Liberty Upsets Patterns

"If, now, it was possible to devise a scheme of legislation which should, according to protectionist ideas, be just the right jacket of taxation to fit this country to-day, how long would it fit? Not a week. Here are 55 millions of people on 3½ million square miles of land. Every day new lines of communication are opened, new discoveries made, new inventions produced, new processes applied, and the consequence is that the industrial system is in constant flux and change. How, if a correct system of protective taxes was a practicable thing at any given moment, could Congress keep up with the changes and readaptations which would be required. The notion is preposterous, and it is a monstrous thing."

~ William Graham Sumner from his book Protectionism: The ‘Ism Which Teaches that Waste Makes Wealth. Hat tip Don Boudreaux — with a great short discussion here by David J. Henderson

"Capitalism is indeed remorseless, but in distributing economic advantage."

"[Michael Ingatieff complains] as if it’s a fact too obvious to question, of 'capitalism’s remorseless distribution of economic disadvantage.'
    "What in the world is he talking about?
    "Ordinary [folk around the world], even ones in lower-income brackets, today live in air-conditioned homes, drive air-conditioned automobiles, carry electronic devices that stream music and videos and enable real-time conversations – in voice or in text – with people literally on the other side of the globe. Nearly all of us regularly fly through the air to distant locations, have closets full of clothes and amazing appliances and detergents to keep those clothes clean, spend lower and lower shares of our disposable incomes on food as the quality and variety of that food increase (fresh blueberries in January in New York would have astonished J.D. Rockefeller), enjoy health care undreamed of by J.P. Morgan, and have life expectancy at birth more than double what it was for most of humanity’s existence.
    "Indeed, our pets eat better than did most of our forebears, and even our inanimate stuff is more comfortably and securely accommodated than they were.
    "These and many other ordinary experiences of modern life are so routine that we take them for granted, yet each and every one would have astounded the richest monarch or pooh-bah before the capitalist era. And each one is the product of innovative, entrepreneurial capitalism. Capitalism is indeed remorseless, but in distributing economic advantage."

~ Don Boudreaux, from his post 'Capitalism Is Indeed Relentless (It Cannot Possibly Feel Remorse)'

“The idea that government deserves credit for all of the benefits produced by freedom," says Don Boudreaux in this guest post, "is a special case of the pernicious deification of government. Such claims are preposterous. They are on a moral and intellectual par with my claim that I deserve credit for not killing pedestrians with my car.”

The Ungrateful Pedestrian, or When Do Politicians Deserve Our Praise?

by Donald J. Boudreaux

Yesterday evening I drove to a nearby restaurant. On my way I passed several strolling pedestrians. I did not kill a single one!

Please note that I possessed near absolute ability to do so. A quick and easy flick of my wrist on the steering wheel at almost any time on my drive would have meant certain death for numerous pedestrians. But I refrained from running them over.

The above account is all true.

Suppose now that you were one of these pedestrians and I solicit from you expressions of gratitude for my not running you over. How would you react? Not only would you be indignant at my solicitation, you’d think me to be demented. And properly so. I would be insanely brazen to seek your gratitude for my not bulldozing you with my car.

And yet politicians routinely seek—and receive—praise for actions that differ in no fundamental way from the actions of drivers who avoid running down innocent pedestrians.

We are assailed with monotonous regularity with news reports and campaign ads boasting of how this minister or that politician “created” so-many-thousand new jobs, or is responsible for whatever amount of economic growth has occurred during his or her term of office. Such claims are preposterous. They are on a moral and intellectual par with my claim that I deserve credit for not killing pedestrians with my car.

No politician creates jobs or prosperity. Jobs and prosperity are created by entrepreneurs and business firms whenever the economy is sufficiently free of government meddling. For government to avoid meddling—that is, for government to keep taxes low and to steer clear of regulating voluntary exchange—is indeed desirable. But to avoid interfering with voluntary exchange is not at all actually to create whatever jobs and prosperity emerge from voluntary exchange. To insist otherwise would be no different from my insisting that I, as a driver who did not run over Ms. Jones as she walked back from the supermarket, am responsible for the tasty dinner she cooked that evening for her family.

If a car is careening out of control onto a pedestrian walkway, anyone who leaps into the car to stop it is a genuine hero. This person does deserve applause and gratitude (while, incidentally, the persons who either intentionally or carelessly caused the car to be out of control deserve condemnation and, perhaps, jail time). But even this hero does not take credit for all that is created and produced by those who would have otherwise been killed.

Whenever that rarest of creatures—an honourable elected official—actually manages to loosen some part of government’s grip on us, that person does merit bona fide acclaim. Even he, however, doesn’t deserve credit for whatever economic growth and cultural flourishing follow. Such credit properly belongs to the countless people who create, innovate, take risks, save, and work hard to produce what consumers want.

The idea that government deserves credit for all of the benefits produced by freedom is a special case of the pernicious deification of government. When deified, government is mistakenly seen as responsible for all that happens in society.

A distressingly large number of writers contend that what looks like government’s refusal to intervene is really just a different form of government intervention. I offer here only two examples. One is left-wing economist Warren Samuels who, in a 1995 issue of Critical Review, wrote that deregulation is simply government regulation carried out by enforcing private property rights rather than by enforcing bureaucratic edicts. When the economy is deregulated, what Samuels sees is that “[o]ne system or structure of (nominally private) coercive power is substituted for another by the very institution, government, which helped establish and/or reinforce the first one.” According to Samuels, only the unsophisticated believe that when government deregulates it thereby reduces its sway over the economy.

This view isn’t confined to left-wingers. Louis Hacker, in an otherwise fine essay appearing in F. A. Hayek’s edited volume Capitalism and the Historians, insists that “the idea of laissez faire is a fiction. For the state, by negative action—that is, by refusing to adopt certain policies—can affect economic events just as significantly as when intervention occurs.” Well, yes–in the same way that I, by not running my car over pedestrians, can affect events just as significantly as if I do kill pedestrians.

Only in the most base materialist sense are Samuels and Hacker correct: insofar as government possesses power to restrict commerce and suffocate industry with its regulations, any self-restraint by government in its zeal to regulate can be said to “affect economic events.” But such sophistry sneakily erects as the benchmark for evaluating government activity the maximum possible destruction that government could possibly inflict. If the actual amount of destruction caused by government falls short of what government could have caused, then government is credited with producing all that it refrained from destroying. Using such a benchmark is lunacy.

The Soviet military could have annihilated the United States population with an atomic attack at almost any time during the cold war. Should we then credit the Soviet military for our current prosperity and our very lives? Does it really make sense to speak of the Soviet military as having “affected economic events” by not launching a nuclear strike against America? If so, then why not also credit the decision by the British military not to launch a nuclear attack against us as a cause of our prosperity?

Refraining from interfering in other people’s affairs is simply the right thing for everyone, including government, to do. 

Until someone convinces me that I deserve a ticker-tape parade every time that I don’t run down a pedestrian with my car, I will find intolerable the misbegotten gratitude and applause that politicians receive for not destroying even more of our liberties and wealth than they currently ravage.

* * * * 

Donald J. Boudreaux is a senior fellow with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University, a Mercatus Center Board Member, and a professor of economics and former economics-department chair at George Mason University.

This article first appeared at the Foundation for Economic Education.

More on trade

Oops. 

"Here's the thing about Trump's tariff plans," explains David Henig, focussing just on the economic vandalism in the States. It will undoubtedly mean it will almost certainly be cheaper to simply manufacture everything outside the US and just import the final product.

He explains that a flat tariff, whether 20% as suggested for most non-US products—or up to 60%, as the moron is proposing for Chinese goods—would be levied in a "non discriminatory [fashion] between intermediate and finished goods. Trump may only be thinking of final consumer goods," if 'thinking'is really even the correct word to use in a context such as this, "but they [finished goods] may only account for 5% of imports." So ...

What does it mean for Trump's tariff plans that nearly all US goods inputs are intermediate goods? Essentially, that if all goods attract a 20% tariff, then it will almost certainly be cheaper to simply manufacture everything outside the US and just import the final product.

What does that mean in plain English?? 

"Intermediate goods" is what economists call stuff that businesses buy to make other stuff. So in that graph above, it means all those capital goods, industrial supplies, and car parts and engines are all intermediate goods. But so too are any consumer products that businesses buy intending to make subsequent sales—they are all, of them, inputs into the "final production" of American goods.

Thus [as Don Boudreaux explains], nearly all imports that are not raw materials are appropriately classified as intermediate components.

And so: 

the percentage of American imports that together comprise the category “intermediate components or raw materials” is far larger than 53%. Indeed, it’s likely well over 95%.

So what does that mean in simple economics? 

In economics so simple that even a moron (or a US president) could understand? 

It means that if tariffs are imposed as the moron intended then "it will almost certainly be cheaper to simply manufacture everything outside the US and just import the final product."

Oops.

 

The allure of economic nationalism, alas, isn’t only real, it’s also powerful. Even once-libertarians aren't immune. Yet as Don Boudreaux points out in this guest post, far from being imposed on us it's so popular that governments actively have to suppress it. Because globalisation, as he says, is a "fundamental human activity" that benefits us all ...

Defending Globalisation

Guest post by Don Boudreaux

THIS PAST SEPTEMBER, THE CATO Institute launched a major new initiative called “Defending Globalisation.” The brainchild of Cato’s prolific international-trade scholar Scott Lincicome, Defending Globalisation is a multimedia project designed to explain the benefits of what is described on the project’s website as “all aspects of the fundamentally human activity that we call ‘globalisation.’”

Many people, no doubt, will object to globalisation being described as a “fundamentally human activity,” a term that conjures images of a natural process that has long been familiar to humans. But the term is accurate. Globalisation is what happens naturally when individuals in modern society are left free from government restraint to trade – free to offer to sell, and free to offer to buy, with no one compelled to accept any such offers and, importantly, with no politicians or policemen obstructing the offerers and offerees.

Trading comes naturally to humans. The trading instinct is the root cause of great commercial cities, ancient and modern. In the past, when transportation and communications were very costly and time-consuming, the natural geographic range over which intensive trading regularly occurred was small. But as the costs of transportation and communications fell, and as each of these activities became faster (with the latter becoming instantaneous literally over the whole earth), the natural geographic range over which intensive trading regularly occurs grew. Today, that natural range for many goods and services spans the entire populated area of the globe.

The indisputable truth that today the natural range of trading activity is large – certainly larger than the area of any individual country – comes in an ironic form: tariffs and other government-erected obstructions on trade. Only because people are eager to trade with people in different countries do governments feel the need to suppress this trade.

Stated straightforwardly, this truth is undeniable. Nevertheless, it is denied by the many pundits and politicians who assert that elites impose globalisation on ordinary people. The implication is that globalisation is both detrimental to the masses as well as unnatural. Of course, if these pundits and politicians really believed that globalisation is unnatural (and, therefore, must be imposed) they’d be content simply to leave ordinary people free to trade, confident that no, or only minimal, cross-border commerce would occur. The very existence of government-erected restraints on international commerce proves that those persons who are responsible for erecting these restraints understand that what must be imposed is not globalisation – that would arise naturally – but economic nationalism.

The allure of economic nationalism, alas, isn’t only real, it’s also powerful. People in different countries and different eras have willingly embraced it. Just why so many people are so easily deluded into believing that they are made better off when their access to goods, services, and investment opportunities is restricted by elites has long been a mystery. This mystery is partly solved by public-choice economics: Voters are rationally ignorant, and disproportionate political influence is enjoyed by special-interest producer groups. 

Another reason is that we humans are likely evolved to see reality as a struggle between “us” and “them,” and therefore the interest groups who stand to gain from protectionism find success in portraying actions that benefit foreigners as actions that harm us and our fellow citizens while simultaneously enriching those who mean us harm. Relevant here is the fact that trade restrictions are invariably described by their peddlers as both “protection” of fellow citizens and “standing up to” or “fighting back against” foreigners.

Free trade and globalisation, although great benefactors of humankind, are not naturally popular. It might even be closer to the truth to say that free trade and globalisation are naturally unpopular. Thus they are forever in need of sound defense – which is precisely what is supplied by the Defending Globalisation project.

I ENCOURAGE YOU TO READ every essay in this project, many of which remain to be published. I’ve read each that has been published, and attest to their excellence. Here’s a small sample of what you’ll learn.

From Johan Norberg’s contribution, titled “Globalisation: A Race to the Bottom – or to the Top?”

In his book 'Globalisation and Labor Conditions,' Robert Flanagan summarises the evidence: “Countries that adopt open trade policies have higher wages, greater workplace safety, more civil liberties (including workplace freedom of association), and less child labor.” Flanagan and Niny Khor also document this relationship in “Trade and the Quality of Employment: Asian and Non‐​Asian Economies,” in the OECD report Policy Priorities for International Trade and Jobs.

This would be extremely surprising if companies always scoured the globe searching for the lowest‐​cost country. But they don’t. If they did, 100 percent of foreign direct investment would go to the least developed countries, but in fact, no more than 2 percent of all foreign direct investment is heading in their direction. Most investment goes to relatively developed countries, and GDP per capita is the strongest influence on labour conditions. On average, richer countries have higher wages, safer jobs, shorter working hours, and stronger labour rights, such as freedom of association and less forced labor.

The race‐​to‐​the‐​bottom hypothesis got it wrong because it neglected half the cost‐​benefit analysis. If labour compensation (in the broad sense, including working conditions) were just a gift generously bestowed on workers, it would make economic sense to reduce it as much as possible, but in a competitive labor market, it is compensation for the job that someone is doing, and therefore there is a tight link between pay and productivity. Some workers might be twice as well paid as others, but that does not make them uncompetitive if they are also twice as productive.

From Daniel Drezner’s “The Dangers of Misunderstanding Economic Interdependence”:

While contemporary fears about excessive interdependence are real, that does not mean that these fears have been realised. Indeed, a quick perusal of the alleged downsides of interdependence reveal that much of what has been feared has not come to fruition.

For example, consider the allegations about how China gamed the liberal international order to serve its own revisionist ends. It is undeniably true that as China has grown economically stronger, it has also grown more repressive and more revisionist. Neither of these facts, however, falsify the liberal theory of international politics. 

The liberal argument posits that interdependence constrains rising powers from pursuing more bellicose policies than they otherwise would have. It says next to nothing about interdependence triggering democratisation. It is possible that China can repress domestically while still acting in a constrained manner on the global stage. Most of China’s alleged revisionist actions have been exaggerated. For example, neither the BRICS (Brazil, Russia, India, China, and South Africa) bank nor the Asian Infrastructure Investment Bank have challenged the Bretton Woods Institutions. Claims that the Belt and Road Initiative is an example of debt‐​trap diplomacy have also been wildly exaggerated; indeed, if anything, China’s recent lending practices suggest that it will not weaponise debts from the Global South. While China has built new institutions outside the purview of the United States, none of them contradict the principles of the liberal international order.

And from Daniel Griswold’s “The Misplaced Nostalgia for a Less Globalised Past”:

Even these adjusted income data understate the gains enjoyed by American workers in our more globalised era. In 'Superabundance: The Story of Population Growth, Innovation, and Human Flourishing on an Infinitely Bountiful Planet,' Cato scholars Marian Tupy and Gale Pooley compare time prices (how many hours people must work on average to acquire various goods and services) across decades and find that American workers have experienced dramatic gains since the 1970s. 

In particular, they calculate that the number of hours an average U.S. blue‐​collar worker would have to work to afford a basket of 35 consumer goods fell by 72.3 percent between 1979 and 2019. For example, in 1979, a coffeemaker cost $14.79 while the average blue‐​collar worker earned $8.34 per hour, meaning he would have to work 1.77 hours to buy the coffeemaker. By 2019, a comparable coffeemaker sold for $19.99 while the average blue‐​collar worker earned $32.36 an hour, translating to a time price of 0.62 an hour — a 65 percent decline. 

Using the same methodology, the authors found similar improvements for other household goods: the time price of a dishwasher had fallen by 61.5 percent; for a washing machine, by 64.6 percent; for a dryer, 61.8 percent; for a child’s crib, 90 percent; for a women’s blazer, 69 percent; and for women’s pants, 44.6 percent.

Today's workers are better off than in decades past not only because familiar goods have become more affordable, but also because new types of products have come on the market and spread rapidly.

Again, the above selections are only a slim sample of the impressive abundance of wisdom, insight, and information that await you at “Defending Globalisation.” Embrace it.

* * * * 

Donald J. Boudreaux is a senior fellow with American Institute for Economic Research and with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University; a Mercatus Center Board Member; and a professor of economics and former economics-department chair at George Mason University. He is the author of the books The Essential Hayek, Globalisation, Hypocrites and Half-Wits, and his articles appear in such publications as the Wall Street Journal, New York Times, US News & World Report as well as numerous scholarly journals. He writes a blog called Cafe Hayek and a regular column on economics for the Pittsburgh Tribune-Review. Boudreaux earned a PhD in economics from Auburn University and a law degree from the University of Virginia.

His psot first appeared at the American Institute for Economic research blog.

'Meaningful school choice would elicit shrieks of anger from upper middle-class homeowners. Too bad.'

"There are ... unwise government interventions that I would wish to eliminate, but that I would also not willingly push a button to eliminate immediately.... I’m ... sufficiently influenced by the works of Adam Smith, Edmund Burke, Lord Acton, and F.A. Hayek to understand that large, sudden changes to an economy or society can be dangerously disruptive, even when such changes involve reversing policies that should never have existed in the first place....
    "But there are buttons I would push. [One] button that I would push is one that would greatly enhance school choice. Starting with the 2023-2024 school year, I would, if I could, use a combination of tax credits and vouchers, paid for out of current government-school revenues, to end everywhere ... the monopoly grip that ... government schools and teachers’ unions have on low- and moderate-income families. This move would, in my ideal world, be a first step toward a complete separation of school and state. The squeals of the unionised teachers would be loud, as would the wailing of government-school administrators. But the pain suffered by these long-time coddled interest groups would be far surpassed by the immediately heightened incentives to improve their teaching and to tamp down their efforts at indoctrination.
    "Perhaps this sudden move toward meaningful school choice would elicit a few shrieks of anger also from upper middle-class homeowners, whose suburban property values currently reflect the superiority of the government schools in their neighbourhoods relative to the abysmally poor schools in other neighborhoods. Too bad. These property-value premia are no more just than they would be if they were instead caused by upscale areas having, say, better government-run supermarkets compared to the government-run stores in poorer neighbourhoods. If the fall in middle- and upper-income people’s property values caused by improving poor people’s access to food would be no reason to keep poor people stuck with incompetent supermarkets, the fall in middle- and upper-income people’s property values caused by improving poor people’s access to education is no reason to keep poor people stuck with incompetent schools."

~ Don Boudreax, from his post 'Some Buttons That I’d Not Push, and Some That I Would Push'

ECONOMICS: The Physical Fallacy

"Many of the products which create a modern standard of living are only the physical incorporation of ideas – not only the ideas of an Edison or Ford, but the ideas of innumerable anonymous people who figure out the design of supermarkets, the location of gasoline stations, and the million mundane things on which our material well-being depends. It is those ideas that are crucial, not the physical act of carrying them out. Societies which have more people carrying out physical acts and fewer people supplying ideas do not have higher standards of living. Quite the contrary. Yet the physical fallacy continues on, undaunted by this or any other evidence."

~ Thomas Sowell, from his 1980 book Knowledge and Decisions -- commented on here by Don Boudreaux

"...'from each according to his ability, to each according to his need'..."

"The rule, 'from each according to his ability, to each according to his need,' creates incentives to demonstrate minimum ability and maximum need. The inevitable result is poverty."

 ~ Richard Fulmer, commenting on a post by Don Boudreaux

"Coase insisted that government should largely limit itself to defining and enforcing property rights."

"[Ronald] Coase showed that as long as property rights are clear and secure, and people can bargain freely with each other, nonphysical resources (such as the electromagnetic spectrum) will eventually be owned by those people and businesses that use these resources most productively from society's perspective....
    "Suppose [for example, that bureaucrats] award a part of the spectrum to a station that insists on broadcasting insect noises. That station is unlikely to be the one that uses that part of the spectrum most productively from the public's point of view. Another station that has plans to use that part of the spectrum in ways more useful to the public — say, by broadcasting pop music — will offer to purchase the insect station's property right in the spectrum. And the insect station will voluntarily sell because the pop-music station will attach a higher value to owning that part of the spectrum than will the insect station....
    "An upshot of Coase's insight is that command-and-control regulations are almost always harmful, or at least suboptimal. Such regulations dictate in detail how firms should behave and deny them the flexibility to find better ways to achieve the same desired outcomes. If each steel producer, say, is told that it must install pollution scrubbers on its factory's smokestacks, every steel producer is barred from using less costly ways to reduce pollution.
    "Coase insisted that government should largely limit itself to defining and enforcing property rights. Bargaining in markets — bargaining to buy, to sell and to use such rights as individuals on the spot judge best — will almost always generate better outcomes than will top-down diktats."

~ Don Boudreaux, from his op-ed 'Property Rights' Importance'

"Inclusion?"

"How many are the people who earnestly call for modern society to encourage greater 'inclusion,' yet who also support minimum-wage legislation? I suspect that the number of such people is large.
    "These people obviously miss what should be, but apparently isn’t, obvious – namely, by criminalising the ability of low-skilled workers to compete for employment by offering to work at wages below the legislated minimum, minimum-wage legislation is the opposite of 'inclusive.' Such legislation excludes from the above-ground job market workers with the lowest skills."
          ~ Don Boudreaux, from his post 'Inclusion?'

There’s No Natural ‘Carrying Capacity’ for the Human Population

 

You may assume that this planet has a natural "carrying capacity" beyond which the human population just cannot go. Sounds reasonable, right? There are sonly so many billions the planet can support, right? Wrong, says Don Boudreaux in this guest post: for humans left free to produce, the planet has no natural carrying capacity. The reason, he explains, is that the planet's ultimate resource is the human mind ...

There’s No Natural ‘Carrying Capacity’ for the Human Population: An Essay Inspired by the Happy News that the Human Population Has Reached Eight Billion

by Don Boudreaux

The late, great Julian Simon spent decades battling intellectually against biologists and zoologists who were convinced that human population growth, if governments did not hold it in check with draconian measures, would spell doom for multitudes of humans. (I might as well have used the present tense above, because many of the scientists with whom Simon did battle, including the most prominent, Paul Ehrlich, are still alive.) These students of animal development and behaviour insist that every species inhabits an environment with a natural “carrying capacity.” If the population of a species grows in number beyond the limits of its environment’s carrying capacity, the death rate of members of that species will rise, while its members’ birth rate fall, because species members will confront unusual difficulty gaining access to food, water, and shelter. The species’ population is thus confined to the limits of its environment’s carrying capacity by the brutality of uncaring nature.

Simon argued that humans, at least those of us who live in free societies, are a categorically different sort of species. He observed that to the extent to which we, members of the human species, inhabit a social environment characterised by free and innovative markets, our species does not inhabit a natural environment with a finite carrying capacity. Simon’s argument starts with the fact that we humans are uniquely enterprising and innovative. When this fact combines with the further reality that market prices are signals about which specific resources are becoming more scarce relative to other resources, human entrepreneurship and creativity are incited to discover ways both to make currently known stocks of scarce resources go further and, more importantly, to discover either new sources of those resources or more abundant substitutes. When we succeed in these endeavours, as we now normally do, we literally produce more resources.

Simon’s explanation is revolutionary. Contrary to what most people seem to believe, we don’t obtain resources from an existing stock created for us by nature, leaving fewer resources available for use tomorrow each time we withdraw some amount for our use today. Instead, resources are ultimately fruits of the human mind and effort. And so we produce more petroleum, more tungsten, more copper, more bauxite in the same way that, when our demand for apple pies or Apple laptops increases, we produce more apple pies and Apple laptops.

For humans in market economies, therefore, the environment has no natural ‘carrying capacity.’

As Simon tirelessly documented, his account of humans’ relationship with the natural environment is amply confirmed by history, especially by modern history. Over the past few centuries the human population has grown remarkably – earlier this month it hit eight billion. At the same time there’s also been astounding growth in humans’ standard of living. Were there a natural carrying capacity on earth for the human population, history offers no evidence of it. Quite the contrary.

Despite the economic soundness of his argument and its consistency with the data – and despite his famous victory in a 1980 wager with Ehrlich on whether or not a bundle of five natural resources would become more scarce over the course of a decade – Simon’s argument left many biologists and zoologists unconvinced. And biologists and zoologists aren’t alone. Pick at random a professor, student, news reporter, or blogger and ask him if we humans are today threatening our long-term survival by over-using resources. Chances are high that the answer you’ll get is an unhesitating yes. You’ll likely be further told that our only hope of avoiding the terrible fate of billions of us being done in by natural forces is for us, especially those of us in rich countries, to dramatically reduce our consumption.

There is, I suppose, something gratifying in counselling personal sacrifice. Sacrifice often is admirable and worthwhile, as when you sacrifice your time to help a neighbour in distress, or sacrifice your comfort today in order to undergo painful medical treatments that will better ensure that you’ll survive past tomorrow. But sacrifice for sacrifice’s sake is, at best, pointless. Costs are incurred in exchange for no benefits....

If Simon is correct, green-inspired efforts to encourage or compel those of us in market economies to reduce our consumption today yield no benefits. Such efforts conserve no resources; they simply result in our producing fewer resources, an outcome that is utterly useless. The uselessness of this outcome lies in the reality that whenever we “need” new resources, we can produce these.

Was Simon naively pollyannaish? Has history’s apparent confirmation of his thesis simply been a matter of good luck? No.

Consider a recent essay in the Wall Street Journal – an essay whose title speaks volumes: “One Man’s Trash Is Another’s Clean Fuel.” The authors, Nick Stork and Joe Malchow, report very Simonesque news:

In a lesson about how the energy transition is likely to play out, landfill operators’ ability to make use of excess gas has exploded in recent years. New facilities are being created to convert trash into renewable natural gas, molecularly identical to the gas that heats homes. The process cuts down greenhouse-gas emissions while creating a low-carbon energy source…

The potential has spurred major sanitation and energy companies to break into this new market. This year Houston’s Waste Management Corp. announced an $825 million investment to boost renewable natural-gas capture. In October the British company BP agreed to acquire Archaea Energy (which one of us founded and the other invested in), a company that designs, builds and operates RNG plants in the U.S. to convert waste emissions. Archaea produces 6,000 oil-equivalent barrels a day through 13 RNG facilities with plans to construct 88 more to serve rising demand. Our only input is trash.

Quiet, private innovation in gas processing made this possible. Archaea sells largely to voluntary buyers who wish to lock in clean gas at fair prices. RNG still comes at a premium compared with other fuel sources, but driving down the cost of producing RNG will mean more of it is available to buyers on attractive terms. We are working to lower the price of RNG by creating standardized and modular production facilities with decreased operating costs, higher processing efficiency, and uptime rates that start above 90 percent.

Energy – indeed, low-carbon energy – from trash!

If turning trash into energy that’s transmissible over long distances nevertheless sounds either fanciful or likely insignificant in its long-term impact, imagine yourself as a native American roaming 600 years ago through the woodlands of what is today western Pennsylvania. You’re thirsty and bend down to enjoy a drink of water from a brook, only to discover that the water at that spot is undrinkable because it’s polluted with a smelly, oily, noxious substance oozing out a few feet upstream. How plausible would this You of 600 years ago have found a prediction that the icky stuff that pollutes your drinking water would, in just a few centuries, be a much-sought-after ‘natural’ resource that powers much of humanity’s activities?

Julian Simon died almost twenty-five years ago, just shy of his 66th birthday. Were he still alive today, he would surely celebrate our population of eight billion and remind anyone who would listen that, far from pushing humans closer to the earth’s carrying capacity, the creative potential of those eight billion human minds will further expand our access to resources. We need only to allow this creativity to operate freely.

Donald J. Boudreaux is a senior fellow with American Institute for Economic Research and with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University; a Mercatus Center Board Member; and a professor of economics and former economics-department chair at George Mason University. He is the author of the books The Essential Hayek, Globalization, Hypocrites and Half-Wits, and his articles appear in such publications as the Wall Street Journal, New York Times, US News & World Report as well as numerous scholarly journals. He writes a blog called Cafe Hayek and a regular column on economics for the Pittsburgh Tribune-Review. Boudreaux earned a PhD in economics from Auburn University and a law degree from the University of Virginia.

This post originally appeared at the AIER blog.

"Protectionism’s harm to consumers is obvious...."

"Protectionism [i..e, shielding local industry from foreign competition by the likes of protective tariffs] necessarily imposes larger costs on the rest of the home-country economy.
    "Protectionism’s harm to consumers is obvious. Having to pay more to buy the outputs of ‘successfully’ protected firms, consumers must reduce their purchases of other goods and services or reduce their savings. 

    "To grasp this economic reality is to realise also the harm that protectionism inflicts on other home-country firms and workers. Every input that protectionism diverts into protected firms is an input diverted away from other productive uses. Non-protected firms thus have less access to raw materials, tools, intermediate goods, and labour. Their outputs fall. 

    "Further, because workers in non-protected firms have fewer or lower-quality tools and inputs with which to work, these workers’ productivity falls. And falling productivity means falling wages.
    "Looking only at the alleged ‘success’ of protected firms and then confidently concluding that protectionism is a boon to the entire country, [one] reasons as would an apologist for successful thieves – an apologist who points to the thieves’ bustling business in larceny, and to the thieves’ high ‘earnings,’ and then confidently concludes that thievery is a boon to the entire country."

~ Don Boudreaux, from his post 'Protectionists Are Shielded From Embarrassment By Their Formidable Ignorance of Economics'

“Markets fail. Use markets.”

"[M]arkets [do not] have to be optimal in order to be preferable to government intervention.
    "Instead, long ago I offered the aphorism 'Markets fail. Use markets.' That is, I readily concede that the market economy is not at some theoretical optimum. The question is what will lead to improvement. I believe that government intervention will often make things worse. Meanwhile, entrepreneurial innovation and creative destruction tends to solve economic problems, including market failures....
    "As a process, markets tend toward improvement, because business profits ultimately depend on satisfying consumers. As a process, government intervention is unreliable, for many reasons. The interests of government officials often diverge from the interests of voters. The disciplinary forces of competition and the profit-and-loss system are absent. The internal processes of bureaucracy tend to reward conformity and repression of innovation.
    "If 'market fundamentalism' is the belief that markets are perfect, then I do not know anyone on the libertarian side who is a market fundamentalist.... I wish that [economics professors] would spend more time discussing 'government fundamentalism,' which is what you are guilty of when you assume that government intervention consists of wise, technocratic solutions."

~ Arnold Kling, from his post 'Markets Fail. . .And Libertarianism Still Works, 10/16'

RELATED: 

• Don Boudreaux: 'Government is Largely Guesswork'

Risk is Inescapable – The Only Question is Whether to Assess it Accurately or Inaccurately

In his latest Guest Post, Don Boudreaux laments the frequent misinterpretation of mishaps as evidence that greater precautions against particular risks are thereby necessarily justified. In our personal, daily lives we understand that accidents happen. Yet this mature understanding of the inescapability of risk seems to disappear when politicians get involved ... 

Risk is Inescapable – The Only Question is Whether to Assess it Accurately or Inaccurately

Guest post by Don Boudreaux

Recently while on a tramp I twisted my ankle. The pain was unpleasant, and I was annoyed by the consequent down-time from physical exercise.

I could have inferred from this experience that my tramping boots are inadequate. Had I made this inference, I’d have purchased a new, higher-quality pair of tramping boots. One result would have been a reduced probability of twisting my ankle and, thus, suffering pain and downtime from exercising. This result, standing alone, would obviously have been beneficial.

But of course a decision to buy better, more-expensive tramping boots would have had, for me, results in addition to this beneficial one. The most notable of these other results is that I’d have had less money to invest or spend on options other than new tramping boots. I can’t specify just what form such a sacrifice would have taken – a slight reduction in my savings, perhaps, or restocking my wine collection with less-tasty vintages. Whatever would have been the downsides of my buying new tramping boots, I chose not to suffer these negative experiences despite the fact that I was fully aware that new and better tramping boots would have reduced my chances of again twisting my ankle.

Is my inaction on the tramping-boot front irrational? If my only goal in life were to avoid twisting my ankle, the answer would be yes. With no other goal such as accumulating bigger savings or enjoying fine wine, I would have sacrificed nothing by buying new and better tramping boots. But because I have countless goals in addition to reducing the prospect of twisting my ankle, my decision not to buy more-protective tramping boots is perfectly rational.

If on future tramps I keep twisting my ankles, then I will indeed buy new and better boots. The reason is that the increased frequency of injury would tell me what a single injury does not: that my tramping boots likely are more inadequate than I’m willing to tolerate and, thus, they should be replaced.

Nothing in the above personal tale is startling. I’m sure that the essential features of this dull account of my decision-making regarding tramping boots apply to routine decisions that you make. You don’t, for example, conclude from one stumble on your front-porch stairs that the stairs are too steep and, thus, should be replaced. You don’t stop dining at your favorite restaurant just because you encounter there one disappointing meal. You don’t change the route you normally take to drive to work just because one morning on your commute you get into a single fender-bender – or even a more serious wreck.

In our personal, daily lives we understand that accidents happen. No particular mishap or accident that you suffer is necessarily evidence that you’ve been doing things wrongly. Put differently, each adult understands – if only subconsciously – that every possible course of action carries some risk. Therefore, an actual manifestation of a course of action’s risk is not itself proof that the risk had been underestimated or that precautions against the risk were insufficient.

Yet this mature understanding of the inescapability of risk, and of the meaning of accidents and occasional misfortunes, seems lacking in the public sector. Very often, a newsworthy calamity is taken to be proof that precautions against such a calamity must be intensified.

Was there a recent mass shooting? We must therefore tighten restrictions on gun ownership!

Was access to imported medical supplies obstructed? We must therefore rely less on foreign production of these supplies!

Was there a fatal accident on an amusement-park ride? We must therefore increase the safety of amusement-park rides!

Did insiders at a big corporation commit fraud? We must therefore strengthen government oversight and regulation of corporate-managers’ behaviour!

Was someone caught getting through airport security with a gun? We must therefore increase the severity of security screenings at airports!

Did someone recently die of food poisoning from canned vegetables bought in a supermarket? We must therefore regulate the safety of foods more stringently!

Each of these events is unfortunate. But none of them, standing alone, implies that we “must therefore do something.” Short of completely prohibiting the activity in question, every degree of precaution regarding that activity leaves some chance that engaging in that activity will result in a mishap, perhaps even a catastrophe. For example, even the most stringent and strictly enforced regulation of food safety will not eliminate the chance of someone dying from food poisoning contracted from store-bought foods. It follows that if government responds to a new case of fatal food poisoning by intensifying its regulation of food safety, the result might be regulation that’s excessively restrictive.

Of course, if reducing the prospects of food poisoning were humanity’s only goal, then each and every increase in the stringency of food-safety regulation would be worthwhile. But because we humans have countless goals other than to avoid food poisoning, steps taken to avoid such poisoning are costly. With each such step that we take, we deny ourselves other valuable goods, services, and experiences. At some point, then, an extra dollop of – economists call it “a marginal increment of” – food safety is no longer worthwhile. The (very real) benefit we would get from the extra protection from food poisoning is less than the (very real) benefits from other goods, services, and experiences that we would have to sacrifice to obtain this extra dollop of protection from food poisoning.

Unfortunately, politicians are biased toward reacting to the latest headlines. Reacting in this manner is a cheap and flashy way of creating the appearance of being caring and responsive. And reporters and headline writers are biased toward blaring out, and even exaggerating, news of the latest unfortunate event. Too often, in response, governments spring into action to implement or to strengthen protections against whatever misfortune is blared in today’s headlines. The too-frequent result is excessive protection against particular risks.

While a series of particular misfortunes might accurately reveal the desirability of taking further precautions against those misfortunes, in almost all cases a single or infrequent misfortune – a misfortune that occurs only once or only relatively rarely – does not, standing alone, reveal that precautions should be intensified. Each of us in our private lives has strong incentives to make these assessments correctly, for if we don’t, we personally suffer. Politicians and bureaucrats, in contrast, not only do not personally suffer if they impose excessive precautions, they are often lauded for doing so – which is yet another good reason for reducing the role of government.

Donald J. Boudreaux is a senior fellow with American Institute for Economic Research and with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University; a Mercatus Center Board Member; and a professor of economics and former economics-department chair at George Mason University. He is the author of the books The Essential Hayek, Globalization, Hypocrites and Half-Wits, and his articles appear in such publications as the Wall Street Journal, New York Times, US News & World Report as well as numerous scholarly journals. He writes a blog called Cafe Hayek and a regular column on economics for the Pittsburgh Tribune-Review. Boudreaux earned a PhD in economics from Auburn University and a law degree from the University of Virginia.

His column first appeared at the AIER blog.

There are things every adult human being really needs to know, argues Don Boudreaux in this guest post, and four of them are inescapable economic principles...

Four Amazing Differences

by Don Boudreaux

If there’s a particular purpose for my presence on this earth – other than being a loving and responsible father for my son – that purpose is to teach principles of economics. Even adjusting (as best as I can) for professional bias, I have no doubt that no body of knowledge is more important for understanding society than is economics, with few bodies of knowledge being as important. And the part of economics that, far and away, is most important is economics principles, popularly known as “Econ 101.” Probably as much as 90 percent of the many harmful government policies being pursued or proposed at any moment would grind to a halt if a majority of the populace [or of economics lecturers - Ed.] had a solid grasp of basic economics.

At the beginning of each semester, I – unlike most teachers of economics principles – devote a couple of hours to the task of impressing upon my students (most of whom are still too young to purchase adult beverages) just how very different is the world they know from the world that was known to most of their ancestors. I identify four ways in which the lives of those of us in the modern, capitalist world differ categorically from the lives of almost everyone until just a few centuries ago.

1: Astonishing Prosperity

The most obvious way in which our lives today differ from those of our pre-capitalist ancestors is that we’re fantastically wealthier. Ordinary people today sleep beneath hard roofs and walk on hard floors in homes equipped with indoor plumbing, electric lighting, and featuring cupboards full of food, closets full of clothing, and garages or driveways full of automobiles. We’re so wealthy that it’s quite plausible that our pets today live materially better lives than did our human ancestors before the industrial age.

Although recounted frequently, this truth about modern standards of living cannot be told too often. We’re so accustomed to our spectacular wealth that we take it for granted. And that which is taken for granted is seldom appreciated and correctly understood.

2: Reliance on Strangers

A second way in which our lives differ categorically from the lives of nearly all of our ancestors is that we, unlike our ancestors, depend for our survival almost exclusively on strangers. Prior to capitalism, Jones personally helped to produce many of the goods that he or she consumed. Jones likely had a hand directly in the hunt, building the family hut, weaving cloth for the family’s clothing, or tending the crops and animals destined to become the family’s meals. Most of the other goods and services consumed by Jones but not directly produced with his or her labor, were produced by people known personally to Jones, such as the village blacksmith, cobbler, cooper, butcher, tailor, tanner, carpenter, and wheelwright.

Today in stark contrast, we denizens of capitalist economies not only do not personally directly help to produce the goods that we consume, we have no idea of the identities of nearly everyone who did have a hand in producing the goods that we consume. Almost everything that we consume is produced for us by persons who we do not know – by people who are, to us, strangers.

Consider the shirt now on your back, the shoes on your feet, the salami in your refrigerator, the lightbulb above your head, your smartphone resting nearby, the gasoline in your car, and the polio vaccine that still protects your body. Ask: Who made these things? You have no idea of their names, faces, religious beliefs, political affiliations, or physical whereabouts. And none of these people know you. But nevertheless these strangers who don’t know you – and, hence, who presumably don’t care about you – somehow were led to toil to produce valuable things for you.

Wow.

3: The Strangers are Multitudinous

A third way that our lives today differ categorically from the lives of all humans who lived before the dawn of capitalism is that the sheer number of people whose knowledge, skills, and efforts are necessary to produce the goods and services that we are accustomed to consume on a regular basis is astronomical. Not only are we today utterly dependent for our survival on strangers, the number of strangers on whom we depend is mind-bogglingly large.

This reality is true for even seemingly simple goods such as pairs of jeans, oranges, and window panes. But this reality is better seen by pondering a more ‘modern’ yet still commonplace good, such as a smartphone. The glass on the phone’s face is made of materials that some strangers found by exploring and that were then processed by other strangers into glass. Yet different strangers programmed the codes that allow the phone to work, while other strangers designed the microprocessors – little marvels that were physically produced by machines made by still other strangers and then transported to the factory for assembly by yet different strangers. Each app, of course, is the product of the minds of other strangers still.

I don’t know – no one could possibly know – the exact number of persons whose efforts were devoted to producing your smartphone and keeping it operational. But I’m confident that this number is much greater than one million – in fact, it’s likely multiple times greater. When this number is added to the number of strangers whose efforts were devoted to producing your living-room couch, your HVAC system, the latest medicines that you ingested, your automobile, and the commercial-air flight that you’ll next take to visit your parents or to close that business deal, the number of strangers who routinely work for you likely numbers well over a billion.

Even more wow.

4: No One Knows How to Make Any Modern Good

The fourth categorical difference between our lives and those of our pre-capitalist forebearers is that almost everything we consume is something that no one person knows how to make or could possibly know how to make. This incredible claim warrants repetition: Nearly everything that we consume is something that no one does, or could, know how to make.

The most famous explanation of this marvelous reality is Leonard Read’s brilliant 1958 essay “I, Pencil.” The production of something as commonplace, as inexpensive, and as seemingly simple as an ordinary pencil requires the knowledge and efforts of so many different individuals that no one person – indeed, no committee of tireless geniuses – could possibly possess such knowledge. This inconceivably vast amount of knowledge is dispersed across the minds of countless specialized producers, nearly all of whom are strangers to each other as well as to the final consumers of their products. And yet we have pencils in such abundance that an ordinary American worker today need toil only 13 seconds to earn enough income – ten cents – to purchase a new pencil.

Reflect on this fact: An ordinary (“nonsupervisory”) private-sector American worker today, who earns about $27 per hour, can earn enough income in a matter of seconds to purchase something the production of which is so complex that no human being can hope to know fully all that is involved in its production and, hence, that requires the knowledge and labor of millions of strangers.

What causes the great and overwhelmingly successful coordination across the globe of the productive efforts of billions of strangers? And why is this coordination so silent and incessant that we take it for granted? We hardly notice it.

We hardly notice this vast occurrence of global cooperation and coordination, that is, until our attention is drawn to it by a competent teacher of Econ 101. That teacher’s task then becomes that of revealing the logic of how market prices, profits and losses, competition, and innovation drive the specialization and the innumerable efforts that make our marvelous world a reality.

The learning adventure is glorious!

* * * * 

Donald J. Boudreaux is a senior fellow with American Institute for Economic Research and with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University; a Mercatus Center Board Member; and a professor of economics and former economics-department chair at George Mason University. He is the author of the books 'The Essential Hayek,' 'Globalization, Hypocrites and Half-Wits,' and his articles appear in such publications as the 'Wall Street Journal,' 'New York Times,' 'US News & World Report' as well as numerous scholarly journals. He writes a blog called Cafe Hayek and a regular column on economics for the 'Pittsburgh Tribune-Review.' Boudreaux earned a PhD in economics from Auburn University and a law degree from the University of Virginia.

His post first appeared at the AIER blog.

What's 'not seen' by social engineers is generally even more important than what is, explains Don Boudreaux in this Guest Post. Social engineers see only a relatively few surface phenomena, he observes, and remain blind to the astonishing complexity that is ever-churning beneath the surface that goes to create those surface phenomena. They need to turn off their tendency to push their simple coercive solutions at the expense of the freedom that would otherwise solve them.

'Turn off that tendency to coerce,' says Don Boudreaux

Beware the Allure of Simple ‘Solutions’

by Don Boudreaux

The attitudes and opinions of today’s so-called “elite” – those public-opinion formers who Deirdre McCloskey calls “the clerisy” – are childish. And not in a good way. Most journalists and writers working for most premier media and entertainment companies, along with most professors and public intellectuals, think, talk, and write about society with less insight than the average toddler.

This sad truth is masked by the one feature that does distinguish the clerisy from young children: verbal virtuosity. Yet beneath the fine words, beautiful phrases, arresting metaphors, and affected allusions lies a notable immaturity of thought. Every social and economic problem is believed to have a solution, and that solution is almost always superficial.

Unlike children, adults understand that living life well begins with accepting the inescapability of trade-offs. Contrary to what you might have heard, you cannot “have it all.” You cannot have more of this thing unless you’re willing to have less of that other thing. And what’s true for you as an individual is true for any group of individuals. We cannot support governments artificially raising the cost of producing and using carbon fuels, for example, unless we are willing to pay higher prices at the pump and, thus, have less income to spend on acquiring other goods and services. Equally, we cannot use money creation to ease the pain today of COVID lockdowns without enduring the greater pain tomorrow of inflation.

While children stomp their little feet in protest when confronted with the need to make trade-offs, adults accept the necessity of trade-offs. Except, of course, for those childish adults who are paid-up members of the clerisy.

No less importantly, adults -- real adults, those who understand this point -- are not beguiled by the superficial. They understand that not everything immediate noticeable is always important, and that -- all too frequently -- it's the things we don't see that are more important. Especially when the latter cause the former.

Pay close attention to how the clerisy (who are mostly, although not exclusively, Progressives) propose to ‘solve’ almost any problem, real or imaginary. You’ll discover that the proposed ‘solution’ is superficial; it’s rooted in the naïve assumption that social reality beyond what is immediately observable either doesn’t exist or is unaffected by attempts to rearrange surface phenomena. In the clerisy’s view, the only reality that matters is the reality that is easily seen and seemingly easily manipulated -- and manipulated, always and everywhere, with coercion. The clerisy’s proposed ‘solutions,’ therefore, involve simply rearranging, or attempting to rearrange, surface phenomena by means of the government's guns.

• Do some people use their own guns to murder other people? Yes, sadly. The clerisy’s superficial ‘solution’ to this real problem is to outlaw private guns (which ignores that this tends to leave guns in the hands of outlaws). 
• Do some people have substantially higher net financial worths than other people? Yes. The clerisy’s juvenile ‘solution’ to this fake problem is to heavily tax the rich and transfer the proceeds to the less rich (ignoring that there are too few rich to make the coercive transfer worthwhile, while reducing incentives for the less rich to get rich themselves). 
• Are some workers paid wages that are too low to support a modern family? Yes. The clerisy’s simplistic ‘solution’ to this fake problem – “fake” because most workers earning such low wages are not heads of households – is to have government prohibit the payment of wages below some stipulated minimum (ignoring that this tends to price marginal workers out of all employment altogether).
• Do some people suffer substantial property damage, or even loss of life, because of hurricanes, droughts, and other bouts of severe weather? Yes. The clerisy’s lazy ‘solution’ to this real problem focuses on changing the weather by reducing the emissions of an element, carbon, that is now (a bit too simplistically) believed to heavily determine the weather.

I could go on ... and I will.

• Do prices of many ‘essential’ goods and services rise significantly in the immediate aftermath of natural disasters? Yes. The clerisy’s counterproductive ‘solution’ to this fake problem (“counterproductive” and “fake” because these high prices accurately reflect and signal underlying economic realities) is to prohibit the charging and payment of these high prices. 
• When real inflationary pressures build up because of excessive monetary growth, are these pressures vented in the form of rising prices? Yes indeed. The clerisy’s infantile ‘solution’ to the very real problem of inflation is to blame it on greed while raising taxes on profits.
• Is the SARS-CoV-2 virus contagious and potentially dangerous to humans? Yes. The clerisy’s simple-minded ‘solution’ to this real problem is to forcibly prevent people from mingling with each other.
• Do many youngsters still not receive schooling of minimum acceptable quality? Yes. The clerisy’s lazy ‘solution’ to this real problem is to give pay raises to teachers and spend more money on school administrators.
• Do some American workers lose jobs when American consumers buy more imports? Yes. The clerisy’s ‘solution’ is to obstruct consumers’ ability to buy imports. Are some people bigoted and beset with irrational dislike or fear of blacks, gays, lesbians, and bisexuals? Yes. The clerisy’s ‘solution’ to this real problem is to outlaw “hate” and to compel bigoted persons to behave as if they aren’t bigoted.
• Do many persons who are eligible to vote in political elections refrain from voting? Yes. The ‘solution’ favoured by at least some of the clerisy to this fake problem – “fake” because in a free society each person has a right to refrain from participating in politics – is to make voting mandatory.

The above list of simplistic and superficial ‘solutions’ to problems real and imaginary can easily be expanded.

The clerisy, mistaking words for realities, assumes that success at verbally describing realities more to their liking proves that these imagined realities can be made real by merely rearranging the relevant surface phenomena. Members of the clerisy ignore unintended consequences. And they overlook the fact that many of the social and economic realities that they abhor are the result, not of villainy or of correctible imperfections, but of complex trade-offs made by countless individuals.

Social engineering appears doable only to those persons who, seeing only a relatively few surface phenomena, are blind to the astonishing complexity that is ever-churning beneath the surface to create those surface phenomena. To such persons, social reality appears as it does to a simple child: simple and easily manipulated to achieve whatever are the desires that motivate the manipulators.

The clerisy’s ranks are filled overwhelmingly with simple-minded people who mistake their felicity with words and their good intentions for serious thinking. They convey to each other, and to the unsuspecting public, the appearance of being deep thinkers while seldom thinking with more sophistication and nuance than is on display in every classroom of toddlers today.

* * * * 

Don Boudreaux is a senior fellow with American Institute for Economic Research and with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University; a Mercatus Center Board Member; and a professor of economics and former economics-department chair at George Mason University. He is the author of the books The Essential Hayek, Globalization, Hypocrites & Half-Wits, and his articles appear in such publications as the Wall Street Journal, New York Times, US News & World Report as well as numerous scholarly journals. 

He writes a blog called Cafe Hayek and a regular column on economics for the Pittsburgh Tribune-Review. Boudreaux earned a PhD in economics from Auburn University and a law degree from the University of Virginia.

A version of his post first appeared at the American Institute for Economic Research blog.

"Race to the bottom"?

Trade skeptics and other foolish fellows and fellow-esses will sometimes concede that, well, yes, it might be okay that you and I and the family down the road can buy our underwear and electronics more cheaply if we let the places that make that stuff more cheaply sell it to us. But, they then say, those places make that stuff more cheaply because their wages are lower -- and if we let those places sell us everything, then eventually all wages everywhere will be lower. We will all, they say, be in a "race to the bottom" in which everyone loses.

I suggest these worry-worts and foolish persons quit their worrying, because that isn't going to happen. And that isn't going to happen, because Capital.

What does that mean? 

Don Boudreaux explains (in the American context) as part of some on-going correspondence he's having with a trade skeptic:

Mr. W__:

Disagreeing with my explanation of why high-wage American workers have nothing to fear from an American policy of free trade with low-wage countries, you write: “High US worker productivity comes from companies investing plenty of capital for workers to work with. But under free trade companies would move investments to countries with lower wages. US workers will become less productive and be paid lower wages. This is why the combination of free trade and capital mobility are bad for workers in rich nations.”

Wrong.

While you’re correct that the productivity of American workers is raised in no small part by significant private-sector investment in the U.S. – that is, by the creation and use in the U.S. of capital goods and services that improve worker productivity – for a variety of reasons you’re incorrect to conclude that American workers would suffer under free trade. Here are two of those reasons.

First, worker productivity in the U.S. isn’t kept high exclusively by investments here in capital goods and services. Also raising American workers’ productivity is the extensiveness and quality of our transportation and communications infrastructure, the relative honesty and efficiency of our legal system, and the still-dominance here of what Deirdre McCloskey calls “bourgeois virtues,” especially our culture of commerce, hard work, and high trust. Making trade freer would do nothing to worsen America’s performance on these fronts; indeed, I believe that this performance would be further improved.

Second, the amount of capital in the world isn’t fixed. It expands or shrinks with the bettering or worsening of investment climates in different countries across the globe.

There’s a reason why low-wage countries have in place less capital per worker than is in place in the U.S., that reason being that investing in those countries is less attractive than is investing in the U.S. And the attractiveness of investing in those countries is unlikely to improve greatly merely as a result of the U.S. lowering its trade barriers. But if the investment climate in low-wage countries improves in a way to attract to those countries substantially more investment, as long as government in the U.S. does nothing to worsen the investment climate here – say, by raising taxes exorbitantly – the stock of capital in America will not fall. Instead, the global stock of capital will rise as new capital is created for low-wage countries. Workers in low-wage countries will thus become more productive with no decline in the productivity of American workers.

Also keep in mind this fact: No small part of the high productivity of American workers is due directly to international trade. This trade not only makes available to many American workers low-cost, high-quality raw materials, tools, and inputs to work with, but also offers to many American companies vast foreign markets that enable these companies to operate at large, highly productive scales.

But in the end, all of the above is unnecessarily complex. The simple fact is this: A people are not made richer when their government obstructs their access to low-priced goods and services. They’re made poorer. Period.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

FURTHER READING: 

• 'Capital Supply and American Prosperity' (1952) - Ludwig Von Mises 

The Simple Life

We often hear, or surmise, that life was simpler "way back when." Not so, say Don Boudreaux in this Guest Post -- simply put, if you’re reading these words, then your way of life now is the simplest that humans have ever lived.

Recently I watched a nature show on TV about Zanzibar. The narrator described the humans who first arrived on that Indian Ocean archipelago 20,000 years ago as having lived “a simple life” – a simplicity of life that persists to this day for some Zanzibarians.

At one point in the show viewers saw film of two young Zanzibarian men paddle a wooden canoe out to sea, where they threw a fishing net into the water. These fishermen later hauled up a nice catch of fish. Just before journeying into the water, these young men were confident they’d net a good catch because, after gazing for some time from shore out into the ocean, they finally spotted a whale shark – a good indication that lots of fish are in the vicinity.

As I watched these young men paddle out into the water, haul in their nets, and paddle back to shore, I said to myself: “Simple?! Those two guys endure much more difficulty and complexity getting fish than I do.”

And I’m unquestionably correct. When I want fish for dinner – which I often do – I drive at my leisure to a restaurant and order fish. I arrive at the restaurant safely and in comfort, and my meal quickly appears on my table already filleted, seasoned, and cooked. Alternatively, I sometimes walk a few steps to a nearby supermarket and buy some fish, fresh or frozen (or already cooked) as I please.

Getting fish is much simpler for me and other denizens of modernity than it was for our pre-modern ancestors and for those persons today who still haven’t had the benefits of modernity.

Of course, what’s true for fish is true for nearly every aspect of life. Despite incessant contrary claims, life for us humans has never been simpler than it is today. It is us, not our long-ago ancestors, who live “a simple life.”

Imagine what life was like, say, for a typical New England farm family a mere 200 years ago. Waking up on a frigid winter morning, a fire had to be started in the fireplace. This task was done in an as-yet-unheated home because, well, the fire had yet to be started. The home had no thermostat-controlled HVAC unit. And the person starting the fire had no automatic lighter – or even safety matches – to ease the task of igniting a flame. Nor was there available any easy-to-light artificial logs.

The kitchen stove, too, had to be lit – and, also like the fireplace, kept lit – manually.

Without indoor plumbing, running water, and antibacterial soap, relieving oneself was more onerous, more unpleasant, and less hygienic than is the corresponding routine today. The cows had to be milked – a task, I confidently guess, that was not remotely “simple” during the pre-dawn hours in sub-zero temperatures. And it’s certainly never as simple as going to the supermarket to purchase milk.

Transforming a live animal into meat for the table was also not “simple” back then – at least not compared to the manner in which nearly all of us today get meat for our tables. I’m willing to believe that, were I to slaughter my own cattle, pigs, and chickens, the resulting meats would be tastier than the beef, pork, and chicken that I buy at restaurants and supermarkets. But I’m unwilling to believe that the improvement in taste would be great enough to compensate for the magnitudes-greater difficulty I’d endure to get meat in the old-fashioned way.

What about bathing? Two centuries ago in rural America, bath water had to be heated over an open flame before being poured into a tub. (Forget showering.) Bathing was far less simple back then than it is today.

Want to visit Uncle Josiah who lives 180 miles away in Providence? You can’t travel faster than a horse if you’re going by land, which you likely are. Making that journey back then was, by the standards of today, anything but simple. Nor was it comfortable.

If anthropologists today are in search of that group of human beings who lived the simplest lives in history, they merely need look at themselves and their neighbors.

Most of us today awaken and spend all of our time indoors in homes and facilities kept toasty warm in winter, and pleasantly cool in summer, by automatic-powered HVAC systems or other modern appliances. To get food – from literally around the world – we simply go to the supermarket and to restaurants. Sometimes we go to farmers’ markets – itself made simple by our and the farmers’ use of automobiles, paved roads, and refrigeration, and by the fact that many of the farmers today accept as payment credit cards.

Compared to our ancestors, we today have a much simpler time communicating with people out of earshot. Indeed, for most of our ancestors, such communication in real time was impossible – the polar opposite of “simple.” And it’s much simpler for us today to entertain ourselves, what with television, satellite radio, streaming videos and music, overnight delivery of books and board games to our doorsteps, smartphones, laptops, YouTube, and the Internet.

How much simpler is it today to summon urban or suburban transportation by using Uber or Lyft apps instead of hailing or calling taxicabs? Answer: much.

Or consider the cleaning of clothes. We simply toss our dirty laundry, along with dashes of detergent, into electricity-powered machines that do nearly all the work for us. Easy-peasy.

How about banking? We simply have those payments that are due to us deposited electronically into our accounts, and we then submit what we owe through various electronic means of payment. Bye-bye to the ‘complex’ dance of going to banks physically, and to writing and mailing paper checks.

My 24-year-old son not long ago told me, off-handedly, that he used DoorDash to order a package of paper towels that were delivered within 20 minutes to his doorstep. He saved himself the complex chore of personally driving to a supermarket to fetch and buy the towels. When my son isn’t in the mood to cook, or to leave his apartment, he simply orders pizza to be delivered, piping hot, directly to him.

The advance of modernity can be described very accurately as the march toward ever more simplicity. Compared to the lives of our pre-industrial ancestors – and, in fact, compared even to the lives of our literal grandparents – each of our lives today is simple beyond the imagination of those who lived a few generations or more ago. Compared to in the past, feeding ourselves is much simpler – as is hydrating ourselves, clothing ourselves, housing ourselves, cleansing ourselves, curing ourselves of illnesses and injuries, keeping ourselves comfortable and safe and informed and amused, and transporting ourselves hither and yon.

Simply put, if you’re reading these words, your way of life is the simplest that humans have ever lived.

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Donald J. Boudreaux is a senior fellow with American Institute for Economic Research and with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University; a Mercatus Center Board Member; and a professor of economics and former economics-department chair at George Mason University. He is the author of the books The Essential Hayek, Globalization, Hypocrites and Half-Wits, and his articles appear in such publications as the Wall Street Journal, New York Times, US News & World Report as well as numerous scholarly journals. He writes a blog called Cafe Hayek and a regular column on economics for the Pittsburgh Tribune-Review. Boudreaux earned a PhD in economics from Auburn University and a law degree from the University of Virginia.
This post first appeared at AIER.