Market Correction

24 January 2009

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

To the Editor:

The headline of your report on Mayor Lawrence Morrissey of Rockford, IL, spending time in Washington begging pooh-bahs there for money speaks volumes: "Wish List in Hand, Mayor Travels to Washington and Finds He's Not Alone" (January 24).

Mayor Morrissey's use of his time seeking government handouts is an ideal, if unintentional, tribute to a great son of Rockford, the economist Gordon Tullock. Forty-two years ago, in one of the most important papers published in economics during the 20th century, Tullock identified the phenomenon of "rent-seeking."* Rent-seekers generate huge amounts of waste by using resources to plead for handouts. It's not so much the actual transfers from taxpayers to successful supplicants that are wasteful, Tullock showed, but the fact that the prospects of receiving these transfers prompt producers to form themselves into special-interest groups. These interest groups divert the time and resources that they, as producers, would have spent doing socially productive things - such as administering cities efficiently - into lobbying for government favors. Successful rent-seekers benefit, but the diversion of resources from productive uses into pleading and pandering at the feet of politicians makes society poorer.

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

* Gordon Tullock, "The Welfare Costs of Tariffs, Monopolies and Theft," Western Economics Journal, Vol. 5, 1967, pp. 224-232.

23 January 2009

Editor, Washington Times

Dear Editor:

Re your headline "Top bailout recipients also major lobbyists" (Jan. 23): While I appreciate the appropriateness of this headline, it's discouraging to realize that such a fact is newsworthy.

If people were as credulous about non-politicians as they are about politicians, we'd routinely read headlines such as "Thief Steals Money to Benefit Himself!" or "Teenage Boys Buy 'Playboy' for the Pictures, Not the Articles" or "18-year-old Italian Supermodel Marries 98-year-old Billionaire Only for His Money!"

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

23 January 2009

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

Dear Editor:

Treasury Secretary nominee Timothy Geithner sides with those who worry, as you put it, that "Beijing has kept its currency artificially low to keep the prices of its goods cheap and generate trade surpluses. That has led to a global capital imbalance, as American consumers borrowed and spent and China became the United States' largest foreign creditor" ("Geithner Says China Manipulates Its Currency," January 23). And he threatens to act "aggressively" to stop this alleged wrongdoing.

Overlook the reality that the only way Beijing can push the price of the yuan lower is through inflation or other policies that weaken the Chinese economy. Instead ask: why should the Obama administration be so upset by Beijing pumping easy credit into markets at a time when this same administration is deeply worried that credit has become too tight?

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

22 January 2009

Editor, WTOP Radio
Washington, DC

Dear Editor:

Interviewed this morning in your report on how Uncle Sam will assume many of the insurance obligations for the Metro transit system, Rep. Jim Moran asserted that this assumption of obligations will "cost taxpayers nothing."

How absurd. Government provision of insurance to Metro would cost taxpayers nothing only if it were certain that whatever insurance claims Metro files in the future will be lower in value than whatever insurance premiums Metro pays. But if this outcome were certain, each and every private insurance company would be jumping at the opportunity to insure Metro. The fact that government feels obliged to serve as Metro's insurer strongly suggests that the expected value of Metro's future claims on its policy exceed the value of the premiums it will pay to Uncle Sam. Taxpayers will be on the hook for the difference.

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

22 January 2009

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

Dear Editor:

President Obama's inaugural declaration that "The question we ask today is not whether our government is too big or too small, but whether it works" is further evidence that the wisdom and values that animated America's founding generations are lost.

If Thomas Jefferson thought as Mr. Obama does, he would have written in 1776: "We hold these truths to be self-evident, that all men are endowed by their government with the unalienable right to be taxed, regulated, scolded, herded, harassed, and otherwise ruled in whatever ways work."

And these soaring words would have been part of the Declaration of Dependence.

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

21 January 2009

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

To the Editor:

Alberto Alesina and Luigi Zingales say that "this recession is unusual is that it was caused in large part by a significant current-account imbalance due to the low savings rate of Americans (families and government)" ("Let's Stimulate Private Risk Taking," January 21). Not so. A current-account imbalance might reflect conditions that portend recession, but it cannot itself cause a recession.

To see why, suppose that Uncle Sam declares Canada, Europe, China, and Japan to be parts of the United States. With no further changes, most of the U.S. current-account deficit would immediately disappear. Much of what were formerly classified as imports, exports, and international capital flows would lose those special classifications - just as purchases, sales, and investments between, say, Nevada and Utah are adorned with no special classifications. And yet, surely no recession can be cured merely by reclassifying economic transactions.

But just as no such reclassification can cure a recession, no recession can be caused by the initial classification of economic transactions. Whatever foolish monetary or fiscal policies might spark bad investments, whatever irrational bubble-izing behaviors might move the market, or whatever unwise regulations (or lack of regulations) might encourage unsustainable investments, it is REAL factors such as these that bear the blame for market unrest and not the arbitrary measurement called the "current-account imbalance."

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

20 January 2009

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

To the Editor:

During the past few days, your paper, like many others across the country, has been filled with celebratory praise for America's tradition of transferring political power peacefully. I am among the celebrants.

But my celebration is tempered by the realization that ours would be an even more civilized and progressive society if we had much less political power to transfer - if we had finally cast off the ages-old superstition that human lives gain meaning only through subordination to a grand collective directed by Great Leaders. Not until more Americans replace their fascination with power and personality with a love of liberty will this country ascend to the highest possible stage of civilization.

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