The Latest from Cafe Hayek

(Don Boudreaux)

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… is this March 21st, 2020, tweet from Thomas Sowell:

It is so easy to be wrong – and to persist in being wrong – when the costs of being wrong are paid by others.

DBx: Indisputably true, both as a matter of logic and as a proposition that consistently succeeds at explaining a great deal of human history.

Note that Sowell’s point is general. Those who are convinced that today’s government-engineered lock-down of much economic activity is appropriate can nod their heads approvingly at the thought that those who are convinced of the opposite fail to account adequately for the costs that would be paid by others were this lock-down less draconian. Ditto the other way ’round: those opposed to this lock-down nod their heads approvingly at what they take to be Sowell’s explanation of why government officials seem now to be so glibly and irresponsibly imposing massive economic costs on hundreds of millions of strangers.

But whatever your position on the lock-down – whether you think it to be worth its gargantuan costs or not worth these costs – you cannot fail to recognize the deep dangers that lurk within any system that allows a handful of people to act in ways that impose massive costs on others.

My own sense is that the benefits of this lock-down are not worth their costs. (And, by the way, I do not reckon as costs only – or even chiefly – financial flows, such as lost profits, and the monetary values of foregone goods and services. Among the many kinds of costs of this lock-down are worse-than-otherwise health in the future, and the innumerable problems inevitably to be created by governments with yet more discretionary powers.) Yet even if I am mistaken – and perhaps I am (I say sincerely) – we should all be deeply suspicious of discretionary power exercised by government officials – power the costs of the exercise of which are borne almost wholly by third parties.

The grade-school fiction – one embraced also by many PhD-sporting intellectuals – is that majority-rule democracy is sufficient to ensure that all decisions made by government officials in democratic nations are without any such negative externalities, that is, without any undue ill-consequences imposed on third-parties. “We the people” make these decisions ourselves through our elected representatives and the assistants that they hire to help them. Problem avoided!

Anyone who believes this above account of democracy is too naive for words. He or she is wholly ignorant of even the most basic principles of public-choice economics – an ignorance, note, that itself imposes negative consequences on third-parties by encouraging the naive to impose the costs of political superstitions and of the resulting dangerous policy-making regimes on their fellow citizens. Such people should read Buchanan, Tullock, Downs, Olson, Schumpeter, Arrow, Stigler, Wagner, Niskanen, Higgs, Holcombe, Yandle, Brennan & Lomasky, Caplan, Lee, Simmons, Munger, and Achen & Bartels, among others. Oh, and do read also Sowell’s own great magnum opus.

(Don Boudreaux)

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Here’s a letter to the Washington Post:

Editor

These days we are lectured incessantly about the importance of deferring to experts. And those persons amongst us – including members of Congress, state governors, and even the President of the United States – who don’t fully follow experts’ prescriptions are solemnly denounced as fools who irresponsibly endanger the public.

Without opining on the merits of epidemiologists’ expert assessments regarding COVID-19, I’m compelled to ask why there is no deference to the expert assessments of us economists. Why, for example, is economists’ long-standing consensus in support of free trade – indeed, strong support for unilateral free trade – ignored? We hear no demands from the likes of politicians such as Sen. Chuck Schumer or pundits such as Dana Milbank that economists’ expert recommendations on trade policy be followed in full, no questions asked.

Likewise, it’s very difficult to find an economist who supports rent control. Yet this expert consensus against rent control is routinely ignored by the likes of New York City Mayor Bill de Blasio and presidential aspirant Bernie Sanders. Why? Where’s their respect for experts?

I emphatically reject the Progressive belief that society is an engineering project that can be scientifically guided by a government of the best and brightest toward some optimal condition. But I also believe that true experts can play a valuable role by informing the public and government officials of the likely consequences of different policies. And so given today’s clamor for deference to the expertise of epidemiologists, where’s the deference of pundits and politicians to the expertise of us economists on those policy matters on which we can fairly be said to have reached a consensus?

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

(Don Boudreaux)

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My intrepid Mercatus Center colleague Veronique de Rugy applauds the creativity and compassion on display in the private sector. A slice:

After what can only be described as a multilevel government failure that resulted in the United States having practically no coronavirus tests available for weeks after the onset of the pandemic, the private sector ramped up its production so much that we’re now testing 65,000 people every day. This number is bound to grow. The tests are a crucial component of making it through this crisis, and they’ll become even more accurate and deliver results faster as innovators do what they do best when they’re unhindered by silly or contradictory government regulations.

Vincent Geloso teaches us what Herbert Hoover inadvertently teaches us about reaction to COVID-19. A slice:

This bias in favor of draconian measures that avoid the stigma of the “do-nothing-Hoover” etiquette stems from the fact that these actions are observable. Even if they impose considerable costs to society at large or hurt the poorest most, they will be privileged over less easily observed but more efficient measures.

Wall Street Journal columnist Kimberly Strassel rightly laments the self-serving cronyism – the “big government contagion” – of government ‘relief’ efforts. A slice:

Government mostly “Cares” for government. Bills that hand out money are written by appropriators. And appropriators never miss an opportunity to expand departments, agencies, bureaus and commissions. A rough calculation suggests the single biggest recipient of taxpayer dollars in this legislation—far in excess of $600 billion—is government itself. This legislation may prove the biggest one-day expansion of government power ever.

And here’s Bruce Yandle on the massive relief bill from Washington.

David Henderson warns against being gullible about claims of scientific consensus. (A note: I’m neither an epidemiologist nor a physician. I remain open to a wide range of claims about plausible scenarios both of just how contagious is the coronavirus and of its lethality. But I am an economist who has spent his adult lifetime – now one that’s been quite long – observing governments. As Vincent Geloso argues in the piece linked above, we must all expect that most government officials will opt for worst-case scenarios and trumpet these as though these scenarios are the only ones that are legitimate. Further, we should all – although, alas, we won’t all – recognize the grave danger of the viral expansion of government power.)

I was recently interviewed by Dan Proft.

Hans Eicholz reviews the great Stephen Davies’s The Wealth Explosion.

(Don Boudreaux)

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… is from pages 262-263 of George Will’s excellent 2019 book, The Conservative Sensibility:

[Welfare] states presuppose economic dynamism sufficient to generate investments, job creation, corporate profits, and individuals’ incomes from which come tax revenues needed to fund entitlements. But welfare states produce in citizens an entitlement mentality and a low pain threshold. That mentality inflames appetites for more entitlements, broadly construed to include all government benefits and protections that contribute to welfare understood as material well-being, enhanced security, and enlarged leisure. The low pain threshold causes a recoil from the rigors, insecurities, and dislocations inherent in the creative destruction of dynamic capitalism. The recoil takes the form of protectionism, regulations, and other government-imposed inefficiencies that impede the economic growth that the welfare state requires.

DBx: Yes.

‘Redistribution’ requires the existence of something to be redistributed. And because cash, as such, can’t be used as food, clothing, shelter, or for any other human purposes beyond kindling for fires or flooring for the cages of pet hamsters, meaningful ‘redistribution’ requires the existence of real goods and services.

The existence of real goods and services, in turn, requires production. And production – to be worthy of its name – must be of real goods and services that are useful to human beings. ‘Producing’ chocolate-covered pine cones is, in economic reality, to produce nothing; it is instead to waste human labor and chocolate.

To ensure that toiling human minds and hands actually produce, rather than waste, requires that the toiling hands and minds have knowledge not only of what people want, but of what people want most – how people rank their consumption possibilities. To toil to produce goods and services ranked low at the cost of not producing goods and services ranked more highly is waste almost as bad as toiling to produce goods and services not wanted at all.

In short, toiling, in order not to be wasteful, must be guided by knowledge of what people wish most to consume. To the extent that toiling is not so guided, it is wasteful.

The best means that humanity has stumbled upon for both informing people what to produce and giving people appropriate incentive to produce what ‘should’ be produced is the competitive market system and the money prices that it generates. (And, yes, the market – no less than language – was indeed stumbled upon and crafted largely by evolution; it was not designed and consciously implemented.) Ironically, perhaps the biggest flaw in this system is the fact that it works so marvelously well. The material fruits that it generates are so magnificent in form and volume that they appear to those of us blessed to live in market-oriented societies as being automatic, a feature of reality like oxygen or rain. Seeming so, the material fruits of markets are far too seldom explored to discover their actual origins.

The resulting ignorance of the operation and benefits of markets is rather like a virus that is potentially lethal to the very markets which do too little to dispel this ignorance.