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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 Reply to Victor Davis Hanson’s Response

12 hours ago

John Stossel sent my letter of earlier today on to Victor Davis Hanson. Mr. Hanson was not impressed with my letter.
I do not have permission to share Mr. Hanson’s response, but I here share my (slightly edited) reply to his response – a reply that John Stossel forwarded to Mr. Hanson:
John,
Mr. Hanson’s attempted defense of his use of the U.S. trade deficit with China fails. The concept itself is economically insignificant, and it does not gain a whit of significance by being large in magnitude. Nor does the identity of the counterparty country matter. In a world of more than two countries, any bilateral trade deficit or surplus is a mere accounting artifact with absolutely zero economic relevance. The fact that Mr. Hanson attempts to salvage his use of the concept by pointing to its

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A Bad Case for Fearing China

17 hours ago

Here’s a letter to National Review:
Editor:
If Victor Davis Hanson’s case (“China’s Brilliant, Insidious Strategy,” May 14) for why we Americans should fear China can be judged by the quality of Mr. Hanson’s economics, we can breathe easily. Mr. Hanson’s economic arguments are hopelessly confused.
For example, he regards America’s trade deficit with China as a “price” that we Americas pay – a price that is “now-worrisome.” But Mr. Hanson’s claim (one, of course, also made repeatedly by Trump) is economic nonsense. In a world of more than two countries, there’s no reason whatsoever to suppose that any pair of countries will import from, and export to, each other the same amounts. It follows that America’s “trade deficit” with China has no more economic significance than does Victor

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Are Only the Rich Getting Richer?

20 hours ago

In this superb new video, Russ Roberts digs carefully into the data and again busts the myth that asserts that over the past few decades only the American rich – and not the American middle-class and poor – have gotten richer.
[embedded content]
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Quotation of the Day…

23 hours ago

… is from page 244 of Agnar Sandmo’s 2016 article “Adam Smith and Modern Economics,” which is chapter 14 in Ryan Patrick Hanley, ed., Adam Smith: His Life, Thought, and Legacy (2016):
But the mastery of techniques is not sufficient to make a good economist. He or she must also be able to develop a more intuitive grasp of the connection between the abstract models and the real economy. In this respect Adam Smith is still a good role model.
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Trade Wars: Wars that Citizens Should Hope Their Governments Lose

2 days ago

In my latest column for the Pittsburgh Tribune-Review, I attempt to reveal just how bizarro and backwards are trade wars. These wars truly are ones that each citizen should fervently hope his or her government loses. A slice:
Oh, as in real wars, in trade wars each government intentionally inflicts harm on innocent people. But unlike in real wars, each government waging a trade war intentionally inflicts harm on its own citizens — as when the U.S. government punitively taxes American buyers of Chinese-made goods in order to pressure Beijing to stop extracting revenue from its taxpayers to subsidize imports sold to Americans.
Trade wars are truly bizarre. The goal of each government in harming its own citizens with tariffs is to pressure the other government into stop harming its own

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Quotation of the Day…

2 days ago

… is from page 2 of Tyler Cowen’s excellent 2019 book Big Business: A Love Letter to an American Anti-Hero:
“Meeting payroll,” to invoke a now old-fashioned phrase, is nothing less than a heroic act. Someone or some group put in the hard work and thought up the innovations required to create a company from scratch – I know it’s easy enough to take this for granted if you aren’t the one who did it.
DBx: Absolutely true. And the fact that no entrepreneur today built the infrastructure that nearly always makes the specific form of his or her business possible – infrastructure that also ensures that the value of that business’s outputs is higher than it would be otherwise – does nothing to diminish the reality that the profits earned by successful entrepreneurs reflect only the additional

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Some Links

2 days ago

George Will – linking to two works by my intrepid Mercatus Center colleague Veronique de Rugy – makes a powerful case against that great geyser of cronyism, the U.S. Export-Import Bank. A slice:
The Trump administration trots out its usual rationale for economic irrationality: Ex-Im is a “national security weapon.” As the bank subsidizes China and Russia? In 2014, in 17 Ex-Im transactions the primary borrower was the Export-Import Bank of China. Says Toomey, “You cannot make this stuff up”: Ex-Im is subsidizing the Chinese bank that is cited as the reason we need Ex-Im.
And here’s Veronique on the power of markets.
My Mercatus Center colleagues Matt Mitchell and Tad DeHaven explore the cronyist origins of Trump’s cronyist trade policies. Here’s their conclusion:
Agriculture is but one

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Quotation of the Day…

3 days ago

… is from page 8 of my Mercatus Center colleague Dan Griswold’s superb 2009 book, Mad About Trade:
Free trade is the working family’s best friend. Import competition delivers lower prices and more variety, empowering consumers to get the most from their paychecks.
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Beep-Beep

3 days ago

I’ve often compared the reality of the economics on display in Washington to the reality of the physics on display in Road Runner cartoons. However, after reading about Marco Rubio’s latest pontifications on trade and corporate strategy, I fear that I have been mistaken: a person watching Road Runner cartoons will never encounter physics as false and as detached from reality as is the economics that one encounters when listening to politicians.
It is inconceivable to me that a human being can be as uninformed, as illogical, and as confused – in short, as utterly mindless – as Rubio now regularly reveals himself to be.
I’ll not bother to point out any of the many howlers in Rubio’s latest. They reveal themselves readily and horrifyingly enough.
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Some Links

4 days ago

My intrepid Mercatus Center colleague Veronique de Rugy continues to fight the good fight against that great geyser of cronyism, the U.S. Export-Import Bank. A slice:
In the 2014 fiscal year, the Ex-Im Bank was the quintessential corporate welfare agency. On the domestic side, 65 percent of Ex-Im activities benefited 10 giant American companies, including GE and Caterpillar. Boeing alone benefited from 70 percent of the loan-guarantee program and 40 percent of the bank’s overall activities ($48.4 billion), earning Ex-Im the nickname “the Bank of Boeing.”
On the foreign side, Ex-Im’s beneficiaries were similarly well-funded. A vast majority of these companies had ready access to capital, and were as large as the domestic beneficiaries. These clients belonged to the Who’s Who of the

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Waging War on Fellow Citizens

4 days ago

This letter is to the half-dozen or so people who e-mailed me during the past 24 hours to insist that we Americans will eventually (as one correspondent put it) “win big from the tough bargaining of the President”:
Mr. & Ms. ____:
You argue that because the Chinese people stand to lose more than do we Americans from a trade war that Trump is right to wage this war.
Baloney.
Each government that wages a trade war attempts to inflict damage on foreigners by first inflicting damage on its own citizens. And the greater the damage sought to be inflicted on foreigners, the greater the damage that a government must first inflict on its own citizens.
What each government essentially tells the other in a trade war is this; “I’ll further reduce the standard of living of my people unless and

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Quotation of the Day…

4 days ago

… is from page 173 of Arnold Plant’s 1970 essay “Homage to Hayek” as this essay is reprinted (and retitled) in the 1974 collection of some of Plant’s writings, Selected Economic Essays and Addresses:

Those whose advocacy of social change is powered by strong emotion have often been repelled by the cold-blooded nature of his [Hayek’s] purely intellectual approach. They would do well to reflect that they would not wish a surgeon to operate on them while his hands were trembling with emotion.

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Pat Buchanan is No Economist

5 days ago

Here’s a letter to CNS News:
Editor:
Patrick Buchanan’s “Tariffs – The Taxes That Made America Great” (May 14) is bundle of blunders.
First, Buchanan praises tariffs as a tool both for raising massive amounts of revenue and for supplying formidable protection against imports. He misses the fact that tariffs that work well on one of these fronts works poorly on the other. If the goal is revenue, the ideal tariff would keep out no imports; if the goal is protection, the ideal tariff would raise no revenue. Buchanan is oblivious to this reality.
Second, Buchanan confuses correlation with causation. It’s true that for much of the high-growth 19th century the U.S. had high tariffs. But back then the U.S. also had either no or low taxes on other economic activities, little regulation by

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Dr. Trump’s Miracle Elixir!

5 days ago

Here’s a letter to “proud Trump man” Nolan McKinney:
Mr. McKinney:
You criticize me for failing “to see that President Trump’s hardball trade bargaining is designed to in the long run bring about a world of unprecedented freer trade.”
Please.
Suppose that “Dr. Trump” has repeatedly ridiculed medical doctors as ignoramuses, and that all of his many utterances about health-care have been pure quackery. Suppose that for decades he has proudly endorsed blood-letting as a cure for cancer, aromatherapy as the best treatment for hypertension, homotoxicology as a remedy for bipolar disorder and eczema, and various lotions as sure-fire means of penis enlargement.
I’m certain that you would protest “Dr. Trump’s” forcible confinement of you as a patient in his “hospital,” and that you would

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Economic Growth is Ultimately Not Explained by Physics

5 days ago

The physicist Michio Kaku was the keynote speaker at my son Thomas’s college graduation ceremony this past Saturday. Kaku’s talk inspired my most-recent column for AIER. A slice:
I suspect that Kaku would reject my argument. Being a physicist, he sees a direct connection between the work of physicists and our ready access to televisions, cell phones, and MRI machines. But I suspect that Kaku misses the less scientifically breathtaking, but much more economically important, activities that ensure our access not only to obviously marvelous products such as TVs, smartphones, and advanced medical care, but also to the no less marvelous likes of indoor plumbing, hard floors and roofs, and ample supplies of food, potable water, and clean clothing.
The executive who introduces a new

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Quotation of the Day…

5 days ago

… is from page 80 of Jerry Evensky’s article “The Wealth of Nations,” which is chapter 5 in Ryan Patrick Hanley, ed., Adam Smith: His Life, Thought, and Legacy (2016):

[Adam] Smith spends most of Book IV [of The Wealth of Nations] demonstrating that mercantilist policies in fact reduce the wealth of the nation. His objective is to unmask the advocates of these distorting policies as powerful players who use their wealth and influence to persuade or, if necessary, “intimidate the legislature” into adopting their self-serving policies.

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Steve Moore Is No Free Trader

6 days ago

Here’s a letter to The Hill
Stephen Moore spends the final 722 words of his May 12th op-ed (“Why free traders and all Americans should back Trump on China policy”) disproving the first four words, which are “I’m a free trader.”
Unlike Mr. Moore, every true free trader understands that other governments’ punitive taxation of their citizens’ purchases of imports is no good justification – either economically or ethically – of his government’s punitive taxation of its citizens’ purchases of imports.
Unlike Mr. Moore, every true free trader understands that differentially higher tariffs imposed by other governments tilt the playing field not in favor of the higher-tariff countries but against them.
Unlike Mr. Moore, every true free trader understands that trade is by nature a two-way

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Some Links

6 days ago

George Will explains the danger of dabbling in protectionism. A slice:
Protectionists, who are comfortable with cognitive dissonance, say their policy is necessary because economic conditions would be even better with more protection. And they say protection is harmless because existing protectionist measures have not prevented conditions from being optimal.
From last year is this clear explanation by James Vincent – who cites Tim Worstall – on why we have nothing to fear from any alleged Chinese monopoly over so-called “rare earths.”
Art Carden advises us to read Hayek as if our children’s lives depend upon it.
John Tamny busts a myth about Amazon’s alleged “sweat shops.”
David Henderson re-reads the indispensable 1977 collection of some of Armen Alchian’s articles, Economic Forces

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Quotation of the Day…

6 days ago

… is from page 454 of Armen Alchian’s May 1960 American Economic Review article, co-authored with William H. Meckling, “Incentives in the United States,” as this article is reprinted in volume 2 of The Collected Works of Armen A. Alchian (2006):
But in trying to improve their lot individuals do more than merely adapt to given cost-reward relationships. They try to alter the schedule of prizes and costs to their own advantage. How? By changing the rules, especially through government. By pressing for advantageous legislative, administrative, or judicial action, individauls can and do use the power of government for personal gain. Thus economists describe the effects of reduced demand for an industry’s product in terms of a new equilibrium with lower prices and lower output. But in a

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Quotation of the Day…

7 days ago

… is from page 7 of the 2000 Liberty Fund reissue of Geoffrey Brennan’s and James M. Buchanan’s 1980 volume, The Power to Tax:

Social-choice theorists have attempted to define reasonable properties that might be expected for a “social” or “governmental choice function.” However, all such efforts have foundered on the central contradiction involved in any shift from the preference or value rankings of a single person to an ordering designed to reflect the potential choice bases for a group or community of persons.

DBx: Yes.
There is no “will of the people.” “The people” as such – unlike an individual or household – have no set of preferences. Individuals can share with each other – even with multitudes of others – a language, religious beliefs, cultural attitudes, notions of right

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Quotation of the Day…

8 days ago

… is from page 20 of the 2000 Liberty Fund reissue of Geoffrey Brennan’s and James M. Buchanan’s 1980 volume, The Power to Tax:
Or if we prefer to return to Adam Smith’s illustration, we may acknowledge that our butcher and our baker are occasionally, and perhaps frequently, benevolent, but surely we should all feel more secure if the institutional structure is so organized as to make their self-interest coincident with our own rather than the opposite.
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Bonus Quotation of the Day…

8 days ago

… is from Pierre Lemieux’s recent EconLog post “Theatre of the Absurd: Godot, Trump, and Xi“:
For more than two centuries, economists have shown that protectionism hurts most of the residents of the country that is supposedly “protected,” irrespective of whether the governments of other countries do the same to their subjects or not. Joan Robinson, the famous Cambridge economist, suggested that retaliation is as sensible as it would be “to dump rocks into our harbors because other nations have rocky coasts.”
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Trump Is a Trade Ignoramus

9 days ago

Here’s a letter to the Washington Post:
Editor:
After further raising the punitive taxes that he inflicts on Americans who buy imports, Pres. Trump tweeted this message to foreigners: “Build your products in the United States and there are NO TARIFFS!” (“Trump doubles tariffs on $200 billion of Chinese imports, escalating U.S.-China trade war,” May 10.)
I urge you to make clear to your readers that Trump’s trade policies are a tangle of inconsistencies and unfathomable economic ignorance.
Trump is forever lamenting U.S. trade deficits. Yet by calling for foreign firms to shift more production to the U.S. he is calling for foreign firms to increase their investments in the U.S. This increased foreign investment will put upward pressure on U.S. trade deficits.
Trump’s obvious

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I Confess…

9 days ago

… that some mornings I wake up and encounter headlines and news that make me want to retire and ignore the world – to devote my time to novels and music and wine, to follow only sports, and to ignore policy, politicians, and the punditry.
This morning is one such morning. Trump has increased the weight of the punitive burdens he imposes on Americans who buy imports – Steve Bannon declares that “we’re in an economic war with China” – Fareed Zakaria wants to “bring us together as a nation” by conscripting young Americans.
It’s all so discouraging, some mornings especially so.
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Quotation of the Day…

9 days ago

… is from page 275 of Doug Bandow’s 1987 paper “The Conservative Judicial Agenda: A Critique,” which is chapter 11 in Economic Liberties and the Judiciary (James A. Dorn & Henry G. Manne, eds., 1987) (footnote deleted):
Conservatives are correct in arguing that the courts have improperly usurped power; many judges are effectively rewriting the Constitution to replace the right to protect one’s property with the right to seize another’s property. But no analysis of judicial activism is complete without acknowledging that the Constitution requires a principled judicial activism in the sense of court intervention to uphold genuine guarantees of individual liberty.
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Quotation of the Day…

10 days ago

… is from page 263 of the 1978 collection, edited by Eric Mack, of Auberon Herbert’s essays, The Right and Wrong of Compulsion by the State; specifically, it’s from Herbert’s June 7th, 1906, lecture at Oxford University, “Mr. Spencer and the Great Machine”:
They have gone in for the winning of power, and those who play for that stake must accept the conditions of the game. You can’t make resolutions – it is said – with rose water; and you can’t play at politics, and at the same time listen to what your soul has to say in the matter. The soul of a high-minded man is one thing; and the great game of politics is another thing. You are now part of a machine with a purpose of its own – not the purpose of serving the fixed and supreme principles – the great game laughs at all things that

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Some Links

11 days ago

GMU Econ PhD candidates Jon Murphy and John Schuler have a new essay with a Coasean message at EconLib.
Mark Perry points us to new research that further reveals the high costs to Americans of Tariff Man’s policy of punitively taxing Americans who purchase imports.
Mike Munger smartly ponders our world of contracts.
Wofford College economist Frank Machovec is among the great professors praised in today’s Wall Street Journal.
Alan Reynolds exposes the incredibly shoddy reporting behind the claim that 40 percent of Americans cannot afford to cover an emergency expense of $400. (HT David Henderson)
Here’s more from Bryan Caplan on Tyler Cowen’s new book, Big Business.
My Mercatus Center colleague Adam Thierer asks if innovation makes us less human.
My former student Ninos Malek defends

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Quotation of the Day…

11 days ago

… is from page 125 of Vol. II (“The Mirage of Social Justice” [1976]) of F.A. Hayek’s great work, Law, Legislation, and Liberty (footnote deleted):
The whole [market] system rests on providing inducements for all to use their skill to find out particular circumstances in order to anticipate impending changes as accurately as possible. This incentive would be removed if each decision did not carry the risk of loss, or if an authority had to decide whether a particular error in anticipation was excusable or not.
DBx: Prosperity for the masses is impossible absent a system in which profits are not only allowed but admired. But a system of profits is unworkable unless it is also a system of profit and loss. And there can be no genuine losses – and, hence, no genuine profits – if the state

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More Vérité from Veronique

11 days ago

In tomorrow’s (May 8th’s) New York Times, my intrepid Mercatus Center colleague Veronique de Rugy eloquently blasts some of the many canards used to ‘justify’ the existence of that great geyser of cronyism, the U.S. Export-Import Bank. A slice:

For nearly four years the Senate leadership has blocked confirmation votes to fill the vacancies on Ex-Im’s board of directors, depriving it of the quorum needed to authorize deals over $10 million. Sadly, Senate Republicans, led by Mitch McConnell and with the help of nearly all Democrats, are expected to end their blockage this week by confirming Kimberly Reed as the head of the bank and two other nominees to the board.
As a candidate Mr. Trump was anti-Ex-Im. Then as president he started calling the bank “a very good thing.” Supporters

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100-1≠60 and 60+1≠100

12 days ago

Here’s a letter to a typical politician, U.S. Senator Marco Rubio (R-FL):
Sen. Rubio:
I just learned at World Trade Online of this astonishing March statement of yours: “Washington’s willingness to sacrifice entire domestic industries and local production just to shave pennies off the costs that American consumers might pay for products is one of the main reasons why Donald Trump is president today.”
You need tutoring in both economics and arithmetic.
Central to your argument is your suggestion that when we Americans buy lower-priced imports our total savings is only very modest – so modest that, you imply, Americans on net benefit from tariffs which lead us to purchase fewer imports.
Well now.
Economics demonstrates that, except under the rarest of circumstances, the gains that free

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