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From: TimF4/10/2012 8:31:49 PM
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As (Julian) Simon Says

by Don Boudreaux on April 5, 2012
in Complexity & Emergence, Dinner Table Economics, Energy, Growth, Innovation, Myths and Fallacies, Population, Seen and Unseen, Standard of Living, The Future, The Profit Motive

Here’s a letter to (HT Chris Meisenzahl)

Eric Pfeiffer reports that “A new study from researchers at MIT … says that the world could suffer from ‘global economic collapse’ and ‘precipitous population decline’ if people continue to consume the world’s resources at the current pace” (“ Next Great Depression? MIT researchers predict ‘global economic collapse’ by 2030,” April 4).

Such doomsday predictions are so common – and so commonly mistaken – because the scientists who make them do not understand what resources are or where resources come from.

Resources are not defined strictly by their physical properties. The likes of bauxite or the electromagnetic spectrum are not ‘naturally’ things that serve human purposes. Physical materials in the earth and atmosphere become resources only if and when human creativity mixes with them in ways that transform these materials into resources.

So we humans not only consume resources; we also create them. Supplies of resources, therefore, rise with increased applications of human creativity. And since the dawn of bourgeois capitalism in the 18th century, the rate at which we create resources – both in the sense of creating more sources of supplies of familiar resources such as petroleum, and of creating entirely new resources such as the worldwide web – has skyrocketed. Nothing in studies such as this latest from MIT gives us any reason to suppose that this rate of resource creation will slow.

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

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From: TimF4/10/2012 8:39:37 PM
1 Recommendation   of 7536
44 Fantastic Photos of Beautiful Cherry Blossom & Kite Festival in DC
March 29th, 2012

Ah beautiful cherry blossoms, kites and love is in the Spring air. It’s that time again for the National Cherry Blossom Festival in Washington, D.C. It would be a great time to see DC since there is also a Blossom Kite Festival, previously called the Smithsonian Kite Festival. An estimated 1 million people will come to witness the events while the cherry blossoms are blooming. With the cost of gas astronomical, here are 44 fantastic photos, a tour for those of you who won’t be able to attend the Cherry Blossom Festival and Blossom Kite Festival this weekend. [44 Photos]

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From: TimF4/10/2012 8:42:53 PM
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The forgotten viewpoint
Posted on March 30, 2012
Mark Perry, at Carpe Diem, reminds us of some good advice from French economist, Frederic Bastiat:

Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.

Let’s apply this advice to some common situations.

Minimum wage. Here’s a good story about how consumers pay for higher minimum wages (HT: Don Boudreaux, Cafe Hayek). The costs to the consumer includes higher prices and fewer options. Some of the cost is also born by low-skilled workers who will have fewer employment opportunities.

Credit card regulations: Don Boudreaux does a nice job in his Pittsburgh Tribune column, Help That Hurts, of looking at the credit card regulations from the viewpoint of consumers. Here’s an excerpt:

Congress, the White House and most of the news media describe CARD [Credit Card Accountability, Responsibility and Disclosure Act of 2009] as “pro-consumer.” At first glance this description seems accurate. After all, don’t consumers benefit when the fees and interest rates they must pay are reduced?

Although the answer to this question is “yes,” this isn’t the correct question.

The correct question is, “Don’t consumers prefer to have the option of paying higher fees and interest rates if the alternative is having no access to credit at all?”

Not everyone is financially careful or responsible. Traditionally, credit-card issuers dealt with this fact not by refusing to lend to consumers with poor credit scores but, instead, by using an ingenious approach that helps both those consumers with poor credit scores as well as the banks that lend to them. That approach is to charge delinquent customers significant fees for late payments and to raise interest rates on delinquent balances.

Here are a couple more things where the consumer viewpoint is usually ignored:
  • Foreign trade – Who would be hurt by restricting access to foreign goods? Consumers.
  • Labor unions – Who funds the generous wages and benefit packages of unions? Consumers.
I’ve added a new category to my blog, Consumer Viewpoint, to remind me to continue to apply Bastiat’s advice as I encounter various situations.

When I try to explain to people that low prices at Walmart (for example) are a boon for consumers, in spite of the much smaller loss to some other groups, I struggle to make the point. But this quote nails it. While some of us are producers. We are all consumers.

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From: TimF4/10/2012 8:53:48 PM
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Government is an expense, not an income
Posted on April 8, 2012

I wrote here and here about why we should view government spending as an expense for the economy, rather than an income, as it is treated in the formula for Gross Domestic Product (GDP = Consumer Spending + Investment Spending + Government Spending).

In the latest issue of Forbes magazine, Amity Schlaes points to research that may confirm my view in her column, Tax Summit for Growth:

Scholars Andreas Bergh and Magnus Henrekson found a negative correlation between government size and economic growth. When government increases by 10%, annual growth decreases by up to one percentage point. So if the U.S. were to cut its income or dividend tax rates the cut might not take us all the way to a 5% growth rate, but it might get us to at least 3%.

I’m always skeptical of statistical studies, even those that confirm my own views. Here, my skepticism is in the magnitude of the correlation, where a 10% growth in government leads to only a 1% point reduction in economic growth.

But, then again, there’s a couple of things to consider here.

First, since government doesn’t usually make up the entire GDP of an economy, this effect may be larger than it appears at first glance.

For example, consider an economy of size 100, with government spending making up 20 of that. A 10% increase in government moves it from 20 to 22. A 1% reduction in the economy moves it from 100 to 99. So a 2 unit increase in government translates into a 1 unit decrease in the economy. That’s a big effect.

Second, the effect of government spending now is spread out over time, so Bergh and Henrekson’s study may only capture the cost in the current period . Government, like you and I, can only spend wealth that was created in the past or will be created in the future.

Governments that borrow heavily to fund their current spending, may reduce the economy by 1 unit now and more units in the future.

Schlaes makes some other great points in her column and I recommend reading the whole thing.

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From: TimF4/11/2012 1:24:37 PM
1 Recommendation   of 7536
How Property Rights Solve Problems
David R. Henderson

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From: TimF4/14/2012 1:38:02 PM
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Justice: Social and Otherwise, Part 1
Apr 11th, 2012 by wintercow20

There is perhaps no greater misunderstanding in the world today than what the term “justice” means. Indeed, almost the very opposite of its true meaning has all but been institutionalized. When we used to teach the canon of Western Civilization as a part of obtaining a college degree, individuals learned about the Aristotelian conception of justice as characterizing the relationship between men. It was very much a process oriented construction and the idea that “justice was blind” is not so much that courts cannot pick decisions based on who stands in front of them (that should be one conclusion from it) but rather that the outcomes that emerge from “just” interactions among men can hardly be seen clearly in advance.

What many folks today conceive of as justice has nothing at all to do with the relationship between men. Rather, the term “justice” now stands synonymous with the vacuous and vague conception called “social justice.” This conception looks only at the “state of affairs” in society and typically fails to recognize that such states of affairs likely include a large range of outcomes that was not the result of any intentional action by any of the men within that society.

These are not the same thing.

The kind of justice that matters, “real justice” so to speak, respects the spontaneous order of not only market processes but of all relationships between humans. When injustices in this world are rectified, they are with respect to the way we treat one another. The modern conception of “social justice” does quite the opposite. By thinking that any social outcome we observe today must have come from the conscious choices of individuals within the undefined and unreal blob referred to as “society” rectifying social injustices requires the explicit intervention into forces that no one ex ante could have predicted would produce the “unjust” outcomes that emerged. Ignoring the possible (likely) nefariousness of such interventions, doing something about “social justice” is akin to suggesting that omniscient beings have the authority and the knowledge to plan all of human activity — which we know both from experience and theory to be impossible.

You’ll see this thinking plainly when you hear folks argue things like, “we’ve let the middle class get hollowed-out” over the last 40 years,” and “the top 1% have ….” Who, for example, made the conscious choice to hollow out the middle class? Is it the CEO of Apple, who decided that it might make sense to have iPads made overseas? Who, exactly, did he treat unjustly? Did he take two otherwise similar Americans, standing before him, and treat one better than the other? Did he take two otherwise different Americans and treat them the same way? When you see droves of low-wage workers, single-parents, “crappy” service sector jobs, who, exactly is committing the injustice? Me? If it is not easy to point to a sentient, freely choosing individual as the cause of the injustice you decry, that is pretty solid evidence that we are not talking about justice in the same way, and a pretty solid sign that whatever remedy is going to be forthcoming is about to promote the kind of injustice that defenders of “justice” say they care about.

We’ll say a little more on this tomorrow.

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From: TimF4/14/2012 2:50:20 PM
1 Recommendation   of 7536

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From: Joe Btfsplk4/17/2012 3:46:16 PM
2 Recommendations   of 7536
Economics: A Million Mutinies Now By Arnold Kling

Good overview of competing ideas in three parts:

The money line:

"the modernist project of technocratic tuning of a complex economy is, as Hayek warned, beyond our ability to undertake successfully."

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To: Joe Btfsplk who wrote (6174)4/19/2012 6:04:53 PM
From: TimF
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Thomas Sowell on Intellectuals and Society

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To: TimF who wrote (6175)4/20/2012 12:12:55 PM
From: Joe Btfsplk
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I'm currently revisiting Sowell's two books on differing visions. Brilliant as would be expected, but there might be another angle.

Message 28047012

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