Market Correction

13 March 2009

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

To the Editor:

You report that "New York State Attorney General Andrew Cuomo is in discussions with Rep. Barney Frank and other lawmakers on a plan to tie Wall Street pay to the long-term performance of the firms" ("Cuomo, Frank Seek to Link Executive Pay, Performance," March 13). But lest anyone conclude that Messrs. Cuomo and Frank propose giving government excessive power, we're assured that "A person close to Mr. Cuomo said change is needed but the intent isn't to micromanage or interfere with the private sector."

Reality is not changed by dishonest disclaimers. Suppose that I threaten to break my neighbor's knee-caps if I determine that the weekly allowance he gives to his children is too high. Should he be reassured if my treat is accompanied by an announcement that my intent isn't to interfere in his private life?

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

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10 March 2009

Editor, Washington Post

Dear Editor:

Your headline reads "U.S. to Toughen Its Stance On Trade" (March 10). Sounds great, doesn't it? Who wants their government to be pushed around by bad guys?

Trouble is, "getting tough on trade" is a euphemism for government getting pushed around by bad guys. When government "toughens" its trade posture, it always does so under pressure from organized producer groups - producers too frightened and too greedy to compete against foreign rivals - producers too namby-pamby to vie for consumer demand without government making it tougher for its own citizens to get the most for their money by buying imports.

For the U.S. "to toughen its stance on trade" is for Uncle Sam, bullied by special interests, to rough up American consumers who would prefer to buy more foreign-made products.

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

10 March 2009

Editor, The New York Times
620 Eighth Avenue
New York, NY 10018

To the Editor:

Paul Krugman claims that the "stimulus" plan is failing because it's "too small and too cautious" ("Behind the Curve," March 9). To support this claim, he points to the continuing loss of jobs.

If Keynesian theory (upon which the stimulus plan is based) were correct, insufficiently large deficit spending would indeed fail to restore full employment - but it would restore SOME employment. Contrary to Mr. Krugman's insinuation, in a Keynesian world deficit spending delivers some benefits even if it is too small to deliver maximum possible benefits.

So the continuing slide of the economy in the wake of hundreds of billions of dollars of stimulus spending suggests that Keynesianism is invalid.

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

9 March 2009

Editor, The New York Times
620 Eighth Avenue
New York, NY 10018

To the Editor:

Paul Krugman insists that the current stimulus plan will fail because it is too small ("Behind the Curve," March 9). We non-Keynesian economists also believe that it will fail, but for very different reasons: the chief problem is less one of deficient aggregate demand than it is one of poor coordination of the plans of producers with the (non-bubblicious) demands of consumers.

Economic prosperity requires that workers whose jobs were created by the bubble be redeployed into jobs that are more sustainable. Stimulus spending does nothing to promote this greater coordination of economic activities - and, by promising higher taxes or higher inflation in the future, it likely interferes with the economy's capacity to coordinate.

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

9 March 2009

Mr. Charles Osgood
CBS News

Dear Mr. Osgood:

Interviewed today on "The Osgood File," Dr. Irving Weissman said that Pres. Obama's lifting of the ban on federal funding for stem-cell research will "take politics back out of science."

Nonsense. While I don't object to stem-cell research, it's Orwellian newspeak to describe government funding of it - or of anything else, for that matter - as representing a retreat of politics. The decision to spend taxpayer dollars in on such research is every bit as political as was the Bush administration's decision not to do so. And because researchers dependent upon government largesse will inevitably be subjected to political pressures, the restoration of such funding further intrudes politics into science.

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

8 March 2009

Editor, The New York Times
620 Eighth Avenue
New York, NY 10018

To the Editor:

Jeffrey Sachs correctly insists that "the numbers don't add up" to support Paul Krugman's claim that the current economic crisis is caused by Asians' "oversaving" (Letters, March 8).

But both Messrs. Sachs and Krugman ignore the deeper question: How can savings be excessive? If people are frugal, entrepreneurs might have difficultly luring them to buy greater quantities of output, but surely these entrepreneurs can find ways to use the saved resources to improve the efficiency of producing those goods and services that consumers DO buy. Frugal consumers, after all, will be especially eager to patronize producers who lower their prices. And a large and growing supply of saved resources is just the ticket to create the greater efficiencies that make possible these lower prices.

Scholars such as J.M. Keynes have speculated that savings can be excessive, but I know of no hard evidence that these speculations are valid.

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

7 March 2009

Editor, The New York Times
620 Eighth Avenue
New York, NY 10018

To the Editor:

Noting that the eleven economists you asked to predict when the recession will end each gave a different answer, Christopher Cook concludes that economics is akin to astrology (Letters, March 7).

This conclusion is understandable because we economists too often mistakenly believe that we - like astronomers - possess knowledge of facts and interrelationships that is sufficiently detailed to allow us to make precise predictions. But as the late Nobel economist F.A. Hayek argued, the economy is far too complex ever to allow for successful detailed predictions.

Mr. Cook's conclusion is also unjustified -- because economics DOES provide a systematic and vital way of interpreting real-world events and of making general, if conditional, predictions: predictions such as "if the demand for wool rises, all other things unchanged, the price of mutton will fall."

Those economists who pretend to know more than they can possibly know do a disservice to those of us who, like all good scientists, understand the limits of our knowledge.

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

6 March 2009

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

To the Editor:

How distressing that so many Americans believe that government-supplied universal health care will make medical treatments more accessible to ordinary Americans ("Obama Calls to Overhaul Health-Care," March 6). Does anyone believe that food would become cheaper and more abundant if we socialized agriculture? Would we enjoy more entertainment if we socialized Hollywood, Broadway, and Nashville? Would kitchen appliances suddenly become free if government gave us universal kitchen-appliance insurance?

Adam Smith, in The Theory of Moral Sentiments, lamented that people are easily duped by the promises of an alluring Great New System. Such people, Smith says, "are commonly intoxicated with the imaginary beauty of this ideal system, of which they have no experience, but which has been represented to them in all the most dazzling colours in which the eloquence of their leaders could paint it. Those leaders themselves, though they originally may have meant nothing but their own aggrandisement, become many of them in time the dupes of their own sophistry [Sen. Kennedy, perhaps?!], and are as eager for this great reformation as the weakest and foolishest of their followers."*

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

* Adam Smith, The Theory of Moral Sentiments (Indianapolis: Liberty Fund, 1976 [1759]), p. 379.

6 March 2009

News Editor, WTOP Radio
Washington, DC

Dear Sir or Madam:

Interviewed today during the 7am hour by Bruce Alan and Mike Moss, "Meet the Press" host David Gregory attributed at least some of the slide in the stock market to Treasury Secretary Geithner's troubles at filling some deputy posts in his Department. How naïve.

Mr. Gregory's understanding of markets reflects the antediluvian belief that all order is designed and, to keep functioning, must be controlled by visible hands. But in fact, the functioning of markets doesn't depend upon government officials controlling or even overseeing things. Quite the contrary. The market's recent fall is more likely the result of far too MUCH 'oversight,' regulation, and meddling by politicians and their underlings.

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

I might even take up (gasp!) smoking tobacco - as I drive, packing unregistered heat, without my seat-belt buckled to the nearest fast-food restaurant serving mountains of trans-fat-laden non-free-range red-meat sandwiches. And I'll cover my feast with plenty of salt.

5 March 2009

Editor, Washington Times

Dear Editor:

Howard Wooldridge correctly highlights many of the regrettable consequences of the "war on drugs" - not the least of which is greater violence (Letters, 5 March).

But let's be clear: the main reason all drugs should be legalized is that in any country with any pretensions of valuing freedom, what any person smokes or ingests or injects is the business only of that person and of his or her family. It is emphatically NOT the business of government. If I want to eat arsenic appetizers and then wash them down with a keg of kerosene, that's MY business. Likewise if I want to smoke pot, snort cocaine, drink moonshine, or consume any other substances declared by the state to be 'illegal.' As a free human being I reserve the right to do what my body what I choose, and I’ll be damned if any politician (or any other officious busybody) will stop me.

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

4 March 2009

Editor, Washington Times

Dear Editor:

Asserting that capitalism corrupts, Daniel Gallington alleges that "the economic power of the private sector, especially if unsupervised, is unable to prevent itself from exploiting whatever ways are found to take lots of easy money out of our economy in the short term, especially if our government allows it. And that is what happened" ("How capitalism corrupts," March 4).

I offer a very different thesis: at the root of the problem is the power of the Federal Reserve to put lots of easy money INTO our economy - new money that creates asset bubbles and inflation, and warps private-sector decision-making by distorting prices. And that is what happened.

Capitalism doesn't corrupt; central banking does.

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

4 March 2009

Editor, Baltimore Sun

Dear Editor:

Because she's "outraged by the exorbitant sums that are paid to CEOs and to upper management in the United States," Susan Talbott asks your newspaper "to summarize the salaries and benefits paid to the top 100 CEOs in the nation" (Letters, March 4). Her reason is that "People need to have facts to be able to protest and effect change."

If Ms. Talbott has not yet seen these data, then she clearly has reached a conclusion based on mere supposition rather than facts. If, on the other hand, she HAS seen these data, she likely found them by doing what anyone seeking such information for publicly traded companies can do free of charge: go to the Securities and Exchange Commission's website. There's little reason for you to devote ink and paper to reporting such facts.

Oh, and if Ms. Talbott truly is outraged, she can buy shares of these privately owned companies and then protest executive compensation legitimately, as an owner, rather than cheaply as a non-owning busybody.

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

3 March 2009

Editor, Foxnews.com

Dear Editor:

President Obama today offered investment advice, declaring that "What you're now seeing is a profit and earnings ratios get to the point that buying stocks is a good thing if you have a long-term perspective on it" ("Obama: It's a Good Time to Buy Stocks," March 3).

Having no expertise at investing, Mr. Obama's must believe that living in the White House imbues him with magical powers of insight. Persons much more experienced at investing than Mr. Obama are mostly selling rather than buying - a fact that suggests that Mr. Obama's arrogance overwhelms his abilities. What's next? Will he offer chef Mario Batali tips on making soufflés? Instruct Bruce Springsteen on writing music? Advise Joe Torre on the intricacies of baseball?

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

2 March 2009

Editor, Washington Times

Dear Editor:

The Dow fell another 300 points today ("Dow plunges nearly 300 to close below 6,800," March 2). This fact means that the Dow is now down 41 percent since the first trading day in September (the month in which the Bush administration and the Fed shifted wildly into a mad mode of bailouts, "stimulus," and money creation), down 30 percent since Barack Obama's election, and down 15 percent since Mr. Obama took office.

Who really knows why? But paraphrasing a question asked by my colleague Bryan Caplan, at the blog EconLog,* I ask: If laissez-faire policies had been the order of the day since early September, would not politicians, pundits, and "progressive" preachers be unified in their angry assurance that such a decline was caused by the free market and would have been avoided had only Uncle Sam bailed firms out and stimulated the economy with goo-gobs more spending and faster money-supply growth?

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

* http://econlog.econlib.org/archives/2009/03/department_of_d.html

2 March 2009

Americas Editor, BBC News

Dear Sir or Madam:

Accompanying your report on Hugo Chavez's seizure of privately owned rice mills is a picture of the smiling dictator; the picture is captioned "President Hugo Chavez has instituted sweeping reforms in 10 years in power" ("Chavez sends army to rice plants," March 1).

"Sweeping reforms"? You make Senor Chavez sound as though he's a Gandhi or a Thatcher. In fact, he's a thieving gangster. If the leader of, say, the Crips instructed his thugs to seize all the liquor stores in South Central L.A., would you describe this creep as having "instituted sweeping reforms"?

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