In “The Elite Needs to Give Up Its G.D.P. Fetish” (August 28) Oren Cass overstates the importance that economists attach to material goods and services as he understates the importance that workers attach to these things.
No competent economist believes that humans do or should care only, or even mainly, about outputs exchanged in markets. But economists do recognize that better access to such outputs enhances individuals’ abilities to attain non-material goals. Community involvement, education, art, and the leisure necessary to care for family and friends are prime examples of non-material ends made more accessible as people’s material desires are better satisfied.
Still, ordinary people obviously care more than Cass realizes about satisfying material desires. By agreeing to take pay cuts – that is, by agreeing to reduce their access to outputs exchanged in markets – workers facing competition from imports or technology could thereby keep their jobs and, in turn, retain the specific community connections that Cass says workers value so highly. Yet workers generally refuse to take pay cuts. They thus reveal that they value continued access to material goods and services more highly than they value the non-material experiences and community connections that they sacrifice by refusing to take lower pay.
The protectionism that Cass proposes can, at best, protect only some Americans from having to make this trade-off. And it can do so only by compelling other Americans – those who pay higher prices for consumer goods and those denied the better jobs that would otherwise be created – to suffer reduced access to material goods and services.
Avoiding such an injustice by keeping trade free is a non-material value that I and other classical liberals cherish and wish would receive greater respect from politicians and pundits.
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 above letter is already too long (for a letter), yet it still ignores several other fallacies found in Cass’s essay.
Past increases in the federal minimum wage always resulted in many more people pushed into jobs paying below minimum and usually losing whatever benefits they previously enjoyed. Far from being an effective and humane way to raise the lowest incomes the unintended consequence of increasing the federal minimum wage has, in fact, been to force hundreds of thousands more Americans into substandard jobs and make the poorest workers poorer.
Welcome to “critical ethnic studies,” which boils down to vulgar Marxism, identity politics and victimology. Ideologically blinkered designers of ethnic-studies programs miss out on knowledge and analysis from mainstream social sciences that could enhance what students are taught.
Santa Clara University political scientist Peter Minowitz wrote a penetrating review essay of Ibram X. Kendi’s How To Be an Antiracist, and Robin DiAngelo’s White Fragility: Why It’s So Hard for White People to Talk about Racism. I might, if pressed, pick a tiny nit or two with this essay, but Peter’s argument is solid and clear and important and timely, and I heartily agree with his conclusion. It’s very much worth a careful read.
Here’s the opening. The remainder of the essay continues beneath the fold.
……..
How to Be a Better—and Less Fragile—Antiracist
By Peter Minowitz, Santa Clara University
When you see something that is not right, not fair, not just, you have a moral obligation to do something, to say something, and not be quiet. –Congressman John Lewis
Professors typically lament the damage President Trump has caused by exaggerating, stereotyping, and demonizing. The ones who drift into activism, however, are not immune to these discursive disorders. I shall explore this problem by scrutinizing two bestsellers: How To Be an Antiracist (One World, 2019) by Ibram X. Kendi and White Fragility: Why It’s So Hard for White People to Talk about Racism (Beacon Press, 2018) by Robin DiAngelo. The authors are already national icons, they extol each other’s work, and their books are being assigned widely within America’s campuses and businesses.
A market economy is a testing ground, in which different business ideas, different management styles, different organisational models and different industry structures can be tried and tested in competition with one another. For example, integrated models, where companies perform a lot of functions in-house, can compete freely with specialised models, where companies outsource many functions to external contractors. In this way, we find out where specialisation is more appropriate, and where integration is more appropriate.
DBx: Yes.
Each proponent of industrial policy would replace this on-going testing, experimentation, competition, and market-revealed discoveries with the personal fancies and preconceived designs of his or her own puny mind.
I do not arrogantly criticize the minds of industrial-policy proponents by describing them as “puny.” Every human mind – including, of course, my own – is puny. No exceptions. The human mind is far too small even to begin to comprehend the amount of knowledge that is routinely discovered and used by competitive market processes.
… is from page 83 of the May 9th, 2020, draft of the important forthcoming monograph from Deirdre McCloskey and Alberto Mingardi, The Illiberal and Anti-Entrepreneurial State of Mariana Mazzucato:
For a nation of non-angels we need restrained guardians, not more schemes devised by economists for pushing people around.
Enter the new paper by Cogan, Heil and Taylor, which finds that, when faced with an inevitable debt explosion in our future, the only viable and desirable option is for Uncle Sam to limit expenditures as a share of GDP, around the 20% ratio that prevailed before the pandemic. The authors find that this approach avoids the “potentially large increase in future federal taxes.” Better yet, they actually find that the policy would boost both short- and long-term GDP.
Unquestioning support for the supreme leader is not a democratic value, as Republicans emphasized just four years ago. In its 2016 platform, the Republican National Committee blasted Barack Obama and the Democrats for having “changed what John Adams called ‘a government of laws and not of men’ into just the opposite.” This year there is no platform. There is only a resolution “enthusiastically” and “unanimously” endorsing whatever Trump wants. What would John Adams have called that?
But as with actual pollution policy, we cannot assume that the political process will produce a mask mandate that resembles what economists might draw on the blackboard. First, we have to ask what the actual gains from the mandate are likely to be, just as we have to be realistic about just how much pollution an actual tax would discourage. With masks, the question is how mandates work when compared to the next best alternative. How many more people would use masks if they are mandated versus simply relying on strong social pressure and private sector no-mask, no-service rules? It might not be many.
… is the frontispiece of David Levy’s and Sandra Peart’s new (2020) volume from Cambridge University Press, Towards an Economics of Natural Equals: A Documentary History of the Early Virginia School; specifically, it’s from a letter that the late Nobel-laureate, and at the time Professor of Economics at the University of Virginia, James Buchanan wrote on October 17th, 1960, to Kermit Gordon, then a program officer at the Ford Foundation:
There seems to me to be two essential ways of approaching the study of problems of political, social, and economic organization. The first way is that of setting up independently certain criteria or goals for achievement and to examine existing and potential institutions in the light of their performance or expected performance in meeting these criteria. This approach, for purposes of exposition here, may be called the “social welfare function” or “social engineering” approach. It seems to characterize much of the current scholarship in the social sciences, and in economics especially. The second approach is that which deliberately avoids the independent establishment of criteria for social organization (such as “efficiency,” “rapid growth,” etc.), and instead examines the behavior of private individuals as they engage in the continuing search for institutional arrangements upon which they can reach substantial consensus or agreement. It follows from this difference in approach itself that “individual liberty,” in the sense of individual participation in the choices of appropriate constraints on human action, will tend to assume a necessary, and hence more prominent, role in the second than in the first. It is also true that the second approach will normally tend to place more emphasis on market organization than the first, not because there is some pre-conceived dogma or creed in favor of this first form of social order, but simply because it does represent one system upon which substantial consensus has been, and is, expressed.
DBx: Agree with the substance of his argument or not (I happen to agree, strongly): How many economists active today are as deeply thoughtful, as seriously philosophical, as was Jim Buchanan? Precious few.
It’s a source of sadness to realize how far the economics profession has fallen since scholars such as Jim Buchanan, Frank Knight, F.A. Hayek, Fritz Machlup, Ronald Coase, Armen Alchian, Yale Brozen, Gordon Tullock, Leland Yeager, Harold Demsetz, and Julian Simon were in their prime.
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A market economy is a testing ground, in which different business ideas, different management styles, different organisational models and different industry structures can be tried and tested in competition with one another. For example, integrated models, where companies perform a lot of functions in-house, can compete freely with specialised models, where companies outsource many functions to external contractors. In this way, we find out where specialisation is more appropriate, and where integration is more appropriate.
For a nation of non-angels we need restrained guardians, not more schemes devised by economists for pushing people around.
There seems to me to be two essential ways of approaching the study of problems of political, social, and economic organization. The first way is that of setting up independently certain criteria or goals for achievement and to examine existing and potential institutions in the light of their performance or expected performance in meeting these criteria. This approach, for purposes of exposition here, may be called the “social welfare function” or “social engineering” approach. It seems to characterize much of the current scholarship in the social sciences, and in economics especially. The second approach is that which deliberately avoids the independent establishment of criteria for social organization (such as “efficiency,” “rapid growth,” etc.), and instead examines the behavior of private individuals as they engage in the continuing search for institutional arrangements upon which they can reach substantial consensus or agreement. It follows from this difference in approach itself that “individual liberty,” in the sense of individual participation in the choices of appropriate constraints on human action, will tend to assume a necessary, and hence more prominent, role in the second than in the first. It is also true that the second approach will normally tend to place more emphasis on market organization than the first, not because there is some pre-conceived dogma or creed in favor of this first form of social order, but simply because it does represent one system upon which substantial consensus has been, and is, expressed.
