Tuesday , January 28 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

My Intrepid Mercatus Center Colleague Veronique de Rugy

1 day ago

I’m often asked why I regularly refer to Veronique de Rugy as “my intrepid Mercatus Center colleague.” The answer is that she is just that. Never have I met anyone as dogged as is Vero at exposing the economic fallacies and factual errors that are always to be found at the root of cronyism and fiscal irresponsibility.
My moniker for Vero occurred to me about five or six years ago when she, with remarkable determination, led the charge that nearly succeeded in permanently plugging that great geyser of cronyism, the U.S. Export-Import Bank. Although this absurd and crony agency is now again gushing out taxpayer dollars at full force, Vero’s efforts were instrumental at slowing it down for years. This tireless and deeply principled American émigré from France alone is responsible for

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Quotation of the Day…

2 days ago

… is from page 23 of Tulane University philosopher Eric Mack’s excellent 2018 book, Libertarianism (original emphasis; the internal quotation is from David Hume):
The first principle of justice that enables us to escape from this anti-cooperative quagmire and at least achieve peaceful co-existence is “the stability of possessions,” which forbids the seizure of other people’s holdings. General compliance with this principle assures individuals that they will enjoy the fruits of their own labor and that they had better engage in productive labor because the options of seizing the fruits of others’ labor has been ruled out. The anticipation of this compliance enormously increases everyone’s incentive to live by production and not by predation.
DBx: Widespread acceptance of this principle

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Bonus Quotation of the Day…

2 days ago

… is from page 6 of the original edition of James M. Buchanan’s 1960 textbook, The Public Finances (a book that isn’t included in Buchanan’s Collected Works) (typo corrected):
[In a market economy] No individual coerces any other individual; a market transaction represents a wholly voluntary exchange from which both parties expect to receive benefits. The market economy is an organized method of securing voluntary cooperation among individuals. It is essentially a system of spontaneous order which arises out of the individual participation of numerous buyers and sellers. Resources are allocated to the many possible employments; goods and services are produced and distributed without a direct central plan every having been discussed, approved, formulated, or even contemplated. The

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Some Links

2 days ago

Jeffrey Tucker rightly laments Trumpism’s swallowing of conservativism. A slice:
Meanwhile, philosopher George Will, something of a guru in conservative circles in the early part of my career, is now the outlier, an isolated dissident in the Trumpization of conservatism. His mighty treatise The Conservative Sensibility proves that the only American conservatism worthy of the name is but an elaboration of the great liberal conviction that society manages itself better than it can ever be managed by state authority. It’s a book for the ages; it has to be because it has made no dent in the march of Trumpism in our own time.
An increasingly popular style of leftist “history” features explanations that mix breathless conspiracy theories with juvenile suppositions about the role of money in

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Quotation of the Day…

3 days ago

… is from page 172 of my late Nobel-laureate colleague Jim Buchanan’s 1987 paper “Man and the State,” as this paper is reprinted in James M. Buchanan, Federalism, Liberty, and Law (2001), which is volume 18 of the Collected Works of James M. Buchanan:
Failure or success has too often been measured in terms of the standard economists’ criterion of efficiency, the ability to get goods and services produced and distributed, to add to the wealth of nations. Markets may fail against the efficiency standard, even in some relative sense. But even in failure markets allow persons to retain exit options without which liberty cannot be secured.
DBx: The important point that Buchanan makes here has several implications, two of which are:
– To the extent that human beings value liberty as an end

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Bonus Quotation of the Day…

3 days ago

… is from page 75 of the original edition of Lee Francis Lybarger’s 1914 book, The Tariff (original emphases):
If you would understand the Motives and Philosophy of Protection, you must realize that it is simply a conflict between the Producer and Consumer. In other words, it is an effort on the part of the producer to secure by law a higher price from the consumer than he is able to obtain in the open market. The Producer is against an open market and in favor of a closed market. Therefore the Tariff causes an increase of price wholly in the interest of the Producer and at the expense of the Consumer. What it gives to one it must take from the other.
DBx: Yes.
Pedants will pounce! They’ll declare that some of the costs of tariffs are typically borne by foreign suppliers in the form

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Some Links

3 days ago

My intrepid Mercatus Center colleague Veronique de Rugy gives credit where credit is due – in this case to the Trump administration for its wise roll-back of an Obama-era labor policy
John O. McGinnis exposes the appalling ideology and bias of the New York Times.
Have you ever heard of the genuine hero Wilson Greatbatch?
Stuart Anderson gets the language right about travel bans.
Kevin Williamson has fun revealing the Everestian economic ignorance now on the loose in Sacramento.
Here’s a deep and important insight from Bryan Caplan about economists’ careless use of market-failure arguments (and economists’ inexcusable disregard of public choice).
My GMU Econ and Mercatus Center colleague Pete Boettke writes about the four pillars of economic wisdom. A slice:
Economics brings truth and

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Quotation of the Day…

4 days ago

… is from page 354 of James Buchanan’s 1968 contribution to the Encyclopedia of the Social Sciences, “Debt, Public,” as this essay is reprinted in Debt and Taxes (2000), which is volume 14 of the The Collected Works of James M. Buchanan:
The core of the fallacy lies in the equating of the community as a unit, in some aggregated national accounting sense, with the individuals-in-the-community, in some political sense as participants, direct or indirect, in collective decision making.
DBx: Just because two or more people choose to come together to supply for themselves some good or service that they will share – as, for example, three neighbors of mine once did when they pitched in to jointly buy a snow blower – does not imply that those people have thereby become a single entity with

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Let’s Really Have Political Realism

4 days ago

Here’s a comment left at the site Law & Liberty:
Among the justifications that Daniel McCarthy offers for protective tariffs is the claim that tariffs can be used to keep prices of goods over time lower (“Economic Nationalism as Political Realism,” Jan. 22). For example, if today’s low-priced U.S. imports bankrupt American firms, foreign firms tomorrow will gain monopoly power which they’ll then exploit to raise prices to monopolistically high levels. By preventing predatorily low prices today (the argument goes), tariffs protect us from monopolistically high prices tomorrow.
That tariffs might work in this way isn’t impossible. In this complex world of ours, almost anything is possible. But only a tiny fraction of possibilities are plausible, and an even smaller number are probable.

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Bonus Quotation of the Day…

4 days ago

… is from the closing paragraph of John Phelan’s new essay “Capitalism is the greatest anti-poverty scheme ever discovered“:
As someone said recently, when your worldview starts with ‘How do we limit the amount of rich people?’, you reach for socialism. When your worldview starts with ‘How do we limit the amount of poor people?’, you reach for capitalism.”
Comments

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Quotation of the Day…

5 days ago

… is from page 187 of the 1976 Liberty Fund edition of Sir Henry Sumner Maine’s profound 1885 volume, Popular Government:
Vox Populi may be Vox Dei, but very little attention shows that there never has been any agreement as to what Vox means or as to what Populus means…. In reality, the devotee of Democracy is much in the same position as the Greeks with their oracles. All agreed that the voice of an oracle was the voice of a god; but everybody allowed that when he spoke he was not as intelligible as might be desired, and nobody was quite sure whether it was safer to go to Delphi or to Dodona.
Comments

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Free To Choose: 40 Years On

5 days ago

Milton Friedman’s remarkable PBS series, Free To Choose, produced by Bob Chitester, debuted 40 years ago this month.
I remember it well. January 1980 was the first month of my final semester as an undergraduate. (By then I was hopeful of being accepted into NYU’s PhD program – which I soon thereafter was, and which I entered that September.) I had by the middle of my senior year of college – and largely due to my great mentors at Nicholls State University, Bill Field and Michele Francois – already studied, and been greatly influenced by, many of the works of Friedman, Hayek, Mises, Buchanan, Bastiat, Schumpeter, W.H. Hutt, Ludwig Lachmann, Israel Kirzner, and Armen Alchian. The science of economics was exciting (as it remains for me in 2020), and my commitment to libertarian

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Johan Norberg Channels Julian Simon

5 days ago

In this short video, Johan Norberg busts the myth that resource scarcities – which are indeed unavoidable – impose or imply limits to economic growth that raises everyone’s living standards.
[embedded content]
Comments

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An Open Letter to Daniel McCarthy

5 days ago

Here’s an open letter to Daniel McCarthy:
Mr. McCarthy:
Your attempted justification, at Law & Liberty, of industrial policy and protectionism carried out in the name of economic nationalism fails on many fronts. But worst of all, perhaps, is your slaying of the straw man “market liberal” who supports free trade.
This “market liberal,” you tell us, argues for free trade from “unhistorical abstractions” because he naively believes that the “market exists in a social vacuum” as it is left “pristine” and undistorted by governments abroad and at home.
Yet other than Samuel Gregg – whose superb article inspired your essay, and whom you concede is aware that Beijing distorts the Chinese economy – you name not a single such “market liberal.” Not one. Where is this ignorant and foolish

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Some Links

5 days ago

Russ Roberts is interviewed on the many pitfalls of measuring economic change. A slice:

Q: Is there a more accurate way to measure wealth in 1975 vs. today?
A: A recent study found the bottom half of the income distribution today makes the same on average as the bottom half 35 or 40 years ago. That’s extraordinarily depressing, if true. It implies the top is just doing way too well. But a handful of studies have instead taken people in 1975 and followed them through time to see if the rich truly did get all the gains. When you do that, you find out that the people at the bottom have the largest percentage gains and often the largest absolute gains over time.

George Will celebrates the forces of freedom in China that resist Beijing’s tyranny.
Dan Mitchell writes on government’s

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Quotation of the Day…

6 days ago

… is from page 85 of George Will’s 2019 excellent book, The Conservative Sensibility:
Note a contradiction in progressivism that has become steadily more severe in the century since [Woodrow] Wilson wrote. Progressivism has no objection to steady enlargement of the “conceptions of state duty.” Quite the contrary, such enlargement is the progressive agenda – the expansion of the central government’s supervision of society’s complexities. But as solicitous government permeates society with its superintending, society responds in an inconvenient way. As government’s interests multiply, so do interest groups. As government seeks to supplement and even supplant market forces in the allocation of wealth and opportunity, there is a corresponding and commensurate multiplication of factions

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Getting the Language Right

6 days ago

Here’s a letter to the Wall Street Journal:
A recent headline of yours reads “Trump Doubles Down on Threats to Impose Tariffs on European Cars” (Jan. 21).
May I suggest that you change your policy to always refer to tariffs as being imposed on people rather than on goods and services? Automobiles, sugar, and other imports – being inanimate – pay nothing. Tariffs are paid only by people, and especially by citizens of the government that imposes them. The whole point of protective tariffs, after all, is to artificially raise the prices of imports in order to entice domestic citizens to pay prices higher than these flesh-and-blood people would otherwise pay for imports’ domestically produced alternatives.
A more accurate and revealing headline in this case would be “Trump Doubles Down on

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Bonus Quotation of the Day…

6 days ago

… is from page 309 of Thomas Sowell’s magnificent 1980 book, Knowledge and Decisions:
An ideology may be viewed as a knowledge-economizing device, for it explains complex empirical data with a few simple and familiar variables. It is hardly surprising that ideological explanations should have a special appeal to those with higher costs of alternative knowledge – the inexperienced (“youth”) and the previously politically apathetic (“masses”).
Comments

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A Deficit of Clarity

6 days ago

Here’s a letter to an attorney friend of mine in St. Louis:
Bevis:
Thanks for reading my letter in today’s Wall Street Journal – one in which I note that foreign investments in the United States promote American trade deficits. But naturally I regret that you, as you say, “don’t know what [I’m] talking about” on this front. I apologize for being unclear.
A U.S. trade deficit arises whenever, during some period – say, a month – we in America buy more goods and services as imports (measured in dollar value) than we sell as exports. So, if $Imports > $Exports, we run a trade deficit. If instead $Imports = $Exports, there’s neither a trade deficit nor a trade surplus. If $Imports < $Exports, we run a trade surplus.
For example, if in January Americans spend $100 on imports and foreigners

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Some Links

6 days ago

The great Sheldon Richman eloquently and knowledgeably defends the Quincy Institute against the ludicrous assertions of Sen. Tom Cotton (R-AR).
My intrepid Mercatus Center colleague Veronique de Rugy resists the growing support for industrial policy. A slice:
What’s more, the late William Niskanen, economist and former Chairman of the Cato Institute looked at this issue in his 1997 paper “R&D and Economic Growth: Cautionary Thoughts.” He argued that the idea that R&D drives economic growth isn’t as sound as it seems on the surface. What we know, Niskanen writes, is that there is “a strong relationship between real expenditures for research and development (R&D) and the level of national output—but little relationship with the rate of economic growth. This record is more consistent

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Quotation of the Day…

7 days ago

… is from page 296 of Deirdre McCloskey’s marvelous 2019 book, Why Liberalism Works: How True Liberal Values Produce a Freer, More Equal, Prosperous World for All:
Notice that if government statisticians did not collect the numbers on the balance of payments, you would not feel them. It’s not true of high inflation or mass unemployment or rising real income. In fact, many economists regard the collecting of the national balance of payments as a silly nuisance, serving merely to encourage bad economics, such as protectionism – better called favoritism combined with defective accounting. The great economist Arnold Harberger (1924- ) is fond of pointing out that the salaries of all the academic economists worldwide would be covered many times over by the economic gain from their repeated

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Oren Cass Is Incorrect to Equate the Competitive Market Process With an Inebriated Ass

7 days ago

In my most-recent column for AIER, I do my best to point out some errors that are in Oren Cass’s recent attempt, at Law & Liberty, to defend industrial policy against Samuel Gregg’s wise warnings against such policy. A slice:
Now to Cass’s foundational error, which is this: he completely misses the market’s role at gathering and processing information. This error is revealed when he equates the competitive market to the meanderings of a drunk donkey. In fact, it is no such thing.
As many economists – from Adam Smith in the 18th century through Carl Menger in the 19th and Ludwig von Mises, F.A. Hayek, Armen Alchian, Milton Friedman, Julian Simon, Deirdre McCloskey, and Vernon Smith in the 20th and 21st – have revealed, the competitive market price system at every moment marshals and

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Government Schooling and Supermarkets

8 days ago

Someone recently wrote to me asking for a reference to something that I’d written comparing the way that we Americans purchase groceries to the way that most of us purchase K-12 schooling. On May 5th, 2011, I published an essay on this topic in the Wall Street Journal, but a search of Cafe Hayek reveals that I have yet to reproduce here that essay in its entirety.
Here it is:
If Supermarkets Were Like Public Schools
Teachers unions and their political allies argue that market forces can’t supply quality education. According to them, only our existing system — politicized and monopolistic — will do the trick. Yet Americans would find that approach ludicrous if applied to other vital goods or services.
Suppose that groceries were supplied in the same way as K-12 education. Residents of

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Quotation of the Day…

8 days ago

… are the closing lines (found on page 185 of the original edition) of James M. Buchanan’s and Richard E. Wagner’s important 1977 book, Democracy in Deficit: The Political Legacy of Lord Keynes:
On the one side, there lies the falsely attractive path toward “national economic planning,” a choice that would have us allow government to go beyond traditional bounds because it has failed even to fulfill its more limited promises. On the other side, there is the way of the free society, of men and women living within a constitutional contract that also keeps governments in well-chosen harness. This way, so well understood by Americans two centuries past, has been obscured by the underbrush of burgeoning bureaucracy. Will we, like Robert Frost’s traveler, choose the road less traveled by?

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Bonus Quotation of the Day…

8 days ago

… is from page 31 of the original edition of Lee Francis Lybarger’s 1914 book, The Tariff (which I just received as a generous gift from David Henderson) (original emphases):
But the word [“protectionism”] as used in the Tariff has the very opposite meaning. It does not protect the people from extortion. It subjects them to extortion, by leaving them to the tender mercies of only one set of sellers. It does not protect the people from high prices. It exposes them to such conditions as make prices high. That is its purpose. The only way a Protective Tariff can possibly operate is to increase the price of the things on which it is levied.
Comments

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Quotation of the Day…

9 days ago

… is from page 155 of Bas Van Der Vossen’s and Jason Brennan’s superb 2018 book, In Defense of Openness (original emphasis):
Growth is what actually saves lives, actually reduces misery, and actually meets people’s basic needs over time. Past economic growth is why Bas, Jason, Peter Singer, and our readers are debating how much a duty we have to rescue distant strangers, rather than ourselves jostling for the best position in a breadline. Future growth is our best bet – possibly our only bet – to lift the millions who are suffering out of poverty.
Comments

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Quotation of the Day…

10 days ago

… is from page 142 of the original edition of James M. Buchanan’s and Richard E. Wagner’s great 1977 book, Democracy in Deficit: The Political Legacy of Lord Keynes:
The events of fiscal history strongly support the hypothesis that unconstrained access to public borrowing will tend to generate excessive government spending.
DBx: Yep.
Public borrowing allows citizens-taxpayers today to spend the money of citizens-taxpayers tomorrow, many of whom aren’t yet even born, and much less of voting age. And when people are able to spend other people’s money, they do so irresponsibly and excessively. This irresponsibility and excess only grow when today’s citizens-taxpayers are falsely assured by some prominent economists that the burden of government indebtedness on future generations is

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Were Adam Smith and Hayek Mistaken?

10 days ago

Here’s a letter to Liberty & Law:
Editor:
Attempting to defend industrial policy carried out in the name of economic nationalism, Oren Cass commits several errors that reveal his unfamiliarity with economics (“Comparative Disadvantage,” January 15). Detailing these errors would require a full-length essay, so I here mention only two.
First, Mr. Cass mistakenly presumes that nations compete against each other economically. They don’t, as economists since Adam Smith have demonstrated. An especially notable such demonstration is offered by Paul Krugman in his 1996 book, Pop Internationalism. It’s regrettable that Mr. Cass, when insisting on a reality of which all economists are aware (namely, that comparative advantage is “endogenous”) approvingly mentions Krugman’s work on strategic

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Quotation of the Day…

11 days ago

… is from page 139 of Peter Bauer’s penetrating 1969 article “Dissent on Development,” as it is reprinted in the original 1972 edition of Bauer’s invaluable collection of the same name (Dissent on Development):
The collection of resources for government financed or sponsored investment often has a substantial disincentive effect on saving, effort and enterprise, because of the taxation or controls imposed for this purpose. These disincentive effects can easily offset, or more than offset, the potential increase in income from investment. The contribution of [government-directed] investment to development is a net factor, after allowing for the repercussions of both the collection and the expenditure of the funds. These repercussions include not only a diminution of resources in

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More on America’s Ignoble Experiment

11 days ago

In my latest column for the Pittsburgh Tribune-Review – published on this, the 100th anniversary of the start of nationwide alcohol prohibition in the United States – I lament some additional costs of such an obnoxious and officious policy. A slice:
The gang violence of 1920s’ liquor trafficking was a direct result of Prohibition which encouraged criminals to supply alcohol and gave them incentives to use violence. It’s no accident that Anheuser-Busch, Jack Daniels and other alcohol suppliers today don’t gun down their competitors or threaten violence on their customers.
Another cost of Prohibition is that it made alcoholic beverages more toxic and stronger.
Unlike today, if an American in the 1920s died or fell seriously ill from drinking tainted beer or wine, there was no one to

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