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Here’s a letter to The Hill:

You report on “Congress reeling from sexual harassment deluge” (Dec. 9).  Of course, all decent people are grateful whenever those who shove themselves unwanted, to satisfy their own lusts, into other people’s personal spaces are exposed and punished for their offensive intrusions.

But let’s be clear: politicians at all levels typically shove themselves unwanted, to satisfy their own lusts, into other people’s personal spaces.  With trade barriers politicians harass – to satisfy their lust for reelection – innocent people who wish to import sugar, clothing, tires, and many other goods.  With civil asset forfeiture they harass – to satisfy their lust for power – innocent people who use cash and recreational drugs.  With occupational-licensing restrictions they harass – to satisfy their lust for the support of their cronies – willing buyers and willing sellers who seek only to peacefully do business with each other.  And with taxes they harass – to satisfy their lust for lucre – those who create wealth.

That these professional harassers harass others also in more carnal ways should surprise no one.

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 page 39 of Melvin Reder’s 1947 book, Studies in the Theory of Welfare Economics:

But, to many critics, “free” competition – or any other kind – has no particular virtues, and the economist has had – and still has – to wage a vigorous battle in its defense.

DBx: By “‘free’ competition” Reder here means open competition, the sort that naturally exists without artificial barriers to entry into, and to exit from, industries and occupations, as well as with widespread freedom of consumers to spend their incomes as they see fit.

Two ugly monuments to the dislike of competition mentioned by Reder are occupational-licensing restrictions and trade restraints.  Many who support such restrictions and restraints do not realize that they oppose competition.  They say – often, although by no means always, sincerely – that they aim merely to ensure that consumers are protected from unsafe products and services (as is claimed for occupational-licensing restrictions) or that workers are protected from losing their jobs (as is claimed for trade restraints).  But even though these proponents of restrictions and restraints do not realize it, what they really oppose is competition.

Especially in the case of trade restraints, nearly every economic argument that protectionists offer as a good reason for such restraints would, if valid, be a good reason for restraints on competition generally.  There is nothing at all unique about competition that comes from across a political border; such competition has all of the upsides and downsides of competition that is exclusively home-grown.  Yet protectionists continue to miss this important reality.  Protectionists do not realize that, if their arguments against imports are valid, then not only must increased trade with foreigners be stopped; in addition, increased trade with any set of particular producers, regardless of these producers’ physical locations, must be stopped.

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… is from page 58 of the first volume (“Rules and Order,” 1973) of F.A. Hayek’s brilliant Law, Legislation, and Liberty – a volume that has done more than any other single book to affect my worldview:

That we should foreswear all principles or “isms” in order to achieve greater mastery over fate is even now proclaimed as the new wisdom of our age….  If I am not mistaken, this fashionable contempt for “ideology” or for all general principles or “isms” is a characteristic attitude of disillusioned socialists who, because they have been forced by the inherent contradictions of their own ideology to discard it, have concluded that all ideologies must be erroneous and that in order to be rational one must do without one.

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Here’s a letter to a high-school senior:

Mr. Kimbrough:

Your teacher is mistaken to assert that, because “free trade causes innocent people to lose jobs,” the case for free trade “is sound economics, but ethically is questionable.”  In making this assertion, your teacher overlooks several key features of trade generally and of a policy of free trade specifically.  Here’s are just two:

First, in the U.S., the number of layoffs and discharges each month that results from imports is a tiny fraction of the total number of layoffs and discharges.  Consider this telling comparison.  Earlier this year the trade skeptics at the Center for Economic and Policy Research estimated that the number of American jobs destroyed each year by imports from 2001 through 2007 was, on average, 620,000 – or 3.72 million over the full six-year period.  Let’s not question the CEPR’s figure – a figure that that organization has every interest in making as large as possible – and compare it to total layoffs and discharges in the U.S.  The month of September 2017 alone saw 1.7 million layoffs and discharges.  This monthly figure is typical.  Therefore, in each two-month period today in the U.S. the total number of jobs destroyed is about the same as the number of jobs destroyed by imports over the entire six-year period 2001-2007.

These facts imply that the vast majority of job destruction is caused by improvements in technology, shifts in consumers’ tastes, and other economic changes that have little or nothing to do with imports.  And so if your teacher really believes that an economic process is ethically questionable if it causes job losses, he or she should oppose not just international trade but all economic competition and change.

Second, ask your teacher what is so ethical about a relatively small handful of existing domestic producers persuading the state to punitively tax fellow citizens whose only offense is to spend their own money in ways that they judge are best for them and their families.  If student interest in majoring in economics were to decline, would your teacher think me to be ethically justified if I – a professor of economics – persuaded the state to punitively tax all students who choose to major in subjects other than economics?  My guess is that he would not.  If my guess is correct, then to be consistent your teacher should also see that it is quite unethical for the state more generally to artificially obstruct consumers’ attempts to spend their money as they – rather than as politically powerful suppliers – see fit.

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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In this podcast, Jonah Goldberg talks trade with Scott Lincicome.

My new Mercatus Center colleague Christine McDaniel, writing in today’s Wall Street Journal, argues for tearing down even the tiniest tariff wall.

Thanks to Robert Wenzel for sharing this short video of Hayek discussing misconceptions about economics.

Sheldon Richman makes the case for ending so-called ‘net neutrality.‘

Naturally, I’m delighted that Mark Perry made one of his famous Venn diagrams out of a recent Cafe Hayek post.

My colleague Larry White writes about Hayek on central banking and moral hazard.

With this new study, Jacob Bundrick and Thomas Snyder give us reason to doubt the stimulative effects of government subsidies to businesses.

George Will riffs insightfully on the ‘tax reform’ pending in Washington.  A slice:

The Democrats’ denunciation of the Republicans’ tax cuts because they especially benefit the wealthy is a recyclable denunciation of any significant tax cut. The top 1 percent of earners supply 39 percent of income tax revenue, the top 10 percent supply 70 percent, the bottom 50 percent supply 3 percent, 60 percent of households pay either no income taxes (45 percent) or less than 5 percent of their income, and 62 percent of Americans pay more in payroll taxes than in income taxes. So, any tax cut significant to macroeconomic policy — any that might change incentives sufficiently to substantially change businesses’ and individuals’ behaviors — must be primarily a cut for the affluent.

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Russ Roberts asks – and goes some long way toward answering – this question in this new, superb video.

You can find more here.

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… is from page 117 of my late Nobel-laureate colleague Jim Buchanan’s paper in the October 1987 issue of Ethics, “The Economizing Element in Knight’s Ethical Critique of Capitalist Order,” as this paper is reprinted in Economic Inquiry and Its Logic (2000), which is volume 12 of the Collected Works of James M. Buchanan:

[T]here is no social value scale, as such, established in market exchange.  The price vector that does emerge becomes a commonly shared constraint to which all persons adjust independently in their efforts to maximize their own subjectively determined scales of value.  It is conceptually meaningless to think of “the economy” as “economizing” on the use of resources.  Only individuals “economize,” given their resource endowments and the constraints that they face, constraints that embody the economizing-maximizing behavior of other participants in the whole exchange nexus.

DBx: No obstacle to clear thought about economic activity looms larger than the notion that the economy is an organization with a single hierarchy of ends – ends the achievement of which each of us, as resource owners (including owners of labor services) and as consumers, does or should behave to promote.  While the economy no less than the household, the firm, and the government is subject to, and governed by, the basic laws of economics and features of reality, unlike the household, the firm, and the government, the economy is not an organization for satisfying any particular goals.  Instead, the economy is that complex of human exchanges – mostly, but not always, mediated with money – that emerges as each individual, each household, each firm, and each government acts in ways to best achieve its individual ends.

An economy ‘works’ to the extent that it enables each of the individuals to achieve as many of his or her ends as possible.  But the achieving of these individually chosen ends is not, and ought not be thought of as, itself a means to some higher end such as “national economic growth” or “global economic prosperity.”  A nation’s measured economy might indeed grow as a result of individuals achieving many of their individually chosen and pursued ends.  And measured global economic prosperity might also rise for the same reason.  Yet these happy outcomes are not ends pursued by the millions or billions of individuals each of whom acts in ways that bring about these outcomes.  No one intends to bring about these outcomes, and attempts to engineer such aggregate outcomes can only stifle individuals’ abilities to achieve as many of their ends as possible.

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Suppose that Toyota, starting in 2018, offers for sale in America a car that reduces its occupants’ risks of being killed or injured by at least 90 percent compared to any other automobile that is or ever has been sold on the market.  Suppose further that this car, assembled in Japan, is otherwise indistinguishable from the mid-price car models sold by General Motors, Ford, and Chrysler in its performance, in its fuel economy and other costs of operation, in its comfort, in its amenities, and – importantly – in its price.  That is, this newly introduced Toyota model is pretty much a routine new mid-price car sold in America today save for one remarkable feature: its occupants’ chances of being killed or injured are 90 percent lower than what those chances are in other cars.

This remarkably safe new Toyota model, although selling at a nominal price comparable to that of an ordinary new Ford Fusion, Buick LaCrosse, Chrysler 200, or other new mid-price cars, is a far better bargain than is each of these other cars; American consumers get far more value for their dollars by buying this new, remarkably safe Toyota model than by buying a more conventional model, such as a Ford Fusion, in the same price range.  And, therefore, because American consumers get so much more for their dollars by buying this new Toyota car than by buying any Ford, G.M., or Chrysler product, consumer demand for this new Toyota car will skyrocket and thereby drain consumer demand away from U.S. car makers.  Indeed, let’s make the entirely plausible assumption that the introduction into the American market of this new, remarkably safe Toyota car drains so much demand away from G.M., Ford, and Chrysler that these American car makers suffer huge losses and must lay of thousands of hard-working, honest, always-played-by-the-rules American workers.

I have some questions for protectionists who believe that the United States government should prevent foreign producers from “dumping” imports in America.  Let’s begin with: Should the U.S. government impose a punitive tariff on this new and remarkably safe foreign-assembled car (that is, really, on Americans who choose to purchase this new and remarkably safe foreign-assembled car)?

If you – Mr. or Ms. Protectionist – are hesitating to answer this question, let me add another assumption: Suppose that it is also indisputably true that Toyota was able to develop and implement the technology to produce and offer for sale such a remarkably safe car only because it received massive direct subsidies from the Japanese government.  Do you now believe that Uncle Sam should protect U.S. automakers from the competition of this new Toyota model by taxing at punitive rates any and all purchases that Americans make of this new Toyota model?

If you answer “no,” then why do you believe that Uncle Sam should tax at punitive rates any and all purchases that Americans make of foreign goods that are sold in the U.S. at prices deemed by Uncle Sam to be ‘too low’?  Why do you not see that quality that is ‘too high’ (at a given price) is the very same phenomenon as prices that are ‘too low’ (with given quality)?

If you answer “yes,” can you explain why you’re willing to forcibly penalize Americans from taking actions that dramatically reduce – and at no additional costs to them – their and their families’ risks of being killed or injured simply because those actions involve buying a foreign-assembled car whose remarkable safety features are made possible by foreign-government subsidies?  Are you really so inhumane as to deny individuals the opportunity to save their and their loved-ones’ lives and limbs simply on the grounds that those individuals, in taking such actions, cause some other individuals to lose their jobs?

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… by taking full advantage of the global division of labor.

Yesterday I was chatting with my friend Mike Long, who recently became CEO of AnyDATA.  AnyDATA’s main product line consists of electronic devices that plug into automobiles’ computer systems and wirelessly feed a wide variety of data on the automobiles to those who are interested in such data.  (Among those who are interested are drivers themselves, automobile manufactures, and automobile insurers.)

AnyDATA is located in southern California.  Most of its employees are high-tech geeks who conceive and design these devices.  The physical construction of Anydata’s devices, however, takes place in China.

I asked Mike if his company would exist if it had to rely on such devices being produced in America.  His instant answer: “No.”

The ability of AnyDATA to tap into the comparative advantage of the Chinese at physically assembling such electronic devices is what makes AnyDATA a reality and, hence, what makes the jobs and relatively high incomes of AnyDATA’s American employees possible.

People such as Trump and others in his troupe of economic nationalists look at the assembly in China of AnyDATA’s devices and lament that these devices aren’t produced in the United States.  But what people such as Trump and others in his troupe of economic nationalists do not see is that if tariffs are used to restrict the importation into the U.S. of these Chinese-assembled devices, such devices will not then be manufactured in the U.S.

The most likely consequence is that similar devices will be imported from a country or countries other than China.  But because, absent tariffs, such devices would continue to be assembled in China, the tariffs shift assembly of these devices to countries in which assembly costs are higher than in China.  The prices that AnyDATA must pay for such assembly services rises.  In turn, prices at which AnyDATA sells its devices to its customers rise.  As a result, AnyDATA will sell fewer devices than otherwise.  It’s business will suffer.

If instead Uncle Sam imposes high tariffs on the importation of such devices from any country, AnyDATA almost certainly must drop this line of products.  Indeed, AnyDATA might be forced out of business altogether.  Given the cost of American labor and other inputs, producing such devices in the U.S. would today simply be uneconomical.

Looked at from a slightly different angle, here’s a list of possible economic outcomes involving industries of the sort to which AnyDATA belongs:

– Americans specialize in high-value-added activities such as inventing and engineering the devices that AnyDATA sells; other countries specialize in the lower-value-added activity of physically assembling the devices.

– The U.S. government obstructs the importation of such assembled devices, causing Americans to play no, or a much smaller, role in the global industry that creates, engineers, and produces such devices.

– The U.S. government conducts protectionist trade policy such that it gives Americans once again a comparative advantage at performing low-value-added tasks such as assembling the devices sold by AnyDATA; Americans would then specialize, not in the high-value-added activities such as inventing and engineering such devices, but, instead, in the lower-value-added activity of physically assembling such devices.

Bottom line: The profitable operation today of many American-based firms depends upon their ability to import low-cost devices and other inputs from other countries.  This ability to import low-cost inputs is vital to the creation and profitable operation of many high-value-added American firms, such as AnyDATA.