cooperate with each other – opportunities (as Matt Ridley says) for ideas to “have sex” with each other – increases exponentially with the size of the population. These increasing returns to scale work against Mr. Wallach’s point. (See also this important article by my late Nobel-laureate colleague Jim Buchanan and his co-author Yong Yoon on Adam Smith’s increasing-returns-based argument for free trade.)
Second and more fundamentally, even if there unambiguously are decreasing returns to the scale of the trading population, this fact means neither that the optimal scale is the population of the nation-state nor that the increased benefits to be gotten by expanding trade beyond the borders of the nation-state are somehow trivial or unworthy simply because the magnitude of these increased benefits aren’t as large as is the magnitude of the benefit of scaling up the size of the trading group from some unit smaller than the nation-state to the full nation-state. Decreasing returns to scale does not mean negative returns to scale. And decreasing returns to scale does not mean that the benefits of increasing the scale are necessarily less than the costs of doing so.
One benefit of free trade is that such trade allows the ‘optimal’ scale of the trading group to be discovered through actual, competitive market activities – with buyers and sellers spending their own money – rather than through political machinations which invariably – and invariably mistakenly – treat the nation-state as if it is economically something special or even meaningful.
Put differently, the case for free trade can be stated as a case for allowing markets rather than government to discover the ‘optimal’ scale of the trading group – which, do note, almost certainly differs for different goods and services.
Whatever the case, there is absolutely no good reason to accept the protectionist’s implicit assumption that the size and population of whatever nation-state he or she happens to be in somehow is the optimal scale of the trading group.
… according to Michael Connell of Monmouth College, “wants to reward his neighbors with low productivity jobs to provide him with something he values highly — a sense of self-righteous smugness.”
(I thank Michael for e-mailing to me this insight and for giving me permission to share it here.)
John Tamny draws an important lesson from “the awful Republican budget.”
Richard Rahn makes the case for privatizing as many government agencies as possible.
Randy Holcombe writes about gun control. And relatedly, here’s Alan Reynolds on the data on mass shootings in the U.S.
