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… is from page 241 of William Easterly’s excellent 2013 book, The Tyranny of Experts (original emphases):

Another way to state the knowledge problem is that success is often a surprise.  It is often hard to predict what will be the solution.  It is even harder to predict who will have the solution, and when and where.  And it is even harder when the success of who, what, when, and where keeps changing.  This is just restating Hayek’s insight about the knowledge problem with conscious design….

All this means that solving the knowledge problem is hard work.  A lot of work requires a lot of rewards, so a successful problem-solving system must hand out such rewards to the problem-solvers.

DBx: When those who don’t understand economics see large profits being earned by someone through market exchange, they childishly assume that those profits are taken unjustly from other people, thus making those other people worse off.  When those who do understand economics see large profits being earned by someone through market exchange, they cheer because they know that those large profits both are evidence that the profit-earner is successfully helping other people to ‘solve’ some of their problems and that those very same profits will attract yet others individuals to contribute their creativity and toil to the same problem-solving effort.  (See again this fine essay by Bob Murphy.)

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… is from page 347 of the 1990 Transaction Publishers reprint of W.H. Hutt‘s excellent 1936 book, Economists and the Public:

The supreme principle of liberty suggests that it is better to risk erring in the direction of allowing too much rather than too little freedom.

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George Will is a fan of Ken Burns’s new documentary, The Vietnam War.  Last night I watched the first episode.  It is indeed excellent.  (A tangential question: How many are the notions or ‘theories’ that are more absurd than the “domino theory“?  Surely not many.)

Speaking of George Will, here’s a recording of a recent interview of him.

Here’s more useful information and perspective from Mark Perry on the recent U.S. Census Bureau report on income and poverty in the United States.

Eugene Volokh thoreauly explores the history of the phrase “The best government is that which governs least.”

Also see Jeffrey Tucker.

Alberto Mingardi ruminates productively on Gertrude Himmelfarb’s new book.

Richard Ebeling, with help from Ludwig von Mises, investigates the real meaning of liberalism.

Michael Zigismund helpfully assembles – and offers some comments on – most of the many critical responses to Nancy MacLean’s fabulist tale Democracy in Chains.  A slice:

I cannot speak for the field of history. But, as an attorney, if I submitted this book as a legal document, I would expect to suffer sanctions, a malpractice claim, and professional discipline, up to and including disbarment.

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… is from pages 216-217 of the 1976 Liberty Fund edition of Henry Sumner Maine’s 1885 volume, Popular Government (footnote deleted):

The Supreme Court of the United States … is not only a most interesting but a virtually unique creation of the founders of the Constitution.  The functions which the Judges of this Court have to discharge under provisions of the Constitution arise primarily from its very nature.  The Executive and Legislative authorities of the United States have no powers, except such as are expressly conferred on them by the Constitution itself; and, on the other hand, the several States are forbidden by the Constitution to do certain acts and to pass certain laws.  What then is to be done if these limitations of power are transgressed by any State, or by the United States?  The duty of annulling such usurpations is confided by the Third Article of the Constitution to the Supreme Court, and to such inferior Courts as Congress may from time to time ordain and establish.

DBx: I’m one day tardy in marking Constitution Day (September 17th) with an appropriate quotation.  The above passage from Maine is appropriate.  In this passage, Maine clearly and concisely explains that the national government of the United States has no powers under the Constitution but those that are expressly delegated to it in that document.  Alas, for anyone unfamiliar with the United States Constitution but familiar with the range of powers currently exercised by the national government, those Constitutionally delegated powers are surprisingly few and limited.  This aspect of the Constitution – the aspect that denies to the national government any powers not expressly delegated to it by the Constitution – is effectively null and void.

“Progressives” and other fans of discretionary government of course are pleased that the U.S. government is no longer in practice bound to exercise only those powers expressly delegated to it by the Constitution.  Yet conservative jurists, quite ironically, have played an unwitting role in this destruction of constitutional restraints.  In their justified quest to prevent courts from exercising powers beyond those that properly belong to the judiciary, too many conservative jurists (and legal scholars) overshot.  The restraints on the judiciary that they advocate are so severe that, under these restraints, the judiciary is neutered in its role in preventing the legislative and executive branches of the national and the state governments from exercising powers that, in the case of the national government, are not delegated to it, and, in the case of the state governments, are denied to them.

In short, in their attempt to keep judicial powers within constitutional limits, too many American conservative jurists forgot about the role of the judiciary in keeping executive and legislative powers within constitutional limits.

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… is from pages 248-249 of the 1998 Liberty Fund edition of Anthony de Jasay’s brilliant 1985 book, The State:

A political system which, by virtue of competitive bidding for consent, produces redistribution we regard as conducive to equality or justice, will also produce redistribution we will regard as pandering to interest groups.  By no means is it clear that there are “objective” criteria for telling which is which.  Still less evident are the means which could possibly constrain or stop one while letting through the other.

DBx: Power is a dangerous thing (not least because it intoxicates both those who have it and those who hope to have it).  Among humankind’s many ‘fatal conceits’ is the widespread belief that we possess the wisdom and the ability to create state power that will be used to do good and never used, or seldom enough used, to do bad.

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… is from my late colleague Jim Buchanan’s 1986 Nobel Prize lecture, “The Constitution of Economic Policy“:

Many critics of the “economic theory of politics” base their criticisms on the presumption that such theory necessarily embodies the hypothesis of net wealth maximization, an hypothesis that they observe to be falsified in many situations.  Overly zealous users of this theory may have sometimes offered grounds for such misinterpretation on the part of critics.  The minimal critical assumption for the explanatory power of the economic theory of politics is only that identifiable economic self-interest (e.g., net wealth, income, social position) is a positively valued “good” to the individual chooses.  This assumption does not place economic interest in a dominating position and it surely does not imply imputing evil or malicious motives to political actors; in this respect the theory remains on all fours with the motivational structure of the standard economic theory of market behavior.

DBx: I thank Philip Booth for reminding me of this passage; Philip offered this reminder in light of this earlier post.

Clearly, if National Book Award nominee Nancy MacLean actually read the Nobel Prize address of the man about whom she wrote her nominated book, she either lacks the mental capacity to grasp what is said in that address or she wrote about Buchanan having recklessly forgotten what she read.  (I cannot believe another possibility, namely, that she, a professional historian, would write a book – Democracy in Chains – in which Jim Buchanan is the central character without bothering actually to read Buchanan’s Nobel lecture.)

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Here’s a letter to a critic of mine on Facebook (who is not the famous filmmaker):

Mr. Michael Moore

Mr. Moore:

About my opposition to government prohibition of “price gouging,” you write sarcastically on Facebook: “Sounds like you trained at the Economic School of Robber Barons.”*

Bad example.  Contrary to popular myth, the so-called “robber barons” were reviled not by consumers for raising prices but by competitors for lowering prices.  John D. Rockefeller drove the prices of kerosene and other products made from petroleum down.  Cornelius Vanderbilt drove the price of steamboat transit down.  A&P founder George Gilman, with help from George Huntington Hartford, drove the prices of groceries down.  James J. Hill drove the quality-adjusted price of long-distance rail transportation down.  Gustavus Swift drove the price of meat down.  Andrew Carnegie drove the price of steel down.  James Buchanan Duke drove the prices of cigars, cigarettes, and most other tobacco products down.  Richard Sears and Aaron Montgomery Ward drove the prices of consumer dry goods down.  Henry Ford drove the prices of automobiles down.

To find the relatively few ‘robber barons’ who profited by exploiting consumers (and taxpayers) rather than by improving consumers’ lives one must turn to those, such as Daniel Drew and Leland Stanford, who secured subsidies and other special privileges from 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

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Here’s a letter to a very thoughtful correspondent:

Mr. Robert Rohne

Mr. Rohne:

Thanks for probing my opposition to government prohibitions on so-called “price-gouging.”  You ask: “Why not see the high prices as caused by sellers who suddenly get monopoly power” in areas devastated by natural disasters?  Good question, for framing the issue as one of monopoly power creates the strongest possible case for government-imposed price ceilings.  Still, I believe that the case for price controls remains weak.

The chief problem that remains is that, even if the high prices are exclusively the result of monopoly power (rather than of a decrease in supply occurring suddenly and simultaneously with an increase in demand), prohibiting prices from rising nevertheless, as a practical matter, causes the quantities supplied of the price-controlled goods to fall short of the quantities demanded.  Therefore, with price controls some non-price method, such as queuing, must be used to ‘decide’ which of the many demanders will be among the fortunate few actually to buy the monopolists’ goods and which of the demanders will be obliged to go without.  What reason is there to assume that this non-price method will result in a better ‘distribution’ of goods than that which would arise without price controls?

You might answer that poor people are better able than rich people to queue.  Perhaps.  But merchants with monopoly power are unlikely to allow queuing to determine who buys their goods when the prices of those goods are capped by government.  Remember: when merchants possess monopoly power, price controls do nothing to reduce this power; competition remains absent.  Denied the ability to use their monopoly power to raise prices, merchants express that power in other ways.  For example, these monopolist merchants hold more inventories aside to be sold at the capped prices to powerful politicians, to family members, to neighbors, or to business associates – not all of whom need (and perhaps none of whom needs) the supplies as much as do the ordinary customers who would prefer to pay high prices for the supplies rather than be unable at low prices to acquire any of the supplies.

Indeed, not only do price controls do nothing to reduce merchants’ monopoly power; price controls promote such power.  Merchant Jones’s high prices today might truly reflect monopoly power.  But those same high prices are the single best incentive for new suppliers tomorrow to bring goods to market in competition with Jones.  If your concern is that merchants in the wake of natural disasters possess monopoly power, allowing prices to rise – allowing merchants to express their monopoly power openly in the form of high prices rather than surreptitiously, such as by reserving inventories for sale to powerful elites – is the policy most likely to end that monopoly power as quickly as possible.

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 97 of volume 13 of the Collected Works of F.A. Hayek (Studies on the Abuse & Decline of Reason, Bruce Caldwell, ed., 2010):

Society as we know it is, as it were, built up from the concepts and ideas held by people; and social phenomena can be recognized by us and have meaning to us only as they are reflected in the minds of men.

DBx: Social sciences such as economics, history, and political science cannot be usefully done using the same methods as the physical sciences.  Human meaning – human ideas and understanding – are, at their core, what these sciences seek to explain.  To treat prices and quantities, for example, in the same way that physicists treat molecules and planets reflects a complete failure of the economist to understand what it means to theorize usefully about human society.