Good links

A short, but insightful graduation speech.

A longer and insightful discussion of wealth and how different views of where it comes from can affect the words we use.

From the first:

4. Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.

From the second:

Europeans and Americans “claimed” a higher portion of global output only because they produced a higher portion of global output!  What these Europeans and Americans “claimed” simply would not have existed had they not produced it.



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Cans of corn

In the comments to this post, we had what I thought was a good discussion regarding fairness and how government interference usually causes unfairness rather than fixes it.

Wally asked if unfair processes exist outside government. I responded that they do but that there are better feedbacks and choice outside of government to help with that.

Don Boudreaux just wrote a fantastic column, Competitive regulation, in the Pittsburgh Tribune addressing how much better feedbacks and choices, which derive from competition, work in a free market work than the regulations from government.

I particularly love this part:

No one asserts that competitive regulation works perfectly. But perfection isn’t the appropriate standard. The claim, rather, is that competitive regulation works pretty darn well.

Want evidence? Go to the supermarket and then to the mall. You’ll find astonishingly wide offerings of high-quality and affordable goods: food and drink products, detergents, kitchenware, clothing, furniture, consumer electronics and on and on and on. You’ll also find stores manned by clerks and managers who generally would be distraught to lose their jobs.

Nearly none of what you see is the result of government regulation. No regulator ordered Safeway into business. And no regulator tells it what to offer for sale. If Safeway wished, it could — as far as the government is concerned — stock only cans of corn and nothing else. It could refuse to pay any of its workers wages higher than the legislated minimum. It could open for only 15 minutes daily. It could use pencils and paper, rather than electronic scanners or cash registers, to tally its customers’ grocery bills.

But it does none of these things. Competing with Kroger, Wal-Mart and other supermarkets, Safeway voluntarily chooses — for its shareholders’ own good — to spend tens of millions of dollars annually to keep its shelves stocked with a vast assortment of items, to pay most of its employees wages well above the legislated minimum, and to undertake all the other countless activities that it must undertake to turn a profit.

I continually find it amazing how much a part of life these feedbacks and choices are and how little people recognize it.

People simply don’t recognize that free market and competition provides them with so many choices. How often do we complain about not getting what we want with stuff that comes to us by way of generally free markets like restaurants, shoes or deodorants? How often do we complain about things from government?

Sure, there are complaints about products. As Boudreaux says, no one says the market is perfect. But, there are entire TV and radio channels dedicated to complaining about government.

The same people go to Target and to the DMV. I can’t figure out why they never seem to think “I want more of what brought me Target and less of what brought me the DMV”.

Some economists aren’t pathetic

While I agree with Nassim Taleb that economists are generally pathetic, not all are. Count Don Boudreaux, David Rose and David Henderson as economists who are not.

While there are many instances where Boudreaux proves his worth, this recent post of his on Cafe Hayek is ample evidence.

First, Boudreaux reprints a letter from economist David Rose that was published in the Wall Street Journal. Rose’s letter proves his worth. I’ve reprinted it below. It’s a must read.

Second, Boudreaux reminds us of a most excellent point made by David Henderson that proves his worth. Henderson pointed out that using the term wealth redistribution incorrectly implies in market economies that there was wealth distribution to begin with. There wasn’t. There was wealth creation from risk-taking and value discovery.

Here’s Rose’s letter:

In his Dec. 20 op-ed “America’s Dangerous Powerball Economy,” Arthur Brooks quite correctly points out that earned income, indeed earned success generally, affects our happiness very differently than unearned income or success.

I would like to extend his point further with something I’ve told my college students for years.

In general, the creation of wealth is edifying. When only voluntary transactions are permitted, the creation of wealth requires cooperation, and this brings out the best in us.

Piles of wealth, however, tend to be corrupting. The fixed nature of a pile is all about apportionment, not cooperation, and this zero-sum game tends to bring out the worst in us.

It follows directly that no matter how noble the ends, government redistribution (which is hardly voluntary) tends to bring out the worst in us. Rising government redistribution over the past 75 years has produced ample evidence of this point.

We are in this mess because we have allowed our culture to be dominated by those who are bent on spreading the false and self-serving narrative that our economy is a giant zero-sum game.

As such, we might as well have the government do the dividing.

Small wonder why our politics have become increasingly about who you are for rather than what you are for.

David C. Rose

Department of Economics

University of Missouri-St. Louis

St. Louis, Mo.