The Music of the Market
22 August 2008
Editor, The New York Times
229 West 43rd St.
New York, NY 10036
To the Editor:
Jeffrey Lewis nicely recounts the experiment of a band using extreme improvisational methods to compose music - no one or two identifiable composers, but participation by all band members ("Communist Songwriting (Sort Of)," August 19). Mr. Lewis describes the goal: "The songs should never be the recognizable product of one or two minds, but an ineffable, dreamlike synthesis of three or more participants in which the final result was sometimes quite mind-boggling."
Contrary to Mr. Lewis's claim, though, this method of composition has far more in common with the free market than it does with communism. Communism turned each individual into, at best, a robot with a tightly scripted role in a gigantic central plan. The communist ideal was PLANNED 'progress'; nothing was to be left to unreliable individual initiative. Everything was directed, in mind- and soul-numbing detail, from the top.
But in free markets - THERE the results are truly and marvelously mind-boggling! Consider the mundane pencil and ask: whose idea was it? Who planned its production from the raw-material stages (felling trees for the wood, drilling oil for the paint, mining bauxite for the ferrule and graphite for the ‘lead’) through to pencils' delivery to hundreds of thousands of retailers? The answer is no one. Pencils - and cars and MP3 players and aspirin and romantic B&Bs and you name it - are each the creative, awesome result, not of any one or two 'composers,' but of the efforts of millions of individuals each doing his or her thing in the feedback-rich environment of markets.
Play on!
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Blind to Reality
21 August 2008
Editor, Washington Post
1150 15th St., NW
Washington, DC 20071
Dear Editor:
Harold Meyerson insists yet again that America has lost its manufacturing, alleging also that investors are abandoning the U.S in favor of "nations with far cheaper workforces" ("Obama's Factory Factor," August 21). Mr. Meyerson singles out China as one such nation.
Facts utterly contradict Mr. Meyerson's fantasies. First, U.S. manufacturing revenues (adjusted for inflation) reached their all-time high in 2006. 2006 was also a peak year for inflation-adjusted manufacturing profits in the U.S. and for inflation-adjusted U.S. manufacturing exports. And the U.S. accounts for the largest share of the globe's manufacturing output; Americans today produce 2.5 times more manufactured goods than do the Chinese.*
Second, in 2007 the flow of per capita foreign direct investment into the U.S. was up 13 percent from 2006, to $672. In China, it was up 14 percent - to $55.**
Harold Meyerson is a perfect example of the Beatles' "Nowhere Man":
"He's as blind as he can be / Just sees what he wants to see."
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
* http://www.freetrade.org/ManufacturingQuiz
** These figures were assembled from:
http://www.ofii.org/docs/FDI_2007.doc
http://www.iht.com/articles/2007/01/15/business/yuan.php
http://209.85.215.104/search?q=cache:I4vFm52RXG4J:www.marketwatch.com/news/story/foreign-direct-investment-china-surges/story.aspx%3Fguid%3D%257B92E5F0B5-115F-426B-8033-2DAC5E5BF283%257D+%22foreign+direct+investment+in+china%22+2007+2008&hl=en&ct=clnk&cd=3&gl=us&lr=lang_en
China and the World Economy
20 August 2008
Editor, Washington Post
1150 15th St., NW
Washington, DC 20071
Dear Editor:
The usually sharp Robert Samuelson is unusually shaky about the "threat" that China allegedly poses to the world economy ("The Real China Threat," August 20). For example, consider his concern that China's exchange-rate policy keeps the prices of its exports too low. Where's the problem for the rest of the world? If China really is supplying goods to us non-Chinese at prices below the true cost of producing these goods, it is forcing its citizens to subsidize our consumption. It is making China poorer while making other countries richer.
Mr. Samuelson would object that this policy harms manufacturers, especially those in poor countries. But suppose - not fantastically - that Chinese low prices were caused not by Beijing's currency policies but instead by Chinese entrepreneurs devising production processes that dramatically lower the true cost of manufacturing in China. Manufacturers in other countries would be no less harmed than if China's low prices were the result of Beijing's policies, while the world's consumers would be no less benefited. The only difference between this scenario and today's (alleged) reality is that, in the latter case, China is made poorer.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
Enterprise Hall
George Mason University
Worrying About 'the Income Gap' Is Worse than Childish
19 August 2008
Editor, Boston Globe
Dear Editor:
Derrick Jackson wants government to reduce income differences among Americans ("Politely declining to touch the income gap," August 19). Forget that even poor Americans today generally have greater access to goods and services than did middle-income Americans of a generation ago.* Instead ask: what kind of philosophy demands that government do what all decent parents teach their children not to do?
Who among us sends our children to school or to the playground with admonitions to begrudge classmates or playmates possessing nicer clothing or fancier toys? Who among us counsels our youngsters to form schoolyard coalitions for forcibly confiscating expensive sneakers and video games from 'rich' kids for "redistribution" to poorer kids? Who among us would not scold our children for such envy, and punish them severely if they participated in such thievery?
Children should avoid envy and learn to thrive by producing rather than by taking. The same is true for adults.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
* http://www.american.com/archive/2008/july-august-magazine-contents/how-are-we-doing
Competition in Reality vs. "Competition in Textbooks
18 August 2008
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
To the Editor:
It's pro-competitive, not anticompetitive, for a retailer to contractually agree with a manufacturer not to charge prices below some minimum for that manufacturer's products ("Price-Fixing Makes Comeback After Supreme Court Ruling," August 18). Because information in markets is imperfect, consumers often and rationally read prices as signals of product quality. Manufacturers who are prevented from setting retail prices that signal their products' high quality will have less incentive to offer high-quality goods - and, hence, less incentive to compete on the basis of quality. Why incur the extra cost of producing higher-quality goods if consumers are inadequately informed about such quality and, therefore, too reluctant to pay prices commensurate with this higher quality?
Retailing is a fiercely competitive industry. Competition among retailers - not only for consumer patronage but also for the best deals from manufacturers - ensures that retailers will not generally bind themselves contractually to charging excessively high prices for the products they sell.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Avoid Games of Chicken
18 August 2008
Editor, Washington Post
1150 15th St., NW
Washington, DC 20071
Dear Editor:
Amity Shlaes rightly points out that in the 1930s "An irate Canada and many other nations retaliated" against the Smoot-Hawley tariff ("Five Ways to Wreck a Recovery," August 18). Take, for example, the case of eggs. Smoot-Hawley increased the tariff on eggs by 25 percent, resulting in a 40 percent fall in egg imports from Canada. Canada responded by raising its tariff on U.S.-produced eggs by 233 percent - causing U.S. egg exports to Canada to fall from 11 million annually to a paltry 200,000.*
Such retaliation isn't the only reason protectionism harms an economy, but it's a predictable and important one.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
* See Jeffry Friedan, Global Capitalism (New York: W.W. Norton, 2006), p. 255.
Fatuous Frank
17 August 2008
Editor, The New York Times Book Review
229 West 43rd St.
New York, NY 10036
To the Editor:
Thomas Frank is confused. First he argues, in 2004, that capitalist materialism was unleashed on this great land by, of all things, Americans' failure to be sufficiently materialistic. Now he asserts that the gigantic and powerful lobbying industry currently astride Washington is the spawn of the same free-market ideology that has allegedly succeeded in inflicting laissez faire policies on Americans ("What's the Matter With Washington?" August 17).
I waited in vain for reviewer Michael Lind to point out the obvious fact that, if the market really has become so dominant as Mr. Frank famously asserts, the government would have fewer, not more, favors to sell. Lobbying would be a dying industry.
Alas, the continued, kudzu-like growth of lobbying firms in Washington is powerful evidence against Mr. Frank's incessantly repeated insistence that free-market "idolaters" have shifted all power from government to markets.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
The Dishon.
17 August 2008
Editor, Washington Times
Dear Editor:
Herb Stark rightly distrusts politicians and shakes his head in wonder at the maneuvering to give Hillary Clinton her "own night" at the Democratic convention (Letters, August 17).
As H.L. Mencken observed, "The typical politician is not only a rascal but also a jackass, so he greatly values the puerile notoriety and adulation that sensible men try to avoid.... The one aim of all such persons is to butter their own parsnips. They have no concept of the public good that can be differentiated from their concept of their own good."*
Politicians of all parties are a blight and a curse. The civility of a society increases in proportion to how successfully its citizens resist infestations of these noxious pests.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
* Marion Elizabeth Rodgers, ed., The Impossible Mencken (New York: Doubleday, 1991), pp. 66-67.
