Market Correction

18 October 2008

Editor, The State
Columbia, SC

Dear Editor:

Asked why he failed to disclose his receiving, free-of-charge, $250,000 worth of renovation work on his private residence, Sen. Ted Stevens explained, as you summarized it, "that some details may have gotten lost amid the busy life of a senator: the committee meetings, the long hours and the challenges that come with representing a state four time zones away" ("Stevens combative in questioning during trial," October 17).

I see the problem. And it suggests that he (and his overworked, travel-weary colleagues in Congress) must also be unaware of the details that permeate those massive bailout bills, omnibus spending statutes, and other such pieces of legislation. No busy mortal can possibly keep track of these details. So it would be only right for Sen. Stevens and those Senators who've testified in his defense as character witnesses to renounce the vast bulk of legislation that they've passed as being filled with provisions too numerous and detailed for such busy pooh-bahs to have carefully pondered - or even to have noticed.

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

17 October 2008

Editor, The Salem News
Salem, MA

Dear Editor:

Praising Franklin Roosevelt's handling of the economy, Walter Mears writes: "He called Congress into special session. The next night, he delivered the first of his fireside chats on radio, telling Americans the government was providing the machinery for recovery and 'it is up to you to support and make it work.' Then came the flood of New Deal legislation, FDR's 'Hundred Days'" ("Voters still seeking way out of economic morass," Oct. 17).

Sounds inspiring. Mr. Mears continues:

"Roosevelt couldn't end the Depression; double-digit unemployment persisted until the World War II buildup began. But his programs eased the pain. Despite it, he changed the national mood and remade the role of the federal government."

In other words, FDR transferred massive amounts of power and resources from private citizens to government in a futile effort to rejuvenate the economy.

So FDR's achievement wasn't to improve the economy but, rather, to give Americans a false sense of confidence that improvement was on the way. What a dubious achievement.

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

16 October 2008

Editor, Washington Times

Dear Editor:

In "Other economic numbers need attention" (Oct. 16), William Hawkins assumes that every dollar increase in America's trade deficit is a dollar increase in Americans’ debt. Not so. If Mr. Hawkins pays for a new car with $20,000 cash and then observes the car dealer stuffing that cash into a mattress, Mr. Hawkins's trade deficit with that dealer rises by $20,000 while his debt to that dealer rises by exactly $0.

More fundamentally, the U.S. trade deficit means that foreigners invest in the U.S. rather than spend all of their dollars on U.S. exports. If Mr. Hawkins mistakenly thinks such investments to be undesirable, I have good news for him: as Uncle Sam meddles much more aggressively in capital markets, foreign investors will be scared away. America will then be much more likely to run trade surpluses - just as it did for nine out of ten years of the greatly depressed 1930s.

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

15 October 2008

Editor, Forbes

Dear Editor:

You describe Milton Friedman as a "champion of unfettered markets" ("Financial crisis haunts Milton Friedman's legacy," October 14). This description reflects a common but unfortunate misunderstanding.

Milton Friedman championed not unfettered markets, but markets fettered by competition and consumer sovereignty rather than by political diktats. Mr. Friedman understood that fetters imposed by government are neither the only nor the best means of keeping markets working well. Indeed, far too often - as Mr. Friedman knew - fetters imposed by government turn in practice into crowbars that businesses use to break free of the competitive shackles that oblige them to behave prudently and fairly.

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

15 October 2008

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

Dear Editor:

You ask "How did world markets come to the brink of collapse?" ("Washington Failed to Catch Up to Wall Street," October 15). You answer: "Some say regulators failed. Others claim deregulation left them handcuffed." You wonder: "Who's right?" Perhaps the answer is 'none of the above.'

Contrary to your pose of presenting all relevant possibilities, you miss the main debate entirely. The chief question is to what extent are today's problems caused by market forces, and to what extent by government interference with these forces. You, though, take the necessity of regulators for granted and ask only why they failed.

If you ran a similar report on the cause of lousy meals served at restaurants whose kitchens are crammed with regulators, you would likely open it with: "Some say regulators failed. Others claim they were handcuffed. Who's right?" Perhaps the answer is 'none of the above.' Maybe, just maybe, the meals will improve only if the regulators clear out of the restaurants altogether and let the chefs and their customers do their thing.

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

15 October 2008

Editor, Baltimore Sun

Dear Editor:

Reading "Dueling Economic Visions" (October 15) I couldn't help ask: what would the greatest reporter in your paper's history say about this mess were he still alive. Fortunately, we have evidence. In his book "Minority Report," H.L. Mencken wrote that

"People crave certainties in this world, and are hostile to ifs and buts.... In the political field the same appetite for surety is visible, which explains, of course, the prosperity of demagogues. They are simply persons who promise in loud, ringing voices to solve the insoluble and unscrew the inscrutable. At their worst they are palpable frauds, comparable to so many thimble-riggers at a county fair; at their best they come close to the elegant imbecility of theologians."*

Since Mencken's time, the only advance in politics is that office-seekers today have been bred so that any one of them can be simultaneously a successful fraud and a shocking imbecile.

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

* H.L. Mencken, Minority Report (The Johns Hopkins University Press, 1997 [1956]), p. 199.

14 October 2008

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

To the Editor:

In her otherwise fine essay "A Capitalist Manifesto" (Oct. 13), Judy Shelton claims that capitalism "accords primacy to the entrepreneur."

Not true. Capitalism accords primacy to the consumer. While capitalism rewards entrepreneurs who succeed, success under capitalism is defined as pleasing consumers. Capitalism does not, and should not, tolerate entrepreneurs who don't satisfy consumers.

The system that gives primacy to the entrepreneur - or at least to prominent producers - is corporatism. Government interventions such as tariffs accord primacy to the producer and, as a result, move us away from capitalism and toward corporatism.

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

14 October 2008

Editor, New York Post

Dear Editor:

This year's Nobel Prize winner in Economics, Paul Krugman, famously worries about income "inequality." He explains this concern as stemming from (as he wrote in a 2002 article for the NY Times Magazine) "a matter of arithmetic": if one person gets richer by $1, other persons must get poorer by this amount.

I dispute his assumption that wealth is a pie fixed in size - but, hey, I'm no Nobel laureate.

So (as pointed out by my former colleague Dave Porter) Nobel-quality economics now informs us that because Prof. Krugman is richer by his $1.4 million prize winnings, the rest of us, collectively, are $1.4 million poorer. I do hope that Prof. Krugman finds some salve for his conscience.

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

12 October 2008

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

Dear Editor:

Fred Hiatt hits the nail squarely: John McCain's campaign is short on ideas (a happy fact, by the way, when one considers the few ideas that the Senator does offer) and long on appeals to patriotism ("What McCain Hasn't Tried," October 13).

Whenever I encounter such flag-waving, I recall this wise warning from H.L. Mencken: "Patriotism, though it is based upon the natural and indeed instinctive love of home, has been elevated in the modern world into an unparalleled congeries of imbecilities. What it demands of the individual citizen, as a practical matter, is that he yield not only his judgment but also his property and even his life to whatever gang of scheming politicians happen to be in power."*

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

* H.L. Mencken, Minority Report (Baltimore: The Johns Hopkins University Press, 1997 [1956]), pp. 115-116.

12 October 2008

News Editor, WTOP Radio

Dear Editor:

During the 2pm hour your anchor interviewed an "expert" who insisted that the cause of today's financial crisis is "deregulation." This gentleman confidently asserted that "only people who are uninformed" disagree with him on this matter.

Well now. Today's edition of the St. Petersburg Times ran a report with this quotation from Columbia University's Charles Calomiris, one of the world's leading scholars of money and banking: "the only deregulation in banking of any significance (branching deregulation, and allowing commercial banks to underwrite corporate securities) had nothing to do with the subprime crisis. Said differently, everyone (including commercial banks) who underwrote or bought subprime paper would have been able to do so long before deregulation."*

Your "expert" seems to be uninformed.

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

* http://www.tampabay.com/news/politics/article848444.ece

12 October 2008

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

To the Editor:

Douglas Lappi asserts that today's economic turmoil is caused by free markets (Letters, October 12). Because, as all serious observers know, at no time during the past century has laissez faire existed in America, Mr. Lappi must mean something like the following: government's forbearance from completely nationalizing all financial and industrial operations has left some freedom in some markets - freedom that is the culprit causing today's problems.

As a matter of logic, this argument cannot be dismissed. But also as a matter of logic, an argument counter to this one cannot be dismissed. Just as today's problems might be caused by market freedoms that exist alongside the many government regulations, so, too, might these problems be caused by the many regulations that exist alongside market freedoms.

Without evidence of how much, if any, of today's meldown is caused by these market freedoms (rather than by the continuing regulations), assertions such as Mr. Lappi's are nothing more than uninformed and irresponsible outbursts.

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

12 October 2008

Editor, Boston Globe

Dear Editor:

Meghan Shoemaker says that "Being prochoice means trusting the woman to make the right decision for her and her family. It means not entrusting that life-altering decision to anyone wearing a badge or robe" (Letters, October 12).

If that life-altering decision is properly left to each woman, isn't it also true that each individual should be free to choose other life-altering paths, such as to ingest currently prohibited narcotics - such as buying goods from abroad without having to pay tariffs - such as working at a wage below the statutorily prescribed minimum - such as purchasing the services of unlicensed physicians, attorneys, and electricians - such as patronizing and working in restaurants that allow smoking - such as not wearing seatbelts - such as educating children as each parent sees fit - such as saving whatever and however for retirement - indeed, such as making these and other personal choices without the interference of anyone wearing a badge, a robe, or the cheap title of elective office.

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