Market Correction

22 June 2009

Editor, Los Angeles Times

Dear Editor:

You want to "Keep the politics out of UC" (Editorial, June 22). Impossible, as the UC system is a government entity. And a government entity free of politics is, as my colleague Russ Roberts says, quite as unthinkable as is a ham sandwich free of pork.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

19 June 2009

Editor, Los Angeles Times

Dear Editor:

Seth Hill writes that "Every time I'm surfing channels and I happen by mistake to land there [on the Fox News channel], I have to watch a commentary by [Newt] Gingrich or former Vice President Dick Cheney. That channel makes me long for the days of the Fairness Doctrine" (Letters, June 19).

Mr. Hill's attitude is the seed of totalitarianism: unable to distinguish what he does voluntarily from what he is coerced into doing, he wants to use force to save himself from the annoyance of fleetingly encountering disagreeable ideas as he flips his channel changer - and to use force to hamper other persons' access to those ideas.

There's nothing fair about that.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

Editor, New Orleans Times-Picayune

Dear Editor:

Befuddled that many Louisianans don't wish to force motorcyclists to wear helmets, Nicholette Shannon suggests that safety is always more important than what she dismisses as "convenience" (Letters, June 19).

Safety, however, clearly does not always trump convenience. If it did, no one would ever ride a motorcycle to begin with. Indeed, no one would ride in automobiles, jaywalk, or eat fast food. Each of us routinely trades-off some safety to get more convenience. And no one, including Ms. Shannon, should presume that her preferred balance between safety and convenience is or ought to be the preferred balance for other persons.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

18 June 2009

Editor, The New York Times
620 Eighth Avenue
New York, NY 10018

To the Editor:

It's heartening that so many of your readers support drug legalization (Letters, June 18). As they, and columnist Nicholas Kristof, point out, there are indeed many practical reasons to end the cruel and futile 'war on drugs.' But there's also an ethical reason to do so: each adult owns his or her life and only his or her life. It's none of my business what you ingest. Nor is it the business of my neighbor or of my co-workers. This fact does not change if my neighbor, co-workers, and I form a coalition and vote to govern your ingestion.

A society truly free tolerates all peaceful actions, from the sublime through the self-destructive.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

17 June 2009

News Editor, WWL Radio
New Orleans, LA

Dear Sir or Madam:

A listener called in today during the one o'clock hour to assert that "health care isn't like other services" - and so it can't be supplied reliably on the market because people are willing to "incur any cost to save their lives."

First, if this assertion is true, it's unclear how matters would be improved by socializing the payment of medical expenses. Second, everyday experience shows that this assertion, in fact, is false. If people really are desperate to save their lives at all costs, then everyone would exercise regularly, eat only healthy foods, and completely avoid rock climbing, horseback riding, snow skiing, and tanning booths. No one would smoke, drink to excess, or have unsafe sex. Women would never get pregnant, as there's still some positive chance of dying while giving birth.

Unless and until people stop behaving in ways that reduce their life-expectancies, it's mistaken to believe that each of us is committed to living longer at all costs.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

17 June 2009

Editor, The New York Times
620 Eighth Avenue
New York, NY 10018

To the Editor:

Maureen Dowd wants President Obama to display his healthy, low-fat eating habits more publicly ("Hold the Fries," June 17). The idea is that Our Leader's ostentatious display of his preferred diet will inspire ordinary Americans to eat better.

What has become of Americans? How different are we now from Louis XIV's French subjects who gazed in awe upon him at his table? And are we so childish that our dietary choices are directed by political celebrities?

If we Americans are indeed such mindless lemmings as Ms. Dowd assumes, I'd prefer that Pres. Obama spend lots of time being filmed gobbling Big Macs while, between bites, he puffs on his cigarette and insists that each of us take control of our own individual lives.

We would do well to reject the stupid cult of celebrity that now surrounds high government officials.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

14 June 2009

Editor, Baltimore Sun

Dear Editor:

Diana Schaub rightly argues that no judge should allow empathy for parties in a courtroom to dilute his or her commitment to apply the law dispassionately ("Why empathy is the enemy of justice," June 14). But the need for judicial impartiality does not imply that judges should avoid engaging with the real-world contexts and details that surround every legal dispute.

In a free society, law isn't simply a set of explicit commands handed down from a sovereign (be it a monarch or a democratically elected legislature). A great deal of law - indeed, MOST law - emerges undesigned from the daily practices of ordinary people interacting with, and sometimes bumping into, each other. People on their own often find ways to minimize these conflicts, and these ways become embedded in people's expectations. These expectations, in turn, become unwritten law - law that good judges find and enforce impartially.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University—

13 June 2009

News Editor, WTOP Radio
Washington, DC

Dear Editor:

Interviewing a guest this morning, anchor Nathan Roberts suggested that California's fiscal problems would have been avoided had Proposition 13, enacted in 1978, not "tied the hands of local governments to raise revenue by taxing property values."

Not so. In 1980-81 (the earliest date for which consistent data are available), property-tax revenues in California were (in 2009 dollars) $16.86 billion. In 2006-07 these revenues were $45.47 billion (again in 2009 dollars). This fact means that inflation-adjusted property-tax revenues were, in 2007, higher than they were in 1981 by 170 percent. Over these same years, California's population increased by 58 percent.*

Whatever the causes of California's current fiscal fiasco, a lack of adequate property-tax revenues isn't one of them.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

* http://weblog.signonsandiego.com/weblogs/afb/archives/034048.html

12 June 2009

Editor, The New York Times
620 Eighth Avenue
New York, NY 10018

To the Editor:

Paul Krugman is angry that media such as Fox News and the Washington Times often make unsubstantiated, over-the-top claims about Democrats and left-liberal causes ("The Big Hate," June 12).

Prof. Krugman should chill. These media - no less than the likes of CBS and your own paper - are in business not to inform but to entertain. And presumably the fictions that so irritate Mr. Krugman entertain their intended audiences - entertain these audiences no less than do the fictions that are routinely emitted by 'progressive' media entertain THEIR intended audiences.

How else, for example, to explain the routine accusation that members of the Chicago school of economics applauded Pinochet's tyranny in Chile? Or the incessant refrain, from outlets such as The Nation, that multinational corporations (and many economists) seek to 'impose' free trade as a means of enslaving workers? Or the common assertion that persons who endorse free markets are really just mean-spirited mercenaries paid in some coin to protect the privileges of the rich with cynical arguments that confuse and confound ordinary folk?

Aren't these arguments just as incendiary and unsubstantiated as are those that Mr. Krugman attacks?

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

10 June 2009

Editor, The New York Times
620 Eighth Avenue
New York, NY 10018

To the Editor:

Geoff Berg blames the high price of medical care on fee-for-service: "The problem with fee-for-service is not merely that it pays providers to provide service; it pays them to create service as well" (Letters, June 10).

This explanation cannot be correct. If it were, we would see, say, the prices of consumer electronics rising ever higher as consumers mindlessly purchase each new gadget marketed by the likes of Sony, Apple, and Dell. These producers, after all, are paid according to the quantities and qualities they supply, and they have incentives to keep creating new gadgets. And yet, the real prices of consumer electronics - as well as of many of the other products supplied according to fee-for-service (which is the vast majority of the economy) - continue to fall.

A better explanation for the high and rising price of medical care is found in Americans' heavy reliance on tax-subsidized third-party payments.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

9 June 2009

Editor, Baltimore Sun

Dear Editor:

Bravo for British ambassador Nigel Sheinwald's case for freer trade ("The peril of protectionism," June 9).

One clarification, though: he says that "our globalized economy has not come about by accident. It is the result of our collective choice for openness." If Mr. Sheinwald is referring to multilateral trade agreements such as the GATT, he's correct as matter of history, but he should also point out that any country would gain from free trade even if it tears down its customs walls unilaterally.

If instead Mr. Sheinwald is referring to each government's choice to move toward freer trade, his words unintentionally mislead. What requires government action - what requires "collective choice" - is protectionism. Free trade exists naturally. Free trade is simply the absence of trade restrictions - the absence of officious interference into the affairs of those engaged in consensual capitalist acts.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

8 June 2009

Editor, New York Post

Dear Editor:

George Will is understandably frightened by the administration's and Congress's massive infusion of politics into the operation of the U.S. auto industry - and he is understandably angered by these politicians' blatant lies about how they wish to keep politics out of the operation of this industry ("G.M.: That's 'Gov't Mandate' to you," June 8). Unfortunately, the "leaders" of this industry invited this cancerous intrusion by seeking handouts.

How sad it is that America has too few persons who really, deeply agree with the poet Shelley that

"The man
Of virtuous soul commands not, nor obeys.
Power, like a desolating pestilence,
Pollutes whate’er it touches."*

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

* Percy Bysshe Shelley, "Queen Mab" (1813).

8 June 2009

Editor, Slate

Dear Editor:

Eliot Spitzer laments the continuing dominance of the service sector in the American economy (“Green Shoots, Red Ink, Black Hole,” June 3). Curious that. One would think that, of all people, the former governor would be a huge fan of the service sector.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

8 June 2009

Editor, Slate

Dear Editor:

Eliot Spitzer asserts that the U.S. economy is in a "transition away from actual goods production" ("Green Shoots, Red Ink, Black Hole," June 3) - part of a long-run pattern that Mr. Spitzer finds "terrifying."

While today's economy is in poor shape, and likely to be made worse by Uncle Sam's frenetic fiddling, the only thing terrifying about the data that Mr. Spitzer presents is Mr. Spitzer's shabby understanding of them.

For example, the evidence that he offers for America's alleged transition away from goods production is the decline in the number of manufacturing jobs. Yes; such jobs are disappearing. But the value of total U.S. manufacturing output is rising. In fact, in 2007 it was (as it has been for decades) the largest in the world, at an all-time high of $1.831 TRILLION - accounting for more than 20 percent of the entire world's manufacturing output. The country generating the second-largest flow of manufacturing output in 2007 was China, which produced output valued at $1.106 trillion – only 60 percent of the U.S. total.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

7 June 2009

Editor, The New York Times Book Review
620 Eighth Avenue
New York, NY 10018

To the Editor:

Reviewing Michael Crawford's "Shop Craft as Soul Craft" (June 7) Francis Fukuyama writes:

"Highly educated people with high-status jobs - investment bankers, professors, lawyers - often believe that they could do anything their less-educated brethren can, if only they put their minds to it, because cognitive ability is the only ability that counts. The truth is that some would not have the physical and cognitive ability to do skilled blue-collar work, and that others could do it only if they invested 20 years of their life in learning a trade. “Shop Class as Soulcraft” makes this quite vivid by explaining in detail what is actually involved in rebuilding a Volkswagen engine.... Small signs of galling and discoloration mean excessive heat buildup, caused by a previous owner’s failure to lubricate; the slight bulging of a valve stem points to a root cause of wear that a novice mechanic would completely fail to perceive."

Indeed. This insight that a successful economy must use knowledge that is dispersed, unimaginably detailed, and often unable to be articulated fueled F.A. Hayek's skepticism of government intervention. Here's Hayek:

"Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation. We need to remember only how much we have to learn in any occupation after we have completed our theoretical training, how big a part of our working life we spend learning particular jobs, and how valuable an asset in all walks of life is knowledge of people, of local conditions, and of special circumstances."*

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

* F.A. Hayek, "The Use of Knowledge in Society," American Economic Review, Sept. 1945, Vol. 35, pp. 519-30. This quotation appears in paragraph 9:

http://www.econlib.org/library/Essays/hykKnw1.html

6 June 2009

Editor, Washington Times

Dear Editor:

Peter Leitner wants Uncle Sam to stop G.M. from selling its Hummer division to China-based Sichuan Tengzhong, LTD., in part because this sale allegedly would be a practice in "forever hijacking scores of U.S. jobs" ("Hummer sale to China," June 5). Mr. Leitner is blind to the full scope of the modern economy.

Most U.S. jobs today depend critically on economic openness of the sort that Mr. Leitner decries. Capital from abroad; inputs from abroad; customers abroad; and consumer goods from abroad (that lower prices in the U.S. and so raise Americans' real wages) - each of these consequences of economic openness plays a large role in creating countless jobs in the U.S. and, ironically, in imparting to all jobs in America much of the attractiveness that makes the prospect of losing these jobs so difficult.

Making America more closed to trade would indeed keep fewer U.S. jobs from 'moving abroad,' but it would also make these jobs less worth keeping.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

5 June 2009

Editor, The New York Times
620 Eighth Avenue
New York, NY 10018

To the Editor:

Floyd Norris wisely warns against the unintended consequences of tax policy - in this case, a one-time tax break on overseas profits that backfired ("Tax Break for Profits Went Awry," June 5).

But the ill and unintended consequences of another piece of tax-policy social-engineering needs greater attention. I speak of Internal Revenue Code section 162(m), a 1993 brainchild of Bill Clinton. Aimed at reducing what Mr. Clinton divined was excessive executive salaries, 162(m) eliminated the tax-deductibility of executive pay in excess of $1 million UNLESS such pay was performance-based.

Alas, as found by economists James Wallace and Kenneth Ferris, "One unintended consequence of the legislation was that executives' total compensation actually increased in the post-1993 period."* The reason is that a greater portion of executive pay was shifted into performance-based stock-options - which are both less transparent to shareholders than are annual salaries, and which give executives greater incentives to rig short-term results in ways that raise executive pay even as this rigging increases market volatility and reduces dividend yields.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

* “IRC Section 162(m) and the Law of Unintended Consequences” (Nov. 2006):
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=942667

4 June 2009

Editor, Washington Times

Dear Editor:

Cal Thomas is correct to note that government-produced automobiles are no models of performance, style, or safety ("Downfall of an icon," June 4). They truly are hunks of junk.

I recall being in Germany in September 1990, not long after the collapse of the Iron Curtain. A German friend told me of a then-recent incident that happened at night as he drove on the autobahn. He was cruising along at about 120 miles per hour in his Mercedes when he saw ahead two faint, flickering lights. "Good thing I slammed on my brakes," he said, "because the lights were candles in the rear window of a Trabant. They were being used as tail lights!"

The government-made Trabant, I gather, had a top speed of about 60 MPH - and, obviously, also a wholly unreliable electrical system.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

4 June 2009

Editor, Washington Post
1150 15th St., NW
Washington, DC 20071

Dear Editor:

Google CEO Eric Schmidt should not be surprised that Google's market success "has competitors sharpening their lobbying efforts" ("Tech Titans' Ties to Washington Grow Closer - and More Complicated," June 4).

Mr. Schmidt's father, the late Wilson Schmidt, was on the economics faculty at Virginia Tech many years ago when that university was home to the Center for Study of Public Choice - a group of scholars whose research shows that government serves well-funded and well-organized lobbies far more readily than it serves the public good. That the elder Mr. Schmidt was instrumental in furthering the research that reveals this reality is evidenced by the fact that the Center's library, now at George Mason University, proudly bears his name.

Sincerely,
Donald J. Boudreaux
Director, Center for Study of Public Choice
and
Chairman, Department of Economics
George Mason University

3 June 2009

Editor, Time

Dear Editor:

On Monday President Obama proclaimed that G.M. "will be run by a private board of directors and management team. They, and not the government, will call the shots and make the decisions about how to turn this company around." And yesterday, two high-ranking members of his administration, writing in USA Today, seemed downright insulted that anyone would doubt the President's word that politics will "play no role" in running this company.

Alas, this political chicken wasted no time coming home to roost. You report today that "Top executives from General Motors and Chrysler face tough questions from lawmakers about sweeping plans to close hundreds of car dealerships as the auto companies undergo government-led bankruptcies" ("Senate Reviews Close of GM, Chrysler Dealers," June 3).

The wonder is not that politicians are meddling. The wonder is that America is populated with a sufficient number of persons so gullible as to encourage Mr. Obama to issue his 'no politics' assurance with a straight face.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University