“Public spending is always a substitute for private spending, and that consequently it may well support one worker in place of another, but adds nothing to the lot of the working class as a whole.”
-Frederic Bastiat, Selected Essays on Political Economy, p. 16 (emphasis in original)
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Posted in Economics, Great Thinkers, Pith, Stimulus
Tagged bastiat, broken window fallacy, economic way of thinking, Economics, frederic bastiat, opportunity costs
Transitionland had a thoughtful response to my cri de coeur on Afghanistan yesterday. Among her recommendations for improving things:(1) Stop the air strikes that are killing civilians,
(2) Crack down on corrupt contractors to USAID,
(3) Stop supporting Afghan warlords who are homicidal and/or corrupt.So, after years of experimentation, we can now start applying these subtle, complex lessons:
(1) Don’t kill,
(2) Don’t steal,
(3) Don’t give aid to those who do.
Comments Off on Seems Obvious, Doesn’t It?
Posted in Development Economics, International, Pith
Tagged afghanistan, bill easterly, usaid, william easterly
Consumers have been buying a lot of tires made in China lately. Naturally, U.S.-based tire manufacturers are upset at their competitors’ success. Fortunately, there are two ways for the aggrieved American firms to ease their troubled minds:
1: Make better tires for less money. Give consumers a reason to buy American tires rather than Chinese. Compete, in other words.
2: Don’t compete. Too much hard work. Instead, persuade some politicians to place a 35 percent protective tariff on competitors’ tires. Price them out of the market. Then keep making the same old tires that people don’t want. If the tariff is large enough, you may even be able to raise your prices, even without raising quality.
This is a choice between raising the bar and lowering it. Unfortunately, U.S. tire firms and allied politicians have chosen to lower it. China, by putting up its own barriers to retaliate, is lowering the bar even further.
The really audacious part is that tire tariff supporters think they are really helping the economy. Raising that bar. Saving American jobs!
There is something very unsettling about the notion that an American job is intrinsically more valuable than a Chinese job. We are all human beings, are we not?
This is an ugly, ugly mindset. And it is one that politicians and tire companies have explicitly adopted. The burden is on them to explain why they think people who live in one country are more deserving of economic opportunity than people who live in another.
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Posted in Economics, International, Regulation of the Day, Trade
Tagged antidumping, china, higher prices for consumers, international trade, protectionism, regulation, Regulation of the Day, Trade
I am shocked — shocked — that $6 million of stimulus money went to a company accused of “overbilling, bribery of union officials and other alleged improprieties on several large New York projects.” Such lapses in oversight never happen with government spending projects!
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Posted in Political Animals, Stimulus
Tagged bribes, government, government spending, government waste, graft, non-competitive bidding, overbilling, spending, Stimulus, union corruption, unions
Teenage unemployment is 25.5% — an all-time high, and nearly triple the general unemployment rate.
Maybe the fact that the minimum wage has increased three years in a row has something to do with it. Why would an employer hire someone unless they produce at least what they’re paid?
A lot of younger people have little experience and no marketable skills. Such things take time to develop. Until they do, they will remain unattractive hires unless they can be paid what they’re worth. Minimum wage laws, of course, make that illegal in many cases.
Another case of good intentions gone awry.
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Posted in Economics, Price and Wage Controls
Tagged econ 101, Economics, economics 101, good intentions, jobs, minimum wage, price controls, regulations, teen unemployment, unemployment, wage controls
Bryan Caplan says there are only two ways for a monopoly to form: government protection, or being the best.
“If the firm has a monopoly because the government made competition illegal, the solution isn’t antitrust; it’s legalizing competition. If the firm has a monopoly because it’s the best, the solution isn’t antitrust; it’s a little freakin’ appreciation.”
One of the oddities of U.S. history is that Herbert Hoover is regarded as a free-market president. He grew federal spending by 52% in just four years. Engaged in massive deficit spending. Created the Federal Home Loan Bank. And the Reconstruction Finance Corporation. Signed the Smoot-Hawley tariffs into law. And the Agricultural Marketing Act. And so on. Free-market, he was not.
The Hoover myth is showing some cracks, fortunately. Where most civics textbooks would blame Hoover’s laissez-faire policies for the Great Depression, a new paper by UCLA’s Lee Ohanian fingers Hoover’s labor market interventions.
I’m personally convinced the Depression was more of a monetary phenomenon than a fiscal one. But Ohanian is surely right that Hoover’s dictating to companies what wages shall pay their workers was a net negative for the economy.
It’s certainly possible to blame Hoover’s policies for the Great Depression. Just not on the grounds that those policies were free-market. People shouldn’t have to read obscure academic journals to find that out.
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Posted in Business Cycles, Economics, Monetary Theory
Over at the Washington Examiner‘s Opinion Zone, I give nanotechnology a Schumpeterian treatment. In the long run, a competitive, cut-throat market process driven by innovation is better for consumers than if government were to fund and direct research:
A nanotech firm that lives mostly off of government grants lives a sheltered, more docile existence. It doesn’t need to come up with new products that save peoples’ lives, or make them better. They just have to be good at getting grants.
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Posted in Economics, Technology, The Market Process
Inertia Wins! 
Do Corporations Have Human Rights?
Intel’s defense in its EU antitrust case has taken the surprising line that the company’s human rights were violated. Over at Real Clear Markets, CEI colleague Hans Bader and I take a closer look. We conclude that Intel actually has a pretty good argument.
Corporations have human rights because doing so greatly reduces transaction costs: “suppose your company wants to buy some computer chips from Intel. You could have each shareholder sign the sales contract – good luck finding them all – or you could treat Intel as a person with the right to sign a contract, and the obligation to honor it. To deal with one person or millions? That is why corporations have legal standing as individuals.”
In short: no corporate rights, no modern economy. No exaggeration. There is a reason why legal conventions emerge as they do, even if they appear strange at first glance.
Iain Murray was kind enough to point out to me that the idea of corporate human rights has very deep roots. The 18th-century legal scholar William Blackstone, in his revered analysis of the English common law, wrote that corporations have the right “[T]o sue or be sued,, implead or be impleaded, grant or receive, by its corporate name, and do all other acts as persons may.”*
*William Blackstone, Commentaries on the Laws of England, Volume 1: Of the Rights of Persons, (Chicago: University of Chicago Press, 1979 [1765]), p. 463.
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Posted in Antitrust, Economics, Law, Publications
Tagged Antitrust, cei, coase, commentaries on the laws of england, contract, contract law, eu, hans bader, human rights, iain murray, intel, ronald coase, transaction costs, william blackstone