Market Correction

7 August 2006

The Editor, New York Times
229 West 43rd St.
New York, NY 10036

To the Editor:

Among the omens that Paul Krugman sees for a coming recession is the fact that "nonresidential investment as a share of G.D.P., though up a bit from its low point, is still far below its levels in the late 1990's" ("Intimations of Recession," August 7).

But on September 2, 2001 ("Damaged by the Dow") he wrote in your pages that during the late 1990s "businesses invested frantically, sinking vast sums into information technology. Now, of course, many of those businesses realize that they invested far too much."

So why should investment levels from those irrationally exuberant, bubbly late 1990s be the benchmark against which we measure the sufficiency of investment today?

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

7 August 2006

The Editor, New York Times
229 West 43rd St.
New York, NY 10036

To the Editor:

Paul Krugman unleashes a riot of confusing claims about the current state of the U.S. economy ("Intimations of Recession," August 7). Here's just one.

He endorses "fiscal stimulus" as means of avoiding recession. But he also continues to lament recent tax cuts. Because tax cuts (and the resulting deficit spending) are a classic means of fiscal stimulus, Krugman should now endorse further tax cuts. Better yet, he should abandon his Keynesian faith in increased spending as a magic cure for a slumping economy.

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

6 August 2006

The Editor, New York Times
229 West 43rd St.
New York, NY 10036

To the Editor:

Robert Hicks describes the McMansion-owning and tax-disliking new residents of his home of Williamson County, Tennessee, as "first and foremost, driven by an obsession with taxes. This isn't to say that none of them have genuine concern for the poor" (“The New New South,” August 6). Interesting comment.

Why does Mr. Hicks assume that a desire to keep one's money out of politicians' paws signals indifference to the poor? Correct or not, there's a perfectly coherent case that the poor are best helped by low taxes which foster robust economic activity along with a vibrant civil society that assists the less-fortunate through private, voluntary aid. Skepticism of political action is not evidence of callousness and greed.

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

5 August 2006

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

Dear Editor:

Charles Whalen argues that the failed 1981 PATCO strike "was a watershed" that still casts "a long, dark shadow" ("Echoes of a Broken Strike," Aug. 5). Among the pieces of evidence he cites to support his claim is the fact that since the early 1980s the percentage of American workers who belong to labor unions has fallen from 20.1 to 12.5.

True. But this decline in union membership began nearly thirty years before the PATCO strike. Union membership (as a percent of workers) peaked, at 36 percent, in 1953. It has steadily declined ever since. Indeed, data* from the union-funded Economic Policy Institute show that the PATCO strike did nothing even to accelerate (much less to spark) this trend.

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

* http://www.epi.org/content.cfm/webfeatures_snapshots_archive_05051999

3 August 2006

Editor, The Washington Times

Dear Editor:

Senator Richard Lugar writes that "the business case for ethanol has never been stronger" ("We can end oil addiction," August 3). But he then asserts that market forces are moving "far too slowly" in developing ethanol, a fact that he predictably uses to justify government subsidies for this effort.

Lugar specializes in winning elections and in spending other people's money. Investors specialize in spending their own money, or money voluntarily entrusted to them, in search of truly profitable economic opportunities. Which of these - a career politician or private investors - is likely correct about the speed with which resources should be devoted to developing ethanol?

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

2 August 2006

Editor, The Washington Times

Dear Editor:

You write that now is the first time since 1959 that Cuba has been without Fidel Castro "at the helm" ("Cubans ponder life without Fidel," August 2). Your metaphor is inappropriate. Castro was never so much a captain "at the helm" as he was a slave master incessantly flogging - often to death - innocent victims of his megalomania.

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

31 July 2006

Editor, The Washington Times

Dear Editor:

Deforest Rathbone rightly laments the thousand of deaths caused each year by drug abuse but wrongly asserts that legalization of drugs "would drive that horrific statistic much higher" (Letters, July 31). On the contrary, it's the current system of prohibition that keeps this statistic inhumanely high. If drugs were legalized, addicts would more readily seek treatment. Also, suppliers would be under competitive and legal pressures not only to ensure the quality of their products but to standardize information about dosages.

And importantly, sellers would lose incentives to push drugs to schoolchildren. Anyone who doubts this claim should ask himself when he last saw Anheuser-Busch or Seagram's peddling their intoxicating wares on schoolyards.

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

29 July 2006

Editor, The Washington Times

Dear Editor:

Victor Davis Hanson laments that "By historical standards, [Americans] are pretty helpless. Most of us can't grow our own food, don't know how cars work and have no clue where or how electricity is generated. In short, few have the smarts to survive if the thin veneer of civilization were lost" ("Fragility of the good life," July 29).

Well, yes, but the only way to avoid this situation is for us to revert to living in a 'society' whose complexity never extends beyond campfires, mud huts, and the trapping of wild game. While under such primitive conditions each person would know how to produce and maintain everything used in that 'society,' everyone who manages to survive would also be perpetually hungry, filthy, ill-clothed, and - ironically enough - inconceivably ignorant.

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

28 July 2006

Editor, The Baltimore Sun

Dear Editor:

Victor Davis Hanson commits the too-common mistake of assuming that all dollar-denominated assets held by foreigners represent American debt ("Don't think good times will last forever," July 28). But when foreigners hold dollars, when they build factories here, when they buy real-estate in America, and when they purchase shares of equity in the likes of GE or Google, they acquire American assets without creating a cent more of American indebtedness.

And in fact, foreigners lately are buying not so much American debt (such as U.S. Treasury bills) but, instead, stock in U.S. corporations. During the past twelve months they've increased their net holdings of such equities by $125 billion. These purchases lower the cost of capital for American companies as well as signal global confidence in the future of the U.S. economy.

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

27 July 2006

The Editor, New York Times
229 West 43rd St.
New York, NY 10036

To the Editor:

Laurance Kaufman correctly argues that landlords are not by nature villainous (Letters, July 27). Nevertheless, NYC's rent-control regulations are singularly adept at inspiring landlords to abuse tenants. Consider that regulators are more likely to permit an owner of a rent-stabilized apartment to raise rent significantly if a new tenant is about to lease the apartment than if the apartment continues to be leased by its existing tenant. Is it surprising that this perverse situation frequently prompts landlords to mistreat their tenants?

Landlord villainy is an artifact of NYC's pernicious rent-control regulations.

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