Market Correction

24 April 2009

Editor, Baltimore Sun

Dear Editor:

Your opposition to so-called "predatory lending" ("Fixing credit cards," April 24) - that is, your opposition to banks making attractive loan offers to low-income borrowers - reminds me of a conversation that I had 20 years ago with a fellow student at the University of Virginia law school. Call her "Jane."

I suggested to Jane that surrogate-motherhood contracts harm no one. Jane very cock-surely responded that such contracts harm surrogate mothers. "How?" I asked. She answered by saying that persons seeking the services of surrogate mothers will offer prices so high that many women "will have no real choice but to become surrogate mothers." Jane then added "And THAT'S exploitation!"

If Jane's 'reasoning' and vocabulary are correct, then surely we all want to be exploited, long and hard. Indeed, who among us doesn't hope to become the victim of such cruelty at the hands of potential employers? And who among us, as consumers, doesn't hope to be abused by exploitatively low prices for goods and services sold by the likes of supermarkets, clothing stores, bookstores, and, yes, banks?

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

24 April 2009

Editor, USA Today

Dear Editor:

You endorse government restrictions on the terms on which credit-card customers can contract with credit-card issuers ("Winds shift for credit issuers," April 24). You apparently believe that current credit terms serve only to inflate issuers' profits rather than to expand the supply of consumer credit.

This belief is questionable. But if it's valid, then the best way to help consumers is for you, Pres. Obama, Rep. Carolyn Maloney, Sen. Chris Dodd, and other proponents of these government restrictions to quit your current jobs and start a bank that issues credit cards. When you more-enlightened and responsive issuers enter the market and offer clearer and more-attractive terms to credit-card users, customers will flock to you. Other issuers will either go out of business (assuming that they're not bailed-out!) or be forced by competition to match your clearer and more-attractive terms. But I see no such efforts.

Unless and until you and these politicians put your own money where your mouths are, there's no reason to credit your claims.

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

24 April 2009

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

To the Editor:

I share your delight that President Obama recently reneged on his campaign promise to renegotiate NAFTA's labor and environmental provisions - a reneging predicted during the campaign by his pro-free-trade advisor Austan Goolsbee ("Austan Goolsbee's Vindication," April 24). But I'm not as confident as you are that this move signals that Mr. Goolsbee's free-trade principles have triumphed within the administration.

Because, for political advantage, Mr. Obama earlier lied about his intentions on the trade front, why should we trust him now?

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

22 April 2009

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

To the Editor:

Sen. Dick Durbin supports legislation that would, as he says, "allow bankruptcy judges to modify the terms of mortgages which would otherwise fail" (Letters, April 22). So it's unsurprising that he regards opposition to this legislation as unreasonable. To persuade opponents of the merits of this legislation, Mr. Durbin notes that "Credit Suisse ... argues that mortgage modifications would be an important tool to prevent foreclosures and protect the bank's bottom line." No doubt. And Credit Suisse is free to modify any mortgages it holds in whatever ways it wishes.

Contrary to Mr. Durbin's presumption, however, the fact that people do things voluntarily doesn't mean that government should force people to do those things. For example, I'll likely forgive a debt owed to me by one of my siblings. But it's wrong for government to command me to do so.

Mr. Durbin's obliviousness to the vital distinction between voluntary actions and coerced behavior makes him a man who is both deluded and dangerous.

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

20 April 2009

Editor, U.S. News & World Report

Dear Editor:

You report that President Obama today "challenged" his cabinet to "cut the budget by $100 million" ("Obama to Cabinet: Cut $100 Million from Budget," April 20). What courage. A President who proclaims the importance of making "hard choices" calls upon his government to trim away a whopping one thirty-six-thousandth of its projected expenditures for the year - or, alternatively reckoned, one twelve-thousandth of its projected budget deficit.

To put this budget "cut" in perspective, suppose that the typical American family, earning $50,000 annually, plans this year to run a budget deficit proportionate to the deficit that Uncle Sam will run. Such a family would plan to spend $75,000. Now suppose that this family, seeking to signal its faux-commitment to financial prudence, promises spending cuts equal, in proportion to its budget, to the cuts announced today by Mr. Obama.

This family would declare - surely with much fanfare - that it will reduce its planned annual expenditures by $2.09! Perhaps it might promise to survive the year with one less gallon of gasoline or with one less cup of coffee.

Who would take such a gesture to be anything other than audaciously insulting sarcasm by the chronically irresponsible?

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

19 April 2009

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

To the Editor:

In "Capitalism After the Fall" (April 19), Richard W. Stevenson writes uncritically that "incomes for most families have been growing slowly for much of the last three decades." Readers should question this piece of conventional wisdom, for it overlooks

- the shrinkage in the average size of U.S. households in recent decades;

- increases in the real value of non-wage benefits paid to workers;

- the wealth of retirees who earn little income but live well by spending down the assets they accumulated during their working years;

- the fact that increased immigration drags the calculated median (and mean) household income downward. This statistical artifact is consistent with the possibility that incomes for the great majority of families have risen substantially over the past three decades.

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

18 April 2009

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

To the Editor:

You report that "American officials remain frustrated that China's currency policies lower the cost of Chinese goods" ("U.S. Won’t Cite China Over Its Currency," April 15).

Translation: "American officials remain frustrated that China's currency policies enable Americans to get more for their dollars."

Perhaps pols in Washington are disturbed that the Chinese are promoting American prosperity while American officials - with their bailouts, gargantuan deficit financing, and inflationary monetary policies - are undermining it.

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

16 April 2009

News Editor, WTOP Radio
Washington, DC

Sir or Madam:

Reporting today on Texas Gov. Rick Perry's remark that over-taxed Americans might one day seek secession from Washington - that is, secession from a gluttonous, arrogant, liberty-squelching national sovereign - you note that "Democratic state Rep. Jim Dunnam of Waco says talk of secession is anti-American."

Really? So what does Mr. Dunnam think that the thirteen colonies did in 1776 if not secede from an overbearing government that asserted sovereignty over them? Or perhaps Mr. Dunnam regards as "anti-American" men such as George Washington, Thomas Jefferson, and John Adams.

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

16 April 2009

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

To the Editor:

Allstate CEO Tom Wilson wants Washington to supplant states as the chief regulator of insurance companies because states allegedly "lack the expertise to properly oversee rapid innovation or systemic risks" ("Regulate Me, Please," April 16). I've some questions.

Are state governments really less able than is Uncle Sam to hire the talent necessary to "oversee" these matters? The answer isn't obvious.

More fundamentally, what does it mean to "oversee rapid innovation"? Innovation necessarily introduces novelty, thereby unleashing trains of consequences both unintended and unforeseeable. Even the smartest regulators cannot predict the results of innovation in sufficient detail to regulate consistently in the public interest. Perhaps one benefit of state-level regulation over national regulation is that, with state-level regulation, different regulatory regimes compete against each other - a process that enables us to rely on experience, rather than on the speculations and prejudices of regulators, to discover which sorts of regulation work best.

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

15 April 2009

Editor, WTOP Radio
Washington, DC

Sir or Madam:

One of the talking heads you interviewed today ridiculed the "Tea Parties" as "childish tantrums against civic responsibility."

Nonsense. The truly childish behavior is that of politicians in Washington. THEY are the ones irresponsibly running up an additional $9.3 TRILLION in government debt over the next decade. THEY are the cowards who - fearing for their seats if some big corporations go bankrupt, and if too many people lose ownership of their houses - are forcing taxpayers to coddle these firms and homeowners in blankets of cash. THEY are the ones who, with all the courage of three-year-olds, blame everyone but themselves.

Civic responsibility involves exposing these frauds and miscreants.

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

13 April 2009

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

To the Editor:

Paul Krugman criticizes the anti-tax tea parties to be held around the country on Wednesday ("Tea Parties Forever," April 13). But Mr. Krugman's message never rises above tabloid journalism. Rather than address the issues, he merely rehashes absurdities spewed (mostly years ago) by right-wingers such as Tom DeLay and Karl Rove. The implication is that, because the likes of Messrs. DeLay and Rove oppose higher taxes, persons who attend these tea parties must be similarly crazy partisans.

But is it really so absurd for ordinary Americans to be furious that Uncle Sam now promises to run up $9.3 TRILLION in debt during the next decade - an unfathomable sum that will inevitably lead to much higher taxes or higher inflation or both? Is it small-minded to oppose corporate welfare for automakers, banks, and insurance companies? Is it lunatic to fear further socialization of medical-care provision? Do these concerns really signal that those of us who hold them are, as Mr. Krugman alleges, "refusing to grow up"?

One need not agree with the tea-partiers to concede that these worries are ones that reasonable people can, and do, have.

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

The great American philosopher, Hank Williams, Sr., put it more bluntly in his song "Mind Your Own Business."
.....

12 April 2009

Editor, Times of London

Sir:

American conservatives have their own reasons for opposing Barack Obama's gigantic agenda ("Right's rage at overbearing Obama," April 12). Some of these reasons are more sensible than others. But I offer here a deeper reason to worry about Mr. Obama's hyperactivity; it is a reason identified exactly 250 years ago by Adam Smith in his first book, The Theory of Moral Sentiments:

"That wisdom which contrived the system of human affections, as well as that of every other part of nature, seems to have judged that the interest of the great society of mankind would be best promoted by directing the principal attention of each individual to that particular portion of it, which was most within the sphere both of his abilities and of his understanding."*

No person, regardless of I.Q. or office, can possibly possess more than an infinitesimal amount of the knowledge of reality necessary for the successful carrying out of 'plans' such as those offered by Mr. Obama. Society best advances when each of us is free to pursue our own individual goals in our own ways, with government doing no more than protecting each of us from the predations and officious ambitions of others.

It is preposterous to suppose that Mr. Obama (or anyone else) can know enough to oversee the automobile industry and the banking industry, to lead the creation of "green jobs," to remake medical-care provision, and to succeed at any of the other ambitious tasks on his agenda. Each of those matters is light years outside of "the sphere both of his abilities and of his understanding."

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

* Adam Smith, The Theory of Moral Sentiments (Indianapolis: Liberty Press, 1976 [1759]), p. 375.