They should sell it to me for less because we live close to each other !!!

Don Boudreaux teaches economics at George Mason University, the place where I'm going to get a Doctorate in Economics if I ever win the lottery and can afford the tuition.  Boudreaux has written a beautiful letter to Bill O'Reilly of Fox News. 

This letter should be studied by schoolchildren everywhere. 
Boudreaux and Russ Roberts are the proprietors of the Cafe Hayek blog. 
Here goes: 

Mr. Bill O’Reilly
The O’Reilly Factor
Fox News
New York, NY

Dear Mr. O’Reilly:

You’re all lathered up because U.S. oil companies are exporting much of their refined gasoline and heating oil to other countries and thereby putting upward pressure on fuel prices here in America. You conclude that these companies have a moral obligation not to export so much.

Your economics is wrong and your ethics convenient.

First some economics. Selling in the global market encourages firms to build larger factories and refineries that, in turn, enable outputs to be produced at lower costs per unit. So while in the short-run rising exports of oil products can cause fuel prices here to spike, the long-run effect might well be lower prices because of larger, more-efficient scales of operation. Also, more exports of fuel products means more imports of other goods and services. The result is lower prices in America for consumer goods such as clothing and furniture, as well as lower prices of inputs such as steel and industrial machinery used by American factories.

I was amused, by the way, that in your Feb. 17th discussion with Lou Dobbs, Mr. Dobbs shared your anger at rising U.S. oil exports. This is the same Mr. Dobbs who repeatedly complains that the problem with America’s involvement in the global economy is that foreigners stubbornly refuse to buy sufficient amounts of American exports. Go figure.

Now about your ethics. You’re paid so handsomely because there’s a large nation-wide demand for your commentary and bombast. In your career you’ve worked for broadcasters in Boston, Dallas, Denver, Hartford, and elsewhere. And before moving to Fox you were a correspondent for ABC News. You apparently never hesitated to sell your product to the highest bidder; you never hesitated to export yourself from one market to another in search of higher pay; you never resisted the bidding for your services by buyers (i.e., employers) far and wide which put upward pressure on the amounts of money that you are paid, both to appear on television and to deliver lunch and dinnertime speeches.

Get ready!!   Here comes the Don Boudreaux Karate Kid Crane kick !!!!!!!

So I ask: are you guilty of an offense against those many Americans who – as a result of your responding to market signals regarding the value of your services – must now pay higher prices for the privilege of hearing your commentary? Should you return to your long-ago job at a local Scranton television station, at your long-ago lower salary, and apologize to the good people of Lackawanna County for your greedy and evil habit of exporting yourself to wherever and whoever offers to pay you more money?

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

Don Boudreaux.  Often imitated, never duplicated. 

The coffee mug shown above was a gift from Dr. Ralph.  His son goes to GMU. 
The picture of Don Boudreaux morphed with Dr. Ralph came from Dr.Ralph.  It's one of the most bizarre things I've ever seen, despite serious competition from some incidents in my Mississippi childhood. 
At 2:00 this afternoon at The Corporate Image 5418 Brentwood Stair in East Fort Worth, I'll be playing guitar and singing with Dr. Ralph. 

The Greatness of Cafe Hayek

George Mason University economics professor Don Boudreaux of Cafe Hayek has been in rare form lately. 

First he talks about a semi-debate he had with "An Unfair Trader".  I think Boudreaux had a (very) brief appearance on the Lou Dobbs Protectionist Parade Program, but was cut off before he could make this argument: 

Dobbs argued that trade is free only if both parties deal with each other on equal terms — so that, for example, America’s trade with China can never be free unless and until Beijing removes all trade restrictions and stops all subsidies (or, at least, restricts and subsidizes Chinese trade no more than Uncle Sam restricts and subsidizes American trade).

I (and June and Tom) argued that, as good as it would be for Americans and, especially, the Chinese for Beijing to remove such restrictions and to halt all such subsidies, free trade for Americans would be achieved if Uncle Sam abolished all of his trade restrictions and subsidies, regardless of what any other government does.
Dobbs thought that this argument was simply hilarious.
I wanted to ask him (but did not get the opportunity) the following question:

Don Boudreaux: “Mr. Dobbs. Will you buy my shoes – the ones now on my feet. I’ll sell them to you for $100 – a more-than-fair price.”

I imagine that the ensuing conversation would have gone something like this:

Lou Dobbs: “What? What are you talking about? Of course I won’t buy your shoes.”

DB: “Why not? I bought (and read) your book, Exporting America.”

LD: “So….??”

DB: “So you said that trade isn’t free unless both parties are equally willing to buy from the other – and that if party A isn’t willing to buy from party B, then party B harms himself by continuing nevertheless to buy from A.”

LD: “So…..??”

DB: “Stick with me, amigo. I bought something from you. You’ve bought nothing from me – even though I’m here making a sincere offer to sell my shoes to you. You refuse to buy them. Trade, therefore, isn’t free. So clearly I should not have purchased your book; clearly I made myself worse off; clearly you are behaving unfairly.”

LD: ?????

Here's an excerpt from another post where Boudreax tries to make a $5,000.00 bet with White House Budget Manipulater Peter Orszag and then with White House Sickness Socialst Nancy-Ann DeParle about the true cost of the Healthcare Abortion.  It's called Spend Your Own Money For A Change:

So I [Don Boudreaux] challenge you [Mr. Orszag and/or Ms. DeParle] to put your money where your words are. Let’s make a real bet.

Pick any year in the future between 2021 and 2046. Tell me your estimate today of how much Uncle Sam will spend on health care that year. I’ll bet each of you $5,000 that Uncle Sam’s actual expenditures on health care in that year — adjusted for inflation — will be at least 25 percent higher than your estimate.
If Uncle Sam’s health care expenditures in that year are less than 25 percent higher than you project them to be, I’ll congratulate you as I mail you your checks. If those expenditures are 25 percent higher than you project them to be — or more — I’ll contribute my winnings to a private health-care charity, as I predict that the need for philanthropic contributions along those lines will be great.
Do we have a bet?

Based on past performance, I'd say that the Boudreaux money is safe, since government bean-counters couldn't properly estimate the cost of Happy Meals while waiting in the McDonald's drive-through.  See: Social Security, Medicare, Medicaid, Iraq, Afghanistan, Fannie Mae and Freddie Mac, toilet seats, screwdrivers, etc. 

Next he links to this great quote from Megan McArdle:

And I’ve watched congressional hearings. There’s no chance that four CEO’s are going to explain the accounting code to the fine folks in Congress; explaining how to boil water would challenge the format.
 

And last, Dr. B. gives us a video on Frederic Bastiat's "Broken Windows"  In addition to being a short little intro to Broken Windows and Things Seen And Unseen, it also proves that Paul Krugman is a silly person.   



That's all for today. Skip me altogether, and READ CAFE HAYEK EVERY DAY ! ! ! 

Of Regulations, Red Tape, and the Trade Deficit

The great economist Frederic Bastiat, one of the guiding lights of this blog, worked as an exporter. Here's some more info on his career from Mises.org :

Bastiat was orphaned at age ten, and was raised and educated by his paternal grandparents. He left school at age seventeen to work in the family exporting business in the town of Bayonne, where he learned firsthand the evils of protectionism by observing all the closed-down warehouses, the declining population, and the increased poverty and unemployment caused by trade restrictions.

I work in the shipping and logistics industry. I've seen the same "evils", and this is one of the many reasons I've started supporting the Libertarian Party.

My friend and fellow blogger Stephen M. Smith works in the shipping and logistics industry. I mentioned this to him about a month ago, and asked for his thoughts on why people in the shipping industry often have Free Market leanings.
This is what I got back from Stephen.
(Please bookmark his website - A Beginner's Guide To Freedom. In a just, rational world, Stephen's words would be carved into marble.)

Of Regulations, Red Tape, and the Trade Deficit
- by Stephen M. Smith

A number of pundits lately have declared that the recent housing-related chaos in the financial and banking sectors is proof that deregulation doesn’t work, or that markets can’t regulate themselves. Clearly, they argue, what we need is more government regulation and oversight. Evidently the same government that specifies the size of the holes in Swiss cheese and mandates the number of toilets each building must have just isn’t doing enough in the area of regulation.

The people calling for more red tape obviously don’t work in logistics. If they did, they would understand that the United States is already the most heavily regulated society in the history of man. The finance and banking industries are without a doubt the most heavily regulated sectors of the most heavily regulated society, but I suspect the logistics and transportation sectors aren’t too far behind.

Granted, my evidence is anecdotal rather than empirical, but given the fact that my entire job is dedicated to regulatory compliance, I think I speak with some authority. When I’m not busy annoying socialists with free-market blog posts, I spend most of my waking hours making sure my company complies with all of the relevant federal regulations covering exports.

And there are a lot of them. So many, in fact, that the bureaucrats hold a conference in Washington, D.C. each year just to review the changes in the regulations. The conference doesn’t cover all the regulations, mind you, just the changes from the previous year. But even that takes three full days. Last year there were well over a thousand attendees (and they were just the ones who managed to get in - demand for the conference routinely outstrips capacity). That’s at least 24,000 man-hours of lost productivity just so we can understand what’s different this year from last.

One of the many focus areas of the latest conference was a new electronic filing requirement mandated by the US Census Bureau. You probably thought that Census only existed to count the number of people and identify the languages spoken in your household once every decade. But it turns out that they are also responsible for compiling all of the statistics that go into those weighty government reports that are ignored by your elected representatives as they vote to separate you from your money.

But the boys and girls from the Census bureau were all fired up for this latest conference. And why were they so excited to see us this time? Because their new regulations increase the penalties for errors. In the past, the most Census could fine a violator was a paltry $1000 per mistake. Now, though, the penalties can include fines of up to $250,000 and - this is where it gets really exciting – jail time! The folks at the Census Bureau couldn’t be happier. They finally get to throw people in jail, just like the big kids in the other branches of government.

Now I know a lot of non-libertarians just roll their eyes when they hear us yammer on about the “gun of government,” but I can assure you it is not an exaggeration. Seriously – the guy with the gun actually gave a one-hour PowerPoint presentation about all of the terrible things he was willing to do us if we stepped out of line. Ironically, he was the most engaging and entertaining speaker of the entire event.

So what could be so important about this new filing requirement that they’re willing (and eager) to put people behind bars over it? It’s not about national security – that’s covered by a whole host of other government bureaucrats (who also carry guns). As I mentioned earlier, the Census bureau compiles statistics. And one of their most important (in their minds, at least) functions is to calculate the trade deficit. The fact that the US has been running a trade deficit for years is a horrible state of affairs according to the bureaucrats in D.C. To correct this “problem,” they drop a thousand pages of new regulations on our desks each year, threaten us with fines and imprisonment if we screw up on any of them, and then tell us we should export more. And at the end of the conference, they give us pocket calculators made in China. No kidding.

A lot of people get all torqued up about the trade deficit, of course. Take Lou Dobbs (please). Lou has made a fortune complaining about the trade deficit, but at least he’s not pointing a gun at anyone to make it go away (as far as I know). I’m not sure why the trade deficit evokes such a fierce reaction in so many people, since any first-year economics major can tell you it’s a completely meaningless number. To see just how ridiculous the whole thing is, allow me to summarize an illustration originally provided by my favorite economist, Frederic Bastiat. (It seems they were torqued up about the trade deficit in 19th century France as well).

A French merchant ships goods valued at €200,000 to the United States. After freight, insurance, and cost of goods sold, the merchant clears €40,000. He then imports American goods valued at €320,000, which he turns around and sells for €400,000. Foolishly, he believes that he has made a profit of €120,000 from these two transactions - €40,000 from the first shipment to America, and another €80,000 from the sale of the imported American goods. To the layman, this may seem like a pretty good business model and the kind of thing one might wish to continue. But there’s a problem, you see. France now has a trade deficit with the United States – after all, she wisely exported €200,000, but then foolishly imported €320,000. All the politicians start whining that France has “given away” €120,000 to foreigners.

Later, the same merchant ships out another €200,000 worth of French goods. But the ship is lost at sea. For some strange reason, the merchant records this as a loss of €200,000. But how can that be? After all, the trade deficit is now greatly improved. French Customs recorded €200,000 of exports, and there were no corresponding imports. Not only has the previous trade deficit with the United States been erased, but France now finds itself in the eviable position of having a trade surplus of €80,000.

Based on the logic of the balance of payments, it becomes obvious that France can easily double its capital at any moment. All the French have to do is load their goods onto ships, and once they’ve cleared Customs, dump them into the ocean. France will gain all that the sea swallows up.

With Bastiat’s illustration in mind, worrying about the trade deficit doesn’t seem to make a lot of sense. So does it make any sense to threaten people with jail time over it? And even if we were to accept the primitive notion that exports are good and imports are bad, why would we wish to increase the regulatory burden associated with exporting from the United States? If the trade deficit were the demonic force most people believe it to be, then surely we would want to reduce the costs associated with exporting, not increase them.

The regulatory burden is by no means limited to the export sector. All areas of economic life in the United States are burdened by miles of red tape – to a far greater degree than most people realize. Every one of these regulations increases the cost of doing business in the United States. Presumably we should be looking for ways to cut the cost of doing business in this country so that we could afford to do more of it. This should be standard practice even in the best of times, but given the depressed state of the economy these days, it is more important now than ever.

I wish I'd said that.
The only thing I might add? If an American firm purchases something from China, what are the Chinese given in return?
Little green pieces of paper with Benjamin Franklin's picture on them.
What is the only use for these green pieces of paper? Where can they be redeemed for something else?
Thank you, Stephen. The world is a better place with you in it.

What NAFTA Superhighway???

The Nation (a fascinating Old Leftie magazine), Lou Dobbs, and The John Birch Society all oppose the proposed NAFTA superhighway.


With a Trifecta like that all in opposition, it's GOT to be a great idea.
Have none of these jackasses ever ready any history? Do they not know that trade is the greatest builders of a nation? Amsterdam? Great Britain? Hong Freakin' Kong? Aren't they aware huge swaths of Africa remain impoverished, partially because of a lack of good deep water ports?

Nobody has ever protected themselves to prosperity. No, that's not true. Small numbers of people are trying to protect their prosperity at the expense of the larger group.

Imagine if you could only trade with relatives.
Or just people on your block.
Then imagine that there's an idiotic demogogue, like the ones above, who is warning you about the evils of mixin' and minglin' with them dern folks on the next block who do thangs different, and tellin' stories of Mexican truck drivers out of their minds on Mexican drugs.

Imagine if you could only trade with nearby states in the U.S.
Imagine that it's pre-1982, and there are idiotic shipping regulations that keep carriers from going across state lines.
I could go on forever.
Do people buy into this guy because he's on TV ? Is that it?
But there has to be a large contingent of Lou Dobbs viewers out there who finished grade school and who can read without their lips moving.
Does anyone know anyone Lou Dobbs loyalists that they can introduce me to?

I want to meet one, and study its habits.

Because you know what I really love about this? (there is no NAFTA superhighway ! read the Nation article !)

Yet Another Sign That The Apocalypse Is Upon Us

Click Here to see "what rough beast slouches toward Bethlehem, waiting to be born...."

Where Right, Left and Center Agree - Free Trade

An Economics professor from George Mason University explains why free trade brings the greatest benefit to the greatest number....

Daniel B. Klein: Where Left, Right, and Center Agree

He's basically saying the same thing that I said here, but doesn't get as worked up about it.

Here's a sampling from his article....
Today, the extent of the market is vast. That's one reason why humanity is better off than in the past. People in China are part of a great chain of beings, a chain that works to make stuff for humanity. Humanity would be happier still if the market were free of protective duties and quotas.
Economists don't agree on much. But almost all economists favor freedom of trade. It is an exceptional consensus in economic opinion.
However, "the man in the street" is less supportive of free trade. That's because he hasn't thought through the ways in which Americans benefit by foreign efforts, and how buying from foreigners is connected to their buying from Americans. Opposing trade with China is like opposing trade with Ohio.

But I'm still deeply disturbed that Starbucks won't let me transport any of their coffee. They apparently use shipping companies with lower rates than mine, despite the amount I spend with them every morning of my life.
Therefore as of today, October 24th 2007, I've modified my current trade agreement with Starbucks:

1. Quotas are now in place. Starbucks will only receive 50% of my Double-Espresso business unless they allow me to transport some loads for them. It's only fair. The only other way they can have a quota increase is to assure me that I'm purchasing coffee that is grown, processed, packaged, and poured in Fort Worth, Texas. Except for the pouring, none of those other industries currently exist in Fort Worth because of unfair foreign competition and a mythical concept called "natural advantage". (It's just some Voodoo Economics concept about the weather.) But I'm prepared to hold out in the name of justice.
2. I will be lobbying Congress to put a 20% protective tariff on all coffee imported into Fort Worth. This will protect Fort Worth jobs in the infant Fort Worth coffee industry. Granted, these jobs don't exist yet but look what protection did for the infant sugar industry, starting back when Thomas Freakin' Jefferson was President (and our infant sugar industry is still protected). If we as a nation can overpay for sugar every year by $400,000 per job saved, we can attempt the same for Fort Worth coffee. Starbucks must now "Think Globally, Grow Locally".
3. I am proposing that we model our remaining "Globally Sourced" coffee quotas on the regulations that are now in place for cotton. A precise quota will be allowed into Starbucks from each nation that currently allows me to haul freight for them. At this point, the number of eligible nations is....One. But to protect my infant shipping industry in additional nations and to encourage them to allow entry to my business, I am requiring Starbucks to bring in 2% of their coffee from each of the following countries: Greenland, Iceland, Norway, Sweden, Denmark, Finland, Estonia, Lichtenstein, Canada, and The Vatican. The current Starbucks practice of limiting their coffee purchases to Equatorial regions isn't just unfair, it's racist. And if we can require the Asians to frantically move their fabric businesses around to whichever nation has some quota left at the end of the year, then the Latin Americans and their buddies in Ethiopia can do the same.

Administering this program will require a swarm of regulators and inspectors to appear every time a Fort Worth Starbucks receives a shipment of coffee. These inspectors will be paid by tax increases, since I'm not about to pay more than $2.00 for a Double Espresso. Plus, I'm the one who has to pay drivers and buy diesel. It will be like the current cozy relationship between ethanol tariffs and Archer Daniels Midland.

Think of it as jobs saved.

I'm waiting by the computer to receive the praise and gratitude of a grateful nation. And Lou Dobbs.

Signs of The End Times

Click HERE to see the latest sign that The Apocalypse Is Upon Us.... If this is true, is there hope for humanity?

"And what rough beast, its hour come round at last, Slouches towards Bethlehem to be born?"
-William Butler Yeats

Photo compliments of Citizen Arcane