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… if she chooses a real-estate agent according to the same criteria that she uses to choose which candidate for political office gets her vote, she would choose that real-estate agent who promises most earnestly to work to ensure that she gets as little house as possible at a price far higher than is necessary to pay.  And when she closes on her purchase of the vastly overpriced house, she’ll boast to her friends of her “victory!”

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Here are my GMU Econ colleague Bryan Caplan’s opening remarks from his recent debate, with Elizabeth Bruenig, on capitalism versus socialism.  A slice:

What’s so awesome about the capitalist ideal?  It’s a system based on individual freedom and voluntary consent.  You’re allowed to do what you want with your own body and your own stuff.  If other people want to cooperate with you, they have to persuade you; if you want other people to cooperate with you, you have to persuade them.  Can consent really be “voluntary” if some people have a lot more to offer than others?  Absolutely.  Some people are vastly more attractive than others, but that does nothing to undermine the voluntariness of dating.  Under capitalism, how people use their freedom is up to them; they can try to get rich, they can relax, they can help the poor, all three, or none of the above.

Shikha Dalmia notes that Trump has exposed the shallowness of the GOP’s commitment to fiscal responsibility and to free markets.

Mathieu Vaillancourt argues, in the Wall Street Journal, against the latest howler from Nancy MacLean – namely, that libertarians are autistic.  A slice:

Nor are classical liberals and libertarians emotionless, compassionless people. The vast majority of us believe in helping the needy; we simply think aid is better given in a bottom-up, voluntary way than dispensed by a centralized government. We disagree among ourselves on how to achieve social goals. But it’s outrageous to suggest that we don’t care.

Alice Temnick poses some probing questions to philosopher Elizabeth Anderson and others who believe that bosses in many of the private companies that exist and compete in market economies have power equivalent to that of tyrannical dictators.

Russ Roberts’s latest EconTalk podcast is with Nassim Nicholas Taleb.

Philip Booth and Diego Zuluaga defend finance against the charge that it is either useless or, worse, destructive.

James Pethokoukis is correct that Trump’s tariffs are appalling.

The editors of the Wall Street Journal weigh in again against Trump’s appalling, illogical, and cronyist trade policy.  A slice:

The policy point is that Mr. Trump’s tariffs are trying to revive a world of steel production that no longer exists. He is taxing steel-consuming industries that employ 6.5 million and have the potential to grow more jobs to help a declining industry that employs only 140,000.

Like King Canute, Mr. Trump is trying to roll back the economic tides. The difference is that Canute knew it was folly.

Tom Mullen explains that the discipline of economics largely was launched to refute the mercantilist fallacies that fuel the likes of Trump’s trade policy.

Warren Meyer wonders why so many ordinary people do not see the reality that protectionism is corporate welfare.

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Here’s a letter to the New York Times:

Josh Bivens errs when he asserts that Trump’s tariffs may “do some good” because they provide “temporary relief for specific sectors (steel and aluminum) facing a specific problem (global excess production capacity, propped up by foreign governmental subsidies)” (“Don’t Worry About Trump’s Tariffs,” March 5).

To the extent that foreign steel-making capacity is the result of foreign-government subsidies, that capacity isn’t excessive from Americans’ perspective.  Instead, it’s foreign-governments’ way of giving to us Americans gifts of steel and aluminum – gifts that we should welcome just as we welcome the sun’s gift to us of light and warmth.  Nor is there any reason to believe that that steel-making capacity is temporary.  The political forces and economic misunderstanding that propel governments to subsidize industries are notoriously tenacious.

But if this alleged excess capacity is indeed temporary, steel and aluminum companies should turn to private financial markets.  Supplying financing to weather passing commercial storms is among the core roles of financial markets.  By taxing American buyers of metals in order to relieve American producers of the need to seek and pay for such financing, our government does exactly what it deplores other governments doing – namely, subsidizing the operations of their politically powerful domestic producers.

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 my column for the January 2006 Freeman I argued that capitalism decreases the risks that we’ll be injured or killed by natural disasters.  My column is below the fold.

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Here’s a letter to a new Cafe Hayek reader:

Mr. Rick Gonzales

Mr. Gonzales:

Thanks for your e-mail.  You support Pres. Trump’s steel tariffs because, you believe, “they’ll help at protecting us from Chinese predatory pricing.”

As you likely know, predatory pricing allegedly occurs when a supplier, hoping to gain a monopoly position tomorrow, tries to destroy all of its competitors by charging ‘excessively’ low prices today.  Forget for purposes of this letter that neither history nor theory is kind to allegations of predatory pricing: the conditions necessary to make it a plausible strategy are wildly unrealistic.  (You can check out some of my thoughts on this matter here.)

You might reply that, if Beijing is subsidizing Chinese steelmakers, such predation becomes more likely to succeed.  To which I respond: ‘Yes.  It raises prospects of success from about 0.0000000000000001% to about 0.0000000000000002%.’  U.S. steelmakers currently supply about 70 percent of all steel-mill products bought in the United States, with the remaining 30 percent coming from foreign-based companies. (The proposed tariffs are on steel-mill products only – ‘raw’ steel, if you will.)  The top ten countries that supply such steel today to the U.S. are, in this order: Canada, Brazil, South Korea, Mexico, Russia, Turkey, Japan, Taiwan, Germany, and India.  The steel supplied to us by the many different companies in these ten countries, combined with the steel that we supply to ourselves, is about 93 percent of all steel-mill products bought and consumed in the U.S.

Among today’s foreign-country suppliers of steel-mill products to the U.S., China ranks #11, supplying about 2 percent of U.S. imports of such steel – or about 0.6 percent of all such steel bought and used today in the U.S.  Even compared only to the amount of such steel supplied to the U.S. market by American companies, Chinese steelmakers supply a paltry 0.4 percent of what American companies supply to the U.S. market.  That is, American steelmakers alone supply 250 times more steel to the U.S. market than do the Chinese.

Remember that to monopolize the American market, not only would the Chinese have to bankrupt all U.S. steel producers, they would have to bankrupt all steel producers worldwide.  This reality and these numbers render fears of a Chinese scheme to monopolize the U.S. market for steel-mill products about as plausible as fears of a zombie apocalypse.

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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My intrepid Mercatus Center colleague Veronique de Rugy, writing in the New York Times, exposes many of the fallacies fueling support for Trump’s tariffs on steel and aluminum.  Some slices:

On the campaign trail, Candidate Trump promised to drain the swamp in Washington. Last Thursday, the swamp showed how powerful it really is. In a sort of crony-capitalist reality TV broadcast, President Trump, flanked by steel and aluminum executives, granted their requests for tariffs.

The announcement itself — which outlined a plan for 25 percent tariffs on steel and 10 percent on aluminum — was no surprise. Last summer, consistent with his longstanding hostility to free trade and globalization, the president exclaimed, “Tariffs, I want tariffs.”

Mr. Trump, in the White House, summoned steel and aluminum tycoons for a “listening session.” It wasn’t the first time some of America’s top executives came hat in hand to Washington in search of privileges

But it may have been the first time we got to watch live as an American president announced to the world that he would gladly help handicap our domestic producers’ foreign rivals — by taxing the Americans who buy steel and aluminum imports

…..

Like President Bush [who imposed ill-advised steel tariffs in 2002], Mr. Trump will raise the cost of doing business in steel- and aluminum-consuming companies. In turn, it will make life much harder for the 6.5 million workers those industries employ. Many will lose their jobs — possibly more than the 170,000 workers currently employed in the steel and aluminum producing industries.

Adding insult to injury, the president is comfortable with the knowledge that his import tax will make our cars, infrastructure, soda cans and aircraft more expensive. And he’s flat-out wrong when he claims, “Maybe it’ll cost a little bit more, but we’ll have jobs.” As the Department of Commerce’s own report shows, the decline of jobs in the steel and aluminum industries predates the competition with China by decades. Industry experts know that this is mostly because of innovation and industry consolidation. The era of labor-intensive metal production is over.

And Mr. Trump may think a tariff-induced trade war would reduce our trade deficits, as he gleefully tweeted the day after the announcement, but don’t count on it. In the unlikely event that the import tax would incentivize foreign companies to set up shop in the United States, these investments would very likely increase the United States trade deficit. It would prompt foreigners to buy fewer American exports in order to accumulate the dollars needed to fund these investments.

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… is from page 390 of the 1982 Liberty Fund issue of the 1978 Oxford University Press edition of Adam Smith‘s Lectures on Jurisprudence; this quotation is from a lecture that Smith delivered on April 13, 1763:

A free commerce on a fair consideration must appear to be advantageous on both sides. We see that it must be so betwixt individuals, unless one of them be a fool and makes a bargain plainly ruinous; but betwixt prudent men it must always be advantageous.  For the very cause of the exchange must be that you need my goods more than I need them, and that I need yours more than you do yourself; and if the bargain be managed with ordinary prudence it must be profitable to both.  It is the same thing with regard to nations.  The exchange must always be profitable if they act with prudence, and as the number of the prudent will be pretty much the same on both sides, and this will be the far greater part, the benefit will be mutual.  For it is evident that the other nation stands more in need of it than the other does of its own, and this must be the case on both sides.

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… believes that national borders emit mystical, potent, and evil powers.  According to the protectionist, if Ann and Bob voluntarily trade with each other while each are in Buffalo, the trade is fine and good: both Ann and Bob gain.  And although Chuck in Charleston is disappointed that Ann bought from Bob rather than from Chuck, even the protectionist doesn’t believe that Chuck has any cause for complaint or that Chuck’s loss of business to Bob is a source of national economic decline.

But let Bob be in Toronto rather than in Buffalo, and – for the protectionist – matters are totally different.  The fact that Ann’s commerce with Bob’s now traverses a political border means, for the protectionist, that that border somehow changes the transaction into one that is harmful to the American economy.  Some mysterious force emanating out of that border transforms Ann’s choosing to buy from Bob in Toronto rather than from Chuck in Charleston an event of grave national concern.  The crossing of that border of Ann’s and Bob’s commerce makes Chuck’s loss of business, for the protectionist, a source of worry for the entire nation.  Chuck himself becomes an object of the protectionist’s pity.  Chuck – the protectionist insists – has been wronged by Bob and, therefore, Ann (!) must be made to pay the price for Bob’s audacity at daring to offer to Ann a deal that Ann finds more attractive than is the deal offered to her by Chuck.

The very same set of commercial transactions – the very same pattern of voluntary buying and selling – is, in the first case, perfectly acceptable and applause-worthy, while in the second case, it is a matter that warrants at least superintendence by government officials and, more likely, obstruction by government officials.  Yet the only difference between the first case and the second case is Bob’s physical location.  In the first case he and Ann are on the same side of a political border while in the second case Bob is on one side of a political border while Ann is on the other side of that border.  The protectionist finds in this difference great and momentous meaning – a fact that implies that the protectionist believes that political borders possess miraculous if mysterious powers, somehow, to fundamentally change the nature and consequences of trade.  (Just what these powers are the protectionist has, for centuries, never been able to adequately explain.  But he nevertheless is dead-certain that these powers are real and dangerous.)

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In my December 2005 Freeman column I celebrated the 80th birthday of one of the most remarkable and inspiring human beings whom I’ve ever had the privilege to meet and get to know, Manuel Ayau (1925-2009).  My column is below the fold.

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