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Quotation of the Day

Posted: 26 Mar 2020 05:17 AM PDT
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(Don Boudreaux)




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… is from page 131 of the 11th (2006) edition of one of greatest economics
textbooks of all time: Paul Heyne’s, Peter Boettke’s, and David
Prychitko’s The Economic Way of Thinking (original emphasis):

We are extremely dependent on changing money prices to secure effective
cooperation in our complex, interdependent society and economy. When prices
are not permitted to signal a change in relative scarcities, suppliers and
demanders receive inappropriate signals. They do not find, because they
have no incentive to look for, ways to make accommodations to one another
more effectively. It is important that people receive some such incentive,
because there are so many little ways and big ways in which people can
accommodate ways that no central planner can possibly anticipate, but
which in their combined effect make the difference between chaos and
coordination. Changing money prices, continuously responding to changing
conditions of demand or supply, provides just such an incentive.

DBx: No principle of economics is more important than the one explained
here by Heyne, Boettke, and Prychitko, and few principles are as important.
Further, absolutely nothing learned in advanced economic classes should in
any way diminish the centrality, power, and practical relevance of this
insight. None of the many formal demonstrations that any competently
trained assistant professor of economics can scribble on a scratch pad to
show conditions under which this government-imposed maximum price and that
government-mandated minimum wage might yield net welfare benefits has any
practical relevance.

Well, perhaps this ability does have the practical trait of allowing
assistant professors either to demonstrate their pedantry or to get an
audience with politicians seeking academic cover for interventions into
markets.

But in the real world, market-set prices and wages are the only practical
means to inform as well as to incite producers and consumers to adjust as
well as is humanly possible to the realities of resource availabilities, of
technical constraints, and of each others wants, expectations, and
abilities. Government restrictions on prices and wages inevitably spread
misinformation and create discoordination and discord. The fact that price
controls and minimum wages are often politically popular means only that
too many people are ignorant of vital economic principles.

Government officials, of course, pander to this economic ignorance.




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An Open Letter to Floridas Attorney General

Posted: 25 Mar 2020 08:26 PM PDT
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(Don Boudreaux)




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Ms. Ashley Moody, Attorney General

State of Florida

Tallahassee, FL

Ms. Moody:

You issued more than 40 subpoenas in response to so-called “price gouging.”
And you justified your actions with this written statement: “Floridians are
searching for essential products needed to stay safe and healthy during
this COVID-19 pandemic. Sadly, when they find these products for sale
online, they often discover that the price tag makes them unattainable.
This is unacceptable and unlawful.”

Your economics is mistaken: the price tag about which you complain is what
prevents these products from being “unattainable.”

The high prices that you aim to push lower entice suppliers to exert the
extra efforts necessary to ramp up production of such products and to speed
them to market. These high prices also encourage consumers to use these
products more prudently. Your efforts to push these prices lower,
therefore, will ensure that such products very soon become “unattainable.”

Products available for sale at unusually high prices are obtainable, for
they actually are for sale (if only at these high prices). In contrast,
products unavailable for sale at ‘normal’ prices are not actually for sale;
they are utterly unobtainable – which means that their prices then are
infinite.

If you truly wish to ensure maximum access of Floridians to the goods and
services that they seek, cease and desist from interfering with market
prices.

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




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Bonus Quotation of the Day

Posted: 25 Mar 2020 12:38 PM PDT
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(Don Boudreaux)




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is Mark Twain’s response to someone who asked him how he could be friends
with Standard Oil vice-president Henry H. Rogers, whose immense fortune was
falsely believed simply because it was chiefly earned as a result of
Rogers’ work at Standard Oil to be tainted:

His money is tainted, it taint mine and it taint yours.

DBx: It’s a damn shame that this civilized respect for others’ property is
today not more widespread. Rather than, like Samuel Clemens, respect and
not envy other people’s unusually great material prosperity, today
Americans read books, articles, and columns by Ivy League credentialed
academics that actively encourage envy and covetousness of that which one
hasn’t earned. And too many Americans cast ballots for politicians who
solemnly promise to pillage the earnings of peaceful people.

This institutionalized envy and pillage is called Progressive. Measuring
differences in monetary incomes and wealth, and explaining how the
god-state will redistribute it all, seems oh-so advanced and scientific.
Indeed, many people convince themselves that such redistribution is
positively humane. Or so I gather it appears to many.

Well.

This attitude from top to bottom and from back to front, in full, disgusts
me. And it should disgust every civilized human being.




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Dont Bail Out the Airlines

Posted: 25 Mar 2020 10:18 AM PDT
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(Don Boudreaux)




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Two of my Mercatus Center colleagues the intrepid Veronique de Rugy, along
with Gary Leff make the case against a government bailout of U.S.-based
commercial airlines. Here are two slices:

When the federal government bails out an industry, it shifts resources away
from nonsubsidized industries to the subsidized one. Because politics
drives the bailout decision, this shifting of resources is done largely
independently of the merit of the industry or of its claims of special
distress. If it were not for the government action, the resources used in
bailouts would be directed naturally by the market to other, more
productive uses. So while it is easy to see the companies and the jobs that
are today saved by bailing out the airlines, we don’t know what goods and
services are thereby not produced and consumed because of the bailout, what
non-airline companies don’t survive because of the bailout, and what jobs
aren’t created and sustained in nonsubsidized industries.

The history of bailouts also suggests that they prop up weak firms long
enough to make their dysfunctions worse, thus requiring further
intervention in the long run. Economist Bill Shughart, for instance, looked
at the history of bank bailouts in the United States and found that

the record of government bailouts of private financial institutions in the
1930s, of Continental Illinois Bank in 1984 (which cost $8 billion) and of
the entire U.S. savings & loan industry in the late 1980s and early 1990s
(which cost $125 billion) teaches that emergency loans keep weak
institutions alive just long enough for their problems to increase.
Bailouts encourage more risk-taking and eliminate the freedom to fail that
is just as essential to a free-market economy as the freedom to succeed.

..

No one should be surprised that the airline industry was the first to ask
for a government bailout, considering its long history as a
government-protected industry. Today, despite “deregulation” (which largely
means that the government no longer tells airlines where they are permitted
to fly and how much they should charge), airlines remain intricately
intertwined with government as a means of subsidy and protection from
competition.

A bailout of airlines funnels taxpayer money to private airline investors
and creditors, and it is not necessary to prevent an economic contagion.
Many large US airlines have demonstrated an ability to successfully fly
through bankruptcy. And bailing out airlines is an inefficient way to
protect workers because it focuses on a single industry’s employees, and
only the most visible of those workers, while ignoring the many
airline-industry contractors who have already lost their jobs and won’t
have work in times of reduced demand.

While airlines should not receive a bailout as a matter of public policy,
if politics dictates one, then the process should not become a grab bag of
interests and preferred policy prescriptions stapled on in haste. Such
bailout packages risk doing long-term damage to the industry that the
bailout is trying to save.




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Some Links

Posted: 25 Mar 2020 07:37 AM PDT
[link removed]

(Don Boudreaux)




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Notre Dame University law professor Stephen Smith (a fellow graduate with
me of UVA Laws class of 1992) busts the mythical claim that the United
States has no abnormally and unnecessarily high rate of incarceration.
Heres his well-grounded conclusion:

We would be much better off as a society—both safer and truer to our
libertarian ideals—if we reserved prisons and jails exclusively for our
most dangerous and most incorrigible criminals, made serious efforts to
rehabilitate instead of merely warehouse inmates, and relied on
less-invasive means to address other social problems.

Also helping to bust the myth that incarceration rates in the U.S. arent
too high by any reasonable standard is Clark Neily.

Ben Zycher isnt impressed with House Republicans proposals for climate
policy.

Personally what I fear the most is the way in which people will respond, at
the end of the emergency, to the major economic wreckage we will have to
deal with. Lots of observers tend to assume that the virus has damaged
populism, as now demagogues (including Trump) were forced to pick “experts”
who are at the helm of our countries. But interventions validated by
experts may backfire too. We may end up with a society which is less
dynamic, more fearful, and more dependent on government than ever so
writes the ever-wise Alberto Mingardi.

Writing in the Wall Street Journal, Stanford University medical professors
Eran Bendavid and Jay Bhattacharya make the case that COVID-19 is likely
much less lethal than is now commonly supposed. Heres their conclusion:

A universal quarantine may not be worth the costs it imposes on the
economy, community and individual mental and physical health. We should
undertake immediate steps to evaluate the empirical basis of the current
lockdowns.




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