Tuesday , April 25 2017
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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

Bonus Quotation of the Day…

9 hours ago

… is from page 4 of the manuscript of University of Arizona philosopher David Schmidtz’s contribution to the forthcoming (2018) book, Markets in Education; this book is part of Oxford University Press’s Debating series; (the philosopher contributing the essay with a viewpoint different from Dave’s is Harry Brighouse) (original emphasis):
When people relate only by consent, they are treating each other as self-owners, that is, as beings with a right to say no.  Respecting persons – treating them as persons – starts with respecting their right to say no.  Sellers show up, looking for opportunities to be of service, when showing up is safe – that is, when they expect their right to say no to be respected.  That measure of security is a key to human progress.
DBx: Many of today’s

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Quotation of the Day…

22 hours ago

… is from page 71 of UCLA emeritus economist William Allen’s 1989 collection of the transcripts of his splendid radio addresses, The Midnight Economist; specifically, it’s from Allen’s September 1982 address “Professional Courage and Business Sense in Media Economics”:
Typical media commentaries, especially in the electronic media, are not pabulum, for pabulum is nutritious, even if soft and bland; the product is merely puree of sophomoric garbage.
Comments

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Imagine the Outcry if Walmart Demanded Payment Years In Advance of Its Delivery of Goods to Consumers

1 day ago

Here’s a letter to the Wall Street Journal:
AFL-CIO official Ed Wytkind pleads for an increase in government funding of Amtrak so that it “serves the country, not just the East Coast” (Letters, April 24).
Never mind the dubiousness of forcing 21st-century taxpayers to fund the expansion of a 19th-century industry.  Mr. Wytkind’s letter unwittingly reveals a key difference between the private sector and the government.  Government-operated firms require advanced payments from their customers (and non-customers!), in the form of tax dollars, as a prerequisite to supplying the outputs that justify their operation.  The “customers” of a government-operated firm must trust that their payments will eventually result in their receipt of sufficiently worthwhile goods or services in return.  If

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The President’s First 100 Days – FDR’s, That Is

2 days ago

Here’s a letter to NPR:
Regarding today’s report on the first 100 days of the terms of various U.S. presidents, I dare say that your happy description of Franklin Roosevelt’s is potted (“The ‘First 100 Days’ Presidential Benchmark Goes Back To FDR And Napoleon“).  Writing in 1939 in the Yale Review, John T. Flynn had a different and more realistic take on the start of FDR’s presidency:
“It was a hodgepodge of good intentions, of bold promises and glittering hopes – a desire to produce recovery, to create abundance while at the same time causing scarcity to get prices up; to help labor, to help the little business men and to help the big business men – all save a few who behaved badly to Mr. Roosevelt personally; to spend as much as possible and to tax as little as possible; to boost

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Quotation of the Day…

2 days ago

… is from page 48 of the 1964 Harper Torchbooks edition of Karl Popper’s profound 1957 book, The Poverty of Historicism:
The old idea of a powerful philosopher-king who would put into practice some carefully thought out plans was a fairy-tale invented in the interest of a land-owning aristocracy.  The democratic equivalent of this fairy-tale is the superstition that enough people of good will may be persuaded by rational argument to take planned action.  History shows that social reality is quite different.
DBx: Freedom is not a synonym for the right to vote in fair and open elections.  Fair and open elections with a wide franchise might – might – be a useful instrument for promoting freedom.  But contrary to much shallow thinking, the right to participate in such elections is not

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$10 > $5 (although sometimes some people believe that $10 = $5)

2 days ago

Earlier today I reconnected in Dallas with my old friend Charlie Steen.  Charlie was a year ahead of me in law school at UVA.  He also has a PhD in economics from UVA.  His undergraduate degree, in economics, is from George Mason University.  Charlie has practiced law in Dallas for the past twenty or so years.
Charlie reminded me of a mental experiment offered either by Thomas Sowell or by my colleague Walter Williams.  The mental experiment is designed to show the job-destroying impact of minimum wages.  Here it is (in my words).
Imagine that you’re given the option of buying ten-dollar bills for $5 a piece.  How many will you buy?  The answer is obvious: as many as the sellers of these discount-priced ten-dollar bills will sell to you.  Of course, in reality $10 bills are never

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Some Links

2 days ago

Ben Shapiro rightly criticizes Trump’s “Buy American” scheme.  (Note also the inexcusable economic ignorance of Trump’s Chief of Staff, Reince Priebus.)  (HT Warren Smith)
And here’s Kevin Williamson on the same.  A slice:

Trump, who is surrounded by people who fancy themselves “nationalists” (in the cause of what nation, it is not entirely clear), is wading deep into an ancient puddle of stupidity most recently explored by Barack Obama (remember his “nationalist” moment, which lasted for about a month in 2011?) and Debbie Wasserman Schultz, the woman who (accidentally) did more than anyone other than Kellyanne Conway and Hillary Rodham Clinton to put Trump in the White House. To call it “economic nationalism” would be too grand: It is merely a very narrow form of special-interest

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Quotation of the Day…

3 days ago

… is from page 214 of Martin Wolf’s 2004 volume, Why Globalization Works:
Every well-informed economist knows that anti-dumping lacks all economic justification, even in theory, let alone in its still more indefensible practice.
DBx: Reality teems with mere possibilities.  Yet almost everything that is possible is so improbable that you are safe in betting all that you own that these mere possibilities will never occur.
It’s possible that I’ll be killed later today by a pig being flung through my window.  After all, I can easily imagine a brute buying a catapult and, after setting the contraption just outside my window, stuffing it with a pig and flinging the beast at me with precision aim.  But despite the horror of the easily imagined event, I’ll take no precautionary action against

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Don’t Buy It

4 days ago

Here’s a letter to the Wall Street Journal:
Pres. Trump’s push to have Uncle Sam “buy American” is a slap in the face of the many people who voted for him because of his alleged business acumen (“In ‘Buy American’ Push, Trump Is Starting in a Hole,” April 21).
Good business executives ensure that their firms do not incur costs that are unnecessarily high.  Well-run businesses do not produce for themselves inputs that they can acquire from others at lower costs.  Profitable firms spend shareholders’ money only to create value and never to create jobs for the sake of creating jobs.
And yet Trump is actively trying to force American taxpayers to spend more than is necessary on the provision of government services.  This supposedly brilliant businessman fancies that he’ll somehow make us

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Public Choice Outreach Seminar 2017

4 days ago

Here’s a reminder that the deadline for students to apply to attend the 2017 Public Choice Outreach seminar is April 28th – one week from today.  I encourage all advanced undergrads and grad students to apply.
Here’s more information on the seminar from Center for Study of Public Choice director Alex Tabarrok:
The annual Public Choice Outreach Conference is June 16-18th, at the Hyatt Arlington in Rosslyn, VA! Submit an application and please do encourage your students to apply. Here’s some more information.

What is the Public Choice Outreach Conference? The Public Choice Outreach Conference is a compact lecture series designed as a “crash course” in Public Choice for students planning careers in academia, journalism, law, or public policy. Graduate students and advanced undergraduates

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Quotation of the Day…

4 days ago

… is from pages 122-123 of Daniel Cohen’s odd but worthwhile 2006 book, Globalization and Its Enemies (which is the translation, by Jessica Baker, of Cohen’s 2004 book, La Mondialisation et ses ennemis):
Economic development nourishes new aspirations, just as it feeds on them.  It opens new possibilities without ascribing them to a preordained agenda.  The determination of those who see the march of human history toward a peaceful end is, in this regard, certainly naive, but no more so than the mechanical vision of those who obstinately believe that the conflict between civilizations is fixed in the form of an immutable past.
DBx: Put in yet a different way: economic growth and the trade that both promotes it and is promoted by it are creative.  In part because it is positive-sum, and

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Quotation of the Day…

5 days ago

… is from page 108 Mark Zupan’s new (2017) book, Inside Job (footnotes deleted; links added):
Both Steven Pinker, in The Better Angels of Our Nature, and Matt Ridley, in The Rational Optimist, credit markets and business enterprises for improving our species’ civility.  Over 200 years earlier, Adam Smith intended to spell this outing a third book that was not published due to his death.  Free markets, which are based on clearly defined and enforced property rights as well as on the liberty of individuals to pursue their happiness, maximize the opportunity for repeat interaction across time, products, places, and people.  The prospect for repeat interaction creates a future and that future, by casting its shadow on the present, promotes integrity.
Comments

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Bonus Quotation of the Day…

5 days ago

… is from page 295 of Arnold Kling‘s 2004 book, Learning Economics:
Anyone who believes that we can afford collectively what we cannot afford individually is delusional.
DBx: Indisputably true.  This reality, alas, implies that a large number of people – likely a majority of the population, and without a doubt nearly all politicians, professors, and elite pundits – are delusional.
Comments

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Not “Leaders.” Lackeys

6 days ago

Here’s a letter to the Wall Street Journal:
Today, the 200th anniversary of the publication of David Ricardo’s On the Principles of Political Economy and Taxation – the book that famously first explained to the world the key principle of comparative advantage – Greg Ip quotes GOP advisor Lanhee Chen’s observation about GOP members of Congress caving to the Republican base’s increasing hostility to free trade (“Is Trump Turning Globalist? Not So Easy”): “I don’t know any [Republican] members who are going to die at the stake for free trade. The majority for free trade just isn’t there anymore.”
So here’s a question: why are politicians routinely called “leaders”?  The typical politician is less a leader than a tortoise is a racehorse.  A far more descriptive term for politicians is

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Some Links

6 days ago

My Mercatus Center colleague Dan Griswold spells out in ideal detail what Trump means by “bad trade deal” and by “good trade deal.”  A slice:

A bad trade [in Trump’s view] deal allows U.S. manufacturing companies to lower their production costs by importing capital machinery, raw materials and intermediate inputs such as steel at global prices. A good trade deal protects the domestic U.S. steel industry and its 150,000 workers by raising the costs of production for steel-using manufacturing companies that employ 6.5 million U.S. workers.
A bad trade deal lowers or eliminates tariffs on the imported food, clothing and shoes that make up a disproportionately larger share of the family budgets of working class Americans and the 45 million Americans living below the poverty line, thus

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Spontaneous Order is Not an Engineered Outcome

6 days ago

Commenting on this post, Lanny Ebenstein asks me:
If even the smartest professors aren’t able to engineer a society according to their, or to anyone else’s, designs, and if the belief that it is possible to do this is always futile and often fatal, why do you believe that it would be possible massively to reorganize society in a libertarian direction of vastly less government? Isn’t that a contradiction of what you have just said?
With respect, I see no contradiction.  My libertarianism (which, I think, is a quite common kind of libertarianism) is simply a call for the state to cease and desist from its own social-engineering projects – from projects small (such as protective tariffs) to projects big (such as government-run pension plans).  The patterns of human interactions that will

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The Humans Are Coming!

6 days ago

Here’s a letter to a new reader of Cafe Hayek:
Ms. Valerie Konski
Ms. Konski:
Thanks for your e-mail.
I don’t share your fear of robots, and I’m skeptical of empirical findings that the introduction of robots is lately responsible for permanently ratcheting down the number of jobs in the economy.  At Café Hayek I’ve addressed this matter in a number of different ways.  Let me here, though, offer another angle.
You and others fear robots because robots substitute for human workers.  And your fear intensifies because, in your words, “robots which are more human-like are becoming more common.”  But what’s more human-like than humans?  Since 1950 the number of humans in the American workforce has increased by nearly 160 percent (from 62 million to 160 million).*  Yet not only is today’s

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Quotation of the Day…

6 days ago

… is from page 56 of Brian Loasby’s paper “Organisation, competition, and the growth of knowledge,” which is chapter 3 of Economics as a Process: Essays in the New Institutional Economics (Richard N. Langlois, ed., 1986) (link added):
As [Burton] Klein (1977) has argued, the stability of a system may be undermined by attempts to stabalise its elements.  Thus the failure rate of organisations may not be an indication of system failure but of system success – just as an abundance of refutations may be a sign of rapid scientific progress.   Since each organisation embodies a particular cluster of ideas, we might derive from [Karl] Popper’s advice to let our ideas die instead of ourselves the recommendation to let organisations die, as an aid to the growth of knowledge.
DBx: Those people

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Bonus Quotation of the Day…

6 days ago

… is from page 49 of the 1964 Harper Torchbooks edition of Karl Popper’s brilliant 1957 volume, The Poverty of Historicism:
Any social science which does not teach the impossibility of rational social construction is entirely blind to the most important facts of social life, and must overlook the only social laws of real validity and of real importance.
DBx: “The only social laws of real validity and of real importance” are those that take account both of the open-endedness and of the many historical contingencies of social reality.
Society, and that part of society that we call “the economy,” are far more complex and contingent than most people realize.  And the fact that clever intellectuals use labels and words in ways that give the appearance of having reduced this colossal

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If Government Subsidies and Tariffs Are Productive, Why Not Use Them Regardless of What Other Governments Do?

6 days ago

Here’s a letter to the Wall Street Journal:
In his commendable essay, Charles Calomiris writes that “the [Chinese] Communist Party ensures its survival by propping up inefficient state-owned enterprises that fund its operations.  The financial system cannot truly liberalize because it must remain an instrument for channeling credit subsidies to these firms” (“Why Trump Might Win With China,” April 18).  This point deserves elaboration.
Resources artificially heaved by government into politically favored industries become unavailable for use in other industries.  And because each politically favored industry generally uses these resources less efficiently than they would be used otherwise, Beijing’s subsidies and protectionism render Chinese producers on the whole less productive (and

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Some Links

7 days ago

Neither George Stigler nor my colleague Walter Williams would be surprised by the finding – by Dara Luca and Michael Luca – that raising the minimum wage causes some firms to shut down and that this negative effect is not distributed randomly.  (HT Tyler Cowen)
My GMU Econ colleague Bryan Caplan questions an AP-economics exam question.
Richard Rahn rightly praises the price system.
Bob Higgs explains that immorality remains immoral – and unjustified – even if it is “efficient.”  A slice:
So, yes, economic analysis is necessary for a sound appraisal of government policy actions, but such analysis does not render moral appraisal irrelevant. Far from it. If it is wrong to launch a military attack against a country that has not attacked one’s own and lacks even a capacity for such an

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Quotation of the Day…

7 days ago

… is from a letter that David Ricardo wrote to T.R. Malthus sometime between 1820 and 1823 and available here:
I at any rate shall not be suspected of undervaluing the benefits of a free trade. Commerce is an interchange of conveniences and luxuries.  In proportion as the market is extended, the people of every country are enabled to make the best division of their labour, and the most advantageous use of their exertions.  Not only does it enable them to procure better and cheaper commodities, which, if there be no other means of getting, they can make themselves, but it furnishes them with the means of getting other commodities, which but for foreign commerce they would never get at all; their climate being unfitted to their production.
DBx: Ricardo was born, in London, 245 years ago

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Bonus Quotation of the Day…

7 days ago

… is from page 44 of Nathan Oman’s 2016 book, The Dignity of Commerce:
Exchange thus requires a kind of other-regardingness.  To be sure, it is not altruism.  Our concern with the advantages of the butcher, the brewer, and the baker is not the love of our neighbors.  Exchange does not require such love.  Commerce, however, is impossible when I am indifferent to the concerns of my trading partner.  In a more aristocratic age, tradespeople were an object of scorn precisely because of the servility that the market imposed on them.  Gentlemen possessed the luxury of satisfying their needs while maintaining indifference to others.  The tradesman, in contrast, could not afford hauteur because he was dependent on the satisfaction of others’ interests for the gratification of his own needs.

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Price Controls

8 days ago

I owe a great deal to Uncle Sam’s energy-price controls of the 1970s.  Seriously.  Were it not for these market obstructions, I’d likely today be, like my father was, a welder or a pipe-fitter.  (Not that anything is wrong with such an occupation, but the pay and amenities of my scholarly life are much superior to those of a welder or a pipe-fitter.)  Having personally sat in many long lines to buy price-controlled gasoline during the disco decade – and on more than one occasion discovering before I inched my way to the front of the line that the pumps had run dry – I was primed by this unhappy reality to appreciate supply-and-demand analysis when I first encountered it as an 18-year-old.
Residents of Mumbai should be equally well-primed to learn and grasp basic economics.  My colleague

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A Haidtian Point

8 days ago

Here’s a letter to the Wall Street Journal:
Today’s “Notable & Quotable” reminds me of what is nearly the identical point made 77 years ago by H.L. Mencken in his essay ‘The Politician’: “The truth, to the overwhelming majority of mankind, is indistinguishable from a headache.  After trying a few shots of it on his customers, the larval statesman concludes sadly that it must hurt them, and after that he taps a more humane keg, and in a little while the whole audience is singing ‘Glory, glory, hallelujah,’ and when the returns come in the candidate is on his way to the White House.”*
Mencken was on to something important.  If science is the process of revealing the details of reality and making plain that these are never optional, politics is the practice of masking reality’s details and

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Quotation of the Day…

8 days ago

… is from page 259 of Joseph Epstein’s insightful 1993 essay “Culture and Capitalism,” as this essay is reprinted in Epstein’s 2014 collection, A Literary Education and Other Essays:
Capitalism, it seems to me, shares many qualities with the avant-garde.  Neither, in its purest form, is a notable respecter of tradition.  Both capitalism and the avant-garde honor, and continually strive to produce, the freshly made.  Each is always on the lookout for new opportunities: capitalism for profit, the avant-garde for new forms – many of them, of late, designed not merely to offend but to outrage.  Yet when it comes to innovation, capitalism has proved much the more creative force….
DBx: Joseph Epstein here identifies one of the many reasons why it is highly misleading to call those of us who

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Some Links

8 days ago

In today’s Wall Street Journal, my Mercatus Center colleague Veronique de Rugy, along with Cato’s Dan Mitchell, argue persuasively against the GOP’s proposed border-adjustment tax.  A slice:
The solution is to reduce the corporate rate and adopt a territorial tax system, taxing only profits earned at home, as almost all other Western countries do. The good news is that the House plan does both these things. The bad news is that the proposal is weighed down by the border-adjustment tax. Republicans should drop this controversial provision and focus on the policies that will boost growth.
To get the maximum bang for the buck, the final package should include restraints on spending—which doesn’t even mean an absolute budget cut. If Congress simply limits the growth of outlays to about 2% a

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Quotation of the Day…

9 days ago

… is from page 186 of the 2016 Mercatus Center re-issue of my late colleague Don Lavoie’s excellent 1985 volume National Economic Planning: What Is Left?:
Rejuvenating the American economy cannot be accomplished without relying on the knowledge supplied by competition as to which specific lines of production to discard and which to pursue.
Comments

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Some Links

10 days ago

Sheldon Richman helps us – and Trump – to better understand trade.  A slice:
Trump has it all wrong. Americans don’t need government agreements. Americans need freedom – what a novel idea! – to trade with whomever we want under terms they find advantageous. That is the essence of free enterprise. It’s also necessary for prosperity.
What about the things Trump attributes to free trade? He says America’s manufacturing base has been devastated. But America’s real manufacturing output is at historic high levels? Exports are also at record heights. Moreover, although Americans import lots of goods, a substantial portion are producer goods – things Americans use to make other things, often for export. Tariffs would raise costs for American producers and make them uncompetitive.
The frequent

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