In the September 2005 Freeman I proposed two topics for fruitful research. My column is below the fold.
… is from pages 111-112 of the 1992 Liberty Fund edition of John Taylor‘s 1822 tract, Tyranny Unmasked:
Employment must be nurtured by free exchanges, like commerce, or it flags. Commercial action and re-action constitute its food. Take away one and the other languishes. A nation deprived of the excitements arising from commercial reverberations, loses the creator of employment, as well as of civilization, knowledge, and comforts; and recedes towards savageness. Even with the aid of these excitements, employment for all can never be established. The fluctuations caused by war, seasons, fashions, and the wonderful catalogue of human passions, will reach employment and prevent that permanency no where to be found; but these fluctuations left to be met by free industry, are themselves excitements of genius and talents, and awaken exertions into life. Which generate most employment, all the inducements which propel the mind and body to make the utmost efforts they can, or the protecting-duty system which destroys most of them?
DBx: Strictly speaking, there will always be jobs to do as long as humans have unfulfilled desires and demands to meet. The question, however, is this: Which system – one of free, open, and competitive markets, or one of restricted, closed, and privilege-clogged markets – will most consistently discover opportunities for individuals to assist each other commercially in the most productive ways? Trade restrictions are arbitrary barriers to human cooperation and to the sharing of human creativity as well as to the stimulus and healthy discipline of competition.
Rather than me rant, I direct you to scholars more knowledgeable and eloquent than I am.
My intrepid Mercatus Center colleague Veronique de Rugy. A slice:
The beauty of the modern age is that you can just turn on your TV and witness live how cronyism works.
Just a few hours ago, President Trump hosted a “listening session” with steel and aluminum executives, whom he had summoned to the White House. Right there, on live TV, we witnessed these CEOs pleading for government support that will inevitably result in higher prices for consumers of steel and aluminum. And, as we all sat there, stunned, we watched the president grant their demand and make policy on live TV.
Veronique and my Mercatus Center colleague Christine McDaniel (who will appear on Fox News this evening at around 6:10 EST).
… mistakes foreigners who seek to give to us more valuable goods (and services) than our ‘leaders’ have bargained for in trade agreements, for common thieves who seek to take from us valuable goods. That is, a protectionist is someone who believes it to be criminal for foreigners to give to us and – in his, the protectionist’s, clamoring for punitive taxes on peaceful people who purchase imports – noble for politically powerful fellow citizens to take from us.
Protectionism is a philosophy of plunder, thuggery, and theft masquerading as “trade policy.”
In my column in the June 2005 Freeman I answered ‘yes’ to the above question – or, ‘yes, at least when compared to political decisions.’ My column, which is not in html form, is below the fold. (There is a column on FEE’s website with this title and under my name, but that’s an error: I didn’t write what there appears. An on-line version of this column of mine is here.)
… is from page 111 of Jacob Viner’s indispensable 1937 volume, Studies in the Theory of International Trade:
It must be conceded that some of the mercantilist doctrine would not be quite so absurd if appraised from the short-run point of view. But I have found no evidence that the mercantilists intended their analysis and proposals to be regarded as holding true for the short run only, and there is abundant evidence that they were ordinarily not aware of any distinction between what was desirable monetary or trade practice, to meet a temporary situation, on the one hand, and as permanent policy, on the other.
DBx: If the short-run were all that mattered, then many practices that are correctly regarded to be foolish, or even dangerous, would be sensible. Tossing out the fine China instead of bothering to wash it after a meal would save time this evening, but leave you poorer over the long run. Burning the dining-room furniture to make a roaring fire in the fireplace would save you from the immediate inconvenience of having to trek outside into the cold weather to fetch a fire log, but if you burn the furniture you’ll make yourself poorer in the long run. Raiding your pension today to buy a luxury vacation to Tahiti and a brand-new top-of-the line Mercedes will give you great pleasure over the next few weeks and months, but cause you to be destitute in your old age.
My very first post at Cafe Hayek is on this very point.
Likewise, saving today’s jobs and today’s industries from being ‘destroyed’ by creative destruction – whatever its source – will yield short-run gains, but only at the underestimated price of long-term impoverishment. Politicians, who focus like lasers only on the short-run, are naturally prone to support protectionist policies. Yet these policies are the equivalent of raiding the pension for relatively paltry short-run benefits – and, moreover, benefits only for some (those who are politically visible) yet costs, even in the short-run, for other (those who are politically invisible).
Some commenters on this blog do not understand the nature of the ad hominem fallacy. Let me help: the ad hominem fallacy is committed when one judges the merits of an argument exclusively by the identity or circumstances of the person making the argument. When someone dismisses my argument in support of free trade on the basis of the fact that I am a tenured professor, I know immediately that that person has no sound arguments against free trade, for someone with sound arguments does not resort to logical fallacies as a means of supporting his or her case. After all, to commit the ad hominem fallacy is to engage in what is nothing more than a gussied-up form of name-calling. And that’s how ill-tutored children argue, not adults.
Anyway, on this topic I reprise below the fold this post from December 21st, 2016.
Mr. Wilbur Ross
Secretary of Commerce
Washington, DC
Mr. Ross:
You and your Commerce department lieutenants justify punitively taxing American buyers of imported steel on the grounds that the economy-wide impact of these punitive taxes will be “negligible” – as in, difficult to detect in the aggregate data on an economy that annually generates $19 trillion in output. The benefits to coddled steel executives and workers will, for them, be significant while the costs to the rest of us who are forced to pay for this coddling will be, well, “negligible.”
Tell me, do you then also believe that the government should legalize pickpocketing? After all, without question the overall negative effects of pickpocketing will be “negligible” as a portion of the overall American economy while the benefits to these thieves will, for them, be significant.
If – as I suspect – you do not believe that pickpocketing should be legalized, can you explain how pickpocketing differs from the steel tariffs that you support? Try as you might, sir, you’ll fail, for such tariffs differ neither in their effects nor their ethics from pickpocketing: in both cases property is sneakily transferred from those who’ve earned it to those who greedily snatch it. The only real difference is that pickpockets, unlike protected American producers, do not outsource the carrying-out of their thievery to the government.
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
By contrast, moving to paid family leave implies adding to Social Security solvency problems in the short to medium run (i.e the system is only potentially budget neutral in the work lifespan of the SS beneficiary). That means that on day one, the new scheme instantly increases government involvement in paid family leave compared to the status quo by the simple fact of using the SS system. It also immediately requires more borrowing (to pay for all SS benefits plus whatever paid leave benefits are needed) and speeds up the insolvency of the program (which will probably be addressed with higher taxes or further benefit cuts). Also, once in place, the best thing that can happen is that the system stays in its original form and “merely” redistributes tax dollars to parents in the short run until it is reformed when the Social Security Trust Fund dries out (talk of moving to private accounts from there seems as unlikely as without the paid leave account).
The first problem is that this would shift the burden of providing the benefit from the private economy to government. Academic evidence shows that family leave keeps employees in their jobs and can make them happier or more productive, which is one reason many companies pay for it. But why pay when the government offers 12 weeks?
Here are Arnold Kling’s insightful reflections on metrics and mis-leadership.
Alberto Mingardi writes about the next novel that I will read – one that I regret that I’ve not yet read fully: Alessandro Manzoni‘s The Betrothed.
John Stossel notes that politicians deserve Oscars. A slice:
On the other hand, President Trump chose Alabama Senator Jeff Sessions (R) to be attorney general. Sessions wins the award for Worst Praise of Abusive Government. He said this about asset forfeiture: “I love that program. We had so much fun doing that, taking drug dealers’ money.”
Fun? Police grabbed billions of dollars, mostly from people who never got trials. That’s a crime, not good government, but both political parties supported it.
A few days ago I took issue with Scott Sumner’s use of the term “repay” (as in, for example, ‘Americans must repay the U.S. trade deficit’). I revisited this issue again in my letter earlier today to Tony Hart. In a comment on the Cafe Hayek post of my letter, GMU Econ doctoral candidate Jon Murphy correctly notes that the words “repay” and “debt” have precise meanings – or, at least, meanings that are precise enough to cause confusion if these words are used as synonyms for similar but nevertheless distinct phenomena.
“Repay” is not a synonym for “give something in return for something else given.” Likewise, to be “repaid” is not simply to “receive something in return for something else given.” “Debt” does not mean “a hoped-for receipt of something in return for something else given.”
To repay is to make good on a debt owed. And a debt is a debtor’s legal or ethical obligation to return principal (usually with interest) to a creditor.
It is talk too loose, too careless, and too pregnant with confusion to say, for example, that when foreigners sell goods to us they expect to be repaid if what is meant is simply that foreigners expect to receive something in return for whatever it is that they sell to us. Put differently, to be paid is not to be repaid. The Norwegian who holds the U.S. dollars that he is paid in exchange for the goods that he sells to an American of course wants eventually – perhaps today, perhaps ten years from now – to exchange those dollars for real goods and services. But despite the fact that many Americans stand ready to sell goods or services to this Norwegian in exchange for those dollars, no American owes this Norwegian anything.
The Norwegian’s dollar holdings are not really – neither legally nor economically – a debt claim against any American. That these dollars might be recorded in some accounting ledgers as American “debt” changes nothing: no American is obliged to turn over anything – to sell anything – to that Norwegian in exchange for that Norwegian’s dollars.
It will not do to respond by saying that U.S. dollars are claims against U.S. goods, services, and assets. Again, no owner of a good, no supplier of a service, and no owner of an asset is obliged – legally, economically, or ethically – to transfer to another person who is not that person’s formal creditor his or her ownership of any good or asset, or to perform any service, in exchange for the dollars. Dollars give their holders the right to bid to acquire goods, services, or assets; they do not represent an obligation of owners of goods, assets, and labor services to accept those bids.
Nor will it do to protest by saying that dollars nevertheless can in practice be used to purchase goods, services, and assets. Yes they can; dollars are indeed a medium of exchange. But – see above – dollars are not actually I.O.U.s that oblige us Americans to fork over that which we don’t wish to fork over.
“Still,” I hear those who fear and loathe the U.S. trade deficit complain, “dollars held by foreigners nevertheless will, in practice, be successfully used eventually to acquire goods and services from Americans” – to which I reply, “So what’s your complaint? You – you current-account-deficit ‘hawk’ you – are utterly delighted when foreigners who earn dollars on their exports to America spend those dollars immediately (in the “current” period) buying American exports. You celebrate these American exports. You proclaim that these expenditures made by foreigners to purchase Americans exports enrich Americans. Yet these exports are the goods and services that foreigners ‘claim’ with their U.S. dollars. Why is it a splendid occurrence for foreigners to make such ‘claims’ on American exports today but a dreadful calamity for foreigners to make such ‘claims’ tomorrow? The ‘claims’ exercised tomorrow differ in no essential ways from the ‘claims’ exercised today.”
Bottom line: It’s a fact that foreigners generally expect to receive something of value from us Americans in exchange for the things of value that we buy from foreigners.* It’s also a fact that this expectation by foreigners, even when held in the form of dollars or in non-debt dollar-denominated assets, is not an expectation of repayment, and much less a legal right to repayment. To call “repayment” those goods and services that Americans might, but are not obliged, to sell to foreigners in exchange for dollars is to mislabel and mislead. The false impression is conveyed that Americans actually owe something to foreigners – that Americans in the past mortgaged some of their future prosperity to foreigners. Yet such an impression isn’t accurate. Once again, only formal debt obligations must be repaid.
…..
* I regard as unfortunate the fact foreigners generally expect to receive something of value from us Americans in exchange for the things of value that we buy from foreigners. I regard it to be an unfortunate reality that foreigners would not sell things to us if they expected never to be able to buy things from us. We Americans would be much more prosperous if foreigners really behaved in the way that many protectionists assume them to behave – that is, if foreigners really were intent on giving to us rivers and streams of valuable goods and services in exchange either for nothing at all or for mere pieces of paper embossed with monochrome portraits of dead American statesmen.
