Market Correction

14 October 2007

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

To the Editor:

Thomas Friedman wants "a president who can unify the country around meaningful action on energy and climate" ("Who Will Succeed Al Gore?" October 14).

I get the creeps whenever I encounter anyone seeking national "unity." A practical impossibility in a nation of 300 million people, "unifying the country" really means government seizing enormous amounts of additional power in order to embark upon schemes of social engineering - schemes whose pursuit gratifies the abstract fantasies of the theory class and, simultaneously, lines the very real pockets of politically powerful corporations, organizations, and "experts."

I want a president who will stick exclusively to protecting my freedoms.

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

13 October 2007

Editor, The Washington Times

To the Editor:

George Lesser correctly notes that Japan's economy is among the most advanced in the world ("Lessons Learned in Japan," October 13). But he's on shakier grounds when suggesting that ordinary Japanese citizens live better than do ordinary Americans. Japan's protectionist agricultural policies keep food in that country notoriously expensive - a fact that contributes to Japan's GDP per capita (calculated according to purchasing power parity) being only about 75 percent of what it is in America (and only 85 percent of what is in Hong Kong).

Or consider housing: even though the Japanese population is older than that of the U.S., and even though the average Japanese home is only one-third the size of the average American home, the home-ownership rate in Japan is lower than in the U.S. (60 percent compared to America's 68 percent).

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

12 October 2007

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

Dear Editor:

Michael Gerson supports Hillary Clinton's plan to have Uncle Sam subsidize savings accounts for poor children ("The Economic Elephant At the GOP Debate," October 12). Playing the more-pragmatic-than-thou card, Gerson notes that "Assets cause people to plan for the future."

Indeed so. But nearly every American born today - including those born to poor parents - already at birth possesses a fabulously valuable asset: an opportunity to work and earn income in an immensely productive economy. Even excluding fringe benefits, the ordinary production-line worker in America today earns an annual salary of about $31,000. Someone who works fifty years earning this salary will earn a lifetime income of $1,550,000. At birth, the discounted value, at today's interest rates, of this opportunity is about $246,915. It is, of course, an asset that must be nurtured - an asset that will pay off only if those who hold it plan for the future.

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

11 October 2007

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

To the Editor:

You assert that "a President's first duty is to do whatever it takes to protect the United States" ("Send in the Attorneys," October 11). Not true. A President's first duty is to uphold the Constitution. If that official's first duty were as you describe it, there would be no point in referencing the Constitution in the oath in which the President swears "to preserve, protect and defend the Constitution of the United States." He would swear simply "to protect the United States."

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

10 October 2007

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

Dear Editor:

Robert Samuelson mistakenly suggests that bank runs in the U.S. during the Great Depression were caused by the absence of deposit insurance ("Lessons from the '87 Crash," Oct. 10). The real culprit was prohibitions on branch banking and on banks issuing their own notes. The prohibition on branching restricted banks' ability to diversify their depositor bases and portfolios. A result was greater exposure to risk. The prohibition on note issue prevented banks from easily meeting customers' desire to hold more currency relative to the size of deposits.

The claim that these statutory restrictions fueled the hundreds of Depression-era bank failures in the U.S. is supported by the fact that in Canada - which, unlike the U.S., allowed banks to branch and to issue their own notes, and which did not have deposit insurance until the 1960s - not a single bank failed during the Great Depression.

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

9 October 2007

News Editor, Morning Edition
National Public Radio

Interviewed this morning by Steve Inskeep, David Wessel asserts that economists working in the Austrian tradition want there to be regular recessions in order to rid the economy of bad investments. Not so. F.A. Hayek and many other Austrian economists argue that excess money creation makes certain investment opportunities appear to be more attractive than they really are. In this theory (whether or not it is correct), recessions are the unfortunate but inevitable result of entrepreneurs eventually learning that artificially low interest rates misled them into starting projects that are economically unsustainable.

Put differently, recessions are no more necessary or desirable than are hangovers: someone who never drinks to excess will never, and ought never, suffer a hangover.

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

8 October 2007

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

To the Editor:

Barry Goldwater did indeed argue that reducing government's size takes precedence over making it more efficient. Paul Krugman - convinced that every opponent of the welfare state is a devious scoundrel - offers Goldwater's argument as evidence that non-"liberals" want government to be incompetent.

Opponents of expansive government have long explained that a government that tries to do everything will do everything poorly. The late Sen. Goldwater, being no anarchist, sought to confine government to a relatively few core functions, in part because being so confined would enable government to perform these functions more competently.

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