Monday , January 21 2019
Home / Don Boudreaux
Don Boudreaux

Don Boudreaux

He is a professor of economics at George Mason University in Fairfax, Virginia. Previously, he was president of the Foundation for Economic Education.

Articles by Don Boudreaux

Quotation of the Day…

8 hours ago

… is from page 11 of Pierre Lemieux’s essay “Trade and Adjustment Costs,” which appeared in the Fall 2016 issue of Regulation:
How do we know that free international trade creates general prosperity? Because the argument is exactly the same for free domestic trade. Domestic trade between, say, Vermont and California can cause disruptions and shocks. Taxi drivers in Vermont are certainly disrupted by Uber. Cheese manufacturers in Vermont are potential disrupters for their California competitors. Creative destruction is necessary for prosperity. This is no less true at the international level.
Comments

Read More »

Some Links

1 day ago

Ed Crane understands that Donald Trump does not understand trade. A slice:
Not to disparage him, but Donald Trump is a truth-challenged, narcissistic ignoramus. What he doesn’t understand about economics could fill many libraries, and his specialty in economic ignorance is trade policy. For instance, he is incapable of comprehending that tariffs are taxes on American consumers. At the recent G7 summit in Quebec he said, “We as a nation lost $817 billion dollars on trade. That’s ridiculous and it’s unacceptable.”
Actually, that statement is ridiculous and unacceptable. The idea that a trade deficit represents a “loss” to America (or any country) is stunningly stupid. Looked at through Trump’s eyes, the couple hundred bucks I leave at the Safeway each week is accumulating into a pretty

Read More »

Quotation of the Day…

1 day ago

… is from page 10 of Israel Kirzner’s and Frederic Sautet’s excellent June 2006 monograph, “The Nature and Role of Entrepreneurship in Markets: Implications for Policy” (footnote deleted):
Markets “work” because the discovery of good entrepreneurial ideas constitutes the discovery of ways of improving the efficiency of production with given resources, the discovery of sources of as-yet-untapped resources, and the discovery of as-yet-unknown possibilities for consumer satisfaction.
DBx: Indeed. Contrary to many mainstream-economists’ claims, markets do not “work” only when information is complete and ‘symmetrically distributed’ and when all prices are in equilibrium.
The real-world market economy is an institution is a never-ending process for discovering existing ‘imperfections’ and

Read More »

Some Links

2 days ago

Phil Magness explains why a carbon tax will not work as advertised in reality. A slice:
First, even though the economists declare that their proposal will be revenue-neutral (i.e., it is offset by other tax and fee reductions so that it extracts no additional revenue from the public), they offer no guarantee but their word that politicians would adhere to this promise as opposed to treating carbon taxes as yet another lucrative revenue stream for public expenditures.
Indeed, several of the carbon tax’s most vocal proponents, such as the misnamed Niskanen Center, openly extol its promised ability to fill the government’s coffers with additional revenue for an assortment of spending projects.
While the Niskanen Center’s own carbon-tax proposal also touts a claim of revenue neutrality, a

Read More »

Quotation of the Day…

2 days ago

… is from page 148 of Ludwig von Mises’s 1951 essay “Profit and Loss,” as reprinted in the 2008 Liberty Fund edition of Mises’s 1952 collection, Planning for Freedom:
To speak of an insufficiency of the supply of p is empty rhetoric if it does not indicate the various products m which were produced in too large quantities with the effect that their production appears now, i.e., after the event, as a waste of scarce factors of production.
DBx: When stated, the point made here by Mises is obvious. Yet many discussions of the state of the economy are conducted in ignorance of this point. If we really do have, for example, too little urban mass transit, what goods and services do we have too much of? We really might have too little urban mass transit, but getting more of it will cost some

Read More »

Some Links

3 days ago

My GMU Econ colleague Bryan Caplan details some of the many reasons why the theory of market failure is a set of floating abstractions, none more baseless than the belief – unjustified in theory and disproven by reality – that governments reliable act apolitically and with sufficient knowledge to ‘correct’ market ‘failures.’ Here’s Bryan’s conclusion:
I could go on and on, but [the] general point is that market failure theory does more than complain about markets; it also tells governments how to repair them.  Any government that fails to comply with these impressively precise instructions ipso facto fails.  Indeed, non-compliant governments are a textbook case of government failure.  And while the severity of this government failure varies, every known government fails severely.
In

Read More »

Quotation of the Day…

3 days ago

… is from page 512 of the 11th (2006) edition of one of greatest economics textbooks of all time: Paul Heyne’s, Peter Boettke’s, and David Prychitko’s The Economic Way of Thinking:
Foreign trade and investment have made large contributions to world economic growth, and those who today stridently insist that “globalization” only makes the rich richer while further impoverishing the the poor ought to explain why this should be the case now when it was not the case in the past, even the very recent past. Nations that have been insulated from the world economy or have chosen to insulate themselves have not experienced notable economic growth. On the other hand, the examples of Hong Kong (before its incorporation into China in 1997) and Singapore should be sufficient to refute those who

Read More »

In Praise of Carbon Fuels

4 days ago

Here’s a letter to the Wall Street Journal:
Editor:
The roster of economists who signed the letter calling for a steadily increasing revenue-neutral carbon tax is impressive (“Economists’ Statement on Carbon Dividends,” Jan. 17). Yet the case for a carbon tax warrants far more skepticism than their letter suggests.
The chief reason for skepticism is, ironically, one that these economists themselves give for their support of a carbon tax – namely, market failure. It’s true that the absence of enforceable and tradable private property rights in air quality prevents the emergence of market prices that both convey accurate information about what level of carbon emissions is ‘optimal,’ and give incentives to people to emit no more than this optimal level.
But because of this very same

Read More »

Some Links

4 days ago

My intrepid Mercatus Center colleague Veronique de Rugy rightly bemoans the unseen negative consequences of government-mandated overtime pay. A slice:
Raising firms’ costs to employ people is never a recipe for increasing employment. It isn’t even a recipe for higher pay for the new workers who qualify under the rules but enter the workforce after the new rules are implemented.
Most firms aren’t actually sitting on piles of unspent cash that they could easily use to pay for overtime. As such, in the short term, when faced with higher costs, we can expect firms to look for ways to offset them, either by reducing the hours that employees work — so that fewer of them work more than 40 hours a week — or by using more part-time workers in place of full-time workers. In the long run,

Read More »

Quotation of the Day…

4 days ago

… is from page 1 of Israel Kirzner’s and Frederic Sautet’s excellent June 2006 monograph, “The Nature and Role of Entrepreneurship in Markets: Implications for Policy” (original emphasis):
The economic history of the past two-and-a-half centuries has demonstrated the remarkable ability of market economies to spontaneously increase standards of living in a dramatic fashion, from hand-to-mouth subsistence to the affluence of modern living. On the other hand, economies which have limited the scope of market freedom have systematically lagged in economic growth. Adam Smith famously spoke of the “invisible hand.” Friedrich A. Hayek once described the market as something of a marvel. However, in order for this acknowledgement to be useful for policy, we need to understand how the

Read More »

Bonus Quotation of the Day…

5 days ago

… is this Facebook post, from yesterday, by Bob Higgs:
Progressives have always believed in “settled science,” and for more than a century, that has just happened to be the science that could be trotted out to justify the exercise of greater power by government bureaucrats. Just a coincidence, I’m sure — something like lightning striking a hundred times in the same place.
Comments

Read More »

Repeating a Central Element in the Economic Case for a Policy of Free Trade

5 days ago

Here’s another letter to my regular correspondent Nolan McKinney:
Mr. McKinney:
You allege that, here, I “misinterpret” John M____’s “identifying the need for government supervision of trade.” In your view, such “supervision” is necessary not so much to protect each individual from being taken advantage of by wily foreign trading partners, but, instead, to “prevent disruptions that come with [international] trade. Only the government is in position to do this.”
Whether or not your interpretation of Mr. M____’s e-mail to me is correct, I profoundly disagree with your substantive point, for at least three reasons.
First, there’s no reason to suppose that even saintly government officials possess, or could possibly obtain, the knowledge necessary to obstruct in welfare-enhancing ways

Read More »

A Powerful Essay by Scott Lincicome in Response to a Fable Told by Carlson, Hammond, and Many Others

5 days ago

This essay by Scott Lincicome is on the long side, but it is well worth reading carefully – including reading what’s at the generously supplied links. (HT my intrepid Mercatus Center colleague Veronique de Rugy)
Here Scott exposes as being a facile fabric of fallacies the narrative told by the likes of Tucker Carlson, Sam Hammond, and many others that selfish American “elites” sold ordinary Americans down the global drain by allowing Americans to trade more freely with the Chinese.
And just fyi, it’s through-the-looking-glass – and shockingly – absurd that, in the tale told by Carlson, et al., “elites” are accused of visiting an injustice on ordinary people when, specifically, what the “elites” are accused of doing is simply removing themselves and their agents from obstructing the

Read More »

Quotation of the Day…

5 days ago

… is from Arnold Kling’s essay “International Trade,” which is a chapter in the indispensable Concise Encyclopedia of Economics (David Henderson, ed.) (footnote deleted; emphasis and links original):
The noneconomic views of trade all seem to stem from a common root: the tendency for human beings to emphasize tribal rivalries. For most people, viewing trade as a rivalry is as instinctive as rooting for their national team in Olympic basketball.
To economists, Olympic basketball is not an appropriate analogy for international trade. Instead, we see international trade as analogous to a production technique. Opening up to trade is equivalent to adopting a more efficient technology. International trade enhances efficiency by allocating resources to increase the amount produced for a

Read More »

Free Trade Does Not Need Sovereign Oversight

6 days ago

Here’s a letter to a Cafe Hayek reader:
Mr. John G____
Mr. G____:
Thanks for your e-mail, and I apologize for the tardiness of my reply.
You write that “In order for trade to be free, the terms of trade must be enforceable. In other words, a legal system that enforces contracts freely entered into must exist, and there must be a law of contract within which the freedom of trade can thrive. There is no liberty unless there is a rule of law within which individuals can freely trade.”
I agree. Yet contrary to your later claim, these conditions for trade require neither a world government (which, like you, I would fear and loathe) nor “nations … negotiating rules of trade on behalf of their citizens.”
All that a policy of free trade requires is that a government not obstruct its citizens’

Read More »

Some Links

6 days ago

GMU Econ alum Eric Crampton blogs on Andrew Farrant’s new paper – a paper that exposes as utterly fallacious Nancy MacLean’s accusation that Jim Buchanan was an advisor to Pinochet.
Richard Ebeling defends Ludwig von Mises against Quinn Slobodian’s intellectual carelessness.
Here’s GMU Econ alum Wayne Crews on the current government ‘shutdown.’
Mike Rappaport writes again on the myth that unemployment insurance definitely cannot be supplied by the private sector.
David Henderson shares some vignettes about the late Harold Demsetz.
Here’s part 1 of Alberto Mingardi’s and Terence Kealey’s critical take on the work of Mariana Mazzucato.
Marian Tupy explains how capitalism brought tourism to the masses.
Mark Perry reports on yet another unnecessary burden that Trump’s tariffs are imposing

Read More »

Quotation of the Day…

6 days ago

… is from Robert McGee’s June 1989 review, in The Freeman, of Richard McKenzie’s 1988 book, The American Job Machine:
The trade deficit is measured by the difference between imports and exports, so a decline in exports will increase the trade deficit if imports remain constant. Yet exports may decline because an expanding internal economy has siphoned domestically produced goods away from world markets. American producers are selling to other Americans rather than to foreigners. So a trade deficit can be caused by an expanding domestic economy – which is a sign of economic health rather than sickness.
DBx: Yep. And as regular readers of this blog know, there are many other reasons why trade deficits – or, more generally, current-account deficits – are not necessarily symptoms of

Read More »

FRED Facts

7 days ago

In my latest column for AIER, I use some data – mostly from FRED – to debunk some persistent myths about the American economy. A slice:
Take, for example, the frequent assertion that globalization or other economic changes in recent decades have caused the United States to deindustrialize. Not so.
Industrial capacity in the U.S. is today at an all-time high. Today it’s 15 percent higher than it was when China joined the World Trade Organization (WTO) in 2001, and 66 percent higher than when NAFTA was launched in 1994. Unsurprisingly, therefore, real U.S. manufacturing output is today near the all-time high that it hit in 2007, just before the Great Recession, and it continues to rise. Despite the fact that America continues to more and more become a service economy, manufacturers in

Read More »

Some Links

7 days ago

In today’s Wall Street Journal, David Henderson remembers Harold Demsetz, who died last week at the age of 88. A slice (link added):
Perhaps Demsetz’s most enduring contribution to social science came in 1969, when he coined what is now known as the “nirvana fallacy” in a critique of fellow economist Kenneth J. Arrow’s assumption that government could make markets more efficient. Demsetz conceded that perfect government intervention might improve things, but noted that Arrow, like many economists, had failed to show that actual government intervention would: “Those who adopt the nirvana viewpoint seek to discover discrepancies between the ideal and the real and if discrepancies are found, they deduce that the real is inefficient.”
Jeffrey Tucker writes about Friedrich List, a

Read More »

Quotation of the Day…

7 days ago

… is from page 93 of the 1985 NYU Press edition of the 1963 English-language translation of Carl Menger’s 1883 Investigations Into the Method of the Social Sciences with Special Reference to Economics (Untersuchungen über die Methode der Sozialwissenschaften und der politischen Okonomie insbesondere) (footnote deleted; original emphases):
The nation as such is not a large subject that has needs, that works, practices economy, and consumes; and what is called ‘national economy’ is therefore not the economy of a nation in the true sense of the word. ‘National economy’ is not a phenomenon analogous to the singular economies in the nation to which also the economy of finance belongs. It is not a large singular economy; just as little as it is one opposed to or existing along with the

Read More »

Quotation of the Day…

8 days ago

… is from page 952 of my emeritus colleague and 2002 Nobel laureate Vernon Smith’s important December 1982 American Economic Review paper, “Microeconomic Systems as an Experimental Science”:
At the heart of economics is a scientific mystery: How is it that the pricing system accomplishes the world’s work without anyone being in charge? Like language, no one invented it. None of us could have invented it, and its operation depends in no way on anyone’s comprehension or understanding of it. Somehow, it is a product of culture; yet in important ways, the pricing system is what makes culture possible. Smash it in the command economy and it rises as a Phoenix with a thousand heads, as the command system becomes shot through with bribery, favors, barter and underground exchange. Indeed,

Read More »

The Absurdity of Protectionism

9 days ago

Here’s a letter to Mr. Andy Harris, a regular reader of Cafe Hayek:
Mr. Harris:
Thanks for your e-mail.
With respect, I disagree with you that in my letter to young Ms. Emily Shin I “did her a disservice by not giving her both sides of the debate over free trade vs protection.”
First, Ms. Shin asked me “What is the one deepest mistake made by persons who fight against free trade?” She did not ask me to list alleged mistakes made by persons who fight for free trade.
Second, the protectionist side of the debate is so muddled and absurd that, frankly, it deserves only ridicule. Intellectually, it’s the equivalent of the belief that 2+2=1, or that the moon is a slab of cheese. Yet nevertheless protectionism remains the default belief among most people – a sad reality that means that

Read More »

A Question for Protectionists

9 days ago

Protectionists:
Given that you are so thoroughly convinced of the (utterly bizarre) proposition that greater abundance that comes into the home country from different political jurisdictions presents such a threat to the living standards of people in the home country that the state must have a policy of reducing this abundance, are you also thoroughly convinced that the state must have a policy of reducing the greater abundance that comes from –
– discoveries in the home country of new deposits of “natural” resources such as petroleum, iron ore, and magnesium?
– improved skills – such as those acquired through worker training and through better schooling – of workers in the home country?
– improved health of workers in the home country?
– a deepening of the division of labor in the

Read More »

Quotation of the Day…

9 days ago

… is from page 19 of Virgil Storr’s, Stefanie Haeffele’s, and Laura Grube’s 2015 book, Community Revival in the Wake of Disaster (citation and footnote omitted; link added):
[Young-back] Choi argues that [Joseph] Schumpeter and [Israel] Kirzner agree on three points, “(1) that there exist in the economy unexploited opportunities, (2) that the role of the entrepreneur consists of exploiting them, and (3) that traditional economic theory is flawed in leaving out the existence of unexploited opportunities and thereby overlooking the very force that moves the economy….
While Kirzner characterizes this as discovery and Schumpeter describes this as creative destruction, both view the entrepreneur as seeing some possibility (e.g., to profitably combine factors in a particular way) that no

Read More »

Is Artificially Engineered Abundance Impoverishing … or Enriching?

10 days ago

Here’s a letter to Kerry Traeger, a new visitor to Cafe Hayek:
Mr. Traeger:
Thanks for your e-mail.
You offer two reasons for your support of Trump’s punitive tariffs on Americans who buy goods imported from China. The first reason is China’s alleged theft of Americans’ intellectual property. The second reason is Beijing’s “subsidies which let Chinese firms dump [goods] on us at prices which are unjustified, artificially and unfairly low.”
Your argument – which isn’t uncommon – is very curious. Your hostility to subsidies doled out by Beijing to Chinese exporters reveals your belief that we Americans are harmed if Chinese firms are able to sell to us at prices that are artificially low – that is, if Chinese firms don’t have to pay market prices for all of the inputs that they use to

Read More »

Bonus Quotation of the Day…

10 days ago

… is from pages 43-44 of the 2002 first edition of Geoffrey E. Wood’s Fifty Economic Fallacies Exposed:
Trade between countries is not a competition in which there are winners and losers. It is a mutually beneficial activity, from which both sides gain….
So, then, the notion that countries ‘compete’ with one another in international trade is totally misconceived. And not only misconceived. It can cause harm, if it leads to policies which impede international trade. If, for example, we start protecting firms by tariffs or subsidies to produce ‘national champions’ then we are wasting resources.
Comments

Read More »

Colin Grabow on the Jones Act

10 days ago

After reading my and Alice Calder’s recent op-ed on the Jones Act, Colin Grabow of the Cato Institute sent to me the following e-mail, which I share (in italics) with his kind permission:
Hi Don,
I was very pleased to see you highlight the odious Jones Act in a column earlier this week. There are, however, a few points I wanted to bring to your attention:

“Not surprisingly, the cost of operating an American flagged and crewed vessel is double that of foreign ones.” I think this actually understates matters, with a 2011 MarAd report finding average U.S. vessel operating costs to be roughly *2.7 times* higher than their foreign-flag counterparts. Furthermore, an August 2018 GAO report says that “According to MARAD officials, the relative cost of operating a U.S.-flag vessel compared to

Read More »

Free Trade IS Fair Trade

10 days ago

In November of 2017 at Hillsdale College I debated Ian Fletcher on trade. My – as well as Ian’s – opening remarks from that debate have just been published in Hillsdale’s annual Champions of Freedom series. Below the fold is the version that I presented at Hillsdale (which is close to, but not identical, to the version that now appears in print in the Hillsdale publication):

Free Trade Is Fair Trade
Donald J. BoudreauxGeorge Mason University
prepared remarks presented atHillsdale College7 November 2017
Free trade is fair trade.  And government acts not only destructively but also unfairly whenever it restricts trade for the alleged purpose of strengthening the domestic economy.  To begin to see why, ask yourself this question: Who has the right to income that you’ve earned and on

Read More »

Protectionists Tell Only Half of the Story

10 days ago

Here’s a letter to a young woman, Ms. Emily Shin, from California who is a senior in high school and who tells me that she’d like to study economics at George Mason!
Ms. Shin:
Thanks for your e-mail. I’m honored that you read Café Hayek, and I’d very much love to have you one day as a student in my classes!
Your question is excellent: “What is the one deepest mistake made by persons who fight against free trade?”
Ethically, it is to suppose that some people – specifically, government officials or those who are in today’s political majority – have a right to interfere with the peaceful commercial choices of other people. I believe that such interference is predatory despite it being cloaked in officialdom’s costume.
Economically, the single deepest mistake committed by opponents of

Read More »

Some Links

10 days ago

My intrepid Mercatus Center colleague Veronique de Rugy opposes Trump administration efforts to obstruct individuals’ freedom to gamble across state lines. A slice:
There are a lot of bad arguments used to prevent the spread of legal online gambling, which mostly consists of poker. The biggest of these is the moral argument, which is basically that gambling is bad and, therefore, nobody should be allowed to do it. But in a free society, the real moral outrage is those who would prevent individuals from freely engaging in activity that does not violate the rights of anyone else.
My support for liberalizing immigration into the United States for all immigrants, regardless of their skills levels, does not prevent me from endorsing – as I do here with GMU Econ student Jeffrey Mason – a

Read More »