Adam Smith's Wisdom
23 January 2007
The Editor, The Washington Times
Dear Editor:
Larry Thornberry correctly observes that the ideas Adam Smith offered in The Wealth of Nations "still hold up" ("Morality and Economics," Jan. 23). So, too, do the ideas Smith offered in his first book, The Theory of Moral Sentiments.
Especially important is Smith's wise warning about anyone who itches to plan society - the "man of system" as Smith called him. Such a man, Smith observed, "seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it."*
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
• Adam Smith, The Theory of Moral Sentiments (1759):
http://www.econlib.org/library/Smith/smMS.html
On CEO Pay
21 January 2007
Editor, The Washington Post
1150 15th St., NW
Washington, DC 20071
Dear Editor:
Roy Smith nicely debunks the myth that corporate CEOs generally are overpaid ("Worth Every Last Million," Jan. 21).
There's deep implausibility in the fashionable belief that CEO pay is driven to outlandish heights by greed. If we grant that CEOs are greedy, we must grant also that shareholders are greedy - which leads us to wonder why greedy shareholders would succumb so gullibly to greedy CEOs. Clearly, as Mr. Smith explains, CEO pay is determined by forces far more complex - if less suitable to justify inquisitions by self-righteous politicians - than “greed.”
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Let's Have a Genuinely Meaningful "Investigation"
20 January 2007
The Editor, New York Times
229 West 43rd St.
New York, NY 10036
To the Editor:
Morton Mintz wants Congress to determine if interest rates charged by credit-card companies are usurious (Letters, Jan. 20). I've got a better idea. Let Mr. Mintz himself investigate by offering credit to consumers. If, as he suspects, current rates are excessive, he'll earn a handsome profit by charging lower rates. If he doesn't profit, he can nevertheless rest assured that a meaningful test of the appropriateness of these rates was conducted - rather than an 'investigation' staged by that troop of political thespians called "Congress."
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Tax It -- If You Want Less of It
19 January 2007
Editor, The Washington Post
1150 15th St., NW
Washington, DC 20071
Dear Editor:
John Edwards wants to raise taxes on capital gains. E.J. Dionne describes Edwards's reasoning: "it's wrong to tax income from work at a higher rate than income from capital - an extension of his long-standing theme that the country should not value 'wealth over work'" ("Balanced Priorities," Jan. 19).
The distinction between "wealth" and "work" is overblown. Not only is wealth ultimately the product of work, the desire to accumulate wealth is a major spur to work. And importantly, capital successfully invested increases workers' productivity and, hence, their incomes. So to tax capital gains is to punish work, not value it.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Who's "Blind"?
18 January 2007
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
To the Editor:
Attempting to discredit free trade, Sen. Byron Dorgan resorts to tired rhetorical tricks (Letters, Jan. 18). For example, he complains about the loss of manufacturing jobs. In fact, though, most of these job losses are due to automation that increases workers' productivity. As economies advance, the loss of manufacturing jobs is no more surprising or regrettable than was our loss over the past few centuries of agricultural jobs or our earlier loss of hunter-gatherer jobs.
Sen. Dorgan calls free-traders "blind." It is much closer to the truth to call protectionists antediluvian.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
On Chinese Production
16 January 2007
The Editor, New York Post
Dear Editor:
As you report, Uncle Sam "blames Beijing's currency practices for contributing to the United States' bloated trade deficit with China" ("IMF Chief: Global Economy Threats Easing," Jan. 16). But as my colleague Tyler Cowen explained in his New York Times column, a higher valued Chinese yuan would have little, if any, effect on the size of this trade deficit.
The reason is that Chinese manufacturers specialize in assembly: they buy component parts from other Asian countries and then assemble these parts into finished products for export.
By lowering Chinese producers' costs of acquiring key inputs, a higher-valued yuan would reduce their costs of production - and thus do little to raise the prices that American consumers pay for goods made in China.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
