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… is from page 181 of the late Richard Timberlake’s 1998 paper “Gold Standard Policy and Limited Government,” which is chapter 5 of Money and the Nation State (Kevin Dowd & Richard H. Timberlake, Jr., eds., 1998):

Commodity money evolved as naturally and as spontaneously as the wheel, the screw, the hydraulic press, the inclined plane, a national language, and common law. Its emergence was economic and natural, not political and contrived.

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The Wall Street Journal‘s Editorial Board decries the defining-down of free speech on campus. A slice:

Columbia’s anti-Israel encampment and protests have included physical intimidation of Jewish students and antisemitic declarations. In October 2023, 100 Columbia professors signed a letter defending students who had flooded the campus in support of Hamas’s “military action” on Oct. 7. Columbia has every right to restrict speech or actions that threaten other students.

Protesters also don’t have a “right” to assemble on school property to disrupt the functioning of the university or intimidate students on the way to class. Even at a public university, all these rules would constitute reasonable restrictions on the time, place and manner of speech.

Luther Ray Abel is right to harshly criticize the “ingrates at the ivy-laden gates.” A slice:

For all the disgust I feel for the views of these students — students who are wrong on the facts about Israel as well as wicked in their treatment of their Jewish peers who have nothing to do with that country a world away — I can’t help but pity them. The adults failed these students. No one loved these young people enough to tell them that they were making fools of themselves and to shut up, get back inside, and go to class. Worse, when a few adults finally did try to establish order and enforce consequences, the faculty rushed in to defend and coddle the agitators.

GMU Econ alum Jon Murphy explains why plagiarism matters – and, thus, why it must be fought.

Phil Gramm and Mike Solon reveal who pays corporate taxes. A slice:

In his call for Congress to repeal the 2017 tax cuts and increase corporate tax rates, President Biden asked: “Are we going to continue with an economy where the overwhelming share of the benefits go to big corporations and the very wealthy?” Rep. Richard Neal, ranking Democrat on the House Ways and Means Committee, said that extending the tax cuts will do nothing but fill “the pockets of venture capitalists and some business owners.” President Obama’s top economist, Austan Goolsbee, said that debates over who pays the corporate tax are “an argument about whether making corporations pay more income taxes would trickle down into lower workers’ wages.”

But as John Adams once said, facts are stubborn things. Seven years into the weakest recovery in postwar history, as the economy slumped toward a recession, the 2017 tax cuts and the Trump administration’s regulatory relief sent real median household income soaring by $5,220 in 2019. That’s 49% higher than the previous highest annual gain in 2015 and 11 times the average percentage gain over the previous 50 years. Real median income rose more in inflation-adjusted dollars in 2019 alone than during the entire Obama recovery from 2009-16. The poverty level plunged at the fastest rate since 1966, to the lowest level since the Census Bureau started collecting the data in 1959.

The lowest income quintile saw its average real income rise by 9.4% in 2019, the year after the tax cut took effect. The second quintile (7.4%), middle quintile (6.9%) and fourth quintile (7.8%) all experienced the largest annual income growth in more than a half-century, and the top quintile (7.2%) had its second-highest income growth. The poverty rate in 2019 was the lowest ever recorded for every category, including individuals, families, unmarried women, blacks, Hispanics and children.

Paul Schwennesen reports that the rich – and everyone else – are getting richer. A slice:

Percy Bysshe Shelley (whose wife Mary famously penned Frankenstein) is credited with first coining the aphorism “the rich get richer, the poor get poorer,” which was itself a riff on the Biblical parable of the talents in Matthew 25:29 which made much the same point. Leading a tumultuous life plagued by debts to many of his close ties within the English gentry, Shelley’s jaundiced view may say more about him than the situation at large in Georgian England. Indeed, by the mid-1800s, England was well on its way toward the phenomenal increases in wealth brought about by the Industrial Revolution and trade liberalization.

Economic historian R. M. Hartwell writes that, based on a number of factors, not only was average per capita income on the rise but that “the real wages of the majority of English workers were rising in the years 1800-1850.” The rich, in other words, were certainly getting richer, but so indeed were the poor. The widely held perception, however—a perception that helped popularize Shelley’s quip—was not so neatly aligned with facts. Large numbers of the working poor felt themselves shabbily treated in the unequal distribution of gains, and early socialists leapt to condemn what ought have to been more soberly recognized as a collective win.

John O. McGinnis sums up the state. A slice:

We know from studies that bureaucrats are very largely left-liberal Democrats. The bureaucracy holds views about the common good that are uncommon and distinctly uncongenial to the New Right.

Empowering the government to regulate big tech, for instance, may actually make it harder for conservatives to get out unorthodox views on social media. One reason that tech companies engage in content moderation at the behest of government is fear that government power will be used against them in the future if they do not comply. And the bureaucrats who control the day-to-day operation of that power are hostile to the New Right.

It is true that the bureaucracy is subject to political control, but that control is imperfect as political appointees must compromise with the bureaucracy to get things done. And thus, the bureaucracy has an enduring influence, even when (as will not always be the case in a two-party system) the President is sympathetic to the New Right.

Gary Galles cautions against underestimating the creative power of people operating in free markets.

My Mercatus Center colleague Tracy Miller explains that the DOJ’s antitrust persecution of Apple is bad for consumers. A slice:

First, we must understand the environment of economic competition that’s the background for this case and the players involved. Market competition is a dynamic process whereby firms seek to gain market share by continued efforts to improve the goods and services they offer, while keeping costs and prices down. If a firm does this well, its market share will likely increase, and the number of competitors may decrease. In technology platform markets, providing consumers with low-priced and high-quality goods and services that are continually being improved by innovation is best achieved by developing and offering a system of complementary products. Firms choose a business model based on what they discover about consumer preferences, often competing by emphasizing different mixes of benefits because of heterogeneity in consumer preferences. Some consumers prefer the more open ecosystem offered by Android phones, while other prefer the more closed iOS ecosystem. Consumers make tradeoffs between price, quality and other attributes such as data privacy.

John Stossel is correct: capitalism reduces racism.

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… is from page 227 of Deirdre McCloskey’s insightful 2024 paper “The Labor Theory of Value Is Mistaken,” which is chapter 18 in The War on Prices: How Popular Misconceptions About Inflation, Prices, and Value Create Bad Policy (Ryan A. Bourne, ed., 2024):

But, shockingly, against all this apparent common sense and ethical appeal, the labor theory of value is wholly mistaken as a matter of economics. It’s deeply screwy, scientifically, and evil in its ethics.

DBx: Oren Cass and other advocates of industrial policy that’s meant to sacrifice the welfare of individuals as spenders of the incomes they earn in order to protect (or resurrect) particular employment options and arrangements are proponents of the labor theory of value. Value, in the view of proponents of such industrial policy, inheres in the labor itself rather than in the output of the labor.

While this notion might appeal to clever sophomores, upon mature investigation it’s revealed as being – as Deirdre accurately describes it – screwy. How do we know it’s screwy? Easy! The very fact that Cass & Co. correctly understand that the only way to entice workers to hold the particular jobs industrial-policy proponents wish to protect (or to resurrect) is to have government coerce consumers to purchase the outputs of these particular workers.

Cass & Co. will protest, insisting that they, with their lawyerly training, realize what mere economists don’t – namely, that the market has no good way to reveal the actual, full value to workers themselves of holding particular kinds of jobs. But economists actually know more – much more – economics than do industrial-policy advocates. Economists know that the market does have a very good mechanism for revealing this value. It’s called a “labor market.” By refusing to work at wages low enough to maintain (or to resurrect) the particular kinds of jobs fancied by Oren Cass and other such proponents of industrial policy, workers themselves reveal that the value to them of these jobs is too low to justify maintaining (or resurrecting) these jobs. Workers, therefore, will hold such jobs only if other people are coerced into subsidizing them – thus the evilness of the labor theory of value in operation.

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Here’s a letter to the Wall Street Journal:

Editor:

Attempting to defend her agency’s ban on noncompete clauses, FTC Chairwoman Lina Khan proclaims that “robbing people of their economic liberty also robs them of all sorts of other freedoms” (“FTC Bans Noncompete Clauses That Restrict Job Switching,” April 23). Ms. Khan has mastered Newspeak. Noncompete clauses are contractual terms negotiated between employers and employees. Employers who offer noncompete clauses no more ‘rob’ employees who agree to these clauses of their economic liberties than do employees who offer, or agree to, these clauses rob employers who agree to these clauses of their liberties. As is true of all contracts, each party gives a concession to the other and receives in return a benefit that each believes to be worth the bargain.

Ms. Khan nevertheless is correct that robbing people of their economic liberties is a grievous offense. But in this case the chief bandit is none other than Ms. Khan, for it is she who is robbing employers and employees of the liberty to structure their economic affairs as they see fit.

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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… is from page 2 of Douglas Irwin’s excellent 1996 monograph Three Simple Principles of Trade Policy:

Exports and imports are inherently interdependent, and any policy that reduces one will also reduce the other.

DBx: Doug here relates an elementary truth of economics – yet a truth overwhelmingly ignored by pundits and politicians. How many are the pundits and politicians in America who assert that the U.S. trade deficit can be reduced or even eliminated with higher tariffs and other barriers on American imports more onerous restrictions on Americans seeking to purchase foreign-made goods? How many are the pundits and politicians who support the ExIm Bank because they think it to be a means of increasing America’s exports relative to her imports?

When it comes to trade, most politicking and punditry (outside of too few publications such as the Wall Street Journal and Reason) is the intellectual equivalent of Cliff Clavin offering to Sam Malone and Norm Peterson his informed opinion on string theory. If most of today’s politicians and pundits who hold forth on questions of trade had any idea of just how silly and uninformed their ‘analyses’ are, they would be deeply embarrassed to be on record uttering, muttering, and writing what they utter, mutter, and write.

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The Editorial Board of the Wall Street Journal decries the ‘progressive’ monoculture on (especially ‘elite’) U.S. campuses – a monoculture that today is increasingly openly antisemitic. Two slices:

Many protesters on and near campus wear masks or kaffiyehs to disguise their identities. Students have to walk through a gauntlet to get to class. The protesters carry banners calling to “Honor the Martyrs of Palestine” and a sign pointing to pro-Israel counterprotesters as “al-Qasam’s next targets.” Al-Qassam is the military wing of Hamas. That’s a call to kill Jews.

…..

This crisis in liberal education has been decades in the making. These schools have sown the intolerance their students are demonstrating by putting identity and left-wing politics above the free exchange of ideas. A progressive faculty monoculture has fueled divisive narratives blaming the Middle East’s ills on colonialism and imperialism.

Antisemitism has too often been tolerated within Near Eastern Studies departments. On Oct. 8, 2023, Columbia professor Joseph Massad praised the “awesome” scenes of the Oct. 7 massacre “witnessed by millions of jubilant Arabs.” In 2018 Columbia professor Hamid Dabashi posted on Twitter (now X) that “Every dirty treacherous ugly and pernicious act happening in the world” could soon be traced to “the ugly name of Israel.”

The liberal elites who run these institutions seem to lack the moral self-confidence to stand up to these student bullies. College presidents have to take charge, restore order and protect Jewish students, or the trustees should fire them and find someone who will.

GMU Econ alum Alex Salter’s letter in today’s Wall Street Journal is spot-on:

Mr. Biden argues military aid to Israel and Ukraine would boost the U.S. economy by “buying American products made by American workers.” But using up resources won’t make us richer—especially when they’re spent on means of destruction.

Economists call this the Broken Window Fallacy. Physical destruction appears economically creative, since mobilizing the resources to repair the damage creates jobs and employment. This ignores opportunity cost: but for the destruction, there would be a different but no less valuable flow of economic activity.

The fallacy is even more forceful in the case of military spending. Now we’re consuming resources with the goal of destroying even more resources. If you’ve ever heard that World War II got us out of the Great Depression, you’ve encountered the fallacy in its most dangerous form.

Supporting Israel and Ukraine may be in the national interest. If so, it won’t be because of economics. The president’s proposals could make us freer. But they definitely won’t make us wealthier.

Prof. Alexander William Salter
Texas Tech, Rawls College of Business
Lubbock, Texas

“Why turn off lights for Earth Day when California is already growing dark?”

In the video here, Johan Norberg makes the case that the best economic system for the earth (and for humanity) is capitalism.

J.D. Tuccille writes that “Julian Simon was right: Ingenuity leads to abundance.”

Arnold Kling reflects on his excellent 2004 book, Learning Economics.

My Mercatus Center colleague Alden Abbott explains that “blocking the Nippon Steel acquisition [of U.S. Steel] through CFIUS would have serious negative implications for U.S. international economic policy.” A slice:

Moreover, the U.S. steel industry is very unconcentrated, with U.S. Steel holding a market share of just under 7% in revenue terms. The largest U.S. producer, Nucor, holds a roughly 13% share. What’s more, no U.S. company is among the world’s 10 largest crude steelmakers (seven of the 10 are Chinese). Nippon Steel is the third or fourth largest.

Because of U.S. tariffs and other company contractual commitments, only a very small portion of Nippon’s current market share can be attributed to the U.S. market. (Nippon is essentially absorbing U.S. Steel’s market share.) In essence, the Nippon Steel acquisition would have, at best, a minor (if not zero) effect on market concentration in the unconcentrated American market.

Based on that information, it is hard to envision what antitrust risks or theories of harm based on “increased concentration” (a major concern of the Biden administration) could be concocted.

Mike Munger is correct: “Competition can’t be perfect.” A slice:

If you’ve ever taken an intro economics class, you’ve heard of the idiotic concept of “perfect competition.” The idea is that no firm has any market power, and is forced to accept the “competitive” price. One sign that competition is “perfect” in this way is zero profits. Since if something is perfect, it must be desirable, a new generation of attorneys is attempting a wholesale takeover of antitrust enforcement. They are being led by advocates such as Lina Khan of the FTC, and Timothy Wu of Columbia Law School, who is hailed by some as the “architect” of the Biden administration’s competition policy.

GMU Econ alum Dominic Pino recommends Jay Nordlinger’s essay on the Nobel-laureate economist Vernon Smith.

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… is from pages 342-343 of A. James Meigs’s Fall 1988 Cato Journal paper, “Dollars and Deficits: Substituting False for Real Problems,” as this paper appears as chapter 14 of Dollars, Deficits, & Trade (James A. Dorn and William A. Niskanen, eds., 1989):

Advocates of reducing the U.S. trade deficit should realize that doing so would also reduce the inflow of capital from abroad. Do we really want to do that? If so, why? U.S. governors and mayors who now go to Europe and Japan with delegations of boosters to attract investors may not have heard that they might be boosting the trade deficit by encouraging capital inflows.

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… is a statement made by my Nobel-laureate emeritus colleague Vernon Smith when he was interviewed recently by National Review‘s Jay Nordlinger:

The reason you’re producing something is that someone wants to consume it, and if there’s no consumption, there’s no production.

DBx: Indeed. And so when advocates of tariffs and industrial policy assert that they want to elevate production over consumption, they are talking gibberish, as the former occurs only insofar as it enables the latter.

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Continuing to archive here at Cafe Hayek as many as possible of my writings….

In my February 25th, 2014, column for the Pittsburgh Tribune-Review I write about my being invited to join the White House Council of Economic Advisors. You can read my column in full beneath the fold.

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