Market Correction

25 August 2007

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

To the Editor:

You propose that the dollar is sliding, in part, because of "concern about America’s huge ongoing foreign indebtedness" ("Dollars for Sale," August 25). This remark is too simplistic.

Much of what is counted as America's "foreign indebtedness" is really no such thing: instead it is foreign ownership of dollar-denominated assets, such as the Dutch company Royal Ahold's ownership of the American supermarket chains Stop & Shop and Giant. If U.S. tax rates remain low and regulations sensible relative to taxes and regulations in other countries, foreigners will continue actively to invest in America. Such continuing investment - even though it increases America's current-account deficit and, hence, increases what is labeled in international accounts as America's "foreign indebtedness" - does nothing to weaken the dollar.

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

25 August 2007

Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281

To the Editor:

Andrew Sharkey, President of the American Iron and Steel Institute, predictably thinks that steel prices in America are too low (Letters, August 25). And in pleading for protection he resorts to the age-old tactic of accusing foreign competitors of acting unfairly.

I challenge Mr. Sharkey to present evidence of consumers hurt by low-priced imports. I want no evidence of industries that contract because consumers find better deals elsewhere; THAT evidence is ubiquitous. Because the ultimate purpose of economic activity is to satisfy consumers - because production is no end in itself but only a means of meeting consumer demands - Mr. Sharkey's complaints deserve no hearing until he supplies compelling evidence of low prices, regardless of their cause, harming consumers.

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

23 August 2007

News Editor, WTOP Radio

To the Editor:

The listener who called today to say that his "biggest economic fear" is America's "merchandise trade deficit" worries needlessly. Valuable outputs come in different forms. Those that come in tangible forms (such as toothpicks) we label "merchandise." Those that are intangible (such as tonsillectomies) we label "services." But so what? A dollar's worth of value is a dollar's worth of value regardless of the form it takes. To suffer distress because Americans produce and export less merchandise than services is akin to suffering distress because Americans produce and export fewer things that are yellow than things that are blue.

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

22 August 2007

Editor, The New Yorker

To the Editor:

Niall Ferguson is a fine historian, which is why I'm surprised that his review of Greg Behrman's "The Most Noble Adventure: The Marshall Plan and the Time When America Helped Save Europe" is insufficiently critical ("Dollar Diplomacy," August 27).

My colleague Tyler Cowen* looked beyond the rhetoric to the reality of the Marshall Plan and found that the role it played in Europe's post-WWII recovery was, if anything, negative. Quoting Cowen: "In nearly every country occupied by Germany during the war, the stringent system of Nazi economic controls was continued even after the country was liberated. And in each case, rapid economic growth occurred only after the controls were lifted and sound economic policy established. This happened irrespective of the timing and extent of Marshall Plan aid."

A move toward market economies ("not always encouraged by the Plan," reports Cowen) - rather than American goodwill and dollars - restored Europeans to prosperity.

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

* Tyler Cowen, "The Marshall Plan: Myths and Realities," in Doug Bandow, ed., U.S. Aid to the Developing World (Washington, DC: Heritage Foundation, 1985), pp. 61-74.

21 August 2007

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

To the Editor:

You complain that China is "exporting huge volumes of finished, manufactured goods - T-shirts, flashlights, radios and socks, just to name a few - to [African] countries, hampering Africa's ability to make its own products and develop healthy, diverse economies" ("China's Trade in Africa Carries a Price Tag," August 21).

Are you suggesting that Chinese producers (perhaps along with producers in other non-African countries) are supplying Africa with all of the goods that Africans can possibly desire? Do you mean to say that Africans are now so utterly sated with material goods that nothing remains for any domestic entrepreneurs to produce for them?

Who knew?! I thought that Africans generally are desperately poor, lacking in many cases even the everyday goods and services that we Americans take for granted.

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

20 August 2007

Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281

To the Editor:

Mark Whitehouse wonders why financial markets aren't jittery over "one of the U.S. economy's greatest vulnerabilities: its appetite for foreign money to finance the huge gap between what it spends and what it earns" ("Foreign Investors View Dollar As 'Refuge Currency' Despite Recent Tumult," August 20).

The answer is that the trade deficit is not a vulnerability. Mr. Whitehouse wrongly supposes it to be a weakness because he misunderstands it. Other than the part driven by Uncle Sam's profligacy, the trade deficit grows not so much because foreigners finance Americans' consumption, but because foreigners actively invest in America. These investments create new factories, more R&D, better-trained workers, and other benefits that brighten our economic future.

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

20 August 2007

Editor, USA Today

To the Editor:

You correctly argue that America's flying public can be better served, but your proposed solution of more government regulation is unwise ("Our view on airline passenger rights: How airlines mistreat fliers and get Congress to go along," August 20). What Congress can instead do to improve matters is

- open domestic routes to foreign carriers - the increased competition will lower prices and improve service;

- follow the example of Canada and more than dozen other countries that have either fully or partially privatized their air-traffic-control systems and seen, as a result, impressive technological advances.

State and local governments can do their part by privatizing airports, thereby unleashing the profit motive to supply more and better ground capacity for planes and passengers.

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

19 August 2007

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

SIR:

Jeffrey Sachs alleges that population growth is a problem (Letters, August 18). Wrong.

We humans consume AND produce. And when property rights are secure, we produce more than we consume because we devise techniques to better transform inputs into outputs. Population grows, resulting in a larger supply of creative minds that generate even more prosperity. Harvard economist Michael Kremer found that for almost all of human history, the population growth rate is proportional to the level of population.* That is, the larger a population, the faster it grows - a fact squarely at odds with Sachs's Malthusian fears.

As for the specific problems listed by Sachs (such as over-fishing), all of these result from the absence of secure property rights. It is startling to note that in Sachs's recent book, The End of Poverty, property rights receive nary a mention.

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

* Michael Kremer, “Population Growth and Technological Change: One Million B.C. to 1990,” Quarterly Journal of Economics, August 1993, pp. 681-716.

19 August 2007

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

Dear Editor:

Amity Shlaes appropriately reminds us that the Great Depression was caused not so much by market failure as by Washington's tragic policy missteps (“A Downturn We Don't Deserve," August 19). One such misstep not mentioned by Ms. Shlaes was the imposition, from June 1932 until December 1934, of a two-cent tax on bank checks. This tax (equivalent to a 31-cent per-check tax today) prompted Americans, when making payments, to shift more toward using currency and away from using checks. Economists William Lastrapes and George Selgin found that the resulting reduction in bank deposits contributed significantly to the disastrous monetary contraction of that era.

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

* William D. Lastrapes and George Selgin, "The Check Tax: Fiscal Folly and The Great Monetary Contraction," Journal of Economic History, 1997:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=33320#PaperDownload

18 August 2007

Editor, The Washington Times

To the Editor:

Ceaselessly stoking up xenophobia, Michelle Malkin asserts that the recent horrific murders in Newark are yet more evidence that immigrants are especially likely to commit crimes ("Sanctuary nation or sovereign nation?" August 18). She's mistaken.

Economists Kristin Butcher and Anne Piehl carefully examined the data and found that the incarceration rate of immigrants is only one-fifth that of the native population. The rate is even lower for recently arrived immigrants. Further, this fact is not the result of deportation. And finally, in their demographic groups, immigrants are only one-tenth as likely to commit crimes as are native-born Americans in those groups.*

Ms. Malkin’s ignorance of the facts is, well, criminal.

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

* “Why are Immigrants' Incarceration Rates so Low? Evidence on Selective Immigration, Deterrence, and Deportation,” NBER Working Paper, No. 13229, July 2007.

17 August 2007

Editor, The Washington Times

To the Editor:

Cal Thomas correctly notes that too many environmentalists are motivated not by reason but by faith ("Not so hot air," August 17). His column reminds me of an experience suffered by the late Julian Simon.

Invited to speak before a group of environmentalists, Simon opened his remarks by asking his audience if they can conceive of any set of facts that would cause them to rethink their position. The answer was a resounding no. Simon then calmly folded his notes and left the podium after explaining that he was not prepared to address that audience because he didn't realize that it would be a religious gathering.

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

16 August 2007

Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281

To the Editor:

Here's advice for your readers: ignore anyone who complains that trade is "imbalanced." I have never encountered any such complaint that makes even a whiff of economic sense.

Exhibit A is today's letter from UAW President Ron Gettelfinger. Mr. Gettelfinger grumbles that "the U.S. and South Korea have a huge imbalance in auto trade." Well, duh - that's an inevitable consequence of specialization. Although we cook in our household, my family still has a huge "imbalance" in the prepared-food trade with McDonald's. But we would make ourselves only poorer if my family and I refused to buy from restaurants that do not buy equal amounts of prepared meals from us. In this case, what is true for each household is true for the collection of households that we call the United States.

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

15 August 2007

Editor, Boston Globe

To the Editor:

Jeff Jacoby courageously denounces the hysterical groupthink so prominent in the crusade against global warming ("Hot tempers on global warming," August 15).

I am a global-warming skeptic - not of the science of climate change (for I have no expertise to judge it), but a skeptic of combating climate change with increased government power. Al Gore, Robert Kennedy, Jr., and too many others dismiss the downside of curtailing capitalism in order to reduce emissions of greenhouse gases. They write and speak as if the material prosperity that capitalism brings is either not threatened by increased government power, or is of only small importance when compared to the threat of global warming. Truly reasonable people are, and ought to be, skeptical of each of these dogmas.

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