Saturday , February 24 2018
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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

A Protectionist is Someone Who…

11 hours ago

… if technology were a country – say, Technologia – would warn his fellow citizens that unless they erect barriers against the goods and services that routinely are exported from Technologia, they will eventually be impoverished by the bounty that would otherwise “unfairly” and surely “flood” into their country.
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Do Trade Deficits Have to Eventually be Repaid?

13 hours ago

Scott Sumner thinks that trade deficits have eventually to be repaid.  I think he’s mistaken – at least on any meaningful definition of the word “repaid.”
In practice some portion of a trade – or, current-account – deficit must be repaid.  For example, the $1,000,000 that Mr. Nonamerican lends to Uncle Sam when Mr. Nonamerican buys U.S. Treasury notes instead of buying American exports must be repaid – and when it is repaid Mr. Nonamerican will use the proceeds to buy American exports (or he’ll push the transaction forward one more ‘period’ by reinvesting the proceeds in dollar-denominated assets).
But suppose instead that Mr. Nonamerican uses the $1,000,000 that he earned on sales of goods to Americans, not to buy U.S. Treasury notes, but to open a restaurant in Fairfax, Virginia.

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A Protectionist is Someone Who…

16 hours ago

… believes that if a man refuses to perform an unpleasant, arduous, and pointless task – say, using a small hand-held shovel to move a mountain of manure from point A to point B and then back again to point A – unless he is paid a great deal of money to do so, then the society of which that man is a member is enriched if other members of that society are forced to pay this man a sum of money sufficient to entice him to perform that task.
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Some Links

16 hours ago

The debut episode of Mark Levin’s show “Life, Liberty, & Levin” – which will air this Sunday evening – features an interview with my great colleague Walter Williams.
My Mercatus Center colleague Christine McDaniel describes ten things that you should know about tariffs.  A slice:

Tariffs Slow Economic Growth
– Average American tariffs fell from almost 60 percent in 1932 to under five percent in 2018.
– The International Monetary Fund has found that these types of reductions in trade barriers can “boost productivity and output,” which can, in turn, mean faster rates of economic growth.
– Economic growth in the late 19th century, while sometimes attributed to high trade barriers, actually resulted from significant population growth and accumulated capital. Tariffs during that time may

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No Good Economist Has Ever Said that Material Possessions Matter Exclusively or Even Mostly

18 hours ago

Here’s a letter to a new correspondent:
Ms. Elaine Dorman
Ms. Dorman:
You’re correct that my arguments about the increasing wealth of ordinary people – and about the disappearing observable differences between the super-rich and the rest of us – are chiefly arguments about material possessions and not about “our emotional well being and satisfaction.”  You’re correct also that these latter things matter and, indeed, that ultimately they matter much more than do material possessions.
Yet I believe that you’re incorrect to declare my argument to be “thus irrelevant and beside the point.”
First, unless increased access to material goods and services (above, say, that which is necessary for bare subsistence) never contributes to improved “emotional well being and satisfaction,” then

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A Protectionist is Someone Who…

18 hours ago

… believes that Castro’s Cuba would have been even poorer had the United States government not done the people of that island the great good favor of enforcing an embargo against it.
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Freeman Essay #95: “A Deficit of Understanding”

19 hours ago

The April 2004 Freeman contains one of my many attempts to bust the myth that a trade deficit – or a current-account deficit – necessarily is something to lament.  In reality, such a “deficit” (It’s a deficit only by accounting definition, not in economic reality) is typically, in a market economy, evidence of relatively sound economic policies and of a relatively promising future.  And such a “deficit” is itself never a cause of any economic damage; it is almost always a cause of economic improvement relative to what the situation would be absent the “deficit.”  My column is below the fold.

“Nothing, however, can be more absurd than this whole doctrine of the balance of trade.”
Adam SmithThe Wealth of Nations
Here’s some sound advice: don’t worry about the trade deficit.
The

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Quotation of the Day…

20 hours ago

… is from page 151-152 of the 1992 Liberty Fund edition of John Taylor‘s 1822 tract, Tyranny Unmasked:
Monopoly is a word sufficiently indefinite, to enable ingenuity to obscure its malignity, by extending it to property acquired by industry and free exchanges; and though private property begets civilization, society, and happiness, it is made, by calling it monopoly, to supply arguments for its own invasion.  If monopoly, like money, does really reach every species of acquisition, yet it may also possess good and evil qualities; and a discrimination between them is necessary, to reap the good and avoid the evil.  The monopolies obtained by industry, admitting the phrase to be correct, are, like earning money, beneficial to society; those obtained by exclusive privileges, like

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Making the Case for Free Trade

1 day ago

Here’s a letter to an economics graduate student who asked to remain anonymous:
Mr. T:
You accuse me of “doing a disservice” to you and other of my fellow economists by “over-simplifying our theoretical understanding of trade.”  You insist that the “exceptions shown by theory to [the case for] free trade should not be ignored.”
With respect, while I appreciate your e-mail, I disagree with your assessment of my efforts.  Nearly all of my writings on trade are for popular audiences.  These writings appear on my blog and in newspaper and magazine columns.  These audiences are not composed of my fellow economists who understand the elemental case for free trade.  Instead, these audiences are composed of people many of whom do not understand the important basics that economists understand

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A Protectionist is Someone Who…

2 days ago

… believes that if the government successfully prevented red-headed consumers from patronizing any producers with hair color other than red, then red-headed people as a group would thereby be made more prosperous.
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A Protectionist is Someone Who…

2 days ago

… believes that we Americans would be even wealthier than we now are if each of the 50 states were a sovereign nation that restricted its citizens’ abilities to import goods and services not only from Europe, Asia, and other far away places, but also from each of the other 49 states.  After all, if creating artificial scarcities in the United States is key to increasing each American’s access to goods and services, imagine how much richer we Americans would be if we in Virginia enjoyed the artificial scarcities created by the government in Richmond obstructing our access not only to goods and services sold by the likes of Canadians and the Chinese, but also to goods and services sold by the likes of North Carolinians, Marylanders, Californians, Hawaiians, and Americans in other

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Some Links

2 days ago

The Maduro Diet – in which you have legions of determined assistants to ensure that you keep your calorie count at levels that guarantee weight loss.  (HT Morgan Frank)
In this 100th “Dead Wrong” video Johan Norberg celebrates human ingenuity.
My intrepid Mercatus Center colleague Veronique de Rugy asks if infrastructure spending in the United States should be mostly local, state, or national.
My GMU Econ colleague Bryan Caplan has an inspired and intriguing proposal to reduce sexual harassment in the workplace.
With his usual and admirable realism, George Will remembers the late Billy Graham.
Max Borders warns of the dangers of a Universal Basic Income.
Here’s Damon Root’s most recent celebration of Frederick Douglass.
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Freeman Essay #94: “Can You Spot the Billionaire?”

2 days ago

In the January/February 2004 Freeman I argued that in modern commercial societies the observable differences – those that are visible to the naked eye – between even the hyper-rich and ordinary people are today small and shrinking.  My column is below the fold.

A Canadian student once confessed to me the confusion and anger he suffers whenever any of his friends move to the United States. I asked him why he feels this way. He replied that he “could never live in a country with such a high Gini coefficient.”
The Gini coefficient is a measure of income inequality. The higher is a country’s Gini coefficient, the greater is the inequality of incomes earned in that country. It says nothing about people’s absolute material well-being or about mobility among income groups. It is merely a

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Quotation of the Day…

2 days ago

… is from David Hume’s essay “Of Commerce” (here from page 254 of the 1985 Liberty Fund collection of some of Hume’s essays, edited by the late Eugene Miller, Essays: Moral, Political, and Literary) (original emphasis):
But when we reason upon general subjects, one may justly affirm, that our speculations can scarcely ever be too fine, provided they be just; and that the difference between a common man and a man of genius is chiefly seen in the shallowness or depth of the principles upon which they proceed.  General reasonings seem intricate, merely because they are general; nor is it easy for the bulk of mankind to distinguish, in a great number of particulars, that common circumstance in which they all agree, or to extract it, pure and unmixed, from the other superfluous

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Greg Mankiw on Free Trade

2 days ago

Greg Mankiw’s recent New York Times column offers an excellent summary of some recent research on international trade.  And I love his conclusion:

That is the theory and evidence regarding international trade [which shows that trade quite unambiguously yields net benefits to the denizens of the free(r) trading countries]. I don’t expect this academic work to persuade Mr. Trump. But he is said to pay more attention to briefings that contain his own name. So let’s return to Adam Smith’s birthplace and ponder these questions:
Should we impose a tariff on Americans vacationing at Scotland’s Trump International Golf Links? Or should vacationers make their consumption choices free from the heavy hand of government?

Alas, I predict that Mankiw’s argument will persuade no protectionists.
My

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A Note on Protectionists

2 days ago

Arguing with a protectionist is like arguing with a man who is almost totally blind but who believes himself to have unusually superior vision.  This sad and unfortunate creature sees only a handful of large, bright images that dance immediately in front of his nose and yet he is convinced to his marrow that he is observing reality in all of its vastness and in vivid detail.  When he is informed by people whose vision is better than his that he, in fact, is blind to most of reality – and, indeed, blind to the most important aspects of reality – he haughtily rejects this information, sometimes even with anger.  He knows what he sees and he sees no reason to believe that there are swathes and details of reality that are beyond the handful of large, bright images that dance immediately

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Bonus Quotation of the Day…

2 days ago

… is from pages 630-631 of The Works of James Wilson (1804):
There have been times – there still are countries and times, when and where the rule, founded in justice and nature, that the property of the parent is the inheritance of his children, has been intercepted in its benign operation by the cruel interference of another rule, founded in tyranny and avarice – the crimes of the subject are the inheritance of the prince.  At those times, and in those countries, an insult to society becomes a pecuniary favor to the crown.  The appointed guardian of the publick security becomes interested in the violation of the law; and the hallowed ministers of justice become the rapacious agents of the treasury.
DBx: Adam Pritchard and I featured this quotation at the beginning of our Summer 1996

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A Protectionist is Someone Who…

2 days ago

… believes that rickshaws are a much better means of urban public transportation than are busses or subways because the number of workers required to transport any given number of passengers is much higher with rickshaws than with busses and subways.  The protectionist – assuming (contrary to fact) that he or she has any capacity for consistency in thought – would lobby to prohibit busses, subways, and even taxies, bicycles, and skateboards on the grounds that these transportation options employ fewer urban-transportation workers than would be employed by a policy of using only rickshaws.
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A Protectionist is Someone Who…

3 days ago

… if she were a high-school math teacher would, at the start of the school year, promise to give to each of a subset of her favorite students a grade of ‘A.’  She would justify this promise by theorizing that when she relieves these students from the pressure of being practically obliged to invest a lot of scarce time and effort toward the studying that is necessary to earn a high grade – that when she releases these students from the distraction and bother of having to compete against their other classmates for high class standing – these favored students will thereby be prompted to study longer, harder, with greater diligence and attention, and with more success than they would study if they were not guaranteed to receive a high grade.
And at the end of the school year, this teacher

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A Protectionist is Someone Who…

3 days ago

… warns of the grave dangers to the neighborhood if a family on the next street refuses to save and thus prevents additional resources from being channeled into a neighborhood factory, and who warns of the grave dangers to the neighborhood if a family in the next town chooses to save in a way that channels additional resources into the very same neighborhood factory.
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Some Links

3 days ago

My Mercatus Center colleagues Veronique de Rugy and Christine McDaniel argue in today’s Investor’s Business Daily against the Trump administration’s cronyist scheme to punitively tax Americans who buy imported steel.  A slice:
In other words, for every steel worker that may be helped by the import tax, there are over 38 workers in steel-using sectors that may be harmed by it. Further, the vast majority of steel-consuming manufacturers are small businesses that don’t command the ability to pass higher prices on to their consumers.
Also from my intrepid Mercatus Center colleague Veronique de Rugy is this honest assessment of Mick Mulvaney.
In my latest Pittsburgh Tribune-Review column I celebrate the power of the economic way of thinking.  A slice:

Another example  [of a point

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Freeman Essay #93: “The State is the Source of Rights?”

3 days ago

The December 2003 Freeman‘s “It Just Ain’t So!” column featured my argument against the claim that human rights come from – or originate with – the state.  My argument is below the fold.

In 1776 a reliable indicator of an American’s opinion of the ideas expressed in the Declaration of Independence was his attitude toward the 1649 execution of England’s King Charles I. Liberals, who shared Jefferson’s principles, believed Charles to have been a tyrant and hence most deserving of losing his head. Conservatives, resisting the call to liberty, classified Charles’s execution as “murder,” believing the English revolutionaries of 130 years earlier to have been reckless destroyers of the foundation on which civilization rests: a powerful monarchy.
Indeed, it was Charles’s execution that put

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Quotation of the Day…

3 days ago

… is from an August 1894 letter from Pres. Grover Cleveland to Rep. T.C. Catchings (D-Mississippi) in which Cleveland gave his reasons for refusing to sign a tariff act; I discovered this quotation on page 292 of Douglas Irwin’s marvelous 2017 volume, Clashing Over Commerce:
When we give to our manufacturers free [that is, untariffed] raw materials we unshackle American enterprise and ingenuity, and these will open the doors of foreign markets to the reception of our wares and give opportunity for the continuous and remunerative employment of American labor.  With materials cheapened by their freedom from tariff charges, the cost of their product must be correspondingly cheapened.  Thereupon justice and fairness to the consumer would demand that the manufacturers be obliged to submit

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If You’re an Ordinary American in 2018, You Are Materially Richer Than Was the Richest Human Being Alive in 1918

3 days ago

Today – February 20th, 2018 – is the second anniversary of what is by far the single most popular blog post that I’ve ever written.  It’s on how ordinary Americans today are quite plausibly materially richer than was J.D. Rockefeller a mere 100 years earlier.  I stand by that claim.  And if my claim is correct – or even if it is a candidate for being correct – of what relevance is all of today’s hand-wringing over, and pontificating about, differences in the sizes of monetary incomes or of monetary wealth?
If you are alive today in a first-world country, you are historically off-the-charts super rich.  You are among the luckiest and most fortunate human beings ever to draw a breath.  So if you’re complaining about the fact that your income or wealth isn’t as high as is that of, say,

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A Protectionist is Someone Who…

3 days ago

… if he sells an automobile to a stranger for cash, believes that the value of this exchange for him is maximized if he stashes every bit of the cash into his mattress and never, ever spends it.  That is, this protectionist believes that he would make himself worse off if ever he would spend any of the cash on goods and services that would improve his standard of living.  This protectionist also believes that the automobile buyer is a gullible sucker or irresponsible fool for parting with cash in exchange for a good that she, the stranger, didn’t produce with her own two hands.
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On a Scale of 1 to 10 – With 10 Being Undoubtable Truth – Protectionism is a Zero

3 days ago

From time to time, when I write a blog post I feel as though I’m setting a trap.  Setting a trap is never my intention, but on such occasions I have a pretty good sense of the specific contents of the retorts that my post will elicit – retorts that will give me the opportunities to explain just why the retorts are mistaken.
I had such a sense when writing this post earlier today and, sure enough, the retort that I felt confident would come actually came (as it happens in this case from Bret Wallach).  My post made the point that the logic of protectionism, if it were correct, would suggest that individual households would maximize their material prosperity by refusing to trade with each other.  Each household would be autarkic.
Here’s Bret Wallach’s comment, in full, on my earlier

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A Protectionist is Someone Who…

4 days ago

… according to Michael Connell of Monmouth College, “wants to reward his neighbors with low productivity jobs to provide him with something he values highly — a sense of self-righteous smugness.”
(I thank Michael for e-mailing to me this insight and for giving me permission to share it here.)
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Some Links

4 days ago

Shikha Dalmia argues persuasively that United States border bouncers (as she so aptly calls them) already have too much power; they do not need additional powers, such as those of spying on private people.
John Tamny draws an important lesson from “the awful Republican budget.”
Richard Rahn makes the case for privatizing as many government agencies as possible.
Todd Zywicki, a colleague from over in GMU’s Scalia School of Law, writes in today’s Wall Street Journal on the Consumer Financial Protection Bureau (CFPB).
James Pethokoukis is understandably underwhelmed by Scott Galloway’s historically uninformed, economically unlearned, and politically unaware case for breaking up today’s large tech firms.
Randy Holcombe writes about gun control.  And relatedly, here’s Alan Reynolds on the

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