Monday , March 30 2020
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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

Some Links

16 hours ago

Arnold Kling is spot-on about the coronavirus relief bill.
Stephen Miller asks, to excellent effect, what the growing number of coronavirus cases really means.
Jeffrey Tucker sees coronavirus as ideology.
Shikha Dalmia makes the case for cutting H-1B visa red tape.
Jeff Jacoby understandably worries about the danger to liberty posed by governments’ reach for power to deal with COVID-19. A slice:
To repeat: This extraordinary menace may well require an extraordinary response. Yet a month ago, could anyone have imagined that we would see the complete cessation of all church and synagogue worship in the United States? Or a total halt to citizens’ First Amendment right “peaceably to assemble and to petition the government”? Or the wholesale shutdown of entire industries and cultural

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Quotation of the Day…

1 day ago

… is from page 195 of Robert Higgs’s indispensable – and now more relevant than ever – 1987 book, Crisis and Leviathan:
The most important legacy of the New Deal, however, is a certain system of belief, the now-dominant ideology of the mixed economy, which holds that the government is an immensely useful means for achieving one’s private aspirations and that one’s resort to this reservoir of potentially appropriable benefits is perfectly legitimate. To take – indirectly if not directly – other people’s property for one’s own benefit is now considered morally impeccable, provided that the taking is effected though the medium of the government.
Comments

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Some Links

2 days ago

Normally I’m allergic to clever proposals of new ways for governments to act. But given all the givens, I find this proposal by Arnold Kling to be ingeniously sound.
David Henderson asks an interesting and important question – one inspired by an observation made by GMU Econ alum Michael Thomas.
Here’s more from Eric Boehm on how Trump’s tariffs punitive taxes on Americans who buy imports – punitive taxes that spring from the unfathomable lunacy and ignorance of Trump’s trade advisor Peter Navarro – are making Americans worse off during the COVID-19 crisis.
My GMU Econ colleague Alex Tabarrok reports the sad reality of the politicized use of the Defense Production Act.
Wisdom from Ilya Somin.
My intrepid Mercatus Center colleague Veronique de Rugy is understandably dismayed by the

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Quotation of the Day…

2 days ago

… is this March 21st, 2020, tweet from Thomas Sowell:
It is so easy to be wrong – and to persist in being wrong – when the costs of being wrong are paid by others.
DBx: Indisputably true, both as a matter of logic and as a proposition that consistently succeeds at explaining a great deal of human history.
Note that Sowell’s point is general. Those who are convinced that today’s government-engineered lock-down of much economic activity is appropriate can nod their heads approvingly at the thought that those who are convinced of the opposite fail to account adequately for the costs that would be paid by others were this lock-down less draconian. Ditto the other way ’round: those opposed to this lock-down nod their heads approvingly at what they take to be Sowell’s explanation of why

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What About Economists’ Expertise?

3 days ago

Here’s a letter to the Washington Post:
Editor
These days we are lectured incessantly about the importance of deferring to experts. And those persons amongst us – including members of Congress, state governors, and even the President of the United States – who don’t fully follow experts’ prescriptions are solemnly denounced as fools who irresponsibly endanger the public.
Without opining on the merits of epidemiologists’ expert assessments regarding COVID-19, I’m compelled to ask why there is no deference to the expert assessments of us economists. Why, for example, is economists’ long-standing consensus in support of free trade – indeed, strong support for unilateral free trade – ignored? We hear no demands from the likes of politicians such as Sen. Chuck Schumer or pundits such as

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Some Links

3 days ago

My intrepid Mercatus Center colleague Veronique de Rugy applauds the creativity and compassion on display in the private sector. A slice:
After what can only be described as a multilevel government failure that resulted in the United States having practically no coronavirus tests available for weeks after the onset of the pandemic, the private sector ramped up its production so much that we’re now testing 65,000 people every day. This number is bound to grow. The tests are a crucial component of making it through this crisis, and they’ll become even more accurate and deliver results faster as innovators do what they do best when they’re unhindered by silly or contradictory government regulations.
Vincent Geloso teaches us what Herbert Hoover inadvertently teaches us about reaction to

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Quotation of the Day…

3 days ago

… is from pages 262-263 of George Will’s excellent 2019 book, The Conservative Sensibility:
[Welfare] states presuppose economic dynamism sufficient to generate investments, job creation, corporate profits, and individuals’ incomes from which come tax revenues needed to fund entitlements. But welfare states produce in citizens an entitlement mentality and a low pain threshold. That mentality inflames appetites for more entitlements, broadly construed to include all government benefits and protections that contribute to welfare understood as material well-being, enhanced security, and enlarged leisure. The low pain threshold causes a recoil from the rigors, insecurities, and dislocations inherent in the creative destruction of dynamic capitalism. The recoil takes the form of

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Some Links

4 days ago

Writing in the Wall Street Journal, Charley Hooper and David Henderson wisely make the case against the absurd 1962 Kefauver-Harris amendment that FDA approval be given, not to drugs that are proven merely to be “safe,” but only to those that are proven to be both “safe and effective.” A slice:
Further, the Kefauver-Harris Amendments dramatically increased the time and cost of getting new drugs approved. Evidence provided by University of Chicago economist Sam Peltzman suggests that the number of new drugs approved dropped by 60% in the decade following the law change. We have fewer ineffective drugs, but also far fewer effective ones than we could have had.
Also rightly critical of the FDA is my intrepid Mercatus Center colleague Veronique de Rugy.
GMU Econ alum Ryan Young and CEI

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Quotation of the Day…

4 days ago

… is from page 131 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 (original emphasis):
We are extremely dependent on changing money prices to secure effective cooperation in our complex, interdependent society and economy. When prices are not permitted to signal a change in relative scarcities, suppliers and demanders receive inappropriate signals. They do not find, because they have no incentive to look for, ways to make accommodations to one another more effectively. It is important that people receive some such incentive, because there are so many little ways and big ways in which people can accommodate – ways that no central planner can possibly anticipate, but which

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An Open Letter to Florida’s Attorney General

4 days ago

Ms. Ashley Moody, Attorney GeneralState of FloridaTallahassee, FL
Ms. Moody:
You issued more than 40 subpoenas in response to so-called “price gouging.” And you justified your actions with this written statement: “Floridians are searching for essential products needed to stay safe and healthy during this COVID-19 pandemic. Sadly, when they find these products for sale online, they often discover that the price tag makes them unattainable. This is unacceptable and unlawful.”
Your economics is mistaken: the price tag about which you complain is what prevents these products from being “unattainable.”
The high prices that you aim to push lower entice suppliers to exert the extra efforts necessary to ramp up production of such products and to speed them to market. These high prices also

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Bonus Quotation of the Day…

5 days ago

… is Mark Twain’s response to someone who asked him how he could be friends with Standard Oil vice-president Henry H. Rogers, whose immense fortune was falsely believed – simply because it was chiefly earned as a result of Rogers’ work at Standard Oil – to be “tainted”:
His money is tainted, it taint mine and it taint yours.
DBx: It’s a damn shame that this civilized respect for others’ property is today not more widespread. Rather than, like Samuel Clemens, respect and not envy other people’s unusually great material prosperity, today Americans read books, articles, and columns by Ivy League credentialed academics that actively encourage envy and covetousness of that which one hasn’t earned. And too many Americans cast ballots for politicians who solemnly promise to pillage the

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Don’t Bail Out the Airlines

5 days ago

Two of my Mercatus Center colleagues – the intrepid Veronique de Rugy, along with Gary Leff – make the case against a government bailout of U.S.-based commercial airlines. Here are two slices:
When the federal government bails out an industry, it shifts resources away from nonsubsidized industries to the subsidized one. Because politics drives the bailout decision, this shifting of resources is done largely independently of the merit of the industry or of its claims of special distress. If it were not for the government action, the resources used in bailouts would be directed naturally by the market to other, more productive uses. So while it is easy to see the companies and the jobs that are today saved by bailing out the airlines, we don’t know what goods and services are thereby

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Some Links

5 days ago

Notre Dame University law professor Stephen Smith (a fellow graduate with me of UVA Law’s class of 1992) busts the mythical claim that the United States has no abnormally – and unnecessarily – high rate of incarceration. Here’s his well-grounded conclusion:
We would be much better off as a society—both safer and truer to our libertarian ideals—if we reserved prisons and jails exclusively for our most dangerous and most incorrigible criminals, made serious efforts to rehabilitate instead of merely warehouse inmates, and relied on less-invasive means to address other social problems.
Also helping to bust the myth that incarceration rates in the U.S. aren’t too high by any reasonable standard is Clark Neily.
Ben Zycher isn’t impressed with House Republicans’ proposals for climate

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Quotation of the Day…

5 days ago

… is from page 92 of my late Nobel-laureate colleague Jim Buchanan’s 1996 article “Economic Freedom and Federalism: Prospects for the New Century,” as this article is reprinted in James M. Buchanan, Federalism, Liberty, and Law (2001), which is volume 18 of the Collected Works of James M. Buchanan:
[T]he centrally planned economy failed because it did not, and cannot, utilise either the knowledge of opportunities or the incentive structures that emerge more or less naturally in markets.
DBx: Yesterday I was interviewed by Juliette Sellgren for her forthcoming podcast series, Juliette’s Uncommon Knowledge. Juliette is a high-school junior with uncommonly good sense about the economy. The first question she asked me is what’s the one thing that kids her age should know that they don’t.

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Strange Value System

5 days ago

Here’s a letter to a “relatively new reader” of Café Hayek:
Mr. Rolfe:
Thanks for your e-mail and for reading my and Veronique de Rugy’s op-ed on responses to COVID-19.
You ask if I’m “not at least slightly angered when stores sell common goods at exorbitantly high prices.”
My answer is no; I’m not at all upset. In fact, I’m pleased.
Of course I lament the underlying conditions that cause the high prices – namely, the fall in supplies of goods relative to demands for them. But to be upset at the high prices themselves – prices which accurately report current levels of scarcity – would make no more sense than to be upset at a newspaper reporter for accurately writing that my home was destroyed by fire. Although the fire is unfortunate, the accurate reporting of it is not.
Nevertheless,

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Some Links

6 days ago

My emeritus Nobel-laureate colleague, Vernon Smith – writing in USA Today – is optimistic that the U.S. economy will survive, and survive well, the COVID-19 outbreak.
Here’s a lovely essay on the false security of closed borders. (HT Tom Palmer)
Ed Stringham shares a letter from 800 medical specialists warning against draconian responses to coronavirus.
Alberto Mingardi asks if there exists better alternatives to lockdowns.
Tyler Cowen predicts that among coronavirus’s victims will be the “Progressive” left.
Raymond Niles reports the happy fact that New York Governor Andrew Cuomo recognizes the benefits of so-called “price gouging.”
Here’s another silver-lining around the dark cloud that is COVID-19.
Comments

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Cash Isn’t Output

6 days ago

Here’s a letter to The Atlantic:
Editor:
Derek Thompson, describing how the Danish economy will allegedly be saved from the coronavirus, writes that the government there will “throw the whole economy into a deep freezer, and when the virus winds down [it] can thaw it out and almost everybody will still be with the company they worked for in January” (“Denmark’s Idea Could Help the World Avoid a Great Depression,” March 21). The specific means of foisting the Danish economy into the freezer is for government to pay 75 percent of the salaries of most private-sector workers who remain formally employed but who miss work because of COVID-19.
Nothing is easier for governments than to dispense cash. But cash is inedible. Cash doesn’t cook, clean, cut hair, catch fish, can vegetables, or

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More on Responses to COVID-19

6 days ago

My intrepid Mercatus Center colleague Veronique de Rugy and I have a new op-ed that went out last night over the Tribune’s wire service. Our essay is on responses to the outbreak of coronavirus. Here’s a slice:
But to improve people’s material well-being requires also that any increased production be of goods and services that are of the most use to people. It would be wasteful to use resources in ramping up production of cruise ships and karaoke machines rather than of more desperately needed hospital beds and food. Income earned at work is valuable only if it can be spent on things that income earners most want.
Unfortunately, government efforts to stop so-called “price gouging” reduce the production of goods and services that people want the most in times of emergency. By

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Quotation of the Day…

6 days ago

… is from page 193 of George Will’s 1992 book, Restoration:
[Government budget D]eficits are political and moral events, not merely economic events. A balanced budget amendment would do something of constitutional significance: It would protect important rights of an unrepresented group, in this case the unborn generations that must bear the burden of the debts. The amendment would block a form of confiscation of property – taxation without representation.
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Some Links

7 days ago

My Mercatus Center colleague Dan Griswold, writing in The Hill, argues that
[c]ertain members of the Trump administration and Congress have ramped up their criticism in recent days, claiming that the virus confirms their warnings that the United States is too dependent on China for imports, especially critical pharmaceutical and medical supplies. But a closer look at our trade with China shows that their warnings are misguided and threaten to compound the mounting cost of the virus.
Good, if too-rare, sense about governments’ reaction to COVID-19 is offered by Gerry Dwyer, Richard Ebeling, John Cochrane, and Nick Gillespie.
John Miltimore reminds us that governments often make panics worse. A slice:
It’s no secret or coincidence that crises—foreign wars, terrorist attacks, and

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More on How Globalization Makes Us Healthier

7 days ago

In my latest column for AIER, I go into more depth on why it’s utterly misguided to conclude from the COVID-19 pandemic that Americans should reject – or even become more skeptical of – globalization. A slice:
First, to be useful, creative capacity must be tapped. By making more abundant in America goods and services not conventionally thought of as health-care related, free trade increases both the practical ability and the incentives for more Americans to devote time to supplying health care and to doing medical research. Because trade increases the abundance in America of the likes of food, clothing, building materials, fuel, and automobiles, trade reduces the number of Americans who work to produce these non-health-care outputs. Larger amounts of American creativity and effort are

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Incessantly Treating Reality as If It’s Optional Doesn’t Make Reality Optional

7 days ago

Here’s a letter to a long-time reader of Café Hayek:
Dear Aileen:
Thanks, as always, for your e-mail.
You’re correct that most people have “strong negative reactions against large price increases” during crises. Indeed, it’s only because these negative reactions are so strong that politicians predictably inveigh against such price hikes and threaten – and often impose – government-enforced prohibitions on so-called “price gouging.”
But this negative reaction – which is fueled by economic misunderstanding – doesn’t change reality. This negative reaction doesn’t alter the underlying fact that during crises the demands for many goods and services rise relative to the supplies of those goods and services and, thus, necessarily make the value of each unit of those goods and services higher

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Quotation of the Day…

7 days ago

… is from page 159 of volume III (“The Political Order of a Free People,” 1979) of Hayek’s Law, Legislation, and Liberty (footnote deleted):
In particular, in order to explain the economic aspects of large social systems, we have to account for the course of a flowing stream, constantly adapting itself as a whole to changes in circumstances of which each participant can know only a small fraction, and not for a hypothetical state of equilibrium determined by a set of ascertainable data. And the numerical measurements with which the majority of economists are still occupied today may be of interest as historical facts; but for the theoretical explanation of those patterns which restore themselves, the quantitative data are about as significant as it would be for human biology if it

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Pittsburgh Tribune-Review: “The market’s bounty”

8 days ago

In my column for the November 26th, 2008, edition of the Pittsburgh Tribune-Review, I celebrated the market’s astonishing bounty – and lamented the fact that the market generally works so smoothly at delivering this bounty that few people ever notice the awesomeness of the market’s daily achievements. You can read my column beneath the fold (link added).

The market’s bounty
Ludwig von Mises, the great Austrian economist who died in 1973, described what he called “the logic of interventionism.” This logic is simple if sad. Government interventions into the economy, being much more likely than not to worsen matters, beget more government interventions.
In part, this ratcheting up of interventionism is due to the panicked turn to government whenever new problems arise. Another part of

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Quotation of the Day…

8 days ago

… is from page 308 of my late Nobel-laureate colleague James Buchanan’s 1980 paper “Procedural and Quantitative Constitutional Constraints on Fiscal Authority,” as this paper is reprinted in Choice, Contract, and Constitutions (2001), which is volume 16 of The Collected Works of James M. Buchanan:
The very purpose of rules, of constitutions, is to prevent us from making decision in an overemotional or overpragmatic response to particular situations.
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The Dangerous Virulence of Ignorance of Trade

9 days ago

Here’s a letter to the Wall Street Journal:
Editor:
United States Trade Representative Robert Lighthizer’s defense of Trump’s tariffs in the face of the COVID-19 outbreak ranges from the economically ignorant to the internally inconsistent all the way to the Orwellian (Letters, March 21).
Mr. Lighthizer’s economic ignorance is displayed by his observation that “while imports of certain other medical products from China have declined since tariffs were imposed, that has been offset by increased imports of such products from other countries.” But offset by how much? In part? Completely? He doesn’t say.
The likely answer is “in part,” the reason being that we import more of these medical products from other countries only because tariffs deny us access to China’s lower-cost versions.

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Quotation of the Day…

9 days ago

… is from page 18 of the original edition of Robert Higgs’s profound and now more-relevant-than-ever 1987 book, Crisis and Leviathan (original emphasis):
Note that once constitutional barriers have been lowered during a crisis, a legal precedent has been established giving government greater potential for expansion in subsequent noncrisis periods, particularly those that can be plausibly described as crises.
DBx: No book now is more relevant to read – or to re-read – than is Bob’s Crisis and Leviathan. If you’ve not yet read it, do so ASAP. If you last read it a few or more years ago, read it again.
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Some Links

10 days ago

Enjoy and learn from the discussion of my GMU Econ colleague Dan Klein with Knud Haakonssen, Mike Huemer, and Brianne Wolf on “Smith, Hume, and Burke as Policy Liberals and Polity Conservatives.”
My intrepid Mercatus Center colleague Veronique de Rugy is justifiably alarmed by many of the policies being proposed to deal with the COVID-19 crisis.
John P.A. Ioannidis warns that “as the coronavirus pandemic takes hold, we are making decisions without reliable data.” A slice:
In the absence of data, prepare-for-the-worst reasoning leads to extreme measures of social distancing and lockdowns. Unfortunately, we do not know if these measures work. School closures, for example, may reduce transmission rates. But they may also backfire if children socialize anyhow, if school closure leads

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Pittsburgh Tribune-Review: “A cut above?”

10 days ago

In my column for the November 4th, 2008, edition of the Pittsburgh Tribune-Review, I wrote about former U.S. senator from Alaska Ted Stevens, who was convicted on charges of corruption. You can read my column beneath the fold.

A cut above?
Sen. Ted Stevens’ face was etched with dismay — at least, that’s what I saw when I looked at his picture in The Washington Post, taken as he left the courthouse following his conviction on charges of corruption.
He didn’t look like a man sorry for anything he had done. Rather, he looked like a man convinced that unjust forces managed to finagle the system into successfully prosecuting someone who knows in his bones that he’s done no wrong.
My first instinct is to have no sympathies for Sen. Stevens. But reflection compels me to register a brief on

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Quotation of the Day…

10 days ago

… is from page 263 of George Will’s superb 2019 book, The Conservative Sensibility:
There is a clear and present danger that America’s sterling contribution to the Great Enrichment might be petering out because Americans might be entering what will be called the Great Flinch, a reaction against the uncertainties and other stresses inherent in dynamism. This might be happening at the very moment when dynamism is needed more than ever.
DBx: Sad but true, this increasing likelihood of the Great Flinch.
Much of the impetus for such a flinch springs from a simple yet significant failure to grasp reality, especially economic reality. The reality that people fail to grasp is that the masses’ modern standard of living is impossible without the economic dynamism that is driven by what my

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