Market Correction

3 June 2009

Editor, Time

Dear Editor:

On Monday President Obama proclaimed that G.M. "will be run by a private board of directors and management team. They, and not the government, will call the shots and make the decisions about how to turn this company around." And yesterday, two high-ranking members of his administration, writing in USA Today, seemed downright insulted that anyone would doubt the President's word that politics will "play no role" in running this company.

Alas, this political chicken wasted no time coming home to roost. You report today that "Top executives from General Motors and Chrysler face tough questions from lawmakers about sweeping plans to close hundreds of car dealerships as the auto companies undergo government-led bankruptcies" ("Senate Reviews Close of GM, Chrysler Dealers," June 3).

The wonder is not that politicians are meddling. The wonder is that America is populated with a sufficient number of persons so gullible as to encourage Mr. Obama to issue his 'no politics' assurance with a straight face.

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

3 June 2009

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

To the Editor:

You argue that Treasury Secretary Timothy Geithner's call for Beijing to raise the value of the yuan is a sop to trade lobbyists ("Geithner's China Pitch," June 3). Sad but spot-on. What Adam Smith wrote in 1776 about Great Britain is no less true in 2009 about America:

"To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be established in it. Not only the prejudices of the publick, but what is much more unconquerable, the private interest of many individuals, irresistibly oppose it."

And any government official who dares to push for free trade can expect "personal insults" and even "real danger ... arising from the insolent outrage of furious and disappointed monopolists."*

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

* Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (1776), Book IV, Chapter 2, paragraph 43:
http://www.econlib.org/library/Smith/smWN13.html#B.IV,%20Ch.2,%20Of%20Restraints%20upon%20the%20Importation%20from%20Foreign%20Countries

2 June 2009

Editor, USA Today

Dear Editor:

Obama administration officials Steven Rattner and Ron Bloom assert that politics will "play no role" in running the new government-owned G.M. ("'A hands-off approach'," June 2).

To believe this assertion is akin to believing that a wolf-pack that corners a crippled elk will play no role in devouring the helpless animal to satisfy the wolves' own hunger.

Politician will no more cast off their own nature than will wolves. Both species are natural predators.

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

2 June 2009

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

To the Editor:

George Priest argues that it's a mistake for the Obama administration to change antitrust policy from one that, at least allegedly, is focused on protecting competition to one focused on restricting large and successful - "dominant" - entities from competing vigorously with less-successful rivals ("The Justice Department's Antitrust Bomb," June 2). Mr. Priest is right: this policy will help only weaker rivals as it harms consumers.

But if the administration insists on resurrecting this old-fashioned (and intellectually debunked) policy, it should do so consistently. It can begin by blocking the Democratic Party from taking advantage of its current dominance over its much-weaker rivals. Given Mr. Obama's apparent understanding of the competitive process, he must know that the G.O.P. and other minor parties can compete against the Democrats only if government prevents the Democrats from exploiting their current market dominance.

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

1 June 2009

News Editor, WTOP Radio
Washington, DC

Dear Editor:

This afternoon you interviewed a pundit who claims to be "inspired" by the way that Bill and Hillary Clinton, having been so critical of Barack Obama during the presidential primary campaign, now work so agreeably with him. I'm not inspired; I'm suspicious. Were the Clintons lying during the campaign, or are they lying now?

Herbert Spencer understood the charade of politics when he wrote the following in 1884: "While before them as candidates, they are, by one or other party, jeered at, lampooned, 'heckled,' and in all ways treated with utter disrespect. But as soon as they assemble at Westminster, those against whom taunts and invectives, charges of incompetence and folly, had been showered from press and platform, excite unlimited faith. Judging from the prayers made to them, there is nothing which their wisdom and their power cannot compass."*

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

* Herbert Spencer, "The Man versus the State, with Six Essays on Government, Society and Freedom," ed. Eric Mack, Introduction by Albert Jay Nock (Indianapolis: LibertyClassics, 1981), p. 96.

1 June 2009

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

To the Editor:

Paul Krugman asserts that the housing-market meltdown was caused by Reagan-era deregulation. This policy change, Krugman argues, encouraged injudicious lending to people who should never have gotten mortgages ("Reagan Did It," June 1).

Mr. Krugman is careless in doing history. Among the facts that he overlooks are the many steps, both before and after Reagan, taken by the White House and Congress to push mortgage lenders to extend home loans to low-income Americans. As recently as 2003, for example, Rep. Barney Frank - hardly a free-marketeer - opposed efforts to pressure Fannie Mae and Freddie Mac to stop buoying the market for subprime mortgages. Mr. Frank declared that critics of Fannie and Freddie "exaggerate a threat of safety and soundness" and "conjure up the possibility of serious financial losses to the Treasury, which I do not see.... The more pressure there is there, then the less I think we see in terms of affordable housing."*

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA 22030

* http://www.youtube.com/watch?v=63siCHvuGFg (The Frank quotation starts near the 1:38 mark.)

31 May 2009

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

Dear Editor:

George Will wisely warns that government micromanagement of the economy will be followed by consequences both unintended and undesirable ("'Shock And Awe' Statism," May 31). The economy is vastly more complex than such planners suppose.

Writing in 1698, Charles Davenant criticized the arrogance of such planners: "It is hard to trace all the circuits of trade, to find its hidden recesses, to discover its original springs and motions, and to shew what mutual dependence all traffics have one upon the other. And yet, whoever will categorically pronounce that we get or lose by any business, must know all this, and besides, have a very deep insight into many other things."*

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA 22030

* Charles Davenant, Discourses on Publick Revenues [1698], p. 388.

28 May 2009

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

To the Editor:

You report that Treasury secretary Timothy Geithner is "planning to press Beijing to take drastic measures to turn China's economy into one that depends heavily on sales to domestic consumers and less on sales to the U.S." ("Geithner to Urge Chinese Leaders to Rely Less on Exports," May 28).

In other words, Mr. Geithner will press the Chinese to take drastic measures to diminish their success at serving American consumers.

When business executives collude to restrict the amounts that they offer to sell to us, they're in violation of antitrust statutes and are often charged as criminals. But when government officials operate to achieve the very same outcome - i.e., reduced supplies available to consumers - these officials are portrayed uncritically, even heroically, as crafting "trade policy."

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

28 May 2009

Editor, The American Prospect

Dear Editor:

You boast that your magazine is "the essential source for progressive ideas." And yet your contributors, including Dean Baker in the blog that you host, are forever lamenting the U.S. trade deficit ("China Knows It Will Take a Beating on Its Treasury Investments," May 21). Alas, these laments reveal no progress beyond the poor economic thinking and mercantilist policy proposals of the late middle ages.

For example, in 1381 Richard Leicester, worried about England importing more than it exports (and paying for these extra imports with money), could have been featured in your pages when he wrote that "Wherefore the remedy seems to me to be that each merchant bringing merchandise into England take out of the commodities of the land as much as his merchandise aforesaid shall amount to; and that none carry gold or silver beyond the sea, as it is ordained by statute."*

True progress in understanding the nature of trade and the absurdity of fretting about the "balance of trade" - in understanding that wealth is access to goods and services and not gold, silver, or currency per se - did not begin until the late 17th century, especially with Nicholas Barbon. Adam Smith capped this progress when in 1776 he noted that "Nothing, however, can be more absurd than this whole doctrine of the balance of trade."**

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

* Quoted in Jacob Viner, "Studies in the Theory of International Trade" (1937), p. 6.

** Adam Smith, "An Inquiry Into the Nature and Causes of the Wealth of Nations" (1776) Book IV, Chapter 3, paragraph 31.

28 May 2009

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

Dear Editor:

Harold Meyerson asserts that California's fiscal woes result from that state taxing its citizens too lightly (“How the Golden State Got Tarnished,” May 28). He's mistaken. In 2008, per capita state and local taxes in California were, at $5,028, sixth highest in the country - a figure exceeded only in Connecticut, D.C., Massachusetts, New Jersey, and New York.*

Nor has government spending in the Golden State been particularly low. In 2008, state and local government spending per capita in California, at $10,678, was also sixth highest in the country. Only Alaska, Delaware, D.C., New York, and Wyoming spent more.**

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA 22030

* http://www.taxfoundation.org/taxdata/show/336.html

** http://www.usgovernmentspending.com/CA_per_capita_spending.html#usgs302