The Latest from Cafe Hayek

(Don Boudreaux)

Tweet

… is from page 172 of my late Nobel-laureate colleague Jim Buchanan’s 1987 paper “Man and the State,” as this paper is reprinted in James M. Buchanan, Federalism, Liberty, and Law (2001), which is volume 18 of the Collected Works of James M. Buchanan:

Failure or success has too often been measured in terms of the standard economists’ criterion of efficiency, the ability to get goods and services produced and distributed, to add to the wealth of nations. Markets may fail against the efficiency standard, even in some relative sense. But even in failure markets allow persons to retain exit options without which liberty cannot be secured.

DBx: The important point that Buchanan makes here has several implications, two of which are:

– To the extent that human beings value liberty as an end in itself – that is, apart from whatever instrumental value liberty has for increasing our material prosperity or even our happiness – the decline in liberty should be entered on the cost side of any cost-benefit analysis of government intervention. To leave it off – to fail to account the loss of liberty as a ‘cost’ – is unscientific if and to the extent that any individual values liberty. The fact that this cost is especially difficult to render in monetary terms doesn’t justify excluding it from cost-benefit calculations.

– When government intervenes to correct real or merely alleged market failures, it typically – as Buchanan notes – blocks off exit options. The Pigouvian tax must be paid. The toilets must use no more than X amount of water per flush. Plastic straws may no longer be offered for sale. Yet to block off exit options is to block off options that might have been used by entrepreneurs to devise better ‘solutions’ to the market failures than those imposed by government. The loss of the prospect of these better ‘solutions’ is also a cost of government intervention, one admittedly difficult to see and practically impossible to quantify. Yet who can deny that it’s real? (This cost of intervention would be nonexistent only if the state really were godlike.)

(Don Boudreaux)

Tweet

… is from page 75 of the original edition of Lee Francis Lybarger’s 1914 book, The Tariff (original emphases):

If you would understand the Motives and Philosophy of Protection, you must realize that it is simply a conflict between the Producer and Consumer. In other words, it is an effort on the part of the producer to secure by law a higher price from the consumer than he is able to obtain in the open market. The Producer is against an open market and in favor of a closed market. Therefore the Tariff causes an increase of price wholly in the interest of the Producer and at the expense of the Consumer. What it gives to one it must take from the other.

DBx: Yes.

Pedants will pounce! They’ll declare that some of the costs of tariffs are typically borne by foreign suppliers in the form of lost profits on foregone export sales. This declaration is true. But it’s also irrelevant.

Because the very purpose of a protective tariff is to artificially divert sales from imports to domestically produced goods and services sold in competition with imports, a protective tariff has its intended effect of so increasing these domestic sales only to the extent that the prices confronted by domestic consumers rise. If and insofar as foreign suppliers absorb – “pay” – the cost of the tariff, price hikes in the domestic market are lower than they would otherwise be and domestic producers who compete against those foreign suppliers aren’t helped.

In the extreme case, in which foreign suppliers absorb the entire cost of the tariff, the prices of imports don’t rise at all. As a result, no sales are diverted from imports to domestic sellers. But, obviously, such an outcome is not the one sought by industry lobbyists who plead for the protection of tariffs. Such lobbyists – and their principals, as well as the politicians who heed their pleas – want to harm domestic consumers by making them pay higher prices. That is the goal.

Every protective tariffs is by its very nature an attack by agents of particular domestic producers against domestic consumers. It is an attack no less real, no less venal, and no less unjustified – economically and ethically – than would be a seller’s threat to shoot out the brains of customers who refuse to pay higher prices for that seller’s offerings.

And apologists for protectionists are apologists for predators. Period.

(Don Boudreaux)

Tweet

My intrepid Mercatus Center colleague Veronique de Rugy gives credit where credit is due – in this case to the Trump administration for its wise roll-back of an Obama-era labor policy

John O. McGinnis exposes the appalling ideology and bias of the New York Times.

Have you ever heard of the genuine hero Wilson Greatbatch?

Stuart Anderson gets the language right about travel bans.

Kevin Williamson has fun revealing the Everestian economic ignorance now on the loose in Sacramento.

Here’s a deep and important insight from Bryan Caplan about economists’ careless use of market-failure arguments (and economists’ inexcusable disregard of public choice).

My GMU Econ and Mercatus Center colleague Pete Boettke writes about the four pillars of economic wisdom. A slice:

Economics brings truth and the light to the darkness, and pierces through the fog to make sense of all human endeavors, whether in pursuit of the highest ideals or the basis of crass motives.  If you are being taught economics by Gordon Tullock, or for that matter Pete Leeson (The Invisible Hook and more recently WTF), be prepared to be shocked out of your comfortable complacency and instead learn about the logic and underlying governing dynamics of the world around you.