… is from page 55 of Armen Alchian’s and William Allen’s Universal Economics (2018; Jerry Jordan, ed.); this volume is an updated version of Alchian’s and Allen’s magnificent earlier textbook, University Economics:
It is often argued that intermediaries like wholesalers, retailers, sales agents, and advertisers exploit the ignorance of customers. That is true in the same way a teacher exploits the ignorance of students, doctors exploit the ignorance of patients, and authors the ignorance of readers. Intermediaries exist (survive) because they reduce the costs of exchange.
Here’s a letter to a sympathetic patron of Cafe Hayek:
Mr. Fulton:
Thanks for your e-mail.
I did indeed read in today’s Wall Street Journal about the decline in U.S. manufacturing output, and I agree that this decline likely has much to do with Trump’s war on Americans who trade with foreigners.
But I’ll refrain from blogging on it. There’s a larger monster that lurks, one that I don’t wish to feed. Indeed, I want to do my part to slay this beast. This larger monster is the too-frequent misuse of economic statistics to stir up opposition to free trade.
Ultimately it matters not one whit how many things conventionally classified as “manufacturing output” are produced in the U.S. What ultimately matters is how many goods and services we Americans are able to acquire for our consumption, with much of this acquisition coming through peaceful commerce with foreigners.
If we produce nothing but outputs classified as services – as, by the way, the great majority have done for decades – and in exchange for our services acquire through trade whatever manufactured goods we chose, there’s no problem whatsoever. Yet this situation would be trumpeted loudly as evidence that the American economy is in decline and, as such, suffers a “problem” that must be “solved” with tariffs and other government interventions.
But any such conclusion is ridiculous. As far as economic policy goes, statistics on manufacturing output are no more relevant than are statistics on yellow-things output, on curvy-edged-things output, or on the output of people who are left-handed, have green eyes, and were born east of the Mississippi.
Earlier this week I was with Deirdre McCloskey and asked her why public resistance to the case for free trade seems today to be no weaker than it was when Adam Smith wrote An Inquiry Into the Nature and Causes of the Wealth of Nations. Deirdre immediately and wisely pointed to the misuse of economic statistics.
I don’t deny that much value is to be had from the careful gathering and study of some economic statistics. But I believe also that a great bulk of them – especially those that bear on international trade – unleash far more smoke, confusion, and devilment than light, insight, and sound policy.
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
The supremely talented, and learned, filmmaker John Papola does it again, this time with a rap video pitting Ludwig von Mises against Karl Marx. Enjoy! And learn.
In the hysteria of an American political election season, the worst thing that could happen would be if politicians and pundits now propose to legislate or regulate the response by the NBA or the Houston Rockets to the Chinese government. With all the chatter about the Chinese attempting to abridge the freedom of speech of Americans through the weapon of financial intimidation if they want to do business in China, it then would be the U.S. government dictating what those sports teams and their NBA representatives could say and agree to in trying to salvage their growing business in China.
Unfortunately, however, [Beto] O’Rourke, [Elizabeth] Warren and [NBA Commissioner Adam] Silver demonstrate the tendency of too many progressives to cut constitutional corners, to despise and bully adversaries, and to practice theatrical but selective indignation about attacks on fundamental American principles, some of which they themselves traduce. Just what we did not need in our dispiriting civic life — additional evidence that there really is no such thing as rock bottom.
In the larger context, the opposition to conventional energy that is the core of the GND is fundamentally anti-human, because one major implication of the opposition to fossil fuels is an aversion to increases in the value of human capital and other parameters that have the effect of increasing the demand for conventional energy. Moreover, the authoritarian implications of the GND are serious, however unnoticed.
… is from page 136 of GMU Econ alum Edward Stringham’s important 2015 Oxford University Press book, Private Governance:
The most personal form of private governance is individual self-governance or internal moral constraints. Ignored by strict neoclassical economists, the importance of individual self-governance or internal moral constraints has been discussed by writers from Adam Smith to Immanuel Kant and Leo Tolstoy. Internal moral constraints are rules that people choose to follow even if other people do not impose them; these constraints are chosen from within. Manners, politeness, honesty, and trustworthiness are common examples of internal constraints that people commonly adopt independent of external rules.
First, the narrowing of the focus provides results that are not that surprising: more capital makes small firms more productive; better food increases schooling performance; access to vaccines improve health; better teachers mean better test scores for students. These are highly unsurprising results even if the measure of the effects is incredibly accurate. Some of their findings were, at first sight, more surprising. For example, Banerjee and Duflo (along with Rachel Glennerster) found that a program to deal with nurse absenteeism in Indian public hospitals that had positive effects initially was ultimately undermined by local politicians and bureaucrats. However, for scholars familiar with the insights from public choice theory and the economics of bureaucracy, the results are unsurprising. They illustrate a point they have been making for a long time regarding the need to consider public sector players to be just as self-interested as everybody else.
Many other economists are asking that question, and coming up with big answers. Michael A. Clemens, an economist at the Center for Global Development, has written that removing or substantially reducing barriers to immigration would create tens of trillions of dollars of additional income for people from poor countries, while also benefiting the rich countries to which they move. How about a Nobel Prize to Mr. Clemens for working on a big question?
It is often argued that intermediaries like wholesalers, retailers, sales agents, and advertisers exploit the ignorance of customers. That is true in the same way a teacher exploits the ignorance of students, doctors exploit the ignorance of patients, and authors the ignorance of readers. Intermediaries exist (survive) because they reduce the costs of exchange.
The most personal form of private governance is individual self-governance or internal moral constraints. Ignored by strict neoclassical economists, the importance of individual self-governance or internal moral constraints has been discussed by writers from Adam Smith to Immanuel Kant and Leo Tolstoy. Internal moral constraints are rules that people choose to follow even if other people do not impose them; these constraints are chosen from within. Manners, politeness, honesty, and trustworthiness are common examples of internal constraints that people commonly adopt independent of external rules.