Cowen on Current Ideological Struggles

In short, it’s not that ideas of government interventionism and free markets are fighting a titanic intellectual struggle. The reality is more mundane. The ascendancy of one view often creates the conditions for an economic counterreaction.

Let Us Keep Our Perspective

Don Boudreaux on the Gulf oil spill and perspective. His letter to The Washington Post editor is below:

Deborah Hahn writes: “Until the damaged BP well in the Gulf of Mexico is capped, please publish daily a front-page picture of wildlife covered in oil, in misery, dying, unable to be cleaned” (Letters, June 26). Ms. Hahn believes that “such pictures are needed to educate the public” about the “horrors of what oil accidents do to our fellow creatures.”

Oil accidents are indeed horrible. But they are the very visible downside of a product with an enormous upside – an upside so important and ubiquitous that, ironically, it has become invisible. It is to us as water is to fish.

So an even greater danger now is an economy polluted by a gusher of panic-driven crude legislation. To counter this danger, please also publish daily a picture of oil’s neglected benefits – such as people still alive because of pharmaceuticals and medical devices; men and women healthy because dangerous bacteria were killed by ammonia or kept contained by plastics; children and grandparents smiling because they’re able to visit each other having driven over roads made of asphalt or flown in airplanes powered by aviation fuel; your readers enjoying your paper (printed with ink!) because they wear eye’glasses’ made of plexiglass.

What really needs more media attention are the many marvels that, because they are so common, are taken for granted.

Sincerely,
Donald J. Boudreaux

The Evolution (or Mutation) of Modern Finance

Simple question. Is this good or bad?

No doubt the answer is extremely complex, not yet known and falls somewhere in between.

(HT: Seeking Alpha)

Smokescreens and Bailouts

Interesting thoughts from Arnold Kling on the Euro Crisis (which he believes is a misnomer). A snippet:

My view of the bailouts is that they are primarily to save French and German banks. All the talk about "saving the Euro" is a smokescreen.

I find it ironic to have an EU official warning about the collapse of democracy. The eurocracy is a very undemocratic organization, chronically in conflict with popular opinion. The bailouts are unpopular, and quite properly so. Any official who claims that that the bailouts should be undertaken in the name of democracy is a poseur.

In Defense of PEDs?

Last week I was discussing Armando Galarraga's near perfect game with a friend of mine and made the following point:

I didn't see the game live, but when I heard about it, it more or less ruined my night. I don't know why, I don't know how, but in the pit of my stomach I felt absolutely awful. Around the same time, during Game 2 of the NBA Finals, with about two minutes left in the game, the refs blew a call where a ball out of bounds should have gone to the Lakers (this was the play where Garnett and Gasol were fighting over and it was determined that the ball went off Gasol). The refs consulted instant replay, as there was under two minutes left to play, but let the call stand, and thus blew the call. Rajon Rondo then hit a jumper to put the Celtics up five, and that was the game. The refs thus had an adverse effect on the outcome of the game.

Now the following day I barely heard a peep about this blown call, which quite possibly determined the outcome of an NBA Finals game. Yet for forty-eight hours all the sports talked about was Jim Joyce's blown call, which ultimately had no determination over the outcome of the regular season game.

Why is this? Why do we as fans place such emphasis on records like this? And if we believe these records are so important, more important than wins and losses, should we not simply legalize the use of steroids and other PEDs in professional sports, but actually mandate their use, as they will help increase the probability that the "greatest" records will be achieved?

The Increasing Popularity of Hayek

Via Tyler Cowen, Hayek's most popular work, The Road to Serfdom, is now the number one non-fiction seller on Amazon. My first post on this blog (and albeit not a very good one as I look back) was on this book.

To See or Not to See...

Steve Landsburg on the Unseen and bias (or ignorance depending on your take).

(HT: Cafe Hayek)

Some More Thoughts on Protectionism

Commenting on this post, Rob makes the case the protectionism is a legitimate policy if it is done on grounds of morality. In other words, if Nation A decides to enact a protectionist policy against Nation B, it is legitimate only if its motivation is because of certain policies (say labor or environmentally related) that Nation A calls into question.

Let's remember that protectionist policies are government mandated policies, most notably enacted as price controls in the form of tariffs and subsidies. So protectionist policies are determined by government officials, not markets.

Rob claims he doesn't have faith in markets to make such decisions, but seems to believe government actors do. He concludes his comment by stating, "it is simply the right of a nation to decide what crosses their borders," which I interpret as meaning government officials possess the right to determine what crosses the nation's borders, and thus enter the marketplace.

Here are my issues with this view:

1. How is it determined what economic practices and policies are moral or not? For example, are sweat shops with "low" wages and "unsafe" working conditions "immoral"? Why? What role does bias, perception and relativism have to play in this determination?

2. Who is making these moral decisions? Why should they be trusted? What are the checks on their decision-making?

3. How far can we extend this moral governance? To domestic issues? To the state and local level? Where is the line drawn? Why there?

4. If markets are not to be trusted, why not?

5. Public Choice Theory would argue that political actors are more subject to the irrational emotions market actors are normally subjected to (greed and fear) because they have less "skin in the game." How are we to trust that they [political actors] are immune to these forces in these instances?

6. Trade has been one of the greatest catalysts of economic dynamism and productivity. What does limiting it, even on moral grounds, ultimately achieve, especially for those whom are being protected against and are thus at the greatest disadvantage?

7. Costs go far beyond regulatory costs. There are real price costs, opportunity costs, political costs, etc... How are these to be measured? What is the cost/benefit? For example, much of the reason the American-Cuban Trade Embargo is still in place is due to "moral" reasons (the fact that these so called moral motivations are so murky to begin with supports my first question). Now would anyone seriously argue, from an economic perspective, that the benefits of this policy have outweighed the costs?

8. Going back to relativity, what degree does the demand for safety, environmental protections, etc... have to play? If these are immutable laws, as supply and demand in whatever form often are, what is the point of attempting to legislate them away? What are the unintended consequences of doing so?

9. Finally, you [Rob] used Rawls' "Veil of Ignorance" thought experiment to claim that, "I can imagine situations in which I would design a world such that protectionism were allowed despite not knowing what country I would be born in." I think I may see your point, as the costs of racism, from our perspective, are far more visible than the costs of protectionism, especially on an anecdotal level. But that seems like a straw man to me. The negative effects still exist (and probably to a much greater degree) even if they don't grab the same headlines. In that sense, I think the Rawlsian line of reasoning shifts the emphasis of the argument in a different direction and thus doesn't have much relevance to this discussion.

To Discriminate or Not to Discriminate? That is the Question...

Via Cafe Hayek, here and here are two op-ed pieces I enjoyed on discrimination, in particular in regards to Rand Paul, Rachel Maddow and the Civil Rights Act of 1964. I actually think the whole argument is a straw man, but it's still fun to debate it.

The question is this: Should it be legal for private parties to discriminate against other private parties based on the formers' personal preferences?

How Do We Decide what Market Transactions are Ethical or Not?

Greg Mankiw on ethics and organ markets.