Sunday , September 22 2019
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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

Still More On So-called “Price-gouging”

15 hours ago

Here’s a letter to a Café Hayek reader:
Mr. Mcphail:
Thanks for your e-mail.
About my posts on so-called “price-gouging” you write: “I agree with your statements about how the market functions normally. But my point of confusion is when the alternative to me [of] refusing a seller’s offer is my starving or dying of thirst am I really free to refuse the offer? And in this case does the market process still function properly?”
Your question is good.
Natural-disaster situations do differ from ordinary situations, but not categorically. They differ only in that, for certain goods, demand is unusually high and supplies are unusually low. Evidence that the market is indeed still functioning properly is precisely the fact that it accurately reports these unusual conditions of demand and

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Some Links

20 hours ago

Gerard Baker, writing in the Wall Street Journal, reveals that he is no convert to the faith of St. Greta of Stockholm. A slice:
The High Church of Environmentalism has acquired many of the characteristics of its ecclesiastical predecessor. An apocalyptic eschatology warns that we will all be consumed by fire if we don’t follow the ordained rules. The notion that it is our sinful nature that has brought us to mortal peril—from the Original Sin of a carbon-unleashing industrial revolution to daily transgressions with plastic bottles and long-haul flights—is as central to its message as it was to the Catholic Church’s. But repentance is near. A gospel of redemption emphasizes that salvation lies in reducing our carbon footprint, with reusable shopping bags and bike-sharing. The secular

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Quotation of the Day…

23 hours ago

… is from page 196 of George Will’s important 2019 book, The Conservative Sensibility:
The quantity of political ignorance matters because voting is not merely an act of individual choice. It also is the exercise of power over others.
DBx: Yes.
The negative externality that I worry about most – that I worry about far more than I worry about, say, carbon emissions, pollution spilling into the Chesapeake Bay, or overfishing – is that which is not merely enabled by, but positively encouraged by, an ethic of democratic majoritarianism: majority rule that is largely constitutionally unconstrained.
To give you a say in my life and me a say in yours – to give Jones a vote in how Smith’s money is spent to affect Jackson’s life – is to create negative externalities of the worst sort. Yet save

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Bonus Quotation of the Day…

2 days ago

… is from page 87 of the 2009 edition of the incomparable H.L. Mencken’s 1926 volume, Notes on Democracy:
The bargaining [of politicians for votes] is conducted to the tune of affecting rhetoric, with music by the choir, but it is as simple and sordid at bottom as the sale of a mule. It lies quite outside the bounds of honour, and even of common decency. It is a combat between jackals and jackasses.
Comments

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Identifying What Is Really Arbitrary

2 days ago

Here’s a third letter to “price-gouging” opponent Marc Michaelson:
Mr. Michaelson:
Accusing me of being in error when I say that prices are not arbitrary, you write that “unless they are reined in by the government sellers in those [natural-disaster] situations can charge whatever prices they want.”
Not so.
Sellers can indeed ask for their wares whatever amounts of money they wish. But asking for an amount of money does not itself create a market price. A market price arises only when a buyer accepts a seller’s offer. Prices are terms of exchange, and each and every exchange requires a seller and a buyer. It follows that for money prices to arise both sellers and buyers must agree on the amounts of money that will change hands. (If you disagree, you must therefore believe that if I

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More Globalization (Please!)

2 days ago

When I posted the first of three videos in Mercatus’s new Globalization series I carelessly missed the happy fact that videos numbers two and three are also already available. Here they are. (In the last video, I believe that the benefits of globalization for middle-income workers in developed countries is overstated. It’s untrue that wages for many of these workers have stagnated for a “generation.“)
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Globalization is a Boon

2 days ago

Today it’s de rigueur (oops! pardon me for using an imported word)…. Today it’s acceptable and commonplace to assert that globalization, on many different margins, has failed, is failing, and will continue to fail and, therefore, must be replaced by economic nationalism. This assertion is indeed now issued and heard so regularly – and from individuals spread all over the political and ideological landscapes – that many (most?) people treat it as an established fact, opposition to which comes only from “globalists,” “cosmopolitans,” “neo-liberals,” and faceless multinational corporations.
But this assertion is complete nonsense. It’s false. Support for it rests on a combination of cherry-picked anecdotes and an immense mountain of economic and historical ignorance, typically offered up

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Some Links

2 days ago

Susan Dudley has very good reasons for liking Paul Rubin’s new book, The Capitalism Paradox. A slice:
Similarly, President Trump’s immigration and trade policies are based on flawed zero-sum thinking. Under the mistaken premise that all workers are competing for a fixed number of jobs, he concludes that keeping foreign workers out is good for Americans. He doesn’t see that voluntary transactions are positive sum and that immigrants increase the number of people available for Americans to cooperate with. For some jobs, foreign workers are better at cooperating with employers than American workers, and through that cooperation, the size of the pie grows. Similarly, by looking only at the competition imported Chinese goods pose for U.S. manufacturers, Trump ignores the fact that U.S.

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Quotation of the Day…

2 days ago

… is from page 105 of the 2004 Liberty Fund edition of David Ricardo’s 1817 treatise, On the Principles of Political Economy and Taxation:
Like all other contracts, wages should be left to the fair and free competition of the market, and should never be controlled by the interference of the legislature.
Comments

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Yet More On the Benefits of So-Called “Price-Gouging”

2 days ago

In my latest column for the Pittsburgh Tribune-Review I return again to the task of explaining the unintended ill-consequences of government prohibitions of so-called “price-gouging.” A slice:
A small handful of people will agree that it’s OK for those who bring new supplies to disaster areas to charge unusually high prices. But what about merchants who, in the wake of disasters, charge unusually high prices for goods that they already had on hand and which they themselves acquired at “normal” prices? Isn’t it wrong — and shouldn’t it be unlawful — for merchants to charge more than normal mark-ups?
No.
How many people believe that someone who in 2005 bought 100 shares of Apple stock at $10 per share acts unethically by now selling that stock at today’s price of $220 per share? How

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A Quick Update of a 2006 Work-Time-Cost Finding

2 days ago

David Henderson e-mailed me earlier today to ask if I’ve ever updated this post on the work-time cost of some goods found in Sears’s Fall/Winter 1975 catalog.
I did do so – in a fashion, and then only in a PowerPoint presentation.
But I just now checked to see if there’s been any change between 2006 and today in the work-time costs of the particular (kinds of) goods mentioned in that 2006 blog post.
At the websites of Amazon, Home Depot, and Lowe’s, I found goods today comparable to ones in 2006. Using the August 2019 average hourly earnings of private-sector production and nonsupervisory employees – which are $23.59 – I calculated the 2019 work-time costs.
Even I was surprised to find that, for the goods listed in that 2006 Cafe Hayek post, the work-time cost of acquiring them has

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Bonus Quotation of the Day…

3 days ago

… is from page 13 of Deirdre McCloskey’s August 2019 manuscript titled “Bettering Humanomics: Beyond Behaviorism and Neo-Institutionalism” (footnote deleted):
Monopoly or inequality or externality or informational asymmetry “exist,” to be sure. Some economists have been vigorous in measuring their local effects, on telephone pricing, say, or the imperfect market for defective horses or automobiles. But their national significance has been nothing like established in economic measurement. Posited externalities among other allegedly significant imperfections have been used without serious empirical inquiry in order to justify all manner of governmental actions. Listen to the rhetoric defending a new policy: we need regulation of this terrible, new imperfection, just as we have

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The Invisible Heart Is Real, and It’s Beating

3 days ago

Here’s a follow-up e-mail to a young, self-described “socialist-leaning progressive”:
Mr. Michaelson:
Thanks for your follow-up e-mail.
You write that economists such as me, who argue against government restrictions on so-called “price-gouging,” “will and should get nowhere using heartless logic to excuse the greed which deprives desperate people of things they need.”
I admit that – as your follow-up e-mail itself shows – making the case against anti-price-gouging legislation is a challenge. It’s a challenge, however, because most people have no understanding of what determines prices or of what role prices play. Most people believe prices to be arbitrary impositions, usually by sellers upon buyers. If this popular belief were correct, the economic case against prohibiting

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Some Links

3 days ago

My intrepid Mercatus Center colleague Veronique de Rugy describes new “reforms” at that great geyser of cronyism, the U.S. Export-Import Bank, as “little more than window dressing that would not substantially change Ex-Im’s dodgy portfolio.”
David Henderson takes stock of supply-side economics.
Phil Magness reports on the not-so-sweet history of Swedish statism.
My GMU Econ colleague Bryan Caplan is indeed wise.
In this podcast, Aaron Powell and Trevor Burrus talk with the grateful Steve Horwitz.
In this video, Taleed Brown discusses millennials and socialism.
David Simon argues that “The depletion of the [Medicare] Part A trust fund does not signal a crisis. It instead presents an opportunity to stop part of the entitlement programs leviathan from further tightening its stranglehold

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Life IS Good

3 days ago

John Stossel, with help from Katherine Mangu-Ward, debunks the doomsayers.
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Quotation of the Day…

3 days ago

… is from pages 23-24 of the transcript of late John Blundell’s conversation (I think in 2000, and the audio of which is available here) with the late Peter Bauer, as this transcript appears in the 2002 volume A Tribute to Peter Bauer; these remarks are those of Bauer:
First of all, I would say we shouldn’t talk about inequalities, but differences, because difference is a neutral term, and inequality is a loaded term. Inequalities often are equated with inequity. Except this leads to the idea that the poor are poor because the rich are rich, i.e. that the rich have extracted their incomes or wealth from the poor, which is not true.
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Bonus Quotation of the Day…

4 days ago

… is from page 361 of Liberty Fund’s 2011 collection of Frédéric Bastiat’s writings, The Man and the Statesman: The Correspondence and Articles on Politics – which is the first volume in what will eventually be six volumes, expertly edited by David Hart, of The Collected Works of Frédéric Bastiat; specifically, this quotation is drawn from Bastiat’s 1846 letter “To the Electors of the District of Saint-Sever” (original emphasis):
Let us suppose that this regime were not forced on us by law, but directly by the will of the monopolists. Let us suppose that the law left us entirely free to purchase iron from the Belgians or the Swedes, but that the ironmasters had servants enough to prevent the iron from passing our frontiers and to force us thereby to purchase from them and at their

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Economic Reality

4 days ago

In response to this post about some unintended ill-consequences of price controls, my Mercatus Center colleague Bob Graboyes sent me this e-mail, which I share here with his kind permission:
My parents ran a children’s clothing store in the 1940s, back when the Office of Price Administration was sending clipboard-carriers around to make sure that merchants weren’t raising prices. My folks would take the best merchandise and stow it under the counter for their friends. Later on, they employed high school kids to clean up the store. When the minimum wage shot up, Dad had to stop using the kids and mop the place up himself. Unhappy people all around.
Comments

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Money Isn’t the Only Currency

4 days ago

Here’s a letter to a new correspondent who is skeptical of my and other economists’ opposition to government prohibitions on so-called “price-gouging”:
Mr. Michaelson:
Thanks for your e-mail.
While you recognize the “downsides to outlawing price gouging,” you “continue to support it because at least it keeps critical goods affordable for poor people.”
Possibly. One can imagine the poorest people being the first to arrive at stores and finding there, available for sale at prices kept artificially low by statute, all the supplies that they wish to buy. That is, one can imagine that those who suffer the ill-consequences of shortages created by prohibitions on “price-gouging” – those who, because of shortages, are unable to buy supplies – are exclusively rich people.
But any such

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Some Links

4 days ago

Michael Strain offers some reason to believe that today’s populism will soon be back beneath the rock from where slithered.
Matt Welch reviews Samantha Power’s The Education of an Idealist. (HT David Henderson)
Kevin Williamson exposes the astonishing ignorance of New York Times columnist Jamelle Bouie. A slice:
Bouie’s majoritarian ideology is nowhere to be found in the Constitution; in fact, the very structure of American government is designed to frustrate that kind of crass majoritarianism. Hence the Senate (as originally organized) and the presidential veto, both designed as checks on the excessive democratic passions to which the House might be subject; hence the written Constitution and the Bill of Rights, i.e. America’s Great Big List of Important Stuff You Idiots Don’t Get a

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Quotation of the Day…

4 days ago

… is from page 346 of the 1990 Transaction Publishers reprint of W.H. Hutt’s 1936 volume, Economists and the Public:
And it is when demand is impartial, when purchasers are completely ignorant or indifferent to the status (e.g. rank, age, sex, race, nationality or religion) of producers, and when other institutions do not protect status, that this tendency to equality finds realization.
DBx: Occupational-licensing requirements, subsidies (such as those doled out through the U.S. Export-Import Bank to its crony clients), and protective tariffs are some of the chief means by which the state undermines the healthful impartiality here praised by Hutt. And the more this impartiality is undermined, the more does status replace contract as each person’s means of prospering and advancing in

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Bonus Quotation of the Day…

5 days ago

… is offered to commemorate Constitution Day in the United States, which is September 17th; this quotation is from page 65 of Liberty Fund’s 1980 edition of James Fenimore Cooper’s 1838 The American Democrat:
Although it is true, that no genuine liberty can exist without being based on popular authority in the last resort, it is equally true that it can not exist when thus based, without many restraints on the powers of the mass. These restraints are necessarily various and numerous.
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Some Links

5 days ago

Max Gulker argues that a President Elizabeth Warren would be an even greater calamity than would a President Bernie Sanders. A slice:
Warren presents herself as a tireless, technocratic savior of capitalism, but her plans give the U.S. government far more control over individual firms, households, and markets than anything proposed in recent memory. Warren, a legal scholar by trade, has moved into the complex realm of a modern economy, where a lawyer’s penchant for sweating the details is usually counterproductive and causes considerably more damage along the way.
My intrepid Mercatus Center colleague Veronique de Rugy is not impressed by the so-called “reform” of that great geyser of cronyism, the U.S. Export-Import Bank.
Richard Ebeling explains that price controls suppress freedom

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Quotation of the Day…

5 days ago

.. is the closing paragraph of Tom Palmer’s 2002 essay “Classical Liberalism and Civil Society”; it appears on page 246 of Tom’s 2009 book, Realizing Freedom:
Classical liberals insist that, under normal circumstances, at least, the liberty of the individual human being is the highest political end. It is not the end or goal of life itself, but the condition that makes the ends of life most likely to be attained.
DBx: Your ability to achieve your individual ends – many of which, by the way, you likely pursue by voluntarily joining with other persons in joint enterprises such as not-for-profit charities and for-profit corporations – is compromised and sometimes even altogether thwarted if you are constantly being taxed and otherwise compelled by the state to serve ends that are not of

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Let Your Voice Be Heard by Opposing the Politicization of Society

6 days ago

In my latest column for AIER I riff on the reality that, contrary to popular assertions, each individual’s voice – and influence – in markets and other non-politicized spheres is much more decisive than it is in politicized spheres, even democratic ones. A slice:
The market gives to the plumber, the pipefitter, and the political-science professor each a real and meaningful say in how his or her life proceeds. The young man who chooses to pursue a career as a physician need not persuade 51 percent of his fellow citizens to endorse his choice; that choice is his and his alone. Likewise for the woman who chooses to delay having children in order to work full-time as an attorney: the decision is hers, and it’s a decisive one.
Unlike in politics, each person’s individual decisions outside

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Quotation of the Day…

6 days ago

… is from page 328 of Vito Tanzi’s 2018 book, Termites of the State: Why Complexity Leads to Inequality (original emphases):
Rules, now issued by modern governments, and increasingly in coordination with other governments and with international organizations, have, to a large extent, replaced the broader principles, or the guidelines, that had existed in the past. These rules are created to deal with current actions and current perceptions of what is proper, legitimate, and necessary. The problem is that it is difficult for specific rules to anticipate future needs and to stipulate future actions that may be guided by new and unanticipated circumstances….
DBx: This point, a Hayekian one, is important.
Common-law processes apply principles to particular situations – to particular

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Preposterous ‘Understanding’ of Trade

6 days ago

Here’s a letter to the Wall Street Journal:
Editor:
Contrary to your implication, the real story of Sen. Kamala Harris’s comment, during the recent debate, about trade is not any implied criticism that she might have made of President Trump’s private parts. Instead, it’s Sen. Harris’s express endorsement of Mr. Trump’s fundamental misconception about trade. She offered this endorsement when she declared “Look, we need to sell our stuff” (Notable & Quotable, Sept. 14).
Like the president, Sen. Harris mistakenly fails to understand that the ultimate purpose of trade is best summarized, not by the phrase that she used, but instead by the phrase “Look, we need to buy their stuff.”
Selling stuff is a means; the end is to acquire stuff. Put differently, exporting – despite its undeniable

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Bonus Quotation of the Day…

7 days ago

… is from pages 439-440 of the 2014 collection – The Market and Other Orders (Bruce Caldwell, ed.) – of some of F.A. Hayek’s most influential essays; specifically, it’s from Hayek’s 1963 lecture, delivered at the University of Chicago, “Economists and Philosophers”:
Let me recall what the characteristic problem of the social sciences is. It consists in the explanation of the formation of an order which not only none of the participants intends to produce or needs to know but which also depends on a far larger number of circumstances than is known to any one among them.
DBx: Yes.
Society is indescribably complex, and therefore to treat it as a simple mechanism is folly.
Yet politics is overwhelmingly an exercise in proposing and imposing simplistic solutions. Want workers to be paid

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