Today’s Quote of the Day…

…is from page 147 of the excellent new book Arguments for Liberty (edited by Aaron Ross Powell and Grant Babcock).  This quote comes from the essay on Contractarianism by Jan Narveson (original emphasis):

Liberalism is exemplified by normative systems that hold two points: (a) that the sole acceptable purpose of rules, laws, and in general interventions must be the good of those intervened upon; and (b) that it is those persons themselves, rather than any supposed authorities, who fundamentally embrace those values.  Individuals, then, are the basic holders of the values that interventionist institutions and personages are to respect….Both are essential.  So-called liberals of the present day tend to think that they, the pundits or theorists or the elected politicians, know what people want better than the people themselves.

Today’s Quote of the Day…

…is from Robert Tollison’s forward for the Liberty Fund edition of Jim Buchanan and Gordon Tullock’s classic work, The Calculus of Consent:

“Politics and the market are both imperfect institutions, with the least-cost set of institutions not being obvious in any real case. The moral: We must better understand how institutions work in the real world to make such choices intelligently.”

Today’s Quote of the Day…

…is from my GMU professor Robin Hanson, as quoted in Quora:

Quora: What is the most important little known economic fact or idea?

Hanson: Honestly, supply and demand. It is the part of economics with which more people have a passing familiarity, yet where even so a deeper fuller understanding would bring big gains. Someone who deeply understands just supply and demand understands a great deal.

For example, understanding all of the many ways in which the real world deviates from a supply and demand world can give one a deep understanding of the likely places to expect both market failures and useful innovations.

JMM: Exactly.

Today’s Quote of the Day…

…comes from page 38 of Economic Sophisms by Frederic Bastiat (1964 Foundation for Economic Education ed., footnote omitted, original emphasis):

I confess that the wisdom and the beauty of these laws [of trade] evoke my admiration and respect.  In them I see Saint-Simonianism: To each according to his capacity; to each capacity according to its production.  In them I see communism, that is to say, the tendency of goods to become the common heritage of men; but a Saint-Simonianism, a communism, regulated by infinite foresight, and in no way abandoned to the frailty, the passions, and the tyranny of men.

JMM: I love this line because Bastiat is addressing two of his biggest critics in 1850’s France: the Saint-Simonianists (socialists) and the communists.  Is Bastiat saying the goals of the socialists or the communists are ignoble?  No.  What he objects to are their methods (central planning, or leaving economic decisions “abandoned to the frailty, the passions, and the tyranny of men”).

Those of us who argue for freedom, of markets and of people, are often accused by our critics of not caring.  Because we are not socialists, we do not care about the poor.  Because we are not communists, we don’t care about the working man.  Because we are not speech restrictions, we do not care about corruption in politics.  Etc Etc.  But nothing could be further from the truth!  We care about these things; that’s why we argue for freedom.  As Bastiat says, it is in these laws of trade and exchange (the economic laws) do we see the noble goals of communism and socialism accomplished without the ignoble aspects of frailty, passions, and tyranny that comes with socialism or communism.

Today’s Quote of the Day…

…is from page 35 of Economic Sophisms by Frederic Bastiat (1964 Foundation for Economic Education edition):

Moreover, free trade also equalizes the conditions of enjoyment, of satisfaction-in short, of consumption.  People seem never to take this aspect of the matter into consideration; yet it is the crux of the whole discussion, since, after all, consumption is the ultimate goal of all our productive efforts.  Under a system of free trade, we should enjoy the benefits of the Portuguese sun just as Portugal itself does; and the inhabitants of Le Harve would have just as much access to the advantages that Nature has conferred upon Newcastle in the form of mineral resources, and under the same conditions, as the people of London do.

JMM: Free trade is the ultimate sharing of the wealth.  Despite living in Virginia, I can enjoy the same goods as people all over the country and the world.  I needn’t live in Florida to get oranges, or India to get curry, or England to get tea.  I can enjoy these things just as equally as if I lived in Miami, or Bombay, or London (and likewise they can enjoy tobacco, dairy, and soybeans just as they lived in Richmond).

Today’s Quote of the Day…

…is from pages 5-6 of Frederic Bastiat’s 1850 essay The Law (Mises Inst. Edition):

But [man] may live and enjoy, by seizing and appropriating the productions of the faculties of his fellow men.  This is the origin of plunder.

Now, labor being in itself a pain, and man being naturally included to avoid pain, it follows, and history proves it, that wherever plunder is less burdensome than labor, it prevails; and neither religion nor morality can, in this case, prevent it from prevailing.

When does plunder cease, then?  When it becomes more burdensome and more dangerous than labor.

As with anything, people will choose the least-costly option for their actions, in this case in the trade off between labor and plunder (Bastiat uses the phrase “plunder” here meaning the legal appropriation of one’s property by the state to transfer to another person).  As the cost of labor rises (or the cost of plunder drops), the attractiveness of plunder increases.  Things like occupational licenses, tariffs, and even progressive taxation all increase the costs of labor, and thus make plunder more attractive, which in turn leads to more lobbying and resources spent to get a share of the plunder.

Respect for the law cannot long be preserved when the law becomes a tool for plunder rather than preventing it.

Today’s Quote of the Day…

…comes from Armen Alchian’s 1961 RAND Corp. publication Some Economics of Property, as reprinted on page 43 of the Liberty Fund edition of The Collected Works of Armen A. Alchian: Vol 2: Property Rights and Economic Behavior [original footnote]:

I should, I suppose, avow at random intervals that all this is not a condemnation of public ownership any more than certain “deficiencies” of marriage, the human eye, the upright position of the human being, or smoking are to be regarded as condemnations of marriage, eyes, walking on two feet, or smoking.  The “lesser” evils in some institution – and they exist in all – are borne for the greater good in some of them.  We are not arguing that private property even in its purest form is perfect in the cost-bearing sense.  No standard of perfection is available.  All of our statements have been comparative in degrees of cost bearing.

The converse of this “apologia” is that others should not speak of the imperfections of the marketplace, either.  Nor should they assume that in those instances where the marketplace is inferior in certain respects to, say, public ownership or government control, we should switch from the market to the government.*  The presence of one kind of relative deficiency does not simply justify a switch to another agency which has other kinds of deficiencies.  We can’t have either agency without also having all its attributes.  We repeat that this neither justifies nor condemns more private or more public ownership, more market- or more government-directed activity.  All this may help form such decisions, but it is only part of the story.

*We are mindful that rabbits have greater skin-healing power (even for some especially large [100cm^2] sizes of skin injury) than do human beings.  Should we deduce that rabbits should be used as soldiers?

Alchian’s point is an important one, but one oft-lost, even among economists: there are no solutions, only trade-offs.  Everything is subject to the question “as compared to what?”  There are no silver bullets and institutions form in response to their surroundings (and their surroundings respond to the institutions).  The mere fact a given institution has deficiencies is not a reason to replace it; its replacement will also have deficiencies.