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November 21, 2004
Dreams into Nightmares
Don Boudreaux
Perhaps the single greatest flaw of politics is that it encourages people to behave romantically rather than realistically -- to confuse intentions with results. To dream is marvelous, wonderful, human; but to dream without constraint and regard to reality is to turn dreams into nightmares. Here's a letter that I sent to the New York Times on Tennessee's "TennCare" scheme. My letter is in response to this story. ....... Editor, New York Times Dear Editor: Your headline about TennCare reads "Once a Model, a Health Plan is Endangered" (Nov. 20, Front Page). How was TennCare ever a model? Only eleven years old, the costs of this taxpayer-funded health-care scheme have ballooned so outlandishly that a politically supportive governor might well kill it. And if it is somehow saved, all agree that it will feature bloodcurdlingly bureaucratic restrictions. A model inspires and informs through its successful operation. TennCare was never a model of anything other than politics' proclivity to elevate quixotic fantasies over reality. Sincerely, Donald J. Boudreaux Chairman, Department of Economics George Mason University
Posted at 9:37 AM, November 21, 2004 | Trackback | Print | #
November 19, 2004
Abolish the FDA
Don Boudreaux
Allegations are swirling that the FDA is doing a poor job protecting Americans from unsafe drugs. Where to begin? First and most obviously: why would anyone seriously expect taxpayer-funded bureaucrats to promote the well-being of consumers? These bureaucrats have no motive of personal gain (profit) or loss to inspire them to be diligent and creative in anticipating and serving the desires of millions of strangers. Furthermore, the FDA faces no real competition. Combine these facts with the additional reality that the regulated too often enjoy undue, if sub rosa, influence with the regulators -- thus "capturing" the regulatory process -- and you have a stew that is a hearty meal for bureaucrats, politicians, and regulated firms but that is poisonous to consumers. Second and, in my opinion, even more importantly: the entire notion of "safe" and "unsafe" drugs is wrong. Popular discussion of the FDA's role proceeds as if there is an objective level of safety for drugs. Each drug either reaches this level or it doesn't. If it does, it is "safe"; if it doesn't reach this level, it is "unsafe." This notion is preposterous. The safety of each and every drug is in a range. Drug A can be more safe or less safe than can drug B. Modifications can make drug A more safe today than it was yesterday. Also, because different people often react differently to any drug, the safety of drug A to Ms. Jones might differ from the safety of the very same drug to Mr. Smith. Apart from the benchmark of absolute, 100% safety for every potential user of any drug -- a benchmark impossible to attain -- there is no obvious benchmark (short of 100% safety for everyone) that distinguishes a "safe" drug from an "unsafe" drug. The FDA and pundits do the public no favors by prattling on as if it were otherwise. Once we understand that absolute safety is impossible, we're closer to understanding that the FDA's ostensible goal of ensuring "safe" drugs is indefinable. Is it startling that a taxpayer-funded, centralized, monopoly bureaucracy -- charged with protecting 300 million people from "unsafe" drugs -- and overseen by politicians whose comparative advantage is in posing pretty for cameras and belting out platitudinous sound-bites, will screw-up given that the benchmark to which its performance is judged in fact is fundamentally indefinable? Not only does the FDA not serve a valid public service; it cannot possibly serve a valid public service. It should be abolished immediately.
Posted at 8:47 AM, November 19, 2004 | Trackback | Print | #
November 18, 2004
Destruction is Not Construction
Don Boudreaux
My colleague Walter Williams recently wrote this column, effectively debunking -- for the umpteenth time -- the silly notion that destruction paves the path to prosperity. Walter shared with me one of the many responses that readers sent to him. This particular reader argues that hurricanes are indeed good for the economy, especially because many of the insurers who pay for hurricane clean-ups and rebuilding are foreign. This argument fails for many reasons, the most obvious of which is that the real resources used for clean-up and rebuilding have opportunity costs. The nationality of the persons who pay the owners of these resources to rebuild after natural disasters is irrelevant. Every worker, every sheet of plywood, every brick, every gallon of gasoline, every everything used to rebuild what a natural disaster destroyed could be used to produce other valuable goods and services -- and, were it not for the destruction, would be used to produce other valuable goods and services. But because destruction calls forth rebuilding, these other valuable goods and services remain unproduced and, hence, unavailable to satisfy human wants. To everyone who fancies that destruction is constructive, I ask: why are Beirut and Baghdad less wealthy than are Boston and Birmingham? And would our prosperity increase if we stopped punishing vandals and arsonists and started applauding and rewarding them?
Posted at 9:19 AM, November 18, 2004 | Trackback | Print | #
November 17, 2004
Insecure Security
Don Boudreaux
Washington Post columnist Harold Meyerson sounds a common theme: "Historically The Democrats have been the party of security" -- meaning, the Democrats and their pet policies of high taxes and extensive regulation by government have, in this view, created security for ordinary Americans against the perils and uncertainties of free markets. Hooey. Meyerson, like too many others, mistakes rhetoric for results. Since the New Deal, Democrats -- as representatives of the Government Faithful -- have indeed championed legislation boasting titles such as "Fair Labor Standards Act" and "Full Employment Act," as well as programs sporting names such as "Social Security" and "Medicare." Sounds good. But the "Fair Labor Standards Act" -- which creates a national minimum wage - prices many unskilled workers out of the job market, cruelly casting them for long periods into the ranks of the unemployed. (This legislation, by the way, was enacted in the 1930s to protect northeastern textile mills and their workers from the upstart mills in the American south. The chief competitive advantage of southern mills was access to a low-cost labor force. How is it fair, I've always wondered, for Uncle Sam to forcibly price some workers out of jobs in order to benefit other workers?) And, of course, Social Security is wholly insecure - and becoming more insecure daily. And yet the Government Faithful somehow find it ennobling to compel ordinary men and women to participate in this insecure system. Of course, the Government Faithful also routinely clamor for higher taxes. The idea is that private citizens don't spend their own money as wisely as does government. The Government Faithful somehow persuade themselves that person A is more secure if person B forcibly takes person A's money and then spends that money allegedly on person A's behalf. Some security.
Posted at 7:16 AM, November 17, 2004 | Trackback | Print | #
November 16, 2004
Russ Roberts on Globalization
Don Boudreaux
My GMU colleague and co-blogger at Cafe Hayek, Russell Roberts, delivered the luncheon address recently at a conference on globalization sponsored by the Federal Reserve Bank of Dallas. Here is a worthwhile-to-read newspaper account of that conference and of Russ's exciting talk.
Posted at 11:31 AM, November 16, 2004 | Trackback | Print | #
Hard Times for Economists
Don Boudreaux
I just read, for the first time, Charles Dickens's Hard Times. It is a wonderful example of the most common misunderstanding of economics. Dickens caricatures the economists who support free markets as one-dimensional imbeciles who believe that humans should strip themselves of all emotions and of all aesthetic sensibilities. The only things that truly matter to these "economists" are Facts and Reason - with Facts defined (apparently) exclusively as quantitative data, and Reason defined exclusively as thought processes devoted coldly to analyzing these Facts. A main character, Thomas Gradgrind, raised his children according to the "system" based on Facts alone. Here are the opening lines of the novel, delivered in a speech by Mr. Gradgrind to teachers at a school he supports:
Now, what I want is, Facts. Teach these boys and girls nothing but Facts. Facts alone are wanted in life. Plant nothing else, and root out everything else. You can only form the minds of reasoning animals upon Facts: nothing else will ever be of any service to them. This is the principle upon which I bring up my own children, and this is the principle upon which I bring up these children. Stick to Facts, Sir!One of Mr. Gradgrind's younger children is named Adam Smith. The characters in this novel are indeed caricatures - the cruel, shallow, and stupid factory owner (Josiah Bounderby) who sees and values nothing except his own narrow material self-interest; Gradgrind, at first a friend of Bounderby, who is disillusioned from his obsession with Facts (and his friendship with Bounderby) only when his beloved daughter Louisa suffers a near-catastrophic mental breakdown because she was denied emotional and aesthetic outlets during her upbringing; Stephen Blackpool, a poor weaver in Bounderby's factory who is all-good, simple, and all-wise in his simplicity. The cartoonishness of these characters is laughable. But if you want to understand much of the hostility to market economics, and to the economics that endorses it, by all means read Hard Times. The presumptions and impressions that motivated this novel remain presumptions and impressions that motivate much of today's hostility to markets.
Posted at 11:14 AM, November 16, 2004 | Trackback | Print | #
