Market Correction

24 September 2006

Editor, The Washington Times

Dear Editor:

By lamenting American imports ("NAFTA highway or new silk road?" Sept. 24), William Hawkins implies that trade's benefits are measured in exports and its costs measured in imports. But if the purpose of economic activity truly were to produce and sell as much as possible in exchange for as few goods and services as possible, workers would clamor to work longer hours for lower wages - and they'd applaud whenever the purchasing power of their wages falls.

I suggest that you test the consistency of Hawkins's belief by paying for all of his future contributions to your newspaper with Monopoly money. If he really believes what he writes, Hawkins will be thrilled to exchange the fruits of his labor for scrip that he can never exchange for goods and services.

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

23 September 2006

Editor, The Baltimore Sun

Dear Editor:

Let's reveal the ugly underbelly of Sen. Barbara Mikulski's letter in which she boasts of her support of special government privileges for the steel industry (Letters, September 23).

She writes: "I have fought for measures to protect America's steel companies and its workers." This sentence instead should read "I have fought for measures to shield America's steel producers from the rigors of competition by preventing American consumers from spending their money as they deem best."

She writes: "I fought for the creation of the Emergency Steel Loan Guarantee Program to provide emergency loan guarantees to help steel companies weather the storm." This sentence instead should read "I have fought to force taxpayers to subsidize steel companies that are too inefficient to get adequate private financing."

Were she truly honest and courageous, Sen. Mikulski would summarize her position by saying "In short, I have worked hard to appease a powerful interest group - and to improve my chances of staying in the Senate - even though doing so makes most Americans poorer and less free."

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

22 September 2006

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

Dear Editor:

Complaining that each of today's 400 richest Americans is a billionaire, Dean Baker says that "If these people pull away so much wealth, that means everyone else has less" ("The Super-Rich Get Richer: Forbes 400 Are All Billionaires," September 22). He is staggeringly mistaken.

For example, Google founders Sergey Brin and Larry Page never once took anything from me or from anyone else. Instead, they created wealth by producing a product that improves my and millions of other people's standard of living. Had Messrs. Brin and Page not created Google and earned their wealth, I and these millions of other people would not be richer - we'd be poorer.

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

21 September 2006

Editor, The New Yorker

Dear Editor:

James Surowiecki rhetorically asks "How much difference is there, after all, between betting on the future price of wheat . . . and betting on the performance of a baseball team?" ("Wagers of Sin," Sept. 25). Answer: a lot.

Persons who bet on sports do not affect the outcomes of the events they bet on (at least not legally). In stark contrast, investors and speculators improve market performance. Someone who buys wheat expecting its price to rise withdraws wheat from the market when wheat is relatively abundant (now) and returns it to the market when wheat is relatively scarce (later). Likewise, someone who sells wheat short causes more wheat to be supplied to the market when wheat's supply is relatively scarce (now) by reducing its supply when wheat is relatively abundant (later).

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

18 September 2006

News Director, Morning Edition
National Public Radio

Dear Sir or Madam:

In Jeff Brady's report on efforts to require states to pay for regulatory takings, Boise city councilwoman Elaine Clegg complains that such a requirement will be too costly for government (September 18). This objection fails.

Suppose that a regulation reduces the value of a parcel of land by $1 million. SOMEONE must bear this cost. If government does not compensate the land's owner, that owner is forced to bear the entire cost that this regulation inflicts on his or her land. In contrast, when government pays for regulatory takings it obliges all taxpayers (who presumably share the benefits of the regulation) to share the costs of the regulation.

If government can't afford to pay for regulatory takings, surely it's grotesquely unjust to inflict these costs on a handful of individual property owners.

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

17 September 2006

The Editor, New Orleans Times-Picayune

To the Editor:

You rightly argue that Uncle Sam should stop subsidizing flood insurance for vacation homes and big business ("Shoring up flood insurance," September 17). But how do you justify continued subsidies for first homes and small business? Forcing people in Michigan and Maine - and even in Monroe, LA - to pay Gulf Coast residents and shopkeepers to live and work in flood-prone areas is morally offensive. Worse, such subsidies increase the likelihood that future hurricanes will inflict not only massive property damage but also unnecessary loss of life.

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

15 September 2006

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

To the Editor:

You assert that "proponents of living wages have the moral high ground" ("Everyday Low Wages," September 15). Not so. Conquering the moral high ground requires more than smugly and theatrically demanding that someone else, such as Wal-Mart, be forced to do more to help the poor. If "living-wage" proponents really want the moral high ground, they would themselves open businesses and attract low-wage workers away from Wal-Mart and other employers by offering higher wages. Until they do so, "living-wage" proponents are mere tin-pot protesters deserving no attention.

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

15 September 2006

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

To the Editor:

Paul Krugman concludes that the growth in year-to-year fluctuations in family income means that "[t]he economic riskiness of life has increased" ("Progress or Regress?" September 15). Not necessarily.

Imagine two occupations. The first offers steady work, week in and week out, and pays $40,000 each and every year. The work opportunities offered by the second occupation are less regular; workers in this second occupation earn $30,000 annually half the time and $70,000 annually the other half. Which occupation would you choose? Many people would choose the second - despite its greater year-to-year fluctuation in income - precisely because an average annual income of $50,000 means less economic riskiness than an average annual income of $40,000.

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

13 September 2006

Editor, The New York Post

Dear Editor:

Falling gasoline prices are indeed welcome economic news ("It's a Gas! Pump Prices Fall to 6-Month Low," Sept. 13). But I worry about what these falling prices reveal about the ethics of American motorists.

If rising gasoline prices are caused - as so many pundits and pols allege - by the greed of oil companies, must it not be true that falling prices are caused by the greed of consumers?

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

12 September 2006

Editor, The Atlantic

Dear Editor:

One factual error mars Jonathan Rauch's otherwise commendable essay on the lamentable presidencies of Richard Nixon, Jimmy Carter, and George W. Bush ("Unwinding Bush," October). Credit for reining in inflation belongs not, as Mr. Rauch says, to Ronald Reagan but to Jimmy Carter.

In 1979 Carter appointed Paul Volcker to replace G. William Miller as Chairman of the Federal Reserve. On October 6, 1979, Volcker led the Federal Open Market Committee to shift its focus from stabilizing interest rates to controlling the growth of the money supply. It was this policy change that reduced inflation.

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

11 September 2006

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

Dear Editor:

Why is Cornelia Strawser perturbed that the current war in Iraq, unlike WWII, features no military draft, gasoline rationing, and a "tax on excess profits" (Letters, Sept. 11)? Each of these policies unnecessarily raises the cost of war.

Conscription and rationing create inefficiencies by substituting bureaucratic decisions for market prices that allocate resources to their highest-valued uses. If the military wants more manpower and oil, government should raise taxes to buy these on the open market. A special tax on "excess profits," however, isn't advisable. Industries earning unusually high profits expand by attracting additional investment. By taxing away "excess" profits, government discourages investors from moving into precisely those industries most needed during wartime.

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

10 September 2006

The Editor, The Economist
25 St James's Street
London SW1A 1HG
United Kingdom

SIR:

Among the successes of Nordic economic policy you list "healthy...current-account surpluses" (“Admire the best, forget the rest," September 9). Why?

It's true that current-account surpluses might be evidence of wholesomely high savings rates, but they might also be evidence of stagnant investment climates. For Sweden, at least, the latter possibility seems to be most plausible in light of the fact that, as you report, "Sweden has created almost no net private-sector jobs since 1950."

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

9 September 2006

Editor, The New Orleans Times-Picayune

Dear Editor:

Like many others, the Rev. Nguyen Vien believes that post-Katrina rebuilding requires "more public resources" ("Promises to be kept," Sept. 9).

The case isn't clear. In a new study of locales receiving FEMA funds, West Virginia University economists Peter Leeson and Russell Sobel* find that such funds increase corruption in recipient areas. Specifically, these researchers conclude that "eliminating FEMA disaster relief would reduce corruption more than 20 percent in the average state."

And because Louisiana is the most corrupt state in the union, pumping even more taxpayer money into that state courts disaster.

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

* http://www.peterleeson.com/Weathering_Corruption.pdf

8 September 2006

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

To the Editor:

Paul Krugman asserts that "the United States as a whole has µgrown a lot richer over the past generation, but the typical American family hasn't" ("Whining Over Discontent," September 8). As David Brooks mentioned yesterday, however, data presented in Stephen Rose's recent essay* in The American Prospect cast doubt on this assertion.

Since 1979 the percent of prime-age Americans (those 25 to 59 years old) living in households with real annual incomes below $75,000 fell, while the percent living in households with real annual incomes above $75,000 rose. Most impressively, the percent of such Americans living in households earning real annual incomes of $100,000 or more increased over the past quarter century from 10 percent to 23 percent. This picture is hardly one of middle-class stagnation.

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

* http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=11943