Market Correction

3 May 2008

Director, Here and Now
WBUR - Boston

Dear Sir or Madam:

I listened to your segment documenting teenagers' struggle to find summer jobs (May 2). Several times you asked why teens are suffering this difficulty, but not once did you mention, as a possible explanation, the higher minimum wage.

The economic theory (and much evidence) of how minimum-wage legislation affects employment explains remarkably well the patterns you document. Teenagers have few skills, so their value to employers is low. It is precisely such low-skilled workers who are priced out of the job market by minimum-wage legislation. In addition, the fact that the teens having the hardest time finding jobs are minority kids from inner cities is also explained by economics: by creating a surplus of low-skilled workers, the minimum-wage encourages employers to discriminate in favor of white suburban kids and against minority youths.

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

2 May 2008

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

To the Editor:

Adhering to the general practice of saying that free trade has both winners and losers, you introduce two letters on Nafta with the heading "Nafta Has Helped Some, Hurt Some" (Letters, May 2). But this familiar endeavor to appear reasonable misleadingly implies that trade across political boundaries has a unique propensity to help some and hurt others. In fact, ANY economic change helps some and hurts others.

Would you introduce letters on the polio vaccine with "Vaccine Has Helped Some, Hurt Some"? After all, the vaccine eliminated jobs for workers who made crutches, wheel chairs, and iron-lung machines. Of course, the benefits of the vaccine - especially over the long run - far outweigh the costs. Likewise with consumers' freedom to spend their incomes as they choose. And free trade is nothing more than consistently allowing consumers to spend their incomes as they choose.

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

1 May 2008

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

To the Editor:

Nicholas Kristof understandably laments the clear-cutting of the Ecuadorian rainforest ("Can We Be as Smart as Bats?" May 1). But as is true of too much commentary on this issue, he blames the problem on human ignorance or myopia without even mentioning the possibility that incentives to clear-cut might be created by insecure property rights.

Such insecurity, for example, causes the clear-cutting of the rainforest in Brazil. Law in that country gives more secure title to owners whose lands are in beneficial use, which is interpreted by the authorities to mean under cultivation. In addition, squatters who clear and cultivate lands can request redistribution of those lands to themselves. Economist Gary Libecap correctly calls such property rights "uncertain and confused" - and notes that this uncertainty and confusion over land titles is a major factor leading to deforestation in Brazil.* Surely Mr. Kristof should look to see if similar problems afflict Ecuador.

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

* Gary D. Libecap, "Contracting for Property Right," Chapter 6 in Terry Lee Anderson and Fred S. McChesney, Property Rights: Cooperation, Conflict, and Law (Princeton University Press, 2003); quotation on page 156.

30 April 2008

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

Dear Editor:

For the umpteenth time, Harold Meyerson asserts that "free trade...will only weaken the nation more" ("Landing the White Whale," April 30). And for the umpteenth time he presents no evidence to back this assertion.

It's time that Mr. Meyerson be informed that dicta are not data. The empirical evidence on trade shows overwhelmingly and unambiguously that freer trade increases prosperity. It shows also that freer trade lengthens life-expectancies and even reduces the likelihood of nations going to war. No matter how you cut, slice, dice, or interpret the data, the conclusion remains that free trade yields enormous benefits to ordinary people.

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

29 April 2008

Editor, USA Today

Dear Editor:

You report that "homes facing foreclosure more than doubled" in the first quarter of 2008 from the first quarter of 2007 ("Homes facing foreclosure more than doubled in Q1", April 29). Sounds ominous.

But a bit of perspective might relieve at least some of the worry. The number of homes now facing foreclosure is about one-half of one percent of homes in the U.S. Although higher rates of foreclosure are nothing to celebrate, the current panic over the alleged "collapse" of the housing market and the end of the American dream are surely and vastly overblown.

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

28 April 2008

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

To the Editor:

Re "Lady Macbeth vs. Billy Budd" (April 28): I nodded my head empathetically to nearly all that Joseph Epstein wrote about his fascination with the Clinton-Obama slugfest. Most significantly, I share his wonder that any voter finds Mrs. Clinton to be an attractive candidate. For me, she has all the appeal of a turpentine martini.

But Mr. Epstein falters badly when he describes Barack Obama as possessing "naive yet carefully orchestrated idealism." Idealism that is carefully orchestrated isn't naive; and when deployed for a successful political campaign, such orchestration quickly quashes the candidate's idealism. Mark my words: Mr. Obama will eventually show himself to be less Billy Budd and more Willy Stark.

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

27 April 2008

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

Dear Editor:

Robert Frank argues that much of the mortgage crisis was caused by parental affection ("Don't Blame All Borrowers," April 27). In Mr. Frank's view, John and Jane Doe's understandable desire to provide the best possible education for their children - rather than any irresponsible "lust" by the Does "for cathedral ceilings and granite countertops" - combined with lax regulatory oversight to compel too many families to borrow money to buy unaffordable houses in locales boasting above-average schools. Mr. Frank finds such borrowing decisions to be forgivable.

This argument is quite a stretch. At the least, a family wishing to live in a good school district need not buy a home; renting is an option. And in many cases, buying a more modest home is also an option (although one that is disappearing in upscale counties with minimum-lot-size regulations and similar zoning restrictions). Regardless of the nobleness of the motivation, buying a house that you can't afford is irresponsible and blameworthy.

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

27 April 2008

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

Dear Editor:

There are many reasons why America remains an attractive place for Europeans to invest, but contrary to Moises Naim's claim, the falling dollar is not one of them ("What Can They Buy? A Good Bit of Us.," April 27).

While a falling dollar does mean that Europeans need fewer euros than before to buy dollar-denominated assets, a falling dollar also means that each dollar of returns on these assets exchanges for fewer euros than before. Look at it this way: if the dollar's value fell to zero, Europeans could get dollar-denominated assets for free - that is, for NO euros! But also, dollars earned as returns on these assets would exchange for NO euros (nor for anything else, for that matter).

In short, a falling dollar does not increase the real rate of return on dollar-denominated assets; therefore, a falling dollar does not raise the demand for such assets.

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